IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
July 9, 2009
No. 09-30102 Charles R. Fulbruge III
Clerk
BURT H. KEENAN
Plaintiff - Appellant Cross-Appellee
v.
DONALDSON LUFKIN & JENRETTE, INC., DONALDSON LUFKIN &
JENRETTE INTERNATIONAL; DONALDSON LUFKIN & JENRETTE
SECURITIES CORP.; DLJ BRIDGE FINANCE, INC.; CREDIT SUISSE
FIRST BOSTON USA, INC.
Defendants - Appellees Cross-Appellants
Appeal from the United States District Court
for the Eastern District of Louisiana
Before JONES, Chief Judge, and HIGGINBOTHAM and HAYNES, Circuit
Judges.
HAYNES, Circuit Judge:
This is the second time these parties have been before us on this case. See
Keenan v. Donaldson, Lufkin & Jenrette, Inc., 529 F.3d 569 (5th Cir. 2008)
(reversing district court’s grant of summary judgment under the Louisiana
Credit Agreement Statute) (hereinafter Keenan I). Following Keenan I’s remand,
the defendants again moved for summary judgment, this time asserting that this
case was filed after the expiration of the applicable Louisiana prescriptive
No. 09-30102
period, among other grounds. The district court granted summary judgment on
the entire case, and Keenan again appealed. For the reasons set forth below, we
AFFIRM in part, and REVERSE and REMAND in part.
I. Factual Background
Keenan I describes the basic facts of this case, and we will not belabor
them here. Suffice it to say that Keenan was a founder of Independent Energy
Holdings PLC (“IE”). The defendant parties (collectively “DLJ Parties”) acted
in various financing and advisory capacities to IE. After experiencing cash flow
problems, IE turned to a banking syndicate (of which one of the DLJ Parties was
a member) to extend additional capital and forgive certain technical defaults of
an existing credit facility. Keenan contends, and the DLJ Parties dispute, that
the DLJ Parties promised that if he personally loaned $10 million to IE and
raised $50 million of mezzanine financing,1 they would waive the technical
default of the existing credit facility and extend the credit facility from £ 165 to
£ 190 million. On June 21, 2000, Keenan, not represented by counsel, loaned IE
the money pursuant to a written agreement between IE and Keenan. The loan
matured on October 1, 2000.
The syndicate waived the technical defaults but did not extend additional
credit to IE. On August 4, 2000, Keenan presented $64 million in mezzanine
finance commitments to DLJ. The syndicate then informed Keenan that they
were no longer interested in the mezzanine finance plan and wanted, instead,
to pursue a short sale of the company. The short sale to AES Corporation
proceeded, but on September 7, 2000, the syndicate refused to lend IE any more
money. IE then entered receivership in the United Kingdom, where IE
conducted business. Although the credit facility was paid in full, Keenan
recovered only 7% of his loan to IE through the receivership process. Keenan
1
Mezzanine financing generally refers to subordinated debt senior only to common
shares of a company.
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No. 09-30102
contends that he did not know until 2005 that he would not be repaid in full
through the receivership process.
On October 7, 2005, Keenan filed suit against the DLJ Parties in the
Eastern District of Louisiana. Keenan’s original complaint contained two
counts—detrimental reliance and promissory estoppel under Louisiana law.2 At
the instigation of the district court, Keenan then conducted discovery to learn if
he had a fraud claim as well. He contends that he eventually discovered that,
when the 2000 promise described above was made, the DLJ Parties had no
intention of honoring it. He then amended his complaint to add various fraud
and breach of fiduciary duty claims. As we discussed above, the district court
then granted summary judgment under the Louisiana Credit Agreement Statute
(“LCAS”), which we reversed in Keenan I. The appeal in Keenan I addressed the
LCAS. The DLJ Parties in that appeal also argued that the fraud and breach of
fiduciary duty claims were barred by Louisiana’s one-year prescription period,
see L A. C IV. C ODE art. 3492, but conceded that the detrimental reliance and
promissory estoppel claims were governed by the ten-year prescriptive period for
an action in contract. See L A. C IV. C ODE art. 3499. We noted: “The district court
did not address the limitations period issue. Because Keenan’s two non-tort
claims [detrimental reliance and promissory estoppel] are not barred, remand
is necessary regardless of our determination on this issue.” 529 F.3d at 579.
Despite initially conceding that the detrimental reliance and promissory
estoppel claims were governed by the ten-year contractual prescription period
(and therefore timely), on remand the DLJ Parties moved for summary judgment
on prescription on these claims as well as the other claims that were based on
fraud, negligence, and breach of fiduciary duty. Keenan argued that the
detrimental reliance and promissory estoppel claims, as well as the breach of
2
No party disputes the application of Louisiana law here.
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No. 09-30102
fiduciary duty claim, were contractual in nature, and, thus, the one-year period
did not apply. He conceded that fraud and negligent misrepresentation fell
under the one-year period, but he argued that the period did not begin to run
until he discovered facts showing that he had been defrauded. The district court
ultimately decided that all claims were delictual in nature (and thus governed
by the one-year statute); it further found that Keenan had sufficient knowledge
of facts to trigger the start of the prescription period when his loan was not paid
in 2000. Thus, the district court concluded that all claims were barred by the
one-year prescription period. Summary judgment was granted, and Keenan
appealed.
II. Standard of Review
We review grants of summary judgments de novo. Minter v. Great Am.
Ins. Co. of N.Y., 423 F.3d 460, 464 (5th Cir. 2005). Summary judgment is
appropriate if, after making all inferences in favor of the non-movant, the record
contains no genuine issue of material fact, and the movant is entitled to a
judgment as a matter of law. F ED. R. C IV. P. 56(b); Minter, 423 F.3d at 464. We
note that when a plaintiff should know of his cause of action is usually a
question of fact. Picard v. Vermilion Parish Sch. Bd., 783 So. 2d 590, 594 (La.
Ct. App. 2001) (“[A] determination of whether or not the Plaintiffs were indeed
prevented from filing their claim [by reason of lack of knowledge] . . . is an issue
of fact.”); see also Ducre v. Mine Safety Appliances, 963 F.2d 757, 760 (5th Cir.
1992) (reversing summary judgment because a fact question remained as to
whether the plaintiff was reasonably ignorant of the facts upon which his claims
were based).
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III. Discussion
A. Prescription Period for Detrimental Reliance and Promissory
Estoppel
The first contention Keenan makes is that the DLJ Parties’ current
arguments about the detrimental reliance and promissory estoppel prescription
period are foreclosed by Keenan I. While we do not countenance the DLJ Parties’
change of position necessitating another appeal and further work by the district
court and this court, we cannot find that Keenan I forecloses this argument.
Because prescription expressly was not reached by our court in the first appeal
and thus was not decided on its merits, the references to prescription are not
“law of the case” in this appeal. See United States v. Hatter, 532 U.S. 557, 566
(2001) (“The law of the case doctrine presumes a hearing on the merits.”).3
Turning to the merits of this issue, the answer to this question turns on
whether these two claims are viewed as contractual in nature – and thus
governed by the ten-year period – or delictual in nature – and thus governed by
the one-year period.4 The question seems simple, but the answer is more
complex. We have applied both statutes to claims denominated as “detrimental
reliance” because the nature of the action, rather than its label, governs which
statute applies. Compare Copeland v. Wasserstein, Perella & Co., 278 F.3d 472,
479 (5th Cir. 2002) (applying one-year statute), with Stokes v. Georgia-Pacific
3
We also conclude that the district court did not abuse its discretion in deciding that
the DLJ Parties are not judicially estopped from asserting a new legal position here because
the district court did not rely upon the prior inconsistent position. See New Hampshire v.
Maine, 532 U.S. 742, 750-51 (2001).
4
This difference is dispositive as to these two claims because Keenan does not contend
that he lacked knowledge of the breach of promise in 2000 when the syndicate failed to extend
further credit. He claims only, as discussed further below, that he lacked knowledge of the
fraud associated with that breach of promise. Under Louisiana law, an action in tort is
governed by a one-year prescription period, and an action in contract, a ten-year prescription
period. Roger v. Dufrene, 613 So. 2d 947, 948 (La. 1993) (citing LA . CIV . CODE art. 3492 &
3499).
5
No. 09-30102
Corp., 894 F.2d 764, 770 (5th Cir. 1990) (applying ten-year statute) . In other
words, “[w]hen evaluating which prescriptive period is applicable to a cause of
action, courts first look to the character of the action disclosed in the pleadings.”
SS v. State, 831 So. 2d 926, 931 (La. 2002).
We conclude that Keenan’s detrimental reliance and promissory estoppel
claims derive from a breach of promise, like Stokes, rather than a breach of duty,
like Copeland.5 Accordingly, we conclude that the district court erred in
5
The relevant allegations for promissory estoppel are the same as the following
allegations from Keenan’s complaint regarding detrimental reliance:
Count Six: Detrimental Reliance
163. Plaintiff repeats and incorporates herein the allegations contained in paragraphs
1 through 162 above as if fully set forth herein.
164. DLJ represented to Keenan that it would continue to give its support, including
further credit and financial support, if necessary, to Independent Energy until such
time as a long-term solution to Independent Energy’s liquidity crisis was reached.
165. DLJ made this representation in order to induce Keenan to make a personal,
unsecured loan of $10 million to Independent Energy.
166. On information and belief, no writings directly acknowledging this representation
exist because such writings were destroyed or not retained by DLJ–in breach of its own
policies and procedures and its legal obligations.
167. Keenan justifiably and reasonably relied on DLJ’s representation.
168. In reliance on DLJ’s representation, Keenan made an unsecured personal loan of
$10 million loan [sic] to Independent Energy.
169. DLJ subsequently refused to extend further credit or financial support to
Independent Energy.
170. As a direct and proximate result of Keenan’s reliance on DLJ’s representation,
Keenan has suffered damages, in an amount to be proven at trial, because only a small
portion of his $10 million loan has been repaid and he has recently learned that he will
not receive full repayment through Independent Energy’s liquidation process.
171. Keenan’s damages were proximately caused by Keenan’s detrimental reliance on
DLJ’s representation. But for DLJ’s representation, he would not have made the $10
million loan to Independent Energy. Further, had DLJ honored its promise, and
provided further credit and financial support, Independent Energy would have solved
its billing problem, survived its liquidity crisis, and repaid Keenan’s loan in full.
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No. 09-30102
granting summary judgment in favor of the DLJ Parties on the defense of
prescription to the promissory estoppel and detrimental reliance claims.6
B. Breach of Fiduciary Duty
We need not reach the question of which statute governs Keenan’s breach
of fiduciary duty claim because we agree with the DLJ Parties that no fiduciary
duty was owed by them to Keenan. As the DLJ Parties argue, there is simply
no evidence of a fiduciary relationship, nor could there be as the claim is pled.7
There is no evidence any DLJ entity was to act for Keenan’s benefit regarding
the loan, see Scheffler v. Adams & Reese, LLP, 950 So. 2d 641, 647 (La. 2007),
and close personal relationships do not create such a duty, see Kaplan v. Fine,
643 So. 2d 438, 440 (La. Ct. App. 1994). Thus, we affirm the district court’s
grant of summary judgment on the breach of fiduciary duty claim (Count Five)
on the alternate ground that no fiduciary duty was owed by the DLJ Parties to
Keenan.8
6
The DLJ Parties also cross-appealed the district court’s denial of their motion for
summary judgment on the merits of these two claims. We treat this as a request to affirm the
summary judgment on an alternate ground. However, we agree with the district court that
fact issues prevent the grant of summary judgment on the merits of these particular claims.
7
The Louisiana Supreme Court quotes the following definition of fiduciary:
“Fiduciary” includes a trustee under any trust, expressed, implied, resulting or
constructive, executor, administrator, guardian, conservator, curator, receiver, trustee
in bankruptcy, assignee for the benefit of creditors, partner, agent, officers of a
corporation, public or private, public officer, or any other persons acting in a fiduciary
capacity for any person, trust or estate.
Scheffler v. Adams & Reese, LLP, 950 So. 2d 641, 647-48 (La. 2007) (quoting LA . REV . STAT .
ANN . § 9:3801(2)).
8
We further hold that the district court’s summary judgment remains in place on this
same alternate ground with respect to any portion of Count Two (fraud by omission) that relies
upon the existence of a fiduciary duty.
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No. 09-30102
C. Fraud and Negligent Misrepresentation
Keenan admits that his remaining four claims sound in tort and are
subject to the one-year prescription period. 9 However, he contends that the
period began to run when he discovered evidence of fraud in discovery (2006)
rather than when he first learned DLJ breached the alleged oral agreement
(2000). We address the fraud-based theories separately from the negligence-
based theories.
1. Fraud and “Fraud by Omission”
Counts One and Two of the amended complaint allege, in essence, that the
DLJ Parties committed fraud by making a promise without any intent to
perform the promise. Keenan considers this action both an affirmative
misrepresentation and “fraud by omission.” However labeled, the critical feature
of this kind of fraud is that the promisor lacks a present intent to perform the
promise. Delta Truck & Tractor, Inc. v. J.I. Case Co., 975 F.2d 1192, 1205 (5th
Cir. 1992) (“[T]o constitute actionable fraud a promise or representation of future
actions must be made with the intention not to perform at the time the promise
is made.” (internal quotations and citations omitted)); Sun Drilling Prods. Corp.
v. Rayborn, 798 So. 2d 1141, 1152 (La. Ct. App. 2001) (“Fraud may be predicated
on promises made with the intention not to perform at the time the promise is
made.”); Bass v. Coupel, 671 So. 2d 344, 351 n.12 (La. Ct. App. 1995) (“We note
that fraud may be predicated on promises made with the intention not to
perform at the time the promise is made. . . . Fraud cannot be imputed, and
simple broken promises alone are not sufficient. The fraud must be based on the
person’s intention not to perform.”).
The question, then, is whether knowledge that a promise has not been
kept is sufficient to trigger prescription for fraud claims based on those broken
9
These claims are fraud, fraud by omission, negligent misrepresentation, and negligent
omission.
8
No. 09-30102
promises. “Prescription commences when a plaintiff obtains actual or
constructive knowledge of facts indicating to a reasonable person that he or she
is the victim of a tort.” Campo v. Correa, 828 So. 2d 502, 510 (La. 2002); see also
Sudo Props., Inc. v. Terrebonne Parish Consol. Gov’t, 503 F.3d 371, 378 (5th Cir.
2007). Constructive notice means “notice enough to call for inquiry about a
claim, not from the time when the inquiry reveals facts or evidence sufficient to
prove the claim.” Lafleur v. Blue, 6 So. 3d 348, 351 (La. Ct. App. 2009) (quoting
Terrel v. Perkins, 704 So. 2d 35, 39 (La. Ct. App. 1997)). Under the doctrine of
contra non valentum, the prescription period is tolled until the plaintiff knew or
should have known of a cause of action. Cole v. Celotex Corp., 620 So. 2d 1154,
1156 (La. 1993); see also Simmons v. Templeton, 723 So. 2d 1009, 1012 (La. Ct.
App. 1998) (holding that the claim had not prescribed because the plaintiff’s
ignorance was not “willful, negligent, or unreasonable.”).10
Keenan argues that he did not understand he had a fraud claim until the
August 2006 depositions of two DLJ bankers who admitted, in his view, their
intent not to perform the promise when made. The district court ruled that
Keenan knew of the fraud on October 2, 2000, when the loan was not paid after
it became due, and if not then, on October 24, 2000, when Keenan delivered his
claim to the receivership for IE demanding repayment of the loan. The district
court reasoned that by this time, Keenan knew that the DLJ Parties would not
keep their alleged promises and that repayment of his loan to IE was subject to
a receivership process and possible nonpayment. The court distinguished Sudo
10
The parties disagree as to whether the rule regarding commencement of the
prescriptive period or the rule for tolling under the doctrine of contra non valentum controls.
We need not reach this issue because, under the facts of this case, the analysis under either
approach yields the same result. See Terrebonne Parish Sch. Bd. v. Columbia Gulf
Transmission Co., 290 F.3d 303, 320 (5th Cir. 2002); Corsey v. State, 375 So. 2d 1319, 1322 (La.
1979) (describing contra non valentem as “generically similar to instances provided by statute
where prescription does not begin to run until the claimant has knowledge of his cause of
action.”).
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No. 09-30102
Properties and ruled that because Keenan admits he knew of DLJ’s breach, that
Keenan simply decided not to bring a fraud claim until he knew that he would
not be paid from the receivership. The claims were therefore prescribed. The
court did not address Keenan’s claim that he did not have constructive or inquiry
notice until the August 2006 depositions.
The DLJ Parties contend that knowledge of a broken promise is enough
to start limitations running (or defeat a claim of contra non valentum) on a
“fraud by promise” claim. But this contention ignores the heart of this kind of
fraud claim – the present intent not to perform. It is this present intention that
avoids turning every breach of contract into a fraud claim. See Automatic Coin
Enters., v. Vend-Tronics, Inc., 433 So. 2d 766, 767-68 (La. Ct. App. 1983) (“A
failure to make [a promise] good is merely a breach of contract.” (internal
quotations and citations omitted)). A breach of promise, standing alone, is not
enough for a fraud claim. Wright Bros. Corp. v. Colomb, 517 So. 2d 1194, 1197
(La. Ct. App. 1987) (“[M]ere failure to perform a promise . . . without more, is not
evidence of fraud.”). Thus, knowledge of a breach of promise, standing alone, is
not enough to “excite inquiry,” start the running of the prescriptive period, or
end the contra non valentum tolling period.11
The DLJ Parties have failed to prove as a matter of law 12 that Keenan
knew of their present intention not to perform until within one year of his filing
of the amended complaint.13 Accordingly, we reverse the summary judgment on
11
Similarly, the mere inclusion of the word “misrepresentation” in his original
complaint does not establish as a matter of law that Keenan had constructive knowledge of
facts indicating DLJ’s intent not to perform the promise when made.
12
The DLJ Parties cite certain ambiguous testimony by Keenan in another case in
2002 in support of their claim that no material fact issues exist. This testimony does not
prove, as a matter of law, either that there was no promise in 2000 or that Keenan knew, by
2002, that such a promise was false.
13
We recognize that the DLJ Parties deny ever making such a promise. For purposes
of analyzing the prescription issue, of course, we assume that such a promise was made.
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No. 09-30102
Counts One and Two (except to the extent Count Two is based upon a breach of
fiduciary duty).14
2. Negligent Misrepresentation and Negligence by Omission
By contrast, Keenan’s negligence claims do not require any intent to
deceive or present intention not to perform a promise.15 Instead, they are
premised on a host of claimed failings in advising him in connection with making
the loan.16 Once Keenan knew that the credit facility was not extended and that
his note matured without payment, he also knew that DLJ’s advice was
inaccurate. While he would not necessarily know of a wrongful intent on DLJ’s
part, he knew that DLJ’s guidance was wrong. Thus, at that point, he had a
duty to inquire further. His failure to do so promptly results in the loss of these
claims due to the passage of the prescription period.
D. LCAS
The DLJ Parties claim that discovery has produced sufficient evidence to
reverse this court’s holding regarding the applicability of the LCAS bar in
Keenan I. It has not. We decline to revisit our prior opinion.
14
Again, we decline the invitation to affirm on the alternate ground that Keenan’s
claims lack merit (except to the extent they rely upon a breach of fiduciary duty). While
Keenan’s claim that a sophisticated businessman such as he would conduct such a large
transaction on a handshake is dubious, weighing credibility is not the office of a summary
judgment motion.
15
The elements necessary to establish a claim of negligent misrepresentation in
Louisiana are: “(1) there must be a legal duty on the part of the defendant to supply correct
information; (2) there must be a breach of that duty, which can occur by omission as well as
by affirmative misrepresentation; and (3) the breach must have caused damages to the
plaintiff based on the plaintiff’s reasonable reliance on the misrepresentation.” Kadlec Med.
Ctr. v. Lakeview Anesthesia Assocs., 527 F.3d 412, 418 (5th Cir.), cert. denied, 129 S. Ct. 631
(2008).
16
Keenan’s allegations in support of his negligence claims essentially mirror those of
his fraud claims, except that he asserts that “[b]y its negligence, DLJ breached its duty of
reasonable care to Keenan . . . .”
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IV. Conclusion
Accordingly, we AFFIRM the district court’s grant of summary judgment
on Count Five (breach of fiduciary duty) and any portions of Count Two (fraud
by omission) that rely upon the existence of a fiduciary duty; we further
AFFIRM the district court’s grant of summary judgment on prescription as to
the negligence and negligent misrepresentation counts; in all other respects, we
REVERSE the district court’s judgment and REMAND for further proceedings
consistent with this judgment.
12