Preview
FILED
8/8/2023 3:15 PM
FELICIA PITRE
DISTRICT CLERK
DALLAS CO., TEXAS
Brandon Keys DEPUTY
CAUSE NO. DC—21—11406
MILTON 635 GRAVOIS ROAD LLC, 635 § IN THE DISTRICT COURT
GRAVOIS ROAD LEASING LLC, and 635 §
GRAVOIS ROAD REAL ESTATE LLC, §
§
Plaintiffs,
g
v. § 44TH JUDICIAL DISTRICT
§
TRT HOLDINGS, INC., §
RBR REAL ESTATE HOLDINGS, LLC, §
BRIAN ZELMAN, and ADAM ZEITSIFF, §
§
Defendants. § DALLAS COUNTY, TEXAS
PLAINTIFFS’ REPLY BRIEF IN SUPPORT OF MOTION TO COMPEL THE
DISCOVERY OF DEFENDANTS’ NET WORTH
TO THE HONORABLE JUDGE OF SAID COURT:
COME NOW, Plaintiffs Milton 635 Gravois Road LLC (“Gravois LLC”), 635 Gravois
Road Leasing LLC (“Gravois Leasing”), and 635 Gravois Road Real Estate LLC (“Gravois Real
Estate”) (collectively “Plaintiffs”) and f1le this Reply Brief in Support of their Motion to Compel the
Discovery of Defendants’ Net Worth (the “Motion”), and respectfully Show the Court as follows:
I. SUMMARY
Rather than addressing the substance of Plaintiffs’ Motion, Defendants’ have attempted to
shift the Court’s focus t0 issues that are irrelevant, have already been decided, or have been
abandoned. Specifically, Defendants raise issues addressed in their previously filed motion for
summary judgment in an attempt t0 rehash arguments relating to an alleged disclaimer 0f reliance.
The Court, however, rejected that argument and denied Defendants’ motion for summary judgment
on December 30, 2022. T0 the extent Defendants assert Plaintiffs lack standing to bring certain
claims, Defendants previously raised the same arguments Within their plea to the jurisdiction—
Which Defendants voluntarily withdrew after the filing of Plaintiffs’ amended petition and have
PLAINTIFFS' REPLY BRIEF IN SUPPORT OF MOTION TO COMPEL THE DISCOVERY 0F DEFENDANTS' NET WORTH —
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therefore abandoned their arguments relating t0 standing. In any event, and contrary to Defendants’
assertion, Plaintiffs have produced evidence establishing: (1) Zelman acted on behalf of TRT; and
(2) Defendants made false representations which Plaintiffs relied upon. Plaintiffs have shown a
substantial likelihood of success on the merits of their claims for statutory fraud and fraud by
omission and their Motion to Compel the Discovery of Defendants’ Net Worth should be granted.
II. ARGUMENT & AUTHORITIES
A. PLAINTIFFS MAINTAIN STANDING
Defendants have misstated both the facts and the law relevant to Plaintiffs’ standing. Under
Defendants’ flawed theory of Texas law, fraudsters in any business transaction may avoid
responsibility for their fraud simply because a special purpose entity is created to close the
transaction, which happens routinely in Texas. This is not and has never been the law in the state of
Texas.
Under Texas law and established equitable principles, Plaintiffs have standing to bring causes
of action against Defendants for their fraudulent misrepresentations and omissions that induced the
sale of the Premises at issue: a real estate development containing a long-term lease of a Gold’s Gym
location located at 635 Gravois Road, Fenton, Missouri 63026 (the “Property”), that was
purportedly “very well performing” with an underlying business that justified the rent under its lease
according to Defendants.
Here, Plaintiffs have standing, first, because Defendants made misrepresentations directly to
them upon which they relied in entering a real estate transaction that caused their damage (based
upon the fraudulent lease extension). Second, Plaintiffs have standing because Defendants intended
or had reason to expect that their misrepresentations made to Plaintiffs’ principals would (and
actually did) influence Plaintiffs’ conduct, with the intention that Plaintiffs act upon the
misrepresentations in the transaction for the Property (based upon the fraudulent
PLAINTIFFS' REPLY BRIEF IN SUPPORT OF MOTION TO COMPEL THE DISCOVERY OF DEFENDANTS' NET WORTH —
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misrepresentations). The Texas Supreme Court has recognized and applied this “reason to expect”
standard for fraudulent misrepresentations where, “although not made directly to the other [party to
a transaction],” a misrepresentation “is made to a third person and the maker intends or has reason
to expect that its terms will be repeated or its substance communicated to the other, and that it Will
influence his conduct in the transaction or type of transaction involved.“
Defendants attack Plaintiffs’ standing to assert fraud claims against them because the
fraudulently-induced Amended Agreement of Purchase and Sale of September 27, 2019 (“APSA” is
between Defendant RBR and one of Plaintiffs’ non—party affiliates, Leeton Real Estate, Inc.
(“Leeton”). Defendants contend that Plaintiffs, as assignees of non-party Leeton, do not have
standing to bring claims against Defendants for the fraudulently—induced APSA With Leeton,
because fraud claims are genera/bl personal to the defrauded party. In other words, Defendants claim
that they are absolved of the consequences of their fraud simply because Plaintiffs used affiliate
companies to close the fraudulently-induced transaction for the Premises.
However, Plaintiffs were actually formed and in reliance upon the various
misrepresentations. Leeton on Plaintiffs’ behalf entered into the APSA; and again in reliance of the
various misrepresentations, Gravois LLC was assigned the APSA and actually closed on the
anticipated transaction, in which its affiliates Gravois Real Estate and Gravois Leasing participated.
At all times relevant, Plaintiffs’ non—party affiliate Leeton (which is the manager of Gravois LLC)
and related principals have acted on behalf of each of the Plaintiffs, in reliance on and under the
influence of Defendants’ misrepresentations regarding the Property. The APSA, induced by
Defendants’ misrepresentations, specifically provided for assignability by Leeton to any affiliate with
notice of the same. Accordingly, Defendants intended and/ or had reason to expect that their
1599 Ermz‘ 2’7“
Young. LLP. v. Par. Mm‘. Lg? Im. C0., 51 S.W.3d 573, 580 (Tex. 2001) (“We conclude that section 531’s
reason—to—expect standard comports with our jurisprudence and does not expand the parameters of common—law fraud
in Texas as Ernst & Young claims. We disapprove of Kano” I). Melbodzlrt Hogfital, 9 S.W.3d 365, 372 (Tex. App.—
Houston [14th Dist] 1999, no pet), to the extent it suggests that Texas law requires privity to establish fraud”).
PLAINTIFFS' REPLY BRIEF IN SUPPORT 0F MOTION TO COMPEL THE DISCOVERY OF DEFENDANTS' NET WORTH —
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misrepresentations would be and were actually repeated to Plaintiffs and their principals, and that
these misrepresentations would (and actually did) influence the Plaintiffs’ principals’ conduct in the
transaction concerning the Property, including but not limited to formation of separate entities—
Gravois LLC, Gravois Leasing, and Gravois Real Estate—to accomplish the transaction? In sum,
Plaintiffs have standing that supports this Court’s jurisdiction.
likewise, and contrary to Defendants’ contentions, Defendant TRT—through Zelman (who
maintained a “TRTholdings” email address during the relevant timeframe in this litigation and
reported directly to the TRT Board of Directors regarding the marketing and sale of the Property)—
represented that the Tenant would agree to a six-year extension of the Lease with a rent increase
above market, thereby presumably securing the future income stream, which anchored the value of
the Property.3 Defendants knew, however, that the Tenant had experienced a decline in revenue and
had no capability or intention of performing under the Lease. Indeed, the St. Louis market was going
to be sold, and the Fenton Gym was already on an “eliminate” list within Gold’s Gym.
B. DISCLAIMER 0F RELIANCE
Defendants’ response rehashes arguments relating to an alleged disclaimer of reliance—
arguments that the Court previously rejected. Nevertheless, Defendants yet again seek to avoid
liability for their fraud based upon non-negotiated boilerplate provisions in the Agreement of
Purchase and Sale (“PSA”). The PSA—which was entered into in May of 2019—originated as a
boilerplate form generated by Defendant RBR. N0 evidence exists as to what terms of the PSA
ZDefendants rely on me, LLC v. Sangani in their argument that the Leeton assignment of the APSA to Plaintiffs does
not confer standing. Zaafl is easily distinguishable to the case at hand. There, the court determined that Zaan did not
assert its rights, specifically that “Zaan does not assert that the price was unfair or that it paid more for the property than
its fair market value. Nor does Zaan complain any representations were made that in any way affected the fair market
value of the property.” Therefore, an individual who creates an individual entity that does not assert its rights needs to
assert his individual rights. This is not the case here as Plaintiffs were damaged by reliance on the fraud.
3566 Exxon Cam 1/. Perez, 842 S.W.2d 629, 630 (Tex. 1992) (A general employee of one employer may become the
borrowed employee of another if the borrowing employer has a right to control the general employee).
PLAINTIFFS' REPLY BRIEF IN SUPPORT 0F MOTION TO COMPEL THE DISCOVERY OF DEFENDANTS' NET WORTH —
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were negotiated, if any, including the purported disclaimer provisions raised by Defendants.
Notably, however, the PSA lapsed and negotiations amongst the Parties continued.
Since negotiations continued after the PSA lapsed, and in order to further entice Plaintiffs’
principals’ interest and induce the purchase acquisition of the premises, Defendants represented to
Plaintiffs’ principal that Gold’s Gym International was a solid company that was fiscally well-
managed and could assure financial performance of the Lease to Tenant, which anchored the
shopping center at the premises. Defendant RBR and Defendant TRT Holdings, Inc. further
represented that if Plaintiffs acquired the Property and the Lease to Tenant, they would acquire a
stable, long-term income stream from a very well performing location. In reliance upon Defendants’
representations, Plaintiffs’ affiliate Leeton Real Estate Inc., on behalf of Plaintiffs, entered into the
APSA on or about September 27, 2019.
Defendants’ misrepresentations were made after the PSA had lapsed, and before the Parties
had entered into the APSA. Thus, the purported disclaimer provision at issue, which Defendants
assert “disclaim” prior representations and reliance, could not possibly be applicable to exclude
reliance on representations made by Defendants after the Parties had executed the PSA. Indeed, the
purported disclaimer provision itself applied by its very terms only to “representations” made in
entering into the PSA. Furthermore, the APSA does not include any language or terms regarding
purported disclaimers of representations or reliance made prior to the date the APSA was executed.
Even the “Reinstatement” term in the APSA (Section 2) reinstates the PSA “[f]rom and after the
date of this First Amendment” but does not in any fashion apply the purported disclaimer of
reliance language in the PSA to the APSA or representations made prior to its entry.
Defendants arguments regarding the alleged disclaimer of reliance are misplaced and
irrelevant for purposes of Plaintiffs’ Motion. likewise, the Court should not entertain Defendants’
PLAINTIFFS' REPLY BRIEF IN SUPPORT OF MOTION TO COMPEL THE DISCOVERY OF DEFENDANTS‘ NET WORTH —
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attempt t0 rehash arguments—arguments to which the Court rightfully rejected when it previously
denied Defendants’ motion for summary judgment on December 30, 2022.
C. PLAINTIFFS HAVE ESTABLISHED A SUBSTANTIAL LIKELIHOOD 0F SUCCESS 0N THE
MERITs 0F THEIR STATUTORY FRAUD AND FRAUD BY OMISSION CLAIMS.
Contrary to Defendants’ contention that Plaintiffs’ evidence is vague, Plaintiffs have
produced evidence which, when considered together, establishes a likelihood of success on their
claims for statutory fraud and fraud by omission. As established in Plaintiffs’ Motion, Defendants
represented to Plaintiffs’ principals that the Fenton Gym “was an extremely well-performing location’
‘
and they were ‘very committed to the market place.” See Exs. F-G. Defendants were aware and
knew, however, that the Fenton Gym was already on a list of gyms identified as not profitable and
that Gold’s Gym was attempting to exit the St. Louis marketplace as early as 2018. See Exs. H—J. As
an inducement to Plaintiffs’ execution of the APSA after the lapsing of the PSA, Defendants
represented that the Tenant would agree to the Lease Extension, a six-year extension of the lease with
a rent increase above market, thereby presumably securing the future income stream, which anchored
the value of the Property. At the time of the Lease extensions, Defendants knew that the Tenant had
experienced a decline in revenue and had no capability or intention of performing under the lease.
Indeed, the St. Louis market was going to be sold, and the Fenton Gym was already on an
“eliminate” list within Gold’s Gym. See Ex. K.
Despite being aware that the Tenant could not fulfill its obligations under the Lease
Extension, Defendants failed to disclose pertinent financial information. See Ex. L-M. Specifically,
Zelman (while acting as TRT and RBR’s representative) made a partial disclosure of revenue and
membership numbers for the Fenton Gym. However, and when asked for updated information,
Zelman withheld information because the numbers for the Fenton Gym had deteriorated.4 See Exs.
4Although Defendants assert that Plaintiffs could have discovered updated gym information, Defendants fail to provide
alternative ways in which Plaintiffs could have discovered the same.
PLAINTIFFS' REPLY BRIEF IN SUPPORT 0F MOTION TO COMPEL THE DISCOVERY OF DEFENDANTS' NET WORTH —
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O-P. Defendants’ false representations relating to the Fenton Gym and the Tenant’s financial stability
were made for the purposes of inducing Plaintiffs’ affiliate Leeton, on behalf of Plaintiffs, to enter into
the APSA. In reliance on Defendants’ representations and omissions, Plaintiffs' affiliate entered into the
APSA for the purchase and sale of the Property. See EX. F. As a result of Defendants’
representations—representations which the individual Defendants hereto knew were false—Plaintiffs
suffered significant injuries including, but not limited to, lost profits and over payment for the subject
Property. See EX. N.
Contrary to Defendants’ contention, Plaintiffs evidence is not vague or immaterial. Rather, the
evidence sufficiently establishes that Defendants (including Zelman) made representations of material
fact, that were false, that were made to induce Plaintiffs affiliate to enter into the APSA, that Plaintiffs’
affiliate relied upon, which have caused Plaintiffs damages. Plaintiffs have demonstrated a likelihood of
success on the merits of their statutory fraud claim and their Motion should therefore be granted.
III. CONCLUSION
WHEREFORE, Plaintiffs prays that the Court grant their Motion to Compel the Discovery
of Defendants’ Net Worth pursuant to Texas Civil Practice and Remedies Code § 41.0115 and order
Defendants to produce the documents requested and identified herein. Alternatively, Plaintiffs
request that the Court order the production of a corporate representative to provide a short
deposition to address each Defendant entities’ net worth. Plaintiffs further pray for any and all
other relief to which they may be justly entitled.
PLAINTIFFS' REPLY BRIEF IN SUPPORT OF MOTION TO COMPEL THE DISCOVERY OF DEFENDANTS‘ NET WORTH —
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Respectfully submitted,
KANE RUSSELL COLEMAN LOGAN P.C.
By: /.r/ RobmN. LeMav
Robert N. LeMay
State Bar N0. 12188750
—
rlema krcl.com
Jaime M. DeWees
State Bar N0. 24097593
j dewees§richom
Collin Delano
State Bar No. 24109801
cdelano krcl.c0rn
901 Main Street
Suite 5200
Telephone (214) 777-4254
Facsimile (214) 777—4299
ATTORNEYS FOR PLAINTIFFS
Certificate of Service
I hereby certify that a true and correct copy of the above and foregoing document was
served on all known counsel of record in this cause in accordance with the Texas Rules of Civil
Procedure on August 8, 2023, as follows:
VIA EFILE
Elliot Strader
Xakema Henderson
AKERMAN LLP
2001 Ross Avenue, Suite 3600
Dallas, Texas 75201
elliot.strader@akerman.com
xakema.henderson@akerman.com
ATTORNEYS FOR DEFENDANTS
/.r/ RobertN. LeMav
Robert N. LeMay
PLAINTIFFS' REPLY BRIEF IN SUPPORT OF MOTION TO COMPEL THE DISCOVERY OF DEFENDANTS‘ NET WORTH —
PAGE 8
10274507v1 (7220800006000)
Automated Certificate of eService
This automated certificate of service was created by the efiling system.
The filer served this document via email generated by the efiling system
on the date and to the persons listed below. The rules governing
certificates of service have not changed. Filers must still provide a
certificate of service that complies with all applicable rules.
Teresa Rowe on behalf of Robert LeMay
Bar No. 12188750
trowe@krcl.com
Envelope ID: 78321019
Filing Code Description: Response
Filing Description: IN SUPPORT OF MOTION TO COMPEL DISCOVERY
Status as of 8/8/2023 3:41 PM CST
Associated Case Party: MILTON 635 GRAVOIS ROAD LLC
Name BarNumber Email TimestampSubmitted Status
Robert LeMay rlemay@krcl.com 8/8/2023 3:15:31 PM SENT
Jaime DeWees jdewees@krcl.com 8/8/2023 3:15:31 PM SENT
Collin Delano cdelano@krcl.com 8/8/2023 3:15:31 PM SENT
Associated Case Party: TRT HOLDINGS, INC.
Name BarNumber Email TimestampSubmitted Status
Elliot Strader elliot.strader@akerman.com 8/8/2023 3:15:31 PM SENT
Xakema Henderson xakema.henderson@akerman.com 8/8/2023 3:15:31 PM SENT
Case Contacts
Name BarNumber Email TimestampSubmitted Status
Teresa Rowe trowe@krcl.com 8/8/2023 3:15:31 PM SENT
Connie Nims cnims@krc|.com 8/8/2023 3:15:31 PM SENT
Bree Kimball BKimball@krcl.com 8/8/2023 3:15:31 PM SENT
Preview
FILED 8/8/2023 3:15 PM FELICIA PITRE DISTRICT CLERK DALLAS CO., TEXAS Brandon Keys DEPUTY CAUSE NO. DC—21—11406 MILTON 635 GRAVOIS ROAD LLC, 635 § IN THE DISTRICT COURT GRAVOIS ROAD LEASING LLC, and 635 § GRAVOIS ROAD REAL ESTATE LLC, § § Plaintiffs, g v. § 44TH JUDICIAL DISTRICT § TRT HOLDINGS, INC., § RBR REAL ESTATE HOLDINGS, LLC, § BRIAN ZELMAN, and ADAM ZEITSIFF, § § Defendants. § DALLAS COUNTY, TEXAS PLAINTIFFS’ REPLY BRIEF IN SUPPORT OF MOTION TO COMPEL THE DISCOVERY OF DEFENDANTS’ NET WORTH TO THE HONORABLE JUDGE OF SAID COURT: COME NOW, Plaintiffs Milton 635 Gravois Road LLC (“Gravois LLC”), 635 Gravois Road Leasing LLC (“Gravois Leasing”), and 635 Gravois Road Real Estate LLC (“Gravois Real Estate”) (collectively “Plaintiffs”) and f1le this Reply Brief in Support of their Motion to Compel the Discovery of Defendants’ Net Worth (the “Motion”), and respectfully Show the Court as follows: I. SUMMARY Rather than addressing the substance of Plaintiffs’ Motion, Defendants’ have attempted to shift the Court’s focus t0 issues that are irrelevant, have already been decided, or have been abandoned. Specifically, Defendants raise issues addressed in their previously filed motion for summary judgment in an attempt t0 rehash arguments relating to an alleged disclaimer 0f reliance. The Court, however, rejected that argument and denied Defendants’ motion for summary judgment on December 30, 2022. T0 the extent Defendants assert Plaintiffs lack standing to bring certain claims, Defendants previously raised the same arguments Within their plea to the jurisdiction— Which Defendants voluntarily withdrew after the filing of Plaintiffs’ amended petition and have PLAINTIFFS' REPLY BRIEF IN SUPPORT OF MOTION TO COMPEL THE DISCOVERY 0F DEFENDANTS' NET WORTH — PAGE 1 10274507v1 (7220800006000) therefore abandoned their arguments relating t0 standing. In any event, and contrary to Defendants’ assertion, Plaintiffs have produced evidence establishing: (1) Zelman acted on behalf of TRT; and (2) Defendants made false representations which Plaintiffs relied upon. Plaintiffs have shown a substantial likelihood of success on the merits of their claims for statutory fraud and fraud by omission and their Motion to Compel the Discovery of Defendants’ Net Worth should be granted. II. ARGUMENT & AUTHORITIES A. PLAINTIFFS MAINTAIN STANDING Defendants have misstated both the facts and the law relevant to Plaintiffs’ standing. Under Defendants’ flawed theory of Texas law, fraudsters in any business transaction may avoid responsibility for their fraud simply because a special purpose entity is created to close the transaction, which happens routinely in Texas. This is not and has never been the law in the state of Texas. Under Texas law and established equitable principles, Plaintiffs have standing to bring causes of action against Defendants for their fraudulent misrepresentations and omissions that induced the sale of the Premises at issue: a real estate development containing a long-term lease of a Gold’s Gym location located at 635 Gravois Road, Fenton, Missouri 63026 (the “Property”), that was purportedly “very well performing” with an underlying business that justified the rent under its lease according to Defendants. Here, Plaintiffs have standing, first, because Defendants made misrepresentations directly to them upon which they relied in entering a real estate transaction that caused their damage (based upon the fraudulent lease extension). Second, Plaintiffs have standing because Defendants intended or had reason to expect that their misrepresentations made to Plaintiffs’ principals would (and actually did) influence Plaintiffs’ conduct, with the intention that Plaintiffs act upon the misrepresentations in the transaction for the Property (based upon the fraudulent PLAINTIFFS' REPLY BRIEF IN SUPPORT OF MOTION TO COMPEL THE DISCOVERY OF DEFENDANTS' NET WORTH — PAGE 2 10274507v1 (7220800006000) misrepresentations). The Texas Supreme Court has recognized and applied this “reason to expect” standard for fraudulent misrepresentations where, “although not made directly to the other [party to a transaction],” a misrepresentation “is made to a third person and the maker intends or has reason to expect that its terms will be repeated or its substance communicated to the other, and that it Will influence his conduct in the transaction or type of transaction involved.“ Defendants attack Plaintiffs’ standing to assert fraud claims against them because the fraudulently-induced Amended Agreement of Purchase and Sale of September 27, 2019 (“APSA” is between Defendant RBR and one of Plaintiffs’ non—party affiliates, Leeton Real Estate, Inc. (“Leeton”). Defendants contend that Plaintiffs, as assignees of non-party Leeton, do not have standing to bring claims against Defendants for the fraudulently—induced APSA With Leeton, because fraud claims are genera/bl personal to the defrauded party. In other words, Defendants claim that they are absolved of the consequences of their fraud simply because Plaintiffs used affiliate companies to close the fraudulently-induced transaction for the Premises. However, Plaintiffs were actually formed and in reliance upon the various misrepresentations. Leeton on Plaintiffs’ behalf entered into the APSA; and again in reliance of the various misrepresentations, Gravois LLC was assigned the APSA and actually closed on the anticipated transaction, in which its affiliates Gravois Real Estate and Gravois Leasing participated. At all times relevant, Plaintiffs’ non—party affiliate Leeton (which is the manager of Gravois LLC) and related principals have acted on behalf of each of the Plaintiffs, in reliance on and under the influence of Defendants’ misrepresentations regarding the Property. The APSA, induced by Defendants’ misrepresentations, specifically provided for assignability by Leeton to any affiliate with notice of the same. Accordingly, Defendants intended and/ or had reason to expect that their 1599 Ermz‘ 2’7“ Young. LLP. v. Par. Mm‘. Lg? Im. C0., 51 S.W.3d 573, 580 (Tex. 2001) (“We conclude that section 531’s reason—to—expect standard comports with our jurisprudence and does not expand the parameters of common—law fraud in Texas as Ernst & Young claims. We disapprove of Kano” I). Melbodzlrt Hogfital, 9 S.W.3d 365, 372 (Tex. App.— Houston [14th Dist] 1999, no pet), to the extent it suggests that Texas law requires privity to establish fraud”). PLAINTIFFS' REPLY BRIEF IN SUPPORT 0F MOTION TO COMPEL THE DISCOVERY OF DEFENDANTS' NET WORTH — PAGE 3 10274507v1 (7220800006000) misrepresentations would be and were actually repeated to Plaintiffs and their principals, and that these misrepresentations would (and actually did) influence the Plaintiffs’ principals’ conduct in the transaction concerning the Property, including but not limited to formation of separate entities— Gravois LLC, Gravois Leasing, and Gravois Real Estate—to accomplish the transaction? In sum, Plaintiffs have standing that supports this Court’s jurisdiction. likewise, and contrary to Defendants’ contentions, Defendant TRT—through Zelman (who maintained a “TRTholdings” email address during the relevant timeframe in this litigation and reported directly to the TRT Board of Directors regarding the marketing and sale of the Property)— represented that the Tenant would agree to a six-year extension of the Lease with a rent increase above market, thereby presumably securing the future income stream, which anchored the value of the Property.3 Defendants knew, however, that the Tenant had experienced a decline in revenue and had no capability or intention of performing under the Lease. Indeed, the St. Louis market was going to be sold, and the Fenton Gym was already on an “eliminate” list within Gold’s Gym. B. DISCLAIMER 0F RELIANCE Defendants’ response rehashes arguments relating to an alleged disclaimer of reliance— arguments that the Court previously rejected. Nevertheless, Defendants yet again seek to avoid liability for their fraud based upon non-negotiated boilerplate provisions in the Agreement of Purchase and Sale (“PSA”). The PSA—which was entered into in May of 2019—originated as a boilerplate form generated by Defendant RBR. N0 evidence exists as to what terms of the PSA ZDefendants rely on me, LLC v. Sangani in their argument that the Leeton assignment of the APSA to Plaintiffs does not confer standing. Zaafl is easily distinguishable to the case at hand. There, the court determined that Zaan did not assert its rights, specifically that “Zaan does not assert that the price was unfair or that it paid more for the property than its fair market value. Nor does Zaan complain any representations were made that in any way affected the fair market value of the property.” Therefore, an individual who creates an individual entity that does not assert its rights needs to assert his individual rights. This is not the case here as Plaintiffs were damaged by reliance on the fraud. 3566 Exxon Cam 1/. Perez, 842 S.W.2d 629, 630 (Tex. 1992) (A general employee of one employer may become the borrowed employee of another if the borrowing employer has a right to control the general employee). PLAINTIFFS' REPLY BRIEF IN SUPPORT 0F MOTION TO COMPEL THE DISCOVERY OF DEFENDANTS' NET WORTH — PAGE 4 10274507v1 (7220800006000) were negotiated, if any, including the purported disclaimer provisions raised by Defendants. Notably, however, the PSA lapsed and negotiations amongst the Parties continued. Since negotiations continued after the PSA lapsed, and in order to further entice Plaintiffs’ principals’ interest and induce the purchase acquisition of the premises, Defendants represented to Plaintiffs’ principal that Gold’s Gym International was a solid company that was fiscally well- managed and could assure financial performance of the Lease to Tenant, which anchored the shopping center at the premises. Defendant RBR and Defendant TRT Holdings, Inc. further represented that if Plaintiffs acquired the Property and the Lease to Tenant, they would acquire a stable, long-term income stream from a very well performing location. In reliance upon Defendants’ representations, Plaintiffs’ affiliate Leeton Real Estate Inc., on behalf of Plaintiffs, entered into the APSA on or about September 27, 2019. Defendants’ misrepresentations were made after the PSA had lapsed, and before the Parties had entered into the APSA. Thus, the purported disclaimer provision at issue, which Defendants assert “disclaim” prior representations and reliance, could not possibly be applicable to exclude reliance on representations made by Defendants after the Parties had executed the PSA. Indeed, the purported disclaimer provision itself applied by its very terms only to “representations” made in entering into the PSA. Furthermore, the APSA does not include any language or terms regarding purported disclaimers of representations or reliance made prior to the date the APSA was executed. Even the “Reinstatement” term in the APSA (Section 2) reinstates the PSA “[f]rom and after the date of this First Amendment” but does not in any fashion apply the purported disclaimer of reliance language in the PSA to the APSA or representations made prior to its entry. Defendants arguments regarding the alleged disclaimer of reliance are misplaced and irrelevant for purposes of Plaintiffs’ Motion. likewise, the Court should not entertain Defendants’ PLAINTIFFS' REPLY BRIEF IN SUPPORT OF MOTION TO COMPEL THE DISCOVERY OF DEFENDANTS‘ NET WORTH — PAGE 5 10274507v1 (7220800006000) attempt t0 rehash arguments—arguments to which the Court rightfully rejected when it previously denied Defendants’ motion for summary judgment on December 30, 2022. C. PLAINTIFFS HAVE ESTABLISHED A SUBSTANTIAL LIKELIHOOD 0F SUCCESS 0N THE MERITs 0F THEIR STATUTORY FRAUD AND FRAUD BY OMISSION CLAIMS. Contrary to Defendants’ contention that Plaintiffs’ evidence is vague, Plaintiffs have produced evidence which, when considered together, establishes a likelihood of success on their claims for statutory fraud and fraud by omission. As established in Plaintiffs’ Motion, Defendants represented to Plaintiffs’ principals that the Fenton Gym “was an extremely well-performing location’ ‘ and they were ‘very committed to the market place.” See Exs. F-G. Defendants were aware and knew, however, that the Fenton Gym was already on a list of gyms identified as not profitable and that Gold’s Gym was attempting to exit the St. Louis marketplace as early as 2018. See Exs. H—J. As an inducement to Plaintiffs’ execution of the APSA after the lapsing of the PSA, Defendants represented that the Tenant would agree to the Lease Extension, a six-year extension of the lease with a rent increase above market, thereby presumably securing the future income stream, which anchored the value of the Property. At the time of the Lease extensions, Defendants knew that the Tenant had experienced a decline in revenue and had no capability or intention of performing under the lease. Indeed, the St. Louis market was going to be sold, and the Fenton Gym was already on an “eliminate” list within Gold’s Gym. See Ex. K. Despite being aware that the Tenant could not fulfill its obligations under the Lease Extension, Defendants failed to disclose pertinent financial information. See Ex. L-M. Specifically, Zelman (while acting as TRT and RBR’s representative) made a partial disclosure of revenue and membership numbers for the Fenton Gym. However, and when asked for updated information, Zelman withheld information because the numbers for the Fenton Gym had deteriorated.4 See Exs. 4Although Defendants assert that Plaintiffs could have discovered updated gym information, Defendants fail to provide alternative ways in which Plaintiffs could have discovered the same. PLAINTIFFS' REPLY BRIEF IN SUPPORT 0F MOTION TO COMPEL THE DISCOVERY OF DEFENDANTS' NET WORTH — PAGE 6 10274507v1 (7220800006000) O-P. Defendants’ false representations relating to the Fenton Gym and the Tenant’s financial stability were made for the purposes of inducing Plaintiffs’ affiliate Leeton, on behalf of Plaintiffs, to enter into the APSA. In reliance on Defendants’ representations and omissions, Plaintiffs' affiliate entered into the APSA for the purchase and sale of the Property. See EX. F. As a result of Defendants’ representations—representations which the individual Defendants hereto knew were false—Plaintiffs suffered significant injuries including, but not limited to, lost profits and over payment for the subject Property. See EX. N. Contrary to Defendants’ contention, Plaintiffs evidence is not vague or immaterial. Rather, the evidence sufficiently establishes that Defendants (including Zelman) made representations of material fact, that were false, that were made to induce Plaintiffs affiliate to enter into the APSA, that Plaintiffs’ affiliate relied upon, which have caused Plaintiffs damages. Plaintiffs have demonstrated a likelihood of success on the merits of their statutory fraud claim and their Motion should therefore be granted. III. CONCLUSION WHEREFORE, Plaintiffs prays that the Court grant their Motion to Compel the Discovery of Defendants’ Net Worth pursuant to Texas Civil Practice and Remedies Code § 41.0115 and order Defendants to produce the documents requested and identified herein. Alternatively, Plaintiffs request that the Court order the production of a corporate representative to provide a short deposition to address each Defendant entities’ net worth. Plaintiffs further pray for any and all other relief to which they may be justly entitled. PLAINTIFFS' REPLY BRIEF IN SUPPORT OF MOTION TO COMPEL THE DISCOVERY OF DEFENDANTS‘ NET WORTH — PAGE 7 10274507v1 (7220800006000) Respectfully submitted, KANE RUSSELL COLEMAN LOGAN P.C. By: /.r/ RobmN. LeMav Robert N. LeMay State Bar N0. 12188750 — rlema krcl.com Jaime M. DeWees State Bar N0. 24097593 j dewees§richom Collin Delano State Bar No. 24109801 cdelano krcl.c0rn 901 Main Street Suite 5200 Telephone (214) 777-4254 Facsimile (214) 777—4299 ATTORNEYS FOR PLAINTIFFS Certificate of Service I hereby certify that a true and correct copy of the above and foregoing document was served on all known counsel of record in this cause in accordance with the Texas Rules of Civil Procedure on August 8, 2023, as follows: VIA EFILE Elliot Strader Xakema Henderson AKERMAN LLP 2001 Ross Avenue, Suite 3600 Dallas, Texas 75201 elliot.strader@akerman.com xakema.henderson@akerman.com ATTORNEYS FOR DEFENDANTS /.r/ RobertN. LeMav Robert N. LeMay PLAINTIFFS' REPLY BRIEF IN SUPPORT OF MOTION TO COMPEL THE DISCOVERY OF DEFENDANTS‘ NET WORTH — PAGE 8 10274507v1 (7220800006000) Automated Certificate of eService This automated certificate of service was created by the efiling system. The filer served this document via email generated by the efiling system on the date and to the persons listed below. The rules governing certificates of service have not changed. Filers must still provide a certificate of service that complies with all applicable rules. Teresa Rowe on behalf of Robert LeMay Bar No. 12188750 trowe@krcl.com Envelope ID: 78321019 Filing Code Description: Response Filing Description: IN SUPPORT OF MOTION TO COMPEL DISCOVERY Status as of 8/8/2023 3:41 PM CST Associated Case Party: MILTON 635 GRAVOIS ROAD LLC Name BarNumber Email TimestampSubmitted Status Robert LeMay rlemay@krcl.com 8/8/2023 3:15:31 PM SENT Jaime DeWees jdewees@krcl.com 8/8/2023 3:15:31 PM SENT Collin Delano cdelano@krcl.com 8/8/2023 3:15:31 PM SENT Associated Case Party: TRT HOLDINGS, INC. Name BarNumber Email TimestampSubmitted Status Elliot Strader elliot.strader@akerman.com 8/8/2023 3:15:31 PM SENT Xakema Henderson xakema.henderson@akerman.com 8/8/2023 3:15:31 PM SENT Case Contacts Name BarNumber Email TimestampSubmitted Status Teresa Rowe trowe@krcl.com 8/8/2023 3:15:31 PM SENT Connie Nims cnims@krc|.com 8/8/2023 3:15:31 PM SENT Bree Kimball BKimball@krcl.com 8/8/2023 3:15:31 PM SENT