UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

No. 11-20261

NEW CENTURY FINANCIAL, INC.,

Plaintiff-Appellee,

v.

OLYMPIC CREDIT FUND, INC.,

Defendant-Appellant.

Appeal from the United States District Court

for the Southern District of Texas

Before REAVLEY, ELROD, and HAYNES, Circuit Judges.

PER CURIAM:*

This appeal arises from the district court’s grant of summary judgment in

favor of Olympic Credit Fund, Inc. (“Olympic”), on New Century Financial, Inc.’s

(“New Century”) claims of fraud and negligent misrepresentation. WE AFFIRM. 

I.

New Century and Olympic are both sophisticated actors in the factoring

industry. Factoring is a type of financing where one business (the factoring

client) sells its right to receive payment for goods sold or services rendered to

customers (account debtors) to another business (the factor) at a discounted

United States Court of Appeals

Fifth Circuit

F I L E D

August 27, 2012

Lyle W. Cayce

Clerk

Pursuant to Fifth Circuit Rule 47.5, the court has determined that this opinion should *

not be published and is not precedent except under the limited circumstances set forth in Rule

47.5.4.

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price. On November 29, 2006, Olympic and Education Advance entered into a

contractual factoring relationship. Education Advance purported to provide

tutoring services to Newark Public Schools under the No Child Left Behind Act. 

Olympic purchased certain accounts receivable owed by Newark Public Schools

to Education Advance for the purported provision of tutoring services.

On April 8, 2009, Education Advance contacted New Century to discuss

the prospect of a factoring relationship. From April 8, 2009 to May 19, 2009,

New Century conducted due diligence regarding the potential transaction. On

April 29, 2009, New Century entered into an Agreement for Purchase and Sale

of Accounts with Education Advance to sell, transfer, and assign its accounts

receivable at a discounted price below their face value. Under this agreement,

Education Advance received cash from New Century in return for promises and

warranties with respect to the collection of the accounts receivable and payments

to New Century. New Century discovered during due diligence that Education

Advance and Olympic were already in a factoring relationship. Before New

Century could become the new factor, Olympic had to release its ownership and

security interest in the Education Advance account. On May 14, 2009, New

Century, Olympic, and Education Advance signed a Payoff Agreement (effective

date May 13, 2009). Under the Payment Agreement, Olympic provided New

Century with a net payoff amount of $955,150.04 to release Olympic’s ownership

and security interest in the account.

The first and only time that New Century directly contacted and

communicated with Olympic was on May 19, 2009, during a single four-minute

telephone call between New Century’s Vice-President of Operations, Nel

Somarriba (“Somarriba”), and an account representative for Olympic, Heather

Panteleeff (“Panteleeff”). The timing of this telephone call occurred: (1) more

than three weeks after the April 29, 2009, effective date of the Agreement for

Purchase and Sale of Accounts between New Century and Education Advance;

(2) approximately one week after the May 13, 2009, effective date of the Payoff

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Agreement between New Century and Olympic; and (3) just hours before New

Century wired $955,150.04 in funds to Olympic pursuant to the Payoff

Agreement. New Century and Olympic dispute whether the purpose of the

telephone call was to conduct due diligence on Education Advance or to verify

the amount and method that New Century was to pay Olympic under the Payoff

Agreement. During the call, Somarriba stated that “she just want[ed] to make

sure and verify the payoff amount.” Soon after, Panteleeff told Somarriba that

New Century was a “good” account and that Olympic “just couldn’t accommodate

one of [Education Advance’s] credits.” A few hours after the telephone call, New

Century paid Olympic $955,150.04 pursuant to the Payoff Agreement.

A few weeks later, on June 15, 2009, New Century discovered that

Education Advance allegedly converted $866,869.00 in funds from Newark

Public Schools that should have been paid to New Century. That conversion

prompted New Century to conduct an investigation, which revealed that

Education Advance’s accounts receivable were fraudulent. Specifically, New

Century discovered that the purported entity Education Advance had contracted

with as “Newark Public Schools” was a fraudulent entity. New Century also

discovered that on May 1, 2009, Education Advance converted a check in the

amount of $254,430.00 that rightfully belonged to Olympic under the factoring

agreement. Olympic had not disclosed this prior conversion to New Century.

On June 30, 2009, New Century filed suit against Olympic alleging claims

of fraud and negligent misrepresentation. New Century claimed that Olympic’s

alleged misrepresentations and omissions induced New Century to purchase the

factoring account, and that but for these alleged misrepresentations and

omissions, the company “would not have entered into any agreement with

Olympic.” New Century sought damages in the amount of $955,105.04, the exact

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amount it paid Olympic for the Education Advance account. After filing suit, 1

New Century moved for partial summary judgment on its claims, and Olympic

moved for dismissal of New Century’s claims. On cross-motions for summary

judgment, the district court held that: (1) the general release and merger clauses

contained in the Payoff Agreement explicitly disclaimed reliance as a matter of

law and precluded New Century’s fraud claims, and (2) the economic-loss rule

barred New Century’s negligent misrepresentation claim. New Century timely

appealed.2

II.

This court reviews a district court’s entry of summary judgment de novo,

applying the same standard as the district court. United States v. Caremark,

Inc., 634 F.3d 808, 814 (5th Cir. 2001). Summary judgment is appropriate in the

absence of a genuine issue of material fact. Fed. R. Civ. P. 56(a). “Even if we do

not agree with the reasons given by the district court to support summary

judgment, we may affirm . . . on any grounds supported by the record.” Lifecare

Hosps., Inc. v. Health Plus, Inc., 418 F.3d 436, 439 (5th Cir 2005).

The parties agree that Texas substantive law applies to this diversity case. 

See, e.g., Abraham v. State Farm Mut. Auto Ins. Co., 465 F.3d 609, 611 (5th Cir.

New Century also sought rescission of its purchase agreement of the Education

1

Advance account based on mutual mistake. In granting summary judgment in favor of

Olympic, the district court did not separately address New Century’s mutual mistake claim.

New Century has not raised this claim on appeal, and therefore, has waived any argument

regarding the claim. See Askanase v. Fatjo, 130 F.3d 657, 668 (5th Cir. 1997) (“All issues not

briefed are waived.”).

The parties dispute whether the district court’s grant of summary judgment in favor 2

of Olympic was proper after the Texas Supreme Court issued its opinion in Italian Cowboy

Partners, Ltd. v. Prudential Ins. Co. of Am., 341 S.W.3d 323 (Tex. 2011). Italian Cowboy

addressed whether specific contractual provisions, which are similar to the provisions in the

Payoff Agreement in this case, disclaimed reliance or simply amounted to a general merger

clause, which would not have disclaimed reliance. We need not address this issue based on

the facts of this case because, as discussed infra, New Century did not satisfy the reliance or

inducement elements of its fraud claim, and the economic-loss rule bars New Century’s

negligent misrepresentation claim. 

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2006) (citing Erie R.R. Co. v. Tompkins, 304 U.S. 64, 78-80, 58 S.Ct. 817, 82

L.Ed. 1188 (1938)). Under Texas law, claims of fraud require a showing of

reliance. See Grant Thornton LLP v. Prospect High Income Fund, 314 S.W.3d

913, 923 (Tex. 2012). Claims of fraud also require a showing that the defendant

intended to induce the plaintiff to act or to refrain from acting. See Italian

Cowboy, 341 S.W.3d at 337 (quoting Aquaplex, 297 S.W.3d at 774). Moreover,

to succeed on a negligent misrepresentation claim, plaintiffs must show that 3

they suffered a pecuniary loss by justifiably relying on a representation. Sloane,

825 S.W.2d at 442. 

In this case, New Century did not satisfy the reliance element of its fraud

claim. All of the alleged misrepresentations and omissions made by Panteleeff

during the telephone call occurred on May 19, 2009, five days after New Century

and Olympic signed the Payment Agreement on May 14, 2009 (effective date

May 13, 2009). Therefore, New Century could not have actually relied on

Panteleeff’s statements at the time that it entered into the Payment Agreement

with Olympic. See Eagle Properties, Ltd. v. KPMG Peat Marwick, 912 S.W.2d

825, 827 (Tex. Ct. App. 1995) (holding that the reliance element of a fraud claim

cannot be satisfied based on a representation made after a transaction is

complete). 

For the same reasons, New Century has not satisfied the inducement

element of its fraud claim. The facts of this case do not show that Olympic

“induced” New Century to enter into either the Payoff Agreement with Olympic

or the Agreement for Purchase and Sale of Accounts with Education Advance. 

The telephone call between Panteleeff and Somarriba occurred after New

Under Texas law, the elements of negligent misrepresentation are: (1) the 3

representation is made by a defendant in the course of his business, or in a transaction in

which he has a pecuniary interest; (2) the defendant supplies false information for the

guidance of others in their business; (3) the defendant did not exercise reasonable care or

competence in obtaining or communicating the information; and (4) the plaintiff suffers

pecuniary loss by justifiably relying on the representation. Fed. Land Bank Ass’n v. Sloane,

825 S.W.2d 439, 442 (Tex. 1991).

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Century entered into both agreements, and therefore, Panteleeff’s alleged

misrepresentations and omissions could not have induced New Century to enter

into either agreement. Olympic simply transferred the account that New

Century was taking over after New Century reached its deal with Education

Advance. See Eagle Properties, 912 S.W.2d at 827 (recognizing that “[a]

representation made after a transaction is complete, no matter how false, cannot

give rise to an action for fraud”). 

As for New Century’s negligent misrepresentation claim, we agree with

the district court’s conclusion that New Century has not shown that it suffered

a pecuniary loss by justifiably relying on Olympic’s representations. The

economic-loss rule bars tort actions based solely on recovery of the loss or

damage to the subject of a contract. See, e.g., D.S.A. Inc. v. Hillsboro Indep. Sch.

Dist., 973 S.W.2d 662, 664 (Tex. 1998). New Century did not allege an injury

distinct from the injury that it suffered under the Payoff Agreement. Moreover,

New Century sought the exact measure of damages that it paid Olympic to

assume the Education Advance account under thePayoff Agreement. Therefore,

the economic-loss rule bars New Century’s negligent misrepresentation claim.

We conclude that the district court did not err by granting summary

judgment in favor of Olympic. AFFIRMED.

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