[DO NOT PUBLISH]

IN THE UNITED STATES COURT OF APPEALS

FOR THE ELEVENTH CIRCUIT

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No. 10-11852

Non-Argument Calendar

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D.C. Docket No. 2:09-cv-02296-WMA

WATER WORKS BOARD OF THE CITY OF BIRMINGHAM, THE,

 Plaintiff - Appellant,

versus

AMBAC FINANCIAL GROUP, INC.,

AMBAC ASSURANCE CORPORATION,

 Defendants - Appellees,

AMBAC ASSURANCE GROUP, INC.,

 Defendant. 

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Appeals from the United States District Court

for the Northern District of Alabama

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(August 5, 2013)

Before CARNES, Chief Judge, MARCUS and WILSON, Circuit Judges.

PER CURIAM: 

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The Water Works Board of the City of Birmingham appeals the district 

court’s dismissal of its claim against Ambac Financial Group, Inc. for failure to 

state a claim upon which relief can be granted. 

We review de novo a court’s dismissal of a complaint for failure to state a 

claim, accepting the factual allegations in the complaint as true and construing 

them in the light most favorable to the plaintiff. Speaker v. United States Dep’t of 

Health and Human Servs. Ctrs. for Disease Control and Prevention, 623 F.3d 1371, 

1379 (11th Cir. 2010).

I.

In March 2007 the Board issued water and sewer revenue bonds. To do that, 

it was required to establish a Reserve Fund. One of the ways the Board could 

satisfy the requirements for the Reserve Fund was by purchasing a surety bond 

from an issuer that had a credit rating of AAA. If the issuer’s rating fell below 

AAA while the bonds were still outstanding, the Board was required to deposit into 

the Reserve Fund the amount of all outstanding securities or replace the original 

surety bond with another bond from an issuer that had a AAA rating.

The Board created the Reserve Fund by purchasing a surety bond from 

Ambac, which had a AAA rating at the time. In June 2008 Ambac’s rating was 

downgraded to AA. As a result, the Board had to put cash in the Reserve Fund. 

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When that happened, the Board sued Ambac for breach of contract, fraud, 

suppression of truth, and negligence.

II.

The Board first claims that Ambac breached its contract with the Board 

because Ambac allowed its credit rating to be downgraded. To prevail on a breach 

of contract action, the claimant must prove: (1) the existence of a valid contract, 

(2) its own performance under the contract, (3) the defendant’s nonperformance, 

and (4) damages. Southern Medical Health Systems, Inc. v. Vaughn, 669 So.2d 

98, 99 (Ala. 1995).

The district court dismissed the Board’s breach of contract claim, reasoning 

that the contract between Ambac and the Board did not require that Ambac keep its 

AAA rating. The Board argues that the Trust Indenture, which provided the terms 

for the Board’s issuance of the water and sewer bonds, imposed a contractual 

obligation on Ambac to maintain a AAA credit rating. Even if we assume that 

Ambac was bound by the Trust Indenture, the Board has not stated a viable claim 

for breach of contract. The Indenture did not require the bond issuer to keep a 

AAA rating. On the contrary, it explicitly acknowledged the possibility of the 

issuer’s rating being downgraded and explained what the Board was required to do 

in that situation.

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The Board argues that even if there is no express requirement, it was implied 

by the terms of the Indenture. Under the Indenture, if Ambac’s rating fell below 

AAA, the surety bond no longer satisfied the Reserve Fund Requirement, and 

Ambac acknowledged in the Certificate of Bond Issuance that the bond had been 

purchased to satisfy the Reserve Fund Requirement. That argument is 

unpersuasive. As we have explained, Ambac’s downgrading was explicitly 

contemplated and provided for in the Trust Indenture, and the Board was given 

alternate ways to satisfy the Reserve Fund Requirement. The fact that the Board 

was required to use a different method to meet the requirement after Ambac’s 

credit was downgraded does not mean the Board did not get the benefit it 

contracted for. By purchasing the bond from Ambac the Board was able to delay 

putting cash in the Reserve Fund and ensured that Ambac would pay the 

bondholders if the Board defaulted. Because there was no contract—express or 

implied—for Ambac to maintain its AAA credit rating, the court did not err in 

dismissing the Board’s claim.

III.

The Board next argues that the court erred when it dismissed its claims for 

fraud. The Board alleges that Ambac violated Alabama law by misrepresenting its 

underwriting standards and its surveillance policy. “The elements of fraud are: (1) 

a misrepresentation of a material fact, (2) made willfully to deceive, recklessly, 

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without knowledge, or mistakenly, (3) that was reasonably relied on by the 

plaintiff under the circumstances, and (4) that caused damage as a proximate 

consequence.” Brushwitz v. Ezell, 757 So.2d 423, 429 (Ala. 2000).

1

 “To establish 

a cause of action for fraud, a buyer must demonstrate that a seller’s statements . . .

were representations of fact and not mere statements of opinion amounting to 

nothing more than sales talk or mere puffery.” Russell v. Wilson, 991 So.2d 745, 

748 (Ala.Civ.App. 2008).

The Board alleges that Ambac’s statements that it made careful investment 

choices were misrepresentations because they were made at a time when Ambac 

was lowering its underwriting standards. We agree with the district court that 

Ambac’s statements were merely “puffing statements” designed to make Ambac 

look appealing. For example, Ambac’s statement that it “remain[s] steadfast in 

judiciously allocating our capital to transactions that enable us to continue to 

deliver superior returns” is a vague promotional statement and not a factual 

statement about Ambac’s policies. Similarly Ambac’s statements that it is “very 

selective” and “very cautious” in choosing securities are puffery. They are not

factual descriptions of Ambac’s underwriting standards. 

 1 The Board relies heavily on NPS LLC v. Ambac Assurance Corp., 706 F.Supp. 2d 162 

(D. Mass 2010), which found that similar statements made by Ambac were material 

misrepresentations. As that decision is not binding precedent, we are not bound to follow it, and, 

as it does not apply Alabama law, we find it unpersuasive.

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The Board also alleges that Ambac misrepresented its surveillance process 

when it stated that “[a]ctive surveillance of the insured portfolio enables Ambac’s 

Surveillance Group to track credit migration of insured obligations.” The Board

does not, however, allege any facts to show that this statement was false; it merely 

alleges that Ambac’s surveillance process was not as good as the Board believes it

should have been.

The district court also correctly noted that several statements highlighted by 

the Board cannot be the basis for the Board’s misrepresentation claim because they 

were made after the Board bought the surety bond so the Board could not have 

relied on them. See Hunt Petroleum Corp. v. State, 901 So.2d 1, 4 (Ala. 2004)

(“Reliance requires that the misrepresentation actually induced the injured party to 

change its course of action.”). The court did not err in dismissing this claim.

IV.

The Board next argues that the court erred by dismissing its suppression of 

truth claim. “The elements of suppression are: (1) a duty on the defendant to 

disclose a material fact; (2) the defendant’s concealment or nondisclosure of that 

fact; (3) inducement of the plaintiff to act; and (4) action by the plaintiff to his 

injury.” Brushwitz, 757 So.2d at 431 (Ala. 2000). “A duty to communicate can 

arise from a confidential relationship between the plaintiff and the defendant, from 

the particular circumstances of the case, or from a request for information, but 

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mere silence in the absence of a duty to disclose is not fraudulent.” Mason v. 

Chrysler Corp., 653 So.2d 951, 954 (Ala. 1995). “Even though one is under no 

obligation to speak as to a matter, if he undertakes to do so . . . he is bound not 

only to state truly what he tells, but also not to suppress or conceal any facts within 

his knowledge which will materially qualify those stated.” Jackson Co. v. 

Faulkner, 315 So.2d 591, 600 (Ala.Civ.App. 1975).

The Board bases its claim of suppression of truth on the fact that Ambac 

made statements about how selective and cautious it was in investing without 

disclosing that it had lowered its underwriting standards and without explaining its 

surveillance policy. Ambac’s general statements that it was “selective” or that it 

was engaging in “active surveillance,” however, do not give rise to a duty to 

disclose its underwriting standards or surveillance policies. The court did not err 

in dismissing this claim.

V.

Finally, the Board argues that the court erred when it dismissed its 

negligence claim, arguing that even if there was no express or implied agreement 

that Ambac would maintain its AAA rating, Ambac had a duty not to negligently

lose its AAA rating.

The Alabama Supreme Court has held that, “if in performing [a contractual 

duty], it is alleged that the defendant negligently caused personal injury or property 

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damage to plaintiff, the remedy is in tort, for it is not the breach of a contract 

express or implied, but the breach of an implied duty to exercise due care not to 

injure plaintiff or her property which is the gravamen of the action.” Vines v. 

Crescent Transit Co., 85 So.2d 436, 440 (Ala. 1956). 

Here, the Board argues that Ambac’s negligence caused it to lose its AAA 

rating. Alabama law does not impose a duty on Ambac to retain that rating; the 

only possible source for that duty would be in the contract between the Board and 

Ambac, making the Board’s claim one sounding in contract law. See Vines, 85 

So.2d at 440 (“[A] negligent failure to perform a contract express or implied . . . is 

but a breach of the contract.”). The court did not err in dismissing this claim.

AFFIRMED.

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