Credit Suisse AG v. Claymore Holdings, LLC

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CREDIT SUISSE AG, CAYMAN ISLANDS BRANCH AND CREDITSUISSE (USA) LLC, Appellants v. CLAYMORE HOLDINGS, LLC, Appellee

No. 05-21-00649-CV

Court of Appeals of Texas, Fifth District, Dallas

February 14, 2023

On Appeal from the 134th Judicial District Court Dallas County Texas Trial Court Cause No. DC-13-07858

Before Justices Nowell and Smith ^[1]

MEMORANDUM OPINION

ERIN A. NOWELL, JUSTICE

This case arises from the inflated appraisal of a residential real estate project near Las Vegas shortly before the 2007 housing financial crisis. We affirmed the original underlying judgment awarding appellee Claymore Holdings, LLC $211,863,998.56 in equitable rescissory damages $74,644,154.22 in prejudgment interest, court costs, and post-judgment interest. See Credit Suisse AG v. Claymore Holdings, LLC, 584 S.W.3d 18, 24 (Tex. App.-Dallas 2018), rev'd, 610 S.W.3d 808 (Tex. 2020).

The Texas Supreme Court reversed and remanded to the trial court for reconsideration of damages in light of its opinion. Id. On remand, the trial court awarded $40 million in fraudulent inducement damages determined by the jury, plus pre- and post-verdict interest, less allocable settlement credits. The trial court also awarded an additional $23,235,910.61 in damages. The final judgment totaled $121,132,984.48.

Credit Suisse now raises three issues on appeal with multiple sub-issues relating to the trial court's damages award on remand. Broadly stated, Credit Suisse challenges (1) the damage award for Claymore's secondary market purchases because Claymore failed to seek a jury finding that Credit Suisse was liable for fraudulently inducing any secondary market purchases; (2) the trial court erred in allocating certain settlement credits; and (3) the trial court erred in calculating prejudgment interest under applicable New York law on the net verdict after deducting applicable settlement credits.

We reverse the $23,235,910.61 damages award for Claymore's secondary market purchases and render a take-nothing judgment on this claim. We conclude the trial court erred by failing to allocate certain settlement credits to the jury's $40 million award for fraudulent inducement. Because the trial court did not have an opportunity to consider prejudgment interest under the new damages award calculation, we remand to the trial court for further proceedings.

Background^[2]

In 2007, Highland, a group specializing in distressed debt invested $250 million in a refinancing of real property in the Lake Las Vegas residential community. Credit Suisse arranged the refinancing using an appraisal Credit Suisse knew to be unreasonable and inflated resulting in Highland losing millions of dollars in its investment.

On July 12, 2013, Highland formed Claymore for the express purpose of "the pursuit of all claims against Credit Suisse related to the loans made and losses suffered . . . in connection with the Lake Las Vegas Residential Community and Golf Courses." It is undisputed Claymore^[3] is the valid and effective assignee of several funds that were lenders under a credit agreement either as initial investors in the refinancing or as a result of purchases on the secondary market of debt.

Claymore sued Credit Suisse for legal and equitable damages for fraudulent inducement, breach of contract, aiding and abetting fraud, civil conspiracy, breach of the implied duty of good faith and fair dealing, and unjust enrichment. Highland eventually recovered settlements related to its refinancing losses from the LLV Developers ($23,275,710), C&W ($12 million), the company hired to appraise the development, and CBRE ($21 million), the company hired to prepare the appraisal. Highland received all three settlements prior to Claymore going to trial against Credit Suisse.

The trial court bifurcated Claymore's claims: (1) a jury trial in December 2014 on Claymore's fraudulent inducement claim based on its initial investment in refinancing; and (2) a bench trial in May 2015 on liability and damages for Claymore's remaining claims, including a request for rescissory damages on the fraudulent inducement claim.

The jury found Credit Suisse liable for fraudulent inducement and awarded $40 million in damages. After the bench trial, the trial court found Credit Suisse liable on Claymore's remaining claims and after accounting for offsets, it awarded Claymore in equitable relief the price it paid for its initial investment ($215,773,287.95) and the price paid for its secondary market purchases ($23,235,910.61). This Court affirmed the judgment. See Credit Suisse AG, 584 S.W.3d at 18.

The Texas Supreme Court concluded an adequate remedy at law existed precluding equitable rescissory damages and remanded to the trial court for "entry of judgment consistent with the opinion" regarding Claymore's fraudulent inducement claim, the only claim tried to the jury in the bifurcated trial. 610 S.W.3d at 830. It reversed and rendered judgment on all remaining claims tried to the bench. Id. In footnote 18 of the opinion, the supreme court explained "because there may be certain matters still in dispute" such as "questions about the availability of and amount of prejudgment interest on [the fraud] claim, the treatment of settlement credits in relation to the jury's allocation of fault, and damages for secondary market purchases," the supreme court refused to render judgment on the jury's fraudulent inducement finding and award the $40 million in damages determined by the jury.

On remand, the trial court awarded $40 million in fraud damages, plus pre-and post-verdict interest, less allocable settlement credits. The trial court also awarded an additional $23,235,910.61 in damages, which equaled the price Claymore paid for the secondary market purchases, plus pre- and post-verdict interest, less allocable settlement credits. The final judgment totaled $121,132,984.48.

The trial court's interpretation of footnote 18's directive from the supreme court in entering judgment, among other things, brings the parties before this Court once again.

Secondary Market Purchases

The supreme court remanded for rendition of judgment on the jury's fraudulent inducement finding and rendered a take nothing judgment on all of Claymore's remaining claims tried to the bench. On remand, the trial court awarded an additional $23,235,910.61 for secondary market purchases in addition to the $40 million in damages for fraudulent inducement.

In its first issue, Credit Suisse argues the trial court erred by awarding damages for the secondary market purchases because the jury was not asked and did not make any liability finding regarding Credit Suisse's fraudulent inducement of any secondary market purchases. Credit Suisse also contends Claymore failed to challenge the trial court's decision to exclude the secondary market purchases from the jury charge in its first appeal thereby waiving the issue in this second appeal. Alternatively, despite these procedural shortcomings, Credit Suisse asserts the record lacks clear and convincing evidence, as required under New York law,^[4] to support the essential elements of fraudulent inducement.

Claymore responds the trial court properly awarded damages for fraudulent inducement on the secondary market purchases because Credit Suisse never challenged the amended findings of fact and conclusions of law from the original bifurcated trial, which included findings and conclusions on the secondary market purchases; therefore, Credit Suisse waived its argument. Alternatively, to the extent Credit Suisse did not waive its argument, Claymore contends the evidence is sufficient to support the award.

It is well established no recovery is allowed unless liability is established. See Mitchell v. Bank of Am., N.A., 156 S.W.3d 622, 627 (Tex. App.-Dallas 2004, pet. denied); see also Miller v. Baer, 189 N.Y.S. 149, 150 (N.Y. App. Term 1921) (noting damage from the act complained of must be proven). In the absence of liability, the question of damages becomes immaterial. Id. Here, the jury was asked only whether Credit Suisse "fraudulently induce[d] Plaintiff to participate in the 2007 Lake Las Vegas Refinancing by making affirmative representations[.]" (Emphasis added). The jury was not asked to determine liability as to the secondary market purchases; therefore, the record contains no liability or causation finding to support damages for the fraudulent inducement of secondary market purchases. Further, Claymore's proposed jury charge did not include a question on fraudulent inducement of secondary market purchases, and Claymore did not object to the absence of the question. The rules of civil procedure require an objection to the charge; otherwise, "[a]ll objections not so presented shall be considered as waived." Tex.R.Civ.P. 272; see also Tex. R. Civ. P. 274 ("A party objecting to a charge must point out distinctly the objectionable matter and the grounds of the objection.").

To overcome these glaring procedural defaults, Claymore relies on the trial court's amended findings of fact/conclusions of law from the bench trial and footnote 18 of the supreme court's opinion. We conclude neither supports the trial court's award of damages for secondary market purchases.

Under New York law, a cause of action based on fraud must assert "a misrepresentation or a material omission of fact which was false and known to be false by defendant, made for the purpose of inducing the other party to rely upon it justifiable reliance of the other party on the misrepresentation or material omission, and injury." Connaughton v. Chipotle Mexican Grill, Inc., 29 N.Y.3d 137, 142, 75 N.E.3d 1159, 1163 (2017). Claymore had the burden to prove these elements by clear and convincing evidence. See Hidden Pond...