This section contains the nature of the case and procedural background.

Medtest (D) had a single asset; a self-administered cervicovaginal cytology testing process. Manning devised the process and West, a lawyer, formed Medtest to obtain a patent and undertake development to make the process commercially attractive. Manning held 31% of the stock and West had 26%. In 1982, Manning sold some of his stock to Pommer (P) for $200,000 in total for a 3% share of the company. P eventually sued for fraud in that West had told them there was a patent on the process when they bought their stock and that Abbott Labs was negotiating to purchase the asset for 50-100 million. None of these statements on their absolute face were true. The jury returned a verdict for P of $300,000 and the judge set aside the verdict and entered judgment for Ds; none of the representations made to Ps were materially false. This appeal resulted.

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