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

Heading: Capco’s claims against Tana, TRT, and Tristone

Text: Capco claims that Tana committed actionable fraud when it sent Capco a closing statement on August 28, 2006, in which Tana estimated that the revenue for August would be $6 million. Capco claims that in reliance on this fraudulent representation, Capco proceeded to close the acquisition to its detriment. Under Texas law, one of the elements of a fraud claim is reliance. Fluorine On Call, Ltd. v. Fluorogas Ltd., 380 F.3d 849, 858 (5th Cir. 2004); Ernst & Young, L.L.P. v. Pac. Mut. Life Ins. Co., 51 S.W.3d 573, 577 (Tex. 2001). However, when knowledgeable parties elect to include an unambiguous waiverof-reliance provision, courts will enforce such provision. See Forest Oil Corp. v. McAllen, 268 S.W.3d 51, 58 (Tex. 2008) (citing Schlumberger Tech. Corp. v. Swanson, 959 S.W.2d 171, 181 (Tex. 1997)) . In the instant case, at several points during the transactional process, Capco signed agreements waiving its reliance on representations made by Tana, TRT, and Tristone. In particular, in signing the PSA, Capco specifically accepted Tana’s disclaimer of any representation regarding the accuracy of any information “now, heretofore, or hereafter furnished to [Capco] by or on behalf of [Tana].” Furthermore, Capco agreed that in deciding to enter the PSA and consummate the acquisition, Capco “relied solely on the basis of its own independent due diligence investigation of the Assets, upon the representations and warranties made in [the PSA], and not on any other representations or warranties of [Tana] or any other person or entity.” Even assuming that Tana’s estimate of August revenues was in fact false, the PSA provisions now prevent Capco from asserting reliance on such representation. 15 No. 11-20264 Capco argues that because Tana allegedly committed fraud in overestimating the August 2006 revenue, the waiver-of-reliance provision is unenforceable. In support of its argument, Capco cites Lyn-Lea Travel Corp. v. Am. Airlines, Inc., 283 F.3d 282, 289 (5th Cir. 2002) in arguing that a fraudulently induced party is not bound by the contract’s terms because the fraud vitiates the requisite mutual assent. Legally, Lyn-Lea is distinguishable because the pertinent issue in that case was whether a fraudulent inducement defense is preempted by the Airline Deregulation Act. Id. at 289-90. Capco’s argument also fails factually because the representation at issue, even if fraudulent, occurred on August 28, 2006, after the PSA had been signed on June 2, 2006. Therefore, Capco could not fraudulently have been induced to sign the PSA because the alleged fraud had not yet taken place. Capco also claims that Tana, TRT, and Tristone committed fraud when they “repeatedly invited Capco to rely upon the April 1, 2006 Ryder Scott reserve report” prior to the execution of the PSA. Notwithstanding Capco’s characterization of Tana’s representations as “invitations to rely,”10 Capco waived its right to rely on such representations. Where the parties have signed a contract with a clause that expressly disclaims reliance on prior representations, such clause negates a fraudulent inducement claim. See LHC 10 The “invitations to rely” to which Capco refers consist of three e-mail communications. The first is an e-mail from Tristone to Tana, dated April 30, 3006, confirming that, “[a]ll offers should be based on review of the [previously provided] information.” The second is an internal Tana e-mail, dated May 25, 2006, informing transaction team members that Capco and Tana had discussed a variance between Tana’s actual production and the Ryder report forecast. The e-mail continues that Tana and Tristone explained to Capco that Tana was “right on Ryder Scott’s production projection.” The third is an e-mail from Tana to Capco, dated May 26, 2006, stating that, “[t]here is no question that we are spot on or ahead of Ryder Scott’s production forecast.” 16 No. 11-20264 Nashua P’ship, Ltd. v. PDNED Sagamore Nashua, L.L.C., 659 F.3d 450, 460 (5th Cir. 2011) (citing and discussing Italian Cowboy Partners, Ltd. v. Prudential Ins. Co. of Am., 341 S.W. 3d 323, 333-37 (Tex. 2011)). Here, not only does the PSA provide that Tana expressly disclaimed any representation of accuracy with respect to previous information provided to Capco, but also Capco specifically represented in the PSA that it had relied solely on its own due diligence investigation and had not relied on any representations made by Tana, TRT, and Tristone. Because the PSA contains a clear intent to disclaim reliance, the lower courts correctly held that Capco is unable to claim fraudulent inducement based on the prior representations of Tana, TRT, and Tristone. See Armstrong v. Am. Home Shield Corp., 333 F.3d 566, 571 (5th Cir. 2003); Forest Oil, 268 S.W.3d at 58-61; Schlumberger Tech. Corp., 959 S.W.2d at 179-80.