Opinion ID: 621884
Heading Depth: 2
Heading Rank: 1

Heading: Capco’s claims against Ryder

Text: On appeal, Capco argues that Capco and Ryder entered into an implied contract whereby Ryder was to conduct an independent re-evaluation of the Properties and advise Capco regarding its closing on the Properties, and that Ryder breached its professional responsibility and caused Capco financial harm because Ryder’s representations at the June 9, 2006 meeting regarding the accuracy of the reserve estimates allegedly were erroneous. Capco contends that its June 4, 2006 e-mail invitation to, and then the June 9, 2006 lender meeting with, Ryder representatives, along with its subsequent payment for the meeting, sufficiently demonstrate that it impliedly had contracted Ryder to advise it with respect to its earlier purchase but prior to closing. Capco further contends that, based on such implied contract, it had a right to rely on representations made 2 Ryder argues that this court lacks jurisdiction over this appeal because Capco failed to comply with Federal Rule of Appellate Procedure 3(c)(1)(C), which requires an appellant to “name the court to which the appeal is taken.” Fed. R. App. P. 3(c)(1). Generally, if there is only one court to which appellant can appeal, we have forgiven a party’s failure to name this court as the court to which the appeal is taken. See e.g., United States v. Cantwell, 470 F.3d 1087, 1088 (5th Cir. 2006) (finding this element of Rule 3 met where only one avenue of appeal exists); McLemore v. Landry, 898 F.2d 996, 999 (5th Cir. 1990) (same). But see United States v. Pulgarin-Ospina, 182 F.3d 913, at  (5th Cir. 1999) (unpublished table decision) (dismissing appeal for failure to name court to which defendant was appealing). Rule 3 must be liberally construed in favor of appeals. Smith v. Barry, 502 U.S. 244, 248 (1992). We find Capco’s notice of appeal sufficient to satisfy the requirements of Rule 3(c)(1). 7 No. 11-20264 by Ryder regarding the accuracy of reserve estimates in its April 1, 2006 Report. Because Ryder’s reserve estimates allegedly were incorrect, Capco claims Ryder committed professional negligence by representing that Capco could rely on the figures.3 Under Texas law, “[t]o establish liability for professional negligence, [a] plaintiff must show the existence of a duty, a breach of that duty, and damages arising from the breach.” Great Plains Trust Co. v. Morgan Stanley Dean Witter & Co., 313 F.3d 305, 314 (5th Cir. 2002). “‘The threshold inquiry in a negligence case is duty.’” Id. (quoting Greater Houston Transp. Co. v. Phillips, 801 S.W.2d 523, 525 (Tex. 1990)); see also Banc One Capital Partners Corp. v. Kneipper, 67 F.3d 1187, 1198-99 (5th Cir. 1995). “The duty owed by a professional to his client derives from their contractual relationship and requires that the professional ‘use the skill and care in the performance of his duties commensurate with the requirements of his profession.’” Fed. Sav. and Loan Ins. Corp. v. Texas Real Estate Counselors, Inc., 955 F.2d 261, 265 (5th Cir. 1992) (citing and quoting I.O.I. Sys., Inc. v. City of Cleveland, Texas, 615 S.W.2d 786, 790 (Tex. Civ. App.—Houston [1st Dist.] 1980, writ ref’d n.r.e.)); Dukes v. Philip Johnson/Alan Ritchie Architects, P.C., 252 S.W.3d 586, 594 (Tex. App.—Fort Worth 2008, pet. denied), cert. denied, 129 S. Ct. 1032 (2009). “[A] binding contract requires ‘(1) an offer; (2) an acceptance in strict compliance with the terms of the offer; (3) a meeting of the minds; (4) each 3 The bankruptcy court dismissed all of Capco’s claims against Ryder, including claims of statutory fraud, common law fraud and fraudulent inducement, fraud by non-disclosure, negligent misrepresentation, and deceptive trade practices. On appeal, however, Capco only addresses the dismissal in the context of its professional negligence claim. Therefore, we only address Capco’s arguments with respect to Capco’s professional negligence claim. 8 No. 11-20264 party’s consent to the terms; and (5) execution and delivery of the contract with intent that it be mutual and binding.’” Coffel v. Stryker Corp., 284 F.3d 625, 640 n.17 (5th Cir. 2002) (quoting Copeland v. Alsobrook, 3 S.W.3d 598, 604 (Tex. App. 1999)). “The determination of a meeting of the minds, and thus offer and acceptance, is based on the objective standard of what the parties said and did and not on their subjective state of mind. Additionally, consideration is a fundamental element of any valid contract.” Copeland, 3 S.W.3d at 604 (citations omitted). The parties do not dispute that a contract existed between Capco and Ryder for Ryder to appear at the June 9, 2006 meeting. The issue before this court is whether Capco presented evidence to demonstrate a genuine issue of material fact about whether Ryder was contracted to provide an independent reevaluation of the Properties and advice at the meeting regarding Capco’s decision to close on the Properties. The extent of Capco’s relevant summary judgment evidence is: (1) Capco’s June 4, 2006 e-mail invitation to a June 9, 2006 meeting for representatives from Capco, Ryder, and UBOC; (2) a July 13, 2006 bill of $2,032.50 for that meeting; and (3) an affidavit, dated August 20, 2010, from Ilyas Chaudhary (“Chaudhary”), the Capco representative, attesting to his recollections of the meeting. As both lower courts held, none of these pieces of evidence indicates that the implied contract established for the June 9, 2006 meeting was for anything more than Ryder’s presentation of the report it previously had been retained by Tana to produce. Agreeing with the lower courts, we hold that nothing further agreed between them has been shown. First, Capco relies on the e-mail from Chaudhary to a Ryder representative advising that Capco had executed the PSA to acquire the 9 No. 11-20264 Properties and stating that a potential Capco lender had requested a meeting with Ryder engineers to discuss the Tana and Capco properties. In the e-mail, Chaudhary added that he believed the purpose of the meeting was to determine loan values. There is no indication in the e-mail that Capco was seeking an independent re-evaluation regarding the earlier purchase of the Properties. There is only a straightforward re-routed request from a potential Capco lender to discuss the Tana properties, which were the subjects of a report Ryder previously had been retained to produce for Tana. Next, Capco relies on an invoice from Ryder to Capco following the meeting “for services rendered in connection with the review of [Capco’s] reserves and the Tana acquisition reserves with Union Bank of California.” Again, there is no indication Capco contracted Ryder to provide an independent re-evaluation of the Properties regarding closing the transaction.4 The invoice merely confirms that Ryder presented its pre-existing reports regarding Capco and Tana properties to Capco’s potential lender at this one-day meeting. Finally, Capco relies on Chaudhary’s August 20, 2011 affidavit which describes the meeting that took place on June 9, 2006. The affidavit states that Basanko made a detailed presentation regarding the Properties. Chaudhary states also that Basanko reviewed the April 1, 2006 Report in detail and discussed the data underlying the report. With respect to Chaudhary’s professional expectation between Capco and Ryder for this meeting, Chaudhary states that “Capco expected to receive the benefit of Ryder Scott’s professional services and independent judgment in this planned meeting.” Chaudhary 4 Notably, even though Capco requested, and the invoice reflects, discussion of both Capco and Tana properties, Capco asserts that the June 9, 2006 meeting itself was an implied contractual encounter to re-evaluate orally the Tana properties only, not the Capco properties. 10 No. 11-20264 further states, albeit using the passive voice, that, “it was made clear that the purpose of the meeting was to assure both Capco and UBOC that proceeding with the contemplated acquisition and financing was a sound decision.” Chaudhary’s affidavit extensively describes his and Capco’s subjective expectations. Noticeably absent from Chaudhary’s affidavit, however, is any indication that Ryder agreed to provide anything beyond a presentation of the April 1, 2006 Report it had prepared for Tana or that Ryder actually provided additional and new information regarding the Properties beyond the scope of the April 1, 2006 Report.5 Chaudhary’s affidavit fails to provide evidence indicating that there was a meeting of the minds with respect to an independent reevaluation Capco hoped it would receive from Ryder at the meeting. Instead, when asked several times at his deposition whether he had ever asked anyone at Ryder to perform due diligence for Capco in connection with the Tana acquisition, Chaudhary admitted that he had no memory of any such request made to Ryder, either verbally or in writing. Further, Chaudhary never asked McInturff and Basanko “to do anything in terms of evaluating the properties independent from the April 1, 2006 Ryder Scott report” nor did he request “an updated valuation of the properties after the April 1, 2006 report.”6 Moreover, 5 Capco argues that Ryder did, in fact, provide information outside the scope of the April 1, 2006 Report because Ryder was brought in to determine loan values. First, the proposition that an engineering firm would be contracted to provide financial lending advice to a bank is improbable. Second, there is no mention anywhere in Chaudhary’s affidavit that Ryder rendered such advice to UBOC at the meeting. Third, it is undisputed that no written assessment, financial or engineering, was generated for firsthand use on June 9, 2006, or later, to memorialize any independent findings offered at the meeting. 6 This admission is supported by the relatively paltry amount Capco paid for an alleged independent evaluation of the Properties. Capco had previously engaged Ryder to provide an analysis of other properties in December, 2005, and the cost of that evaluation was estimated to be between $25,000 and $35,000, not inclusive of additional travel and other expenses. It 11 No. 11-20264 Chaudhary admitted that he was unaware of “McInturff doing anything besides reviewing the April 1, 2006 Report.” These circumstances demonstrate that Capco did not contract for the original evaluation of the Properties, did not contract with Ryder independently to re-evaluate their previous Tana evaluation, and did not contract with Ryder for a new evaluation. These conclusions contradict Capco’s present contention that it paid Ryder $2,032.50 for an oral, one-day independent re-evaluation and updated warranty of the accuracy of the figures in the 184-page April 1, 2006 Report. As the courts below held, Capco presents no evidence that Ryder agreed to such a duty. Capco highlights other portions of Chaudhary’s affidavit, arguing that Ryder provided professional services beyond presenting the report by vouching for the credibility of the figures in the April 1, 2006 Report. Specifically, Chaudhary attests that Basanko “indicated that the reserve estimates set forth in the April 1, 2006 report were ‘conservative,’ explaining that in the event there was any question regarding the characterization of any reserves as ‘proved’ or ‘probable,’ Ryder Scott would have characterized such reserves as ‘probable.’” Capco claims that because these characterizations were beyond the scope of the report and were unavailable to Capco prior to June 9, 2006, a new contractual relationship was established at the meeting. However, Capco’s own expert admitted that Tana’s prospectus and the April 1, 2006 Report itself set forth the is incongruous that six months later, Ryder agreed to provide an independent re-analysis of the Properties for $2,032.50. As the bankruptcy judge noted, it “defies reason and experience to assert that Plaintiffs paid $2,000 for an independent evaluation of value in a transaction to pay $83 million for mineral rights.” In addition to this implausibility, we note that an opposite conclusion, inferring a professional re-evaluative duty from a presentation of an original analysis, prepared contractually for a different entity, might dissuade authors of professional reports from presenting their reports to anyone other than an original client. 12 No. 11-20264 distinction between “proved” and “probable,” and represented that the reserve estimates were conservative.7 Therefore, not only were Basanko’s representations within the scope of the April 1, 2006 Report, but such categorizations were already available to Capco before the June 9, 2006 meeting. When comparing the April 1, 2006 Report and the June 9, 2006 presentation, there is no evidence that the presentation embellished the reserves report by giving professional assurances beyond the data. A further examination of the Chaudhary affidavit confirms that, though descriptive of Chaudhary’s expectations, it never describes Ryder’s acceptance of a duty to re-evaluate independently the Properties for Capco. To extract such an engagement from Chaudhary’s affidavit,8 Capco is obliged to point selectively to: (1) statements about Capco’s expectations that do not contain any assumptions by Ryder of reciprocal obligations; (2) statements uttered after the meeting by a Ryder employee positioning himself for a potential employment opportunity with Capco; and (3) statements which do not confirm a pre-existing contractual agreement, but instead describe the discussion occurring at the meeting itself. 7 According to the “[p]enultimate paragraph of Page 7 of Tana’s prospectus and the definition of Unproved reserves included in the April 1st report, 1st paragraph”: “Tana et al assured any potential purchaser that Ryder Scott had downgraded any reserves where there could be questionable underlying data, such as uncertainties regarding reservoir limits and ultimate recoveries, to Probable and Possible reserves leaving only those without these uncertainties within the Proved category. This is a representation that the reserve estimates are conservative.” 8 Again, the two-month old report is 184 pages long; a similar engagement between these same parties six months earlier cost Capco between $25,000 and $35,000; and, as the bankruptcy court highlighted, one would have to assume that Capco engaged Ryder for such a consequential re-evaluation of the Properties after executing the PSA and without contemplation of either a written contract or written product from the engagement. 13 No. 11-20264 Capco argues that a general professional relationship existed between Capco and Ryder sufficient to confer professional liability on Ryder. It is the specific nature of the professional relationship, however, that determines what duty Ryder owed to Capco. See Fed. Sav. and Loan Ins. Corp., 955 F.2d at 265 (“The duty owed by a professional to his client derives from their contractual relationship . . . .”). Capco’s evidence demonstrates only two engagements with Ryder prior to the closing of the acquisition: (1) Capco’s earlier, written contract with Ryder to produce the December 31, 2005 Report that was estimated to cost between $25,000 and $35,000, and estimated to take over two months to produce; and (2) Capco’s June 4, 2006 e-mail invitation to Ryder to present on June 9, 2006, for $2,032.50, the April 1, 2006 Report that Tana contracted Ryder to produce. By preparing the December 31, 2005 Report for Capco, and then by presenting the contents of the Capco December 31, 2005 Report as well as the Tana April 1, 2006 Report to UBOC, Ryder fulfilled its contractual duties to Capco.9 Absent evidence demonstrating a meeting of the minds between Capco and Ryder specifically establishing a duty beyond presenting the contents of the December 31, 2005 Report and the April 1, 2006 Report at one meeting, Capco cannot establish that Ryder owed a duty to Capco independently to re-evaluate the reserves of the Properties with the skill and care commensurate with the requirements of the profession to anyone but Tana, the party who originally 9 Capco also raises the issue of “whether the Bankruptcy Court erred in finding that the acquisition of the Tana Properties by Capco was completed on June 2, 2006.” Because the bankruptcy court’s finding does not affect our determination of whether a specific professional relationship existed between Capco and Ryder, we do not address this finding. However, the post-PSA timing of the June 9, 2006 meeting does support the conclusion that this was not an engagement to conduct an independent re-evaluation of the Properties. 14 No. 11-20264 contracted it to produce the April 1, 2006 Report.