Pommer v. Medtest Corporation
United States Court of Appeals for the Seventh Circuit
961 F.2d 620 (1992)

- Written by Kelli Lanski, JD
Facts
A man named Patrick Manning developed a specialized medical testing process and together with Daniel West, a lawyer, formed Medtest Corporation (defendant) to obtain a patent and develop the testing process for sale. Manning sold some of his Medtest stock to Robert and Anna Lisa Pommer (collectively, Pommer) (plaintiffs), who ultimately held 3 percent of Medtest’s company stock. While negotiating the stock sale, West told Pommer that Medtest had a patent for its testing process and that a sale of Medtest to Abbott Laboratories was imminent at a price between $50 million and $100 million. In fact, Medtest did not yet have a patent. Moreover, although Medtest had engaged in preliminary discussions with an Abbott employee, the companies had not discussed terms and Abbott later informed Medtest that it was not interested in a purchase. Pommer sued Medtest, alleging that Medtest’s statements constituted fraud in violation of § 10(b) of the Securities Exchange Act of 1934. A jury awarded Pommer $300,000 in damages, representing the stock purchase price plus interest. A magistrate judge set aside the award, concluding that Pommer had not stated a case for fraud because none of the representations Medtest made were material. Pommer appealed.
Rule of Law
Issue
Holding and Reasoning (Easterbrook, J.)
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