610 S.W.3d 808
Tex.2020Background
- In 2007 Claymore (Highland-managed funds) invested $250 million in a $540 million refinancing of the Lake Las Vegas development; Credit Suisse arranged the deal and served as Administrative Agent and arranger.
- Credit Suisse retained CBRE to prepare a FIRREA/USPAP “Qualified Appraisal”; Claymore alleges Credit Suisse induced and helped produce a manipulated, non–FIRREA-compliant appraisal that overstated collateral value.
- Claymore relied on the appraisal and participated in the loan; the borrowers defaulted months later after the housing-market collapse and Claymore lost most of its investment.
- A Texas jury found Credit Suisse liable for fraudulent inducement and awarded $40 million in damages (measuring the difference between what Claymore paid and the value of what it received).
- In a later bench trial the court found breach of contract and related claims and awarded equitable “rescissory” damages of about $211.9 million; the court of appeals affirmed.
- The Texas Supreme Court affirmed the $40 million fraud verdict but held the trial court erred in awarding $211.9 million in equitable rescissory (and related) damages and rendered judgment for Credit Suisse on the contract and duplicative claims; the case was remanded for entry of judgment consistent with that ruling.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Availability of rescissory/equitable damages after jury verdict | Damages were incalculable; equity (rescissory damages) was necessary to fully redress injury | Legal damages were available and the jury already measured the key asset-value question; equity unavailable | Rescissory/equitable monetary relief was improper; trial court’s $211.9M award reversed |
| Breach-of-contract damages requirement | Credit Suisse breached by failing to deliver a Qualified Appraisal; equitable relief appropriate | Claymore failed to prove legally cognizable contract damages; cannot obtain rescissory relief | Contract claim fails for lack of proved legal damages; judgment rendered for Credit Suisse on contract claim |
| Effect of contractual disclaimers on fraud (reliance) | Disclaimers are not specific to appraisal; appraisal compliance was peculiarly within Credit Suisse’s knowledge so disclaimer ineffective | Disclaimers and independence clauses bar justifiable reliance as a matter of law | Disclaimers ineffective here because the misrepresented facts (FIRREA compliance/appraisal integrity) were peculiarly within Credit Suisse’s knowledge; jury’s fraud liability stands |
| Other claims (implied covenant, aiding/abetting, conspiracy) | Alternative theories justify same relief | Claims are duplicative, seek identical damages, and cannot sustain separate rescissory awards | Claims dismissed/rendered against Claymore as duplicative; no separate rescissory relief available |
Key Cases Cited
- Van Wagner Advert. Corp. v. S&M Enters., 492 N.E.2d 756 (N.Y. 1986) (equitable rescission unavailable where adequate legal remedy exists)
- Rudman v. Cowles Commc’ns, Inc., 280 N.E.2d 867 (N.Y. 1972) (rescission is an extraordinary remedy only when legal remedy is lacking)
- Merrill Lynch & Co. v. Allegheny Energy, Inc., 500 F.3d 171 (2d Cir. 2007) (benefit-of-the-bargain damages measured as difference between warranted value and true value at time of transaction)
- Simcuski v. Saeli, 377 N.E.2d 713 (N.Y. 1978) (fraud requires justifiable reliance proved by clear and convincing evidence)
- DDJ Mgmt., LLC v. Rhone Grp. L.L.C., 931 N.E.2d 87 (N.Y. 2010) (facts discoverable by ordinary diligence are not peculiarly within defendant’s knowledge)
- Terwilliger v. Terwilliger, 206 F.3d 240 (2d Cir. 2000) (under New York law, plaintiff must prove legally cognizable contract damages)