An Alpine teleport.  Notice the real estate?

Yesterday, the Fifth Circuit overruled a defense summary judgment on a fraud claim.  The court held that, under Texas law, the statute of frauds doesn’t bar a claim for fraud if the plaintiff seeks only out-of-pocket (reliance) damages.  But the court affirmed summary judgment on the breach of contract and breach of fiduciary duty claims.  GWTP Investments, L.P. v. SES Americom, Inc., No. 06-10747 (5th Cir. Aug. 16, 2007).

GWTP sued SES Americom for reneging on a deal to split the eight terrestrial "teleports" that SES bought in a bankruptcy auction.  Their Memorandum of Understanding specified that it "under no circumstances would . . . be legally binding on or enforceable against either party."  The lack of an agreement in writing doomed the breach of contract claim under the real estate statute of frauds.  The court also found no evidence of an "agency" relationship that would support the breach of fiduciary duty claim. 

But the fraud claim survived because the statute of frauds applies only if the plaintiff tries to recover benefit-of-the-bargain damages.  GWTP sought nothing but "the out-of-pocket damages [it] incurred in preparing to operate the teleports."  Slip op. at 10.  The court therefore held that the claim didn’t run afoul of the statute of frauds.

Barry Barnett

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