Preview
FILED
5/17/2022 3:14 PM
FELICIA PITRE
DISTRICT CLERK
DALLAS CO., TEXAS
Martin Reyes DEPUTY
CAUSE NO. DC-21-11406
MILTON 635 GRAVOIS ROAD LLC, IN THE DISTRICT COURT
§§§§§§§§§§§§§§
635 GRAVOIS ROAD LEASING LLC, and
635 GRAVOIS ROAD REAL ESTATE,
LLC,
Plaintiffs,
V. 44TH JUDICIAL DISTRICT
TRT HOLDINGS, INC.,
RBR REAL ESTATE HOLDINGS, LLC,
BRIAN ZELMAN, and ADAM ZEITSIFF,
DALLAS COUNTY, TEXAS
Defendants.
DEFENDANTS’ REPLY IN SUPPORT OF THEIR
MOTION FOR SUMMARY JUDGMENT
Defendants TRT Holdings, Inc. (“TRT”), RBR Real Estate Holdings, LLC (“RBR”), Brian
Zelman (“Zelman”), and Adam Zeitsiff (“Zeitsiff’) (collectively, “Defendants”) file this reply in
support of their motion for summary judgment (the “Motion”).
I. INTRODUCTION
Plaintiffs’ kitchen-sink approach does nothing to change that they clearly and
unequivocally intended to and did disclaim any reliance on Defendants’ statements in the PSA’s
merger clause, Section 20.6.1 Plaintiffs’ response brief repeatedly misstates the applicable law
and suggests material factual issues exist Where they do not.
Here, only Section 20.6 is at issue. Plaintiffs spend a great portion of their response brief explaining why
1
both Section 9 and Section 20.6 are not effective disclaimer-of-reliance provisions. On May 13, 2022, Plaintiffs filed
a Second Amended Petition, which does not affect the arguments in the Motion. In note 9 of Plaintiffs” response brief,
they state the Second Amended Petition clarifies that the misrepresentations that they complain about “do not pertain
to the physical condition, construction or status of the land or improvements making up the Premises.” Defendants
agree that they are not moving for summary judgment on Section 9, nor does the Motion argue that Section 9 prevents
Plaintiffs’ fraud-based claims. See Mot at 1 1. The Motion cites Section 9 in the facts section as evidence that Plaintiffs
manifested an intent to disclaim reliance on Defendants’ statements in two separate places.
First, Plaintiffs argue the disclaimer of reliance is not clear and unequivocal because it
doesn’t list any specific representations or examples of representations, but the leading Texas
Supreme Court cases, Schlumberger and Forest Oil, do not impose such a requirement. Those
cases hold the exact opposite, stating that broad, “all embracing” disclaimers like the one here
indicate the parties 3“ clear intent” to disclaim reliance on each other’s representations. Second,
Plaintiffs wrongly argue the disclaimer itself had to be negotiated for that factor to militate against
them. But even the case law they rely on contradicts this argument. The fact that the parties
negotiated the PSA—a fact Plaintiffs concede—suffices for the negotiation factor.
Plaintiffs also concede the transaction was arm’s length, they are knowledgeable in
“business matters and real estate transactions,” and they were represented by legal counsel. In
light of their concessions and given the clear disclaimer, Plaintiffs cannot show they justifiably
relied on Defendants’ representations to support their claims, all of which arise in fraud. Summary
judgment is therefore appropriate.
II. ARGUMENTS AND AUTHORITIES
A. Disclaimer precludes plaintiffs’ claims
Plaintiffs correctly state that to determine if a disclaimer-of-reliance provision is binding,
the Court must consider whether: (1) the disclaimer language is clear; (2) the contract was the
product of an arm’s-length transaction; (3) the parties were knowledgeable in business; (4) the
complaining party was represented by counsel; and (5) the terms of the agreement were negotiated
rather than boilerplate. Italian Cowboy Partners, Ltd. v. Prudential Ins. C0. of America, 341
S.W.3d 323, 337 n.8 (Tex. 2011); Forest Oil, 268 S.W.3d at 60. Plaintiffs contest only whether
the disclaimer is “clear” and whether the terms of the agreement were negotiated rather than
boilerplate. Both present questions of law that Plaintiffs cannot overcome.
DEFENDAN TS’ REPLY IN SUPPORT OF THEIR MOTION FOR SUMMARY JUDGMENT Page 2
1. Plaintiffs concede most of the factors favor enforcing the disclaimer.
Plaintiffs concede three of the above factors, numbers 2-5. Resp. at 19 (“Plaintiffs do not
dispute that counsel represented them and that they dealt with RBR and the other Defendants at
arms’ length in the real estate transactions at issue. . . . Plaintiffs were knowledgeable in business
matters and in real estate transactions”). Despite conceding that they are knowledgeable in
“business matters and real estate transactions,” Plaintiffs try to manufacture a factual issue by
stating, “Defendants have not established that the parties were equally knowledgeable about the
transactions” and Defendants “had materially better knowledge” about the “facts and
circumstances” of the transaction. Id. But Plaintiffs ask the Court to apply a more granular
standard than the law requires and which has been expressly rejected by the Texas Supreme Court.
See, e.g., Int’l Bus. Machines Corp. v. Lusz'n Indus, LLC, 573 S.W.3d 224, 230 n.4 (Tex. 2019)
(“Lufldn also argues that it was not knowledgeable about business-operations software systems,
but it does not dispute that it was generally knowledgeable about ‘business matters.”’).
1. The disclaimer-of-reliance provision is clear.
Plaintiffs misunderstand, and thereby conflate, standard merger clauses and broad
disclaimers of reliance. Standard merger clauses “often contain language indicating that no
representations were made other than those contained in the contract, without speaking to reliance
at all.” Italian Cowboy Partners, Ltd. v. Prudential Ins. Co. ofAm, 341 S.W.3d 323, 334 (Tex.
2011) (emphasis added); see also Lufkin, 573 S.W.3d at 229 (holding that “a merger clause,
standing alone, does not prevent a party from suing for fraudulent inducement. . ..But a clause that
clearly and unequivocally expresses the party’s intent to disclaim reliance” can preclude fraud-
based claims). Accordingly, pure merger clauses do not preclude fraud-based claims because they
only disclaim representations, not reliance. Plaintiffs’ confiision about the two types of merger
DEFENDAN TS’ REPLY IN SUPPORT OF THEIR MOTION FOR SUMMARY JUDGMENT Page 3
clauses that arise is apparent from their misapplication of Italian Cowboy and Lusz'n, and their
insistence that Section 20.6 needed to specifically reference topics like “the financial wherewithal
of Gold’s Gym and Tenant” and the value of the lease, see Resp. at 13-14.
First, Plaintiffs misunderstand Italian Cowboy. There, the “principal issue” was “whether
disclaimer-of-representations language within a lease contract amounts[ed] to a standard merger
clause, or also disclaim[ed] reliance on representations.” 341 S.W.3d at 327-28 (emphasis added).
The Texas Supreme Court held that the subject provision stated only that the parties had not “made
any representations or promises” but, unlike the clauses in Schlumberger and Forest Oil (and here),
it failed to state that the parties were not relying on those representations or promises. Id. at 334.
Plaintiffs misunderstand why the merger clause in Italian Cowboy was ineffective and argue
wrongly that the language in Italian Cowboy “more closely resembles the language in PSA Section
20.6, although it actually provides more specificity as to subject matters.” Resp. at 16. This is
simply wrong Where Italian Cowboy involved a pure merger clause with no disclaimer of reliance
language, and Section 20.6 includes the very disclaimer language that the court held was missing
in Italian Cowboy.
Whether a disclaimer of reliance is clear and unequivocal is not based on its specificity as
’
Plaintiffs argue. To be “clear and unequivocal,” a disclaimer of reliance must indicate the parties
intent to disclaim reliance. Compare Italian Cowboy, 341 S.W.3d at 327-28 (“[A] plain reading
of the contract language at issue indicates that the parties’ intent was merely to include the
substance of a standard merger clause, which does not disclaim reliance), with Allen v. Devon
Energy Holdings, L.L.C., 367 S.W.3d 355, 377 (TeX. App—Houston [lst Dist] 2012) (holding
that disclaimer-of-reliance clause had “requisite clear and unequivocal expression of
intent necessary to disclaim reliance”)).
DEFENDAN TS’ REPLY IN SUPPORT OF THEIR MOTION FOR SUMMARY JUDGMENT Page 4
Plaintiffs cite Lusz'n to support their argument that Section 20.6 needed to list specific
representations, see Resp. at 16, but Plaintiffs misunderstand the import of the list of
representations in the disclaimer-of-reliance provision there. In Lufkin, the Texas Supreme Court
did not hold that to be clear and unequivocal, a disclaimer of reliance must specifically reference
or “list examples of representations.” The clauses in that case only disclaimed reliance on
representations that were “not specified” in the agreements. Lusz'n, 573 S.W.3d at 229. Plaintiff
therefore cited two other provisions from the agreement to argue that the misrepresentations on
which it based its fraudulent-inducement claim were “specified” in the agreement, and, that
reading those two provisions together with the disclaimers’ “not specified” language rendered the
disclaimer too ambiguous to be enforceable. Id. at 229-30. The court was “not convinced” by this
argument because, among other reasons, the disclaimers included examples of the representations
the parties intended to disclaim. Id. at 230.
Contrary to Plaintiffs’ argument, a list of example representations is not what renders a
disclaimer of reliance effective because accepting Plaintiffs’ reasoning means the disclaimers in
Schlumberger and Forest Oil would be too broad. The Texas Supreme Court has “acknowledged
that ‘[a]n all-embracing disclaimer of any and all representations, as here, shows the parties’ clear
intent.’” Italian Cowboy, 341 S.W.3d at 333 (quoting Forest Oil Corp. v. McAllen, 268 S.W.3d
51, 58 (Tex. 2008)). But Plaintiffs argue that Schlumberger and Forest Oil are “not useful”
because they involved settlements intended to resolve the parties’ present and future disputes. See
Resp. at 15. Plaintiffs again amplify dicta to draw an incorrect conclusion. More accurately, the
Texas Supreme Court has merely explained that settlement agreements may constitute an
additional factor in evaluating a disclaimer’s effectiveness because settlements inherently imply
that the parties intended to settle the disputes between them once and for all. See Forest Oil, 268
DEFENDAN TS’ REPLY IN SUPPORT OF THEIR MOTION FOR SUMMARY JUDGMENT Page 5
S.W.3d at 58 (“A ‘once and for all’ settlement may constitute an additional factor urging rejection
of fraud-based claims, but a freely negotiated agreement to settle present disputes and arbitrate
future ones should also be enforceable”); Italian Cowboy, 341 S.W.3d at 335 (explaining that
because Schlumberger and Forest Oil involved settlement agreements, the court “could more
easily determine that the parties intended once and for all to resolve specific disputes”).
The same inference about the parties’ intent in settlement agreements actually applies to
the kind of property sale at issue here, which inherently includes the expectation of finality. See
Forest Oil, 268 S.W.3d at 60 (“After-the-fact protests of misrepresentation are easily lodged, and
parties who contractually promise not to rely on extra-contractual statements—more than that,
promise that they have in fact not relied upon such statements—should be held to their word.
Parties should not sign contracts While crossing their fingers behind their backs”).
Plaintiffs also argue wrongly that Section 20.6 applies only to Defendants’ affirmative
statements and not their omissions and nondisclosures. Resp. at 13. In Schlumberger, the court
held that the disclaimer of reliance there precluded plaintiffs from proving reliance for several
claims, including a fraud-by-nondisclosure claim, and the disclaimer there similarly did not state
that the parties were disclaiming reliance on any omissions. 959 S.W.2d at 181.
At every turn, Plaintiffs fail to show the disclaimer here is not clear and unequivocal
because it is.
2. The parties negotiated the terms of the PSA and APSA.
Because it is undisputed that the parties negotiated the terms of the PSA and APSA,
Plaintiffs argue that the parties must have negotiated the disclaimer itself and because they didn’t,
this factor cannot negate reliance. Resp. at 8-10. Plaintiffs ignore that the Texas Supreme Court
has expressly rejected the argument that because a disclaimer is a “non-negotiated boilerplate”
DEFENDAN TS’ REPLY IN SUPPORT OF THEIR MOTION FOR SUMMARY JUDGMENT Page 6
provision, the negotiation factor cannot be satisfied. Lufkin, 573 S.W.3d at 237 n.4. Rather, the
Supreme Court of Texas has repeatedly stated the parties must negotiate “the terms of the
agreement”—not the terms of the disclaimer: “[T]he factors do not require that every sentence in
a contract be negotiated.” Id. (citing Forest Oil, 268 S.W.3d at 60).2 Where Lufl
Preview
FILED 5/17/2022 3:14 PM FELICIA PITRE DISTRICT CLERK DALLAS CO., TEXAS Martin Reyes DEPUTY CAUSE NO. DC-21-11406 MILTON 635 GRAVOIS ROAD LLC, IN THE DISTRICT COURT §§§§§§§§§§§§§§ 635 GRAVOIS ROAD LEASING LLC, and 635 GRAVOIS ROAD REAL ESTATE, LLC, Plaintiffs, V. 44TH JUDICIAL DISTRICT TRT HOLDINGS, INC., RBR REAL ESTATE HOLDINGS, LLC, BRIAN ZELMAN, and ADAM ZEITSIFF, DALLAS COUNTY, TEXAS Defendants. DEFENDANTS’ REPLY IN SUPPORT OF THEIR MOTION FOR SUMMARY JUDGMENT Defendants TRT Holdings, Inc. (“TRT”), RBR Real Estate Holdings, LLC (“RBR”), Brian Zelman (“Zelman”), and Adam Zeitsiff (“Zeitsiff’) (collectively, “Defendants”) file this reply in support of their motion for summary judgment (the “Motion”). I. INTRODUCTION Plaintiffs’ kitchen-sink approach does nothing to change that they clearly and unequivocally intended to and did disclaim any reliance on Defendants’ statements in the PSA’s merger clause, Section 20.6.1 Plaintiffs’ response brief repeatedly misstates the applicable law and suggests material factual issues exist Where they do not. Here, only Section 20.6 is at issue. Plaintiffs spend a great portion of their response brief explaining why 1 both Section 9 and Section 20.6 are not effective disclaimer-of-reliance provisions. On May 13, 2022, Plaintiffs filed a Second Amended Petition, which does not affect the arguments in the Motion. In note 9 of Plaintiffs” response brief, they state the Second Amended Petition clarifies that the misrepresentations that they complain about “do not pertain to the physical condition, construction or status of the land or improvements making up the Premises.” Defendants agree that they are not moving for summary judgment on Section 9, nor does the Motion argue that Section 9 prevents Plaintiffs’ fraud-based claims. See Mot at 1 1. The Motion cites Section 9 in the facts section as evidence that Plaintiffs manifested an intent to disclaim reliance on Defendants’ statements in two separate places. First, Plaintiffs argue the disclaimer of reliance is not clear and unequivocal because it doesn’t list any specific representations or examples of representations, but the leading Texas Supreme Court cases, Schlumberger and Forest Oil, do not impose such a requirement. Those cases hold the exact opposite, stating that broad, “all embracing” disclaimers like the one here indicate the parties 3“ clear intent” to disclaim reliance on each other’s representations. Second, Plaintiffs wrongly argue the disclaimer itself had to be negotiated for that factor to militate against them. But even the case law they rely on contradicts this argument. The fact that the parties negotiated the PSA—a fact Plaintiffs concede—suffices for the negotiation factor. Plaintiffs also concede the transaction was arm’s length, they are knowledgeable in “business matters and real estate transactions,” and they were represented by legal counsel. In light of their concessions and given the clear disclaimer, Plaintiffs cannot show they justifiably relied on Defendants’ representations to support their claims, all of which arise in fraud. Summary judgment is therefore appropriate. II. ARGUMENTS AND AUTHORITIES A. Disclaimer precludes plaintiffs’ claims Plaintiffs correctly state that to determine if a disclaimer-of-reliance provision is binding, the Court must consider whether: (1) the disclaimer language is clear; (2) the contract was the product of an arm’s-length transaction; (3) the parties were knowledgeable in business; (4) the complaining party was represented by counsel; and (5) the terms of the agreement were negotiated rather than boilerplate. Italian Cowboy Partners, Ltd. v. Prudential Ins. C0. of America, 341 S.W.3d 323, 337 n.8 (Tex. 2011); Forest Oil, 268 S.W.3d at 60. Plaintiffs contest only whether the disclaimer is “clear” and whether the terms of the agreement were negotiated rather than boilerplate. Both present questions of law that Plaintiffs cannot overcome. DEFENDAN TS’ REPLY IN SUPPORT OF THEIR MOTION FOR SUMMARY JUDGMENT Page 2 1. Plaintiffs concede most of the factors favor enforcing the disclaimer. Plaintiffs concede three of the above factors, numbers 2-5. Resp. at 19 (“Plaintiffs do not dispute that counsel represented them and that they dealt with RBR and the other Defendants at arms’ length in the real estate transactions at issue. . . . Plaintiffs were knowledgeable in business matters and in real estate transactions”). Despite conceding that they are knowledgeable in “business matters and real estate transactions,” Plaintiffs try to manufacture a factual issue by stating, “Defendants have not established that the parties were equally knowledgeable about the transactions” and Defendants “had materially better knowledge” about the “facts and circumstances” of the transaction. Id. But Plaintiffs ask the Court to apply a more granular standard than the law requires and which has been expressly rejected by the Texas Supreme Court. See, e.g., Int’l Bus. Machines Corp. v. Lusz'n Indus, LLC, 573 S.W.3d 224, 230 n.4 (Tex. 2019) (“Lufldn also argues that it was not knowledgeable about business-operations software systems, but it does not dispute that it was generally knowledgeable about ‘business matters.”’). 1. The disclaimer-of-reliance provision is clear. Plaintiffs misunderstand, and thereby conflate, standard merger clauses and broad disclaimers of reliance. Standard merger clauses “often contain language indicating that no representations were made other than those contained in the contract, without speaking to reliance at all.” Italian Cowboy Partners, Ltd. v. Prudential Ins. Co. ofAm, 341 S.W.3d 323, 334 (Tex. 2011) (emphasis added); see also Lufkin, 573 S.W.3d at 229 (holding that “a merger clause, standing alone, does not prevent a party from suing for fraudulent inducement. . ..But a clause that clearly and unequivocally expresses the party’s intent to disclaim reliance” can preclude fraud- based claims). Accordingly, pure merger clauses do not preclude fraud-based claims because they only disclaim representations, not reliance. Plaintiffs’ confiision about the two types of merger DEFENDAN TS’ REPLY IN SUPPORT OF THEIR MOTION FOR SUMMARY JUDGMENT Page 3 clauses that arise is apparent from their misapplication of Italian Cowboy and Lusz'n, and their insistence that Section 20.6 needed to specifically reference topics like “the financial wherewithal of Gold’s Gym and Tenant” and the value of the lease, see Resp. at 13-14. First, Plaintiffs misunderstand Italian Cowboy. There, the “principal issue” was “whether disclaimer-of-representations language within a lease contract amounts[ed] to a standard merger clause, or also disclaim[ed] reliance on representations.” 341 S.W.3d at 327-28 (emphasis added). The Texas Supreme Court held that the subject provision stated only that the parties had not “made any representations or promises” but, unlike the clauses in Schlumberger and Forest Oil (and here), it failed to state that the parties were not relying on those representations or promises. Id. at 334. Plaintiffs misunderstand why the merger clause in Italian Cowboy was ineffective and argue wrongly that the language in Italian Cowboy “more closely resembles the language in PSA Section 20.6, although it actually provides more specificity as to subject matters.” Resp. at 16. This is simply wrong Where Italian Cowboy involved a pure merger clause with no disclaimer of reliance language, and Section 20.6 includes the very disclaimer language that the court held was missing in Italian Cowboy. Whether a disclaimer of reliance is clear and unequivocal is not based on its specificity as ’ Plaintiffs argue. To be “clear and unequivocal,” a disclaimer of reliance must indicate the parties intent to disclaim reliance. Compare Italian Cowboy, 341 S.W.3d at 327-28 (“[A] plain reading of the contract language at issue indicates that the parties’ intent was merely to include the substance of a standard merger clause, which does not disclaim reliance), with Allen v. Devon Energy Holdings, L.L.C., 367 S.W.3d 355, 377 (TeX. App—Houston [lst Dist] 2012) (holding that disclaimer-of-reliance clause had “requisite clear and unequivocal expression of intent necessary to disclaim reliance”)). DEFENDAN TS’ REPLY IN SUPPORT OF THEIR MOTION FOR SUMMARY JUDGMENT Page 4 Plaintiffs cite Lusz'n to support their argument that Section 20.6 needed to list specific representations, see Resp. at 16, but Plaintiffs misunderstand the import of the list of representations in the disclaimer-of-reliance provision there. In Lufkin, the Texas Supreme Court did not hold that to be clear and unequivocal, a disclaimer of reliance must specifically reference or “list examples of representations.” The clauses in that case only disclaimed reliance on representations that were “not specified” in the agreements. Lusz'n, 573 S.W.3d at 229. Plaintiff therefore cited two other provisions from the agreement to argue that the misrepresentations on which it based its fraudulent-inducement claim were “specified” in the agreement, and, that reading those two provisions together with the disclaimers’ “not specified” language rendered the disclaimer too ambiguous to be enforceable. Id. at 229-30. The court was “not convinced” by this argument because, among other reasons, the disclaimers included examples of the representations the parties intended to disclaim. Id. at 230. Contrary to Plaintiffs’ argument, a list of example representations is not what renders a disclaimer of reliance effective because accepting Plaintiffs’ reasoning means the disclaimers in Schlumberger and Forest Oil would be too broad. The Texas Supreme Court has “acknowledged that ‘[a]n all-embracing disclaimer of any and all representations, as here, shows the parties’ clear intent.’” Italian Cowboy, 341 S.W.3d at 333 (quoting Forest Oil Corp. v. McAllen, 268 S.W.3d 51, 58 (Tex. 2008)). But Plaintiffs argue that Schlumberger and Forest Oil are “not useful” because they involved settlements intended to resolve the parties’ present and future disputes. See Resp. at 15. Plaintiffs again amplify dicta to draw an incorrect conclusion. More accurately, the Texas Supreme Court has merely explained that settlement agreements may constitute an additional factor in evaluating a disclaimer’s effectiveness because settlements inherently imply that the parties intended to settle the disputes between them once and for all. See Forest Oil, 268 DEFENDAN TS’ REPLY IN SUPPORT OF THEIR MOTION FOR SUMMARY JUDGMENT Page 5 S.W.3d at 58 (“A ‘once and for all’ settlement may constitute an additional factor urging rejection of fraud-based claims, but a freely negotiated agreement to settle present disputes and arbitrate future ones should also be enforceable”); Italian Cowboy, 341 S.W.3d at 335 (explaining that because Schlumberger and Forest Oil involved settlement agreements, the court “could more easily determine that the parties intended once and for all to resolve specific disputes”). The same inference about the parties’ intent in settlement agreements actually applies to the kind of property sale at issue here, which inherently includes the expectation of finality. See Forest Oil, 268 S.W.3d at 60 (“After-the-fact protests of misrepresentation are easily lodged, and parties who contractually promise not to rely on extra-contractual statements—more than that, promise that they have in fact not relied upon such statements—should be held to their word. Parties should not sign contracts While crossing their fingers behind their backs”). Plaintiffs also argue wrongly that Section 20.6 applies only to Defendants’ affirmative statements and not their omissions and nondisclosures. Resp. at 13. In Schlumberger, the court held that the disclaimer of reliance there precluded plaintiffs from proving reliance for several claims, including a fraud-by-nondisclosure claim, and the disclaimer there similarly did not state that the parties were disclaiming reliance on any omissions. 959 S.W.2d at 181. At every turn, Plaintiffs fail to show the disclaimer here is not clear and unequivocal because it is. 2. The parties negotiated the terms of the PSA and APSA. Because it is undisputed that the parties negotiated the terms of the PSA and APSA, Plaintiffs argue that the parties must have negotiated the disclaimer itself and because they didn’t, this factor cannot negate reliance. Resp. at 8-10. Plaintiffs ignore that the Texas Supreme Court has expressly rejected the argument that because a disclaimer is a “non-negotiated boilerplate” DEFENDAN TS’ REPLY IN SUPPORT OF THEIR MOTION FOR SUMMARY JUDGMENT Page 6 provision, the negotiation factor cannot be satisfied. Lufkin, 573 S.W.3d at 237 n.4. Rather, the Supreme Court of Texas has repeatedly stated the parties must negotiate “the terms of the agreement”—not the terms of the disclaimer: “[T]he factors do not require that every sentence in a contract be negotiated.” Id. (citing Forest Oil, 268 S.W.3d at 60).2 Where Lufl