MEMORANDUM OPINION AND ORDER – PAGE 1

IN THE UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF TEXAS

DALLAS DIVISION

LAWRENCE E. STEINBERG, § 

§

Plaintiff, §

§

v. § Civil Action No. 3:03-CV-0562-N

§

JAMES H. BRENNAN, III, §

§

Defendant. §

MEMORANDUM OPINION AND ORDER

Before the Court are Defendant’s Motion to Strike Federal Securities Fraud Cause of

Action, filed on September 14, 2004, and Defendant’s Second Motion for Partial Summary

Judgment, filed on the same date. Because the amendment adding a federal securities fraud

claim was unauthorized, the Court grants the motion to strike. Additionally, because the

contract at issue includes provisions in which Plaintiff unequivocally disclaims reliance on

representations presently made the basis of his common law fraud claim, the Court grants the

motion for partial summary judgment.

I. BACKGROUND

On or about September 14, 2001, Plaintiff Lawrence E. Steinberg of Texas and

Defendant James H. Brennan, III of Tennessee executed a stock purchase agreement (the

“Agreement”). Under the terms of the Agreement, Steinberg would purchase from Brennan

20,000 shares of common stock of United American Companies, Inc. (“UAC”) for $50,000.

In February 2003, Steinberg sued Brennan in Texas court alleging breach of contract and

common law fraud. The former cause of action rests on an allegation that Steinberg had paid

 

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MEMORANDUM OPINION AND ORDER – PAGE 2

$50,000, but not received the 20,000 shares. The fraud claim rests on an allegation that

Steinberg entered the agreement in reliance upon Brennan’s false representations of UAC’s

viability. Brennan removed to this Court in March 2003, invoking diversity jurisdiction.

Brennan concedes liability on the breach of contract claim. He claims that, in conformity

with the Agreement, he has offered to repurchase the disputed shares from Steinberg and to

reimburse Steinberg for costs and attorneys’ fees related to this suit. 

Steinberg continues to press the fraud claim, however, and Brennan contests it. On

July 15, 2004 this Court granted Brennan’s motion to dismiss the fraud claim, on the grounds

that Steinberg’s petition failed to allege fraud with particularity as required by FED. R. CIV.

P. 9(b). Steinberg filed an amended complaint on August 3, 2004, which added some factual

detail to the common law fraud claim as well as a new cause of action for federal securities

fraud. Brennan now moves to strike the new federal cause of action and for summary

judgment on the common law fraud claim. 

II. STEINBERG’S ADDITION OF 

SECURITY LAW CLAIMS IS UNTIMELY

This Court’s Scheduling Order of April 29, 2003 directed that “[a]ny motion for leave

to amend pleadings must be filed within 180 days of this Order.” That deadline passed in

October, 2003. The Court’s order of July 15, 2004, which directed Steinberg to replead in

order to remedy deficiencies in his common law fraud claim, was not an invitation to add

new causes of action in contravention of the Scheduling Order. Steinberg did not file a

motion to amend in connection with the new cause of action, and does not presently offer any

explanation for his failure to add this claim within 180 days of April 29, 2003. Accordingly,

 

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1Contrary to Steinberg’s claim, he is not presently entitled to amend of right, see FED.

R. CIV. P. 15(a), because Brennan answered on October 30, 2003.

MEMORANDUM OPINION AND ORDER – PAGE 3

he fails to meet the Federal Rules’ requirement for exceptions to the Scheduling Order. See

Fed. R. Civ. P. 16(b)(“a schedule shall not be modified except upon a showing of good cause

and by leave of the district judge . . .”). The motion to strike Count III of the Amended

Complaint is therefore granted.1

III. SUMMARY JUDGMENT STANDARD 

Summary judgment is proper when the pleadings and evidence demonstrate that no

genuine issue of material fact exists and the movant is entitled to judgment as a matter of law.

FED. R. CIV. P. 56(c). An issue is material if its resolution is potentially outcome

determinative. Weeks Marine, Inc. v. Fireman’s Fund Ins. Co., 340 F.3d 233, 235 (5th Cir.

2003). A dispute as to a material fact is genuine if the evidence is such that a reasonable jury

could return a verdict for the nonmoving party. Boudreaux v. Swift Transportation Co., 402

F.3d 536, 540 (5th Cir. 2005). The Court must accordingly view all facts and inferences in

the light most favorable to the nonmoving party. Id. at 540. The party moving for summary

judgment must demonstrate the absence of a genuine issue of material fact, but need not

negate the elements of the nonmovant’s case. Little v. Liquid Air Corp., 37 F.3d 1069, 1075

(5th Cir. 1994) (en banc).

IV. THE CONTRACTUAL DISCLAIMER PRECLUDES 

STEINBERG’S FRAUD CLAIM AS A MATTER OF LAW

To prevail on a common law fraud claim under Texas law, a plaintiff must establish

(1) the defendant made a material representation; (2) the representation was false; (3) the

 

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 Brennan objects to numerous statements in Steinberg’s declaration as beyond the

scope of the particularized fraud allegations in the complaint. Because the Court holds that

Steinberg’s fraud claim is precluded as a matter of law, it is not necessary to rule on these

objections.

MEMORANDUM OPINION AND ORDER – PAGE 4

defendant either knew the representation was false when made or made it recklessly without

any knowledge of its truth and as a positive assertion; (4) the defendant made the

representation with the intention that it be acted upon; (5) the representation was in fact

relied upon; and (6) damage to the plaintiff resulted. Burleson State Bank v. Plunkett, 27

S.W.3d 605, 612 (Tex. App. – Waco 2000, pet. denied) (citing Ins. Co. of N. Am. v. Morris,

981 S.W.2d 667, 674 (Tex. 1998)). Steinberg’s complaint asserts that in September 2001,

Brennan fraudulently “represented to Steinberg that [UAC] was a viable, healthy corporation

that had just raised $7 million from the sale of its stock by Jeffries & Company, an

investment banking firm.” Steinberg’s evidence for these representations consists of his

personal declaration2

 and a handwritten note, dated September 10, 2001, that Brennan faxed

to Steinberg. The note provides information on a number of investment opportunities and

then states: 

Following is some material on another of our companies,

[UAC]. They don’t need any money-Jeffries has just done

$7mm in equity ($2mm of their own money and $5mm from

Mass Mutual Insurance).

UAC has closed a merger with our shell, Providence

Capitol I, and Jeffries will trade the stock 1st quarter 2002 in the

$6-10 per share range.

We made arrangements last week to buy 80,000 free

trading unrestricted shares of stock in UAC at $2.50 per share

from a former consultant to the Company. Day [?] and I are

buying half of it ($100,000) and thought that you might want the

rest.

 

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MEMORANDUM OPINION AND ORDER – PAGE 5

Perhaps you can put $250,000 in the five Debentures and

$100,000 in the private UAC stock purchase. The UAC stock

will trade in early 2002 and your shares will be completely free

trading.

Let’s discuss this all.

RegardsJim Brennan.

Steinberg claims that UAC was in fact in dire straits, and that this letter “exemplifies”

Brennan’s false representations regarding UAC’s capitalization and viability. He further

claims that he relied to his detriment on these representations when he purchased UAC stock.

The Court agrees with Brennan that Steinberg cannot establish the fifth element of his fraud

claim, reliance, because the parties included an effective disclaimer of reliance in the Stock

Purchase Agreement.

A. Legal Standard 

Texas law recognizes a power of contracting parties to create contractual provisions

that disclaim reliance on prior representations or promises. Schlumberger Tech. Corp. v.

Swanson, 959 S.W.2d 171 (Tex. 1997) (disclaimer of reliance precluded fraud claim based

on prior representations); cf. Prudential Ins. Co. of America v. Jefferson Associates, Ltd., 896

S.W.2d 156 (Tex. 1995) (“as is” designation in real estate contract precluded finding that

seller’s prior representations were a cause in fact of harm related to subsequently discovered

asbestos). A potentially conflicting doctrine holds that fraud in the inducement prevents a

contract, including merger clauses and disclaimers of reliance, from coming into being, and

that parol evidence is admissible to demonstrate fraud. Schlumberger, 959 S.W.2d at 179.

The juxtaposition of these doctrines leads to disputes like that presently before the Court,

where one party claims that the contractually embodied intent of the parties was to disclaim

 

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 The venture at issue concerned offshore diamond mining. The disclaimer stated that

“each of us [the Swansons] expressly warrants and represents and does hereby state . . . and

represent . . . that no promise or agreement which is not herein expressed has been made to

him or her in executing this release, and that none of us is relying upon any statement or

representation of any agent of the parties being released hereby. Each of us is relying on his

or her own judgment and each has been represented by Hubert Johnson as legal counsel in

this matter. The aforesaid legal counsel has read and explained to each of us the entire

contents of this Release in Full, as well as the legal consequences of this Release.” 959

S.W.2d at 180 (emphasis added by Schlumberger court). A separate provision acknowledged

past controversy over the valuation of the interest and waived all causes of action arising out

of the controversy. 

MEMORANDUM OPINION AND ORDER – PAGE 6

reliance, and the other complains he would not have signed the contract except for a

particular misrepresentation. 

The Schlumberger court determined that the two doctrines may be reconciled based

on a totality of the circumstances inquiry. “The contract and the circumstances surrounding

its formation determine whether the disclaimer of reliance is binding.” 959 S.W.2d at 179-

180 (citations omitted); cf. Prudential, 896 S.W.2d at 162 (“The nature of the transaction and

the totality of the circumstances surrounding the agreement must be considered.”). If the

contract and the circumstances of its formation evince clear and specific intent to disclaim

reliance on prior representations, then the element of reliance in a fraudulent inducement

claim is negated as a matter of law. 959 S.W.2d at 179. The Schlumberger court found such

clear and specific intent where sophisticated parties, represented by competent legal counsel,

included an emphatic, particularized disclaimer of reliance in a contract that resolved a

dispute over the valuation of an interest in a dissolving joint venture.3

 Id. at 180. The court

did not question the plaintiffs’ contention that during the negotiations, the defendants falsely

represented the venture was not commercially viable in order to buy them out at an unfairly

 

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MEMORANDUM OPINION AND ORDER – PAGE 7

low price. See id. at 174. It found, however, that the contract’s language, read in context,

unequivocally demonstrated the plaintiffs’ intent to forego reliance upon prior

representations in order to terminate the joint venture at the agreed price. 

Schlumberger is open to different interpretations, and the difference between these

interpretations matters in the present case. The present contract, as discussed at greater

length in the next section, conspicuously and straightforwardly rules out reliance on prior

representations. There is no indication, however, that the relevant sections were drafted

specially for this transaction, and likewise no evidence concerning the role of counsel or the

existence of any prior disputes or negotiations. Brennan accordingly argues for

enforceability on the grounds that the contract is straightforward and the deal was arm’slength, while Steinberg argues that the contract “merely reflects the customary recitals and

disclaimers made by a customer to his stockbroker,” and that the key contextual

circumstances of Schlumberger are absent. 

Accordingly, the Court must determine whether, under Schlumberger, the structure

and language of a contract may demonstrate a sophisticated party’s clear and unequivocal

intent to disclaim reliance on prior representations, when central facts of Schlumberger – e.g.,

assistance of counsel, prior dispute, and tailored drafting – are absent. Although

Schlumberger is not completely clear on this question, the Court concludes based on Fifth

Circuit precedent that the answer is yes. While the Fifth Circuit has sometimes described

Schlumberger in narrow terms, Fifth Circuit opinions have consistently looked to the

structure and terms of contracts in order to determine whether clear and unequivocal intent

 

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MEMORANDUM OPINION AND ORDER – PAGE 8

to disclaim reliance exists under Schlumberger. They have implicitly rejected any

requirement of emphatic, tailored drafting, or general factual congruity with Schlumberger.

The first Fifth Circuit opinion to apply Schlumberger was Dunbar Medical Systems,

Inc. v. Gammex Inc., 216 F.3d 441 (2000). The court “read Schlumberger as holding that

particular contract clauses may, under certain limited circumstances, curtail the contracting

parties’ ability to challenge the contract validity on fraudulent inducement grounds,” and

stated that “Schlumberger gives us some indication of what those circumstances may

include.” Id. at 449. With respect to both an “as is” clause and a merger clause, the court

held that “the language of the clause is not sufficient to bar [the] fraudulent inducement

claim.” Id. at 450. The principal ground for this conclusion was that the parties had

embodied the allegedly fraudulent representations in the contract as explicit warranties.

Because the holding rested on this distinctive circumstance, Gammex is not particularly

helpful in guiding the Court’s present analysis. 

Subsequent opinions are more instructive. They have consistently found clear and

unequivocal intent to disclaim reliance under Schlumberger, based principally or solely on

contractual language. In U.S. Quest Ltd. v. Kimmons, 228 F.3d 399 (5th Cir. 2000), the court

considered whether a merger clause precluded a fraudulent inducement claim based on an

alleged oral agreement to enter into another contract subsequent to the written contract at

issue. The court explained that under Schlumberger, “a simple merger clause restricting

recovery to that provided by the terms of the contract” would not preclude a fraudulent

inducement claim. Id. The court found, however, that language stating the contract was “in

lieu of any and all prior or contemporaneous agreements, conditions or understandings”

 

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MEMORANDUM OPINION AND ORDER – PAGE 9

explicitly contradicted the assertion that the parties relied on promises to enter further

contracts. Id. at 400. It therefore held the merger clause enforceable. It did so without

mentioning issues such as the role of counsel, the existence of prior disputes, or whether the

merger clause was extensively negotiated or specifically drafted for that transaction. 

The same result obtained in Armstrong v. American Home Shield Corp., 333 F.3d 566

(5th Cir. 2003). Plaintiffs in that case alleged that defendant made fraudulent representations

in the course of negotiations to acquire plaintiffs’ business and hire plaintiffs. Based upon

a review of the entire employment agreement, the court determined that “the language and

intent” of the agreement demonstrated plaintiffs did not rely upon the representations in

question. Id. at 571. The court concluded that the agreement’s generic merger clause did not

evince clear intent to disclaimer reliance. It held, however, that another provision giving

defendants the sole right to determine whether to expand a particular business program

refuted plaintiffs’ alleged reliance on a representation that such expansion would take place.

Similarly a provision providing that defendants made “no representations, warranties, and/or

guarantees of the accuracy of the numbers and/or assumptions” refuted plaintiffs’ alleged

reliance on certain statistical representations. Id. In light of these provisions, the court

found that the contract contained “clear and unequivocal disclaimers of reliance.” Id. In

that case as well, the court discerned intent to disclaim reliance entirely from the terms of the

contract, without requiring that the relevant clauses be negotiated with the assistance of

counsel or drafted specifically for that transaction or in response to a prior dispute.

Finally, in Cronus Offshore, Inc. v. Kerr-McGee Oil & Gas Corp., 369 F. Supp. 2d

848 (E.D. Tex. 2004), affirmed, 2005 WL 1023386 (5th Cir. 2005) (unpublished), the district

 

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 In addition to this authority, a recent unpublished decision of this Court provides

persuasive authority for the proposition that contractual language and structure can

demonstrate the requisite intent under Schlumberger. The Court in Corporate Link Inc. v.

Fairbanks Capital Corp. held that a merger clause precluded a fraud claim because: 

the merger clause was not buried in the middle of a complex and

lengthy contract; instead it was part of a fairly simple six-page

agreement. Further, there has been no suggestion that the parties

were in unequal bargaining positions or that this was a contract

of adhesion. [Citing Prudential]. Finally, Corporate Link has

not denied being aware of the merger cause, nor has it alleged

Fairbanks deceived it into believing the merger clause was

absent or unenforceable. 

2005 WL 770564, at *9 (N.D. Tex 2005) (Boyle, J.) (unpublished).

MEMORANDUM OPINION AND ORDER – PAGE 10

court considered fraud claims based on alleged misrepresentation of a drilling site’s viability.

The district court summarized Schlumberger as holding “that where, as here, a disclaimer of

reliance in the contract is negotiated by parties of equal bargaining strength in an arm’slength transaction, it is binding upon the parties and, as a matter of law, precludes claims of

both fraudulent inducement and nondisclosure” 369 F. Supp. 2d at 859. It then held that an

“as is” clause precluded reliance on representations of viability. The Fifth Circuit upheld the

district court’s decision in an unpublished opinion. It concluded that the totality of the

circumstances supported the district court’s enforcement of the “as is” clause, and

particularly emphasized the plaintiff’s sophistication and utilization of counsel. 2005 WL

1023386 at *1. Neither the district court nor the court of appeals considered whether the “as

is” clause at issue had been specifically drafted for that transaction or whether the agreement

terminated a dispute.4

 

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 Accord Schlumberger, 959 S.W.2d at 180 (“Because courts are to assume that the

parties intended every contractual provision to have some meaning, [citations omitted], we

must presume that the parties contemplated, by the inclusion of this clause, that the Swansons

would not rely on any representations of Schlumberger about the commercial feasibility and

value of this project, which, after all, was the very dispute that the release was supposed to

resolve. Therefore, we conclude that the disclaimer of reliance is binding . . . .”).

MEMORANDUM OPINION AND ORDER – PAGE 11

This Fifth Circuit authority contradicts Steinberg’s assertion that Schlumberger was

“specific to the facts of that particular situation.” The Fifth Circuit has routinely enforced

disclaimers of reliance on the basis of contractually evident intent, without requiring the

particular constellation of facts that appeared in Schlumberger. It also contradicts

Steinberg’s contention that disclaimers of reliance are unenforceable if they use customary

rather than idiosyncratic language. In focusing their inquiry on the contractual text, these

Fifth Circuit opinions did not ask whether the contested clauses, like snowflakes, were one

of a kind. Instead they proceeded from the presumption that contracting parties intend what

they agree to,5

 and inquired whether the contracts went beyond generic merger provisions

to evince clear intent to disclaim reliance on the specific type of representation under dispute.

See Armstrong, 333 F.3d 571; Kimmons, 228 F.3d 403. This Court will apply the same

analysis. In light of the foregoing discussion, the Court concludes that idiosyncratic drafting

and other characteristic facts of Schlumberger are not prerequisite for a finding of clear and

unequivocal intent under that case. Rather, such intent may be discerned from the totality

of the circumstances, and in particular from the text and structure of the contract at issue. 

 

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MEMORANDUM OPINION AND ORDER – PAGE 12

B. The Agreement Expresses Steinberg’s Intent to Rely 

on His Own Research Rather Than Prior Representations 

about UAL’s Capitalization and Liability

The Court has concluded that under Texas law, the text and structure of an agreement,

considered in light of available evidence related to its formation, can demonstrate contracting

parties’ intent to disclaim reliance on prior representations. The Court additionally concludes

that the present Agreement and surrounding facts demonstrate Steinberg’s clear and

unequivocal intent to rely on his own research and assessments rather than Brennan’s

representations. 

As in Armstrong, the present Agreement goes beyond an omnibus merger clause to

include numerous specific provisions that directly contradict Steinberg’s alleged reliance on

prior representations concerning UAL’s capitalization and viability. Paragraph 2, “Seller’s

Representations,” indicates that Brennan represents the shares to be free and clear of claims,

liens, encumbrances, and restrictive legends, but has made “[n]o representations as to the

Company’s business or prospects.” For his part, Steinberg represents in Paragraph 3,

“Purchaser’s Representations,” that:

(b) No representations as to the Company’s business or

prospects have been made to the Purchaser by the Seller or any

agents regarding an investment in the Shares. The Purchaser

acknowledges that neither the Company nor the Seller has

prepared, and that neither the Company nor the Seller has been

requested by the Purchaser to prepare, [sic] comprehensive

written prospectus or disclosure statement [sic] . . . that

otherwise might be required if the sale of the Shares to the

Purchaser were required to be registered under [the Securities

Act of 1933]; 

 

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 Indeed, Paragraph 1 of the Agreement states that Brennan makes the sale in reliance

upon Steinberg’s representations and warranties, which include Steinberg’s representations

of sophistication and opportunity to research.

MEMORANDUM OPINION AND ORDER – PAGE 13

(c) Purchaser has such knowledge and experience in financial

and business matters that he is capable of evaluating the merits

and risks of an investment in the Shares;

(d) Purchaser has been given an opportunity to inquire of all the

officers and directors of the Company, as well as full and

complete access to all documents, books and records concerning

the business of the Company, its financial history, current

circumstances, and prospects[.]

Finally, Steinberg represents and warrants in Paragraph 4, entitled “Accredited Investor,”

“that he is a knowledgeable and experienced investor,” and that he qualifies as an accredited

investor under SEC rules as confirmed by check marks next to criteria for that status.

This contract comprehensively sets forth an arm’s-length transaction between

sophisticated parties who understand the risks involved in stock transfers and have allocated

those risks in a deliberate manner. In particular, it allocates the burdens and associated risks

of verifying the financial history and viability of the Company to the purchaser, not the seller.

Furthermore, Steinberg as purchaser warrants and represents that he is qualified to assume

those burdens and that he has been permitted to take necessary steps to minimize those risks.

These disclaimers, which specifically address the category of representation now at issue,

make clear that Steinberg did not rely on Brennan’s prior representations.6

Steinberg argues, however, that the disclaimer of reliance does not bind him because

he asserts it is “boilerplate.” The Court has already rejected Steinberg’s contention that

 

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MEMORANDUM OPINION AND ORDER – PAGE 14

Texas law requires disclaimers of reliance to be individually drafted. The following passage

from Prudential explains the relevance of the “boilerplate” designation to the present inquiry:

The nature of the transaction and the totality of the

circumstances surrounding the agreement must be considered.

Where the “as is” clause is an important part of the basis of the

bargain, not an incidental or “boiler-plate” provision, and is

entered into by parties of relatively equal bargaining position, a

buyer’s affirmation and agreement that he does not rely on

representations by the seller should be given effect.

Prudential, 896 S.W.2d at 162, cited in Schlumberger, 959 S.W.2d at 181. The doctrine of

Schlumberger and Prudential is not that disclaimers of reliance must be distinctively phrased.

It is that the language and structure of a contract, considered in light of any relevant facts

surrounding its formation, must evince intent to disclaim reliance on past representations, e.g.

Armstrong, supra, rather than acquiescence to obscure, unilaterally imposed conditions of

a more powerful party, e.g., Burleson State Bank v. Plunkett, 27 S.W.3d 605, 612 (Tex. App.

– Waco 2000, pet. denied) (disclaimer unenforceable in contract between bank and

unsophisticated customer and cosigner); Woodlands Land Development Co. v. Jenkins, 48

S.W.3d 415 (Tex. App. – Beaumont 2001, no pet.) (same result for nonnegotiable contract

between housing developer and home purchaser). 

The requisite intent is manifest in the present case. Steinberg makes no attempt to

recant his representations of sophistication and wealth, and the Court considers it undisputed

that the present contract was between “parties of relatively equal bargaining position.” The

relevant provisions were not merely incidental to the contract. Indeed, they are so

straightforward and so central to the agreement that a party of Steinberg’s professed

sophistication would have to be negligent or duplicitous to sign the agreement without

 

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 The Court similarly rejects Steinberg’s contention that “a fact issue is presented

whether the facts in a given case are governed by Schlumberger or are distinguishable from

MEMORANDUM OPINION AND ORDER – PAGE 15

intending to acquiesce to them. The Agreement is just over four pages long and is written

in short, straightforward paragraphs. Both parties initialed or signed each page, and

Steinberg indicated his accredited investor status by placing check marks next to specific

criteria. The three paragraphs discussed above make up nearly half the text of the

Agreement. Thus, the sheer volume of provisions devoted to risk allocation demonstrates

that the disclaimers form “an important part of the basis of the bargain.” This conclusion

finds further support in obvious economic reasons why a sophisticated seller of stock would

insist on such provisions, and why a sophisticated buyer would not accede to them lightly.

Accordingly, the disclaimer provisions cannot be considered “boilerplate” under Prudential

and Schlumberger.

Nor is the Court swayed from its analysis by Steinberg’s assertion that the disclaimer

clauses are counterfactual. Steinberg emphasizes that rather than stating that the parties do

not rely on past representations, the Agreement states as a matter of apparent historical fact

that, for example, “[n]o representations as to the Company’s business or prospects have been

made to the Purchaser by the Seller . . . .” Steinberg claims that these statements are simply

wrong, because Brennan’s fax in fact contained statements about the company. 

As an initial matter, the Court rejects Steinberg’s suggestion that any contradiction

between the contract and the faxed note creates a fact issue for the jury. Enforceable

disclaimer clauses do not merely constitute evidence of nonreliance under Schlumberger —

they preclude the reliance element of a fraud claim as a matter of law.7

 959 S.W.2d at 179.

 

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it.” The question whether a claim is precluded as a matter of law does not become a jury

question simply because it involves consideration of the totality of circumstances.

MEMORANDUM OPINION AND ORDER – PAGE 16

A somewhat stronger argument is that the juxtaposition of the Agreement and the fax

supports Steinberg’s contention that the contract was mere boilerplate that did not reflect the

understanding and intent of the parties. The Court must reject this contention for reasons

already discussed. The statement in question appears in two places in the Agreement, one

of which is Steinberg’s own representations. Given Steinberg’s sophistication and the

conspicuousness and straightforwardness of these statements in the contract, his protests of

counterfactuality constitute self-indictment. If Steinberg truly interpreted these provisions

to inaccurately state historical fact, then he should not have agreed to the contract in which

they appeared. 

Finally, for purposes of determining whether the contract reflects the requisite clear

and unambiguous intent under Schlumberger, this Court concludes that the statements at

issue, considered in context of the entire Agreement, are essentially synonymous with a

statement that the purchaser does not rely on past representations. Every stock transaction

must include the exchange of some information about the company. This information does

not necessarily constitute a “representation,” which in this context clearly refers to “a

presentation of fact . . . made to induce someone to act, esp. to enter into a contract.” See

BLACK’S LAW DICTIONARY 1327 (8th ed. 2004). In connection with other parts of the

Agreement that indicate Steinberg’s ability and opportunity to inspect UAL’s finances, this

contract’s “no representations” provisions make clear that any past statements about the

 

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 Even if the “no representations” provisions were, as Steinberg alleges, patently

counterfactual, Steinberg’s representation would still be tantamount to an explicit disclaimer

of reliance. A party’s intent to disclaim reliance on past representations may appear in its

acceptance of contractual terms that foreclose reasonable reliance. For example, the Fifth

Circuit concluded in Armstrong that the plaintiffs did not rely on representations that the

other party would expand a “Systems Check” program, because the contract allocated to the

other party “the sole right to determine whether to implement a system check program and

to what extent.” 333 F.3d at 571. A sophisticated party similarly cannot be deemed to enter

a contract in reliance on representations he stipulates were never made. 

MEMORANDUM OPINION AND ORDER – PAGE 17

company were merely informational, and were not meant by either party to supplant the

sophisticated purchaser’s own research as the ultimate basis for his purchasing decision.8

IV. CONCLUSION

Because Steinberg is precluded from establishing an essential element of his fraud

claim due to the disclaimers of reliance in the agreement, that claim fails as a matter of law.

Accordingly, the motion for partial summary judgment is granted. Additionally, because

Steinberg’s amendment adding a federal securities fraud claim was unauthorized, unjustified,

and untimely, the motion to strike is granted. 

 SIGNED July 29, 2005.

__________________________________

David C. Godbey

United States District Judge

 

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