COLLAPSE OF REAL ESTATE WEB CREATES PROCEDURAL TANGLE

Brauss v. Triple M Holding GMBH
Dallas Court of Appeals, No. 05-11-00271-CV (August 13, 2013)
Justices Moseley (Opinion), Fillmore, and Myers
After Eric Brauss’s complex real estate “empire” collapsed, several limited partnerships and investors sued Brauss and his former wife, Christine Martin, for fraud, breach of contract, and breach of fiduciary duty. Brauss settled with some plaintiffs and unsuccessfully litigated against others, resulting in a judgment of over $113 million. The Court of Appeals affirmed, but reversed the portion of the judgment holding Martin jointly and severally liable for approximately $48 million of the award based on fraud.

Complex procedural maneuvers preceded the ultimate judgment. Over 200 plaintiffs intervened solely to join in the settlement. Two other groups of plaintiffs—the “Nixdorf Appellants” and the “Song-Winkler Appellants”—objected to the settlement and intervened to litigate against defendants. Of the $113 million award, $48 million was awarded to the Nixdorf Appellants. Brauss challenged the sufficiency of the evidence for that damages award because the Nixdorf Appellants relied on a summary page as evidence of damages. The court upheld reliance on that single page because the supporting documents underlying the information reflected in the single page were also admitted. Therefore, there was sufficient evidence of damages against Brauss.

Brauss also challenged the sufficiency of the evidence on the fraud claim asserted by the Nixdorf Appellants. The Court of Appeals reviewed all the evidence of Brauss’s failure to disclose facts to the limited partners and determined there was sufficient evidence to uphold the trial court’s implied finding of fraud. The court also determined that because Brauss invoked the Fifth Amendment, the trial court was free to draw negative inferences against Brauss. Martin also challenged the fraud claim for sufficiency of the evidence. The court found no evidence that Martin made any misrepresentation, acted as an agent for Brauss’s entities, or had any fiduciary duty to the litigating plaintiffs. Therefore, Martin could not be held jointly and severally liable with Brauss for fraud.

Attempting to limit the recovery of other appellants, some appellants appealed parts of the judgment relating to the others. The Court of Appeals held an appellant cannot complain of trial court errors that do not affect that appellant’s rights. Finally, one group of appellants—the Song-Winkler Appellants—attempted to intervene at the trial court, which struck the intervention. The Court of Appeals determined that the Song-Winkler Appellants’ claim was moot because they secured an agreed final judgment in a separate lawsuit that provided relief for the same claims they asserted in the Brauss suit. Because of that judgment, any claims by the Song-Winkler Appellants were moot.

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