Opinion ID: 6986345
Heading Depth: 2
Heading Rank: 2

Heading: Allegation Two: Conflict Of InteRest

Text: The second amended complaint also alleges that Appellees violated Section 14(a) when they did not disclose that Appellee Jordan had a conflict of interest. Jordan served as “Director Emeritus” of the Pittsburgh High Technology Council (the “Council”) while he was a director of CMD. The Council’s raison d’etre was to lure high technology businesses away from areas like California, where CMD resides, to Jordan’s home town of Pittsburgh, Pennsylvania, where FORE Systems is located. Since the complaint contains no facts demonstrating that Jordan personally or financially benefitted from FORE Systems’ purchase of CellAecess, the district court concluded that there was no conflict of interest. Desaigoudar disagrees. She claims that a conflict can exist without a personal or financial benefit to the conflicted, such as when a “director appears on both sides of a transaction.” Appellant’s Opening Brief at 16. In support, she cites a law review note 7 and the American Bar Association Model Business Corporation Act, ¶8.60 (3rd ed.1997) (the “Model Act”). She makes no suggestion that either authority should be controlling. Moreover, the complaint does not indicate how Jordan’s presence on the Council placed him “on both sides” of CMD’s dealings with CellAecess. While suspicions might be aroused by the fact that Jordan and the president of FORE Systems served together on the Council, suspicious circumstances alone cannot satisfy Rule 9(b) or the PSLRA. See In re Silicon Graphics, 183 F.3d 970. The facts as Desaigoudar presents them do not suggest that Jordan arranged for CMD to terminate funding for CellAecess so that, seven months later, FORE Systems could purchase the company. In addition, the Council was not a party to and never had any financial interest in either the termination or the purchase. Jordan therefore had no discernable conflict for Appellees to disclose in CMD’s June and July 1995 proxy materials.