Jeffrey Leibovitz and Sequoia Frankford Springs 23, L.P. v. Sequoia Real Estate Holdings, L.P.
465 S.W.3d 331
| Tex. App. | 2015Background
- In 2011 the parties (investors, Sequoia entities, and Behunin) executed a Settlement and Mutual Release Agreement resolving two lawsuits about management and disclosures concerning the Frankford Springs tenancy‑in‑common investment. The Agreement included broad mutual releases, a non‑reliance clause, a confidentiality/non‑disparagement clause, and an agreement that breaches could be enjoined and that the substantially non‑prevailing party would bear fees.
- Appellant Jeffrey Leibovitz (and entity SFS 23) later threatened to file FINRA/SEC complaints and to send them to investors in other Sequoia offerings, and alleged after the settlement that Sequoia had commingled investor funds and withheld due‑diligence information.
- Sequoia Real Estate Holdings sought injunctive relief to enforce the confidentiality and release terms, moved for summary judgment on multiple affirmative defenses, and tried breach claims; the jury found Leibovitz breached and awarded $2,500 in damages.
- The trial court entered a permanent injunction restraining appellants from disclosing the Agreement or contacting other Sequoia investors and awarded Sequoia $200,000 in attorney’s fees against both appellants.
- On appeal appellants challenged: the summary judgment on fraud/duress defenses; enforceability of the confidentiality clause (including public‑policy/misprision and First Amendment arguments); scope of the injunction and its application to SFS 23; the jury charge on damages; and the award of attorney’s fees against SFS 23.
Issues
| Issue | Plaintiff's Argument (Holdings) | Defendant's Argument (Leibovitz / SFS 23) | Held |
|---|---|---|---|
| Enforceability of disclaimer of reliance / summary judgment on fraud defenses | Waiver/non‑reliance and broad mutual release bar fraud, concealment, and fraudulent inducement defenses; Agreement negotiated, parties sophisticated, and was "once and for all." | Fraud defenses survive because Sequoia allegedly withheld material facts (commingling, due diligence) and reliance cannot be waived in this context. | Court: Disclaimer of reliance enforceable as matter of law under Forest Oil/Schlumberger factors; summary judgment on fraud defenses affirmed. |
| Misprision of felony / public‑policy challenge to confidentiality clause | Confidentiality expressly excludes disclosures required by law or regulatory inquiries, so no conflict with misprision statute. | Enforcement would bar reporting felonies and thus violate public policy / create criminal liability (misprision). | Court: Clause permits disclosures required by law/regulatory proceedings; no misprision or public‑policy invalidation. |
| Economic duress defense to Agreement | Parties expressly disclaimed duress in Agreement; Agreement was negotiated, arm’s‑length, and parties were sophisticated. | Agreement procured by coercion: threat to stop mortgage payments/foreclose forced signing. | Court: Parties may disclaim economic duress in these circumstances; disclaimer enforced and summary judgment affirmed. |
| Permanent injunction scope and application to SFS 23 | Injunction enforces contractual covenant; Leibovitz acted as manager of SFS 23’s GP so partnership bound and was in "active concert or participation." | Injunction is prior restraint on speech, overly broad, and cannot bind SFS 23 absent independent wrongful acts. | Court: Injunction narrowly enforces agreed covenant, not an unconstitutional prior restraint; SFS 23 properly bound through its general partner/manager; injunction affirmed. |
| Jury charge — measure of damages (benefit‑of‑the‑bargain vs. consequential/fees) | Benefit‑of‑the‑bargain is an appropriate measure; parties sought to measure injury from breached settlement. | Damages for breach of a settlement should include foreseeable consequential damages such as attorney’s fees incurred enforcing the settlement. | Court: Benefit‑of‑the‑bargain instruction was permissible; appellant waived charge objection on sufficiency ground; verdict stands. |
| Attorney’s fees award against SFS 23 | Agreement provided allocation of fees to substantially prevailing party; Sequoia prevailed (obtained permanent injunction) so fees award proper against appellants including SFS 23. | No damages found against SFS 23; injunction/fees improper as to SFS 23 and trial court abused discretion. | Court: Fee provision reflects parties’ intent; Sequoia was substantially prevailing party; awarding fees against SFS 23 affirmed. |
Key Cases Cited
- Forest Oil Corp. v. McAllen, 268 S.W.3d 51 (Tex. 2008) (factors for enforceability of disclaimer of reliance in settlements)
- Schlumberger Tech. Corp. v. Swanson, 959 S.W.2d 171 (Tex. 1997) (parties may contractually bar future disputes and disclaim reliance)
- Nixon v. Mr. Prop. Mgmt. Co., 690 S.W.2d 546 (Tex. 1985) (standard for traditional summary judgment)
- City of Keller v. Wilson, 168 S.W.3d 802 (Tex. 2005) (standards for legal and factual sufficiency review)
- Near v. Minnesota ex rel. Olson, 283 U.S. 697 (U.S. 1930) (prior restraint doctrine; distinguished where restraint is contractual and voluntarily assumed)