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Mu Sigma Wins Illinois Supreme Court Reversal Dismissing Long-Running Investor Lawsuit
- Client News
- November 28, 2022
After nearly seven years of litigation, Paul, Weiss won a complete victory at the Illinois Supreme Court on behalf of privately held data analytics company Mu Sigma, Inc., and its founder and CEO, Dhiraj Rajaram. In a unanimous decision, the court reversed an Illinois Appellate Court decision that had reinstated fraud and breach of fiduciary duty claims brought by a former Mu Sigma investor, and affirmed the trial court ruling dismissing the case.
The case arose from a transaction that took place in 2010 when Mu Sigma repurchased the shares of its stock held by one of its early investors, Walworth Investments-LG, LLC. Walworth sued Mu Sigma in 2015, claiming that it had been defrauded into selling its stock because Mr. Rajaram had purportedly told one of Walworth’s principals before the transaction that Mu Sigma’s growth prospects “had severely dimmed” and that it was “moving from explosive growth to steady growth,” statements that Walworth alleged were false. Walworth asserted its claims despite having made a more than 600% profit on its investment in Mu Sigma in less than four years, and despite having agreed in the stock repurchase agreement that Mu Sigma and Mr. Rajaram had not made any representations to Walworth about Mu Sigma’s financial condition except as set forth in the agreement itself.
The case was a see-saw battle in the Illinois courts. Walworth originally survived a motion to dismiss and a motion for reconsideration but, after a new judge was assigned to the case, the trial court ultimately dismissed all of Walworth’s claims in 2019. In March 2021, the Illinois Appellate Court reversed and reinstated Walworth’s claims, finding that Walworth’s disclaimer of reliance on extra-contractual statements was “ambiguous” under applicable Delaware law. In a 33-page opinion, the Illinois Supreme Court unanimously reversed the appellate court’s decision and affirmed the trial court’s judgment dismissing the case.
The Paul, Weiss team included litigation partners Allan Arffa, who argued the appeal, Andre Bouchard and Jeffrey Recher, and counsel Robert Kravitz.