Stabilis Fund II LLC v. Compass Bank
Filing
80
Memorandum Opinion and Order Denies 79 MOTION for Reconsideration, re 77 Memorandum Opinion and Order Defendant's Motion For Clarification and Reconsideration and Brief in Support. The Court disagrees that it need not accept Stabilis's factual allegations as true and DENIES Compass's motion for reconsideration. (Ordered by Judge Jane J. Boyle on 8/9/2018) (ndt)
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF TEXAS
DALLAS DIVISION
STABILIS FUND II LLC,
Plaintiff,
v.
COMPASS BANK,
Defendant.
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CIVIL ACTION NO. 3:18-CV-0283-B
MEMORANDUM OPINION AND ORDER
Before the Court is Compass’s motion for clarification and reconsideration. Doc. 79. For the
following reasons, the Court DENIES Compass’s motion.
On July 30, 2018, the Court issued an Order granting in part and denying in part Compass’s
motion to dismiss. Doc. 77, Mem. Op. & Order. Now Compass seeks clarification about whether the
Court dismissed in full or in part Stabilis’s fraudulent-inducement claim and urges the Court to
dismiss the fraudulent-inducement claim in full if it has not already done so. Doc. 79, Mot. for
Reconsideration, 1. Also, Compass urges the Court to reconsider its conclusion that Compass failed
to disclose the loan modification agreement (LMA) in the loan sale agreement (LSA). Id. The Court
addresses Compass’s fraudulent-inducement-claim concerns first.
In its Order, the Court found that the disclaimer-of-reliance provision in the LSA barred
Stabilis’s fraudulent-inducement claim based on extra-contractual representations. Doc. 77, Mem.
Op. & Order, 14. Compass seeks to clarify whether that holding applies to alleged affirmative
misrepresentations and nondisclosures or only affirmative misrepresentations. Doc. 79, Mot. for
Reconsideration, 2–4. If the latter, Compass asks the Court to find that the disclaimer-of-reliance
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provision bars nondisclosures too. Id. at 4–8.
The Court’s holding applies to alleged extra-contractual affirmative misrepresentations and
nondisclosures. The Court agrees with Compass that Texas law compels this conclusion. See, e.g.,
Schlumberger Tech. Corp. v. Swanson, 959 S.W.2d 171, 182 (Tex. 1997)(finding disclaimer-ofreliance provision barred fraudulent-inducement claim based on nondisclosure because “nondisclosure allegations are simply the converse of . . . affirmative misrepresentations”). Thus, Stabilis’s
fraudulent-inducement claim based on allegations that, prior to execution of the LSA, Compass
made affirmative misrepresentations that the LMA did not exist and failed to disclose the LMA is
DISMISSED with prejudice.
But the Court declines to dismiss Stabilis’s fraudulent-inducement claim in full. As Compass
notes, the disclaimer-of-reliance provision bars “representations and nondisclosures that allegedly
occurred prior to the execution of the LSA.” Doc. 79, Mot. for Reconsideration, 1. But Stabilis’s
alleges that Compass failed to disclose the LMA in the LSA. See Doc. 49, Am. Compl., ¶ 32 (alleging
that the schedule in the LSA did not include the LMA).1 And because this claim arises from the
contract—not “representations and nondisclosures that occurred prior to the execution of the
LSA”—the disclaimer-of-reliance provision does not bar it. Hence the Court’s language in its Order
that its analysis of the disclaimer-of-reliance provision “does not apply to Stabilis’s fraudulentinducement claim premised on nondisclosure of the LMA in the LSA.” Doc. 77, Mem. Op & Order,
14 n5. Thus, Stabilis’s fraudulent-inducement claim arising from nondisclosure in the LSA survives.
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In its Order, the Court disagreed with Compass that the excluded-documents provision in the
LSA absolved Compass of a duty to disclose all documents material to the loan in the LSA, Doc. 77,
Mem. Op. & Order, 10, and Compass does not challenge that conclusion here.
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Next, Compass asks the Court to reconsider its conclusion that Compass’s inclusion in the
LSA of a notice sent to the Kauras alerting them that the December 2011 LMA was void and
ineffective adequately disclosed the LMA in the LSA. Doc. 79, Mot. for Reconsideration, 8–11.
Compass moves for reconsideration pursuant to Federal Rule of Civil Procedure 59(e), Doc.
79, Mot. for Reconsideration, 4, but because the Court’s Order was interlocutory, Rule 54(b) applies.
See Neaville v. Wells Fargo Bank, N.A., 3:11-cv-97-P, 2013 WL 121245900, at *2 (N.D. Tex. June
4 2013)(applying Rule 54(b) because the court’s order granting in part and denying in part the
defendant’s motion for summary judgment was interlocutory). Under Rule 54(b), a court may revise
an interlocutory order at any time before judgment. Fed. R. Civ. P. 54(b). Thus, Rule 54(b) is a less
exacting standard than Rule 59. Neaville, 2013 WL 121245900, at *2. Nevertheless, “motions for
reconsideration are only appropriate for the narrow purpose to correct manifest errors of law or fact
or to present newly discovered evidence.” Id.
Here, Compass fails to present newly discovered evidence, nor has the Court made a manifest
error of law or fact. Instead, Compass rehashes its argument that the notice indicated Compass and
the Kauras had fully executed a loan-modification agreement because the notice is titled “Failure to
Satisfy Condition Precedent,” and a condition precedent cannot exist absent an executed contract.
Id. at 9 (quoting Tabe v. Tex. Inpatient Consultants, LLLP, No. 01-16-00971-CV, 2018 WL 3583359,
at *3 (Tex. App.—Houston [1st Dist.] July 26, 2018)).
At the motion to dismiss stage, the Court may decide matters of law, such as the legal
significance of a condition precedent, but not questions of fact, such as what Stabilis understood or
should have understood based on the notice. See Cotter v. Gwyn, CIVIL ACTION NO. 15-4823,
2017 WL 2230013, at *2 (E.D. La. May 19, 2017)(finding that deciding “what Plaintiff knew or
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should have known and at what point is inappropriate at [the motion to dismiss] stage” because it
is question of fact); Coleman v. Dall. Indep. Sch. Dist., No. CIV. A. 3:99-CV-1074, 2000 WL 715990,
at *1 ( N.D. Tex. June 1, 2000)(holding that courts should grant Rule 12(b)(6) motions to dismiss
“if it is clear, as a matter of law,” that no relief could be granted). Instead, the Court accepts as true
Stabilis’s factual allegations that the notice alerted it only that Compass and the Kauras had
discussed a loan modification agreement because “[i]t is common in the banking and finance industry
for a lender to discuss a possible loan modification for a borrower in default, and then to terminate
such discussions with a letter like this one, when no agreement had ever been reached.” Doc. 49,
Am. Compl., ¶ 44.
Compass argues that Stabilis’s allegations are not entitled to a presumption of truth because
its allegations contradict the language of the notice. Doc. 79, Mot. for Reconsideration, 10. It argues
that Stabilis cannot claim it believed the notice related to discussions of a possible loan modification
agreement because the notice “nowhere states that Compass is terminating ‘discussions’ or a
‘possible’ loan modification.” Id. But the Court refuses to accept that the notice must have explicitly
stated that Compass was terminating discussions of a possible loan modification—and used those
specific terms—in order for Stabilis to plausibly allege it believed that was the notice’s purpose. Thus,
the Court disagrees that it need not accept Stabilis’s factual allegations as true and DENIES
Compass’s motion for reconsideration.
SO ORDERED.
SIGNED: August 9, 2018.
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JANE J. BOYLE
UNITED STATES DISTRICT JUDGE
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