     Case: 17-50105   Document: 00514605591     Page: 1   Date Filed: 08/17/2018




        IN THE UNITED STATES COURT OF APPEALS
                 FOR THE FIFTH CIRCUIT
                                                               United States Court of Appeals
                                                                        Fifth Circuit

                                                                      FILED
                                 No. 17-50105                   August 17, 2018
                                                                 Lyle W. Cayce
IAS SERVICES GROUP, L.L.C.,                                           Clerk


             Plaintiff - Appellant

v.

JIM BUCKLEY & ASSOCIATES, INCORPORATED; JAMES BUCKLEY,
Individually, and as Co-Trustee of the Buckley Family Trust Dated 6/21/01;
BARBARA BUCKLEY, Individually, and as Co-Trustee of the Buckley
Family Trust dated 6/21/01,

             Defendants - Appellees




                Appeal from the United States District Court
                     for the Western District of Texas


Before CLEMENT, HIGGINSON, and HO, Circuit Judges.
STEPHEN A. HIGGINSON, Circuit Judge:
      This is a case about a business deal gone sour between two insurance-
claims-adjusting firms. Looking to expand, Plaintiff-Appellant IAS expressed
interest in acquiring Defendant-Appellee James Buckley & Associates. During
negotiations, James Buckley, owner of Buckley & Associates, made various
representations regarding the strength of his company’s business—
representations that IAS now contends were fraudulent. Allegedly in reliance
on those representations, IAS acquired Buckley & Associates’ assets and
agreed to employ Buckley. Shortly thereafter, Buckley & Associates lost its
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largest client, causing it, and IAS, to lose money. IAS made do for a while, but
eventually fired Buckley and sued him and Buckley & Associates for, among
other things, fraudulent inducement and breach of contract.             Buckley
countersued for breach of his employment contract with IAS. The district court
dismissed IAS’s fraud claim and then, after a bench trial, rendered judgment
for defendants on all other claims. IAS appealed, and we affirm in part and
reverse in part.
                                         I.
                                         A.
      In 2010, IAS, a Texas based firm owned and operated by Larry Cochran,
was looking to expand. With the help of an investment banking firm, IAS
identified California-based James Buckley & Associates as a potential
acquisition target. In early 2011, the two firms entered into a non-disclosure
agreement in which they each agreed not to “disclose to any third party, or use
the existence of this Agreement, or the nature of the transaction contemplated,
in any way without the express prior written approval of the other.” IAS made
an initial offer to purchase Buckley & Associates about a month later, and,
after some negotiations, the parties agreed to a $3.6 million purchase price,
with $2.4 million due at closing and a $1.2 million note payable in five equal
annual installments. They also agreed that IAS would employ James Buckley
for five years at a salary of $250,000 per year. The parties memorialized those
terms in a letter of intent that they signed in June. The letter of intent also
included a 60-day exclusivity or “no shop” period during which Buckley &
Associates would not discuss with any other person the possibility of a sale of
Buckley & Associates’ stock or assets.
      Prior to closing, IAS did its due diligence, looking into Buckley &
Associates’ financial statements and customer history performance reports.
IAS learned that Buckley & Associates’ biggest customer, responsible for
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approximately 45% of its revenues, was a large insurance company called QBE.
Cochran asked if he could meet with Buckley & Associates’ key clients,
including QBE, but Buckley responded that such a meeting would not be
appropriate and that he could “handle that better himself.” Cochran did,
though, review QBE’s contract with Buckley & Associates and was aware that
the contract did not guarantee any particular amount of business and that
QBE could terminate the agreement for any reason with 45 days’ notice.
Cochran understood that, as is typical in the industry, the amount of business
received from an insurance company depended on the strength of the loss
adjuster’s relationship with the company and the adjuster’s rank among the
company’s various vendors. And on that score, Buckley painted a rosy picture.
He told Cochran that Buckley & Associates was QBE’s “number one” adjusting
firm, outperforming QBE’s eight other vendors, and represented that Buckley
& Associates’ revenues were likely to grow. And just days before closing,
Buckley told Cochran that there was “[g]reat news” from QBE, and that recent
developments with respect to a merger between QBE and another insurance
company called Sterling “look very good for us.”
        But the reality was not so rosy. According to an internal Buckley &
Associates memo created in June 2011, and shown to Buckley, Buckley &
Associates was ranked eighth out of QBE’s nine vendors for the first quarter
of 2011. In fact, Buckley & Associates had not been ranked first in total quality
among all of QBE’s vendors at any time during 2010 or 2011 (although it had
been ranked first at times in the past). And following its merger with Sterling,
QBE was looking to consolidate its vendor panel by working with fewer, larger
firms. Indeed, prior to IAS’s acquisition of Buckley & Associates, QBE knew
that it was not going to continue doing business with all of its current adjusting
firms. It did not, however, make its consolidation plan public until December
2011.
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                                 No. 17-50105
      IAS’s acquisition of Buckley & Associates was finalized on October 11,
2011, when the parties executed an asset purchase agreement and Buckley
and IAS entered into an employment agreement. Pursuant to the employment
agreement, IAS could terminate Buckley either for cause (including fraudulent
conduct) or for reasons other than cause.        Buckley would be entitled to
severance pay upon termination only if he: (1) was terminated for reasons
other than cause (or he quit for “good reason”) and (2) “execute[d] and
deliver[ed] to [IAS] a General Waiver & Release of Claims.”
      The asset purchase agreement provided for the transfer of Buckley &
Associates’ assets, including its contracts, to IAS. Two of its provisions are
particularly relevant to this appeal. First, in section 2.3, Buckley and Buckley
& Associates represented and warranted to IAS that:
      Neither the execution and delivery by [Buckley & Associates or
      Buckley] of this Agreement and the other agreements
      contemplated hereby, nor the performance by [Buckley &
      Associates or Buckley] of their respective obligations under this
      Agreement and such other agreements, nor the consummation by
      [Buckley & Associates] of the Purchase Transaction, will . . .
      violate, conflict with, result in a breach of, constitute a default
      under, result in the acceleration of, create in any party the right to
      accelerate, terminate, modify or cancel, or require any
      authorization, consent, approval, execution or other action by, or
      notice to, any third party under, any Contract or any Encumbrance
      to which [Buckley & Associates or Buckley] is a party or by which
      such Person is bound or to which any of such Person’s assets are
      subject, provided that the Parties acknowledge that consents of the
      landlords under the Lease Agreements . . . to assignments of the
      Lease Agreements to [IAS] have not been obtained on or prior to
      the [effective date of the asset purchase agreement], and the
      Parties Shall use their commercially reasonable efforts after [that
      date] to obtain such consents.
Second, section 4.2 sets forth the following covenant regarding “Non-
Assignable Contracts”:


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      If any consent, waiver or approval required to be made or obtained
      for the valid and effective assignment of any Assumed Contract by
      [Buckley & Associates] to [IAS] has not been obtained as of the
      [effective date of the asset purchase agreement], (such Assumed
      Contracts being the “Non-Assignable Assumed Contracts”),
      [Buckley & Associates and Buckley] will use their respective
      commercially reasonable efforts to . . . cooperate with [IAS] in
      arrangements designed to provide the benefits of such Non-
      Assignable Assumed Contract (including, without limitation, the
      right to receive all amounts owing to [Buckley & Associates]
      thereunder) to [IAS] . . . .
      As is relevant here, the contract between Buckley & Associates and QBE
provided that “[n]either party may assign this agreement or any of the rights
hereunder or delegate any of its obligations hereunder without the prior
consent of the other party.” It further provided that “any such attempted
assignment shall be void.”    Buckley did not obtain QBE’s consent to assign
its contract to IAS, believing that the nondisclosure agreement he had entered
with IAS prevented him from disclosing the pending sale.         But Cochran
assumed that Buckley had obtained QBE’s consent.         It was not until he
received a call from Buckley six days after closing that Cochran learned that
QBE had not consented to assigning its contract to IAS. At that time, Buckley
told Cochran that there was “a problem with . . . QBE and the assignment,”
but that “they weren’t really giving him any answers.”
      About one week after the parties executed the asset purchase agreement,
QBE made the decision to terminate its relationship with Buckley & Associates
and, by extension, IAS. An internal QBE email explaining the decision stated
that QBE was “recently made aware that IAS had purchased [Buckley &
Associates],” and that “[t]his action put QBE . . . in a position of having to
decide whether to bring on an additional new firm under contract or terminate
the existing contract with the former [Buckley & Associates].” QBE decided to
terminate, as it did not want to invest in bringing a new vendor on board.

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Although it appears that the decision to terminate was triggered by IAS’s
acquisition of Buckley & Associates, QBE’s vice president of claims did testify
at trial that QBE “likely would have reached a similar outcome, just later in
time,” as part of its planned vendor consolidation.       Two months later, in
December 2011, QBE sent Buckley a letter officially giving notice of its intent
to terminate the relationship. The termination was effective February 1, 2012.
      Even prior to the official termination notification, IAS did not receive
any new claims from QBE.       Rather, IAS worked only on “tail files” that
remained from claims assigned to Buckley & Associates prior to its acquisition.
Buckley did bring in some new business for IAS, but, in 2012, revenue of the
former Buckley & Associates was down 50% below what had been projected at
the time IAS acquired it, and it dropped another 27% in 2013.           Between
acquisition and early 2014, IAS incurred approximately $950,000 in losses
from Buckley’s division.
      IAS suffered other losses, too. Business was down 25 to 40% industry
wide in 2012. By 2013, IAS claimed it did not have the cash on hand to make
the second annual payment owed to Buckley on the $1.2 million note. IAS then
terminated Buckley in early 2014, taking the position that his termination was
“for cause” based on his failure to get consent to assign the QBE contract to
IAS. As noted above, Buckley was entitled to severance pay only if he was
terminated for reasons other than for cause and if he “execute[d] and
delivere[d] to [IAS] a General Waiver & Release of Claims.” While the parties
dispute whether Buckley was actually terminated for cause, it is undisputed
that he never delivered a release of claims to IAS.       IAS never made any
severance payments.
                                      B.
      IAS filed this suit against Buckley and Buckley & Associates in early
2014, asserting claims for fraud,          fraudulent inducement, fraud by
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                                 No. 17-50105
nondisclosure, and breach of contract. Buckley and Buckley & Associates
moved to dismiss all claims and filed counterclaims alleging (among other
things not relevant here) that IAS breached the employment agreement by
failing to pay Buckley any severance pay. The district court granted the motion
to dismiss with respect to IAS’s fraud-based claims, and the parties proceeded
to a bench trial on IAS’s breach-of-contract claim and Buckley and Buckley &
Associates’ counterclaim. After trial, the district court adopted Buckley and
Buckley & Associates’ proposed findings of fact and conclusions of law and
awarded them damages and attorneys’ fees. IAS timely appealed.
                                      II.
                                      A.
      IAS first challenges the district court’s dismissal of its fraudulent-
inducement claim. We review a dismissal for failure to state a claim de novo,
accepting all well-pleaded facts as true and viewing them in the light most
favorable to the plaintiff. Gonzalez v. Kay, 577 F.3d 600, 603 (5th Cir. 2009).
“[R]eview is limited to the complaint, any documents attached to the complaint,
and any documents attached to the motion to dismiss that are central to the
claim and referenced by the complaint.” Lone Star Fund V (U.S.), L.P. v.
Barclays Bank PLC, 594 F.3d 383, 387 (5th Cir. 2010). Under Rules 8(a) and
9(b) of the Federal Rules of Civil Procedure, to state a claim for fraud, a
plaintiff must plausibly plead facts establishing “the time, place and contents
of the false representation[], as well as the identity of the person making the
misrepresentation and what that person obtained thereby.” United States ex
rel. Grubbs v. Kanneganti, 565 F.3d 180, 186 (5th Cir. 2009) (quoting United
States ex rel. Russell v. Epic Healthcare Mgmt. Grp., 193 F.3d 304, 308 (5th
Cir. 1999)).
      “Fraudulent inducement ‘is a particular species of fraud that arises only
in the context of a contract and requires the existence of a contract as part of
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its proof.’” Bohnsack v. Varco, L.P., 668 F.3d 262, 277 (5th Cir. 2012) (quoting
Haase v. Glazner, 62 S.W.3d 795, 798 (Tex. 2001)).          To state a claim for
fraudulent inducement, a plaintiff must plausibly plead facts establishing that:
“(1) the other party made a material misrepresentation, (2) the representation
was false and was either known to be false when made or was made without
knowledge of the truth, (3) the representation was intended to be and was
relied upon by the injured party, and (4) the injury complained of was caused
by the reliance.” Int’l Bus. Machs. Corp. v. Lufkin Indus., Inc., No. 12-15-
00223-CV, -- S.W.3d --, 2017 WL 2962836, at *4 (Tex. App.—Tyler July 12,
2017, pet. filed), supplemented, No. 12-15-00223-CV, 2017 WL 3499951 (Tex.
App.—Tyler Aug. 16, 2017, no pet.). On appeal, IAS identifies three alleged
misrepresentations that it contends led it to enter into the asset purchase
agreement: (1) Buckley’s statement that Buckley & Associates was QBE’s
“number one” vendor; (2) Buckley’s statement that Buckley & Associates’
revenue from QBE would continue to grow; and (3) the statement in § 2.3 of
the purchase agreement that its execution would not “violate, conflict, [or]
result in a breach of . . . any Contract . . . to which [Buckley & Associates] is a
party.” We address each in turn and reverse the district court’s dismissal.
                                        1.
      The district court held that IAS failed to adequately plead (1) when and
where the “number one” vendor statement was made, as required under Rule
9(b), and (2) that IAS relied on the statement in entering the asset purchase
agreement. We disagree on both points.
      To the first point, Rule 9(b) does require that fraud be pleaded with
“particularity.” Fed. R. Civ. P. 9(b). But “9(b)’s ultimate meaning is context-
specific.” Grubbs, 565 F.3d at 188 (quoting Williams v. WMX Techs., Inc., 112
F.3d 175, 178 (5th Cir. 1997)); accord Benchmark Elecs., Inc. v. J.M. Huber,
Corp., 343 F.3d 719, 724 (5th Cir. 2003) (“What constitutes ‘particularity’ will
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necessarily differ with the facts of each case . . . .” (quoting Guidry v. Bank of
LaPlace, 954 F.2d 278, 288 (5th Cir. 1992))). And we are mindful that Rule
9(b) “does not supplant Rule 8(a)’s notice pleading,” Grubbs, 565 F.3d at 186,
which requires “only enough facts to state a claim to relief that is plausible on
its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). Rather, Rule
9(b) “supplements” Rule 8(a), Grubbs, 565 F.3d at 186, in order to “provide[]
defendants with fair notice of the plaintiffs’ claims, protect[] defendants from
harm to their reputation and goodwill, reduce[] the number of strike suits, and
prevent[] plaintiffs from filing baseless claims and then attempting to discover
unknown wrongs.” Tuchman v. DSC Commc’ns Corp., 14 F.3d 1061, 1067 (5th
Cir. 1994).
      Here, the complaint alleges that, during the 60-day no-shop period that
began with the execution of the parties’ letter of intent on June 21, 2011,
“Buckley represented to the President of IAS, Larry Cochran, that [Buckley &
Associates] was QBE’s ‘number one’ adjusting firm.” Under the circumstances,
the allegations are sufficiently particular to “state a claim to relief that is
plausible on its face,” Twombly, 550 U.S. at 570, and to satisfy Rule 9(b)’s
purpose of weeding out strike suits and fishing expeditions. As we explained
in Grubbs, Rule 9(b)’s particularity requirements are tied to the elements of
fraud, specifically detrimental reliance, see 565 F.3d at 188–89; without
sufficient detail regarding the alleged misrepresentation, no plaintiff could
plausibly plead that he or she actually relied on it. Here, the timing and
content of the alleged misrepresentation support an inference of reliance; the
complaint alleges that the “number one” vendor statement was made during
the time in which the purchase agreement was being finalized and just months
before it was executed.
      As to reliance, the complaint’s allegations are also sufficient.       The
complaint alleged that “[t]he principal component of the value of an insurance
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adjusting business is the revenue generated by the customer contracts”; that
Buckley & Associates’ biggest customer was QBE, which was responsible for
45.3% of its revenues; that Buckley misrepresented that Buckley & Associates
was ranked first among QBE’s vendors; and that IAS relied on that
representation when conducting its “financial analysis and pricing model for
[Buckley & Associates].” Those allegations are susceptible to the reasonable
inference that IAS relied on the statement that Buckley & Associates was
QBE’s top-rated vendor when forecasting the likely volume of claims QBE
would send to Buckley & Associates and thus the value of Buckley &
Associates’ assets. See Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (holding that
a claim to relief is plausible when a court can “draw the reasonable inference
that the defendant is liable” from the facts alleged).
       The district court also relied on Bohnsack v. Varco, L.P., 668 F.3d 262
(5th Cir. 2012), to conclude that the complaint failed to adequately plead that
the “number one” vendor statement was material to IAS’s decision to enter into
a contract with Buckley & Associates, rather than simply a statement to
encourage negotiations. But that reliance was misplaced. In Bohnsack, we
held that, under Texas law, “[f]alse statements that build a plaintiff’s trust
during negotiations but are not a ‘material factor’ in his decision to enter into
a contract cannot form the basis for a fraudulent inducement claim.” Id. at
278. But there, a two-year gap separated the alleged misrepresentation from
plaintiff’s decision to enter into a contract with the defendant. And the nature
of the alleged misrepresentation was such that, while it might have built trust
between the parties for purposes of facilitating negotiations, it made the
plaintiff less likely to enter into a contract than would have the truth. 1 Id. at


       1 Furthermore, Bohnsack was an appeal from the denial of judgment as a matter of
law, so we were asked to assess the sufficiency of the evidence rather than of the pleadings.
See 668 F.3d at 266, 279.
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278. Here, by contrast, the alleged misrepresentation was relevant to the
“principal” input regarding the value of Buckley & Associates’ assets and was
made within a few months of the execution of the asset purchase agreement.
Under the circumstances, the “number one” vendor statement is the kind of
statement that “a reasonable person would attach importance to and would be
induced to act on.” Citizens Nat’l Bank v. Allen Rae Invs., Inc., 142 S.W.3d 459,
478–79   (Tex.   App.—Fort     Worth   2004,    no   pet.)   (defining   “material
information”).
      Finally, defendants argue that the complaint failed to allege with
sufficient particularity how Buckley knew that the alleged misrepresentation
was false.   But the complaint specifically alleged that Buckley made the
“number one” vendor representation sometime after June 21, 2011, despite an
internal Buckley & Associates document dated June 2, 2011, indicating that
the company was ranked eighth out of nine vendors. Those facts are sufficient
for the reasonable inference that Buckley either knew that the statement was
false or made it recklessly with regard to its truth. The complaint adequately
pleaded that the “number one” vendor statement fraudulently induced IAS to
enter into the asset purchase agreement.
                                       2.
      IAS also contends that Buckley fraudulently induced it to enter the asset
purchase agreement by misrepresenting that Buckley & Associates’ business
with QBE was “likely to grow” and “would continue to grow.” “Because ‘[a]
prediction, or statement about the future, is essentially an expression of
opinion,’ future predictions are generally not actionable.” Hoffman v. L & M
Arts, 838 F.3d 568, 579 (5th Cir. 2016) (quoting Presidio Enters., Inc. v. Warner
Bros. Distrib. Corp., 784 F.2d 674, 679 (5th Cir. 1986)) (applying Texas law).
But “[i]n rare cases, a prediction of future events can be ‘so intertwined with’
‘direct representations of present facts’ as to be actionable.” Id. (quoting
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Trenholm v. Ratcliff, 646 S.W.2d 927, 931 (Tex. 1983)). In Trenholm, for
example, a land developer’s prediction that a nearby trailer park would soon
shut down and move was actionable because it was intertwined with false
representations of present fact—namely that the park had been sold and
notices given to its tenants. Trenholm, 646 S.W.2d at 930–31.
      Viewing the facts as alleged in the light most favorable to IAS, Buckley
said business with QBE “would continue to grow” in connection with his
statement that Buckley & Associates was QBE’s “number one” vendor. 2 The
reasonable implication was that business would continue to grow because
Buckley & Associates was ranked first. As in Trenholm, the “representation
was not merely an expression of an opinion” that growth would continue, but
was intertwined with the alleged factual misrepresentation of Buckley &
Associates’ rank among QBE’s vendors. Id. at 930–31. Accordingly, “the whole
statement amounts to a representation of facts” and is therefore actionable.
Id. at 931.
                                         3.
      The district court also held that IAS failed to state a claim for fraudulent
inducement based on the representations in § 2.3 of the asset purchase
agreement. We disagree. In pertinent part, § 2.3 states that execution of the
agreement will not “violate, conflict with, [or] result in a breach of . . . any
Contract” to which Buckley and Buckley & Associates are parties. But, as
alleged in the complaint, Buckley & Associates’ contract with QBE required
Buckley & Associates to obtain QBE’s consent prior to assigning that contract
to any other party. Nonetheless, defendants closed on the transaction, thereby
assigning Buckley & Associates’ contract with QBE to IAS, without attempting


      2 Specifically, the complaint alleges that Buckley misrepresented that Buckley &
Associates “was QBE’s ‘number one’ adjusting firm and that business would continue to
grow.”
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to obtain QBE’s consent. Accordingly, the complaint plausibly alleged that §
2.3 was a material misrepresentation, falsely asserting that execution of the
asset purchase agreement would not result in a conflict with or breach of any
other contract, despite defendants’ failure to obtain QBE’s consent to
assignment as required under QBE’s contract with Buckley & Associates. The
complaint also plausibly alleged reliance. It alleged that a large proportion of
the value of Buckley & Associates came from its contract with QBE, and that
IAS would not have acquired Buckley & Associates’ assets had it known that
QBE had not consented to the assignment of its contract to IAS.
      The district court, however, held that IAS failed to establish justifiable
reliance based on a dispute regarding the meaning of § 4.2 of the asset
purchase agreement. Section 4.2 provides that, if any consent required to be
obtained “for the valid and effective assignment” of any contract is not obtained
prior to execution of the purchase agreement, then Buckley and Buckley &
Associates “will use their respective commercially reasonable efforts to . . .
cooperate with [IAS] in arrangements designed to provide the benefit” of any
contracts rendered non-assignable due to the failure to obtain consent. IAS
argued, then as now, that § 4.2 simply operates like a contracted-for remedy,
setting out defendants’ obligations in the event of a failure to obtain consent
without undermining the reliability of the representation made in § 2.3. But
the district court concluded that § 4.2 “disclaimed reliance on all contracts
being assignable,” and that, “[b]ecause it was not clear that [§§] 2.3 and 4.2
operate the way in which plaintiff contends,” § 4.2 created a “red flag”
indicating that reliance on § 2.3 was unwarranted.
      “It   is   well-established    that    ‘[t]he    recipient     of   a   fraudulent
misrepresentation is not justified in relying upon its truth if he knows that it
is false or its falsity is obvious to him.’”          Nat’l Prop. Holdings, L.P. v.
Westergren, 453 S.W.3d 419, 424 (Tex. 2015) (quoting Restatement (Second) of
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Torts § 541 (1977)).      Accordingly, under Texas law, “a person may not
justifiably rely on a representation if ‘there are “red flags” indicating such
reliance is unwarranted.’” Grant Thornton LLP v. Prospect High Income Fund,
314 S.W.3d 913, 923 (Tex. 2010) (quoting Lewis v. Bank of Am. NA, 343 F.3d
540, 546 (5th Cir. 2003)). But “[t]he issue of justifiable reliance is generally a
question of fact.” Jacked Up, LLC v. Sara Lee Corp., 854 F.3d 797, 811 (5th
Cir. 2017) (quoting Prize Energy Res., L.P. v. Cliff Hoskins, Inc., 345 S.W.3d
537, 584 (Tex. App.—San Antonio 2011, no pet.); accord 1001 McKinney Ltd.
v. Credit Suisse First Bos. Mortg. Capital, 192 S.W.3d 20, 30 (Tex. App.—
Houston [14th Dist.] 2005, pet. denied) (“[C]ourts have uniformly treated the
issue of justifiable reliance as a question for the factfinder.”). And for good
reason. Justifiable reliance is a fact-intensive inquiry, asking “whether, ‘given
a fraud plaintiff’s individual characteristics, abilities, and appreciation of facts
and circumstances at or before the time of the alleged fraud[,] it is extremely
unlikely that there is actual reliance on the plaintiff’s part.’” Grant Thornton
LLP, 314 S.W.3d at 923 (quoting Haralson v. E.F. Hutton Grp., Inc., 919 F.2d
1014, 1026 (5th Cir. 1990)).
      Under some circumstances, disclaimers such as waiver-of-reliance or
negation-of-warranty provisions in contracts can preclude justifiable reliance
on contrary statements. See Schlumberger Tech. Corp. v. Swanson, 959 S.W.2d
171, 180–81 (Tex. 1997). However, such language must be unequivocal to bar
a claim of fraudulent inducement. Id. at 181 (holding that “a release that
clearly expresses the parties’ intent to waive fraudulent inducement claims, or
one that disclaims reliance on representations about specific matters in
dispute, can preclude a claim of fraudulent inducement”); Italian Cowboy
Partners, Ltd. v. Prudential Ins. Co. of Am., 341 S.W.3d 323, 331 (Tex. 2011)
(explaining that, to disclaim reliance on any misrepresentations, contract must
“do so by clear and unequivocal language”). And even then, circumstances
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matter. The Texas Supreme Court has “especially reject[ed] the notion that
the mere use of [a] negation-of-warranty and no-recourse provision . . . could
wholly negate justifiable reliance.” JPMorgan Chase Bank, N.A. v. Orca Assets
G.P., L.L.C., 546 S.W.3d 648, 655–56 (Tex. 2018). Rather, courts “must view
the circumstances in their entirety.” Id. at 656.
        Here, circumstances aside, there is no unequivocal disclaimer.
Whether an adequate disclaimer of reliance exists is a matter of law, subject
to “well-established rules of contract interpretation.” Schlumberger Tech., 959
S.W.2d at 179; see also Italian Cowboy Partners, 341 S.W.3d at 333. If the
contract is subject to two or more reasonable interpretations, then “the contract
is ambiguous, creating a fact issue on the parties’ intent.” Italian Cowboy
Partners, 341 S.W.3d at 333 (quoting J.M. Davidson, Inc. v. Webster, 128
S.W.3d 223, 229 (Tex. 2003)).      As the district court all but recognized by
concluding that “it was not clear that §§ 2.3 and 4.2 operate the way in which
plaintiff contends,” it is ambiguous to say the least whether § 4.2 disclaims
reliance on § 2.3. Accordingly, §4.2 is not the kind of unequivocal statement
that can disclaim reliance or create a red flag as a matter of law, and dismissal
on that basis was not warranted.
                                       4.
      Finally, defendants contend that remand for further litigation of IAS’s
fraudulent inducement claim is unnecessary because the district court already
heard and rejected IAS’s fraud evidence.            At trial, Buckley pressed a
counterclaim against IAS, arguing that IAS was liable for paying him $250,000
in severance pay. In defense, IAS presented evidence of Buckley’s alleged
fraudulent misrepresentations, arguing that they constituted cause for
termination under the employment agreement and therefore precluded
severance pay. In adopting defendants’ findings of fact and conclusions of law,
the district court concluded that “there was no fraud” committed by Buckley
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                                 No. 17-50105
and therefore “no valid basis for IAS to terminate [him] ‘for cause’” under the
terms of the employment agreement.
      But we are not persuaded that the district court’s order precludes
remand for further litigation of IAS’s fraud claims.        The district court’s
conclusion that “there was no fraud” does not appear to be have been based on
any assessment of the evidence presented at trial. Rather, the district court
noted that “IAS’s fraud allegations ha[d] been dismissed,” and then concluded
on that basis that “there was no fraud.” Because we reverse the dismissal of
IAS’s fraudulent inducement claim, we remand for further proceedings.
                                       B.
      IAS next contends that the district court erred by entering judgment,
after a bench trial, against it on its breach-of-contract claim. It argues that
Buckley and Buckley & Associates breached § 2.3 of the asset purchase
agreement by executing the agreement without first having obtained QBE’s
consent to assignment. The district court disagreed, concluding that Buckley
and Buckley & Associates had no contractual duty to obtain QBE’s consent
prior to closing on the purchase agreement and finding that, in any event, the
failure to obtain QBE’s consent did not cause IAS cognizable contract damages.
Because we agree on the second point and affirm, we need not address the first.
      “The standard of review for a bench trial is well established: findings of
fact are reviewed for clear error and legal issue are reviewed de novo.”
Lehmann v. GE Global Ins. Holding Corp., 524 F.3d 621, 624 (5th Cir. 2008)
(quoting In re Mid-S. Towing Co., 418 F.3d 526, 531 (5th Cir. 2005)). A finding
is clearly erroneous if, after viewing the evidence in its entirety, we are “left
with the definite and firm conviction that a mistake has been committed.”
Bertucci Contracting Corp. v. M/V ANTWERPEN, 465 F.3d 254, 258–59 (5th
Cir. 2006) (quoting Walker v. Braus, 995 F.2d 77, 80 (5th Cir. 1993)). We may


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                                  No. 17-50105
not reverse a finding that is “plausible in light of the record viewed as a whole”
simply because we “would have weighed the evidence differently.” Id. at 258.
      “The elements of a claim for breach of contract are: (1) the existence of a
valid contract; (2) performance or tendered performance by the plaintiff; (3)
breach of the contract by the defendant; and (4) damages to the plaintiff
resulting from that breach.” Walker v. Presidium, Inc., 296 S.W.3d 687, 693
(Tex. App.—El Paso 2009, no pet.). The final element requires causation.
Velvet Snout, LLC v. Sharp, 441 S.W.3d 448, 451 (Tex. App.—El Paso 2014, no
pet.). To recover on a breach-of-contract claim, “the evidence must show that
the damages are the ‘natural, probable, and foreseeable consequence’ of the
defendant’s conduct.”    Id. (quoting Prudential Sec., Inc. v. Haugland, 973
S.W.2d 394, 396–97 (Tex. App.—El Paso 1998, pet. denied).
      Here, the district court’s finding was not clearly erroneous. There was
evidence presented at trial that QBE’s decision to terminate its relationship
with Buckley & Associates—and, by extension, IAS—was primarily the result
of QBE’s internal restructuring rather than Buckley’s failure to obtain its
consent prior to the assignment. For example, QBE’s vice president of claims
testified that QBE terminated its relationship with Buckley & Associates
“because of [QBE’s] decision to consolidate firms.” He also testified that QBE
likely would have terminated its relationship with Buckley & Associates for
that reason regardless of IAS’s acquisition of Buckley & Associates and any
attendant failure to obtain QBE’s consent. And he testified that QBE likely
would not have consented to the assignment of its contract with Buckley &
Associates to IAS even if notified earlier, reinforcing the conclusion that its
decision to terminate its relationship with Buckley & Associates was caused
by its desire to work with fewer vendors, and vendors with whom it already
had an established relationship, and not because of Buckley’s failure to obtain
its consent. Finally, there was evidence that QBE’s contract with Buckley &
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                                 No. 17-50105
Associates did not guarantee any particular amount of business and that QBE
could terminate the contract for any reason. In sum, the district court’s finding
that IAS did not suffer any damages as a result of any alleged breach of § 2.3
of the asset purchase agreement is plausible in light of the record as a whole
and therefore not clearly erroneous.
                                       C.
      Finally, IAS challenges the district court’s award to Buckley of
approximately $300,000 in severance pay.          It contends that, under its
employment agreement with Buckley, he was only entitled to severance pay if
he (1) was terminated for reasons other than cause and (2) executed a waiver
and release of claims. It contends that neither condition was satisfied and that
Buckley is therefore not entitled to severance pay.        It is undisputed that
Buckley did not execute the required waiver and release. Buckley argues that
he is nonetheless entitled to severance pay. We disagree.
      Even assuming that Buckley was terminated for reasons other than
cause, he failed to satisfy the second condition precedent to his receipt of
severance pay: execution of the required release and waiver. The employment
agreement states that “[a]s a condition to the Employee’s entitlement to receive
each and every installment of the Severance Payment, the Employee must
execute and deliver to the Employer a General Waiver & Release of Claims,” a
copy of which was attached to the employment agreement. Buckley contends
that the failure to perform a condition precedent is an affirmative defense that
IAS has waived by not pleading, but Texas law “expressly requires the party
asserting breach to prove that a condition precedent is satisfied.” Mullins v.
TestAmerica, Inc., 564 F.3d 386, 412 n.19 (5th Cir. 2009) (citing Associated




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                                       No. 17-50105
Indem. Corp. v. CAT Contracting, Inc., 964 S.W.2d 276, 283 (Tex. 1998)). 3
Buckley alternatively argues that he was excused from satisfying the condition
precedent because doing so would have been futile. His point appears to be
that he should not have been required to release his claims against IAS—
specifically his claim that IAS wrongfully withheld severance pay—when IAS
would nonetheless refuse to pay based on its position that he had been
terminated for cause.         But the waiver and release itself belies Buckley’s
argument. It explicitly excludes claims “arising under or pursuant to . . . the
Asset Purchase Agreement,” to which Buckley’s employment agreement was
attached as an exhibit, and states that Buckley retains claims related to his
“right to receive the compensation specified in Section 6 of the Agreement,”
which contains the provisions pertaining to severance pay. Buckley therefore
could have completed the required waiver and release and still pursued his
claim for severance pay. Accordingly, we vacate the district court’s award of
severance pay to Buckley.
                                             III.
       For the foregoing reasons, we REVERSE the dismissal of IAS’s
fraudulent-inducement claim, AFFIRM the judgment in favor of defendants on
IAS’s breach-of-contract claim, and VACATE the award of $296,091.72 in



       3  “In a diversity case, substantive state law determines what constitutes an
affirmative defense.” LSREF2 Baron, L.L.C. v. Tauch, 751 F.3d 394, 398 (5th Cir. 2014).
While the employment agreement states that it is governed by California law, Buckley cites
only Texas law in support of his argument. In any event, the satisfaction of a condition
precedent is an affirmative part of a plaintiff’s claim for breach of contract under California
law, too. See Alki Partners, LP v. DB Fund Servs., LLC, 209 Cal. Rptr. 3d 151, 164 (Cal. Ct.
App. 2016) (“A party’s failure to perform a condition precedent will preclude an action for
breach of contract.”); Health Net, Inc. v. Am. Int’l Specialty Lines Ins. Co., No. B262716, 2016
WL 5845753, at *15 (Cal. Ct. App. Oct. 6, 2016) (listing “performance of, or excuse from,
conditions precedent to the defendant’s obligations” as an element of a breach-of-contract
claim); see also Occurrence of Agreed Condition Precedent, Judicial Council of Cal. Civil Jury
Instruction 322 (2018) (placing burden on plaintiff to prove that condition precedent has been
satisfied).
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                                No. 17-50105
severance pay in favor of James Buckley.          We REMAND for further
proceedings consistent with this opinion.




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                                    No. 17-50105
JAMES C. HO, Circuit Judge, dissenting in part:
      I disagree with the majority’s opinion insofar as it reverses the district
court’s dismissal of IAS’s fraudulent inducement claim.
      “[F]raudulent   inducement       claims   require   plaintiff   to   prove   a
misrepresentation” and, among other things, “that defendant knew the
representation was false and intended to induce plaintiff to enter into the
contract through that misrepresentation.” Bohnsack v. Varco, L.P., 668 F.3d
262, 277 (5th Cir. 2012) (emphasis added). In my view, IAS has not pled its
allegations with sufficient particularity. See Fed. R. Civ. P. 9(b) (“In alleging
fraud or mistake, a party must state with particularity the circumstances
constituting fraud or mistake.”).
      First, Buckley’s statement that JBA was QBE’s “number one” vendor
lacks sufficient context to be actionable. As we have previously observed: “A
representation of fact can constitute actionable fraudulent inducement only if
it (1) admits of being adjudged true or false in a way that (2) admits of
empirical verification.” Hoffman v. L & M Arts, 838 F.3d 568, 579 (5th Cir.
2016) (emphasis added, citation and quotations omitted).
      IAS has not pleaded exactly what Buckley’s “number one” statement was
intended to communicate. Perhaps the metric Buckley was employing was
something quite different from the “internal ranking” the majority invokes (the
range of possibilities include total dollars spent, number of claims processed,
quality or speed of service, client satisfaction, or yet some other metric). We
do not know, and IAS does not tell us—it provides no explanation of any kind
anywhere in its complaint.       Accordingly, IAS has failed to plead with
particularity that Buckley did indeed make a misrepresentation. See, e.g.,
Lone Star Fund V (U.S.), L.P. v. Barclays Bank PLC, 594 F.3d 383, 388 (5th
Cir. 2010) (fraud claimants “must successfully allege . . . that the
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                                No. 17-50105
representations were false when made”); Williams v. WMX Techs., Inc., 112
F.3d 175, 177 (5th Cir. 1997) (“[A]rticulating the elements of fraud with
particularity requires a plaintiff to specify the statements contended to be
fraudulent, identify the speaker, state when and where the statements were
made, and explain why the statements were fraudulent.”) (emphasis added).
     Second, IAS failed to plead that JBA’s representations in the Asset
Purchase Agreement were fraudulent. ¶2.3 of the Asset Purchase Agreement
provides that
     Neither the execution and delivery by the Seller, the Owner, or the
     Beneficial Owners of this Agreement and the other agreements
     contemplated hereby, nor the performance by the Seller, the
     Owner or the Beneficial Owners of their respective obligations
     under this agreement and such other agreements, nor the
     consummation by the Seller of the Purchase Transaction, will (a)
     violate or conflict with any provision of the Articles of
     Incorporation or Bylaws of the Seller, (b) violate any Law, Order,
     or other restriction to which the Seller, the Owner or the Beneficial
     Owners is subject, (c) require the Seller, the Owner or the
     Beneficial Owners to make any declaration to or registration or
     filing with, or obtain any consent or Permit from, any
     Governmental Authority, (d) result in any loss of any Permit
     related to the Business or (e) violate, conflict with, result in a
     breach of, constitute a default under, result in the acceleration of,
     create in any party the right to accelerate, terminate, modify or
     cancel, or require any authorization, consent, approval, execution
     or other action by, or notice to, any third party under, any Contract
     or any Encumbrance to which the Seller, the Owner or the
     Beneficial Owners is a party or by which such Person is bound or
     to which any of such Person’s assets are subject, provided that the
     Parties acknowledge that consents of the landlords under the
     Lease Agreements (as defined in Section 1.5(b)(v)) to assignments
     of the Lease Agreements to Buyer have not been obtained on or
     prior to the Effective Time, and the Parties shall use their
     commercially reasonable efforts after the Effective Time to obtain
     such consents.

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                                  No. 17-50105
      As relevant here, ¶2.3 of the Agreement promised that “the
consummation [] of the Purchase Transaction” did not “require” the “consent”
of QBE (or anyone else)—and that the acquisition would not “violate, conflict
with, [or] result in a breach of” JBA’s contract with QBE (or anyone else).
      JBA complied with this promise: JBA did not need QBE’s consent for
JBA to be acquired by IAS. Nor did the acquisition result in any breach or
conflict with JBA’s contract with QBE.
      IAS is simply mistaken when it claims that ¶2.3 promises that all
consents to assignment of third-party contracts—such as the JBA-QBE
contract—had been obtained. Rather, ¶2.3 states only that no third party
consent was required for IAS to purchase JBA.
      To be sure, IAS is emphatic that the ability to maintain QBE’s business
was a central reason for its desire to acquire JBA in the first place. Put another
way, QBE’s consent to assignment of its contract with JBA was undoubtedly
necessary to fulfill IAS’s ambitions for the Purchase Transaction. But ¶2.3
does not promise that “the consummation of IAS’s ambitions for the purchase
transaction” would not require QBE’s consent.
      Nor did the acquisition result in any breach or conflict with JBA’s
contract with QBE. To be sure, consummation of the acquisition gave QBE the
contractual right not to continue doing business with JBA. But that is not a
breach or violation of JBA’s contract with QBE. To the contrary, QBE always
possessed the right to stop sending contracts to JBA at any time—the change
of corporate ownership created no right that QBE did not already possess.
      The bottom line is this: JBA never warranted that it had obtained QBE’s
consent to the JBA-IAS sale, because QBE’s consent wasn’t actually required
for JBA to sell to IAS. QBE’s consent was only required for reassignment of
the contracts—the contracts IAS aspired to obtain by purchasing JBA. And
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                                No. 17-50105
nothing in ¶2.3 purports to represent that JBA made all the arrangements
necessary for reassignment of the QBE contracts.
     Hence, ¶2.3 was not a misrepresentation and could not have supported
IAS’s fraudulent inducement claim.
     I concur in the majority’s resolution of the remaining issues.




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