In reliance upon Flaherty and Collins the City of Ramsey built a ramp extension, including the facing wall for what Flaherty and Collins promised to build.
Rule 10b-5 of the SEC is good because it is the most succinct statement of how there can be misstatement [negligent or if intentional then fraudulent misstatement, leading to wrongly induce another to enter into a contract -- AND that the wrongful inducement can be by either an affirmative misstatement, or a failure to disclose a material fact that might be an influencing fact, if known by the counterparty. Wikipedia explains:
"Rule 10b-5: Employment of Manipulative and Deceptive Practices":
It shall be unlawful for any person, directly or indirectly, by the use of any means or instrumentality of interstate commerce, or of the mails or of any facility of any national securities exchange,
(a) To employ any device, scheme, or artifice to defraud,
(b) To make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, or
(c) To engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person,
in connection with the purchase or sale of any security."
In the case of TSC Industries, Inc. v. Northway, Inc.,[2] the word "material" was defined by the U.S. Supreme Court - "an omitted fact is material if there is a substantial likelihood that a reasonable shareholder would consider it important in deciding how to vote."
As many if not most of us know, opinions about what the law is or should be are only that - opinions - and if opinions did not differ, if law were science, there would never be litigation since each side would know "the law."
To me, it was a material omission by Flaherty and Collins to not have disclosed an intent in looking to gain an equity partner in its Indianapolis adventure, (the "Cosmopolitan by the Canal"), with the intent to not gain capital to make themselves more credit-worthy in Ramsey, but instead
to start a previously undisclosed further adventure,
to be yet another domino in their line which might fall and take other dominoes of risk with it, to wit expanding the Cosmopolitan property; something only recently disclosed publicly via the press in Indiana. Were I on council that situation would have been material to me on whether my city should take risks with the private-sector risk taker. "What are your other risks out there that could fail," is material, were I thinking of lending that Flaherty firm money - or going into any city credit-extension with them.
Were I on Ramsey's council, I would want to pin things down better, given this new factor, before going further, and if Flaherty and the Pittsburgh bank balk, particularly if the Pittsburgh bank had advanced notice of the greater risk factor and co-participates in it, which may or may not be the case, but if they balk, the City should assure its position is adjusted favorably given the enhanced but undisclosed risk, or consider suing for reliance damages (cost of the ramp extension) and refuse to proceed.
Apparently now a signed contract is being offered by the other side, and earlier executory promises of Ramsey were induced without disclosure that Flaherty intended to spread itself thinner - Orland Park and another Flaherty local adventure were disclosed - beyond what had been said. This added Indianapolis risk, with the City's security being an issue, makes reliance upon a personal guarantee of Flaherty (and spouse) and Collins (and spoouse) as security less a good idea if personal guarnatees are being given for this new Indiana adventure of the two gentlemen.
That's my opinion, but not being on council I have no vote. But my additional opinion is that those on council owe me and all other Ramsey citizens the duty of fully exploring this question of enhanced riskiness with Goodrich and Bray, before voting to approve a written contract offered as the other side's wish for wording in furtherance of previous executory understandings and commitments.
Opinions can differ, and those on council may, as previously, be as headstrong as they wish. Or not.