Behind Dallas Appeals Court’s $288 Million Ruling Against Credit Suisse

appeals court, dallas, ruling

A verdict of nearly $40 million issued four years ago in Dallas recently was affirmed as a $288 million judgment against Swiss banking giant Credit Suisse. Of course, as with most legal appeals, the story continues.

The case over a failed Las Vegas real estate deal ended its current local run with the recent 35-page ruling authored by Justice Elizabeth Lang-Miers of the 5th District Court of Appeals in Dallas.

The next stop apparently will be in Austin at the Supreme Court of Texas since Credit Suisse almost immediately announced its intention to appeal.

Failed Deal Leads to Vegas-sized Judgment

The ruling addresses Credit Suisse’s failed attempt to void the original 2014 verdict and eventual judgment in favor of the Dallas investment firm Highland Capital Management. Jurors awarded $40 million against Credit Suisse after finding the company duped Highland into investing $250 million to help refinance a Las Vegas resort.

When Lake Las Vegas went belly up as part of the 2008 financial crisis, Highland sued based on allegations that Credit Suisse knowingly manipulated the property’s perceived value by relying on a faulty appraisal, among other claims.

Even though the state district jury in Dallas agreed with Highland, the case continued to go through additional legal wrangling. The trial court eventually approved the verdict amount and signed a 2015 judgment for more than $288 million after ruling that Highland was owed additional damages beyond the $40 million jury award.

Why Appeals Cases Take So Long

With a jury verdict, court judgment and favorable appeals court ruling, some might think Highland is about to pocket a hefty chunk of change. Not so fast. In the land of appeals, as this case perfectly illustrates, the devil is in the details.

In every Texas case when a trial court enters a judgment where money is awarded, the losing party can post a court-approved supersedeas bond or cash deposit to cover the amount.

By doing so, companies such as Credit Suisse can prevent winning parties like Highland from enforcing a judgment while the case is on appeal. Like a lot of big companies, Credit Suisse can find $288 million between its couch cushions, which is one of the many reasons why appeals can take so long to resolve.

Now that Credit Suisse has announced its intention to appeal to the Texas Supreme Court, and since it can appeal to the U.S. Supreme Court in the event of an adverse ruling, it may be years before this legal saga reaches its eventual end.

Although the legal profession strives to uphold the idea that “justice delayed is justice denied,” the truth is that any court case can be delayed if one or more parties have the financial wherewithal and internal fortitude to continue the fight through appeals. Eventually, it’s up to our courts to decide the justice part.

 

Why Massive Trinity Industries Judgment was Reversed

Big news for Dallas-based Trinity Industries came down late last month when a three-judge panel from the U.S. 5th Circuit Court of Appeals unanimously reversed and rendered, throwing out a $663.3 million adverse judgment. This case presented the odd situation where a plaintiff and jury said the government was defrauded, but the government wanted no part of it.

Like a lot of appeals court rulings, the final decision is focused more on the law’s intent rather than what the plaintiff alleged.

Case Background

The original 2014 verdict followed an earlier mistrial and three years of contentious litigation in the U.S. District Court for the Eastern District of Texas in Marshall. The lawsuit was filed under the federal False Claims Act by a man who owned a company that competed against Trinity. The False Claims Act allows individuals to file lawsuits aimed at protecting the government from fraud. Often, the government will join such cases as a plaintiff, but not always.

The plaintiff accused Trinity of defrauding the federal government by not disclosing a redesign in its ET-Plus guardrail system that was sold under federally subsidized state contracts. Jurors heard one week of testimony before slapping Trinity with a $175 million verdict that climbed to more than $663 million in the final judgment after the addition of penalties and attorney fees.

Court’s Reasoning

Trinity appealed, noting that the government never said there was anything wrong with the company’s guardrails as it continued to buy them. Notably, the Federal Highway Administration decided not to join the lawsuit as a plaintiff and instead issued an official memorandum during the trial expressing its continued confidence in the ET-Plus system.

On September 29, the 5th Circuit panel ruled in Trinity’s favor by reversing the earlier judgment and dismissing all claims against the company. Considering that Trinity didn’t tell the Federal Highway Administration about modifying its guardrail system and later made millions and millions of dollars selling the same system, you might ask, “So why didn’t Trinity lose on appeal?”

The answer, according to the unanimous three-judge panel, boiled down to a question of materiality.

The 5th Circuit noted that even though the plaintiff and the East Texas jury may have believed the government was defrauded, the government’s actions painted a much different picture.

“When the government, at appropriate levels, repeatedly concludes that it has not been defrauded, it is not forgiving a found fraud— rather it is concluding that there was no fraud at all,” the court concluded.

While some will argue that the ruling ignored the jury’s decision, the 5th Circuit’s reasoning no doubt will be relied upon by future defendants in False Claims Act cases until or unless this issue reaches the U.S. Supreme Court.