Christian Bouriez; Montanelle Beheer v. CARNEGIE MELLON UNIVERSITY On Appeal from the United States District Court for the…

PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
_____________
No. 07-3876
_____________
CHRISTIAN BOURIEZ;
MONTANELLE BEHEER,
Appellants
v.
CARNEGIE MELLON UNIVERSITY
_____________
On Appeal from the United States District Court
for the Western District of Pennsylvania
(Civil No. 02-cv-02104)
District Judge: Honorable Arthur J. Schwab
Argued October 1, 2008
Before: FISHER, CHAGARES, and HARDIMAN, Circuit
Judges.
(Filed: October 26, 2009)
John R. Gall, Esq. (Argued)
Philomena M. Dane, Esq.
Christopher F.W. Haas, Esq.
Kristen M. Blankley, Esq.
Squire Sanders & Dempsey, L.L.P.
1300 Huntington Center
41 South High Street
Columbus, OH 45213-6197
John M. Von Mehren, Esq.
Squire Sanders & Dempsey, L.L.P.

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The parties also dispute whether an Arbitrator’s findings1
in a related proceeding are now binding on CMU. This issue is not
germane to this appeal, however, because the District Court
assumed that the Arbitrator’s decision is binding, but still granted
CMU’s motion for summary judgment. Because the collateral
estoppel issue does not affect the outcome of this appeal, we
express no opinion with regard to that dispute.
2
127 Public Square
4900 Key Tower
Cleveland , OH 441114-1304
Counsel for Appellants
George E. Yokitis, Esq. (Argued)
Walter P. DeForest, Esq.
Mindy J. Shreve, Esq.
DeForest Koscelnik Yokitis
Kaplan & Berardinelli
Koppers Building, 30th Floor
436 Seventh Avenue
Pittsburgh, PA 15219
Counsel for Appellee
__________________
OPINION OF THE COURT
__________________
CHAGARES, Circuit Judge.
Christian Bouriez and Montanelle Beeher, B.V. (collectively
referred to as “Bouriez”) appeal the District Court’s grant of
summary judgment in favor of Carnegie Mellon University
(“CMU”) with respect to Bouriez’s fraudulent misrepresentation
and negligent misrepresentation claims. The issue on appeal is
whether the District Court erred in concluding that Bouriez failed
to establish that CMU proximately caused Bouriez’s losses.1
Because we conclude that the District Court’s proximate cause

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3
analysis was in error, we will vacate the grant of summary
judgment to CMU and remand for further proceedings consistent
with this opinion.
I.
We state the facts in the light most favorable to Bouriez.
Carnegie Mellon Research Institute (“CMRI”) 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.”
In July 1997, an entity called Governors Refining
Technologies, LLC (“GRT”) and a related entity, Governors
Technologies Corporation (“GTC”) (collectively referred to as
“Governors”), agreed to sponsor a microwave-enhanced catalytic
cracking project that CMU had been developing. “[T]he primary
goal of this project [was] to demonstrate an efficient process that
uses suitable catalysts in conjunction with microwaves to
selectively crack hydrocarbons.” Joint Appendix (J.A.) 332. The
term “cracking” refers to the breaking down of “heavier
hydrocarbons into lighter hydrocarbons of a more useful range.”
Id. If successful, microwave heating would have provided a better
alternative to traditional heating methods that “use large quantities
of energy,” and would have “reduce[d] the environmental impact
of industrial waste.” J.A. 326. Governors agreed to fund CMU’s
development of microwave technology in exchange for the right to
license any technology developed. Governors had no assets except
the rights to the technology.
Plaintiff Christian Bouriez is an investor who resides in
London, England. Plaintiff Montanelle Beeher, B.V. is an entity
incorporated and owned by Bouriez. Bouriez traveled to Pittsburgh
to learn about the work being done by CMRI under Governors’
sponsorship. Governors provided Bouriez with a Business Plan
and a Project Plan written by CMRI. Bouriez also met with CMRI
and Governors representatives on three occasions in 1999. CMU’s
Business Plan emphasized its good name and scientific expertise
in microwave technology. J.A. 369-72.

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The parties dispute the exact definition of “proof of2
concept.” Bouriez claims that “proof of concept” is a scientific
term that typically connotes the development of a process to a point
that would support commercialization. At the arbitration, CMU’s
expert testified that “proof of concept” meant that one had an
hypothesis and had “proved” it, and that “proof” means one can
predict results. Another CMU witness testified that “proof of
concept” meant that one could use microwaves and a catalyst to
crack a pitch.
4
In encouraging Bouriez to invest in microwave technology,
CMU presented him with a document entitled “Proposal for a
Project Plan for Microwave Enhanced Catalytic Processing”
(hereinafter “December 11 Proposal”). J.A. 362. CMU gave this
same document to Governors earlier to obtain Governors’
investment. See J.A. 325. In the December 11 Proposal, CMU
represented, inter alia, that certain technological improvements
have been “demonstrated” and that CMRI reached the “proof of
concept” stage of development for the technology. J.A. 329. The2
December 11 Proposal also listed several purported “microwave
enhancements” that CMRI had “proven.” J.A. 330. In addition,
Bouriez indicated during his deposition that Alberto Guzman, the
Assistant Director of the CMU division undertaking the microwave
project, told him that “proof of concept had been established. I
understood from Mr. Guzman that this technology was working.
I understood that this technology was feasible. I understood that
this technology was commercially viable.” J.A. 361.
Furthermore, in a presentation to Bouriez in July 1999,
CMU indicated that the data-collection phase of its research would
be completed within six months and that the commercialization
phase would begin approximately two years thereafter. J.A. 375.
In a later presentation, CMU provided financial projections
estimating that Governors would generate $37.5 million in profits
by the year 2003, based on the then-current state of the research.
In a letter, Guzman claimed that these projections were “good and
conservative.” J.A. 383, 387.
On October 5, 1999, Bouriez signed two written

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5
agreements: the “Share Purchase Agreement” and the
“Shareholders Agreement.” J.A. 930. Pursuant to these
agreements, Bouriez invested $5 million in Governors to fund the
work being done by CMRI under Governors’ sponsorship. In
exchange, Bouriez received 6.25 million shares of Governors’
stock, which he still owns. The price of these shares was based
entirely on the potential value of Governors’ contract with CMU
and the microwave technology that it was funding. Bouriez’s
expert concluded that besides its contract with CMU, Governors
had no other significant assets or means of achieving profit. J.A.
411. Moreover, the Share Purchase Agreement explicitly stated
that Governors had no other assets and that no public market
existed for its shares. J.A. 727. Prior to investing in Governors,
Bouriez did not retain an independent advisor with microwave or
petroleum processing expertise to evaluate the microwave
technology that CMRI claimed to have developed. J.A. 355 (“I
relied on what people of CMRI told me [in making the
investment].”).
In September 2000, Bouriez and CMRI learned that
Governors was out of money. CMRI and Bouriez were also told
that two officers of Governors had diverted approximately $1.35
million of the funds invested by Bouriez to pay for a debt unrelated
to the work being done by CMRI. J.A. 931. The two officers
diverted this money without authorization of Governors’ Board of
Directors. Id. It remains unclear, however, whether the diverted
money actually included any of Bouriez’s investment because
CMU acknowledged that Governors had many other investors
whose money could have comprised the diversion. J.A. 593 (“We
admitted that we were informed of the diversion. We don’t know
that it was Mr. Bouriez’s money. All we know is that GTC’s
money was diverted to another company; that money that was to go
to pay us for the project.”).
On December 4, 2000, CMRI stopped working for
Governors because it was not paid amounts that Governors
allegedly owed. J.A. 931. CMU directly solicited an additional
investment from Bouriez, however. J.A. 248-49. Bouriez was
prepared to make another investment, but this time decided to
obtain an independent audit first. J.A. 79-81. Contrary to CMU’s

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6
representations, the independent auditor concluded that “proof of
concept of microwave enhancement effect in catalytic cracking of
hydrocarbons did not exist [in summer 1999].” J.A. 1010. The
independent auditor further concluded that “the microwave
enhancement effect was not [proved] in 2001 and it is not today.”
Id.
Bouriez’s trial expert agreed with these findings: “In reality
all of the information available suggests that CMU was still very
much in the ideation stage in late 1999, even after three years of
sporadic activity in the area of microwave processing of
hydrocarbon streams.” J.A. 401. The expert also concluded that
CMU never subsequently established “proof of concept.” J.A. 402.
Furthermore, David Purta, the lead scientist on the microwave
project, admitted during his deposition that CMU had not
“developed a technology . . . that could achieve the same results as
conventional catalytic cracking processes at environments of lower
temperatures.” J.A. 390.
Bouriez instituted this action against CMU in December
2002, alleging fraudulent misrepresentation, negligent
misrepresentation, and unjust enrichment. On January 30, 2003,
CMU filed an arbitration demand against, inter alia, Bouriez and
Governors. CMU moved the District Court to compel Bouriez to
join that arbitration. The District Court granted CMU’s motion,
but this Court reversed, holding that because “Bouriez’s claims
deal with his shareholder agreement, and not the 1996 Agreement”
defining the contractual relationship between Governors and CMU,
“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, 295-96 (3d Cir. 2004).
After the parties in this case completed discovery and were
awaiting trial, the Arbitrator issued an Opinion and Final Award in
favor of Governors and against CMU, concluding that CMU falsely

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Specifically, the Arbitrator concluded that CMU was liable3
for breach of contract and negligent misrepresentation: “GRT has
proved by a preponderance of the evidence that CMRI did not have
an adequate basis to represent that it had ‘proved’ or
‘demonstrated’ what it claimed in the . . . [December 11]
Proposal.” J.A. 272. CMRI therefore “failed to deliver the most
basic consideration it was to deliver in return for the monies to be
provided by GRT,” and CMU had “breached its agreement with
GRT in such a fundamental manner as to constitute a failure of
consideration and, therefore, rescission is appropriate.” Id.
Moreover, the Arbitrator found that “even if GRT would not have
been entitled to rescission based on its breach of contract theory, it
is entitled to rescission on its negligent misrepresentation claim,”
J.A. 279, because CMU had a “confidential relationship” with
Governors and therefore had an affirmative duty of “full and frank
disclosure,” which it breached, J.A. 277-78.
7
represented to Governors that its microwave technology worked.3
The Arbitrator ordered CMU to pay Governors $9,935,490.08 in
rescissory damages, interest, costs, and fees. CMU declined to
appeal the Arbitrator’s decision and satisfied the award.
Thereafter, Bouriez and CMU filed cross motions for
summary judgment. Bouriez argued that the Arbitrator’s findings
were binding through collateral estoppel and that those findings
established each element of his claims. CMU asserted that because
it had satisfied the arbitration award to Governors, Bouriez could
not prove any damages caused by CMU’s alleged
misrepresentations. Bouriez responded that his claims for
fraudulent misrepresentation and negligent misrepresentation were
still valid because Governors was in the process of dissolving and
Bouriez argued that he would not get his full $5 million investment
back. Specifically, Bouriez expected to receive only approximately
$2.15 million of the arbitration award upon Governors’ dissolution
because: (1) approximately $2.25 million of the arbitration award
went towards paying Governors’ legal fees, (2) Governors must
satisfy legitimate business expenses before dissolution, and (3)
Bouriez only owns 23 percent of Governors’ stock. J.A. 345, 349,
589-90. Bouriez also, however, withdrew his unjust enrichment

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8
claim, acknowledging that CMU’s rescission of all funds it
received in connection with the investment in microwave
technology terminated this claim. J.A. 562.
The District Court granted CMU’s motion and denied
Bouriez’s motion, holding that Bouriez failed to offer evidence that
CMU’s misrepresentations proximately caused his damages beyond
a share of the arbitration award. Specifically, the District Court
held that because Bouriez’s claims are based on “those ‘very same
misrepresentations,’” they
caused the “very same damages” to both Governors
and Plaintiffs, and those damages, as measured by
the Arbitrator, are the full amount of monies
Governors had invested with CMU pursuant to the
rescinded agreement, which monies CMU has
already paid back in full, with interest. Thus CMU
has disgorged to Governors all monies invested by
Plaintiffs that were passed through Governors to
CMU for use on the Project.
Bouriez v. Carnegie Mellon Univ., No. 02-cv-2104, 2007 WL
2492735, at *12 (W.D. Pa. Aug. 30, 2007) (emphasis in original).
The District Court rejected Bouriez’s argument that CMU
caused “some independent injuries or damage to” him, or that his
“damages were somehow distinct from Governors’ damages.” See
id. The District Court concluded that
Plaintiffs may have “lost $5 million” but not “as a
result” of CMU’s misrepresentations; what was lost
‘as a result’ of CMU’s representations was all the
monies CMU was ordered to return to Governors
when its agreement with CMU was rescinded,
which included all of Plaintiffs’ investment that was
channeled through Governors for the Project. CMU
proximately caused exactly all of the economic loss
represented by the monies it returned to Governors.
Id. (emphasis in original). Finally, the District Court concluded

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9
that “[t]o the extent Plaintiffs’ investment in Governors is no
longer worth $5 million, Plaintiffs have not offered any record
evidence to show that the entirety of any lost value is attributable
to CMU’s misrepresentations, rather than the $1.35 million
diversion of funds by Governors’ directors and other forces.” Id.
Bouriez now appeals, arguing that the District Court
incorrectly assumed that the arbitration award represented the full
universe of damages caused by CMU’s misrepresentations.
II.
This is a diversity action governed by Pennsylvania law.
The District Court had jurisdiction over this action pursuant to 28
U.S.C. § 1332(a)(2) because this is an action between a citizen of
a State and citizens or subjects of a foreign state, and the amount
in controversy exceeds $75,000. This Court has jurisdiction over
this appeal pursuant to 28 U.S.C. § 1291 because this is an appeal
of a final decision of a District Court.
When reviewing an order granting summary judgment,
“[w]e exercise plenary review . . . and we apply the same standard
that the lower court should have applied.” Farrell v. Planters
Lifesavers Co., 206 F.3d 271, 278 (3d Cir. 2000). Summary
judgment is appropriate “if the pleadings, the discovery and
disclosure materials on file, and any affidavits show that there is no
genuine issue as to any material fact and that the movant is entitled
to judgment as a matter of law.” Fed. R. Civ. P. 56(c). In making
this determination, we “view the facts in the light most favorable
to the nonmoving party and draw all inferences in that party’s
favor.” Farrell, 206 F.3d at 278 (quotation marks and citation
omitted). “There must, however, be sufficient evidence for a jury
to return a verdict in favor of the nonmoving party; if the evidence
is merely colorable or not significantly probative, summary
judgment should be granted.” Armbruster v. Unisys Corp., 32 F.3d
768, 777 (3d Cir. 1994). “A disputed fact is ‘material’ if it would
affect the outcome of the suit as determined by the substantive
law.” Gray v. York Newspapers, Inc., 957 F.2d 1070, 1078 (3d
Cir. 1992).

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10
Where the non-moving party will bear the burden of proof
at trial, the moving party’s burden can be “discharged by ‘showing’
. . . that there is an absence of evidence to support the nonmoving
party’s case.” Celotex Corp. v. Catrett, 477 U.S. 317, 325 (1986).
If the moving party has carried this burden, the burden shifts to the
non-moving party to point to sufficient cognizable evidence to
create material issues of fact “such that a reasonable jury could find
in its favor.” McCabe v. Ernst & Young, LLP, 494 F.3d 418, 424
(3d Cir. 2007) (citing Fed. R. Civ. P. 56(e)).
III.
Under Pennsylvania law, a fraudulent misrepresentation
claim has six elements:
“(1) a representation; (2) which is material to the
transaction at hand; (3) made falsely, with
knowledge of its falsity or recklessness as to whether
it is true or false; (4) with the intent of misleading
another into relying on it; (5) justifiable reliance on
the misrepresentation; and (6) the resulting injury
was proximately caused by the reliance.”
Overall v. Univ. of Pa., 412 F.3d 492, 498 (3d Cir. 2005) (quoting
Gibbs v. Ernst, 647 A.2d 882, 889 (Pa. 1994)). A negligent
misrepresentation claim has four elements:
(1) a duty recognized by law, requiring the actor to
conform to a certain standard of conduct for
protection of others against unreasonable risks; (2)
failure to conform to the standard required; (3) a
causal connection between the conduct and resulting
injury; and (4) actual loss or damage resulting to
interests of another.
Colacicco v. Apotex, Inc., 432 F. Supp. 2d 514, 554 (E.D. Pa.
2006). Thus, proximate cause is an essential element of both
fraudulent misrepresentation and negligent misrepresentation
claims. Allegheny Gen. Hosp. v. Philip Morris, Inc., 228 F.3d 429,
445 (3d Cir. 2000).

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11
The central issue in this appeal is whether Bouriez has
presented evidence sufficient to create a genuine issue of material
fact as to whether CMU proximately caused the loss of his
investment in Governors. Proximate cause is a question of law to
be decided by the trial court. Holt v. Navarro, 932 A.2d 915, 921
(Pa. Super. Ct. 2007). The court must ascertain whether a
defendant’s acts or omissions were a “substantial factor” in
bringing about the plaintiff’s harm. First v. Zem Zem Temple, 686
A.2d 18, 21 n.2 (Pa. Super. Ct. 1996). In making this
determination, Pennsylvania courts apply the factors listed in
Restatement (Second) of Torts § 433:
(a) the number of other factors which contribute in
producing the harm and the extent of the effect
which they have in producing it;
(b) whether the actor’s conduct has created a force or
series of forces which are in continuous and active
operation up to the time of the harm, or has created
a situation harmless unless acted upon by other
forces for which the actor is not responsible;
(c) lapse of time.
See, e.g., Brown v. Phila. College of Osteopathic Med., 760 A.2d
863, 869 (Pa. Super. Ct. 2000) (quoting and relying on Restatement
(Second) of Torts § 433).
Bouriez argues that the District Court misapplied the
“substantial factor” test because it focused on the wrong loss. We
agree. Referencing § 433(a) of the Restatement, the District Court
held that the existence of “other factors,” such as the $1.35 million
diversion of Bouriez’s funds, was clear. It then looked at the
shortfall between Bouriez’s investment in Governors and the
distribution Bouriez will receive after Governors’ dissolution. The
Court held that CMU’s misrepresentations were not a “substantial
factor” in causing the shortfall, attributing it to the diversion and
“other factors” instead. Accordingly, the District Court concluded
that CMU was entitled to summary judgment because Bouriez

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12
failed to establish that CMU proximately caused his loss.
In assessing proximate cause, however, the relevant question
is not whether CMU’s misrepresentations were a “substantial
factor” in causing the shortfall, but whether they were a
“substantial factor” in causing Bouriez’s failed investment in
Governors. This is because the entire $5 million failed investment
is the relevant injury for the purpose of analyzing proximate cause
in this case. By emphasizing, instead, the difference between
Bouriez’s investment in Governors and the distribution Bouriez
will receive after Governors’ dissolution, the District Court focused
on potential damages in this case, rather than on the injury. Only
the latter is relevant to the proximate cause inquiry, for although
the actions of a third party or other forces can mitigate or even
eliminate the ultimate damages award, those forces do not change
the fact of the initial injury and the cause of that injury. As
discussed below, a correct application of the “substantial factor”
test precludes the grant of summary judgment to CMU.
Bouriez produced sufficient evidence to raise a genuine
issue of material fact as to whether CMU’s misrepresentations
were a “substantial factor” in causing his failed investment in
Governors. Although § 433 of the Restatement instructs courts to
consider the effect of “other factors” on a plaintiff’s alleged injury,
it is well established that a “substantial factor need not be . . . the
only factor” in bringing about the relevant harm. Jefferson Bank
v. Progressive Cas. Ins. Co., 965 F.2d 1274, 1284 (3d Cir. 1992)
(quotation marks and citations omitted). Applying the “substantial
factor” analysis under § 433 of the Restatement, and concentrating
on the relevant loss, we hold that Bouriez presented sufficient
evidence that CMU’s misrepresentations induced his investment,
and the revelation of the misrepresentations caused the investment
to become worthless. Cf. Moffatt Enters., Inc. v. Borden Inc., 807
F.2d 1169, 1176 (3d Cir. 1987) (reversing a grant of summary
judgment to defendant on causation grounds where “plaintiffs have
presented evidence sufficient to support a finding that they
justifiably relied to their detriment upon [defendant’s] alleged
misrepresentations” in entering into distributor agreement with
defendant).

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A “superseding cause” is an intervening force that is “so4
extraordinary as not to have been reasonably foreseeable.” Chacko
v. Commonwealth Dep’t of Transp., 611 A.2d 1346, 1349 (Pa.
Commw. Ct. 1992) (“Among the factors to consider in determining
whether a subsequent force is an intervening or superseding cause
13
Specifically, Bouriez presented evidence that CMU made
representations directly to him that its microwave technology
actually worked. For example, in the December 11 Proposal, CMU
stated that the technology was “proven,” had been “demonstrated,”
and that it established the “proof of concept.” Bouriez also
introduced evidence that the potential value of CMU’s technology
was the only basis for Bouriez’s investment in Governors, because
Governors’ contract with CMU was the sole potential means for
Governors to have any value or to be profitable. Next, Bouriez
proffered evidence that CMU’s technology did not work and has
never worked. This was the conclusion of Bouriez’s expert and an
independent auditor that Bouriez hired. Bouriez’s expert also
concluded that Bouriez’s investment was rendered worthless as
soon as CMU’s misrepresentations were revealed because the
entire value of Bouriez’s investment depended on the viability of
CMU’s technology. Thus, no “lapse of time” existed between the
revelation of the misrepresentations and Bouriez’s loss.
Although CMU and the District Court point to the presence
of “other factors,” such as the alleged diversion of Bouriez’s funds,
the above evidence, at a minimum, establishes a genuine issue of
material fact that CMU’s misrepresentations were at least one
substantial factor in causing the initial injury to Bouriez. See
Jefferson Bank, 965 F.2d at 1284 (“‘Pennsylvania law has long
recognized that this substantial factor need not be . . . the only
factor. . . .”’ (quoting Jones v. Montefiore Hosp., 431 A.2d 920,
923 (Pa. 1981))). Notably, even deducting the alleged diversion of
$1.35 million from the $2.85 million “shortfall” leaves another
“shortfall” of $1.5 million. CMU has not offered a cause for this
shortfall; it simply attributes it to “other factors.” Such vague
references to other contributing forces are insufficient to validate
the District Court’s proximate cause analysis; CMU’s argument
merely raises a “superseding cause” defense.4

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are whether the force is operating independently of any situation
created by the first actor’s negligence and whether it is or is not a
normal result of that situation.”) (citing Restatement (Second) Torts
§ 442(c)). Importantly, the defendant bears the burden of proving
the existence of any superseding cause. Hill v. Reederei F. Laeisz
G.M.B.H., Rostock, 435 F.3d 404, 421 (3d Cir. 2006). Moreover,
“[i]t is for a jury to determine whether an act is so extraordinary as
to constitute a superseding cause.” Feeney v. Disston Manor Pers.
Care Home, Inc., 849 A.2d 590, 595 (Pa. Super. Ct. 2004); see also
Frey v. Smith, 685 A.2d 169, 173 (Pa. Super. Ct. 1996) (“[W]hat
the original actor should have realized and what a reasonable man
would say was highly extraordinary are, of course, fact questions
which must in the majority of the cases be left to the jury.” (citation
and quotation omitted)).
Because the question of whether the diversion of Bouriez’s
funds – or “other factors” – “was so extraordinary as not to have
been reasonably foreseeable,” as well as the question of
“reasonableness” itself, are normally left to the jury, these issues
are not typically resolved at summary judgment. Feeney, 849 A.2d
at 595 (quotation marks and citation omitted); Frey, 685 A.2d at
173. Perhaps recognizing this, CMU did not raise a “superseding
cause” defense on appeal. We therefore do not consider whether
the alleged diversion or “other factors” constitute a superseding
cause that relieves (or partially relieves) CMU from liability. At
this time, we merely hold that Bouriez has presented sufficient
evidence to defeat CMU’s motion for summary judgment.
CMU argues that Governors’ legal fees are irrelevant5
because Bouriez is not entitled to recover legal fees. Although it
is true that the American Rule precludes Bouriez from recouping
the legal fees he incurs in this action, it does not prevent him from
recovering the total damages – subject to mitigation – that he
suffered as a proximate cause of CMU’s misrepresentation. This
14
Finally, we note that CMU’s satisfaction of the arbitration
award is relevant to the present lawsuit, but only to the extent that
it mitigates Bouriez’s damages. Governors’ dissolution prevents
the return of Bouriez’s full investment because Governors must
first pay its legal fees and business expenses. The remaining funds5

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issue requires further factual development.
The District Court also relied heavily on securities cases to6
support its proximate cause analysis. We hold that these cases,
though relevant, do not support the District Court’s conclusion.
Proximate causation is analogous to the concept of “loss causation”
in the securities context. To prove “loss causation,” a plaintiff
must show that “the revelation of [the defendant’s]
misrepresentation or omission was a substantial factor in causing
a decline in the security’s price, thus creating an actual economic
loss for the plaintiff.” McCabe, 494 F.3d at 425-26 (emphasis
added). Like the concept of “proximate cause” in common law
fraud cases, “[t]he loss causation requirement limits the
circumstances in which an investor can sue over a failed
investment, so that the individual allegedly responsible for the
misrepresentation or omission does not become an insurer against
all the risks associated with the investment.” Id. at 425 n.3.
Instead, liability extends only when the loss is foreseeable. Id. at
15
must be distributed proportionally amongst Governors’
shareholders (Bouriez owns approximately 23 percent of
Governors’ shares). Thus, Bouriez only expects to receive $2.15
million of his $5 million failed investment from Governors, leaving
him with a loss of $2.85 million. This distribution does not affect
the $5 million injury that CMU actually caused to Bouriez, but can
be used to mitigate the ultimate damages award if liability is
proven.
We acknowledge that this result may make the cumulative
amount of damages to Governors and Bouriez exceed the total
funds that CMU received for the development of microwave
technology. Contrary to the District Court’s rationale, however,
CMU would not be making a “double payment” if it is found liable
– it would simply be compensating all injured parties harmed by its
wrongful conduct. This result is fully consistent with the
“proximate cause” doctrine, which is only intended to prevent
liability for unforeseeable or extraordinary consequences of one’s
actions. See, e.g., Gibbs v. Ernst, 647 A.2d 882, 891 (Pa. 1994)
(noting the importance of foreseeability to the concept of proximate
cause). If CMU made misrepresentations to both Bouriez and6

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430-31. Here, Bouriez presented sufficient evidence to
demonstrate that the revelation of CMU’s misrepresentations was
a substantial factor in causing his investment in Governors to lose
value. See id. at 425-26.
16
Governors, thus causing two separate injuries, CMU will not be
able to avoid its liability to Bouriez by compensating Governors for
its separate loss.
IV.
For the foregoing reasons, we will vacate the District
Court’s grant of summary judgment in favor of CMU, and will
remand the case for further proceedings consistent with this
opinion.

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