Recent blog postings have addressed appellate arguments we have advanced in connection with a case that went to trial in State District Court, Lubbock County, Texas.  This blog posting focuses on a case that was similar in many respects; it proceeded to trial in State District Court, Brown County, Texas.  In both instances, we were honored to represent first-rate people who possess many fine qualities.

While constructing the blogs that concentrated on the Lubbock County case, we regularly drew upon the appellate court brief we filed with the Texas Court of Appeals.  To provide for a “change of pace,” we have prepared this blog by extracting various segments of the last-amended petition (the pleading reflecting the assertions under which the case was tried).

Cautionary Remarks: Incomplete Overview & Analysis

This blog makes no attempt to quote from the above-referenced petition in an expansive manner.  To the contrary, this blog encompasses limited segments of that pleading.  Consequently, it should not be relied upon in connection with an attempt to obtain an understanding of the factual or legal aspects of the Brown County case, or the characteristics and qualities of the participants thereto.  On a pragmatic level, the segments of the pleading that are set forth herein are too incomplete to form a meaningful analysis.  Moreover, many of the segments have been edited or revised so as to provide for a shorter, more compact blog posting.  As an additional matter, the names of the parties have been omitted.*

Allegations Pertaining To Material Omissions

Mindful of the cautionary considerations featured above, a general overview of the claims that were made in connection with the Brown County, Texas case is set forth below.  Among other things, the operative petition alleged that the Defendant omitted crucial information from his sales presentations, to include the following:

1) he “failed to tell the Plaintiffs” that he was not “registered with the Texas State Securities Board”;

2) he “failed to tell the Plaintiffs that PCI, the issuer of the ‘guaranty bonds,’ was not registered with the Texas Department of Insurance”;

3) he “failed to tell the Plaintiffs that the ‘guaranty bonds’ did not actually guarantee the financial results that had been promised”;

4) he “failed to tell the Plaintiffs that in 2004, Adley Wahab had entered a guilty plea for forgery of a commercial instrument”; and

5) he “failed to inform the Plaintiffs that the educational credentials of Adley Wahab had been falsified.”

The operative petition further alleged that the Defendant “concealed . . . information showing that he was incapable of evaluating and assessing the true attributes of A&O Notes because he had not engaged in a meaningful due diligence review.”

Segment Of Pleading Discussing Common Law Fraud Principles

The section of the pleading which encompasses common law fraud allegations reflected a discussion of pertinent legal standards.  Excerpts from that discussion are set forth below:

  • “A misrepresentation made knowingly or recklessly concerning a material fact, which is communicated with the intention of inducing a party to rely on it, and which is, in fact, relied on by that party to his or her detriment or injury, is fraudulent.” See Stone v. Lawyer’s Title Ins. Corp., 554 S.W.2d 183, 185 (Tex. 1977).
  • “Common law fraud encompasses outright falsities, as well as material omissions and half-truths. In a situation ‘where a person voluntarily discloses information, he must disclose the whole truth.’”  Newby v. Enron Corp., 540 F. Supp. 759, 771 (S.D. Tex. 2007).
  • “‘The maker of a false representation need not, in every instance, know it is false for the statement to form the basis for actionable fraud.’” Wright v. Carpenter, 579 S.W.2d 575, 579 (Tex. Civ. App. 1979, writ denied).

Section 33A(2) Assertions

Claims were advanced on behalf of certain investors pursuant to Section 33A(2) of the Texas Securities Act.  Some of the contentions that were raised in that regard are set forth below:

  • “The sales presentations that were made . . . were materially false and misleading”;
  • “‘An omission or misrepresentation is material if there is a substantial likelihood that a reasonable investor would consider it important in deciding to invest.’” Texas Capital Sec., Inc. Sandefer, 58 S.W.3d 760, 776 (Tex. Civ. App.—Houston [1st Dist.] 2001).
  • The Defendant sold the securities in question “by means of untrue statements of materials facts and [he] omitted to state material facts necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading.”

Trial Concludes: Decision Issued

After the trial came to a close and “the dust settled,” so to speak, the Honorable Stephen Ellis, to whom the case was tried, issued a “letter opinion,” where he found in favor of the Plaintiffs.  Judge Ellis followed up on those rulings by entering a Judgment against the Defendant; he also executed a document styled “Findings Of Fact And Conclusions Of Law.”

Subsequent to those filings, the Defendant assembled an appellate brief, wherein he adamantly contested the Plaintiffs’ allegations, together with the determinations that were made by the trial court.  Although a robust, hard-hitting brief was recently filed on behalf of the Plaintiffs, the ultimate outcome cannot be determined.  Suffice to say, this case is still “mid-stream.”  A final resolution has not yet been achieved.  With those principles in mind, it is important for readers to refrain from drawing any substantive conclusions at this juncture.  Even a cursory review of modern jurisprudence shows that trial court decisions have frequently been vacated or modified by appellate courts.  Viewed in that light, it would not be prudent for readers to “jump to any conclusions.”  Wisdom and fairness coalesce so as to call for a calm, deliberative process that is even-handed, and takes all pertinent considerations into account.

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If you have sustained financial losses based upon a misleading sales presentation, you may be in a position to obtain a recovery.  Important legal principles operate so as to protect the interests of investors.  Contact Chris Bebel to discuss your rights.  Mr. Bebel is a former SEC attorney and a former federal prosecutor who has concentrated on investment fraud cases for approximately thirty years.  He works closely with Bradley Ellison, a learned paralegal who previously served as a U. S. Air Force master sergeant.  Mr. Ellison is currently pursuing his third master’s degree.  Mr. Bebel, Mr. Ellison, and other Tefteller Law, PLLC personnel work as a team to represent investors who have suffered losses.  Caveat: Throughout his career in private practice, Mr. Bebel has routinely declined cases presented by investors seeking legal representation.  Neither Mr. Bebel nor any other reputable attorney can promise you that your case will be accepted.

Mr. Bebel has, for many years, represented investors situated throughout the country, including investors residing in the following states:  Indiana, Texas, Minnesota, Arkansas, California, Kansas, Iowa, Colorado, Oklahoma, New Jersey, New York, and Florida.

Mr. Bebel has provided instructive presentations addressing an array of securities industry topics to lawyers and securities industry professionals in the following cities: Tucson, AZ; Colorado Springs, CO; Jacksonville, FL; Fort Myers, FL; San Diego, CA; New York, NY; Houston, TX; Dallas, TX; San Antonio, TX; and Toronto, Ontario.

Mr. Bebel has been published through the following: Public Investors Arbitration Bar Association, Oklahoma City, OK; the State Bar of Texas, Austin, TX; South Texas College of Law, Houston, TX; Texas Tech Law Review, Texas Tech University (voted Best Article of the Year by Texas Tech Law Review editors); West Virginia Law Review, West Virginia University; Louisiana Law Review, Louisiana State University; and Practicing Law Institute, New York, NY.

Mr. Bebel has served as a visiting lecturer on securities law principles at the following institutions: Mitchell Hamline School of Law, St. Paul, MN; the FBI Academy, Quantico, VA; Baylor University School of Law, Waco, TX; University of Houston Law Center, Houston, TX; and Texas Tech University School of Law, Lubbock, TX.

* Based upon the considerations enumerated herein, the blog postings that pertain to the Lubbock County case should not be relied upon to formulate an assessment or understanding of that proceeding or the participants thereto.