A federal jury in the District of Massachusetts handed a complete victory to Quinn Emanuel’s client, Peter Kruskall, on common-law fraud and contract reformation claims brought by Andre Crawford-Brunt, an investor in the artificial intelligence company that Mr. Kruskall co-founded as chief technology officer.
In 2013, MIT graduate Peter Kruskall and a co-founder launched Kensho Technologies, Inc., an artificial intelligence startup serving the financial industry, which was later acquired by S&P Global, Inc. for a purchase price of more than half a billion dollars. In 2014, Mr. Crawford-Brunt, then the Head of Global Equity Trading at Deutsche Bank, purchased an approximately 2% stake in Kensho from the company’s founders.
In 2017, Mr. Crawford-Brunt filed a lawsuit against Mr. Kruskall in the U.S. District Court for the District of Massachusetts, in which Mr. Crawford-Brunt demanded additional shares of Kensho based on allegations of common-law fraud and unilateral mistake. Mr. Crawford-Brunt alleged that when he purchased his shares in 2014, he was falsely told that the shares represented two percent of the company’s total equity calculated on a fully diluted basis, rather than just two percent of the outstanding common stock, and that the existence of previously-issued dilutive instruments (including convertible notes, options, and warrants) were not properly disclosed to him. Mr. Crawford-Brunt also asserted that Mr. Kruskall’s co-founder had misrepresented the valuation that Kensho’s main strategic investor had attributed to the company. Based on these allegations, Mr. Crawford-Brunt alleged that he was entitled to receive significantly more shares of Kensho from both founders, which would have been worth more than $40 million at the time of the S&P acquisition. The case was assigned to Chief Judge F. Dennis Saylor.
Mr. Kruskall was represented by two Massachusetts law firms before engaging Quinn Emanuel. He retained Quinn Emanuel in late 2021 after the Court issued a series rulings in Mr. Crawford-Brunt’s on the proper measure of damages, Mr. Kruskall’s motion for summary judgment, and other motions in limine.
In the months remaining before trial commenced, Quinn Emanuel vastly expanded the record through independent fact gathering and by obtaining discovery produced in parallel litigation. Meanwhile, the Quinn Emanuel team filed and won a series of pretrial motions that excluded key exhibits relating to liability and damages. The six-day jury trial began on 16, 2022, and concluded on June 27.
During Quinn Emanuel’s cross-examination of Mr. Crawford-Brunt, he admitted for the first time that he knew of the allegedly undisclosed convertible note issued to Kensho’s main strategic investor and knew that the purchase price and ownership percentage of his investment in Kensho did not take into account any shares that could be issued pursuant to the note. These admissions were fatal to the plaintiff’s claims, because they demonstrated that he could not have reasonably believed that his investment was based on the “fully diluted” number of shares in Kensho; rather, it was truthfully represented to the plaintiff that he was purchasing 2% of the issued and outstanding shares of the company.
The Quinn Emanuel team also focused heavily on the credibility of Mr. Crawford-Brunt’s testimony about what he had been told and the lack of documentary evidence supporting his recollections. After Mr. Crawford-Brunt took the stand, his cross-examination revealed significant inconsistencies in his testimony. For example, Mr. Crawford-Brunt purported to have a verbatim recollection of meetings that he had previously admitted he could not remember well, if at all. Since no documentary evidence supported Mr. Crawford-Brunt’s allegation that his investment was based on Kensho’s “fully diluted” equity, these challenges to his credibility seriously undermined his case. Quinn Emanuel’s cross-examination also highlighted that Mr. Crawford-Brunt was a sophisticated investor who failed to conduct meaningful due diligence before deciding to invest. Third-party witnesses corroborated the truthfulness of what Mr. Crawford-Brunt had been told about Kensho’s capital structure and the terms of a prior investment by Kensho’s main strategic backer.
Quinn Emanuel’s direct examination of Mr. Kruskall highlighted that he was a young, hard-working engineer who had designed and built Kensho’s hugely successful technology; that he had not personally negotiated the deal with Mr. Crawford-Brunt; and that Mr. Crawford-Brunt had bought his shares at a fair price. Mr. Kruskall did not suffer serious blows to his credibility during his cross examination.
In closing argument, the Quinn Emanuel trial team successfully argued that Mr. Crawford-Brunt was not a victim of fraud, but was merely seeking to add to the millions of dollars he had already made on his investment in Kensho, based on allegations that he could not substantiate. The jury returned a unanimous verdict in favor of Mr. Kruskall on all counts after deliberating for little over an hour.