Unreported / Non-Citable
Background
82 Glenwood Avenue, L.L.C. contributed a $3 million earnest-money deposit toward an Austin real-estate transaction involving an entity it had formed with BHL Capital LLC. Before the wire transfer, BHL Capital’s owner, Nolan Schutze, and an agent of 82 Glenwood exchanged emails with escrow agent Evan Lipp about language in a draft contract. Lipp said he understood the draft to provide that the money would be released after the feasibility period ended or if the contract was canceled.
Shortly after receiving the money, Kane Title, L.L.C. wired it to Schutze at his request, less a $75,000 fee. According to the complaint, Lipp later sent an email implying that he was still withholding the funds while determining who could act for the purchasing entity. 82 Glenwood sued Schutze, BHL Capital, Lipp, David Kane, Kane Title, and others. After settling with Schutze and BHL Capital, it pursued contract, fiduciary-duty, negligence, and promissory-estoppel claims against Lipp, Kane, and Kane Title. The district court dismissed those claims under Rule 12(b)(6).
The Court’s Holding
The Fifth Circuit affirmed. Applying Texas law, the court held that 82 Glenwood failed to plead mutual assent to a contract requiring Lipp to return the money only to 82 Glenwood. The emails did not identify 82 Glenwood or communicate that its purported agent represented it, and they reflected discussion of how the participants interpreted a draft contract rather than Lipp’s consent to be contractually bound to 82 Glenwood. Because the claim against Kane Title was derivative of the claim against Lipp, it failed as well.
The court also held that the negligence and fiduciary-duty claims failed for lack of proximate cause. The complaint did not allege facts showing that Lipp or Kane Title participated in Schutze’s deception or had reason, based on prior dealings or the communications surrounding this transaction, to foresee that one person introduced as a partner would misappropriate funds supplied by another partner.
Finally, Lipp’s statement about when the money would be released was an opinion interpreting draft contract language, not a promise supporting promissory estoppel. Even if treated as a promise, the complaint did not adequately allege that Lipp could foresee reliance on his interpretation of a draft that remained subject to revision. The complaint also contained no factual allegations against Kane, warranting dismissal of the claims against him.
Key Takeaways
- Funding an escrow and discussing draft contract language did not establish mutual assent to an agreement requiring the escrow agent to return the money exclusively to the funder.
- An escrow agent could not reasonably foresee, on the pleaded facts, that one apparent transaction partner would misappropriate funds provided by another apparent partner.
- An escrow agent’s expressly qualified opinion about a draft contract’s meaning was not an actionable promise for promissory-estoppel purposes.
Why It Matters
The decision underscores the importance of giving escrow agents clear, documented instructions identifying the parties, their authority, and the permitted recipients of deposited funds. It also shows that allegations of an escrow agent’s mistaken release of funds will not establish negligence or fiduciary liability without facts making the resulting fraud reasonably foreseeable.