In a case in which TCJL participated as amicus curiae, the Texas Supreme Court has substantially reduced a nearly $300 million damage award by a Dallas trial court that was affirmed by the Dallas Court of Appeals. The case, Credit Suisse AG, Cayman Islands Branch and Credit Suisse Securities (USA) LLC v. Claymore Holdings, LLC (No. 18-403), underscores SCOTX’s willingness to review the erroneous application of the law of another jurisdiction (in this case, New York) by Texas courts.

The dispute resulted from the failure of a Las Vegas-area real estate project in the wake of the global financial crisis in 2008. Based on an appraisal provided by Credit Suisse, Highland Management, a Dallas investor, loaned the project $250 million. When the borrower defaulted, all the investors–including Credit Suisse–lost money. Highland then created a subsidiary, Claymore Holdings, LLC, for the sole purpose of pursuing litigation against Credit Suisse based on the theory that Credit Suisse deliberately and fraudulently inflated the appraisal to induce Highland to make the loan. Claymore also alleged breach of contract theories as well and sought to recover the full value of its lost investment. The financing agreement between the parties provided that New York law would govern a dispute.

Claymore filed suit in Dallas district court. The fraudulent inducement claim was tried to a jury, which awarded Claymore $40 million rather than the $172 million Claymore sought. The breach of contract claim was tried to the court, which likewise found for Claymore and awarded equitable relief of $211 million. Claymore thus recouped its investment through the litigation. The Dallas Court of Appeals affirmed the trial court’s judgment, and Credit Suisse appealed to SCOTX.

In response to Credit Suisse’s petition for review, Claymore urged SCOTX to reject review on the basis that the case did not rise to a sufficient level of importance to the jurisprudence of this state to merit consideration by our state’s highest arbiter of justice. It alleged that because New York law governed the issues, a New York trial court has ruled against Credit Suisse in a similar case and been affirmed, and the court of appeals rejected Credit Suisse’s argument, SCOTX had no business looking into it. TCJL intervened as amicus at this stage of the case, arguing that the trial court’s application of New York law (as well as the Court of Appeals’ affirmation) and calculation of damages was erroneous and rose to the jurisdictional level, especially given Texas’ growing international importance as a business and financial hub. Even if litigants agree to be governed by the law of another state, that doesn’t mean that we should turn a blind eye to what goes on in our trial courts. SCOTX accepted review.

In an opinion by Justice Blacklock, SCOTX found upheld the jury’s $40 million award on the fraudulent inducement claim, but struck down the trial court’s $211 million award on the contract claims. SCOTX opined that because the jury awarded legal damages for fraud, the value of which were reasonably calculable by a damages model accepted by both parties, the further award of equitable remedies was erroneous under both New York and Texas law. As Justice Blacklock observed, “Claymore cites no authority from New York law under which it can leave its favorable $40 million jury verdict for legal damages in place as a backup and then seek a second bite at the apple in equity under the theory that one of the calculations it asked the jury to make cannot really be calculated at all.” Moreover, Claymore’s election of remedy argument failed because “the power to elect a remedy as between multiple legal theories is not the power to elect a recovery as between law and equity. Equitable relief is available only if legal damages cannot be calculated.” SCOTX further criticized the trial court’s “kitchen-sink” award of $211 million, which it based on the finding that legal damages could not be calculated–even though the jury had just done it.

TCJL applauds the Court for reviewing this case and vindicating the principle that matters of substantial importance to the jurisprudence of the state do not depend on what law applies to a dispute. We also applaud SCOTX’s respect for the jury’s decision in the case, while rejecting the trial court’s clearly erroneous award of equitable remedies.

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