Magna Equities II, LLC v. Heartland Bank, 4:17-cv-01479

Background

In 2014 Heartland Bank and McLarty Capital (Lenders) entered credit agreements with oilfield services company HII; HII defaulted and signed modifications requiring HII to raise equity and release certain claims.
Plaintiffs invested in HII (May 2015) after representations that raising $2.735 million would permit waivers of defaults and let HII continue operations; Lenders waived defaults when the equity was raised.
Plaintiffs allege Heartland froze HII accounts and swept funds in July 2015, causing HII to collapse and ultimately file Chapter 11; Plaintiffs assert fraud, negligent misrepresentation, money had and received, unjust enrichment, and promissory estoppel claims.
Heartland moved to designate Roth Capital (placement agent) and HII CEO Matthew Flemming as responsible third parties under Texas Civil Practice & Remedies Code chapter 33; Plaintiffs objected on pleading, applicability to promissory estoppel, and timeliness/statute-of-limitations grounds.
The court evaluated (1) whether Heartland met the low pleading/fair-notice standard for designation, (2) whether Chapter 33 applies to promissory estoppel, and (3) whether designation was timely given the limitations periods and disclosure rules.
Court granted Heartland's motion as to fraud, negligent misrepresentation, money had and received, and unjust enrichment claims, but denied designation as to promissory estoppel.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Sufficiency of pleading to designate Roth and Flemming as responsible third parties	Heartland merely parrots Plaintiffs' allegations; Plaintiffs say those facts do not create a legal theory of liability against Roth/Flemming	Plaintiffs' own complaint alleges Roth/Flemming relayed Heartland's representations and thus caused or contributed to harm; Chapter 33 requires only fair notice	Designation allowed — pleadings meet Chapter 33's low fair-notice threshold
Applicability of Chapter 33 to promissory estoppel claim	Chapter 33 covers torts, not contract-based promissory estoppel, so designation should not apply	Heartland argued courts have allowed designation for promissory estoppel but said it need not designate for that claim	Denied as to promissory estoppel — court declined to designate Roth/Flemming on that claim
Timeliness under §33.004(d) given limitations period for certain claims	Designation untimely because two-year SOL for negligent misrepresentation, money had and received, unjust enrichment expired July 9, 2017, before Heartland moved in Jan 2018	Heartland: plaintiffs never requested disclosure under Texas Rule 194; plaintiffs filed suit just days before SOL ran, so Heartland had no realistic opportunity to designate earlier	Designation timely — court applies case-by-case timeliness rule, finds plaintiffs filed close to SOL expiration and had notice of third parties, so Heartland did not violate disclosure/timeliness requirements
Accrual date for negligent misrepresentation (affects timeliness)	Plaintiffs: claims accrued when Heartland allegedly swept funds (July 9, 2015)	Heartland: claims accrued when misrepresentations were made (March–May 2015) so SOL ran before suit	Court applies Texas law (Murphy/Weaver): negligent misrepresentation accrues when advice is taken; here accrual date was May 20, 2015 (date of investment), so suit filed May 12, 2017 was within two-year period

Key Cases Cited

JCW Electronics, Inc. v. Garza, 257 S.W.3d 701 (Tex. 2008) (Chapter 33 scope and application to nontraditional defendants)
In re Unitec Elevator Servs. Co., 178 S.W.3d 53 (Tex. App.—Houston [1st Dist.] 2005) (court may not probe truth of allegations at designation stage)
Weaver & Tidwell, L.L.P. v. Guarantee Co. of N. Am. USA, 427 S.W.3d 559 (Tex. App.—Dallas 2014) (negligent misrepresentation accrues when advice is taken)
Murphy v. Campbell, 964 S.W.2d 265 (Tex. 1997) (discovery rule and accrual principles for professional-advice claims)
Sabine Towing & Transp. Co. v. Holliday Ins. Agency, 54 S.W.3d 57 (Tex. App.—Texarkana 2001) (discusses accrual for negligent misrepresentation claims)
In re CVR Energy, Inc., 500 S.W.3d 67 (Tex. App.—Houston [1st Dist.] 2016) (defendant may rely on plaintiffs' own pleadings to support third-party designation)