Preview
FILED
5/13/2022 4:32 PM
FELICIA PITRE
DISTRICT CLERK
DALLAS CO., TEXAS
Lafonda Sims 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. 44™ JUDICIAL DISTRICT
TRT HOLDINGS, INC., RBR REAL
ESTATE HOLDINGS, LLC, BRIAN
ZELMAN, and ADAM ZEITSIFF,
Defendants. DALLAS COUNTY, TEXAS
PLAINTIFFS' RESPONSE TO DEFENDANTS'
MOTION FOR SUMMARY JUDGMENT
TO THE HONORABLE COURT:
Plaintiffs Milton 635 Gravois Road LLC, 635 Gravois Road Leasing LLC, and 635 Gravois
Road Real Estate, LLC (collectively the "Plaintiffs") file this Response to Defendants' Motion for
Summary Judgment (the "Motion") filed by Defendants TRT Holdings, Inc. ("TRT"), RBR Real
Estate Holdings, LLC ("RBR"), Brian Zelman ("Zelman"), and Adam Zeitsiff ("Zeitsiff) (each a
"Defendant" and collectively the "Defendants"), and respectfully show the Court the following:
I
INTRODUCTION
The Supreme Court of Texas ("SCOTX") is clear on what is required to effectively disclaim
fraud. First:
"[A] clause that clearly and unequivocally expresses the party's intent to disclaim
reliance on the specific misrepresentations at issue can preclude a fraudulent-
inducement claim."! (emphases added).
1 International Business Machines Corporation v. Lufkin Industries, LLC, 573 S.W.3d 224, 229 (Tex. 2019).
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Second, however;
"Not every such disclaimer is effective and courts must always examine the contract
itself and the totality of the surrounding circumstances when determining if a
waiver-of-reliance provision is binding."* (emphases added).
The Motion wholly fails on both counts as the clauses relied upon do not even remotely
apply to the "specific misrepresentations at issue" and, more importantly, the Motion woefully
neglects to establish a summary judgment record upon which this Court could even begin to
examine the "totality of the surrounding circumstances." The Motion is supported by a single
declaration of less than three pages attaching seven documents from a teal estate transaction taking
over one year to conclude. The Motion wholly fails to establish that no genuine issue of material
fact exists such that the Court could rule as a matter of law. In addition, the Motion fails to follow
controlling precedent and misstates both the applicable law and the contracts in question as further
set out below. For all these reasons, the Motion must be denied.
I.
SUMMARY OF RESPONSE
Defendants! attempts to avoid liability for their fraud due to non-negotiated boilerplate
provisions in the Agreement of Purchase and Sale ("PSA") fail for numerous reasons. First, even
assuming without conceding that the PSA's boilerplate provisions are clear and unequivocal
expressions of disclaimers of reliance specific to the representations at issue (they are not),
Defendants ignore Forest Oi/'s first factor that to be effective in the face of fraud the contract must
have been negotiated and the purported disclaimer itself must have been discussed in the course of
negotiations. At a minimum, a genuine issue of material fact exists as to whether the PSA was fully
negotiated and the purported disclaimers were both discussed and negotiable. The Motion certainly
? Id. In doing so, SCOTX has provided guidelines known as the Forest Oi/ factors.
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does not establish either as a matter of law. Therefore, the totality of the circumstances and balance
of the relevant Forest Oil factors (as further discussed below) do not bar Plaintiffs' fraud claims.
Second, even if the boilerplate provisions in question were viable to vitiate fraud, by their
plain terms those provisions only benefit RBR, the sole contracting party to which they apply.
Indeed, Defendants Zelman, TRT, and Zeitsiff are independently liable for their own fraudulent
conduct, and no provision or term in the PSA or the First Amendment to Agreement of Purchase
and Sale ("APSA") applies to them.
Third, the gatden-variety merger clause in Section 20.6 of the PSA by its own terms does
not support summary judgment even as to Defendant RBR. SCOTX has repeatedly articulated that
a true disclaimer of reliance (as opposed to an ordinary merger clause) must clearly and
unequivocally evidence a party's intent to disclaim reliance on the specific misrepresentations at
issue in order to bar fraud claims. Here, an ordinary merger clause is at issue that is unspecific, does
not use the term "disclaimer," and lacks the unequivocal expression of intent directed to the specific
fraudulent misrepresentations at issue. Furthermore, Section 20.6 by its plain terms does not apply
to actionable omissions or non-disclosures as well as the allegations of fraud concerning the lease
extension that is expressly contained within both the PSA and the APSA.
Fourth, Section 9 of the PSA concerning the physical "Condition of Property" does not
amount to an unequivocal expression of intent directed to Plaintiffs' fraud claims, which claims have
nothing to do with the physical condition of the real property or improvements or any issues
regarding the land. Rather, if induced by fraud, Plaintiffs' claims are not barred by the "as is" clause
relating to the real property in Section 9, which has nothing to do with the specific fraud at issue.
Therefore, RBR's argument that Section 9 is an applicable disclaimer of reliance is unfounded.
Fifth, even if Sections 20.6 and 9 of the PSA did meet SCOTX's exacting standard and
applied by their terms to the fraudulent conduct in question, the trial court must then separately
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engage in a factually intensive evaluation of the totality of the circumstances surrounding the PSA
and APSA to determine whether fraud claims asserted against RBR and based upon affirmative
statements not contained within the PSA or APSA ate properly barred. This factual analysis is
improper on summary judgment, where the factual context surrounding the negotiation of the PSA
and APSA is not established by the summary judgment record, is controverted and where genuine
issues of material fact exist. Indeed, no depositions have yet taken place and the Motion and
summary judgment record, supported by a single perfunctory declaration, does not establish the
"totality of the circumstances" as a matter of law.
As further set out below, the PSA provisions cited by Defendants are not enforceable
disclaimers of Plaintiffs! reliance, and Defendants' Motion should be denied.
Il.
SUMMARY JUDGMENT EVIDENCE
In support of their Response and pursuant to TEX. R. CIv. P. 16Ga(c) ef seg., Plaintiffs rely
upon and incorporate herein by reference for all purposes the following exhibits:*
e Exhibit A: The Declaration of Mark S. Cohen (the "Cohen Declaration")
o Exhibit 1; Email dated April 11, 2019 with Attachments
e Exhibit B: The Declaration of Mark Sher in Response to Motion for Summary
Judgment (the "Sher Declaration")
IV.
CONTROVERTING MATERIAL FACTS
The PSA originated as a boilerplate form generated by RBR.*_ Neither Leeton Real Estate,
Inc. ("Leeton") nor Plaintiffs had previously used the boilerplate form for any purpose.” No
3 For brevity of the filing record, Plaintiffs further rely upon and incorporate herein by reference for al
purposes the exhibits introduced by the Motion, including specifically the PSA (produced by Defendants as
"RBR000408-432", as "Exhibit 2" to the Motion) (citations to "Defs.' MS], Exhibit 2, PSA, p. ").
4 Ex. A, Cohen Declaration, pp. 1-2; Ex. B, Sher Declaration.
5 Id.
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evidence exists as to what terms of the PSA were negotiated, if any, or to what degree. Indeed,
neither Leeton nor Plaintiffs negotiated the purported disclaimer provisions at issue (§20.6 and §9 of
the PSA) which originated in the boilerplate form, nor did they negotiate nor even discuss any
disclaimers of reliance during the entirety of the transaction.’ Defendants offer no evidence that the
contracting parties even discussed the purported disclaimer provisions during the course of the
transaction or that the provisions were negotiable.’ Any inference by Defendants that §20.6 and §9
were either negotiated or even discussed by the parties (by Defendants' inclusion of Ex. 7 to the
Jesse Smith Declaration) fails and, at a minimum, has been sufficiently controverted.* Consequently,
§20.6 and §9 of the PSA are non-negotiated boilerplate and no evidence exists that they wete even
discussed by the patties or were negotiable.
Section 20.6 does not contain the word "disclaimer" or "disclaims," does not expressly apply
to fraudulent omissions or non-disclosures, and by its plain terms only applies to RBR as the other
party to the PSA.° Only a single sentence in §20.6 concerns reliance and is vague as to subject
matter. This sentence does not specifically apply to the fraud at issue.
Section 9 concerns "Condition of Property" and applies to "statements" and
"representations' wn pertaining to the Property, the land or the improvements or relating thereto. 10
The PSA defines "Property" as "that certain real property located at 635 Gravois Road, Fenton, MO
63026... with all appurtenances, rights, privileges, warranties and easements benefiting, belonging or
pertaining thereto. wit Notably, the PSA in §6.2 expressly indicates that the conveyance of the
6 Ex. A, Cohen Declaration, pp. 1-2; Ex. B, Sher Declaration.
7 Ex. A, Cohen Declaration, p. 2; Ex. B, Sher Declaration.
8 Id.
» Defs.' MSJ, Exhibit 2, PSA, p. 18 (§20.6).
© Defs.' MSJ, Exhibit 2, PSA, p. 29 (§9).
1! Defs.' MSJ, Exhibit 2, PSA, p. 1 (PSA "KEY PROVISIONS SUMMARY" page).
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Property is subject to the tenant leases and creates the defined terms "Leases", "Tenant", and "New
Gold's Gym Leases.""? §10.3 of the PSA expressly provides that at closing a separate "assignment
and assumption of the applicable Leases" must be provided in addition to a deed, and the defined
terms "Leases" and "Tenant" are expressly referenced.'’ Hence, the transaction evidenced by the
PSA separately provides for the conveyance of the physical teal estate through the deed and the
conveyance of Leases by an "assignment and assumption."
Two aspects of the nature of these conveyances are notable. First, §9 only expressly
concerns the conveyance of the physical real estate and its related rights, and not the conveyances of
the Leases. ' 4 Second, §9 does not contain or refer to in any manner the defined terms "Lease",
"Tenant", or "New Gold's Gym Lease," which clearly and unequivocally expresses the intent to
exclude those subject matters from its risk-shifting terms.
Further, Section 9 imposes upon Buyer the duty to "conduct such inspections including
but not limited to, the physical and environmental conditions thereof... Wis It further provides
"upon closing, Buyer shall assume the risk that adverse matters, including, but not limited to,
adverse physical or construction defects or adverse environmental, health or safety conditions may
not have been revealed by Buyer's inspection or investigations."'® Section 9 also contains a waiver
and release of claims related to various environmental statutes.’ Based on the sum of its various
12 Defs.’ MSJ, Exhibit 2, PSA, p. 7 (§6.2).
13 Defs.' MSJ, Exhibit 2, PSA, pp. 11-12 (§10.3).
14 Defs.' MSJ, Exhibit 2, PSA, p. 29 (§9) ("[p]ertaining to the property, the land or the improvements or
relating thereto").
15 Defs.' MSJ, Exhibit 2, PSA, p. 29 (§9).
16 Defs.' MSJ, Exhibit 2, PSA, pp. 29-30 (§9).
1 Defs.' MSJ, Exhibit 2, PSA, pp. 29-30 (§9).
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terms (both included and omitted), Section 9 solely concerns the "Condition of Property" and
relates to specific matters concerning the physical real estate including the land and improvements."
Plaintiffs' fraud claims (based upon express representations, omissions and non-
disclosures)'? do not involve the physical real estate or the land or improvements, but rather, inser
alia, the financial wherewithal of a Tenant (that is expressly defined in the PSA), the financial
justification of the Tenant's rent under the "Lease", and the Tenant's and its guarantor's respective
then present ability to perform under the "New Gold's Gym Lease", which was assigned and
executed as part of the transaction.
The subject matter of Plaintiffs’ fraud claims is neither expressly contained within nor
reasonably contemplated by either Section 20.6 or Section 9.
Vv.
ARGUMENT & AUTHORITIES
Summary Judgment Standard.
Summary judgment is a harsh remedy, which should be strictly construed and cautiously
applied. 20 The movant's "extraordinary burden" for summary judgment means that "all conflicts in
the evidence are disregarded, the evidence favorable to the non-movant is taken as true, and all
doubts as to a genuine issue of material fact are resolved in the non-movant's favor."*' Furthermore,
every reasonable inference is drawn in favor of the non-movant.” If, after applying these rules, there
'8 Defs.' MS], Exhibit 2, PSA, pp. 29-30 (69).
19 See Second Amended Petition §15 & 16. {16 contains the following clarifying statement: "The
Misrepresentations do not pertain to the physical ‘ondition, construction or status of the land or
improvements making up the Premises."
20 See In re Price's Estate, 375 S.W.2d 900, 904 (Tex. 1964).
21 Kazmir v. Suburban Homes Realty, 824 /.2d 239, 242 (Tex. App.—Texarkana 1992, writ denied) (citing
Nixon v. Mr. Property Management, 690 S 2d 546, 548-49 (Lex. 1985); see also Limestone Prods. Distrib. v.
McNamara, 71 S.W.3d 308, 311 (Tex. 2002); M.D. Anderson Hosp. v. Willrich, 28 S.W.3d 22, 23 (Tex. 2000).
22 Provident Life & Adc. Ins. v. Knott, 128 SW.3d 211, 215 (Tex. 2003).
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remain one ot more genuine questions of fact, then the summary judgment motion must be denied
as a matter of law.” The Motion woefully fails to meet its burden.
2. To disclaim Plaintiffs' reliance, the parties' negotiations must have specifically
discussed Sections 20.6 and 9 of the PSA; here, it is undisputed (or at least a genuine
issue of material fact exists) that they were not.
In Forest Oil Corp. v. McAllen, 268 S.W.3d 51, 60 (Tex. 2008), SCOTX noted the Schlumberger
facts that guided its reasoning, now known as the "Forest Oi/ Factors." As part of the trial court's
consideration of the totality of the circumstances underlying an alleged disclaimer of reliance, the
first factor involves assessment of whether:
(1) the terms of the contract were negotiated, rather than boilerplate, and during
negotiations the parties specifically discussed the issue which has become the
topic of the subsequent dispute;
Id. (emphasis added). The Dallas Court of Appeals has clarified what the phrase "the issue which has
become the topic of the subsequent dispute" means. "[T]he topic of the subsequent dispute" is the
specific contract term being asserted against the party claiming fraud." Lebowitz v. Sequoia Real Estate
Holdings, LP., 465 S.W.3d 331, 344 (Tex. App—Dallas 2015); see also Bever Properties, LLC v. Jerry
Huffman Custom Builder, LLC, 2015 WL 4600347, *11 (Tex. App—Dallas July 31, 2015).
Consequently, in this case, the Court is required by the Dallas Court of Appeals to consider whether
the terms of the PSA were negotiated, rather than boilerplate, and during those negotiations whether
§9 and §20.6 were actually discussed.
Defendants’ Motion simply does not establish this first factor as a matter of law, and instead
wholly fails to address what terms, if any, of the PSA were negotiated or were boilerplate, or
whether §20.6 or §9 were even discussed during negotiations. Accordingly, Defendants have not
carried their burden on summary judgment to establish that there is no genuine issue of material fact
such that the Court can rule as a matter of law. Indeed, to the contrary, the Cohen Declaration
3 Powers v. Adams, 2. S.W.3d 496, 497-99 (Tex. App.—Houston [14th Dist.] 1999, no pet.).
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Exhibit A) establishes that to the extent that Defendants' Motion may be arguing that the April 11,
2019 email from Mr. Cohen represents negotiation of the PSA (which is unclear), that argument is
incorrect. Indeed, the Cohen Declaration further establishes that §9 and §20.6 of the PSA were
boilerplate terms that originated from RBR, that Cohen has no recollection of ever discussing those
provisions, and that the Plaintiffs never negotiated a disclaimer of reliance with RBR. The Sher
Declaration (Exhibit B) unequivocally states §9 and §20.6 were not discussed.
Consequently, at best, Defendants’ summary judgment evidence is hopelessly controverted
on the existence (or non-existence) of the first Forest Oil factor,”* and summary judgment based on
non-negotiated and unspecific boilerplate provisions never even discussed is wholly improper.”
It should be noted that the Motion fails to fully and adequately address the first Forest Oi/
factor by choosing to grossly oversimplify the analyses SCOTX and the Dallas Court of Appeals
actually require of this Court. The Motion, indeed, contains no analysis of whether "during
negotiations the parties specifically discussed the issue which has become the topic of the
subsequent dispute." Further, the Motion fails to even cite to the controlling opinions of Leibowitz
and Bevers, instead citing to distinguishable portions of a non-controlling opinion from Houston's
First District, Pogue v. Williamson, 605 S.W.3d 656 (Tex. App.—Houston [1st Dist.] 2020).
Tn citing Pogue, the Defendants fail to acknowledge damaging language to their position. The
Houston Court holds: "When there is proof that the parties specifically contemplated the issue that
2 See Baker v. City of Robinson, 305 S.W.3d 783, 796 (Tex. App.—Waco 2009, no pet) (finding "nothing in the
record to indicate the parties discussed the zoning of the property" that became the subject of dispute, and
"[a}fter considering the factors listed in Forest Oi/' concluding that neither the disclaimer of reliance or merger
clause precluded fraud claims); see also Allen v. Devon Energy Holdings, L.L.C., 367 S.W.3d 355, 379 (Lex.
App.—Houston [1* Dist.] 2012), pet. granted, judgment set aside and remanded by agreement, 2013 WL. 273026, at *1
("We deny appellees’ request to withdraw our March 9, 2012 opinion on rehearing, and we do not withdraw
that opinion.") (finding no evidence that parties expressly negotiated alleged disclaimer and holding it
unenforceable based on the totality of circumstances).
25 Compare Cmty. Mgmt. LLC v. Cutten Dev. L.P., No. 14-14-00854-CV, 2016 WL 3554704, at *10 (Tex.
App.—Houston [14th Dist] June 28, 2016, pet. denied) ("[I}he summary judgment evidence shows that the
parties discussed the issue that became the topic of subsequent dispute.").
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has become the topic of dispute, courts should be particularly reluctant to hold a disclaimet-of-
reliance claims unenforceable.” It is undisputed on this record there is simply is no such proof.
Therefore even under the non-controlling authority on which they rely, Defendants fail to establish
the existence of facts supporting Pogue's rendition of the first Forest Oi/ factor. Defendants further
fail to follow the SCOTX opinion in International Business Machines Corporation v. Lufkin Industries,
LLC, 573 S.W.3d 224 (2019), which properly cites to the full statement of the first Forest Oi/ factor
and upon which Pogue appears to rely. In that case, Lufkin sought to avoid its clear disclaimer of the
issues copiously discussed (i.e., how much customization of the subject software was needed), on the
basis of ambiguity when the clear and precise disclosure language expressly disclaimed the "amount
of the hours to provide any of the Services, charges to be paid or the results of any of the Services to
be provided" which clearly encompassed the subject matter of the discussions and were thus
expressly disclaimed.” Consequently, Defendants not only ignore Leibowitz and Bevers but also
wholly fail to meet the standard set out in Pogwe when viewed in the controlling context of Lufkin.
3. Claims against TRT, Zelman, and Zeitsiff stand independently and are not subject to
any contractual provisions in the PSA executed by RBR.
Plaintiffs' claims against Defendants TRT, Zelman, and Zeitsiff are not dependent on
conspiracy with RBR for those Defendants' liability for fraud. Plaintiffs’ conspiracy claim is
brought in the alternative. Rather, Defendants are each directly liable for their own fraud, which
26 Pogue, 605 S.W.3d at 667.
27 Lufkin, 573 SW.3d at 226 and 228-229. Lufkin also at p. 237 footnote 4 raises the issue of negotiability of
the disclaimers. As noted the summary judgment record offers no proof in this regard.
28 Spurgeon v. Empire Petroleum Partners, LLC, No. 05-18-00783-CV, 2019 WL 2521722, at *4 (Tex. App.—
Dallas June 19, 2019, no pet.) (finding sufficient allegations against individual defendant for which individual
can be held liable "for fraudulent or tortious acts committed while in the service of the corporation’ won ‘where
he had direct personal participation in the wrongdoing"); see also L] Charter, L.L.C. v. Air Am. Jet Charter, Inc.,
No. 14-08-00534-CV, 2009 WL 4794242, at *14 ([ex. App.—Houston [14th Dist] Dec. 15, 2009, pet.
denied) ("It is the general rule in Texas that company agents are individually liable for fraudulent or tortious
acts committed while in the service of their limited liability company. . . . [S]ince Trey Schwarz and Buzzy
Schwarz committed fraud, the judgment should have held them, along with LJ Charter, jointly and severally
liable for the fraud damages.") (internal citations omitted).
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exists separate and apart from any term or provision in the PSA or APSA.” Zelman is and was an
employee of TRT. TRT is not a party to the PSA or APSA and Zeitsiff, an employee of Gold's
Gym International, executed the false and fraudulent Lease Extension facilitated by TRI. The
purported disclaimer provisions cited in Defendants' Motion support this principle, where Section
20.6 limits the merger clause to statements "of the other party" to the contract, RBR, and Section 9
states only that "Seller [RBR] has not made and is not liable for or bound by" representations that
concern Plaintiffs' acceptance of the physical condition of the real property. 31 Consequently, as a
matter of law, only Defendant RBR may avail itself of any contractual defense under the PSA or
APSA. Defendants’ Motion as to TRT, Zelman, and Zeitsiff based upon contract provisions that do
not expressly protect them is wholly unsupported and inapplicable.”
4. Legal Standard: A disclaimer of reliance sufficient to vitiate fraud must be clear and
unequivocal, and specific to the subject matter purportedly being disclaimed; §20.6
and §9 are not.
A contract is subject to avoidance on the ground of fraudulent inducement. For more than
fifty years, Texas has followed "the rule that a written contract [even] containing a merger clause can
[nevertheless] be avoided for antecedent fraud or fraud in its inducement and that the parol evidence
29 See Transcor Astra Grp. S.A. v. Petrobras Am. Inc., No. 20-0932, 2022 WL 1275238, at *11 (Tex. Apr. 29, 2022)
(citing Franka v. Velasquez, 332 S.W.3d 367, 383 (Tex. 2011)) ("[A]n individual [that] was acting in a corporate
capacity does not prevent the individual from being held personally—or “individually"—liable for the harm
caused by those acts."); see also Campbell v. Hamilton, 632 S.W.2d 633 (Tex. App—Dallas 1982, writ ref'd n.t.e.)
(holding seller liable for agent's fraud and misrepresentations within scope of agency).
30 See Zarzana v. Ashley, 218 S.W.3d 152, 159 (Tex. App.—Houston [14th Dist.] 2007, pet. struck) (citing GTE
Southwest, Inc. v. Bruce, 998 S.W.2d 605, 617-18 (Tex. 1999) (discussing employers’ liability for unauthorized
torts of employees where "closely connected with the [employce's] authorized duties").
31 Defs.' MSJ, Exhibit 2, PSA, pp. 29-30 (99); p. 18 20.6).
3 Source 4 Value v. Hoelzer, No. 07-18-00338-CV, 2020 WL 4249744, at *3-5 (Lex. App—Amarillo July 21,
2020, pet. denied) (citing In re Arthur Andersen LLP, 121 $.W.3d 471, 481 (Lex. App—Houston [14th Dist.]
2003, orig. proceeding) (affirming liability against non-contracting party "if the third party benefits from the
fraudulent transaction and had knowledge of the fraud," or "by mere silent acquiescence when he benefits
from the fraud"); see also Visa Inc. v. Sally Beauty Holdings, Inc., No. 02-20-00339-CV, 2021 WL 5848758, at *20
(Tex. App.—Fort Worth Dec. 9, 2021, pet. filed) (same).
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rule does not stand in the way of proof of such fraud."* SCOTX recognized an exception to this
tule in Schlumberger Technology Corp. v. Swanson, and held that when sophisticated parties represented by
counsel negotiate at arm's length and disclaim reliance on representations "about a specific matter in
dispute," such a disclaimer may be binding. In other words, fraudulent inducement is almost
always grounds to set aside a contract despite a merger clause, but in certain limited circumstances,
only a clear and specific disclaimer-of-reliance clause can negate such a claim as a matter of law.
The question of whether an adequately clear and specific disclaimer of reliance exists is a
question of law for the Court to assess within the factual totality of the circumstances.” A standard
merger clause is not enough to bar a fraud claim. SCOTX has repeatedly held that to disclaim
reliance, parties must use clear and unequivocal language. 36 This elevated requirement of precise
language helps ensure that parties to a contract—even sophisticated parties represented by able
attorneys—understand that the contract's terms disclaim reliance, such that the contract may be
binding even if it was induced by fraud.
In particular in this case, an agreement signed at the inception of a business relationship like
the PSA and APSA (as opposed to the settlement agreements in Sch/uwmberger and Forest Oil) "should
be all the more clear and unequivocal in effectively disclaiming reliance and precluding a claim for
fraudulent inducement, lest we ‘forgive intentional lies regardless of context." Indeed, ‘Texas courts
have recognized a number of contractual provisions (not contained in the PSA and APSA in this
case) that would provide greater clarity to effectively disclaiming reliance, including: (1) an all-
embracing disclaimer that the affected party had not relied on any representations or omissions by
38 [alian Cowboy Partners, Lid. v. PrudentialIns, Co. of Am., 341 SW.3d 323, 331 (Lex. 2011) (citing Dallas Farm
Match. Co. v. Reaves, 307 S.W.2d 233, 239 (Tex. 1957)).
34959 S.W.2d 171, 179 (Tex. 1997).
38 Forest Oil Corp. v. McAllen, 268 S.W.3d 51, 61 (Tex. 2008).
36 See Forest Oil, 268 S.W.3d at 62; Schlumberger, 959 S.W.2d at 179-80.
37 Italian Cowboy, 341 S.W.3d at 335 (quoting Forest Oi/, 268 S.W.3d at 61).
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the offending party; (2) a specific no liability clause stating that the party providing certain
information will not be liable for any other person's use of the information; and (3) a specific waiver
of any claim for fraudulent inducement based on misrepresentations or omissions 38 The clauses
telied upon by Defendants do not meet this standard.
a. PSA §20.6
Defendants’ Motion relies on two provisions in the PSA: Section 20.6 on "Merger/Prior
Agreements. and Section 9 regarding the "Condition of Property." Neither clause effectively
disclaims Plaintiffs’ reliance in this case, as a matter of law. Section 20.6 is a general, boilerplate
merger and finality clause that does not use the word "disclaim," or expressly disclaim, waive, or
release any claims, rights, or remedies based upon RBR's statements and representations as alleged in
the Second Amended Petition:
20.6 Merger/Prior_ Agreements. THIS AGREEMENT CONSTITUTES TI
FINAL AGREEMENT BETWEEN THE PARTIES. IT IS THE COMPLETE AND EXCLUSIVE
EXPRESSION OF THE PARTIES’ AGREEMENT ON THE MATTERS CONTAINED IN THIS
AGREEMENT ALI PRIOR AND CONTEMPORANEOUS NEGOTIATIONS AND
AGREEMENTS BETWEED THE PARTIES ON THEMATTERS CONTAINED IN THIS
AGREEME! ARE EXPRESSLY MERGED INTOAND SUPERSEDED BY THIS
AGREEME EK PROVISIONS OF TILS AGREEMENT MAY NOT BE EXPLAINED,
SUPPL .EMENTED, OR QUALIFIED THROUGH EVIDENCE OF TRADE USAGE OR A PRIOR
COURSE OF DEALINGS. IN ENTERING INTO THIS AGREEMENT, THE PARTIES HAVE
NOT RELIED UPON ANY STATEMENT, REPRESENTATION, WARRANTY, OR
AGREEMENT OF THE OTHER PARTY EXC! T FOR THOSE EXPRESSLY CONTAINED IN
THIS AGREEMENT. THERE [S$ NO CONDITION PRECEDENT TO THE EFFECTIVENESS
OF THIS GREEMENT OTHER THAN THOSE EXPRESSLY STATED IN THIS
AGREEME
The second-to-last sentence is the only portion of Section 20.6 in which the parties agree
they "have not relied" upon any statement or representation "of the other party" (here, only RBR's
statements and representations) Because Section 20.6 applies only to statements and
representations, it does not apply to Plaintiffs' claims based on Defendants’ fraudulent omissions
and non-disclosures that concern omitting to disclose known facts regarding the Tenant's inability
38 Allen v. Devon Energy Holdings, L.L.C., 367 $.W.3d 355, 380 (Lex. App.—Houston [1st Dist.] 2012).
39 See Allen, 367 S.W.3d at 380 (citing Coastal Bank SSB v. Chase Bank of Tex., N.A., 135 S.W.3d 840, 843 (Tex.
App.—Houston [1st Dist.] 2004, no pet.) (the Alken v. Devon Energy court declined to enforce disclaimer for
PLAINTIFFS' RESPONSE TO DEFENDANTS' MOTION FOR SUMMARY JUDGMENT - Page 13 of 21
9216353 v6 (72208.00006.000)
to perform under the Lease and Lease Extension (Count 3), including specifically the Tenant's
inclusion on a list of unprofitable locations.
Construed as a whole, Section 20.6 does not contain any specific disclaimer directed to
Defendants! mistepresentations regarding the financial wherewithal of Gold's Gym and the Tenant,
or their respective financial performance and stability or that the value of the Tenant's Lease was
justified by the volume of stable gym memberships then existing, as well as the fraudulent nature of
the Lease Extension. Rather, because the agreement to provide the Lease Extension is "contained
within this agreement" in both the PSA (Section 6.2)’ and the APSA, Plaintiffs' claims regarding the
fraudulent nature of the Lease Extension from its inception ate not subject to the purported
disclaimer claimed through the merger clause.
Consequently, the only party that can rely on Section 20.6 is RBR, and the only portion of
Plaintiffs' fraud claims arguably at issue are the affirmative statements and representations (as
opposed to fraudulent omissions). However, Section 20.6 provides no direct reference specifically
to the affirmative fraudulent statements or even a general reference to their subject matter. Further
it does not provide that reliance upon them was clearly and unequivocally disclaimed, waived, or
released as a matter of law, as SCOTX requires.
omissions, and comparing to Coastal Bank SSB where disclaimers expressly stated that plaintiff had not relied
on defendant's representations and that defendant would not have any liability "for any representations . . or
for any omissions").
0
6.2 Subject to Leases. The Property will be conveyed subject to those leases identified
on ExhibitB attached hereto and any other Icases affecting the Properly as of Closing, as such leases may
have been amended or modified from time to time (each a “Lease”, and may be collectively referred to
herein as the “Leases”. The tenants under the Leases are each a “Fengnt”, and may be collectively
referred to herein as the Tenants”. Buyer acknowledges that Seller is in the process of amending and/or
entering new leases with each of the Tenants operating as a Gold’s Gym (collectively, the “New Gelil's
Gym Leases"). The form of New Goid’s Gym Leases shall be delivered to Buyer as part of the Due
Diligence Materials (defined below), and Buyer agrees and acknowledges that Seller will sign the New
Gold’s Gym Leases at or before Closing.
PLAINTIFFS' RESPONSE TO DEFENDANTS' MOTION FOR SUMMARY JUDGMENT - Page 14 of 21
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The Motion's comparison of Section 20.6 of the PSA to disclaimers in Sch/umberger and Forest
Oil is misleading. Neither Schlumberger nor Forest Oil is particularly useful in this respect, because
both cases analyzed release provisions in settlement agreements that were intended to resolve
present and future disputes expressly contemplated by the settling parties.“’ These distinguishing
contexts for disclaimer language ("full and final settlement" versus a real estate sale contract) are part
of the fact-finder's assessment of "the totality of the circumstances, 142 which at present are not ripe
for summary judgment due to the paucity of the summary judgment record.
Better comparisons of Section 20.6's language are to the contract provisions analyzed in the
Italian Cowboy Partners and Lufkin cases from SCOTX, both of which involved forward-looking
contracts for prospective business transactions:
Italian Cowboy Partners Lufkin ] PSA
341 S.W.3d at 328 573 S.W.3d at 228-29 Section 20.6 _|
[Commercial lease:] Section 2. In entering into this | ....The provisions of this
14.18 Representations. Tenant SOW, Lufkin Industries is not agreement may not be
acknowledges that neither relying upon any representation explained, supplemented, or
Landlord nor Landlord's made by or on behalf of IBM qualified through evidence
agents, employees or that is not specified in the of trade usage or a prior
contractors have made any Agreement or this SOW, course of dealings. In
representations or promises including, without limitation, the entering into this agreement,
with respect to the Site, the actual or estimated completion the parties have not relied
Shopping Center or this Lease date, amount of hours to upon any statement,
except as expressly set forth provide any of the Services, representation, warranty,
herein. charges to be paid, or the results or agreement of the other
of any of the Services to be party except for those
Schlumberger Tech. Corp. v. Swanson, 959 S.WW.2d 171, 180 (Tex. 1997) ("Further, the Swansons released al
‘causes of action of whatsoever nature, or any other legal theory arising out of the circumstances described
above, from any and all liability damages of any kind known or unknown, whether in contract or tort.’ The
sole purpose of the release was to end the dispute about the value of this commercial project between
Schlumberger and the Swansons once and for all."); Forest Oil Corp. v. McAllen, 268 S.W.3d 51, 58 (Tex. 2008)
("A ‘once and for all' settlement may constitute an additional factor urging rejection of fraud-based
laims, but a freely negotiated agreement to settle present disputes and arbitrate future ones should also be
enforceable. . . . [T]he parties expressly negotiated the treatment of surface issues; environmental issues were
an important aspect of the contract. Although the settlement agreement does not preclude all future
environmental disputes, it does require arbitration of them.") (emphasis added).
#2 Forest Oil, 268 S.W.3d at 58; see also Pogue v. Williamson, 605 S.W.3d 656, 668 (Tex. App.—Houston [1st
Dist] 2020, no pet.) (citing Forest Oi) ("The foregoing factors ate not exclusive. We must also look at the
totality of the circumstances.").
PLAINTIFFS' RESPONSE TO DEFENDANTS' MOTION FOR SUMMARY JUDGMENT - Page 15 of 21
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14.21 Entire Agreement. This provided under this SOW. This expressly contained in this
lease constitutes the entire SOW, its Appendices, and the agreement.
agreement between the parties Agreement represent the entire
hereto with respect to the agreement between the parties
subject matter hereof, and no regarding the subject matter and
subsequent amendment or replace any prior oral or written
agreement shall be binding communications. g
upon either party unless it is
signed by each party... |
It is notable that the language in Italian Cowboy was ineffective to disclaim and mote closely
resembles the language in PSA Section 20.6, although it actually provides more specificity as to
subject matters. The language in Lufkin, which was effective to disclaim is remarkably more specific.
As shown above, PSA Section 20.6 uses less specificity on the subject matter of the purported
reliance disclaimers than the provisions at issue in Ifalian Cowboy Partners, where SCOTX did not find
a clear and unequivocal disclaimer.“ Where as in Lufkin, where SCOTX determined the disclaimers
were effective because they expressly "list examples of representations that were 'not specified! in the
contract, the specificity matches almost exactly the representations alleged to be fraudulent which
were discussed in the negotiations." Based on this threshold inquiry, Defendants have not
demonstrated that Section 20.6 contains the requisite clear and unequivocal disclaimer language.
8 See also Lufkin, 573 SW.3d at 229 (additionally providing "Section 2.11. This SOW and referenced
Agreement identified below ate the complete agreement between Lufkin Industries and IBM regarding
services, and replace any prior oral or written communications between us. Accordingly, in entering into this
SOW, neither party is relying upon any representation that is not specified in this SOW including without
limitation, any representations concerning 1) estimated completion dates, hours, or charges to provide any
service; 2) the experiences of other customers; or 3) results or savings Lufkin Industries may achieve.").
* Italian Cowboy Partners, Ltd. v. Prudential Ins. Co. of Am. 341 S.W.3d 323, 336 (Tex. 2011) ("We decline to
extend our holdings in Schlumberger and Forest Oil—each of which included clear and unequivocal language
expressly disclaiming reliance on representations, and representing reliance on one's own judgment—to the
generic merger language contained in the contract at issue in this case. As a matter of law, the lease agreement
at issue does not disclaim reliance, and thus does not defeat Italian Cowboy's claim for fraudulent
inducement.").
4 Int'l Bus. Machines Corp. v. Lufkin Indus. LLC, 573 SMW.3d 224, 231 (Tex. 2019) (“Both disclaimers list
examples of representations that were 'not specified’ in the contract, including representations regarding the
project's completion date, the amount of hours necessary to provide services, the charges to be paid for the
services, and the 'results' of the services IBM provided."
PLAINTIFFS' RESPONSE TO DEFENDANTS' MOTION FOR SUMMARY JUDGMENT - Page 16 of 21
9216353 v6 (72208.00006.000)
b PSA §9
Section 9 of the PSA is even more unavailing as an effective disclaimer of reliance. The
limited portion cited by Defendants (omitting language clarifying its limitations) pertains only to the
physical condition of the Property:
BUYER HAS NOT RELIED AND WILL NOT RELY ON, AND SELLER HAS
NOT MADE AND ARE NOT LIABLE FOR OR BOUND BY, ANY EXPRESS
OR IMPLIED WARRANTIES, GUARANTEES, STATEMENTS,
REPRESENTATIONS OR INFORMATION PERTAINING. TO THE
PROPERTY, THE LAND OR THE IMPROVEMENTS OR RELATING
THERETO (INCLUDING SPECIFICALLY, WITHOUT LIMITATION,
PROPERTY INFORMATION PACKAGES DISTRIBUTED WITH RESPECT
TO THE PROPERTY) BUYER REPRESENTS THAT IT IS A
KNOWLEDGEABLE, EXPERIENCED AND SOPHISTICATED BUYER OF
REAL ESTATE AND THAT IT IS RELYING SOLELY ON ITS OWN
EXPERTISE AND THAT OF BUYER’S CONSULTANTS IN PURCHASING
THE PROPERTY ....
The PSA's defined terms demonstrate that Section 9 pertains to the physical condition of the real
estate and was intended simply to shift responsibility to Plaintiffs, as Buyer, for determining the
acceptability of the physical condition of that real estate. To argue that Section 9 applies to
fraudulent conduct involving the Tenant and the financial substance underlying its Lease and Lease
Extension is beyond an overreach. The PSA defines "Property" as the actual real estate pursuant to
its legal description.” References to "land" and "improvements" and information "relating thereto"
do not clearly and unequivocally disclaim reliance arising from Defendants’ misrepresentations
separate from the physical real property such as the Lease, Tenant or New Gold's Gym Lease (all
defined terms in the PSA).
By way of example, the terms "Leases," "Tenants," and "New Gold's Gym Lease" defined in
Section 6.2 of the PSA, and "Due Diligence Materials" defined in Section 7.2 of the PSA," could
have been referenced in Sections 9 or 20.6 of the PSA to demonstrate specific and clear disclaimers
46 See Defs.' MSJ, Exhibit 2 [RBR0000408}.
47 See Defs.' MSJ, Exhibit 2 [RBR0000414-415}.
PLAINTIFFS' RESPONSE TO DEFENDANTS' MOTION FOR SUMMARY JUDGMENT - Page 17 of 21
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of reliance by the parties with respect to these subject matters, but they were not. Accordingly,
neither clause meets the exacting standard required to prove a clear and unequivocal contractual
disclaimer of reliance as a matter of law."
5. Totality of the circumstances: Even if §20.6 and §9 were clear, unequivocal and
specific disclaimers of reliance, the totality of the circumstances are not before the
Court and, even if they were, material fact issues exist that preclude summary
judgment.
Indeed, even if there is a clear, unequivocal and specific disclaimer of reliance (which does
not exist anywhere in the PSA or the APSA), the fact finder must "always examine the contract itself
and the totality of the surrounding circumstances when determining if a waiver-of-reliance provision
is binding." The issue of whether Plaintiffs’ justifiable reliance was disclaimed is a fact-intensive
inquiry that inherently requires examination of the factual context in which genuine issues of
material fact can be found to exist at the summary judgment stage.”
One Texas appellate court described this two-step process as follows:
The first inquiry is whether the parties have used "clear and
unequivocal language" to disclaim reliance on representations. If the
contract contains a clear and unequivocal disclaimer of reliance
clause, we then look to the circumstances to determine whether
the provision is binding on the parties.*! (Emphasis added).
48 Italian Cowboy Partners, 341 S.W.3d at 334 ("Pure merger clauses, without an expressed clear and unequivocal
intent to disclaim reliance or waive claims for fraudulent inducement, have never had the effect of precluding
claims for fraudulent inducement.").
4 Forest Oil, 268 S.W.3d 51 at 60.
50 See Garya v. CTX Morte, Co, LLC, 285 $.W.3d 919, 927 (Tex. App—Dallas 2009, no pet:) (reversing
summary judgment on fraud, fraudulent inducement, and negligent misrepresentation claims improperly
granted on the basis of disclaimed reliance); LAS Services Group, L.L.C. v. Jim Buckley & Associates, Inc., 900 F.3d
640, 650 (5th Cir. 2018) (stating Texas common law principles for fraudulent inducement) (reversing
dismissal of fraud claim).
5! Cmty. Mgmt, LLC v. Cutten Dev. L.P., 2016 WL 3554704, *5 (Tex. App—Houston [14th Dist]) (citing
Italian Cowboy, 341 S.W 3d at 336-337).
PLAINTIFFS' RESPONSE TO DEFENDAN
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FILED 5/13/2022 4:32 PM FELICIA PITRE DISTRICT CLERK DALLAS CO., TEXAS Lafonda Sims 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. 44™ JUDICIAL DISTRICT TRT HOLDINGS, INC., RBR REAL ESTATE HOLDINGS, LLC, BRIAN ZELMAN, and ADAM ZEITSIFF, Defendants. DALLAS COUNTY, TEXAS PLAINTIFFS' RESPONSE TO DEFENDANTS' MOTION FOR SUMMARY JUDGMENT TO THE HONORABLE COURT: Plaintiffs Milton 635 Gravois Road LLC, 635 Gravois Road Leasing LLC, and 635 Gravois Road Real Estate, LLC (collectively the "Plaintiffs") file this Response to Defendants' Motion for Summary Judgment (the "Motion") filed by Defendants TRT Holdings, Inc. ("TRT"), RBR Real Estate Holdings, LLC ("RBR"), Brian Zelman ("Zelman"), and Adam Zeitsiff ("Zeitsiff) (each a "Defendant" and collectively the "Defendants"), and respectfully show the Court the following: I INTRODUCTION The Supreme Court of Texas ("SCOTX") is clear on what is required to effectively disclaim fraud. First: "[A] clause that clearly and unequivocally expresses the party's intent to disclaim reliance on the specific misrepresentations at issue can preclude a fraudulent- inducement claim."! (emphases added). 1 International Business Machines Corporation v. Lufkin Industries, LLC, 573 S.W.3d 224, 229 (Tex. 2019). PLAINTIFFS' RESPONSE TO DEFENDANTS' MOTION FOR SUMMARY JUDGMENT - Page 1 of 21 9216353 v6 (72208.00006.000) Second, however; "Not every such disclaimer is effective and courts must always examine the contract itself and the totality of the surrounding circumstances when determining if a waiver-of-reliance provision is binding."* (emphases added). The Motion wholly fails on both counts as the clauses relied upon do not even remotely apply to the "specific misrepresentations at issue" and, more importantly, the Motion woefully neglects to establish a summary judgment record upon which this Court could even begin to examine the "totality of the surrounding circumstances." The Motion is supported by a single declaration of less than three pages attaching seven documents from a teal estate transaction taking over one year to conclude. The Motion wholly fails to establish that no genuine issue of material fact exists such that the Court could rule as a matter of law. In addition, the Motion fails to follow controlling precedent and misstates both the applicable law and the contracts in question as further set out below. For all these reasons, the Motion must be denied. I. SUMMARY OF RESPONSE Defendants! attempts to avoid liability for their fraud due to non-negotiated boilerplate provisions in the Agreement of Purchase and Sale ("PSA") fail for numerous reasons. First, even assuming without conceding that the PSA's boilerplate provisions are clear and unequivocal expressions of disclaimers of reliance specific to the representations at issue (they are not), Defendants ignore Forest Oi/'s first factor that to be effective in the face of fraud the contract must have been negotiated and the purported disclaimer itself must have been discussed in the course of negotiations. At a minimum, a genuine issue of material fact exists as to whether the PSA was fully negotiated and the purported disclaimers were both discussed and negotiable. The Motion certainly ? Id. In doing so, SCOTX has provided guidelines known as the Forest Oi/ factors. PLAINTIFFS' RESPONSE TO DEFENDANTS' MOTION FOR SUMMARY JUDGMENT - Page 2 of 21 9216353 v6 (72208.00006.000) does not establish either as a matter of law. Therefore, the totality of the circumstances and balance of the relevant Forest Oil factors (as further discussed below) do not bar Plaintiffs' fraud claims. Second, even if the boilerplate provisions in question were viable to vitiate fraud, by their plain terms those provisions only benefit RBR, the sole contracting party to which they apply. Indeed, Defendants Zelman, TRT, and Zeitsiff are independently liable for their own fraudulent conduct, and no provision or term in the PSA or the First Amendment to Agreement of Purchase and Sale ("APSA") applies to them. Third, the gatden-variety merger clause in Section 20.6 of the PSA by its own terms does not support summary judgment even as to Defendant RBR. SCOTX has repeatedly articulated that a true disclaimer of reliance (as opposed to an ordinary merger clause) must clearly and unequivocally evidence a party's intent to disclaim reliance on the specific misrepresentations at issue in order to bar fraud claims. Here, an ordinary merger clause is at issue that is unspecific, does not use the term "disclaimer," and lacks the unequivocal expression of intent directed to the specific fraudulent misrepresentations at issue. Furthermore, Section 20.6 by its plain terms does not apply to actionable omissions or non-disclosures as well as the allegations of fraud concerning the lease extension that is expressly contained within both the PSA and the APSA. Fourth, Section 9 of the PSA concerning the physical "Condition of Property" does not amount to an unequivocal expression of intent directed to Plaintiffs' fraud claims, which claims have nothing to do with the physical condition of the real property or improvements or any issues regarding the land. Rather, if induced by fraud, Plaintiffs' claims are not barred by the "as is" clause relating to the real property in Section 9, which has nothing to do with the specific fraud at issue. Therefore, RBR's argument that Section 9 is an applicable disclaimer of reliance is unfounded. Fifth, even if Sections 20.6 and 9 of the PSA did meet SCOTX's exacting standard and applied by their terms to the fraudulent conduct in question, the trial court must then separately PLAINTIFFS' RESPONSE TO DEFENDANTS' MOTION FOR SUMMARY JUDGMENT - Page 3 of 21 9216353 v6 (72208.00006.000) engage in a factually intensive evaluation of the totality of the circumstances surrounding the PSA and APSA to determine whether fraud claims asserted against RBR and based upon affirmative statements not contained within the PSA or APSA ate properly barred. This factual analysis is improper on summary judgment, where the factual context surrounding the negotiation of the PSA and APSA is not established by the summary judgment record, is controverted and where genuine issues of material fact exist. Indeed, no depositions have yet taken place and the Motion and summary judgment record, supported by a single perfunctory declaration, does not establish the "totality of the circumstances" as a matter of law. As further set out below, the PSA provisions cited by Defendants are not enforceable disclaimers of Plaintiffs! reliance, and Defendants' Motion should be denied. Il. SUMMARY JUDGMENT EVIDENCE In support of their Response and pursuant to TEX. R. CIv. P. 16Ga(c) ef seg., Plaintiffs rely upon and incorporate herein by reference for all purposes the following exhibits:* e Exhibit A: The Declaration of Mark S. Cohen (the "Cohen Declaration") o Exhibit 1; Email dated April 11, 2019 with Attachments e Exhibit B: The Declaration of Mark Sher in Response to Motion for Summary Judgment (the "Sher Declaration") IV. CONTROVERTING MATERIAL FACTS The PSA originated as a boilerplate form generated by RBR.*_ Neither Leeton Real Estate, Inc. ("Leeton") nor Plaintiffs had previously used the boilerplate form for any purpose.” No 3 For brevity of the filing record, Plaintiffs further rely upon and incorporate herein by reference for al purposes the exhibits introduced by the Motion, including specifically the PSA (produced by Defendants as "RBR000408-432", as "Exhibit 2" to the Motion) (citations to "Defs.' MS], Exhibit 2, PSA, p. "). 4 Ex. A, Cohen Declaration, pp. 1-2; Ex. B, Sher Declaration. 5 Id. PLAINTIFFS' RESPONSE TO DEFENDANTS' MOTION FOR SUMMARY JUDGMENT - Page 4 of 21 9216353 v6 (72208.00006.000) evidence exists as to what terms of the PSA were negotiated, if any, or to what degree. Indeed, neither Leeton nor Plaintiffs negotiated the purported disclaimer provisions at issue (§20.6 and §9 of the PSA) which originated in the boilerplate form, nor did they negotiate nor even discuss any disclaimers of reliance during the entirety of the transaction.’ Defendants offer no evidence that the contracting parties even discussed the purported disclaimer provisions during the course of the transaction or that the provisions were negotiable.’ Any inference by Defendants that §20.6 and §9 were either negotiated or even discussed by the parties (by Defendants' inclusion of Ex. 7 to the Jesse Smith Declaration) fails and, at a minimum, has been sufficiently controverted.* Consequently, §20.6 and §9 of the PSA are non-negotiated boilerplate and no evidence exists that they wete even discussed by the patties or were negotiable. Section 20.6 does not contain the word "disclaimer" or "disclaims," does not expressly apply to fraudulent omissions or non-disclosures, and by its plain terms only applies to RBR as the other party to the PSA.° Only a single sentence in §20.6 concerns reliance and is vague as to subject matter. This sentence does not specifically apply to the fraud at issue. Section 9 concerns "Condition of Property" and applies to "statements" and "representations' wn pertaining to the Property, the land or the improvements or relating thereto. 10 The PSA defines "Property" as "that certain real property located at 635 Gravois Road, Fenton, MO 63026... with all appurtenances, rights, privileges, warranties and easements benefiting, belonging or pertaining thereto. wit Notably, the PSA in §6.2 expressly indicates that the conveyance of the 6 Ex. A, Cohen Declaration, pp. 1-2; Ex. B, Sher Declaration. 7 Ex. A, Cohen Declaration, p. 2; Ex. B, Sher Declaration. 8 Id. » Defs.' MSJ, Exhibit 2, PSA, p. 18 (§20.6). © Defs.' MSJ, Exhibit 2, PSA, p. 29 (§9). 1! Defs.' MSJ, Exhibit 2, PSA, p. 1 (PSA "KEY PROVISIONS SUMMARY" page). PLAINTIFFS' RESPONSE TO DEFENDANTS' MOTION FOR SUMMARY JUDGMENT - Page 5 of 21 9216353 v6 (72208.00006.000) Property is subject to the tenant leases and creates the defined terms "Leases", "Tenant", and "New Gold's Gym Leases.""? §10.3 of the PSA expressly provides that at closing a separate "assignment and assumption of the applicable Leases" must be provided in addition to a deed, and the defined terms "Leases" and "Tenant" are expressly referenced.'’ Hence, the transaction evidenced by the PSA separately provides for the conveyance of the physical teal estate through the deed and the conveyance of Leases by an "assignment and assumption." Two aspects of the nature of these conveyances are notable. First, §9 only expressly concerns the conveyance of the physical real estate and its related rights, and not the conveyances of the Leases. ' 4 Second, §9 does not contain or refer to in any manner the defined terms "Lease", "Tenant", or "New Gold's Gym Lease," which clearly and unequivocally expresses the intent to exclude those subject matters from its risk-shifting terms. Further, Section 9 imposes upon Buyer the duty to "conduct such inspections including but not limited to, the physical and environmental conditions thereof... Wis It further provides "upon closing, Buyer shall assume the risk that adverse matters, including, but not limited to, adverse physical or construction defects or adverse environmental, health or safety conditions may not have been revealed by Buyer's inspection or investigations."'® Section 9 also contains a waiver and release of claims related to various environmental statutes.’ Based on the sum of its various 12 Defs.’ MSJ, Exhibit 2, PSA, p. 7 (§6.2). 13 Defs.' MSJ, Exhibit 2, PSA, pp. 11-12 (§10.3). 14 Defs.' MSJ, Exhibit 2, PSA, p. 29 (§9) ("[p]ertaining to the property, the land or the improvements or relating thereto"). 15 Defs.' MSJ, Exhibit 2, PSA, p. 29 (§9). 16 Defs.' MSJ, Exhibit 2, PSA, pp. 29-30 (§9). 1 Defs.' MSJ, Exhibit 2, PSA, pp. 29-30 (§9). PLAINTIFFS' RESPONSE TO DEFENDANTS' MOTION FOR SUMMARY JUDGMENT - Page 6 of 21 9216353 v6 (72208.00006.000) terms (both included and omitted), Section 9 solely concerns the "Condition of Property" and relates to specific matters concerning the physical real estate including the land and improvements." Plaintiffs' fraud claims (based upon express representations, omissions and non- disclosures)'? do not involve the physical real estate or the land or improvements, but rather, inser alia, the financial wherewithal of a Tenant (that is expressly defined in the PSA), the financial justification of the Tenant's rent under the "Lease", and the Tenant's and its guarantor's respective then present ability to perform under the "New Gold's Gym Lease", which was assigned and executed as part of the transaction. The subject matter of Plaintiffs’ fraud claims is neither expressly contained within nor reasonably contemplated by either Section 20.6 or Section 9. Vv. ARGUMENT & AUTHORITIES Summary Judgment Standard. Summary judgment is a harsh remedy, which should be strictly construed and cautiously applied. 20 The movant's "extraordinary burden" for summary judgment means that "all conflicts in the evidence are disregarded, the evidence favorable to the non-movant is taken as true, and all doubts as to a genuine issue of material fact are resolved in the non-movant's favor."*' Furthermore, every reasonable inference is drawn in favor of the non-movant.” If, after applying these rules, there '8 Defs.' MS], Exhibit 2, PSA, pp. 29-30 (69). 19 See Second Amended Petition §15 & 16. {16 contains the following clarifying statement: "The Misrepresentations do not pertain to the physical ‘ondition, construction or status of the land or improvements making up the Premises." 20 See In re Price's Estate, 375 S.W.2d 900, 904 (Tex. 1964). 21 Kazmir v. Suburban Homes Realty, 824 /.2d 239, 242 (Tex. App.—Texarkana 1992, writ denied) (citing Nixon v. Mr. Property Management, 690 S 2d 546, 548-49 (Lex. 1985); see also Limestone Prods. Distrib. v. McNamara, 71 S.W.3d 308, 311 (Tex. 2002); M.D. Anderson Hosp. v. Willrich, 28 S.W.3d 22, 23 (Tex. 2000). 22 Provident Life & Adc. Ins. v. Knott, 128 SW.3d 211, 215 (Tex. 2003). PLAINTIFFS' RESPONSE TO DEFENDANTS' MOTION FOR SUMMARY JUDGMENT - Page 7 of 21 9216353 v6 (72208.00006.000) remain one ot more genuine questions of fact, then the summary judgment motion must be denied as a matter of law.” The Motion woefully fails to meet its burden. 2. To disclaim Plaintiffs' reliance, the parties' negotiations must have specifically discussed Sections 20.6 and 9 of the PSA; here, it is undisputed (or at least a genuine issue of material fact exists) that they were not. In Forest Oil Corp. v. McAllen, 268 S.W.3d 51, 60 (Tex. 2008), SCOTX noted the Schlumberger facts that guided its reasoning, now known as the "Forest Oi/ Factors." As part of the trial court's consideration of the totality of the circumstances underlying an alleged disclaimer of reliance, the first factor involves assessment of whether: (1) the terms of the contract were negotiated, rather than boilerplate, and during negotiations the parties specifically discussed the issue which has become the topic of the subsequent dispute; Id. (emphasis added). The Dallas Court of Appeals has clarified what the phrase "the issue which has become the topic of the subsequent dispute" means. "[T]he topic of the subsequent dispute" is the specific contract term being asserted against the party claiming fraud." Lebowitz v. Sequoia Real Estate Holdings, LP., 465 S.W.3d 331, 344 (Tex. App—Dallas 2015); see also Bever Properties, LLC v. Jerry Huffman Custom Builder, LLC, 2015 WL 4600347, *11 (Tex. App—Dallas July 31, 2015). Consequently, in this case, the Court is required by the Dallas Court of Appeals to consider whether the terms of the PSA were negotiated, rather than boilerplate, and during those negotiations whether §9 and §20.6 were actually discussed. Defendants’ Motion simply does not establish this first factor as a matter of law, and instead wholly fails to address what terms, if any, of the PSA were negotiated or were boilerplate, or whether §20.6 or §9 were even discussed during negotiations. Accordingly, Defendants have not carried their burden on summary judgment to establish that there is no genuine issue of material fact such that the Court can rule as a matter of law. Indeed, to the contrary, the Cohen Declaration 3 Powers v. Adams, 2. S.W.3d 496, 497-99 (Tex. App.—Houston [14th Dist.] 1999, no pet.). PLAINTIFFS' RESPONSE TO DEFENDANTS' MOTION FOR SUMMARY JUDGMENT - Page 8 of 21 9216353 v6 (72208.00006.000) Exhibit A) establishes that to the extent that Defendants' Motion may be arguing that the April 11, 2019 email from Mr. Cohen represents negotiation of the PSA (which is unclear), that argument is incorrect. Indeed, the Cohen Declaration further establishes that §9 and §20.6 of the PSA were boilerplate terms that originated from RBR, that Cohen has no recollection of ever discussing those provisions, and that the Plaintiffs never negotiated a disclaimer of reliance with RBR. The Sher Declaration (Exhibit B) unequivocally states §9 and §20.6 were not discussed. Consequently, at best, Defendants’ summary judgment evidence is hopelessly controverted on the existence (or non-existence) of the first Forest Oil factor,”* and summary judgment based on non-negotiated and unspecific boilerplate provisions never even discussed is wholly improper.” It should be noted that the Motion fails to fully and adequately address the first Forest Oi/ factor by choosing to grossly oversimplify the analyses SCOTX and the Dallas Court of Appeals actually require of this Court. The Motion, indeed, contains no analysis of whether "during negotiations the parties specifically discussed the issue which has become the topic of the subsequent dispute." Further, the Motion fails to even cite to the controlling opinions of Leibowitz and Bevers, instead citing to distinguishable portions of a non-controlling opinion from Houston's First District, Pogue v. Williamson, 605 S.W.3d 656 (Tex. App.—Houston [1st Dist.] 2020). Tn citing Pogue, the Defendants fail to acknowledge damaging language to their position. The Houston Court holds: "When there is proof that the parties specifically contemplated the issue that 2 See Baker v. City of Robinson, 305 S.W.3d 783, 796 (Tex. App.—Waco 2009, no pet) (finding "nothing in the record to indicate the parties discussed the zoning of the property" that became the subject of dispute, and "[a}fter considering the factors listed in Forest Oi/' concluding that neither the disclaimer of reliance or merger clause precluded fraud claims); see also Allen v. Devon Energy Holdings, L.L.C., 367 S.W.3d 355, 379 (Lex. App.—Houston [1* Dist.] 2012), pet. granted, judgment set aside and remanded by agreement, 2013 WL. 273026, at *1 ("We deny appellees’ request to withdraw our March 9, 2012 opinion on rehearing, and we do not withdraw that opinion.") (finding no evidence that parties expressly negotiated alleged disclaimer and holding it unenforceable based on the totality of circumstances). 25 Compare Cmty. Mgmt. LLC v. Cutten Dev. L.P., No. 14-14-00854-CV, 2016 WL 3554704, at *10 (Tex. App.—Houston [14th Dist] June 28, 2016, pet. denied) ("[I}he summary judgment evidence shows that the parties discussed the issue that became the topic of subsequent dispute."). PLAINTIFFS' RESPONSE TO DEFENDANTS' MOTION FOR SUMMARY JUDGMENT - Page 9 of 21 9216353 v6 (72208.00006.000) has become the topic of dispute, courts should be particularly reluctant to hold a disclaimet-of- reliance claims unenforceable.” It is undisputed on this record there is simply is no such proof. Therefore even under the non-controlling authority on which they rely, Defendants fail to establish the existence of facts supporting Pogue's rendition of the first Forest Oi/ factor. Defendants further fail to follow the SCOTX opinion in International Business Machines Corporation v. Lufkin Industries, LLC, 573 S.W.3d 224 (2019), which properly cites to the full statement of the first Forest Oi/ factor and upon which Pogue appears to rely. In that case, Lufkin sought to avoid its clear disclaimer of the issues copiously discussed (i.e., how much customization of the subject software was needed), on the basis of ambiguity when the clear and precise disclosure language expressly disclaimed the "amount of the hours to provide any of the Services, charges to be paid or the results of any of the Services to be provided" which clearly encompassed the subject matter of the discussions and were thus expressly disclaimed.” Consequently, Defendants not only ignore Leibowitz and Bevers but also wholly fail to meet the standard set out in Pogwe when viewed in the controlling context of Lufkin. 3. Claims against TRT, Zelman, and Zeitsiff stand independently and are not subject to any contractual provisions in the PSA executed by RBR. Plaintiffs' claims against Defendants TRT, Zelman, and Zeitsiff are not dependent on conspiracy with RBR for those Defendants' liability for fraud. Plaintiffs’ conspiracy claim is brought in the alternative. Rather, Defendants are each directly liable for their own fraud, which 26 Pogue, 605 S.W.3d at 667. 27 Lufkin, 573 SW.3d at 226 and 228-229. Lufkin also at p. 237 footnote 4 raises the issue of negotiability of the disclaimers. As noted the summary judgment record offers no proof in this regard. 28 Spurgeon v. Empire Petroleum Partners, LLC, No. 05-18-00783-CV, 2019 WL 2521722, at *4 (Tex. App.— Dallas June 19, 2019, no pet.) (finding sufficient allegations against individual defendant for which individual can be held liable "for fraudulent or tortious acts committed while in the service of the corporation’ won ‘where he had direct personal participation in the wrongdoing"); see also L] Charter, L.L.C. v. Air Am. Jet Charter, Inc., No. 14-08-00534-CV, 2009 WL 4794242, at *14 ([ex. App.—Houston [14th Dist] Dec. 15, 2009, pet. denied) ("It is the general rule in Texas that company agents are individually liable for fraudulent or tortious acts committed while in the service of their limited liability company. . . . [S]ince Trey Schwarz and Buzzy Schwarz committed fraud, the judgment should have held them, along with LJ Charter, jointly and severally liable for the fraud damages.") (internal citations omitted). PLAINTIFFS' RESPONSE TO DEFENDANTS' MOTION FOR SUMMARY JUDGMENT - Page 10 of 21 9216353 v6 (72208.00006.000) exists separate and apart from any term or provision in the PSA or APSA.” Zelman is and was an employee of TRT. TRT is not a party to the PSA or APSA and Zeitsiff, an employee of Gold's Gym International, executed the false and fraudulent Lease Extension facilitated by TRI. The purported disclaimer provisions cited in Defendants' Motion support this principle, where Section 20.6 limits the merger clause to statements "of the other party" to the contract, RBR, and Section 9 states only that "Seller [RBR] has not made and is not liable for or bound by" representations that concern Plaintiffs' acceptance of the physical condition of the real property. 31 Consequently, as a matter of law, only Defendant RBR may avail itself of any contractual defense under the PSA or APSA. Defendants’ Motion as to TRT, Zelman, and Zeitsiff based upon contract provisions that do not expressly protect them is wholly unsupported and inapplicable.” 4. Legal Standard: A disclaimer of reliance sufficient to vitiate fraud must be clear and unequivocal, and specific to the subject matter purportedly being disclaimed; §20.6 and §9 are not. A contract is subject to avoidance on the ground of fraudulent inducement. For more than fifty years, Texas has followed "the rule that a written contract [even] containing a merger clause can [nevertheless] be avoided for antecedent fraud or fraud in its inducement and that the parol evidence 29 See Transcor Astra Grp. S.A. v. Petrobras Am. Inc., No. 20-0932, 2022 WL 1275238, at *11 (Tex. Apr. 29, 2022) (citing Franka v. Velasquez, 332 S.W.3d 367, 383 (Tex. 2011)) ("[A]n individual [that] was acting in a corporate capacity does not prevent the individual from being held personally—or “individually"—liable for the harm caused by those acts."); see also Campbell v. Hamilton, 632 S.W.2d 633 (Tex. App—Dallas 1982, writ ref'd n.t.e.) (holding seller liable for agent's fraud and misrepresentations within scope of agency). 30 See Zarzana v. Ashley, 218 S.W.3d 152, 159 (Tex. App.—Houston [14th Dist.] 2007, pet. struck) (citing GTE Southwest, Inc. v. Bruce, 998 S.W.2d 605, 617-18 (Tex. 1999) (discussing employers’ liability for unauthorized torts of employees where "closely connected with the [employce's] authorized duties"). 31 Defs.' MSJ, Exhibit 2, PSA, pp. 29-30 (99); p. 18 20.6). 3 Source 4 Value v. Hoelzer, No. 07-18-00338-CV, 2020 WL 4249744, at *3-5 (Lex. App—Amarillo July 21, 2020, pet. denied) (citing In re Arthur Andersen LLP, 121 $.W.3d 471, 481 (Lex. App—Houston [14th Dist.] 2003, orig. proceeding) (affirming liability against non-contracting party "if the third party benefits from the fraudulent transaction and had knowledge of the fraud," or "by mere silent acquiescence when he benefits from the fraud"); see also Visa Inc. v. Sally Beauty Holdings, Inc., No. 02-20-00339-CV, 2021 WL 5848758, at *20 (Tex. App.—Fort Worth Dec. 9, 2021, pet. filed) (same). PLAINTIFFS' RESPONSE TO DEFENDANTS' MOTION FOR SUMMARY JUDGMENT - Page 11 of 21 9216353 v6 (72208.00006.000) rule does not stand in the way of proof of such fraud."* SCOTX recognized an exception to this tule in Schlumberger Technology Corp. v. Swanson, and held that when sophisticated parties represented by counsel negotiate at arm's length and disclaim reliance on representations "about a specific matter in dispute," such a disclaimer may be binding. In other words, fraudulent inducement is almost always grounds to set aside a contract despite a merger clause, but in certain limited circumstances, only a clear and specific disclaimer-of-reliance clause can negate such a claim as a matter of law. The question of whether an adequately clear and specific disclaimer of reliance exists is a question of law for the Court to assess within the factual totality of the circumstances.” A standard merger clause is not enough to bar a fraud claim. SCOTX has repeatedly held that to disclaim reliance, parties must use clear and unequivocal language. 36 This elevated requirement of precise language helps ensure that parties to a contract—even sophisticated parties represented by able attorneys—understand that the contract's terms disclaim reliance, such that the contract may be binding even if it was induced by fraud. In particular in this case, an agreement signed at the inception of a business relationship like the PSA and APSA (as opposed to the settlement agreements in Sch/uwmberger and Forest Oil) "should be all the more clear and unequivocal in effectively disclaiming reliance and precluding a claim for fraudulent inducement, lest we ‘forgive intentional lies regardless of context." Indeed, ‘Texas courts have recognized a number of contractual provisions (not contained in the PSA and APSA in this case) that would provide greater clarity to effectively disclaiming reliance, including: (1) an all- embracing disclaimer that the affected party had not relied on any representations or omissions by 38 [alian Cowboy Partners, Lid. v. PrudentialIns, Co. of Am., 341 SW.3d 323, 331 (Lex. 2011) (citing Dallas Farm Match. Co. v. Reaves, 307 S.W.2d 233, 239 (Tex. 1957)). 34959 S.W.2d 171, 179 (Tex. 1997). 38 Forest Oil Corp. v. McAllen, 268 S.W.3d 51, 61 (Tex. 2008). 36 See Forest Oil, 268 S.W.3d at 62; Schlumberger, 959 S.W.2d at 179-80. 37 Italian Cowboy, 341 S.W.3d at 335 (quoting Forest Oi/, 268 S.W.3d at 61). PLAINTIFFS' RESPONSE TO DEFENDANTS' MOTION FOR SUMMARY JUDGMENT - Page 12 of 21 9216353 v6 (72208.00006.000) the offending party; (2) a specific no liability clause stating that the party providing certain information will not be liable for any other person's use of the information; and (3) a specific waiver of any claim for fraudulent inducement based on misrepresentations or omissions 38 The clauses telied upon by Defendants do not meet this standard. a. PSA §20.6 Defendants’ Motion relies on two provisions in the PSA: Section 20.6 on "Merger/Prior Agreements. and Section 9 regarding the "Condition of Property." Neither clause effectively disclaims Plaintiffs’ reliance in this case, as a matter of law. Section 20.6 is a general, boilerplate merger and finality clause that does not use the word "disclaim," or expressly disclaim, waive, or release any claims, rights, or remedies based upon RBR's statements and representations as alleged in the Second Amended Petition: 20.6 Merger/Prior_ Agreements. THIS AGREEMENT CONSTITUTES TI FINAL AGREEMENT BETWEEN THE PARTIES. IT IS THE COMPLETE AND EXCLUSIVE EXPRESSION OF THE PARTIES’ AGREEMENT ON THE MATTERS CONTAINED IN THIS AGREEMENT ALI PRIOR AND CONTEMPORANEOUS NEGOTIATIONS AND AGREEMENTS BETWEED THE PARTIES ON THEMATTERS CONTAINED IN THIS AGREEME! ARE EXPRESSLY MERGED INTOAND SUPERSEDED BY THIS AGREEME EK PROVISIONS OF TILS AGREEMENT MAY NOT BE EXPLAINED, SUPPL .EMENTED, OR QUALIFIED THROUGH EVIDENCE OF TRADE USAGE OR A PRIOR COURSE OF DEALINGS. IN ENTERING INTO THIS AGREEMENT, THE PARTIES HAVE NOT RELIED UPON ANY STATEMENT, REPRESENTATION, WARRANTY, OR AGREEMENT OF THE OTHER PARTY EXC! T FOR THOSE EXPRESSLY CONTAINED IN THIS AGREEMENT. THERE [S$ NO CONDITION PRECEDENT TO THE EFFECTIVENESS OF THIS GREEMENT OTHER THAN THOSE EXPRESSLY STATED IN THIS AGREEME The second-to-last sentence is the only portion of Section 20.6 in which the parties agree they "have not relied" upon any statement or representation "of the other party" (here, only RBR's statements and representations) Because Section 20.6 applies only to statements and representations, it does not apply to Plaintiffs' claims based on Defendants’ fraudulent omissions and non-disclosures that concern omitting to disclose known facts regarding the Tenant's inability 38 Allen v. Devon Energy Holdings, L.L.C., 367 $.W.3d 355, 380 (Lex. App.—Houston [1st Dist.] 2012). 39 See Allen, 367 S.W.3d at 380 (citing Coastal Bank SSB v. Chase Bank of Tex., N.A., 135 S.W.3d 840, 843 (Tex. App.—Houston [1st Dist.] 2004, no pet.) (the Alken v. Devon Energy court declined to enforce disclaimer for PLAINTIFFS' RESPONSE TO DEFENDANTS' MOTION FOR SUMMARY JUDGMENT - Page 13 of 21 9216353 v6 (72208.00006.000) to perform under the Lease and Lease Extension (Count 3), including specifically the Tenant's inclusion on a list of unprofitable locations. Construed as a whole, Section 20.6 does not contain any specific disclaimer directed to Defendants! mistepresentations regarding the financial wherewithal of Gold's Gym and the Tenant, or their respective financial performance and stability or that the value of the Tenant's Lease was justified by the volume of stable gym memberships then existing, as well as the fraudulent nature of the Lease Extension. Rather, because the agreement to provide the Lease Extension is "contained within this agreement" in both the PSA (Section 6.2)’ and the APSA, Plaintiffs' claims regarding the fraudulent nature of the Lease Extension from its inception ate not subject to the purported disclaimer claimed through the merger clause. Consequently, the only party that can rely on Section 20.6 is RBR, and the only portion of Plaintiffs' fraud claims arguably at issue are the affirmative statements and representations (as opposed to fraudulent omissions). However, Section 20.6 provides no direct reference specifically to the affirmative fraudulent statements or even a general reference to their subject matter. Further it does not provide that reliance upon them was clearly and unequivocally disclaimed, waived, or released as a matter of law, as SCOTX requires. omissions, and comparing to Coastal Bank SSB where disclaimers expressly stated that plaintiff had not relied on defendant's representations and that defendant would not have any liability "for any representations . . or for any omissions"). 0 6.2 Subject to Leases. The Property will be conveyed subject to those leases identified on ExhibitB attached hereto and any other Icases affecting the Properly as of Closing, as such leases may have been amended or modified from time to time (each a “Lease”, and may be collectively referred to herein as the “Leases”. The tenants under the Leases are each a “Fengnt”, and may be collectively referred to herein as the Tenants”. Buyer acknowledges that Seller is in the process of amending and/or entering new leases with each of the Tenants operating as a Gold’s Gym (collectively, the “New Gelil's Gym Leases"). The form of New Goid’s Gym Leases shall be delivered to Buyer as part of the Due Diligence Materials (defined below), and Buyer agrees and acknowledges that Seller will sign the New Gold’s Gym Leases at or before Closing. PLAINTIFFS' RESPONSE TO DEFENDANTS' MOTION FOR SUMMARY JUDGMENT - Page 14 of 21 9216353 v6 (72208.00006.000) The Motion's comparison of Section 20.6 of the PSA to disclaimers in Sch/umberger and Forest Oil is misleading. Neither Schlumberger nor Forest Oil is particularly useful in this respect, because both cases analyzed release provisions in settlement agreements that were intended to resolve present and future disputes expressly contemplated by the settling parties.“’ These distinguishing contexts for disclaimer language ("full and final settlement" versus a real estate sale contract) are part of the fact-finder's assessment of "the totality of the circumstances, 142 which at present are not ripe for summary judgment due to the paucity of the summary judgment record. Better comparisons of Section 20.6's language are to the contract provisions analyzed in the Italian Cowboy Partners and Lufkin cases from SCOTX, both of which involved forward-looking contracts for prospective business transactions: Italian Cowboy Partners Lufkin ] PSA 341 S.W.3d at 328 573 S.W.3d at 228-29 Section 20.6 _| [Commercial lease:] Section 2. In entering into this | ....The provisions of this 14.18 Representations. Tenant SOW, Lufkin Industries is not agreement may not be acknowledges that neither relying upon any representation explained, supplemented, or Landlord nor Landlord's made by or on behalf of IBM qualified through evidence agents, employees or that is not specified in the of trade usage or a prior contractors have made any Agreement or this SOW, course of dealings. In representations or promises including, without limitation, the entering into this agreement, with respect to the Site, the actual or estimated completion the parties have not relied Shopping Center or this Lease date, amount of hours to upon any statement, except as expressly set forth provide any of the Services, representation, warranty, herein. charges to be paid, or the results or agreement of the other of any of the Services to be party except for those Schlumberger Tech. Corp. v. Swanson, 959 S.WW.2d 171, 180 (Tex. 1997) ("Further, the Swansons released al ‘causes of action of whatsoever nature, or any other legal theory arising out of the circumstances described above, from any and all liability damages of any kind known or unknown, whether in contract or tort.’ The sole purpose of the release was to end the dispute about the value of this commercial project between Schlumberger and the Swansons once and for all."); Forest Oil Corp. v. McAllen, 268 S.W.3d 51, 58 (Tex. 2008) ("A ‘once and for all' settlement may constitute an additional factor urging rejection of fraud-based laims, but a freely negotiated agreement to settle present disputes and arbitrate future ones should also be enforceable. . . . [T]he parties expressly negotiated the treatment of surface issues; environmental issues were an important aspect of the contract. Although the settlement agreement does not preclude all future environmental disputes, it does require arbitration of them.") (emphasis added). #2 Forest Oil, 268 S.W.3d at 58; see also Pogue v. Williamson, 605 S.W.3d 656, 668 (Tex. App.—Houston [1st Dist] 2020, no pet.) (citing Forest Oi) ("The foregoing factors ate not exclusive. We must also look at the totality of the circumstances."). PLAINTIFFS' RESPONSE TO DEFENDANTS' MOTION FOR SUMMARY JUDGMENT - Page 15 of 21 9216353 v6 (72208.00006.000) 14.21 Entire Agreement. This provided under this SOW. This expressly contained in this lease constitutes the entire SOW, its Appendices, and the agreement. agreement between the parties Agreement represent the entire hereto with respect to the agreement between the parties subject matter hereof, and no regarding the subject matter and subsequent amendment or replace any prior oral or written agreement shall be binding communications. g upon either party unless it is signed by each party... | It is notable that the language in Italian Cowboy was ineffective to disclaim and mote closely resembles the language in PSA Section 20.6, although it actually provides more specificity as to subject matters. The language in Lufkin, which was effective to disclaim is remarkably more specific. As shown above, PSA Section 20.6 uses less specificity on the subject matter of the purported reliance disclaimers than the provisions at issue in Ifalian Cowboy Partners, where SCOTX did not find a clear and unequivocal disclaimer.“ Where as in Lufkin, where SCOTX determined the disclaimers were effective because they expressly "list examples of representations that were 'not specified! in the contract, the specificity matches almost exactly the representations alleged to be fraudulent which were discussed in the negotiations." Based on this threshold inquiry, Defendants have not demonstrated that Section 20.6 contains the requisite clear and unequivocal disclaimer language. 8 See also Lufkin, 573 SW.3d at 229 (additionally providing "Section 2.11. This SOW and referenced Agreement identified below ate the complete agreement between Lufkin Industries and IBM regarding services, and replace any prior oral or written communications between us. Accordingly, in entering into this SOW, neither party is relying upon any representation that is not specified in this SOW including without limitation, any representations concerning 1) estimated completion dates, hours, or charges to provide any service; 2) the experiences of other customers; or 3) results or savings Lufkin Industries may achieve."). * Italian Cowboy Partners, Ltd. v. Prudential Ins. Co. of Am. 341 S.W.3d 323, 336 (Tex. 2011) ("We decline to extend our holdings in Schlumberger and Forest Oil—each of which included clear and unequivocal language expressly disclaiming reliance on representations, and representing reliance on one's own judgment—to the generic merger language contained in the contract at issue in this case. As a matter of law, the lease agreement at issue does not disclaim reliance, and thus does not defeat Italian Cowboy's claim for fraudulent inducement."). 4 Int'l Bus. Machines Corp. v. Lufkin Indus. LLC, 573 SMW.3d 224, 231 (Tex. 2019) (“Both disclaimers list examples of representations that were 'not specified’ in the contract, including representations regarding the project's completion date, the amount of hours necessary to provide services, the charges to be paid for the services, and the 'results' of the services IBM provided." PLAINTIFFS' RESPONSE TO DEFENDANTS' MOTION FOR SUMMARY JUDGMENT - Page 16 of 21 9216353 v6 (72208.00006.000) b PSA §9 Section 9 of the PSA is even more unavailing as an effective disclaimer of reliance. The limited portion cited by Defendants (omitting language clarifying its limitations) pertains only to the physical condition of the Property: BUYER HAS NOT RELIED AND WILL NOT RELY ON, AND SELLER HAS NOT MADE AND ARE NOT LIABLE FOR OR BOUND BY, ANY EXPRESS OR IMPLIED WARRANTIES, GUARANTEES, STATEMENTS, REPRESENTATIONS OR INFORMATION PERTAINING. TO THE PROPERTY, THE LAND OR THE IMPROVEMENTS OR RELATING THERETO (INCLUDING SPECIFICALLY, WITHOUT LIMITATION, PROPERTY INFORMATION PACKAGES DISTRIBUTED WITH RESPECT TO THE PROPERTY) BUYER REPRESENTS THAT IT IS A KNOWLEDGEABLE, EXPERIENCED AND SOPHISTICATED BUYER OF REAL ESTATE AND THAT IT IS RELYING SOLELY ON ITS OWN EXPERTISE AND THAT OF BUYER’S CONSULTANTS IN PURCHASING THE PROPERTY .... The PSA's defined terms demonstrate that Section 9 pertains to the physical condition of the real estate and was intended simply to shift responsibility to Plaintiffs, as Buyer, for determining the acceptability of the physical condition of that real estate. To argue that Section 9 applies to fraudulent conduct involving the Tenant and the financial substance underlying its Lease and Lease Extension is beyond an overreach. The PSA defines "Property" as the actual real estate pursuant to its legal description.” References to "land" and "improvements" and information "relating thereto" do not clearly and unequivocally disclaim reliance arising from Defendants’ misrepresentations separate from the physical real property such as the Lease, Tenant or New Gold's Gym Lease (all defined terms in the PSA). By way of example, the terms "Leases," "Tenants," and "New Gold's Gym Lease" defined in Section 6.2 of the PSA, and "Due Diligence Materials" defined in Section 7.2 of the PSA," could have been referenced in Sections 9 or 20.6 of the PSA to demonstrate specific and clear disclaimers 46 See Defs.' MSJ, Exhibit 2 [RBR0000408}. 47 See Defs.' MSJ, Exhibit 2 [RBR0000414-415}. PLAINTIFFS' RESPONSE TO DEFENDANTS' MOTION FOR SUMMARY JUDGMENT - Page 17 of 21 9216353 v6 (72208.00006.000) of reliance by the parties with respect to these subject matters, but they were not. Accordingly, neither clause meets the exacting standard required to prove a clear and unequivocal contractual disclaimer of reliance as a matter of law." 5. Totality of the circumstances: Even if §20.6 and §9 were clear, unequivocal and specific disclaimers of reliance, the totality of the circumstances are not before the Court and, even if they were, material fact issues exist that preclude summary judgment. Indeed, even if there is a clear, unequivocal and specific disclaimer of reliance (which does not exist anywhere in the PSA or the APSA), the fact finder must "always examine the contract itself and the totality of the surrounding circumstances when determining if a waiver-of-reliance provision is binding." The issue of whether Plaintiffs’ justifiable reliance was disclaimed is a fact-intensive inquiry that inherently requires examination of the factual context in which genuine issues of material fact can be found to exist at the summary judgment stage.” One Texas appellate court described this two-step process as follows: The first inquiry is whether the parties have used "clear and unequivocal language" to disclaim reliance on representations. If the contract contains a clear and unequivocal disclaimer of reliance clause, we then look to the circumstances to determine whether the provision is binding on the parties.*! (Emphasis added). 48 Italian Cowboy Partners, 341 S.W.3d at 334 ("Pure merger clauses, without an expressed clear and unequivocal intent to disclaim reliance or waive claims for fraudulent inducement, have never had the effect of precluding claims for fraudulent inducement."). 4 Forest Oil, 268 S.W.3d 51 at 60. 50 See Garya v. CTX Morte, Co, LLC, 285 $.W.3d 919, 927 (Tex. App—Dallas 2009, no pet:) (reversing summary judgment on fraud, fraudulent inducement, and negligent misrepresentation claims improperly granted on the basis of disclaimed reliance); LAS Services Group, L.L.C. v. Jim Buckley & Associates, Inc., 900 F.3d 640, 650 (5th Cir. 2018) (stating Texas common law principles for fraudulent inducement) (reversing dismissal of fraud claim). 5! Cmty. Mgmt, LLC v. Cutten Dev. L.P., 2016 WL 3554704, *5 (Tex. App—Houston [14th Dist]) (citing Italian Cowboy, 341 S.W 3d at 336-337). PLAINTIFFS' RESPONSE TO DEFENDAN