Preview
FILED
DALLAS COUNTY
7/16/2018 8:21 PM
FELICIA PITRE
DISTRICT CLERK
CAUSE NO. 2017-05678
WILLIAM HOWELLS, an individual, IN THE DISTRICT COURT
Plaintiff,
v.
RICK BALDWIN, an individual; PEAG,
LLC, a Delaware limited liability company;
EAGLE PRIVATE CAPITAL, LLC, a
Missouri limited liability company;
CATALYST HOLDCO INVESTMENTS,
LLC, a Texas limited liability company;
BEAR RIVER HOLDINGS, LLC, a Texas
limited liability company; TRANSITION
CAPITAL PARTNERS, LLC, a Texas OF DALLAS COUNTY, TEXAS
limited liability company; THE TCP
GROUP, a Texas limited liability company;
PETRA CAPITAL PARTNERS, LLC, a
Georgia limited liability company; PETRA
GROWTH FUND II, LP, a Delaware
limited partnership; PETRA PARTNERS II,
LLC, a Georgia limited liability company;
KEVYN DEMARTINO, an individual;
AARON WOMACK, an individual;
ROBERT SMITH, an individual; and DAN
PATTERSON, an individual,
Defendants. 162ND JUDICIAL DISTRICT
Defendants’ Traditional Motion for Summary Judgment
Defendants Rick Baldwin, PEAG, LLC, Eagle Private Capital, LLC, Catalyst Hold-
co Investments, LLC, Bear River Holdings, LLC, Transition Capital Partners, LLC, The
TCP Group, Petra Capital Partners, LLC, Petra Growth Fund II, LP, Petra Partners II,
LLC, Kevyn DeMartino, Aaron Womack, and Dan Patterson (collectively “Defendants”)1
1
PEAG, LLC, Eagle Private Capital, LLC, Catalyst Holdco Investments, LLC, Kevyn DeMarti-
no, Bear River Holdings, LLC, Transition Capital Partners, LLC, Petra Capital Partners, LLC,
Petra Growth Fund II, LP, and Petra Partners II, LLC are sometimes collectively referred to as
the “Successor Defendants.”
hereby file this Traditional Motion for Summary Judgment on all claims made against them
by Plaintiff William Howells (“Howells”).
I. Summary of the Argument
This lawsuit arises from an unsuccessful business venture among Plaintiff and Defend-
ants. On or about February 11, 2011, Mach Speed Technologies, Inc. (“Technologies”) and
its principal shareholder, Howells, entered into an Asset Purchase Agreement (the “APA”)
with Mach Speed Holdings, LLC (“Holdings”) whereby Holdings purchased all of the assets
of Technologies. As part of the APA, Holdings granted Howells a subordinated promissory
note for $3.0 million in exchange for “certain personal goodwill” (the “Original Note”).
Howells retained the right in Holdings’s LLC Agreement to hold, and indeed continuously
held, a seat on Holdings’s Board of Managers (the “Board”).
After several years of profitability, Holdings unraveled and began selling its assets.
Howells was an active participant in the Board’s deliberations as Holdings attempted to sur-
vive. On April 30, 2015, Howells (through his entity Inspire Technologies Group, LLC)
repurchased the original assets of Technologies (the “Inspire APA”). In conjunction with
that Inspire APA, Howells and Holdings executed (i) the final, fourth amendment to the
Original Note (the “Fourth Amended Note”) and (ii) a “General Release Agreement” (the “Re-
lease”) waiving claims based on any conduct that preceded February 28, 2015. The Release
also preserved claims arising from the Forth Amended Note. Howells thereafter resigned
from the Board. On October 30, 2015, Holdings filed for Bankruptcy.
Howells’s Amended Petition asserts—against a collection of Holdings’s former inves-
tors, lenders, and/or Managers—(i) claims expressly waived in the Release, (ii) claims
against parties who cannot be sued as a matter of law for the claims asserted, and (iii) no
viable damage theory. Howells attempts to exploit narrow exceptions in the Release to sup-
port his claims, but even a cursory parsing of his pleading reveals fatal legal and factual
defects. Accordingly, summary judgment is appropriate and straightforward.
Defendants’ Traditional Motion for Summary Judgment Page | 2
II. Summary Judgment Evidence
True and correct copies of the evidence supporting this motion are detailed in and at-
tached to the Appendix filed herewith. Such evidence is incorporated as if fully set forth
herein.
III. Factual Background
On or about February 11, 2011, Holdings purchased Technologies’s assets via the APA.2
The parties to the APA were Holdings, Technologies, and Howells (the principal sharehold-
er of Technologies). As part of the APA, Howells received the Original Note from
Holdings.3 Howells and Holdings were the only parties to the Original Note. Also in con-
nection with the purchase, Holdings amended its LLC Agreement (the “LLC Agreement”).4
The LLC Agreement provided that Howells would be allowed to designate a Manager of
Holdings—and he designated himself.5 As a Manager of Holdings, Howells became a fidu-
ciary of Holdings.6 Among his other duties, he became “responsible for the operation and
management of the business of [Holdings], . . . for the implementation of all actions of
[Holdings],”7 and for seeing that Holdings “[kept] full and accurate books and records of all
of its transactions in accordance with accepted accounting principles, consistently applied.”8
2
See App. 6–498.
3
See App. 3, 86–98, 539–45.
4
See App. 3, 499–538.
5
App. 508–09.
6
Members, on the other hand, had no such duties: “Other than designating Managers for such
functions, no Member (solely in its capacity as a Member) shall participate in the operation or
management of the business of [Holdings]. . . . The right of a Member to consent to and approve
of certain matters under the provisions of this Agreement shall not be deemed a participation in
the operation and management of the business of the Company, or the exercise of control over
the Company’s affairs.” App. 512.
7
App. 509.
8
App. 520.
Defendants’ Traditional Motion for Summary Judgment Page | 3
Howells remained a Manager of Holdings until early 2015,9 during which time the parties
amended the Note four different times.10 During that time, Howells regularly attended
Board of Managers meetings, examples of which appear, infra, at notes 12–14.
Between 2011 and August 2014, Holdings expanded profitably to a company with assets
over $90 million. On August 13, 2014, Holdings obtained a larger credit line to expand op-
erations. Contemporaneously, Howells and Holdings executed the Third Amendment to
the Original Note (“Third Amended Note”).11 Like the previous amendments and the Origi-
nal Note, Howells and Holdings were the only parties to the Third Amended Note. Shortly
thereafter, operational problems caused Holdings to default on its new credit line.
Between late 2014 and April 2015, Holdings’s Board of Managers, including Howells,
debated various strategies to save the company. Howells attended a February 12, 2015
Board meeting, during which the Managers deliberated measures to address Holdings’s pre-
carious financial situation—including liquidation of certain business lines, engagement of a
work out firm, and bankruptcy.12 Howells attended the February 18, 2015 and February 24,
2015 board meetings deliberating engagement of bankruptcy counsel and a turna-
round/restructuring firm, including a liquidation plan and plan submitted and presented by
Howells that was rejected by the Board.13 Howells also attended the March 10, 2015 board
meeting deliberating, among other things, efforts to obtain a forbearance agreement from
the company’s major secured creditor and a proposal by Howells to purchase certain assets
from the liquidation.14
9
App. 562, 564–65. Howells also served as Holdings’s CEO from March 29, 2011 to July 16,
2012 (App. 552–54) during which time he was obligated to “in general supervise and control all
of the business and affairs of [Holdings]” (App. 510–11).
10
Howells and Holdings were the only parties to the Note and each of the amendments.
11
See App. 545–551.
12
See App. 3, 555, 752.
13
See App. 3, 556–558, 752–53.
14
See App. 3, 559–60, 753.
Defendants’ Traditional Motion for Summary Judgment Page | 4
Ultimately, the Board of Managers decided to begin selling assets. The original assets of
Technologies were among those assets put up for sale, and Howells bought them through
his entity Inspire Technologies Group, LLC.15 Howells participated in meetings leading to
the unanimous approval of the sale of “certain IP and assets of the Mach Speed division to
Bill Howells”16 as well as subsequent meetings dealing with the timing of the Inspire trans-
action.17
On April 30, 2015, Howells and Holdings executed the Inspire APA.18 In conjunction
with the Inspire APA, Howells and Holdings executed the Fourth Amended Note19 and the
Release.20 In the Release, Howells:
release[d] and forever discharge[d] [Holdings], its subsidiaries, parent enti-
ties and affiliates, and each of their respective present and former owners,
directors, managers, officers, trustees, interest holders, employees, agents, at-
torneys, representatives, successors and assigns, and present and former
parent, subsidiary, affiliated and related entities, including but not limited to
. . . Kevyn DeMartino, . . . Dan Patterson, . . . Josh Rosenfeld, . . . Rob
Smith, Rick Baldwin, . . . Keith Driscoll, . . . Aaron Womack, . . . Transi-
tion Capital Partners, Ltd., Catalyst Holdings, LLC, Bear River Holdings,
LLC, The TCP Group, LLC, .. . TCP Partners, LLC (all such parties are
collective referred to as the “Released Parties”) of any from any and all liabili-
ties, claims, debts, demands, actions, causes of action, charges, complaints,
obligations, costs, expenses, attorneys’ fees, damages, injuries, losses, agree-
ments, interest, promises, judgments, accounts and other legal responsibilities
arising in law, equity or otherwise, of any and every kind, nature and charac-
ter whatsoever, whether known or unknown, unforeseen, unanticipated,
unsuspected or latent, based on or concerning any set of facts or events oc-
15
See App. 667–736.
16
See App. 559–60.
17
See App. 3, 561–64, 753–54.
18
App. 667–736, 740. As described above, the assets were owned by Holdings’s subsidiary, Mach
Speed Technologies, LLC, so it is a party to the Inspire APA.
19
Pet. at ¶ 42, Ex. H.
20
App. 721–25, 740.
Defendants’ Traditional Motion for Summary Judgment Page | 5
curring at any time up to [February 28, 2015] (including but not limited to
the sale of assets by Bear River International, LLC to Bear River Holdings,
21
LLC).
The Release contained only one exemption, providing:
This Agreement does not waive or release any rights, liabilities, claims, debts,
demands, actions, causes of action, charges, complaints, obligations, costs,
expenses, attorneys’ fees, damages, injuries, losses, agreements, interest,
promises, judgments, accounts and other legal responsibilities arising in law,
equity or otherwise, of any and every kind, nature and character whatsoever,
whether known or unknown, unforeseen, unanticipated, unsuspected or la-
tent, based on or concerning any set of facts or events (collectively, “Claims”)
that may arise after [February 28, 2015]. Further, this Agreement does not
waive or release any Claims arising under or relating to the Fourth
Amended and Restated Subordinated Note dated as of April 30, 2015 (the
“Note”) or against Mach Speed Technologies, LLC arising under or relating
to that certain Asset Purchase Agreement dated as of April 30, 2015, by and
between Mach Speed Technologies, LLC and Inspire Technology Group,
LLC, including, without limitation, the issuance, enforcement or payment of
the Note. The release and waiver contained in the Agreement also does not
22
waive the parties’ rights to enforce this Agreement.
This exemption was limited: While claims preceding February 28, 2015 were waived, How-
ells retained the ability to sue on claims “arising under or relating to” the Fourth Amended
Note and not any previous versions of the note.23 Additionally, the Release contained an
integration clause, which noted that it “sets forth the entire agreement between the Compa-
ny and Employee regarding the matters contained herein, and Employee represents that no
other statements, promises, or commitments of any kind, written or oral, have been made to
Employee by the Company, or any of its agents, to cause him to accept it.”24 Howells was
21
App. 721–22. The Release noted, however, that it did “not waive or release [claims] .. . that
may arise after [February 28, 2015,] arising under or relating to the [Fourth Amended Note,] or
against Mach Speed Technologies, LLC arising under or relating to [the Inspire APA].” App.
722.
22
App. 722.
23
Id.
24
App. 724.
Defendants’ Traditional Motion for Summary Judgment Page | 6
represented by legal counsel in negotiating the Release.25 The Release also awarded Howells
$212,500 in severance.26
Later in 2015, Mach Speed Holdings filed for Chapter 7 bankruptcy. See In re Mach Speed
Holdings, LLC, No. 4:15-BK-41918 (E.D. Tex. Oct. 30, 2015). In July 2016, Howells filed a
claim in the bankruptcy case for approximately $5.4 million—the amount he alleges Mach
Speed Holdings owes him under the Fourth Amended Note (inclusive of interest, fees, ex-
penses and other charges).27
Howells filed this lawsuit on May 12, 2017. Holdings is not a party. Defendants are a
collection of Holdings’s investors, lenders, and/or Managers.28 Howells amended his peti-
tion on June 7, 2017 and dismissed previously pled TUFTA claims.29 The remaining claims
are as follows:
25
Id.
26
App. 721.
27
Howells’s claim may be found in the court file for In re Mach Speed Holdings, LLC, No. 4:15-BK-
41918 (E.D. Tex. Oct. 30, 2015) as Claim No. 16.
28
Transition Capital Partners, LLC (“TCP”) was the equity sponsor and majority shareholder of
Holdings. Rick Baldwin (“Baldwin”) and Dan Patterson (“Patterson”) were TCP Partners and—at
various times—members of Holdings’s board of managers. Petra Growth Fund II, LP (“PGF II”)
was a secured lender to Holdings and also a minority shareholder. Petra Partners II, LLC (“PP
II”), is the general partner of PGF II, and Petra Capital Partners, LLC (“PCP”) is a management
company (PGF II, PP II, and PCP, collectively “Petra”). Robert Smith (“Smith”) was the manag-
ing member of PGF II, represented Petra in its investment in Holdings, and was at various times
a member of Holdings’s board. Eagle Private Capital, LLC (“Eagle”) was a secured lender to
Holdings. Catalyst Holdco Investments, LLC (“Catalyst”) was a turnaround firm engaged by
Holdings in February 2015. Kevyn DeMartino (“DeMartino”) is the managing partner of Cata-
lyst and a former board member of Holdings. Bear River Holdings, LLC (“BRH”) acquired
certain assets from Holdings in 2015. Aaron Womack (“Womack”) was the owner of Bear River
prior to the sale of Bear River’s assets to Holdings, and became an executive at Holdings. Wom-
ack was a member of BRH at the time it acquired assets from Holdings in 2015. PEAG, LLC
(“PEAG”) acquired Holdings’s remaining assets following Petra’s foreclosure in August 2015.
Petra and Eagle are the controlling investors in PEAG, Catalyst is currently engaged to assist in
the management of PEAG, and DeMartino is a member of PEAG’s board. Smith was a mem-
ber of PEAG’s board until his recent death.
29
The Trustee in Holdings’s bankruptcy has the exclusive right to bring TUFTA claims. See In re
Moore, 608 F.3d 253, 261 (5th Cir. 2010) (“[T]he right to recoup a fraudulent conveyance, which
outside of bankruptcy may be invoked by a creditor, is property of the estate that only a trustee
Defendants’ Traditional Motion for Summary Judgment Page | 7
o Breach of Contract (against Successor Defendants)
o Fraudulent Inducement (against Baldwin, Womack, and Successor De-
fendants)
o Promissory Fraud (against Baldwin and Successor Defendants)
o Negligent Misrepresentation (against Baldwin and Successor Defend-
ants)
o Breach of Fiduciary Duty (against Baldwin, Smith, and Successor De-
fendants)
o Civil Conspiracy (against all Defendants)
For the reasons set forth below, Defendants are entitled to judgment in their favor on each
of these claims.
IV. Standard of Review
Summary judgment is proper if the plaintiff cannot prevail on one or more of his claims
as a matter of law.30 A moving party is entitled to summary judgment in his favor if he con-
clusively negates at least one essential element of the plaintiff’s claim and thereby shows
that there is no genuine issue of material fact and he is entitled to judgment as a matter of
law.31
V. Argument and Authorities
A. Howells’s Tort and Fiduciary Duty Claims are Barred by the Release.
Howells’s fraudulent inducement, negligent misrepresentation, and breach of fiduciary
duty claims are barred by the February 28, 2015 Release. Specifically, Howells agreed to re-
or debtor in possession may pursue once a bankruptcy is under way. Although fraudulent-
transfer claims under Texas state law could not be brought by the debtor, such claims become es-
tate property once bankruptcy is under way by virtue of the trustee's successor rights under §
544(b).”) (internal quotations and citations omitted).
30
Butcher v. Scott, 906 S.W.2d 14, 15 (Tex. 1995) (per curiam).
31
Randall’s Food Markets, Inc. v. Johnson, 891 S.W.2d 640, 644 (Tex. 1995).
Defendants’ Traditional Motion for Summary Judgment Page | 8
lease Defendants from liability on any claims relating to the various promissory notes, ex-
cept for a limited exception permitting him to sue on conduct stemming from the final
Fourth Amended Note. This exception was limited and forward-looking.
Nevertheless, Howells tries to thread a host of claims through this narrow exemption in
order to sue on tort claims predating the Release which stem from the previous iterations of
the note. This position is flatly contradicted by the Release, which plainly waives liability for
pre-February 28, 2015 conduct and precludes reliance on any oral representations. The Re-
lease and Fourth Amended Note provided Howells with the opportunity to walk away from
a failing business in exchange for the possibility of payment on that note, which was in turn
exchanged for a waiver of his previous claims. Howells seized that opportunity. Now,
Howells backtracks on the promise he made in that Release, and brings claims of fraudulent
inducement, promissory fraud, negligent misrepresentation, and breach of fiduciary duty.
But all are barred because they are based on conduct that predated the February 28, 2015
Release.
The facts necessary to grant summary judgment are apparent from the face of the Peti-
tion because Howells’s claims expressly rely on the following pre-Release conduct:
Allegations that he was “constructively terminated by Mach Speed Holdings” be-
fore the execution of the Release because Howells discovered “underhanded
$1,000,000 self-dealings” and threatened to blow the whistle on this misconduct.
Am Pet. ¶ 56.
Defendants alleged “willful[] neglect[] to correct the false misrepresentations and
material omissions made in connection with the [August 13, 2014] Third
Amended and Restated Note.” Am. Pet. ¶ 80.
Alleged representations and material omissions made in connection with the
Third Amended Note—which occurred “[i]n or about August 2014.” Am. Pet. ¶
81 (emphasis added); see also Am. Pet. ¶¶ 83, 85.
Alleged breach of fiduciary duty claims are also based on representations and
omissions made in connection with the Third Amended Note or conduct that
otherwise occurred before February 28, 2015. Am. Pet. ¶¶ 105–110.
Defendants’ Traditional Motion for Summary Judgment Page | 9
Defendants’ alleged “false representations and material omissions in connection
with the Third Amended and Restated Note,” in advance of the Fourth Amend-
ed Note.32 Am. Pet. ¶ 100.
Alleged breach of fiduciary duty claims arising from payments through Catalyst,
a firm retained before execution of the Release. Am. Pet. ¶ 107.
Accordingly, summary judgment is appropriate.33
B. Howells’s Fraud and Negligent Misrepresentation Claims Fail as a Matter of Law
Because He Cannot Demonstrate Reliance
Even if the Court disagrees that Howells’s claims for fraud and negligent misrepresenta-
tion are barred by the Release, Howells still cannot prevail on such claims because he
cannot demonstrate reliance as a matter of law.
1. Howells Disclaimed Reliance on the Representations Which He Alleges Support His
Fraud and Negligent Misrepresentation Claims
Howells’s claims for fraudulent inducement,34 promissory fraud,35 and negligent misrep-
resentation36 each contain a common element—justifiable reliance on a false
32
Additionally, the Fourth Amended Note expressly waived reliance on any such representations.
See Am. Pet. Ex. H at 161 (“There are no unwritten oral agreements between the parties.”).
33
Although Howells’s promissory fraud claim appears facially related to post-Release conduct, the
claim is likewise barred. Howells’s assertion that Baldwin, in the course of negotiating the
Fourth Amended Note, falsely represented that Holdings “intended to perform its obligations
under the Fourth Amended and Restated Note” (Am. Pet. ¶ 90) is but an attempt by Howells to
skirt around the consequences of his Release by framing this representation as new. But this rep-
resentation was not new—it is the same representation made over the course of Howells’s
dealings with Holdings surrounding the Note and its amendments. Indeed, elsewhere in the Peti-
tion Howell details the same conduct as “willful[] neglect[] to correct the false
misrepresentations and material omissions made in connection with the Third Amended and
Restated Note when [Howells] entered into the [Fourth Amended Note].” Am. Pet. ¶ 80.
34
A claim for fraudulent inducement requires that the plaintiff relied on the representations and
omissions, and that such reliance was justifiable and especially likely. See Baleares Link Exp., S.L.
v. GE Engine Services-Dallas, LP, 335 S.W.3d 833, 839–40 (Tex. App.—Dallas 2011, no pet.) (cit-
ing Ernst & Young, L.L.P. v. Pacific Mut. Life Ins. Co., 51 S.W.3d 573, 580 (Tex. 2001)) (stating that
foreseeability that the plaintiff might rely on the misrepresentation is not enough for fraud; the
reliance must be justifiable and especially likely).
Defendants’ Traditional Motion for Summary Judgment Page | 10
representation.37 To prove this element, Howells cannot rely on alleged representations he
clearly and unequivocally disclaimed. In the Release, Howells “represent[ed] that no other
statements, promises, or commitments of any kind, written or oral” were made to him “to
cause him to accept” the terms of the Release. App. 721.
“[A] party’s disclaimer of reliance on representations, if the intent is clear and specific,
can defeat claims for fraud, fraudulent inducement, and negligent misrepresentation, be-
cause reliance is a necessary element of each of those claims.” Garza v. CTX Mortg. Co.,
LLC, 285 S.W.3d 919, 927 (Tex. App.—Dallas 2009, no pet.). In the summary-judgment
context, “a binding disclaimer provision negates the element of reliance in both fraudulent
inducement and negligent misrepresentation claims.” Kilpatrick v. Kilpatrick, No. 02-12-
00206-CV, 2013 WL 3874767, at *6 (Tex. App.—Fort Worth July 25, 2013, pet. denied).
A court will “examine the contract itself and the totality of the surrounding circumstanc-
es when determining if a waiver-of-reliance provision is binding.” Forest Oil Corp. v. McAllen,
268 S.W.3d 51, 60 (Tex. 2008). In evaluating the surrounding circumstances, a court con-
siders several factors, including “whether the contract was negotiated or boilerplate, wheth-
whether the complaining party was represented by counsel, whether the parties dealt with
35
See Baleares Link Exp., S.L. v. GE Engine Services-Dallas, LP, 335 S.W.3d 833, 839–40 (Tex. App.—
Dallas 2011, no pet.) (citing Ernst & Young, L.L.P. v. Pacific Mut. Life Ins. Co., 51 S.W.3d 573, 580
(Tex. 2001)) (stating that foreseeability that the plaintiff might rely on the misrepresentation is
not enough for fraud; the reliance must be justifiable and especially likely); Southwestern Energy
Prod. Co. v. Berry-Helfand, 411 S.W.3d 581, 594 (Tex. App.—Tyler 2013) rev’d on other grounds at
491 S.W.3d 699 (Tex. 2016) (“Fraud is not actionable until relied upon to the detriment of the
person to whom the representations were made. The plaintiff’s reliance must have been justifia-
ble.”).
36
Ramirez v. First Liberty Ins. Corp., 458 S.W.3d 568, 576 (Tex. App.—El Paso 2014, no pet.) (not-
ing that negligent misrepresentation requires evidence of (1) a representation by the defendant in
the course of the defendant’s business, or a transaction in which the defendant had a monetary
interest; (2) the defendant provided false information to others for the guidance of their business;
(3) the defendant did not exercise reasonable caution or care in communicating or obtaining the
information; and (4) the plaintiff suffered monetary damages by relying on the representations
and information).
37
Grant Thornton LLP v. Prospect High Income Fund, 314 S.W.3d 913, 923 (Tex. 2010).
Defendants’ Traditional Motion for Summary Judgment Page | 11
each other at arms-length, whether the parties were knowledgeable in business matters, and
whether the release language was clear.” Id.
Here, these factors uniformly support Defendants’ argument that the disclaimer is bind-
ing. The Release was negotiated, specific (i.e., not a boilerplate or form contract), and
targeted (it totaled four pages, excluding signatures). Howells was represented by legal
counsel in negotiating the Release.38 The parties were knowledgeable and experienced in
business matters, with Howells founding and expanding his electronics equipment compa-
ny, Mach Speed Technologies, into a major retailer. Am. Pet. ¶¶ 1, 22; Am. Pet. Ex. B at
68. And the language of the Release is clear and unequivocal, much like the disclaimer-of-
reliance provisions upheld in Forest Oil and Schlumberger Tech. Corp. v. Swanson, 959 S.W.2d
171, 177 (Tex. 1997). Finally, the fact that the Release was a “once and for all” agreement
“constitute[s] an additional factor urging rejection of fraud-based claims....” Forest Oil, 268
S.W.3d at 58.
Because the disclaimer is binding, the Court should grant summary judgment on the
grounds that the element of reliance is negated as to Howells’s fraud and misrepresentation
claims. See, e.g., Lau v. Reeder, No. 05-14-01459-CV, 2016 WL 4371813, at *4 (Tex. App.—
Dallas Aug. 16, 2016, pet. denied) (mem. op.) (affirming summary judgment granted in part
because agreement disclaimed reliance on misrepresentations); Springs Window Fashions Div.,
Inc. v. Blind Maker, Inc., 184 S.W.3d 840, 874 (Tex. App.—Austin 2006, pet. granted) (hold-
ing that merger clause negated, as a matter of law, the reliance element of party’s fraudulent
inducement theory); Yzaguirre v. KCS Res., Inc., 47 S.W.3d 532, 543 (Tex. App.—Dallas
2000) (holding that a disclaimer clause in a settlement agreement negated party’s claim for
fraudulent inducement as a matter of law and affirming summary judgment granted on that
ground), aff’d, 53 S.W.3d 368 (Tex. 2001).
38
App. 721 (“Employee acknowledges that he has been advised to consult with legal counsel about
this Agreement prior to signing the Agreement, that Employee has had sufficient opportunity to
do so, and that Employee is, in fact, represented by legal counsel.”).
Defendants’ Traditional Motion for Summary Judgment Page | 12
2. Howells Cannot Demonstrate Reliance Because, As A Controlling Person, Howells
Had A Duty To Keep And Maintain The Very Information He Claims Was Allegedly
Misrepresented.
Even if the Court disagrees that Howells disclaimed reliance on the representations
which form the basis of his claims for fraud and negligent misrepresentation, those claims
still fail because Howells himself had a duty to keep and maintain the very information
which he alleges was misrepresented. Specifically, Howells alleges Defendants made mis-
representations and omitted facts about the financial conditions of Holdings.
Justifiable reliance cannot be established when a person knows the truth (or has a legal
duty to know the truth and fails to fulfil that duty): “When a person knows the truth, a false
representation does not deceive or defraud him; any loss the person sustains is self-
inflicted.”39 Thus, summary judgment as a matter of law turns on two factors—(i) whether
Howells had a duty to know about the financial condition of Holdings and (ii) whether
Howells’s claims depend on a showing that Howells failed to fulfil that very duty.
The extent of Howells’s legal duties and obligations can be objectively established as a
matter of law by interpreting the LLC Agreement of Holdings, a Delaware LLC.40 When
39
Great Am. Ins. Co. v. Jim Stephensom Motor Co., No. 05-94-00858-CV, 1996 WL 135688, at *8
(Tex. App.—Dallas Mar. 26, 1996, writ denied) (citing Bynum v. Signal Life Ins. Co., 522 S.W.2d
696, 700 (Tex. Civ. App.—Dallas 1975, writ ref’d n.r.e.));see also Nat’l Prop. Holdings, L.P. v.
Westergren, 453 S.W.3d 419, 424 (Tex. 2015) (holding that a party could not justifiably rely on
defendant’s statements about a release that conflicted with content of the release itself). The
same rule applies when the person who is “legally charged with knowledge of the true facts.”
Howard v. Burlington Ins. Co., 347 S.W.3d 783, 798 (Tex. App.—Dallas 2011, no pet.) (affirming
summary judgment on fiduciary duty claim); Shindler v. Mid-Continent Life Ins. Co., 768 S.W.2d
331, 334–35 (Tex. App.—Houston [14th Dist.] 1989, no writ) (holding that parties “were, as a
matter of law, charged with knowledge” that insurance policies terminated, and therefore “may
not assert a claim for misrepresentation”); Sutton v. Grogan Supply Co., Lumber Division, 477
S.W.2d 930, 935 (Tex. Civ. App.—Texarkana 1972, no writ) (the person who claims he has been
defrauded must not be in possession of information showing the utter falsity of the alleged mis-
representation.).
40
CML V, LLC v. Bax, 6 A.3d 238, 250 (Del. Ch. 2010) (quoting TravelCenters of Am., LLC v.
Brog, 2008 WL 1746987, at *1 (Del.Ch. Apr. 3, 2008)) (Delaware LLCs are creatures of con-
tract); Zimmerman v. Crothall, 62 A.3d 676, 702 (Del. Ch. 2013) (the Court must closely examine
and interpret the LLC’s governing instrument to determine fiduciary duties).
Defendants’ Traditional Motion for Summary Judgment Page | 13
interpreting the duties of a Managers of a Delaware LLC, Delaware law applies.41 General-
ly, Delaware law imposes on Managers of a Delaware LLC the core duties of care, loyalty,
and good faith.42 Moreover, as a Manager, Howells had a fiduciary duty to keep and main-
tain the books and records of Holdings.43 As a Manager, Howells also had a fiduciary duty
to oversee, and keep himself fully informed about, the financial condition of Holdings.44
Thus, the question of whether Howells had a legal duty to know about and oversee the fi-
nancial condition of Holdings must be answered in the affirmative.
That Howells attempts to establish his claims through conduct that, ifproven, show a
breach of his own duty is apparent from the face of his Amended Petition. His fraudulent
inducement claim expressly pleads reliance on (i) Holdings’s ability to pay sums when they
would become due under the Third Amended and Restated Note, (ii)Holdings’s financial
and inventory reports, (iii) alleged “fraudulent transactions” and (iv) alleged “fictitious
transactions with affiliates.” Am. Pet. ¶ 81. His promissory fraud claim pleads statements,
made during a meeting of the Board of Managers that Howells had a duty to know, that
disprove justifiable reliance. Am. Pet. ¶ 91 (reciting a statement that Holdings has “no mor-
al or ethical obligation” to repay the Fourth Amended Note). His negligent
misrepresentation claim relies on the same alleged financial improprieties recited in support
of the fraudulent inducement claim. Am. Pet. ¶ 100. Howells had a duty to know all of
these facts he now alleges were false. Even if he were to prove information he received was
false, he simultaneously establishes a breach of his own duties to Holdings. Because “[a]
claim for misrepresentation cannot stand when the party asserting the claim is legally
41
See Tex. Bus. Org. Code § 1.102.
42
In re FAH Liquidation Corp., 581 B.R. 98, 112 (Bankr. D. Del. 2017).
43
The Managers were responsible for seeing that Holdings “[kept] full and accurate books and rec-
ords of all of its transactions in accordance with accepted accounting principles, consistently
applied.” App. 520.
44
See App. 509–10.
Defendants’ Traditional Motion for Summary Judgment Page | 14
charged with knowledge of the true facts,”45 Defendants are entitled to judgment as a matter
of law.
C. Howells’s Breach of Contract Claim is Barred.
It is undisputed that Defendants are not parties to the Fourth Amended Note.46 Breach
of contract requires contractual privity—an enforceable agreement between the plaintiff and
the defendant.47 “[T]he benefits and burdens of a contract belong solely to the contracting
parties, and ‘no person can sue upon a contract except he be a party to or in privity with it.’”
First Bank v. Brumitt, 519 S.W.3d 95, 102 (Tex. 2017) (quoting House v. Hous. Waterworks Co.,
31 S.W. 179, 179 (Tex. 1895)). Courts routinely grant summary judgment on these
grounds. See, e.g., Christus Health Gulf Coast v. Aetna, Inc., 397 S.W.3d 651, 656 (Tex. 2013)
(holding summary judgment proper because applicable statute required contractual privity,
which was absent); McDaniel v. Smith, No. 05-15-00473-CV, 2016 WL 1298620, at *3 (Tex.
App.—Dallas Apr. 4, 2016, no pet.) (affirming summary judgment granted in part due to a
Preview
FILED DALLAS COUNTY 7/16/2018 8:21 PM FELICIA PITRE DISTRICT CLERK CAUSE NO. 2017-05678 WILLIAM HOWELLS, an individual, IN THE DISTRICT COURT Plaintiff, v. RICK BALDWIN, an individual; PEAG, LLC, a Delaware limited liability company; EAGLE PRIVATE CAPITAL, LLC, a Missouri limited liability company; CATALYST HOLDCO INVESTMENTS, LLC, a Texas limited liability company; BEAR RIVER HOLDINGS, LLC, a Texas limited liability company; TRANSITION CAPITAL PARTNERS, LLC, a Texas OF DALLAS COUNTY, TEXAS limited liability company; THE TCP GROUP, a Texas limited liability company; PETRA CAPITAL PARTNERS, LLC, a Georgia limited liability company; PETRA GROWTH FUND II, LP, a Delaware limited partnership; PETRA PARTNERS II, LLC, a Georgia limited liability company; KEVYN DEMARTINO, an individual; AARON WOMACK, an individual; ROBERT SMITH, an individual; and DAN PATTERSON, an individual, Defendants. 162ND JUDICIAL DISTRICT Defendants’ Traditional Motion for Summary Judgment Defendants Rick Baldwin, PEAG, LLC, Eagle Private Capital, LLC, Catalyst Hold- co Investments, LLC, Bear River Holdings, LLC, Transition Capital Partners, LLC, The TCP Group, Petra Capital Partners, LLC, Petra Growth Fund II, LP, Petra Partners II, LLC, Kevyn DeMartino, Aaron Womack, and Dan Patterson (collectively “Defendants”)1 1 PEAG, LLC, Eagle Private Capital, LLC, Catalyst Holdco Investments, LLC, Kevyn DeMarti- no, Bear River Holdings, LLC, Transition Capital Partners, LLC, Petra Capital Partners, LLC, Petra Growth Fund II, LP, and Petra Partners II, LLC are sometimes collectively referred to as the “Successor Defendants.” hereby file this Traditional Motion for Summary Judgment on all claims made against them by Plaintiff William Howells (“Howells”). I. Summary of the Argument This lawsuit arises from an unsuccessful business venture among Plaintiff and Defend- ants. On or about February 11, 2011, Mach Speed Technologies, Inc. (“Technologies”) and its principal shareholder, Howells, entered into an Asset Purchase Agreement (the “APA”) with Mach Speed Holdings, LLC (“Holdings”) whereby Holdings purchased all of the assets of Technologies. As part of the APA, Holdings granted Howells a subordinated promissory note for $3.0 million in exchange for “certain personal goodwill” (the “Original Note”). Howells retained the right in Holdings’s LLC Agreement to hold, and indeed continuously held, a seat on Holdings’s Board of Managers (the “Board”). After several years of profitability, Holdings unraveled and began selling its assets. Howells was an active participant in the Board’s deliberations as Holdings attempted to sur- vive. On April 30, 2015, Howells (through his entity Inspire Technologies Group, LLC) repurchased the original assets of Technologies (the “Inspire APA”). In conjunction with that Inspire APA, Howells and Holdings executed (i) the final, fourth amendment to the Original Note (the “Fourth Amended Note”) and (ii) a “General Release Agreement” (the “Re- lease”) waiving claims based on any conduct that preceded February 28, 2015. The Release also preserved claims arising from the Forth Amended Note. Howells thereafter resigned from the Board. On October 30, 2015, Holdings filed for Bankruptcy. Howells’s Amended Petition asserts—against a collection of Holdings’s former inves- tors, lenders, and/or Managers—(i) claims expressly waived in the Release, (ii) claims against parties who cannot be sued as a matter of law for the claims asserted, and (iii) no viable damage theory. Howells attempts to exploit narrow exceptions in the Release to sup- port his claims, but even a cursory parsing of his pleading reveals fatal legal and factual defects. Accordingly, summary judgment is appropriate and straightforward. Defendants’ Traditional Motion for Summary Judgment Page | 2 II. Summary Judgment Evidence True and correct copies of the evidence supporting this motion are detailed in and at- tached to the Appendix filed herewith. Such evidence is incorporated as if fully set forth herein. III. Factual Background On or about February 11, 2011, Holdings purchased Technologies’s assets via the APA.2 The parties to the APA were Holdings, Technologies, and Howells (the principal sharehold- er of Technologies). As part of the APA, Howells received the Original Note from Holdings.3 Howells and Holdings were the only parties to the Original Note. Also in con- nection with the purchase, Holdings amended its LLC Agreement (the “LLC Agreement”).4 The LLC Agreement provided that Howells would be allowed to designate a Manager of Holdings—and he designated himself.5 As a Manager of Holdings, Howells became a fidu- ciary of Holdings.6 Among his other duties, he became “responsible for the operation and management of the business of [Holdings], . . . for the implementation of all actions of [Holdings],”7 and for seeing that Holdings “[kept] full and accurate books and records of all of its transactions in accordance with accepted accounting principles, consistently applied.”8 2 See App. 6–498. 3 See App. 3, 86–98, 539–45. 4 See App. 3, 499–538. 5 App. 508–09. 6 Members, on the other hand, had no such duties: “Other than designating Managers for such functions, no Member (solely in its capacity as a Member) shall participate in the operation or management of the business of [Holdings]. . . . The right of a Member to consent to and approve of certain matters under the provisions of this Agreement shall not be deemed a participation in the operation and management of the business of the Company, or the exercise of control over the Company’s affairs.” App. 512. 7 App. 509. 8 App. 520. Defendants’ Traditional Motion for Summary Judgment Page | 3 Howells remained a Manager of Holdings until early 2015,9 during which time the parties amended the Note four different times.10 During that time, Howells regularly attended Board of Managers meetings, examples of which appear, infra, at notes 12–14. Between 2011 and August 2014, Holdings expanded profitably to a company with assets over $90 million. On August 13, 2014, Holdings obtained a larger credit line to expand op- erations. Contemporaneously, Howells and Holdings executed the Third Amendment to the Original Note (“Third Amended Note”).11 Like the previous amendments and the Origi- nal Note, Howells and Holdings were the only parties to the Third Amended Note. Shortly thereafter, operational problems caused Holdings to default on its new credit line. Between late 2014 and April 2015, Holdings’s Board of Managers, including Howells, debated various strategies to save the company. Howells attended a February 12, 2015 Board meeting, during which the Managers deliberated measures to address Holdings’s pre- carious financial situation—including liquidation of certain business lines, engagement of a work out firm, and bankruptcy.12 Howells attended the February 18, 2015 and February 24, 2015 board meetings deliberating engagement of bankruptcy counsel and a turna- round/restructuring firm, including a liquidation plan and plan submitted and presented by Howells that was rejected by the Board.13 Howells also attended the March 10, 2015 board meeting deliberating, among other things, efforts to obtain a forbearance agreement from the company’s major secured creditor and a proposal by Howells to purchase certain assets from the liquidation.14 9 App. 562, 564–65. Howells also served as Holdings’s CEO from March 29, 2011 to July 16, 2012 (App. 552–54) during which time he was obligated to “in general supervise and control all of the business and affairs of [Holdings]” (App. 510–11). 10 Howells and Holdings were the only parties to the Note and each of the amendments. 11 See App. 545–551. 12 See App. 3, 555, 752. 13 See App. 3, 556–558, 752–53. 14 See App. 3, 559–60, 753. Defendants’ Traditional Motion for Summary Judgment Page | 4 Ultimately, the Board of Managers decided to begin selling assets. The original assets of Technologies were among those assets put up for sale, and Howells bought them through his entity Inspire Technologies Group, LLC.15 Howells participated in meetings leading to the unanimous approval of the sale of “certain IP and assets of the Mach Speed division to Bill Howells”16 as well as subsequent meetings dealing with the timing of the Inspire trans- action.17 On April 30, 2015, Howells and Holdings executed the Inspire APA.18 In conjunction with the Inspire APA, Howells and Holdings executed the Fourth Amended Note19 and the Release.20 In the Release, Howells: release[d] and forever discharge[d] [Holdings], its subsidiaries, parent enti- ties and affiliates, and each of their respective present and former owners, directors, managers, officers, trustees, interest holders, employees, agents, at- torneys, representatives, successors and assigns, and present and former parent, subsidiary, affiliated and related entities, including but not limited to . . . Kevyn DeMartino, . . . Dan Patterson, . . . Josh Rosenfeld, . . . Rob Smith, Rick Baldwin, . . . Keith Driscoll, . . . Aaron Womack, . . . Transi- tion Capital Partners, Ltd., Catalyst Holdings, LLC, Bear River Holdings, LLC, The TCP Group, LLC, .. . TCP Partners, LLC (all such parties are collective referred to as the “Released Parties”) of any from any and all liabili- ties, claims, debts, demands, actions, causes of action, charges, complaints, obligations, costs, expenses, attorneys’ fees, damages, injuries, losses, agree- ments, interest, promises, judgments, accounts and other legal responsibilities arising in law, equity or otherwise, of any and every kind, nature and charac- ter whatsoever, whether known or unknown, unforeseen, unanticipated, unsuspected or latent, based on or concerning any set of facts or events oc- 15 See App. 667–736. 16 See App. 559–60. 17 See App. 3, 561–64, 753–54. 18 App. 667–736, 740. As described above, the assets were owned by Holdings’s subsidiary, Mach Speed Technologies, LLC, so it is a party to the Inspire APA. 19 Pet. at ¶ 42, Ex. H. 20 App. 721–25, 740. Defendants’ Traditional Motion for Summary Judgment Page | 5 curring at any time up to [February 28, 2015] (including but not limited to the sale of assets by Bear River International, LLC to Bear River Holdings, 21 LLC). The Release contained only one exemption, providing: This Agreement does not waive or release any rights, liabilities, claims, debts, demands, actions, causes of action, charges, complaints, obligations, costs, expenses, attorneys’ fees, damages, injuries, losses, agreements, interest, promises, judgments, accounts and other legal responsibilities arising in law, equity or otherwise, of any and every kind, nature and character whatsoever, whether known or unknown, unforeseen, unanticipated, unsuspected or la- tent, based on or concerning any set of facts or events (collectively, “Claims”) that may arise after [February 28, 2015]. Further, this Agreement does not waive or release any Claims arising under or relating to the Fourth Amended and Restated Subordinated Note dated as of April 30, 2015 (the “Note”) or against Mach Speed Technologies, LLC arising under or relating to that certain Asset Purchase Agreement dated as of April 30, 2015, by and between Mach Speed Technologies, LLC and Inspire Technology Group, LLC, including, without limitation, the issuance, enforcement or payment of the Note. The release and waiver contained in the Agreement also does not 22 waive the parties’ rights to enforce this Agreement. This exemption was limited: While claims preceding February 28, 2015 were waived, How- ells retained the ability to sue on claims “arising under or relating to” the Fourth Amended Note and not any previous versions of the note.23 Additionally, the Release contained an integration clause, which noted that it “sets forth the entire agreement between the Compa- ny and Employee regarding the matters contained herein, and Employee represents that no other statements, promises, or commitments of any kind, written or oral, have been made to Employee by the Company, or any of its agents, to cause him to accept it.”24 Howells was 21 App. 721–22. The Release noted, however, that it did “not waive or release [claims] .. . that may arise after [February 28, 2015,] arising under or relating to the [Fourth Amended Note,] or against Mach Speed Technologies, LLC arising under or relating to [the Inspire APA].” App. 722. 22 App. 722. 23 Id. 24 App. 724. Defendants’ Traditional Motion for Summary Judgment Page | 6 represented by legal counsel in negotiating the Release.25 The Release also awarded Howells $212,500 in severance.26 Later in 2015, Mach Speed Holdings filed for Chapter 7 bankruptcy. See In re Mach Speed Holdings, LLC, No. 4:15-BK-41918 (E.D. Tex. Oct. 30, 2015). In July 2016, Howells filed a claim in the bankruptcy case for approximately $5.4 million—the amount he alleges Mach Speed Holdings owes him under the Fourth Amended Note (inclusive of interest, fees, ex- penses and other charges).27 Howells filed this lawsuit on May 12, 2017. Holdings is not a party. Defendants are a collection of Holdings’s investors, lenders, and/or Managers.28 Howells amended his peti- tion on June 7, 2017 and dismissed previously pled TUFTA claims.29 The remaining claims are as follows: 25 Id. 26 App. 721. 27 Howells’s claim may be found in the court file for In re Mach Speed Holdings, LLC, No. 4:15-BK- 41918 (E.D. Tex. Oct. 30, 2015) as Claim No. 16. 28 Transition Capital Partners, LLC (“TCP”) was the equity sponsor and majority shareholder of Holdings. Rick Baldwin (“Baldwin”) and Dan Patterson (“Patterson”) were TCP Partners and—at various times—members of Holdings’s board of managers. Petra Growth Fund II, LP (“PGF II”) was a secured lender to Holdings and also a minority shareholder. Petra Partners II, LLC (“PP II”), is the general partner of PGF II, and Petra Capital Partners, LLC (“PCP”) is a management company (PGF II, PP II, and PCP, collectively “Petra”). Robert Smith (“Smith”) was the manag- ing member of PGF II, represented Petra in its investment in Holdings, and was at various times a member of Holdings’s board. Eagle Private Capital, LLC (“Eagle”) was a secured lender to Holdings. Catalyst Holdco Investments, LLC (“Catalyst”) was a turnaround firm engaged by Holdings in February 2015. Kevyn DeMartino (“DeMartino”) is the managing partner of Cata- lyst and a former board member of Holdings. Bear River Holdings, LLC (“BRH”) acquired certain assets from Holdings in 2015. Aaron Womack (“Womack”) was the owner of Bear River prior to the sale of Bear River’s assets to Holdings, and became an executive at Holdings. Wom- ack was a member of BRH at the time it acquired assets from Holdings in 2015. PEAG, LLC (“PEAG”) acquired Holdings’s remaining assets following Petra’s foreclosure in August 2015. Petra and Eagle are the controlling investors in PEAG, Catalyst is currently engaged to assist in the management of PEAG, and DeMartino is a member of PEAG’s board. Smith was a mem- ber of PEAG’s board until his recent death. 29 The Trustee in Holdings’s bankruptcy has the exclusive right to bring TUFTA claims. See In re Moore, 608 F.3d 253, 261 (5th Cir. 2010) (“[T]he right to recoup a fraudulent conveyance, which outside of bankruptcy may be invoked by a creditor, is property of the estate that only a trustee Defendants’ Traditional Motion for Summary Judgment Page | 7 o Breach of Contract (against Successor Defendants) o Fraudulent Inducement (against Baldwin, Womack, and Successor De- fendants) o Promissory Fraud (against Baldwin and Successor Defendants) o Negligent Misrepresentation (against Baldwin and Successor Defend- ants) o Breach of Fiduciary Duty (against Baldwin, Smith, and Successor De- fendants) o Civil Conspiracy (against all Defendants) For the reasons set forth below, Defendants are entitled to judgment in their favor on each of these claims. IV. Standard of Review Summary judgment is proper if the plaintiff cannot prevail on one or more of his claims as a matter of law.30 A moving party is entitled to summary judgment in his favor if he con- clusively negates at least one essential element of the plaintiff’s claim and thereby shows that there is no genuine issue of material fact and he is entitled to judgment as a matter of law.31 V. Argument and Authorities A. Howells’s Tort and Fiduciary Duty Claims are Barred by the Release. Howells’s fraudulent inducement, negligent misrepresentation, and breach of fiduciary duty claims are barred by the February 28, 2015 Release. Specifically, Howells agreed to re- or debtor in possession may pursue once a bankruptcy is under way. Although fraudulent- transfer claims under Texas state law could not be brought by the debtor, such claims become es- tate property once bankruptcy is under way by virtue of the trustee's successor rights under § 544(b).”) (internal quotations and citations omitted). 30 Butcher v. Scott, 906 S.W.2d 14, 15 (Tex. 1995) (per curiam). 31 Randall’s Food Markets, Inc. v. Johnson, 891 S.W.2d 640, 644 (Tex. 1995). Defendants’ Traditional Motion for Summary Judgment Page | 8 lease Defendants from liability on any claims relating to the various promissory notes, ex- cept for a limited exception permitting him to sue on conduct stemming from the final Fourth Amended Note. This exception was limited and forward-looking. Nevertheless, Howells tries to thread a host of claims through this narrow exemption in order to sue on tort claims predating the Release which stem from the previous iterations of the note. This position is flatly contradicted by the Release, which plainly waives liability for pre-February 28, 2015 conduct and precludes reliance on any oral representations. The Re- lease and Fourth Amended Note provided Howells with the opportunity to walk away from a failing business in exchange for the possibility of payment on that note, which was in turn exchanged for a waiver of his previous claims. Howells seized that opportunity. Now, Howells backtracks on the promise he made in that Release, and brings claims of fraudulent inducement, promissory fraud, negligent misrepresentation, and breach of fiduciary duty. But all are barred because they are based on conduct that predated the February 28, 2015 Release. The facts necessary to grant summary judgment are apparent from the face of the Peti- tion because Howells’s claims expressly rely on the following pre-Release conduct: Allegations that he was “constructively terminated by Mach Speed Holdings” be- fore the execution of the Release because Howells discovered “underhanded $1,000,000 self-dealings” and threatened to blow the whistle on this misconduct. Am Pet. ¶ 56. Defendants alleged “willful[] neglect[] to correct the false misrepresentations and material omissions made in connection with the [August 13, 2014] Third Amended and Restated Note.” Am. Pet. ¶ 80. Alleged representations and material omissions made in connection with the Third Amended Note—which occurred “[i]n or about August 2014.” Am. Pet. ¶ 81 (emphasis added); see also Am. Pet. ¶¶ 83, 85. Alleged breach of fiduciary duty claims are also based on representations and omissions made in connection with the Third Amended Note or conduct that otherwise occurred before February 28, 2015. Am. Pet. ¶¶ 105–110. Defendants’ Traditional Motion for Summary Judgment Page | 9 Defendants’ alleged “false representations and material omissions in connection with the Third Amended and Restated Note,” in advance of the Fourth Amend- ed Note.32 Am. Pet. ¶ 100. Alleged breach of fiduciary duty claims arising from payments through Catalyst, a firm retained before execution of the Release. Am. Pet. ¶ 107. Accordingly, summary judgment is appropriate.33 B. Howells’s Fraud and Negligent Misrepresentation Claims Fail as a Matter of Law Because He Cannot Demonstrate Reliance Even if the Court disagrees that Howells’s claims for fraud and negligent misrepresenta- tion are barred by the Release, Howells still cannot prevail on such claims because he cannot demonstrate reliance as a matter of law. 1. Howells Disclaimed Reliance on the Representations Which He Alleges Support His Fraud and Negligent Misrepresentation Claims Howells’s claims for fraudulent inducement,34 promissory fraud,35 and negligent misrep- resentation36 each contain a common element—justifiable reliance on a false 32 Additionally, the Fourth Amended Note expressly waived reliance on any such representations. See Am. Pet. Ex. H at 161 (“There are no unwritten oral agreements between the parties.”). 33 Although Howells’s promissory fraud claim appears facially related to post-Release conduct, the claim is likewise barred. Howells’s assertion that Baldwin, in the course of negotiating the Fourth Amended Note, falsely represented that Holdings “intended to perform its obligations under the Fourth Amended and Restated Note” (Am. Pet. ¶ 90) is but an attempt by Howells to skirt around the consequences of his Release by framing this representation as new. But this rep- resentation was not new—it is the same representation made over the course of Howells’s dealings with Holdings surrounding the Note and its amendments. Indeed, elsewhere in the Peti- tion Howell details the same conduct as “willful[] neglect[] to correct the false misrepresentations and material omissions made in connection with the Third Amended and Restated Note when [Howells] entered into the [Fourth Amended Note].” Am. Pet. ¶ 80. 34 A claim for fraudulent inducement requires that the plaintiff relied on the representations and omissions, and that such reliance was justifiable and especially likely. See Baleares Link Exp., S.L. v. GE Engine Services-Dallas, LP, 335 S.W.3d 833, 839–40 (Tex. App.—Dallas 2011, no pet.) (cit- ing Ernst & Young, L.L.P. v. Pacific Mut. Life Ins. Co., 51 S.W.3d 573, 580 (Tex. 2001)) (stating that foreseeability that the plaintiff might rely on the misrepresentation is not enough for fraud; the reliance must be justifiable and especially likely). Defendants’ Traditional Motion for Summary Judgment Page | 10 representation.37 To prove this element, Howells cannot rely on alleged representations he clearly and unequivocally disclaimed. In the Release, Howells “represent[ed] that no other statements, promises, or commitments of any kind, written or oral” were made to him “to cause him to accept” the terms of the Release. App. 721. “[A] party’s disclaimer of reliance on representations, if the intent is clear and specific, can defeat claims for fraud, fraudulent inducement, and negligent misrepresentation, be- cause reliance is a necessary element of each of those claims.” Garza v. CTX Mortg. Co., LLC, 285 S.W.3d 919, 927 (Tex. App.—Dallas 2009, no pet.). In the summary-judgment context, “a binding disclaimer provision negates the element of reliance in both fraudulent inducement and negligent misrepresentation claims.” Kilpatrick v. Kilpatrick, No. 02-12- 00206-CV, 2013 WL 3874767, at *6 (Tex. App.—Fort Worth July 25, 2013, pet. denied). A court will “examine the contract itself and the totality of the surrounding circumstanc- es when determining if a waiver-of-reliance provision is binding.” Forest Oil Corp. v. McAllen, 268 S.W.3d 51, 60 (Tex. 2008). In evaluating the surrounding circumstances, a court con- siders several factors, including “whether the contract was negotiated or boilerplate, wheth- whether the complaining party was represented by counsel, whether the parties dealt with 35 See Baleares Link Exp., S.L. v. GE Engine Services-Dallas, LP, 335 S.W.3d 833, 839–40 (Tex. App.— Dallas 2011, no pet.) (citing Ernst & Young, L.L.P. v. Pacific Mut. Life Ins. Co., 51 S.W.3d 573, 580 (Tex. 2001)) (stating that foreseeability that the plaintiff might rely on the misrepresentation is not enough for fraud; the reliance must be justifiable and especially likely); Southwestern Energy Prod. Co. v. Berry-Helfand, 411 S.W.3d 581, 594 (Tex. App.—Tyler 2013) rev’d on other grounds at 491 S.W.3d 699 (Tex. 2016) (“Fraud is not actionable until relied upon to the detriment of the person to whom the representations were made. The plaintiff’s reliance must have been justifia- ble.”). 36 Ramirez v. First Liberty Ins. Corp., 458 S.W.3d 568, 576 (Tex. App.—El Paso 2014, no pet.) (not- ing that negligent misrepresentation requires evidence of (1) a representation by the defendant in the course of the defendant’s business, or a transaction in which the defendant had a monetary interest; (2) the defendant provided false information to others for the guidance of their business; (3) the defendant did not exercise reasonable caution or care in communicating or obtaining the information; and (4) the plaintiff suffered monetary damages by relying on the representations and information). 37 Grant Thornton LLP v. Prospect High Income Fund, 314 S.W.3d 913, 923 (Tex. 2010). Defendants’ Traditional Motion for Summary Judgment Page | 11 each other at arms-length, whether the parties were knowledgeable in business matters, and whether the release language was clear.” Id. Here, these factors uniformly support Defendants’ argument that the disclaimer is bind- ing. The Release was negotiated, specific (i.e., not a boilerplate or form contract), and targeted (it totaled four pages, excluding signatures). Howells was represented by legal counsel in negotiating the Release.38 The parties were knowledgeable and experienced in business matters, with Howells founding and expanding his electronics equipment compa- ny, Mach Speed Technologies, into a major retailer. Am. Pet. ¶¶ 1, 22; Am. Pet. Ex. B at 68. And the language of the Release is clear and unequivocal, much like the disclaimer-of- reliance provisions upheld in Forest Oil and Schlumberger Tech. Corp. v. Swanson, 959 S.W.2d 171, 177 (Tex. 1997). Finally, the fact that the Release was a “once and for all” agreement “constitute[s] an additional factor urging rejection of fraud-based claims....” Forest Oil, 268 S.W.3d at 58. Because the disclaimer is binding, the Court should grant summary judgment on the grounds that the element of reliance is negated as to Howells’s fraud and misrepresentation claims. See, e.g., Lau v. Reeder, No. 05-14-01459-CV, 2016 WL 4371813, at *4 (Tex. App.— Dallas Aug. 16, 2016, pet. denied) (mem. op.) (affirming summary judgment granted in part because agreement disclaimed reliance on misrepresentations); Springs Window Fashions Div., Inc. v. Blind Maker, Inc., 184 S.W.3d 840, 874 (Tex. App.—Austin 2006, pet. granted) (hold- ing that merger clause negated, as a matter of law, the reliance element of party’s fraudulent inducement theory); Yzaguirre v. KCS Res., Inc., 47 S.W.3d 532, 543 (Tex. App.—Dallas 2000) (holding that a disclaimer clause in a settlement agreement negated party’s claim for fraudulent inducement as a matter of law and affirming summary judgment granted on that ground), aff’d, 53 S.W.3d 368 (Tex. 2001). 38 App. 721 (“Employee acknowledges that he has been advised to consult with legal counsel about this Agreement prior to signing the Agreement, that Employee has had sufficient opportunity to do so, and that Employee is, in fact, represented by legal counsel.”). Defendants’ Traditional Motion for Summary Judgment Page | 12 2. Howells Cannot Demonstrate Reliance Because, As A Controlling Person, Howells Had A Duty To Keep And Maintain The Very Information He Claims Was Allegedly Misrepresented. Even if the Court disagrees that Howells disclaimed reliance on the representations which form the basis of his claims for fraud and negligent misrepresentation, those claims still fail because Howells himself had a duty to keep and maintain the very information which he alleges was misrepresented. Specifically, Howells alleges Defendants made mis- representations and omitted facts about the financial conditions of Holdings. Justifiable reliance cannot be established when a person knows the truth (or has a legal duty to know the truth and fails to fulfil that duty): “When a person knows the truth, a false representation does not deceive or defraud him; any loss the person sustains is self- inflicted.”39 Thus, summary judgment as a matter of law turns on two factors—(i) whether Howells had a duty to know about the financial condition of Holdings and (ii) whether Howells’s claims depend on a showing that Howells failed to fulfil that very duty. The extent of Howells’s legal duties and obligations can be objectively established as a matter of law by interpreting the LLC Agreement of Holdings, a Delaware LLC.40 When 39 Great Am. Ins. Co. v. Jim Stephensom Motor Co., No. 05-94-00858-CV, 1996 WL 135688, at *8 (Tex. App.—Dallas Mar. 26, 1996, writ denied) (citing Bynum v. Signal Life Ins. Co., 522 S.W.2d 696, 700 (Tex. Civ. App.—Dallas 1975, writ ref’d n.r.e.));see also Nat’l Prop. Holdings, L.P. v. Westergren, 453 S.W.3d 419, 424 (Tex. 2015) (holding that a party could not justifiably rely on defendant’s statements about a release that conflicted with content of the release itself). The same rule applies when the person who is “legally charged with knowledge of the true facts.” Howard v. Burlington Ins. Co., 347 S.W.3d 783, 798 (Tex. App.—Dallas 2011, no pet.) (affirming summary judgment on fiduciary duty claim); Shindler v. Mid-Continent Life Ins. Co., 768 S.W.2d 331, 334–35 (Tex. App.—Houston [14th Dist.] 1989, no writ) (holding that parties “were, as a matter of law, charged with knowledge” that insurance policies terminated, and therefore “may not assert a claim for misrepresentation”); Sutton v. Grogan Supply Co., Lumber Division, 477 S.W.2d 930, 935 (Tex. Civ. App.—Texarkana 1972, no writ) (the person who claims he has been defrauded must not be in possession of information showing the utter falsity of the alleged mis- representation.). 40 CML V, LLC v. Bax, 6 A.3d 238, 250 (Del. Ch. 2010) (quoting TravelCenters of Am., LLC v. Brog, 2008 WL 1746987, at *1 (Del.Ch. Apr. 3, 2008)) (Delaware LLCs are creatures of con- tract); Zimmerman v. Crothall, 62 A.3d 676, 702 (Del. Ch. 2013) (the Court must closely examine and interpret the LLC’s governing instrument to determine fiduciary duties). Defendants’ Traditional Motion for Summary Judgment Page | 13 interpreting the duties of a Managers of a Delaware LLC, Delaware law applies.41 General- ly, Delaware law imposes on Managers of a Delaware LLC the core duties of care, loyalty, and good faith.42 Moreover, as a Manager, Howells had a fiduciary duty to keep and main- tain the books and records of Holdings.43 As a Manager, Howells also had a fiduciary duty to oversee, and keep himself fully informed about, the financial condition of Holdings.44 Thus, the question of whether Howells had a legal duty to know about and oversee the fi- nancial condition of Holdings must be answered in the affirmative. That Howells attempts to establish his claims through conduct that, ifproven, show a breach of his own duty is apparent from the face of his Amended Petition. His fraudulent inducement claim expressly pleads reliance on (i) Holdings’s ability to pay sums when they would become due under the Third Amended and Restated Note, (ii)Holdings’s financial and inventory reports, (iii) alleged “fraudulent transactions” and (iv) alleged “fictitious transactions with affiliates.” Am. Pet. ¶ 81. His promissory fraud claim pleads statements, made during a meeting of the Board of Managers that Howells had a duty to know, that disprove justifiable reliance. Am. Pet. ¶ 91 (reciting a statement that Holdings has “no mor- al or ethical obligation” to repay the Fourth Amended Note). His negligent misrepresentation claim relies on the same alleged financial improprieties recited in support of the fraudulent inducement claim. Am. Pet. ¶ 100. Howells had a duty to know all of these facts he now alleges were false. Even if he were to prove information he received was false, he simultaneously establishes a breach of his own duties to Holdings. Because “[a] claim for misrepresentation cannot stand when the party asserting the claim is legally 41 See Tex. Bus. Org. Code § 1.102. 42 In re FAH Liquidation Corp., 581 B.R. 98, 112 (Bankr. D. Del. 2017). 43 The Managers were responsible for seeing that Holdings “[kept] full and accurate books and rec- ords of all of its transactions in accordance with accepted accounting principles, consistently applied.” App. 520. 44 See App. 509–10. Defendants’ Traditional Motion for Summary Judgment Page | 14 charged with knowledge of the true facts,”45 Defendants are entitled to judgment as a matter of law. C. Howells’s Breach of Contract Claim is Barred. It is undisputed that Defendants are not parties to the Fourth Amended Note.46 Breach of contract requires contractual privity—an enforceable agreement between the plaintiff and the defendant.47 “[T]he benefits and burdens of a contract belong solely to the contracting parties, and ‘no person can sue upon a contract except he be a party to or in privity with it.’” First Bank v. Brumitt, 519 S.W.3d 95, 102 (Tex. 2017) (quoting House v. Hous. Waterworks Co., 31 S.W. 179, 179 (Tex. 1895)). Courts routinely grant summary judgment on these grounds. See, e.g., Christus Health Gulf Coast v. Aetna, Inc., 397 S.W.3d 651, 656 (Tex. 2013) (holding summary judgment proper because applicable statute required contractual privity, which was absent); McDaniel v. Smith, No. 05-15-00473-CV, 2016 WL 1298620, at *3 (Tex. App.—Dallas Apr. 4, 2016, no pet.) (affirming summary judgment granted in part due to a