The Fifth Circuit and Texas Supreme Court both recently addressed limitations issues in commercial cases:

• Civelli v. JP Morgan Securities involved an investor’s claim that JP Morgan wrongly transferred certain shares of stock in an oil company. The Fifth Circuit declined to apply the discovery rule, stating: “Any injury incurred from the J.P. Morgan defendants’ alleged negligence in transferring the shares without plaintiffs’ consent arose at the time of the transfer. Because Civelli admits that he knew by February 2014 that they had transferred the funds, the rule of discovery does not apply.” No. 21-20618 (Jan. 11, 2023).
• Marcus & Millichap v. Triex Texas Holdings LLC was a suit against a real-estate broker about the sale of a gas station. The Texas Supreme Court held: “It is undisputed that Triex knew it was injured in December 2012. The question before us is whether the discovery rule defers accrual of Triex’s cause of action until it knew that Marcus & Millichap caused its injury. We hold that it does not.” No. 21-0913 (Jan. 13, 2023) (per curiam).

A dispute about “fee forfeiture,” in the broader context of fidiuciary-duty breaches by a company’s lawyer, led to this observation about the proper role of the Burrow v. Arce fee-forfeiture factors: “[T]there is no “windfall” given the record in this case. Hughes unfairly transferred PPI’s assets to Performance Probiotics, in breach of her fiduciary duty to PPI, and then used those assets to generate the fees at issue. That is, even though Hughes was paid by Performance Probiotics, she was effectively paying herself with funds that were rightfully PPI’s. We find no abuse of discretion in the district court’s award of fee forfeiture in this context as it accords with the general rule that disloyal agents must disgorge their ill-gotten gains.”  Thomas v. Hughes, No. 20-50671 (March 3, 2022).

Plaintiffs, businesses that supply information to credit bureaus, sued Lexington Law, a consumer-advocacy organization, for fraud in its preparation of demand letters by consumers. CBE Group v. Lexington Law Firm, No. 20-10166 (April 1, 2021). The Fifth Circuit affirmed JNOV for the law firm, observing problems with the plaintiff’s evidence of:

• A contract. “While Chavarria and Garza may have misunderstood the process through which Lexington Law would represent them (and that misunderstanding may have been prompted by the firm’s actions), they were still bound by the terms of an engagement agreement the validity of which is not in doubt.”
• Reasonable reliance. “Once Plaintiffs developed suspicions that the letters may not have been sent from consumers themselves, they incurred costs in investigating correspondence on their own accord rather than because of the FCRA or the FDCPA. Indeed, Plaintiffs’ internal policies require them to investigate and respond to dispute letters sent by consumers and third parties alike. Thus, Plaintiffs fraud claim falls short for the additional reason that they did not justifiably rely on any alleged misrepresentation.”

WickFire won a tortious-interference judgment against TriMax. It claimed that TriMax “committed ‘click fraud’ by repeatedly clicking on WickFire’s advertisements without any intention of making purchases,” which has the effect of driving up WickFire’s costs without any corresponding increase in revenues. The Fifth Circuit reversed, noting:

• Tortious interference with contract. “WickFire produced evidence that a third party had a deleterious financial effect on its bottom line. But as was the case in El Paso Healthcare System, the record here fails to indicate that WickFire’s damages occurred because a co-contracting party breached its agreement with WickFire.”
• Tortious interference with prospective business relations. “WickFire’s damages theory for this claim was grounded in the assertions that TriMax’s tortious conduct delayed the development of TheCoupon.co website by six months and that WickFire lost $334,000 in profits because of that delay. When WickFire’s damages expert was asked how he calculated that dollar figure, the expert said that he had ‘quantified those damages by calculating the amount of profits that [WickFire] lost because of the six-month delay.’ He did not testify as to how he performed that calculation, nor did he point to any data concerning the business generated by TheCoupon.co. This evidence is threadbare and conclusory.”

Wickfire LLC v. Woodruff, No. 17-50340 (Feb. 26, 2021).

Belliveau v. Barco, Inc., discussed yesterday as to its holding about veil-piercing, also found that the plaintiff had not established a fiduciary relationship with the defendants under Texas law. The Court examined:

• The general principle that “one party’s subjective belief” is insufficient to establish an attorney-client relationship;
• The inadequacy of “vague and conclusory” statements about the parties’ dealings to satisfy that standard (especially if later deposition testimony undermines those statements); and
• The long-standing principle that to establish an informal relationship of  “trust and confidence,” that relationship must have existed before the “agreement made
  the basis of the suit.”

No. 19-5017 (Jan. 28, 2021). The dissenting judge agreed with the majority on its analysis of this claim.

In a dispute about various licensing agreements, the Fifth Circuit found that Texas law’s requirements for piercing the corporate veil had not been satisfied:

“The evidence, when viewed as a whole, does not raise a fact issue regarding Barco’s dishonest purpose or intent to deceive Belliveau in entering into the Barco Sublicense. Piercing the corporate veil is not a cumulative remedy for creditors of corporate or other legal entities in Texas; that theory does not make owners of such entities codefendants for every breach of contract case. It is a remedy to be used when the actions of the entity’s owner amounting to ‘actual fraud’ have rendered the entity unable to pay its debts. The district court properly granted summary judgment on Belliveau’s claim to pierce the corporate veil.”

Specifically, the court reviewed (and rejected) arguments about the consideration exchanged in the licensing agreement, issues about disclosure, and a “badges of fraud” analysis under Texas’s fraudulent-transfer statute. Belliveau v. Barco, Inc., No. 19-50717 (Jan. 28, 2021). A dissent identified issues for trial on these matters.

All journeys must end, and at long last the journey of the transferee’s good-faith defense has ended in Janvey v. GMAG LLC: “This case requires us to determine whether the Texas Uniform Fraudulent Transfer Act’s … good faith affirmative defense allows Defendants-Appellees to retain fraudulent transfers received while on inquiry notice of a Ponzi scheme. We initially held it does not. We then vacated that decision so that the Supreme Court of Texas could clarify whether good faith requires a transferee on inquiry notice to conduct an investigation into the fraud, or, alternatively, show that such an investigation would have been futile. Having received an answer to our question, we once  again hold that the Defendants-Appellees’ good faith defense must fail.”  No. 17-11526 (Oct. 8, 2020).

Applying Fed. R. Civ. P. 9(b), the Fifth Circuit found no fraud claims stated in:

• Colonial Oaks Assisted Living v. Hannie Development, No. 19-30995 (Aug. 25, 2020): “The pleadings are devoid of allegations regarding what instructions the employees received, who gave the instructions, whether anyone followed the instructions, and whether Sellers were aware of the specific instructions given.
• Umbrella Investment Group v. Wolters Kluwer, No. 20-30078 (Aug. 25, 2020): “In this case, the only relevant fact that UIG has alleged beyond what little it alleges ‘on information and belief’ is that Wolters Kluwer provided ‘written certification that the property subject to the loan was not in a flood hazard area that required flood insurance under FEMA regulations pursuant to the Flood Disaster Protection Act of 1973.’ That fact alone can ground nothing more than speculation as to the cause of the error, and therefore, UIG has failed to state a claim for fraud.”

Phoneternet complained that an inaccurate report available on Lexis-Nexis caused the loss of a business opportunity (oddly enough, with the car company Lexus). The Fifth Circuit affirmed, holding (among other matters) as to their negligent-misrepresentation and promissory-estoppel claims:

“If Phoneternet believed the errors had already been corrected, there would have been no reason for Phoneternet to repeatedly call LexisNexis. In that case, Phoneternet would be asking LexisNexis to correct already accurate information. Moreover, to the extent Phoneternet did rely on LexisNexis’s alleged statement that all fifteen errors in the report had been “modified . . . as requested,” such reliance cannot be considered reasonable and justified. Given the alleged importance of this report—the only remaining obstacle between Phoneternet and a lucrative multimillion-dollar contract with Toyota—Phoneternet should have at least confirmed that the errors had been corrected before blindly relying on LexisNexis’s representation.”

Phoneternet LLC v. Lexis-Nexis, No. 19-11194 (June 3, 2020) (unpublished) (emphasis added).

The Texas Supreme Court’s recent opinion in JP Morgan Chase v. Orca Assets, 546 S.W.3d 648 (Tex. 2018) has significantly influenced commercial litigation, particularly with its focus on “red flags” about a questionable transaction. In Universal Truckload, Inc. v. Dalton Logistics, Inc., Ni. 17-20725 (Jan. 3, 2020), a promissory estoppel case, the Fifth Circuit observed: “[T[his case differs from JPMorgan in at least three crucial ways. First, the letter of intent at issue in JPMorgan was a binding contract signed by both parties. The [Indication of Interest (“IOI”] that Universal Truckload sent Dalton is expressly nonbinding. Second, the letter of intent in JPMorgan included a clause disclaiming any oral agreements. Universal Truckload’s IOI does not. And third, the letter of intent in JPMorgan directly contradicted the oral promise, and Universal Truckload’s IOI does not. The Supreme Court of Texas explained in JPMorgan, ‘there is no direct contradiction if a reasonable person can read the writing and still plausibly claim to believe the [oral] representation.’ The conditions laid out in the IOI explain what would need to happen if Universal Truckload was to enter a contract to purchase Dalton. But the jury did not find in favor of Dalton on a contract theory. Dalton succeeded on a promissory estoppel theory, which requires the absence of a contract.”

“The complaint alleges that during the April and October 2016 phone calls, the defendants negligently misrepresented to Mr. Dick that ‘reinstatement was not an option’ and that ‘there was nothing [the] Plaintiff could do to stop a foreclosure.’ The plaintiff’s claim that these misrepresentations prevented her from reinstating the loan merely repackages her claim for breach of contract based on the duty to cooperate. It is therefore barred by the economic loss rule.” Dick v. Colorado Housing Enterprises LLC, No. 18-10900 (July 5, 2019) (unpublished).

In Janvey v. GMAG, LLC, the Fifth Circuit returned to the “good faith” defense to a claim under the Texas Uniform Fraudulent Transfer Act – a defense that potentially allows an innocent third-party to retain the benefit of a transfer made by a debtor with intent to defraud creditors. The specific question was whether the Texas Supreme Court would accept a “futility” defense to inquiry notice, and the Court concluded that it would not: “No prior court considering TUFTA good faith has applied a futility exception to this exception, and we decline to hold that the Supreme Court of Texas would do so. Transferees seeking to retain fraudulent transfers might offer up evidence of undertaken investigations to prove a reasonable person’s suspicions would not have been aroused when the transfer was received. But the fact that a fraud or scheme is later determined to be too complex for discovery does not excuse a finding of inquiry notice and does not warrant the application of TUFTA good faith.” No. 17-11526 (Jan. 9, 2019).

Koerner sued CMR about problems with a roof; to support his fraud claim, he cited an email from a CMR superintendent after an inspection of the roof: “I did not disclose or offer any info on my findings [to Koerner] and simply left [Koerner] assured we are working on correcting his leak issue, after all he is a lawyer and I know they are sneaky :).” The Fifth Circuit was unimpressed, observing: “The email . . .  does not say that [the superintendent] did not intend to fix the other problems in addition to the leak. He just did not want to tell Koerner about them because he thought Koerner was a sneaky lawyer.” Koerner v. CMR Const. & Roofing, LLC, No. 18-30019 (Dec. 7, 2018).

IAS, an insurance claim-adjusting firm, acquired Buckley, another such firm. Litigation ensued after Buckley was unable to bring the business from a large client, QBE. The Fifth Circuit found that IAS stated a viable fraudulent-inducement claim under Fed. R. Civ. P. 9(b) as to “three alleged misrepresentations that it contends led it to enter into the asset purchase agreement: (1) Buckley’s statement that Buckley & Associates was QBE’s ‘number one’ vendor; (2) Buckley’s statement that Buckley & Associates’ revenue from QBE would continue to grow; and (3) the statement in § 2.3 of the purchase agreement that its execution would not ‘violate, conflict, [or] result in a breach of . . . any Contract . . . to which [Buckley & Associates] is a party.'” The Court’s analysis of the third factor is particularly informative, touching on recent Texas Supreme Court authority about waiver-of-reliance provisions (Italian Cowboy Partners v. Prudential Ins. Co., 341 S.W.3d 323 (Tex. 2011)) and “red flags” that can negate justifiable reliance. (JPMorgan Chase Bank v. Orca Assets GP, LLC, 546 S.W.3d 648 (Tex. 2018)). A dissent would not have found any of the representations fraudulent as pleaded. IAS Service Group v. Buckley & Assocs., No. 17-50105 (Aug. 17, 2018).

“Aetna’s reliance on any alleged misrepresentation by NCMC was not justifiable. Almost immediately after NCMC notified Aetna of its prompt pay discount, Aetna began investigating. Its investigation revealed NCMC’s billing practices. Yet Aetna continued to pay claims marked with the prompt pay discount moniker.” In support, the Fifth Circuit cited the recent and influential case of JPMorgan Chase v. Orca Assets,  546 S.W.3d 648 (Tex. 2018), and “promoted” the unpublished case of Highland Crusader Offshore Partners v. LifeCare Holdings, 377 F. App’x 422 (5th Cir. 2010), observing: “The panel recognizes that Highland Crusader is unpublished, and therefore not precedential, but we cite it here to show consistency throughout our case law.” North Cypress Medical Center v. Aetna, No. 16-20674 (July 31, 2018).

Fisk Electric, a subcontractor, sued the general contractor and its surety under the Miller Act, a “federal statute that requires general contractors to secure payment to subcontractors on most federal construction projects.” Fisk claimed it was The dispute involved the inducement into of a settlement agreement; the specific issue on appeal was “whether the party alleging fraud must engage in active investigation to satisfy the standard of justifiable reliance.” In something of a counterpoint to recent Texas cases such as JP Morgan Chase v. Orca Assets, No. 15-0712 (Tex. March 23, 2018), the Court concluded that it was not, and Fisk was entitled to rely on the general contractor’s representations in these particular negotiations. Fisk Elec. Co. v. DQSI LLC, No. 17-30091 (June 29, 2018).

Donald Rumsfeld unforgettably spoke about known unknowns. The Fifth Circuit engaged that general concept in Bartolowits v. Wells Fargo, in which the plaintiff claimed that a lender “misrepresented the amount [plaintiff] owed and its security interest in his property to a state court in seeking a foreclosure order.” But on the issue of  “whether Wells Fargo committed fraud by claiming the right to foreclose on unsecured property,” the Court found that he could not have justifiably relied on this statement “because he knew that Wells Fargo lacked a security interest in some of the property it sought to foreclose upon” (indeed, at the time, the plaintiff denied Wells’s allegations and notified Wells of the error). In sum: “There is no justifiable reliance when the misrepresentations contradict a fact known by the plaintiff.” No. 17-10434 (April 4, 2018, unpublished).

The plaintiff won a multi-million dollar lawsuit about the sale of Akaushi cattle (example, to right), a specialty breed from Japan valued for its exceptional flavor, and made difficult to acquire as a result of export restrictions on what Japan regards “as a national treasure.” The Fifth Circuit affirmed in large part, reaching these holdings of broader interest:

• The jury found that the defendant “committed fraud by misrepresenting ‘that it intended to sell to [Plaintiff] 30% of its calves and that it would comply with the restrictions in the 2010’ Full-Blood Contracts” that set a number of specification s about registration, marketing, etc. Because “Texas courts have upheld fraud claims based on representations with less specificity,” the defendant’s sufficiency challenge was rejected.
• Despite testimony about millions of dollars in potential harm, the actual judgment awarded equitable relief. Because “the district court’s equitable remedy protected [Plaintiff] from actual harm[, its] harm is limited to presumed harm, and that is insufficient under Texas law to justify an award of punitive damages” in addition to the equitable relief.
• In affirming a calculation made in connection with the equitable remedies, the Court reminded of “the purpose of the law of disgorgement[,] under which ‘a disgorgement order might be for an amount more or less than that required to make the victims whole.'”

Bear Ranch LLC v. Heartland Beef, Inc., No. 16-41261 (March 20, 2018).

The receiver for the Allen Stanford businesses alleged that Stanford Coins and Bullion made fraudulent transfers to Dilllon Gage, a wholesaler of coins and precious metals. The receiver lost at trial and the Fifth Circuit affirmed in Janvey v. Dillon Gage, Inc., No. 15-1121 (May 5, 2017). The Court noted conflicting evidence about SCB’s subjective belief as to its ability to pay all creditors, supported by objective evidence about its saleable inventory at the relevant time. The Court also found no reversible error in a jury charge that did not expressly define “intent,” or in the instructions given on other aspects of a fraudulent transfer claim under Texas law.

At issue in Meadaa v. Karsan (a case on a return trip to the Fifth Circuit) was whether investors were misled into believing they would acquire an ownership interest in a hotel, or whether the relevant statements were “an unfulfilled future promise.” The Fifth Circuit affirmed a finding that the statements were false and actionable under Louisiana law, noting the combined force of the sellers’ oral representations and followup letters to investors “specifying their individual interests in” the relevant company. No. 15-30413 (May 18, 2016).

Appellant “Why Not LLC” (unfortunately, not the appellee, despite the perfect name for that side of an appeal) complained of a frozen yogurt franchise termination by Yumilicious. The district court granted summary judgment on Why Not’s many causes of action, and the Fifth Circuit affirmed, principally on grounds relating to Yumilicious’s lack of intent and the terms of the franchise agreement. In the course of doing so, the opinion offers a primer on commonly-litigated issues about basic business torts in Texas. The Court observed that Why Not’s pleading had presented “a large serving of claims and counterclaims piled precariously together,” and concluded: “This saccharine swirl of counterclaims suggests that litigants, like fro-yo fans, should seek quality over quantity.” Yumilicious v. Barrie, No. 15-10508 (April 6, 2016). (The opinion is silent as to whether Why Not has any relation to the left fielder on Bud Abbott’s famous baseball team.)

A builder obtained a 6-figure judgment against an architect, for cost overruns and lost profits, resulting from the architect’s negligence.  Garrison Realty LP v. Fouse Architecture & Interiors, PC, No. 12-40764 (Oct. 21, 2013, unpublished).  The jury awarded distinct sums for negligence and negligent misrepresentation.  The Fifth Circuit found that the causes of action were duplicative in this context and reversed as to the inclusion of the smaller award in the final judgment. The Court also held that the defendant had waived an argument for a partial offset as a result of a prior lawsuit, finding that offset had not been pleaded as a defense, and that the plaintiff was prejudiced because it could have changed its trial proof had the issue been raised earlier.  (On the pleading issue, the Court noted that the defendant had alleged offset, but only claimed it was a bar “in whole” rather than “in whole or in part.”)

The borrower in Martin-Janson v. JP Morgan Chase alleged waiver and promissory estoppel claims arising from a foreclosure — claims which the Fifth Circuit has not encouraged in 2013 opinions.  Here, however, after reviewing the plaintiff’s five allegations about the specific statements made, the Court reasoned: “Based on the foregoing factual allegations, Martin-Janson asserts that she seeks discovery to reveal either the draft loan modification agreement that JPMorgan allegedly prepared, or the terms of her promised modification based on the lender’s standard formulae. In these ways, Martin-Janson argues, she would be able to prove that JPMorgan ‘promise[d] to sign a written agreement which itself complies with the statute of frauds,’  Viewing Martin-Janson’s factual allegations, and the reasonable inferences to be drawn therefrom, in the light most favorable to her, we conclude that she has pled a plausible promissory estoppel claim that potentially avoids JPMorgan’s statute of frauds defense.”  (citations omitted).  Accordingly, the Court reversed a Rule 12 dismisal of the promissory estoppel claim, while affirming as to waiver. No. 12-50380 (July 15, 2013, unpublished). 

Another 2013 mortgage case affirmed judgment for a mortgage servicer on contact, promissory estoppel and tort claims about an unsuccessful HAMP modification negotiation.  The holding of note is that the plaintiffs’ DTPA claim failed as a matter of law.  James v. Wells Fargo Bank, No. 12-10861 (May 3, 2013, unpublished). (quoting Montalvo v. Bank of America, 864 F. Supp. 2d 567, 595 (W.D. Tex. 2012) (“Texas federal courts have recently addressed DTPA claims like [plaintiff]’s claim and concluded that a person seeking a loan modification under the HAMP using a loan servicer is not a consumer under the DTPA.”)

A steady flow of mortgage servicing cases in 2013 continued with Smith v. JPMorgan Chase (March 22, 2013, unpublished).  In affirming summary judgment for the lender on several issues, the Court made two holdings of note.  First, an incomplete RESPA response, provided less than sixty days before suit was filed, could not support a contract or negligent misrepresentation claim when it caused no damage.  Second, the statement: “Defendants’ agents made harassing phone calls 8-10 times per day.  I quit answering our phone, but the constant ringing caused us to have to unplug our home phone and to only use our cell phones” did not raise a fact issue on a claim of unreasonable collection efforts, when “Defendants’ detailed call records, on the other hand, indicated that calls were not answered, phone numbers were disconnected, and messages were left, but, on days when there were multiple calls, only two calls were made.”

In the third mortgage servicing opinion of 2013, the Fifth Circuit affirmed the dismissal of contract, promissory estoppel, and tort claims under Texas law arising from the attempted negotiation of a loan modification during a foreclosure situation.   Milton v. U.S. Bank, No. 12-40742 (Jan. 18, 2013, unpublished); see also Gordon v. JP Morgan Chase (contract and estoppel claims under Texas law) and Pennell v. Wells Fargo Bank (negligent misrepresentation claim under Mississippi law).  The Court also found that this mortgagor-mortgagee relationship did not create an independently actionable duty of good faith, and that reliance on alleged representations that were inconsistent with the loan documents and foreclosure notice was not reasonable.  Id. at 5, 6.

The receiver for the Allen Stanford entities sued to recover $1.6 million in contributions to political committees as fraudulent transfers under Texas law.  Janvey v. Democratic Senatorial Campaign Committee, No. 11-10704 (Oct. 23, 2012).   The Fifth Circuit affirmed summary judgment for the receiver, holding: (1) notwithstanding some conflicting language in prior opinions, the receiver had standing to “maintain . . . actions done in fraud of creditors even though the corporation would not be permitted to do so”; (2) limitations ran from the discovery of the fraud, not the public disclosure of the payments under federal election law; and (3) TUFTA was not preempted by that law, noting its limited preemptive effect and the lack of a conflict as to election regulation.

The Court vacated its earlier panel opinion in Sawyer v. du Pont, which rejected claims of fraudulent inducement by employees who the Court concluded were “at-will.”  The issue of whether at-will employees can bring such claims (which here, also involves the application of a notice provision in the employees’ CBA with their employer), has now been certified to the Texas Supreme Court.  No. 11-40454 (July 27, 2012).  The Texas Lawyer Blog has some interesting insight on the procedural history of this ruling.

“What follows is the tale of competing mineral leases on the Louisiana property of Lee and Patsy Stockman during the Haynesville Shale leasing frenzy.”  Petrohawk Properties v. Chesapeake Louisiana at 1, No. 11-30576 (as rev’d Aug. 2012).  The Fifth Circuit affirmed a finding that one of the dueling leases was procured by fraudulent misrepresentations as to the legal effect of a lease extension, rejecting several challenges to whether such a representation was actionable under Louisiana law, as well as an argument that the fraud had been “confirmed [ratified].”  The Court also rejected a counterclaim for tortious interference with contract, noting that Louisiana has a limited view of that tort and requires a “narrow, individualized duty” between plaintiff and tortfeasor.  Id. at 20-24 (citing 9 to 5 Fashions v. Spurney, 538 So.2d 228 (1989)).

The bankruptcy case of Bandi v. Becnel involved a dispute as to whether a debt was nondischargeable because it arose from fraud, or whether it fell within an exception for statements about “financial condition” in 11 U.S.C. § 523(a)(2)).  No. 11-30654 (June 12, 2012).  The Court found that the phrase “financial condition” should be construed “to connote the overall net worth” of the debtor, and thus did not include “[a] representation that one owns a particular residence or a particular commercial property” because the property could be subject to liens or other liabilities.  Op. at 8.  The Court reviewed a substantial body of law from its prior opinions, other Circuits, and the Supreme Court about the intricacies of this statute and other related provisions of the Bankruptcy Code.

In Illinois Central Railroad Co. v. Guy, the Court reviewed a jury verdict that two lawyers had improperly induced a railroad into settling asbestos exposure claims.  No. 10-61006 (May 29, 2012).  The Court rejected jurisdictional challenges that were based on the Rooker-Feldman and Burford doctrines, finding sufficient distance between the facts of the case and the underlying state court proceedings.  Op. at 14, 16.  The Court also found sufficient evidence of affirmative acts of concealment, and due diligence by the railroad, to toll limitations, Op. at 20, although a dissent argued otherwise.  Op. at 27  (“I would reverse because doing nothing is not due diligence.”).  The Court rejected a waiver defense, distinguishing the defendants’ cases as arising when a fraud plaintiff accepted a benefit after it knew or should have known of fraudulent inducement.   Op. at 25.

In Grissom v. Liberty Mutual, the trial court awarded $212,000 in damages for negligent misrepresentation, based on the difference between the coverage a homeowner actually had at the time of Hurricane Katrina, and the coverage he could have had under a “preferred risk policy.”  No. 11-60260 (April 23, 2012).  The Fifth Circuit reversed on preemption issues unique to flood insurance as well as the viability of the claim itself, stating: “Because Liberty Mutual was not offering insurance advice, was not a fiduciary of Grissom, and did not offer any statement to Grissom to imply the lack of alternative insurance options, Mississippi law would not recognize negligent misrepresentation as a cause of action against Liberty Mutual . . . .”  Op. at 9-10.

In Amco Energy v. Capco Exploration (No. 11-20264, Jan. 30, 2012), the Court addressed two fundamental business tort issues.  The first involved a professional negligence claim about the evaluation of certain oil properties — the majority found that the professional’s contract did not extend to the matters complained of and thus created no professional duty, while the dissent “cannot fathom how one can conclude that there was no contract” for those matters.  Op. at 8, 10, 23.   The second found a contractual disclaimer of reliance that defeated a fraud claim, continuing the recent development of law on that issue in Italian Cowboy Partners, Ltd. v. Prudential Ins. Co., 341 S.W.3d 323, 333 (Tex. 2011) and LHC Nashua Partnership Ltd. v. PDNED Sagamore Nashua LLC, 659 F.3d 450, 460 (5th Cir. 2011).  Op. at 17.

Bohnsack v. Varco presented a post-judgment appeal of successful claims for fraud and misappropriation of trade secrets about an oil drilling device called the “Pit Bull.”  No. 10-20741 (Jan. 23, 2012).  The Court ruled: (1) the evidence was sufficient to hold the defendant liable for statements of its outside counsel, to show that those statements were a “material factor” to the plaintiff, and to establish injury from lost profits (op. at 13-16); (2) the fraud damages awarded were benefit-of-the-bargain damages, not compensable under common-law fraud (op. at 16-20 (discussing Haase v. Glazner, 62 S.W.3d 795 (Tex. 2001))); (3) fraudulent inducement failed because the defendant’s statements only induced negotiations, not entry into a contract (op. at 22); and (4) the damages were compensable as misappropriation of a trade secret, under the broad definition of “use” in Texas law, and in light of damages evidence sufficient to show “the value a reasonably prudent investor would pay for the trade secret.”  Op. at 25-26.

The case of LHC Nashua Partnership Ltd. v. PDNED Sagamore Nashua LLC presented several liability and damages issues in a contract case arising from a real estate development project.  While nominally applying New Hampshire law, the Court addressed Texas law because it did not materially differ on the key points.  Op. at 8.  The Court’s holdings included these: a promissory estoppel claim was not actionable given the scope of the parties’ written contract, op. at 9-10; the plaintiff offered sufficient evidence of justifiable reliance on alleged misrepresentations, op. at 11-13; and a merger clause in the parties’ agreement did not foreclose the misrepresentation claim, op. at 13-14.  The Court’s analysis of the merger clause focused on the recent Texas Supreme Court case of Italian Cowboy Partners v. Prudential, which substantially clarified Texas law in that area.  The Court affirmed an award of reliance damages but reversed an award of $25 million in lost profits, stating that the contract induced by fraud “contemplated a future closing transaction”; therefore, “[Plaintiff] cannot recover lost profits flowing from an agreement to purchase property that never closed due to the failure of that agrement’s express conditions.”  Op. at 21-23.