The opinion of the court was delivered by: Arthur J. Schwab United States District Judge
Pending before this Court are the parties' cross-motions for summary judgment (document nos. 214 and 219). Plaintiffs, Christian Bouriez ("Bouriez") and Montanelle Beheer B.V. ("Montanelle") (collectively "Plaintiffs"), a company incorporated and owned by Bouriez, seek partial summary judgment in their favor, for their claims for fraud and negligent misrepresentation against defendant Carnegie Mellon University ("CMU" or "CMRI") and for CMU's counterclaim for unjust enrichment against Plaintiffs.*fn1 Defendant CMU seeks summary judgment on all counts of the complaint, namely fraudulent misrepresentation, negligent misrepresentation, and unjust enrichment.
After careful consideration, and for the reasons set forth below, Plaintiffs' motion for partial summary judgment will be denied and CMU's motion for summary judgment on all counts of the complaint will be granted.
II. Procedural Background
On October 6, 2002, Plaintiffs filed a complaint against CMU alleging fraudulent misrepresentation (Count I), negligent misrepresentation (Count II), and unjust enrichment (Count III). Plaintiffs' complaint alleges that CMU misrepresented facts regarding a microwave catalytic cracking technology that CMU claimed to have developed under a contract with Governor's Refining Technologies Corporation, LLC ("GRT").*fn2 Plaintiffs claim that the misrepresentation induced them to invest five million dollars ($5,000,000) in GRT's parent company, Governor's Technologies Corporations ("GTC") to fund this microwave catalytic cracking project.
On January 30, 2003, CMU filed a Demand for Arbitration with the International Centre for Dispute Resolution (No. 50T1800006303) against Bouriez, Montanelle, GRT and GTC (collectively "Governors"), and two other individuals, John Cowhig ("Cowhig"), Chief Executive Officer of Governors, and a shareholder in GTC, and David Grayson ("Grayson"), President of Governors and a shareholder in GTC. Bouriez, Montanelle, GTC, Grayson, and Cowhig objected arguing they were not parties to the Arbitration.
On January 31, 2003, CMU filed a motion seeking to compel (document no. 5) Plaintiffs to arbitrate their claims. CMU's Motion to Compel was based on the 1996 Master Agreement between CMU and Zeta Projects Limited (GRT's predecessor) (see note 2, supra) which contained a clause mandating that any dispute over the Master Agreement be settled by arbitration in Pittsburgh, Pennsylvania. This Court granted CMU's motion and ruled as follows: "Plaintiffs, as agents of Governors Technologies Corporation . . . are bound by their principal's ("GTC's") agreement to arbitrate. Plaintiffs embraced the [Master] Agreement and directly benefitted therefrom" and thus were equitably estopped from avoiding its arbitration clause. Order of Court Regarding Arbitration, Dated February 27, 2003, document no. 22, p. 1.
The United States Court of Appeals for the Third Circuit overturned this Court's Order, stating as follows:
Bouriez is complaining that Carnegie Mellon wrongly induced him into a shareholder agreement with Governors Technologies. While the purpose of that agreement was that Bouriez could provide money to Governors Technologies that Governors Technologies would use to fund Carnegie Mellon, the fact remains that Bouriez's claims deal with his shareholder agreement, and not the [Master Agreement] . . . . A dispute that arises under one agreement may be litigated notwithstanding a mandatory arbitration clause in a second agreement, even when the two agreements are closely intertwined . . . . The District Court's contrary conclusion fails to acknowledge that Bouriez was one step removed from the 1996 Agreement and, therefore is not equitably estopped from avoiding the arbitration clause contained in that Agreement. Bouriez v. Carnegie Mellon Univ., 359 F.3d 292, 295 (3d Cir 2004).
On April 21, 2004, CMU filed its Answer with counterclaims and subsequently, an Amended Counterclaim on November 19, 2004. The three counterclaims allege that: CMU is a third party beneficiary of the contract between Bouriez and GTC or, in the alternative, that Plaintiffs were unjustly enriched (Count I); that Plaintiffs are personally liable as to the contract between Bouriez and GTC and CMU wishes to pierce the corporate veil or hold Plaintiffs liable under the participation theory (Count II); and finally that CMU has a claim for ownership of Bouriez' shares in GTC if he is awarded damages.
During the Arbitration, the Arbitrator dismissed Cowhig and Grayson as parties, leaving CMU and the Governors as the remaining parties. CMU sought payment for unpaid invoices for the research conducted on the microwave catalytic cracking technology project ("Project"), in the amount of $1,229,127.30 plus interest, (2) a declaration that only CMU had rights, including intellectual property rights, in the microwave catalytic cracking technology, and (3) a denial of the Respondents' counterclaim. Arbitration Opinion, p. 3. GRT sought an award against CMU of the money that had been previously paid for the Project and to third parties for equipment, arbitration costs and expenses, and a denial of CMU's claims. Id. GTC sought a dismissal from the Arbitration or in the alternative, if it was deemed to be a proper party, a denial of CMU's claims. Id.
The Arbitrator found that:
[Due to] the nature of the relationship between the parties, CMRI had a duty of full and frank disclosure to GRT [and] . . . it did not satisfy that duty. It was incumbent on CMRI to explain carefully to GRT the very significant limitations on drawing conclusions about the benefits of microwaves in cracking heavy hydrocarbons from the experiments which had been performed. Had it done so, it is unlikely that GRT would have funded, and continue to fund, the Project . . . . Thus GRT, although not satisfying the burden of proof to establish fraudulent misrepresentation, has satisfied its burden of proof to establish negligent misrepresentation CMU breached its agreement with GRT in such a fundamental manner as to constitute a failure of consideration. GRT is entitled to rescission. It is therefore entitled to return of all monies paid to CMU by GRT and GTC in connection with the Project ($5,895,734), and all monies paid to third parties for Project equipment in support of the Project ($982,607). GRT is entitled to interest of 6% simple interest per annum on the above amounts.
All of CMU's claims are denied. Upon CMU's compliance with this Award, however, neither GRT nor GTC will have any interest in the Funded Technology or Funded Equipment, all of which will be owned by CMU.
Arbitration Opinion, pp. 32, 38-40 (emphasis added).
On December 6, 2004, Plaintiffs filed a Motion to Dismiss Count II of CMU's Amended Counterclaim, arguing that the decision in the arbitration order appeal, Bouriez, 359 F.3d 292, was the law of the case and precluded Count II of CMU's counterclaims. Plaintiffs also argued that CMU failed to state a claim as to Count II. Plaintiffs' motion to dismiss was denied. Document no. 104. Plaintiffs subsequently filed a motion for summary judgment as to Counts I and II of CMU's Amended Counterclaim which was granted by Order of November 9, 2005. Document no. 118.
On June 21, 2007, CMU filed a summary judgment motion as to all the counts of the complaint. Plaintiffs filed a motion for partial summary judgment in their favor for Counts I and II of the complaint and against CMU on its counterclaim of unjust enrichment.
The parties have stipulated to the following facts in their Joint Concise Statement of Material Facts (document no. 93) and Joint Stipulation (document no. 125):
Carnegie Mellon Research Institute ("CMRI" or "CMU") was an unincorporated, non-academic, organizational unit of Defendant CMU. CMRI was engaged in scientific research and development for government agencies and industrial entities whom CMRI called "sponsors." On May 7, 1996, Carnegie Mellon entered into a written agreement with Zeta Projects Limited ("ZPL") (the " Master Agreement"). In 1997, CMU entered into a Project Plan for Microwave Enhanced Catalytic Processing ("Project Plan") with ZPL. On July 17, 1999 ZPL assigned the Master Agreement to Recovery Refining Technologies, LLC ("RRT"), which subsequently changed its name to Governors Refining Technologies, LLC ("GRT"). On September 11, 1997, CMU, ZPL, and GRT entered into a written agreement entitled "Consent and Agreement to Assignment and Assumption" (the "Consent to Agreement") in which CMU consented to the assignment of the Master Agreement from ZPL to GRT.
Plaintiff Bouriez is an investor who resides in London, England and came to Pittsburgh to learn about the research being conducted by CMU under Governors' sponsorship. Dr. Alberto Guzman ("Guzman") was an Associate Director of CMRI. Mr. Patrick Brassart ("Brassart") introduced Bouriez to CMRI. Governors provided Bouriez with a written Business Plan. Bouriez read the Business Plan before investing in Governors. Governors provided Bouriez with a Project Plan written by CMRI. Bouriez met with CMRI and Governors representatives on three occasions in 1999. On October 5, 1999, Bouriez and Montanelle agreed to invest $5 million in Governors in order to fund the work being done by CMRI under Governors' sponsorship.
Plaintiffs and other GTC shareholders signed two documents entitled "Shareholders Agreement" and the "Share Purchase Agreement." CMU is not a signatory to the Share Purchase Agreement. Governors owed CMU in excess of $1.2 million for work previously done by CMRI. Also in October 1999, Bouriez nominated himself and Brassart to serve as directors of GTC. Bouriez did not retain an independent advisor with microwave or petroleum processing expertise to evaluate the microwave catalytic cracking technology CMRI claimed to have developed prior to investing in Governors. Bouriez and Montanelle received stock from Governors in exchange for their $5 million investment and they still own the stock.
In September, 2000, Bouriez and CMRI learned that Governors was out of money and were informed that Cowhig and Grayson had diverted approximately $1.35 million of the original $5 million that had been invested by Bouriez, in order to pay for a debt that was not related to the Project research being conducted by CMRI. This diversion of the money was done without authority from the Governors Board of Directors. The remainder of the $5 million was used for the Project. On December 4, 2000, CMRI stopped working for Governors due to outstanding payments owed by Governors. On December 19, 2000, Susan Burkett sent Cowhig a letter stating: "Enclosed please find an invoice in the amount of ...