argument in north presidio versus lowe's home centers llc and we should have mr ernest leonard and for lowe's mr mark gladwell and anthony j luciano so i only see two lawyers do we have three yes your honor lowe's is actually splitting the argument i'll be taking the first part and then my colleague mr luciano would take in the second part okay we'll hear first from mr leonard mr leonard you may proceed i don't hear anything coming from you yet thank you your honor can you hear me now yes may it please the court this is ernest leonard on behalf the appellant for presidio llc as described in their brief this case involves a real estate project for texas that was being developed by north presidio lowe's was intended to be an anchor tenant as described in the brief there was a signed contract which was the agreement to enter into ground lease which contemplated that three contracts would then be signed at closing and then it was around me the most important issue is how did judge mcbryde certainly tried to put you in a box and nail it tight so where did he commit an error the primary one has to do with that we do have an enforceable contract under the facts plan we have a situation and i fully recognize and appreciate the limitation of liability provisions that judge mcbryde pointed out to section 13b which was damages would be limited to the earnest money and section thirty five was that closed until closing site development work would be performed at north presidio's expense however under the facts he pled here we have a situation where the site development agreement with its forty three million damage cap while it was never executed is enforceable under texas law now i would agree it certainly would have been better had north presidio did no site development work before closing however that was not practical and even the contract contemplated there'd be some basically i would rely upon two principles of texas law that i believe that judge mcbryde missed first of them is that an agreement to make a future agreement which this was can be enforceable if it is specific as to all essential terms and the essential terms of the site development agreement were set forth in the agreement to enter into ground lease itself as authority we cited the texas appellate court case of apmd holdings which lowe's also cited which basically enunciated this rule that agreement to make a future contract could be enforceable under those conditions that court said that essential terms are those that the parties would reasonably regard as being vitally important elements of their bargain and very importantly that court said that material terms of a contract are determined on a case by case basis that is it's a fact issue the court also said that texas courts favor validating contracts rather than avoiding them so in our pleading your honor we note that section 7b of the contract almost all but writes out the site development agreement it lists six detailed express requirements of the site development agreement the section 7b of agreement also contemplated that we'd be doing work some site development work before closing we pled that they had weekly telephone conferences at which time they will confirm that we were doing the work my client was doing the work under their own criteria and the lowe's development criteria and that during these calls lowe's affirmed that the terms of the site development agreement when the drafts were being exchanged were acceptable to them but let me ask what do you do with section thirty five it seems to clearly say until the closing your client's at risk if things don't consummate yes your honor i believe that goes towards the timing of the payment but in this case we have some additional facts which is the conduct of the parties themselves and going forward under promises that they would execute that and i believe it's that goes to your noncontractual claims right i mean your honor it does that would but it also goes under this principle of law your honor that an agreement to agree could be enforceable and i understand judge mcbryde's reliance on section thirty five but i would contend that in a timing of payment issue in this case we have the conduct of the parties where they were going forward with lowe's encouragement to do significant site development work and therefore i believe these allegations support the conclusion that the essential terms of the site development agreement had been agreed upon even though lowe's thereafter refused to execute the document also significant can you help can you help us yes ma'am it seems that okay judge costa asked you about section thirty five so what about 13b it doesn't replace 13b it's not in disharmony with it it's not at all clear what term of the sda you want it to be enforceable but what term of it would change our analysis i agree with the general principle that an agreement to agree can be enforced in texas law that's just a general proposition but where does it get you well under the pleadings they had everything worked out in fact the only reason that lowe's gave not to execute the agreement was a change of leadership so construing those pleadings we had everything worked out in the sda which is described in section 7b describes essentially obligation to pay per site development costs that were specific to lowe's okay what part of the sda would make it the preclosing site development compensable that's not clear to me at least yes it's section 7b it describes in subsection four tenant shall pay periodically within thirty days and reimburse landlord for tenant share of the project costs including without limitation the cost of site work so the agreement was that the site work that was specific in and attributable to lowe's would be reimbursed and so that's essentially something we'll take to the jury on that is ask that that amount be determined but you don't just take the sda you have to take the contract too even assuming you take the sda and the contract will say that presda site development is only compensable after closing pursuant to section thirty five i understand you need to take them both i don't see how you get around thirty five even if you're allowed to take the sda i understand i believe that's a timing issue but what we would have here is it talks about the payments will be due after the closing and what we have here is an essential under texas law they had an agreement to agree that's enforceable and we would be entitled to our reimbursements for that so you're saying presda site development is compensable as long as the money is gotten for it after closing even if it's incurred prior to closing and that that's your interpretation of construing both those provisions in harmony i think i understood the question your honor but what i'm saying is if the parties have agreed it should be found to have agreed to the sda it would be required to be paid and i understand there is that problematic issue with section thirty five which says that no payment will be due until closing i fully understand that but i believe what we do have is based upon the conduct of lowe's based upon the conduct of the parties we have all the facts that supported show that they agreed to this and they should reimburse us for the significant cost that we incurred developing this to be essentially a lowe's track the other point of contract law is if a draft of an agreement is prepared submitted to the parties each them expresses their consent there's a written contract and we cited a supreme court case for that and that's really just black letter law and the pleading allegation supported that the fact that they communicated regularly they said we affirmed we agreed to this and that when it was at the end of the day the only reason why they wouldn't sign it was because of a change of leadership now lowe's argues that the fact that drafts were being exchanged meant the assent was not unconditional however the fact that will be pled was the only reason they didn't sign it was because of a change of leadership and i think this is also a fact issue now as far we did also plead some alternative claims because in the event that the sda cannot be found unenforceable under texas law we believe we would be able to recover under the promissory estoppel and quantum meruit and promissory estoppel of course recited the elements promise reliant foreseeable reliance and substantial reliance by us on there for the detriment lowe's has two primary arguments first of all they say there can't be promissory estoppel because there's an express contract which was the agreement which covers the claim well not really what that does is cover issues for example 13b covers limitation of liability saying that the only thing you get is that the agreement to enter into ground lease is breached is return of the earnest money contract but we have other damages besides site development the section thirty five as i mentioned is timing the agreement the executed agreement to enter into ground lease does not give rights itself to reimburse that site development which is what lowe's argued to judge mcbryde if that's the case that agreement did not cover reimbursement to our right to reimburse it without the agreement to enter into the ground lease only we would not be entitled to do anything that's why this is not a matter of an express contract covering the same subject matter the other argument they made was that they did not plead it as a promise well we pled in paragraph fifteen of the complaint that based upon their frequently stated intent to consummate the agreement and enter into the ground lease and other contracts that we north presidio spent substantial funds and resources to develop the property in a manner that would accommodate them according to the lowe's criteria now lowe's argues several cases they cite a case from this court in two thousand and ten atkins which the court found that promises to resolve claims for extra work at a later date were too vague well that's not what we have here we have here something very specific do the work and we'll enter into the sda they also cited wiseman case which says an agreement to agree cannot support a claim for promissory estoppel well that case is a bit different because that really involved promissory estoppel as an affirmative defense and the court views the example of an oral agreement to sell real estate that would be otherwise barred by the statute of frauds and said you can't backdoor an unenforceable agreement in by using a promissory estoppel argument and they also cited a case from the court of appeals city of beaumont and texas court of appeals it said a commitment to complete performance under a contract does not give rise to a promissory estoppel claim well that's very different because here the parties this is alternatively pled so it's assuming there is no contract we agreed to complete a contract because here since it pled alternatively that means there is no contract quantum meruit we had the same issue as express contract that i have addressed and the district court what benefit did you receive for that claim you have to have received the benefit is my understanding i believe that lowe's had to receive the benefit that was the intangible benefit i'm sorry right that's right what benefit did lowe's receive and i want to be very frank the law is not real clear out there there's not a lot what my argument is they received an intangible benefit because they had the benefit as part of their development plan of a site that was being developed i've looked quite extensively for cases that address use of enjoy in terms of intangible benefit and your honor i was not able to find a case that correctly fit on point they cited not any case whatsoever that might even possibly say that you could have such a claim i do not your honor i'll be very frank i did not they say cited they cited a couple you want to know how i feel about your fraud claim yes ma'am what claim yes i don't understand how the new ceo changing direction is fraud and i don't understand really what every once in a while you pepper into all the various arguments that the new ceo changed direction i don't understand how that's relevant to any of the clients so you need to help me with that yes ma'am at some point in time they realized they weren't going forward we don't know what that point in time is that's why we're relying upon the relaxed standard where they have the information from them if they knew they were not going to mr leonard your time has expired you have some time in a moment we'll hear next from mr liddell yes your honor mr liddell mr liddell okay you are allotted thirteen minutes thank you your honor may i please the court i plan to focus in my part of the argument on why the contract limitation of liability provision takes care of all of the claims north presidio pleaded here then my colleague plans to talk about some additional independent defects in the noncontractual claims so before diving into the language of this contract i think it's helpful to just take a quick step back and look at what kind of contract this is what it's trying to do this is a real estate contract and it shares the same structure as virtually all contracts of its type in that there's a first contract to then close at some later date some things will happen leading up to the closing but when the buyer the purchaser enters that first contract it puts up earnest money and then it can walk away before closing and just be out that earnest money this is a very common structure this is how real estate contracts work and that's exactly what happened here lowe's entered into that first contract put up its earnest money decided to walk away and then forfeited its earnest money now when you look at the specific language of the contract all this is confirmed in effect amplified your honors have talked some about section 13b that section starts out with a real kind of classic statement of the earnest money framework if the lease is not consummated on account of lowe's defaults hereunder forfeiture shall be an entitled as its sole and exclusive remedy here under to receipt of the earnest money deposit but then section 13b actually goes beyond that and it makes clear that the earnest money isn't just the exclusive remedy for a breach of contract claim but for any claim with really any connection to the agreement and its language is clear and unequivocal on this point north presidio hereby waives and releases any right to sue lowe's as to any claims injury or loss arising from or in connection with this agreement to recover damages over the earnest money deposit and texas courts have made clear that that arising from or in connection with language is indeed as broad as it sounds it encompasses any dispute connected to the agreement even claims that merely relate to it so the parties later kind of amplified this or confirmed section 13b's limitation of liability provision in section thirty five which what your honors have also brought up this morning and that's a provision that's in bold all caps the parties knew what they were doing and it says let's just read it until the closing any site work grading other work north presidio undertakes in any other action lifespan or activity north presidio undertakes in anticipation of lowe's leasing the surmised premises is strictly at north presidio's sole risk and expense now my friend on the other side has said that's a timing provision i'm not exactly sure what he means but just reading it it says until the closing as in unless and until the transaction closes all of this is at north presidio's risk and expense of course there was no closing here so that until the closing term wasn't satisfied so the section 13b section thirty five reading them together really just leave the clear impression that unless and until the transaction closes that lowe's can not be liable for more than fifty thousand so let's apply those provisions here and i think it's helpful that i don't think the parties actually disagree on limited key points for example north presidio hasn't challenged whether these provisions are enforceable either as a whole or as any of their claims no do they challenge that their contractual and noncontractual claims come within the scope of them that is for section 13b that they arrived from or in connection with the contract or per section thirty five that they seek damages for action money spent or activity undertaken in anticipation of lowe's closing the lease which again section thirty five says it's all at north presidio's sole risk and expense so putting that all together at least for purposes of section 13b and for section thirty five there's no real dispute apart from that slight dispute on section thirty five that north presidio's claims come within the scope of these and that they apply at least on their face for these two claims to bar all the contractual and noncontractual claims because north presidio has now received its earnest money again all it's entitled to so north presidio instead of engaging on these key terms it turns instead to the spirit of section 7b so let's look at section 7b 7b doesn't purport to change anything regarding section 13b or section thirty five what 7b does is it talks about one of the contracts that the parties are supposed to negotiate leading up to the closing the closing once involved the ground lease the contract called the epcr and a contract called the sda and then the agreement to enter ground lease this initial contract that's before the court that talks about all of them and gives very broad outlines what kinds of terms there to include what kinds of areas they were to address and the contract contemplates that the closing is when the parties execute those contracts and exchange them and then those three contracts will govern the parties conduct going forward but of course there was no closing or execution here and so the sda whatever terms that the parties might have eventually negotiated regarding it that never came into effect so not only as your honors have recognized do the general outlines of the sda reflected in the agreement not purport to alter section 13b or section thirty five but even if that were at work or otherwise it simply wouldn't work here because the sda never became an enforceable contract and i just want to be clear on this point this execution was required it was a part of the sda to be binding and there were a couple of reasons for that one if you just read the agreement as a whole it first differentiates between the agreement to the sda and the execution of the sda and the execution part was supposed to happen at closing and that makes sense in light of the broader framework of the contract in section 13b section thirty five they make very clear that up until closing lowe's is at most responsible for fifty thousand in damages and then after closing the ground lease the epcr and the fca they might provide for additional liability but again there wasn't execution there wasn't a closing the fca never came into effect mr liddell what do we do with opposing counsel mr leonard's argument that while they couldn't collect the money ahead of time before closing that the predone work could be compensated after closing under the you know yes your honor the first agreement yes i understand your honor i guess a few points here first of all in section 7b when the contract lays out the six or so terms calling them terms is kind of generous the six or so provisions and very general language of yesterday was to include none of those none of those say and i don't think that my friend on the other has contested this that they mean to apply to work done preclosing and if you pair that with both section 13b and section thirty five which says i think very clearly until the closing that yields the only possible interpretation being that until the closing the section 13b section thirty five govern after the closing if the parties reached agreement on the sda executer debt then it would go through i guess part of my opposing counsel's argument here is this notion that the sda contained all the essential terms and i just want to be clear on a few points i mean one north presidio never pleads breach of the sda i want to make that clear i think it's important to see how all this operates they plead that we breached the agreement to enter ground lease that first initial contract by failing to enter into the sda they say this time and again in their pleadings there is no breach of the sda claim it's all about the agreement so if you look at breach of the agreement then the limitation of liability provisions and again 13b and thirty five obviously apply and there's no indication that the stated terms of the sda alter them and more important even beyond all of that this notion that the sda contained all the essential terms just to match up to what north presidio has pleaded if you look at the terms that north presidio pleaded there's a conclusory pleading that lowe's quote assented to the terms of the sda and then the only term that actually talks about is this reimbursement for site work provision but even that term's incomplete because if you look at what they actually plead it says and frankly what the agreement indicates it says that lowe's will reimburse north presidio for quote its share of the project costs but nowhere either in the pleadings or in the agreement does north presidio ever even say what lowe's share is which again just goes to the broader point that section 7b we're just laying out a very general framework for some contracts that that was essentially to come into effect if the parties reached an agreement and decided to proceed with closing but that never happened here we don't have any terms of the sda that are either in the agreement or even pleaded that would possibly override the very strong provisions in section 13b and in section thirty five also on this point i don't think that my opposing counsel is arguing this but i just want to dot all my i's and cross all my t's to the extent there's any argument that these later oral discussions about the site work and that we assent to the sda to the extent he's arguing that that some somehow does change section 13b and section thirty five which again i don't think he is but just to be clear section twenty four of the agreement which is on page three hundred and thirty of the record it makes it very clear that you can't amend this without a signed writing no amendment to this agreement express or implied shall be binding upon the parties unless such amendment shall be in writing and signed again it's undisputed there's no signed writing they hadn't pleaded one so the sda couldn't if it contained some terms that somehow aren't pleaded but the court would still consider them again just couldn't override the clear terms with 13b and thirty five and my last point briefly your honor even if north presidio had pleaded a breach of the sda and even if they had pleaded full terms all the essential terms which we don't know what they are but even if they had it still wouldn't change anything because even if these were two separate contracts you would still read the sda along with the agreement and the only way to read those two contracts in harmony would be to do as i said a few times now is that the sda takes over postclosing and that the agreements limitation of liability provisions govern preclosing also your honor that's why we think that the court doesn't have to go beyond the terms of the limitation of liability provision to resolve all of north presidio's claims unless the court has further questions i'll yield the remainder of my time thank you sir next here coming up mr luciano who has seven minutes if he needs it good afternoon your honors as my colleague explained that i'm going to be discussing a few additional reasons why the noncontractual claims were properly dismissed two in particular the first of which applies to all three of those claims and it's that because those claims are functionally duplicative of the breach of contract claim they're subsumed within it and can't exist apart from it and then the second specifically with respect to fraud is i'll discuss a few of the pleading defects and failure to comply with the particularity requirements under rule 9b turning first to the express contract texas courts have been careful to police against parties taking what is in substance a breach of contract claim and rephrasing it in equitable or tort terms applying that to the quasicontract first the whole point of quasicontract is that when parties find themselves governed by no agreement sometimes equity will step in and fill in the gaps but of course that doesn't apply when an express agreement covers the promises in the case of promissory estoppel or the services in the case of quantum meruit and that's precisely the case here turning first to the promises this is from paragraph twelve of the amended complaint they plead that the frequently stated intention of lowe's to consummate the agreement and enter into the ground lease the eccr and the sda that promise is an agreement to perform under the agreement or that promise is a promise to perform under the agreement to consummate the sba to close on the ground lease and so by failing to perform that promise lowe's bore breach of contract liability there's no reason to resort to equity to effectively sidestep the contractual provisions it's the same story with respect to quantum meruit the services at issue here are site work performed in anticipation of closing and i think as should be painfully clear by now section thirty five of the agreement covers that with about as much particularity as you can imagine it specifically puts that those services at north presidio's sole risk until closing so north presidio cannot take what amounts to a breach of contract claim services and promises covered by an agreement and then resort to equity north presidio's counsel's argument against that is that no contract covers the services at issue because the agreement doesn't provide for compensation of them but i think that gets it backwards because the express contract law applies even when a contract forecloses liability it covers the services all the same it just doesn't provide for compensation of them and that's what makes it all the more important to hold the parties to the terms of their bargain and not allow them to resort to equity the existence of two potential contracts doesn't alter the calculus either i'll point the court to this court's opinion in williams v colonial bank there plaintiff's employee wanted to enforce one contract this court agreed with the employer that another contract controlled and because that second contract controlled it foreclosed the ability of plaintiff to resort to equity to enforce the terms of what was an unenforceable agreement now taking these same principles and applying them to the fraud claim results in what texas courts referred to as the economic loss rule and that rule the gist of it is that if duties and damages sound in contract then what you've pled is substantively a breach of contract claim even if you call it something else here both of those defining characteristics align decisively on the favor on the side of contract again the promises that issue or the alleged omissions are a failure to perform under the agreement in other words that lowe's failed to disclose that it didn't intend to follow through on the ground lease that's functionally duplicative of the contractual obligations that they already bore and so in that sense there's no room between that and the breach of contract case another way to think about it i think this is a helpful phrasing is from the lincoln general insurance case judge costa your opinion from two thousand and fifteen where you explained the economic loss rule bars a tort claim when no factual basis for the tort claim would exist had the defendant complied with the contract here applying that principle if lowe's had followed through and abided by these promises that north presidio rephrases in fraud terms of course there would be no fraud by nondisclosure claim turning to the second defining characteristic which is the damages here we have the classic case of purely economic loss to the subject matter of the contract in other words reliance damages anticipation of closing north presidio i think candidly conceived this much on page twenty six of its opening brief where it explains that it sought contractual expectancy damages and the economic loss rule would bar its claim so long as a contractual obligation exists we would submit that a contractual obligation undoubtedly exists they sued for it and recovered under it and so the fact that they cannot recover their full measure of damages is all the more reason to apply the economic loss rule the very purpose of which is to avoid parties disregarding unfavorable provisions by recasting breach of contract claims but even if all of this wasn't substantively breach of contract claim turning specifically to the fraud pleadings i wanna just highlight in my time left two failings in that respect i know that north presidio relies primarily on the relaxed pleading standards for the facts within the defendant's knowledge but that has no applicability to the first failing of their fraud claim which related to the duty to disclose even assuming there's a duty to disclose here furnished on partial disclosures north presidio gave no elaboration on what those partial disclosures were when exactly they occurred over the course of these weekly conference calls that could have happened at any more from a year plus long period or who from lowe's affirmatively made those partial disclosures all of those facts were within north presidio's knowledge and their failure to plead them with specificity derails their fraud claim from the outset even with respect to facts that perhaps were within lowe's exclusive knowledge the relaxed pleading standards for information and belief are not an exception to the particularity requirements under rule 9b that's in the bell helicopter case nor are they a license to make allegations on information and belief but yet omit any factual basis for them that's from the willard case and so here what you have is a multimonth period in which lowe's must have decided that it wasn't following through and must have allegedly been able to disclose that but that allegation could be copied and pasted into any breach of contract case for that reason because the pleadings are deficient we respectfully request that the court affirm thank you your honors thank you sir mr leonard you have five minutes on rebuttal yes your honor i would like to follow up on the fraud claim the nature of our fraud claim as i mentioned is that at some point in time lowe's knew they were not gonna go forward with our project we know at least at the time they told us it was terminated we also know that a few months before there was as we plead there was a new ceo and that there was announced a plan to close stores as well as reevaluate the new developments we don't know when that point in time occurred we won't know until we take discovery those are facts only within the mindset a little bit in the knowledge of lowe's if the decision was made and they allowed us to continue working and doing site development work then we have the fraud by nondisclosure because as we plead we had meeting after meeting week after week after week when we told them what we're doing they said we're fine keep going every meeting looks good that's the basis we claim we do not have the facts nor would we until we have discovery to plead into particularity that is why we are relying upon the relaxed standards as far as the economic loss goes counsel is exactly like what we stated this is an alternative pleading if there is a contract if the sda is enforceable then we would go under that particular theory we would not have half a fraud claim but the right to damages the right to reimbursement doesn't come under the executed contract it comes under the site development agreement which was never executed and if the court finds that is not enforceable then we certainly it would take it outside the economic loss provision because the duties were not set by a contract because the contract didn't exist nor would the rights or damages be based upon contract because the contract does not exist that is why it is an alternative pleading and then as far as the nature of our duty they made the argument that we're adopting a new statement section that the texas supreme court has not addressed well actually he cited the statute the fraud by nondisclosure elements from this court's opinion and then we cited also the reply brief at the supreme court although they noted that they had not officially adopted the statement provisions about fraud by nondisclosure that it did not hold the other cases that was addressing that did say there's a duty to disclose based upon partial disclosures it did not hail it was wrongly decided rather it basically said the evidence before it didn't support an application so that's the nature of our fraud claim we go back to the situation that you think if the contract itself if the sda cannot be enforceable under these circumstances i believe the facts do relate it to be enforceable we should be able to recover the very least of the promissory estoppel because they certainly did tell us as we pled that their intention was to consummate agreement enter into the ground lease ecr the site development agreement and relying upon that we spent substantial funds developing that and incurred expenses upon that so for that we believe we're entitled to certainly under the promissory estoppel argument that's all actually i had to the rebuttal unless any questions we've got your argument and the case will be submitted