LHC Nashua Partnership, Ltd. v. PDNED Sagamore Nashua, L.L.C.
659 F.3d 450
5th Cir.2011Background
- LHC Nashua Partnership sues PDNED Sagamore Nashua and PDNED Manager after PDNED sold property to Lowe's following an option and attempted lease process.
- PDNED had an Agreement to Enter Into a Ground Lease (AGL) with Lowe's and sought to transfer rights to LHC via a P&S agreement for the property.
- Lowe's never signed the ground lease nor provided a written waiver of the right of first refusal, despite PDNED's assurances.
- P&S required Lowe's lease and waiver as conditions to closing; closing was set for Oct 13, 2006 but never occurred as conditions were not satisfied.
- LHC incurred lender fees and anticipated tax consequences; Lowe's ultimately purchased the property from PDNED, and LHC filed claims for promissory estoppel and misrepresentation (negligent and fraudulent).
- The district court granted JMOL on breach of contract but submitted promissory estoppel and misrepresentation claims to a jury, which awarded substantial damages, later challenged on appeal.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Choice of law governs | NH law vs. TX law differences may affect outcome | Either law yields similar results; court should choose one | We need not resolve choice-of-law as results align under both |
| Promissory estoppel barred by merger/express contract | Promissory estoppel should enforce promises absent breach | P&S merger clause precludes promissory estoppel | Promissory estoppel claims are barred by the P&S Agreement (merger/express contract) under NH/TX analyses |
| Negligent and fraudulent misrepresentation survive | Misrepresentations induced contract; justifiable reliance shown | Merger clause/contract controls; misrepresentation barred | Negligent and fraudulent misrepresentation claims survive; findings upheld |
| Merger clause effect on fraud claim | Merger clause does not negate fraudulent inducement | Merger clause bars reliance on prior representations | Merger clause does not bar fraudulent misrepresentation under either state law |
| Damages: proper measure, lost profits | Lost profits allowed as damages for misrepresentation | Lost profits not recoverable; only out-of-pocket losses | Out-of-pocket damages affirmed; lost-profits damages vacated |
Key Cases Cited
- Great Lakes Aircraft Co. v. City of Claremont, 135 N.H. 270 (NH 1992) (promissory estoppel limited when express contract exists)
- Italian Cowboy Partners, Ltd. v. Prudential Ins. Co. of Am., 341 S.W.3d 323 (Tex. 2011) (standard merger clause does not negate fraudulent inducement claims)
- Van Der Stok v. Van Voorhees, 151 N.H. 679 (NH 2005) (ratification doctrine and reliance considerations)
- Akwa Vista, LLC v. NRT, Inc., 160 N.H. 594 (NH 2010) (damages for inducing into contract; out-of-pocket damages allowed)
- Eno Brick Corp. v. Barber-Greene Co., 109 N.H. 156 (NH 1968) (two measures of damages for misrepresentation recognized)
- Formosa Plastics Corp. United States v. Presidio Eng'rs & Contrs., Inc., 960 S.W.2d 41 (Tex. 1998) (both out-of-pocket and benefit-of-the-bargain damages recognized in fraud)
- ISG State Operations Inc. v. Nat'l Heritage Ins. Co., 234 S.W.3d 711 (Tex.App.Eastland 2007) (unperformed anticipated contract damages not recoverable)
- Snierson v. Scruton, 145 N.H. 73 (NH 2000) (reliance elements for fraud claims)
- Rockwood v. SKF USA, Inc., 758 F. Supp. 2d 44 (D.N.H. 2010) (considerations on promissory estoppel applications)
- Bailey v. Shell W. E&P. Inc., 609 F.3d 710 (5th Cir. 2010) (conflicts of law and deference standards)