GOULD VENTURES, LLC v. COOLEY, LLP
3:24-cv-09485
D.N.J.May 23, 2025Background
- Gould Ventures, LLC and Jason Gould (Plaintiffs) sued Cooley LLP and four of its current/former attorneys (Defendants) for nondisclosure and misrepresentations related to investments in Carbon IQ, Inc.
- Plaintiffs allege Defendants, acting as counsel for Carbon IQ and its CEO, failed to disclose known fraud allegations against the CEO (Cantey) and misrepresented the existence of Directors & Officers (D&O) insurance.
- Plaintiffs made a significant additional investment and accepted a board seat in Carbon IQ after these alleged nondisclosures and misstatements.
- When Cantey's fraud surfaced, Plaintiffs claimed damages including those from separate securities litigation involving another investor (Refinery Management), arguing these damages would not have occurred but for Defendants’ actions.
- The lawsuit includes claims for securities fraud, common law fraud, negligent misrepresentation, aiding and abetting fraud, breach of fiduciary duty, and legal malpractice.
- Defendants moved to dismiss all claims; the court addressed whether the complaint met heightened pleading standards and established duties between the parties.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Group Pleading/Individual Liability | Defendants acted jointly; Complaint sufficient. | No specific misconduct tied to individual defendants; group pleading fails. | Dismissed as to Mayhugh and Tu; Plaintiffs must specify acts. |
| Securities Fraud | Defendants had a duty to disclose client fraud and failed, inducing investment. | No direct duty/no contact or fiduciary relation; no actionable misrepresentation. | Dismissed; no duty to disclose or direct contact pre-investment. |
| Fraud/Negligent Misrepresentation | Defendants made false statement re: D&O insurance; omitted material facts. | No actionable false statement; no duty to disclose; reliance unreasonable. | Survives only as to Wang's D&O statement; rest dismissed. |
| Legal Malpractice/Breach Fid. Duty | Attorney-client/fiduciary relationship created by reliance on defendants' advice. | No such relationship—plaintiffs had own counsel; mere investor/board role. | Dismissed; no relationship or duty beyond arms-length dealings. |
Key Cases Cited
- Ashcroft v. Iqbal, 556 U.S. 662 (pleading standard for motions to dismiss)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (standard for well-pleaded factual allegations)
- Basic Inc. v. Levinson, 485 U.S. 224 (materiality standard for securities fraud)
- Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308 (pleading scienter under PSLRA)
- Shapiro v. UJB Fin. Corp., 964 F.2d 272 (duty to speak truthfully once statements are made)
- Lightning Lube, Inc. v. Witco Corp., 4 F.3d 1153 (New Jersey common law duty to disclose in fraud)