Case Title: Knightek, LLC v. Jive Communications, Inc.

Citation: 

Docket Number: 

State: delaware

Court: Delaware Supreme Court

Date: 2020-01-27T00:00:00Z

Document:
IN THE SUPREME COURT OF THE STATE OF DELAWARE 
 
KNIGHTEK, LLC,  
 
 
§ 
 
 
 
 
 
 
§  
No. 570, 2018 
 
Plaintiff Below, 
 
 
§  
 
 
Appellant,  
 
 
§  
Court Below: Superior Court 
§  
of the State of Delaware 
v. 
 
 
 
 
§ 
 
 
 
 
 
 
 
 
§ 
C.A. No. N18C-04-260  
JIVE COMMUNICATIONS, INC., 
§ 
 
     
 
 
 
 
 
 
 
§ 
 
     
Defendant Below,   
 
§ 
 
 
Appellee. 
 
 
 
§ 
 
 
 
 
 
 
 
Submitted:  November 20, 2019 
Decided:  
January 27, 2020 
 
Before SEITZ, Chief Justice; VALIHURA, VAUGHN, TRAYNOR, Justices; and 
SLIGHTS, Vice Chancellor,* constituting the Court en Banc. 
 
Upon appeal from the Superior Court.  REVERSED. 
 
Ryan P. Newell, Esq., (argued) Lauren P. DeLuca, Esq., CONNOLLY 
GALLAGHER LLP, Wilmington, Delaware; Attorneys for Plaintiff-Appellant 
KnighTek, LLC. 
 
Rudolf Koch, Esq., Robert L. Burns, Esq., (argued) Nicole K. Pedi, Esq., 
RICHARDS, LAYTON & FINGER P.A., Wilmington, Delaware; William Trach, 
Esq., LATHAM & WATKINS LLP, Boston, Massachusetts; Attorneys for 
Defendant-Appellee Jive Communications, Inc.   
 
 
SEITZ, Chief Justice:     
 
 
 
 
 
* Sitting by designation under Del. Const. art. IV, § 12. 
2 
 
 
 
As alleged in the complaint, when Erik Knight sold KnighTek, LLC to Jive 
Communications, Inc., Jive agreed to pay Knight $100,000 upfront and a revenue-
based payment stream capped at $4.6 million.  The continuing payments would 
convert to a lump sum payment if Jive’s ownership changed.  Years later, Jive 
offered to cash out KnighTek for $1.75 million, a substantial discount from the 
remaining cap amount.  According to Knight, Jive’s representatives told him the 
buy-out money depended on KnighTek accepting the proposal right away.  If it did 
not, Jive would use the funds for other buyouts.  Jive’s representatives also told 
Knight if he turned down the offer, it would take five years for Jive to make the 
remaining payments.  Two days after KnighTek agreed to accept $1.75 million, Jive 
announced publicly it was being acquired by LogMeIn for $342 million—a change 
of control that according to KnighTek would have netted it a $2.7 million immediate 
payment under their earlier agreement. 
 
Believing it had been misled and shorted about $1 million, KnighTek filed 
suit against Jive, alleging that Jive fraudulently induced KnighTek to take the 
discounted payout.  According to KnighTek, Jive and its representatives knew about 
the imminent change of control, misrepresented the availability of buyout funds, and 
duped KnighTek into accepting a discount when KnighTek could have received 
almost $1 million more and an immediate payment after the LogMeIn transaction.   
3 
 
 
 
The Superior Court dismissed the complaint.  As the court held, some of Jive’s 
alleged misrepresentations lacked particularity and others failed to state a claim 
under Utah law, the law governing their agreements.  We disagree, and find that, 
viewing the complaint in the light most favorable to KnighTek, accepting as true its 
well-pleaded allegations, and drawing all reasonable inferences that logically flow 
from those allegations, KnighTek alleged fraud with sufficient particularity and 
stated a claim for fraudulent misrepresentation under Utah law.  Thus we reverse the 
Superior Court’s dismissal and remand to the Superior Court for further proceedings. 
I. 
 
As alleged in the complaint, in March 2014, Jive purchased certain 
communication equipment and services businesses from KnighTek and a related 
entity.  Under the Asset Purchase Agreement, KnighTek received $100,000 up front, 
payments based on future revenues subject to a $4,616,063.10 Cap Amount,1 and 
warrants for 15,000 shares of Jive common stock if Jive met certain revenue goals.  
A related Agency Agreement accelerated the unpaid balance up to the Cap Amount 
                                          
 
1 The parties dispute the amount owed.  KnighTek alleged that the Cap Amount, as defined under 
the Agency Agreement, was $4,616,063.10.  App. to Opening Br. at A13 (Complaint ¶ 13, n.1 
(hereinafter “Compl.”)).  Jive disputes this figure and points out that the Agency Agreement 
defines the Cap Amount as the product of certain financials, but “it does not state the Cap Amount 
directly.”  Appellee’s Answering Br. at 7–8 (citing App. to Opening Br. at A57).  This Court need 
not determine the correct amount of the Cap Amount to resolve this appeal. 
4 
 
 
upon any “Change of Control,” which included a sale of substantially all of Jive’s 
assets or a change in more than 50% of Jive’s ownership.2 
 
In September 2017, Knight, the sole owner of KnighTek before Jive’s 
acquisition, contacted Jive to ask whether Jive would consider an accelerated lump-
sum payment in return for a discount on the remaining Cap Amount.  Jive declined 
Knight’s proposal.  Several months later, however, Jive’s management changed their 
mind.  On January 25, 2018, Jive’s Vice President of Finance, Samuel Simmons, 
sent Knight an email offering to accelerate the unpaid balance of the Cap Amount in 
exchange for a discount.  Simmons initially proposed discounting the $2,748,442.89 
owed to a $964,928 lump-sum payment.3  “[I]nstill[ing] a sense of urgency,” 
Simmons also wrote that “[t]he proposal outlined above is based on availability of 
funds across multiple acquisitions and with a goal to complete by the end of January 
2018.”4 
 
Negotiations between Simmons and Knight moved quickly.  According to the 
complaint, “Simmons repeatedly emphasized that Jive had limited funds and that 
Jive was considering several other discount acceleration requests from other 
businesses that Jive had acquired.”5  For example, in a January 25, 2018 email, 
                                          
 
2 App. to Opening Br. at A46, A52 (Agency Agreement); App. to Opening Br. at A13 (Compl. ¶¶ 
14–15). 
3 Id. at A14 (Compl. ¶¶ 19–20). 
4 Id. (Compl. ¶ 21). 
5 Id. (Compl. ¶ 22). 
5 
 
 
Simmons repeated his statement that he aimed to close “by the end of January” and 
stated that he was “juggling a number of other offers (some of which have already 
been accepted), so the sooner the better as availability of funds depends on who 
moves quickest and how beneficial the economics are.”6  Also, KnighTek alleged 
that at some point during negotiations Jive represented “that if he failed to 
immediately agree to a discounted lump-sum payment, he would have to wait more 
than five years before the Cap Amount due would be fully satisfied.”7 
 
According to the complaint, Jive had been negotiating a sale to another 
company, LogMeIn, the entire time, and Jive’s representatives knew about the 
acquisition while negotiating with Knight.  This sale transaction would trigger the 
“Change of Control” provision under the Agency Agreement, leading to an 
acceleration of the amount due under the Asset Purchase Agreement. 
 
After some back and forth on price, Simmons and Knight reached a tentative 
agreement.  On February 5, 2018, Simmons sent Knight an email stating that the Jive 
board agreed to buy out KnighTek’s interest for $1,750,000.  He emphasized again 
the need for speed: “I was able to get your buyout approved conditional on speedy 
completion, or they want me to move forward with someone else at this time given 
our goal date of the 31st that we’re a little behind on.”8  On February 6, after 
                                          
 
6 Id. at A14–15 (Compl. ¶ 23). 
7 Id. at A17 (Compl. ¶ 37). 
8 Id. at A15 (Compl. ¶ 24). 
6 
 
 
negotiating other terms, the parties executed the Acceleration Agreement.  Jive 
wired $1,750,000 to KnighTek on February 7. 
 
On February 8, a press release announced that LogMeIn was acquiring Jive 
for $342 million.  According to the complaint, “[t]he preparation necessary to 
negotiate a large-scale acquisition of a company such as Jive requires weeks, if not 
months, of lead time.”9  After learning about the LogMeIn acquisition, KnighTek 
filed suit against Jive in the Superior Court for rescission of the Acceleration 
Agreement based on fraudulent misrepresentation and fraudulent concealment.  The 
dispute is governed by Utah law.10  The crux of KnighTek’s complaint is that “Jive 
intentionally misrepresented to [Knight] that if he failed to immediately agree to a 
discounted lump-sum payment, Jive would use its limited funds to pay other 
businesses that were willing to accept a discounted payoff of monies still due from 
their acquisition by Jive,” and that KnighTek “would have to wait more than five 
years before the Cap Amount due would be fully satisfied.”11 
 
Jive moved to dismiss under Superior Court Civil Rule 9(b) for failure to plead 
fraud with particularity and under Rule 12(b)(6) for failure to state a claim.  As the 
                                          
 
9 Id. at A16 (Compl. ¶ 32). 
10 The Acceleration Agreement contains a Utah choice of law clause, and the parties do not dispute 
that Utah law applies to KnighTek’s claims in this case. 
11 Id. at A17 (Compl. ¶¶ 37–38).  KnighTek also claimed that Jive owed it fiduciary duties because 
KnighTek was a Jive warrant holder, and that Jive was obligated to disclose the merger even in 
the absence of any misrepresentation.  See id. at A18–19 (Compl. ¶¶ 48–49). 
7 
 
 
Superior Court described it, Jive argued that “there is no well-ple[aded] allegation 
(1) of a false representation of presently existing fact, (2) that a ‘representor’ made 
a statement which they knew to be false or made recklessly, or (3) that KnighTek 
acted in a reasonable reliance.”12  The Superior Court granted Jive’s motion and held 
that KnighTek failed to plead a number of its allegations with particularity and that 
the remainder of the allegations failed to state a claim for fraud.   
 
As to particularity, the court found that, besides the statements expressly 
attributed to Simmons, the other alleged misrepresentations failed to meet the 
particularity requirement because they failed to name the individual who made the 
misrepresentations or the time and place they were made.13  For the representations 
attributed to Simmons, the court found that “they constitute forward-looking 
predictions, opinion-type statements or subjective opinions, not statements 
concerning a presently existing material fact.”14  Further, the court held that 
“nowhere in the [c]omplaint does KnighTek allege Simmons’[s] representations 
were false, that Simmons knew them to be false, or made them recklessly, knowing 
he had insufficient knowledge upon which to base such representation.”15  And 
finally, the court found that KnighTek waived its ability to enforce the Change of 
                                          
 
12 KnighTek, LLC v. Jive Commc’ns, Inc., 197 A.3d 493, 499 (Del. Sup. Ct. 2018).  Jive also 
addressed KnighTek’s fraudulent concealment claim, which is not on appeal.   
13 Id. at 502.   
14 Id. at 502–03 (citation omitted). 
15 Id. at 503. 
8 
 
 
Control provision because the Acceleration Agreement extinguished any claim and 
it “got what it negotiated and bargained for.”16  In response to a motion for 
clarification by KnighTek, the Superior Court clarified that it dismissed KnighTek’s 
complaint with prejudice.17 
II. 
 
This Court reviews the Superior Court’s dismissal of KnighTek’s complaint 
de novo.18  “Dismissal is appropriate only if it appears with reasonable certainty that, 
under any set of facts that could be proven to support the claims asserted, the plaintiff 
would not be entitled to relief.”19  We must “view the complaint in the light most 
favorable to the non-moving party, accepting as true its well-pled allegations and 
drawing all reasonable inferences that logically flow from those allegations.”20  We 
may “not, however, simply accept conclusory allegations unsupported by specific 
facts, nor . . . draw unreasonable inferences in the plaintiff’s favor.”21 
 
 
                                          
 
16 Id. at 505. 
17 Opening Br. Ex. B. 
18 Clinton v. Enter. Rent-A-Car Co., 977 A.2d 892, 895 (Del. 2009).   
19 Id. (citing Feldman v. Cutaia, 951 A.2d 727, 731 (Del. 2008)) (internal quotations omitted).   
20 Id.   
21 Id.   
9 
 
 
A. 
 
KnighTek argues that the Superior Court erred when it dismissed its 
fraudulent misrepresentation claim.22  According to KnighTek, its complaint 
“addresses each element required under Utah law to adequately state a claim for 
fraudulent misrepresentation, including allegations specifying the time, place, and 
contents of Jive’s representations, the facts misrepresented, the identity of the person 
making the misrepresentations, and what Jive gained as a result of its malfeasance, 
as required under Rule 9(b).”23  KnighTek points to Jive’s misrepresentation of “its 
financial condition to cajole KnighTek to accept its discounted offer,” while 
knowing “that it was only days away from its February 7, 2018 announcement of its 
$342 million sale to LogMeIn which would trigger its obligation to pay KnighTek 
in full,” and its “repeated[] warn[ings]” that KnighTek “would not see full payment 
for at least another five years” even though the LogMeIn sale was imminent.24   
 
Jive responds that the Superior Court properly dismissed KnightTek’s 
complaint because the complaint “did not allege any false statements regarding 
presently existing material facts.”25  Jive argues that the complaint did not allege that 
                                          
 
22 KnighTek does not appeal the dismissal of the fraudulent concealment claim.  Oral Argument 
Video at 2:34–58, https://livestream.com/accounts/5969852/events/8882483/videos/199124463 
(“And just to avoid any confusion that may have arisen from the briefing, KnighTek is only 
pursuing its claim as to fraudulent misrepresentation.”). 
23 Opening Br. at 3–4.   
24 Id. at 4–5.   
25 Answering Br. at 4.   
10 
 
 
Simmons’s statements “were knowingly false,” and at any rate, the statements were 
“non-actionable opinion or puffery-type statements” or “forward-looking 
projection[s].”26  Jive also argues that the Superior Court correctly determined that 
certain of KnighTek’s allegations fail Rule 9(b)’s particularity requirement. 
B. 
 
Under Superior Court Civil Rule 9(b), when pleading fraud claims, “[t]he 
circumstances constituting fraud . . . shall be stated with particularity,” although 
“[m]alice, intent, knowledge and other condition of mind of a person may be averred 
generally.”27  Under the particularity requirement, a plaintiff must plead “the time, 
place, and contents of the false representations, as well as the identity of the person 
making the representation.”28    
 
We find that KnighTek has pled its fraud claim with sufficient particularity to 
meet the purpose of Rule 9(b)—“to enable an opponent to be informed of charges 
so as to be able to prepare a defense to them.”29  First, for Simmons’s alleged 
misrepresentations—that Jive had limited funds to buy out KnighTek and Jive was 
                                          
 
26 Id.   
27 Super. Ct. Civ. R. 9(b).   
28 Nutt v. A.C. & S., Inc., 466 A.2d 18, 23 (Del. Super. Ct. 1983) (internal quotations omitted); see 
also Browne v. Robb, 583 A.2d 949, 955 (Del. 1990) (“In cases of fraud the particularity required 
by Rule 9(b) includes ‘the time, place and contents of the false representations . . . .’” (quoting 
Nutt, 466 A.2d at 23)).   
29 Chesapeake and Potomac Tel. Co. of Md. v. Chesapeake Utils. Corp., 436 A.2d 314, 338 (Del. 
1981); see also Brown, 583 A.2d at 955 (“The entire purpose of Rule 9(b) is to put the defendant 
on notice so that he can adequately prepare a defense.”). 
11 
 
 
satisfying requests on a first-come, first-served basis—Jive does not contest the 
Superior Court’s finding that these alleged representations meet Rule 9(b)’s 
requirements.  The complaint attributes them to specific, dated emails from 
Simmons—providing the time, place, contents, and representor’s identity.30   
 
Second, we disagree with the Superior Court that KnighTek failed to allege 
the other misrepresentations with sufficient particularity.  The Superior Court 
decided that Jive’s alleged misrepresentations directed to the time KnighTek would 
have to wait to receive payment were deficient because KnighTek did not name the 
individual(s) who made the other representations or the time or place of the 
misrepresentations.31 
 
The 
complaint, 
however, 
attributes 
the 
alleged 
misrepresentation to “Jive.”32  While Jive is not a specific individual, when the 
complaint is read as a whole, the time, place, and individuals involved are set forth 
in the complaint.  According to the complaint, the misrepresentations occurred 
during the Acceleration Agreement negotiations;33 negotiations occurred with 
Simmons and Jive’s General Counsel;34 and they occurred over a short period of 
time, from January 25 to February 7 of 2018.35  The complaint also refers to 
                                          
 
30 KnighTek, 197 A.3d at 502. 
31 Id. 
32 App. to Opening Br. at A10 (Compl. ¶ 2), A17 (Compl. ¶¶ 37, 40).  
33 Id. 
34 Id. at A15 (Compl. ¶ 25), A14–15 (Compl. ¶¶ 20–24). 
35 Id. at A14 (Compl. ¶ 22), A16 (Compl. ¶ 30). 
12 
 
 
Simmons as speaking for Jive.36  While the complaint could have been more specific 
about the details of the alleged misrepresentations, we find that the allegations were 
sufficiently particular to put Jive on notice that at least Simmons made such 
misrepresentations during the Acceleration Agreement negotiations.  Thus, viewing 
the complaint in the light most favorable to KnighTek, we find that the complaint 
satisfies Rule 9(b)’s particularity requirement.   
C. 
 
The Superior Court also found that KnighTek failed to plead adequately 
fraudulent misrepresentation.  To state a claim for fraudulent misrepresentation 
under Utah law, a plaintiff must allege:  
(1) that a representation was made (2) concerning a presently existing 
material fact (3) which was false and (4) which the representor either 
(a) knew to be false or (b) made recklessly, knowing that there was 
insufficient knowledge upon which to base such a representation, (5) 
for the purpose of inducing the other party to act upon it and (6) that the 
other party, acting reasonably and in ignorance of its falsity, (7) did in 
fact rely upon it (8) and was thereby induced to act (9) to that party’s 
injury and damage.37 
Applying these requirements here, KnighTek must have alleged that the 
representations were false, concerned presently existing material facts, the 
                                          
 
36 Id. at A14 (Compl. ¶ 22) (“Mr. Simmons and [Knight] thereafter engaged in negotiations . . . in 
which Mr. Simmons repeatedly emphasized that Jive had limited funds and that Jive was 
considering several other discount acceleration requests from other businesses that Jive had 
acquired.”). 
37 Gold Standard, Inc. v. Getty Oil Co., 915 P.2d 1060, 1066–67 (Utah 1996); see also Pace v. 
Parrish, 247 P.2d 273, 274–75 (Utah 1952).  
13 
 
 
representor knew they were false, and KnighTek acted reasonably and in ignorance 
of their falsity.38   
i. 
 
Starting with the falsity issue, the Superior Court held that KnighTek did not 
allege that Simmons’s statements about Jive’s limited funds and satisfaction of a 
limited number of requests were false.39  We disagree.  Although the complaint does 
not use the words “this representation was false,” it does allege that Jive 
“misrepresented” those facts.40  To call something a “misrepresent[ation]” means 
that it is false.41  To hold otherwise would elevate form over substance—relying on 
the technical absence of a particular word when the actual words used convey the 
same meaning.42 
 
Further, a reasonable inference drawn from the complaint is that Jive was not 
short of cash and thus was not satisfying acceleration requests on a first-come, first-
served basis.  Instead, Jive made those misrepresentations to dupe KnighTek into a 
discounted payment when shortly thereafter KnighTek would be entitled to receive 
                                          
 
38 The Superior Court did not address the allegations attributed to Jive because it found that they 
did not meet the particularity requirement.  Because we find that they do meet the requirement, 
and we review this dismissal de novo, we consider these allegations on appeal. 
39 KnighTek, 197 A.3d at 503. 
40 See, e.g., App. to Opening Br. at A17 (Compl. ¶¶ 37–38).   
41 See Misrepresentation, Black’s Law Dictionary (11th ed. 2019) (“The act or an instance of 
making a false or misleading assertion about something, usu. with the intent to deceive.”). 
42 See Super. Ct. Civ. R. 8(f) (“All pleadings shall be so construed as to do substantial justice.”).  
14 
 
 
almost $1 million more.  The same reasoning applies to Jive’s alleged 
misrepresentation that KnighTek would have to wait five years to be paid the net 
Cap Amount.43 
 
The Superior Court also found the complaint deficient because KnighTek did 
not allege that Simmons knew his statements were false.  But the complaint alleged 
that “the officers and directors of Jive, including the individuals who negotiated the 
Acceleration Agreement with [Knight], knew at all relevant times that a Change of 
Control was imminent which would have required Jive to make full payment to 
KnighTek of the Cap Amount due.”44  It is not necessary under Rule 9(b) to plead 
knowledge or intent with particularity,45 and as an “individual[] who negotiated the 
Accelerated Agreement with [Knight],” that allegation includes Simmons.46   
 
KnighTek also alleged that Jive “intentionally” misrepresented its financial 
position and its intention to pay off other businesses—meaning the representor, Jive, 
intended to provide false information.47  The same is true for Jive’s representation 
that KnighTek would have to wait five years for a full payout.  KnighTek alleged 
                                          
 
43 Jive contests the importance of the merger announcement because an announcement would not 
have triggered the Change of Control provision.  Answering Br. at 13.  But Jive does not contest 
that the actual merger would have been the triggering event under the Change of Control provision, 
and the merger occurred on April 3, 2018, two months after the announcement.   
44 App. to Opening Br. at A16 (Compl. ¶ 35).   
45 See Super. Ct. Civ. R. 9(b) (“Malice, intent, knowledge and other condition of mind of a person 
may be averred generally.”).   
46 App. to Opening Br. at A16 (Compl. ¶ 35).  
47 Id. at A17 (Compl. ¶ 38). 
15 
 
 
that Jive “intentionally misrepresented,”48 and the individual negotiators knew “at 
all relevant times that a Change of Control was imminent.”49  A reasonable inference 
from those allegations is that the representations were false and that the representor 
knew they were false. 
ii. 
 
The Superior Court also held that Simmons’s representations did not concern 
any presently existing material fact.  Instead, the court found that these statements 
were “forward-looking predictions, opinion-type statements or subjective opinions,” 
which “do not constitute fraud” under Utah law.50   
 
Although subjective opinions and forward-looking predictions generally do 
not constitute actionable fraud under Utah law,51 there is a distinction between 
forward-looking predictions or opinions that are subject to uncertainty and 
predictions or opinions that the speaker knows are false.  For example, in Crookston 
v. Fire Insurance Exchange,52 a representative from the defendant insurance 
company told the plaintiff insureds that the insurance company was not yet in a 
                                          
 
48 Id. (Compl. ¶ 37). 
49 Id. at A16 (Compl. ¶ 35). 
50 KnighTek, 197 A.3d at 502.   
51 See Wright v. Westside Nursery, 787 P.2d 508 (Utah Ct. App. 1990) (finding that the defendant’s 
representation about a property’s value was not actionable as fraud because the evidence supported 
that the defendant’s valuation was done in good faith as it was consistent with property tax 
assessments and otherwise lacked evidence of bad faith). 
52 817 P.2d 789, 800 (Utah 1991).   
16 
 
 
position to settle certain claims, and he would include the plaintiffs in any settlement 
negotiations.  It turned out, however, that the insurance representative knew that he 
was prepared to settle and, contrary to his assurances, did so the same day without 
the plaintiffs’ involvement in an agreement with the loss payee.53  The Utah Supreme 
Court held that such evidence supported a jury’s finding that the insurance 
representative’s statements were actionable fraud.54 
 
In this case, KnighTek alleged that Simmons represented that “Jive had 
limited funds[,] . . . Jive was considering several other discount acceleration requests 
from other businesses,” and Jive’s “availability of funds depend[ed] on who moves 
quickest.”55  These representations, along with the allegations about the five-year 
wait as an alternative to a discounted payment, are no less representations 
concerning “presently existing material fact[s]” than the representations in 
Crookston.  Like the company in Crookston that represented the company’s 
readiness to settle certain insurance claims, Simmons represented that Jive’s position 
                                          
 
53 Id. at 793–95, 800.   
54 Id. at 800; see also Cerritos Trucking Co. v. Utah Venture No. 1, 645 P.2d 608, 611 (Utah 1982) 
(“The jurisprudence of this state has long recognized as actionable deceit a promise accompanied 
by the present intention not to perform it, made for the purpose of deceiving the promissee, thereby 
inducing him to act where otherwise he would not have done so . . . .”); Andalex Res., Inc. v. Myers, 
871 P.2d 1041, 1047 (Utah Ct. App. 1994) (“A misrepresentation of intended future performance 
is not a ‘presently existing fact’ upon which a claim for fraud can be based unless a plaintiff can 
prove that the representor, at the time of the representation, did not intend to perform the promise 
and made the representation for the purpose of deceiving the promisee.”).  
55 App. to Opening Br. at A14–15 (Compl. ¶¶ 22–23), A17 (Compl. ¶ 38) (“Jive intentionally 
misrepresented to [KnighTek] that if he failed to immediately agree to a discounted lump-sum 
payment, Jive would use its limited funds to pay other businesses that were willing to accept a 
discounted payoff . . . .”). 
17 
 
 
did not allow it to satisfy all acceleration requests.  Jive also represented that 
KnighTek would have a five-year wait for full payment if it did not accept the 
discount.  In both cases, the speaker made what could be construed as a forward-
looking statement but the representor knew it would not occur—in Crookston, the 
plaintiffs would be in settlement negotiations; here, Jive was juggling multiple 
acceleration requests with limited funds, and KnighTek would have to wait five 
years for payment if it did not accept the discount. 
 
Jive’s representations were objective and verifiable.56  They describe how Jive 
intended to use the funds and what would happen if KnighTek did not accept the 
discount quickly.  Viewing the facts in the light most favorable to KnighTek, the 
reasonable inference is that KnighTek’s allegations involve presently existing 
material facts. 
iii. 
 
Turning to whether KnighTek acted reasonably and in ignorance of the 
representations’ falsity, KnighTek alleged that it acted in ignorance of the 
representations’ falsity.57  The Superior Court found, however, that KnighTek did 
                                          
 
56 See Boud v. SDNCO, Inc., 54 P.3d 1131, 1135–36 (Utah 2002) (finding that a statement was an 
affirmation of fact if it was “objective in nature, i.e., verifiable or capable of being proven true or 
false,” as opposed to an opinion, which is subjective and open to reasonable disagreement). 
57 App. to Opening Br. at A17–18 (Compl. ¶¶ 42–43) (KnighTek “was purposefully kept in 
ignorance of the impending Change of Control” and “relied on Mr. Simmons’[s] 
misrepresentations and was thereby induced to sign the Acceleration Agreement.”).   
18 
 
 
not act reasonably.  According to the court, because KnighTek was negotiating at 
arm’s length with Jive, it “was obligated to take reasonable steps to inform itself 
with respect to its preexisting contractual rights”—the Change of Control 
provision.58  As the court held, the complaint did not allege that KnighTek performed 
any due diligence into whether the Change of Control provision might soon be 
triggered.59  As a result, the court concluded that “KnighTek cannot reasonably rely 
on a representation it failed to seek.”60  We disagree. 
 
The Superior Court correctly observed that Utah law, like the law of most 
jurisdictions, generally expects that a party engaged in arms-length contract 
negotiations will make reasonable inquiries of its contractual counter-party before 
committing to a final agreement.61  But a party need not make inquiry when the 
counter-party “knows [certain facts] to be necessary to prevent his partial or 
ambiguous statement of the facts from being misleading.”62   
The misrepresentations alleged in the complaint, taken together, support a 
reasonable inference that Jive led KnighTek away from any inquiry by intentionally 
concealing the LogMeIn sale negotiations and pressing for a quick decision on the 
                                          
 
58 KnighTek, 197 A.3d at 503. 
59 Id. at 503–04. 
60 Id. at 504. 
61 Id. at 503 (citing Sugarhouse Finance Co. v. Anderson, 610 P.2d 1369, 1373 (Utah 1980)). 
62 First Sec. Bank of Utah N.A. v. Banberry Dev. Corp., 786 P.2d 1326, 1330–31 (Utah 1990) 
(citing RESTATEMENT (SECOND) OF TORTS § 551 (1977)).   
19 
 
 
discounted cash-out proposal.  As noted earlier, Jive represented that its ability to 
pay depended on the availability of funds and KnighTek’s speed.63  The alternative 
to taking a discounted payment was to wait five years for full payment.64  These 
allegations raise a fair inference that, from KnightTek’s perspective, Jive could only 
make these representations truthfully if Jive were not contemplating an imminent 
Change of Control transaction that would trigger a right to full payment.   Because 
KnighTek reasonably relied on the truthfulness of Jive’s affirmative representations 
about the availability of funds and its alternative, the complaint raises a fair inference 
that KnighTek likewise reasonably relied on the implicit representation that there 
was no imminent Change of Control.  If these pled facts are proven, then KnightTek 
would have no reason or obligation to inquire whether any of those representations, 
express or implicit, were truthful.65  
                                          
 
63 App. to Opening Br. at A14 (Compl. ¶ 21). 
64 Id. at A17 (Compl. ¶ 37). 
65 See Pace, 247 P.2d at 276 (“Defendants suggest that the plaintiffs had no right to rely on the 
representations made by defendant, but were bound to make more careful and complete inquiry 
concerning such matters. . . . The full measure of the plaintiffs’ duty was to use reasonable care 
and observation in connection with these representations.  Having done so, it does not lie in 
defendant’s mouth to say that they were too gullible and shouldn’t have believed him.”).  In 
Sugarhouse Finance Co. v. Anderson, 610 P.2d 1369, 1373 (Utah 1980), the Utah Supreme Court 
found that a plaintiff is obligated “to take reasonable steps to inform himself” when dealing at 
arm’s length.  There, however, the court found that the plaintiff could not reasonably rely on the 
defendant’s alleged omissions when there was no duty to speak.  Id. at 1373–74 (plaintiff alleged 
fraud “in defendant’s failure to state . . . and in his failure to disclose”).  The case here is different.  
Rather than omissions, KnighTek relied on Jive’s affirmative representations and their necessary 
implications, which were strong enough to reasonably lead KnighTek astray from inquiring 
further.  Jive cannot claim later that KnighTek “shouldn’t have believed [it].”  Pace, 247 P.2d at 
276. 
20 
 
 
 
KnighTek and Jive are both sophisticated parties, there was a significant 
percentage of the Cap Amount in dispute, and having a contractual representation 
regarding future changes in control might have been more prudent and efficient.  But 
under these alleged facts and Utah law, KnighTek’s reliance on the truth of Jive’s 
assertions and the associated implication that there was not an imminent Change of 
Control—especially under Jive’s manufactured deadline—deserves a pleading stage 
inference of reasonableness.  
D.   
 
Finally, KnighTek argues that the Superior Court erred when it found that the 
Acceleration Agreement barred KnighTek’s fraud claim.  The Superior Court found 
that KnighTek waived its Change of Control rights by entering into the Acceleration 
Agreement because, under the agreement, the receipt of payment deemed all of 
Jive’s obligations “fully paid, discharged, satisfied, released and terminated.”66  The 
court held that any post-Agreement transaction was irrelevant because “KnighTek 
got what it negotiated and bargained for”—a lump sum payment immediately, which 
KnighTek believed was discounted, rather than future payments that KnighTek 
believed would be higher.67   
                                          
 
66 KnighTek, 197 A.3d at 505 (quoting App. to Opening Br. at A60 (Acceleration Agreement)). 
67 Id. 
21 
 
 
 
Under Utah law, however, “a release will be voidable if it was an integral part 
of a scheme to defraud.”68  Jive knew it would soon be liable for its entire obligation 
under the Change of Control provision, but misrepresented the circumstances to 
reduce its obligations prior to the merger.  The release of future obligations was 
necessary for the alleged fraud to benefit Jive.  And because KnighTek has 
adequately pleaded fraudulent misrepresentation under Utah law, the release would 
be void if Jive defrauded KnighTek. 
III. 
 
KnighTek’s complaint alleged adequately a claim for fraudulent 
misrepresentation, and the claim was not waived.  We reverse the Superior Court’s 
dismissal and remand for further proceedings consistent with this opinion.  
Jurisdiction is not retained. 
 
                                          
 
68 Ong Intern. (U.S.A.) Inc. v. 11th Ave. Corp., 850 P.2d 447, 453 (Utah 1993); see Lamb v. 
Bangart, 525 P.2d 602, 608 (Utah 1974) (“[A] contract clause limiting liability will not be applied 
in a fraud action.  The law does not permit a covenant of immunity which will protect a person 
against his own fraud on the ground of public policy.  A contract limitation on damages or remedies 
is valid only in the absence of allegations or proof of fraud.”).