Conestoga Trust Services, LLC, Trustee of Conestoga Trust v. Focus Medical Underwriters, LLC Matthew L. Rios, M.D. Syed Fateh Hyder, M.D. Clarity Evaluations, LLC Timothy A. Beste, M.D. Barry Cook, M.D. And Convergence Medical Underwriting, LLC ( 2023 )

In the
Court of Appeals
Second Appellate District of Texas
at Fort Worth
___________________________
No. 02-23-00003-CV
___________________________
CONESTOGA TRUST SERVICES, LLC, TRUSTEE OF CONESTOGA TRUST,
Appellant
V.
FOCUS MEDICAL UNDERWRITERS, LLC; MATTHEW L. RIOS, M.D.; SYED
FATEH HYDER, M.D.; CLARITY EVALUATIONS, LLC; TIMOTHY A. BESTE,
M.D.; BARRY COOK, M.D.; AND CONVERGENCE MEDICAL
UNDERWRITING, LLC, Appellees
On Appeal from the 141st District Court
Tarrant County, Texas
Trial Court No. 141-308667-19
Before Kerr, Bassel, and Wallach, JJ.
Memorandum Opinion by Justice Bassel
MEMORANDUM OPINION
I. Introduction
Appellant Conestoga Trust Services, LLC, Trustee of Conestoga Trust (a third-
party purchaser of life-insurance policies) appeals the summary judgment granted in
favor of Appellees Focus Medical Underwriters, LLC; Matthew L. Rios, M.D.; Syed
Fateh Hyder, M.D.; Clarity Evaluations, LLC; Timothy A. Beste, M.D.; Barry Cook,
M.D.; and Convergence Medical Underwriting, LLC (who prepared life-expectancy
reports that projected the life expectancies of the individuals insured under the life-
insurance policies) on Conestoga’s claims for fraud and negligent misrepresentation.
In a single issue, Conestoga argues that fact issues exist regarding when it discovered
or should have discovered that Appellees were intentionally providing materially false
life-expectancy estimates and that Appellees failed to establish as a matter of law that
Conestoga did not reasonably rely on the life-expectancy estimates prepared by
Appellees. Because Appellees negated the reliance element—an element common to
both Conestoga’s fraud claim and its negligent-misrepresentation claim—we affirm
the trial court’s order granting Appellees’ traditional summary-judgment motion.
II. Factual and Procedural Background
A. An Overview of the Life-Settlement Business
A life settlement involves the sale of an existing life-insurance policy by the
original insured/owner to a life-settlement buyer. The original insured/owner
benefits by selling the policy for more than its cash surrender value. For its part, the
2
buyer pays less than the policy’s full death benefit to purchase the rights to the policy.
Premiums are then paid by the buyer to keep the policy in force, and when the policy
matures, the buyer (or whoever has been designated by the buyer) receives the policy’s
benefit. For an investor, the value of a life settlement is largely based on three factors:
(1) the face amount of the policy (the death benefit); (2) the life expectancy of the
insured; and (3) the premiums that will have to be paid to keep the policy in force.
Because the return on a life-settlement investment depends on the insured’s life
expectancy and the date of the insured’s death, the accuracy of a life-expectancy
estimate is important. If the insured dies before his or her estimated life expectancy,
the investor receives a higher return. If the insured lives longer than expected, the
investor’s return will be lower.
B. Michael McDermott’s Involvement in the Life-Settlement Industry
and His Introduction to Ronald James
The central players in this matter are Michael McDermott on behalf of
Conestoga, and the person who was providing Conestoga with information—Ronald
James. One company that was engaged in selling life settlements as investments was
Retirement Value, LLC. Retirement Value sold its securities through a group of
agents, whom it referred to as licensees. McDermott signed up as a licensee with
Retirement Value in April 2009. While McDermott worked at Retirement Value, he
3
was introduced to Ronald James.1 Conestoga’s brief states, “Conestoga’s claims
against James have been settled.” See Tex. R. App. P. 38.1(g) (stating that appellate
court may accept as true facts in the brief unless contradicted by another party). The
James Defendants are not parties to this appeal.
C. McDermott’s Formation of Conestoga and Conestoga’s
Relationship with James
In spring 2010, McDermott formed Conestoga Trust Services, LLC, which
acted as the trustee of Conestoga Trust. The role of the trust was to purchase certain
life-insurance policies (that were acquired in life-settlement transactions) and to hold
them for the benefit of investors who would be entitled to receive a certain fixed
portion of the total death benefits payable under the policies in which such investors
elected to participate.
The James Defendants were the exclusive source of the life-settlement policies
for Conestoga, and all of the policies held by Conestoga were acquired from the
James Defendants. Pursuant to an agreement between the James Defendants and
Conestoga, the James Defendants were responsible for conducting due diligence to
vet the policies before offering them to Conestoga. The James Defendants were also
responsible for obtaining life-expectancy reports, but before agreeing to work with the
James Defendants, McDermott insisted that the James Defendants could not obtain
James operated James Settlement Services International, LLC and James
1
Settlement Services, LLC (sometimes referred to herein as JSS). We refer to James
and his companies, collectively, as the James Defendants.
4
any life-expectancy estimates from Midwest Medical, which was a life-expectancy
estimate provider that Retirement Value had used. The James Defendants were
tasked with obtaining life-expectancy estimates from licensed, competent, trustworthy
sources based on all relevant and available information and with providing to
Conestoga the life-expectancy reports regarding the insureds on the policies that the
James Defendants offered and sold to Conestoga.
The James Defendants, for their part, obtained a copy of each insured
individual’s medical records, contacted the life-expectancy estimate providers, and
requested them to perform a medical review and to prepare a life-expectancy estimate.
In this case, the James Defendants purchased from Appellees life-expectancy
estimates (each of which included a disclaimer stating that the life expectancy was an
estimate and was not a guarantee of the life expectancy of the insured) and provided
them to Conestoga.
The James Defendants began presenting Conestoga with a portfolio of life-
settlement policies to purchase in April 2010. Over the years that followed,
Conestoga purchased numerous life-settlement policies from the James Defendants.
D. Retirement Value Litigation
In May 2010, Retirement Value came under a court-ordered receivership
pursuant to litigation filed by the Texas Attorney General’s Office at the insistence of
the Texas Securities Board (TSSB). The “Receiver’s Third Amended Cross-Claim and
Third-Party Claim” that was filed in August 2011 added JSS, James, and McDermott
5
as defendants. The receiver alleged that James had conceived the fraudulent and
illegal investment scheme that was the subject of the suit, had talked a man into
setting up Retirement Value, and had worked with him to design and implement the
investment scheme to create a larger market in which the James Defendants could sell
their policies. The receiver also alleged that Midwest Medical was creating unreliable
life-expectancy estimates; that Midwest Medical’s actual-to-expected performance was
42% (as compared to over 90% for other major life-expectancy estimate providers);
and that James had used Midwest Medical’s life-expectancy estimates, despite knowing
that they were way below others in the industry, because his scheme would not have
worked without the lower estimates from Midwest Medical. The receiver further
alleged that McDermott was heavily involved in Retirement Value’s marketing efforts,
was thought of as part of Retirement Value’s leadership, and was part of the initial
due diligence performed by Retirement Value on Midwest Medical. McDermott
settled the Retirement Value case in September 2012 for $750,000 and a commitment
to cooperate with the TSSB.
E. Conestoga’s Continued Relationship with James
Despite the Retirement Value suit, Conestoga did not cease doing business
with the James Defendants. In early 2013, Conestoga received a communication by a
third party accusing the James Defendants of pushing the use of life-expectancy
reports created by Midwest Medical while at the same time James had life-expectancy
estimates from others that were several times longer. The third party further asserted
6
that James had used the long life-expectancy estimates to purchase cheap and had sold
the policies to Retirement Value at inflated prices by using shorter life-expectancy
estimates produced by Midwest Medical. Conestoga forwarded the accusations to
James and requested a response. James replied by denying everything and assuring
Conestoga that he and his companies would do no such thing; specifically, James
stated, “WE DO NOT BUY POLICIES BASED ON LONG LE’S[2] AND
SELL THEM AT SHORT LE’S,” and “WE DO NOT PICK LE
PROVIDERS.”
F. The 2013 Press Release and the Change in Life-Expectancy
Protocol
In May 2013, Conestoga circulated a press release entitled “Conestoga
International Adopts New Life[-]Expectancy Protocol For Life Settlements” with the
subheading “New Protocol Considers Actual Recorded Deaths from the Social
Security Administration Tables.” The press release states,
Michael McDermott, President of Conestoga International LLC[] has
announced that the company has changed its protocol for determining
life expectancies on life[-]settlement policies purchased by the Conestoga
Settlement Trust[] and made available as fractional interests to accredited
investors[.]
Conestoga made the decision to re-evaluate its life[-]expectancy
protocol as a result of the recent turmoil in the life[-]expectancy
prediction industry[:]
2
Those in the industry often shorten the term “life expectancy” to LE. When
such shorthand reference appears in quoted material, we will leave it unaltered.
7
• 21st Services, Inc[.,] a recognized life[-]expectancy
provider, recently announced that it had made yet
another major change in its methodology[;]
• AVS[,] another recognized life[-]expectancy
provider, filed for bankruptcy[; and]
• Numerous lawsuits and regulatory actions have been
filed against other life[-]settlement companies for
allegedly manipulating life expectancies[.]
These developments and a corporate commitment to constantly
strive to improve its product caused Conestoga to search for a more
stable methodology to establish life expectancies for its portfolio of
life[-]settlement policies[.]
Conestoga no longer relies solely on predictions from licensed
life[-]expectancy providers. Rather, on all policies purchased for the
portfolio and made available as fractional interests in life settlements to
accredited investors, Conestoga includes life expectancies from the
Social Security Administration Tables, based only on age and general
statistics of longevity, without adjusting due to the impaired health of the
insureds.
“Although this results in considerably longer life expectancies
than companies who rely on underwritten life expectancies exclusively[]
and requires that Conestoga escrow funds to pay premiums for longer
periods of time, it was deemed necessary to offer life settlements that
could better meet the expectations of our clients[,]” said Mr.
McDermott[.]
“The life[-]expectancy[-]prediction industry has proven itself time-and-again to
be an untested and imprecise science, at best[.]
“It is in the long-term interests of our clients to protect the value of life
settlements based upon the stability of life[-]expectancy tables from the Social Security
Administration—tables based upon actual, irrefutable results, rather than relying
solely upon the constantly changing underwriting methodologies offered by recognized
life[-]expectancy providers[.]”
Conestoga was already a leader in the industry in its handling of
life expectancies prior to this announcement. By designating funds
8
necessary to pay premiums for up to three years beyond underwritten
life expectancies, Conestoga set a new standard for protection against
premium [costs] in the life[-]settlement industry[.]
Conestoga was created in 2010 with the goal to offer the safest
and most transparent life settlements in the industry. Conestoga makes
available fractional interests in life settlements to accredited investors in
forty-seven states in the US, and abroad, from a portfolio of policies
owned by the Conestoga Settlement Trust, currently valued at more than
$100 [m]illion[.] [Emphasis added.]
G. Conestoga’s Disclaimer Language
As part of its efforts to attract investors, Conestoga provided investors with
Private Placement Memoranda, which indicated the nature of the investment being
created and cautioned as to the risks of the investments. Conestoga’s January 17,
2014 Private Placement Memoranda include the following caveats as to the life-
expectancy estimates:
Conestoga purchases policies that have life[-]expectancy predictions
from life[-]expectancy providers licensed and registered in Texas—one
of the few states that require[s] life[-]expectancy providers to be
registered. Average life expectancies are predicted by two licensed and
registered independent life[-]expectancy underwriting companies[] or by
a combination of an underwritten life expectancy and a life expectancy
issued by the United States Social Security Administration. The Social
Security Life[-]Expectancy Tables do not take into account an
individual’s personal health status[] but are based on the actual recorded
deaths for millions of Americans. Conestoga does not represent that it
is an expert in regard to life[-]expectancy reporting. Rather, Conestoga
relies on life[-]expectancy estimates of registered life[-]expectancy
providers supplied to Conestoga’s source for its life[-]settlement
insurance policies to estimate the maturity dates of its policies[] and on
the information maintained by the United States Social Security
Administration. The accuracy of any life[-]expectancy estimates or medical
information concerning an insured is not independently verified by Conestoga. Life
expectancies are only forecasts of the expected mortality of an insured and are
9
inherently uncertain, especially in small sample sizes. Inaccuracies are not only
possible but expected both from estimates that are too long and estimates that are too
short. Inaccuracies can result from inaccurate diagnoses[] or prognoses[;]
changes in an insured’s ability to fight disease[; and] reliance on
outdated, inaccurate, improper, or flawed methodology, among other
reasons. In addition, improvements in medicine, disease treatment,
pharmaceuticals, and other medical and health services may enable
insured persons to live longer than expected. Conestoga makes no guarantee
or assurance that any life[-]expectancy estimate obtained with respect to the expected
maturity of a life[-]insurance policy will be accurate or correct. Rather, any
mortality table or other actuarial data with respect to the insured person
under such policy will only be an educated prediction of, and therefore
not a guarantee of, the date of the future maturity of the policy. . . .
....
There is no guarantee or warranty implied in any [life-expectancy] estimate
provided to Conestoga, and such estimate does not constitute a
recommendation of any nature.
[] No One Can Predict the Actual Life Expectancy of the
Insured Person
When the life[-]insurance policies are made available for possible
participation, Conestoga receives life[-]expectancy estimates on the
insured persons from a qualified third-party life[-]expectancy provider.
Any life[-]expectancy prediction is only an estimate of how long the insured person will
live[] based on available medical and actuarial data. No one can predict when an
individual will die. Within a given set of life[-]insurance policies, there may
be insured persons who die earlier than expected, other insured persons
who die when expected, and still other insured persons who live much
longer than expected.
....
Life expectancies and mortality estimates relied upon by independent
life[-]expectancy providers are uncertain estimates only. There can be no
assurance that the current mortality tables or other actuarial data relied
upon will be predictive of the future longevity or the mortality of an
insured. . . .
10
....
Because no one can with certainty predict the date of death of the
insured person, life[-]expectancy predictions are only forecasts, projections, and
estimates of the expected longevity of an insured and are inherently uncertain,
especially in small sample sizes. [Emphases added.]
H. Conestoga’s Intervention in the Georgia Suit Involving James
Settlement Services International
As noted in Conestoga’s 2013 press release, the life-settlement industry was
replete with lawsuits, and the lawsuits did not cease. In 2017, James Settlement
Services International sued an insurance broker, Eugene E. Houchins III, and others
in the Northern District of Georgia (the Houchins suit). Conestoga intervened in the
suit in 2018. In August 2019, Conestoga filed a motion for leave to file an amended
complaint in intervention “to add allegations that James Settlement [had] fraudulently
induced Conestoga to purchase [a life-insurance policy that was sold multiple times on
the secondary market] by providing false and misleading information regarding the
insured’s life expectancy.” Conestoga’s amended complaint alleged that “[p]art of the
due diligence and vetting that James Settlement [had] agreed to provide [Conestoga
was] life[-]expectancy estimates on the insureds from licensed providers.” Conestoga
further alleged that “James Settlement intended to induce Conestoga to act upon the
false and misleading representations as to [the insured’s] life expectancy by buying the
policy, and Conestoga did act in justifiable reliance upon the representations by
buying the policy.” McDermott gave a deposition in that suit and stated that he had
trusted James to “basically choose good policies to put in the portfolio for Conestoga
11
to offer,” that he (McDermott) had no relationship with the life-expectancy providers,
that he had relied on James to provide life-expectancy providers, and that he did not
educate himself about life-expectancy reports during that time “[b]ecause that was the
responsibility of James Settlement Services.”
I. The Investor Suit Against Conestoga
Conestoga did not remain immune from suit. When sued, it defended itself by
relying on the inherent unreliability of life-expectancy estimates. In 2019, investors
sued Conestoga and McDermott (as well as JSS) in the Northern District of Texas
(the Neukranz suit). Two years later, Conestoga filed a motion to dismiss the
investors’ complaint, arguing that none of the investors had pleaded facts showing
that their alleged reliance was justifiable. Specifically, Conestoga argued that “the
allegations ignore almost all of what [the investors] were told about the estimates.”
Conestoga quoted the law regarding relying on representations when red flags are
present: “[A] person ‘may not justifiably rely on a representation if there are red flags
indicating such reliance is unwarranted.’” McDermott filed a sworn affidavit in the
case in which he noted, “As stated in the documentation provided to potential
investors, each insured’s life expectancy was an estimate, and the amount needed to
pay the carrier to keep each policy in force over time was similarly an estimate. It is
obviously not possible to guarantee an insured’s life expectancy.” McDermott also
pointed out that “[a]ll Private Placement Memorand[a] ever used by Conestoga Trust
very clearly informed potential investors . . . that forecasts of the expected mortality
12
of an insured are inherently uncertain and that no one can predict when an individual
will die” and “that Conestoga Trust made no guarantee or assurance that any
life[-]expectancy estimate obtained [would] be accurate or correct.”
J. The Underlying Suit
In June 2019, Conestoga sued the James Defendants in the 141st District Court
for various causes of action and sued Appellees for fraud and negligent
misrepresentation based on the life-expectancy reports that they had prepared.
Appellees answered with a general denial and pleaded various affirmative defenses,
including the affirmative defense of statute of limitations and lack of justifiable
reliance.3
Appellees filed a motion to dismiss under Texas Rule of Civil Procedure 91a,
which permits summary dismissal as to pleaded claims that have no basis in law or
fact. See Tex. R. Civ. P. 91a. The trial court granted the motion, and the case was
appealed. Conestoga Tr. Servs., LLC, Tr. of Conestoga Tr. v. Focus Med. Underwriters, LLC,
No. 14-20-00302-CV, 2022 WL 599344, at *1 (Tex. App.—Houston [14th Dist.]
As to the reliance element common to Conestoga’s causes of action, Appellees
3
argued that Conestoga could not reasonably or justifiably rely upon the life-
expectancy reports prepared by Appellees because (1) Conestoga had prior knowledge
of and had acknowledged negative acts and facts about the James Defendants,
(2) Conestoga had decided as of May 2013 that the Social Security Administration
Tables were more reliable predictors of life expectancy and had incorporated that
information into its projections, and (3) Conestoga had arbitrarily added several years
onto any life-expectancy estimates that it had received from the James Defendants in
order to reduce the need to collect extra premium money from investors.
13
Mar. 1, 2022, no pet.) (mem. op.).4 The Fourteenth Court of Appeals concluded that
Conestoga had sufficiently pleaded actionable claims for fraud and negligent
misrepresentation, reversed the trial court’s dismissal order, and remanded for
proceedings consistent with its opinion. See id. at *3.
On remand to the trial court, Appellees moved for traditional summary
judgment on Conestoga’s claims based on the affirmative defense of statute of
limitations and lack of justifiable reliance.5 Conestoga filed a response, Appellees filed
a reply, and Conestoga filed a response to the reply. The trial court held a hearing on
the summary-judgment motion. Afterward, the trial court rendered a summary-
judgment order that does not state the ground on which it was granted. Conestoga
perfected an appeal to challenge the summary-judgment order.
III. Summary Judgment Was Proper
Conestoga argues in its sole issue that the trial court erred by granting
Appellees’ traditional motion for summary judgment. Conestoga challenges both
grounds—statute of limitations and reliance—on which Appellees moved for
4
Originally appealed to this court, the prior appeal was transferred to the
Fourteenth Court of Appeals by the Texas Supreme Court pursuant to its docket
equalization efforts. See Tex. Gov’t Code Ann. § 73.001; Conestoga Tr. Servs., 2022 WL
599344, at *1 n.2.
5
Appellees initially filed a combined no-evidence and traditional motion for
summary judgment. Later, the parties entered into a Rule 11 agreement that
Appellees would amend their summary-judgment motion “to drop the no[-]duty
argument and proceed on limitations and reliance.” Appellees complied by filing an
amended traditional motion for summary judgment that proceeded solely on
limitations and lack of justifiable reliance.
14
summary judgment. Because we hold that Appellees conclusively established that
Conestoga could not have justifiably relied on the life-expectancy reports due to
numerous red flags that were present and that Conestoga did not come forward with
competent controverting evidence that raises a fact issue on the element of reliance,
we uphold the trial court’s summary judgment in favor of Appellees.
A. Standard of Review
We review a summary judgment de novo. Travelers Ins. v. Joachim, 315 S.W.3d
860, 862 (Tex. 2010). We consider the evidence presented in the light most favorable
to the nonmovant, crediting evidence favorable to the nonmovant if reasonable jurors
could, and disregarding evidence contrary to the nonmovant unless reasonable jurors
could not. Mann Frankfort Stein & Lipp Advisors, Inc. v. Fielding, 289 S.W.3d 844, 848
(Tex. 2009). We indulge every reasonable inference and resolve any doubts in the
nonmovant’s favor. 20801, Inc. v. Parker, 249 S.W.3d 392, 399 (Tex. 2008).
A defendant that conclusively negates at least one essential element of a
plaintiff’s cause of action is entitled to summary judgment on that claim. Frost Nat’l
Bank v. Fernandez, 315 S.W.3d 494, 508 (Tex. 2010). Once the defendant produces
sufficient evidence to establish the right to summary judgment, the burden shifts to
the plaintiff to come forward with competent controverting evidence that raises a fact
issue. Phan Son Van v. Peña, 990 S.W.2d 751, 753 (Tex. 1999).
15
B. Applicable Law
We begin by setting forth the elements of a fraud claim and a negligent-
misrepresentation claim, noting the reliance element in each claim:
To prevail on a fraud claim, a plaintiff must show[] (1) the defendant
“made a material representation that was false[,”6] (2) the defendant
“knew the representation was false or made it recklessly as a positive
assertion without any knowledge of its truth[,]” (3) the defendant
intended to induce the plaintiff to act upon the representation[,] and
(4) the plaintiff actually and justifiably relied upon the representation and
suffered injury as a result. Ernst & Young, L.L.P. v. Pac. Mut. Life Ins. Co.,
51 S.W.3d 573, 577 (Tex. 2001) (citing Trenholm v. Ratcliff, 646 S.W.2d
927, 930 (Tex. 1983)). The fourth element has two requirements: the
plaintiff must show that it actually relied on the defendant’s
representation and, also, that such reliance was justifiable. Grant Thornton
LLP v. Prospect High Income Fund, 314 S.W.3d 913, 923 (Tex. 2010).
To prevail on a cause of action for negligent misrepresentation, a
plaintiff must show[] (1) a representation made by a defendant in the
course of its business or in a transaction in which it has a pecuniary
interest[,] (2) the representation conveyed “‘false information’ for the
guidance of others in their business[,] (3) the defendant did not exercise
6
The Texas Supreme Court has previously explained what constitutes a material
representation:
A representation is material if the representation was important to the
plaintiff in making a decision, such that a reasonable person would be
induced to act on and attach importance to the representation in making
the decision. See Italian Cowboy Partners[, Ltd. v. Prudential Ins. Co. of Am.],
341 S.W.3d [323,] 337 [(Tex. 2011)] (citations omitted). The
representation may be material even if it was not the only factor inducing
the plaintiff[] to make the decision or enter into the transaction, but the
plaintiff must have relied on the misrepresentation. See Brush v.
Reata Oil & Gas Corp., 984 S.W.2d 720, 727–28 (Tex. App.—Waco 1998,
pet. denied) (citations omitted).
Barrow-Shaver Res. Co. v. Carrizo Oil & Gas, Inc., 590 S.W.3d 471, 496–97 (Tex. 2019)
(emphasis added in bold).
16
reasonable care or competence in obtaining or communicating the
information[,] and (4) the plaintiff suffer[ed] pecuniary loss by justifiably
relying on the representation.” Fed. Land Bank Ass’n of Tyler v. Sloane, 825
S.W.2d 439, 442 (Tex. 199[1]).
JPMorgan Chase Bank, N.A. v. Orca Assets G.P., L.L.C., 546 S.W.3d 648, 653–54 (Tex.
2018). The Texas Supreme Court in Orca Assets expanded on the reliance element:
Justifiable reliance . . . can be negated as a matter of law when
circumstances exist under which reliance cannot be justified. See Nat’l
Prop. Holdings, L.P. v. Westergren, 453 S.W.3d 419, 424 (Tex. 2015) . . .
(“We hold that, as a matter of law, th[e] reliance was not justifiable.”);
AKB Hendrick, LP v. Musgrave Enters., Inc., 380 S.W.3d 221, 232 (Tex.
App.—Dallas 2012, no pet.) (holding that reliance on a representation
made in a business or commercial transaction can be unjustified as a
matter of law).
In determining whether justifiable reliance is negated as a matter
of law, courts “must consider the nature of the [parties’] relationship and
the contract.” AKB, 380 S.W.3d at 232. “In an arm’s-length
transaction[,] the defrauded party must exercise ordinary care for the
protection of his own interests. . . . [A] failure to exercise reasonable
diligence is not excused by mere confidence in the honesty and integrity
of the other party.” Westergren, 453 S.W.3d at 425 (quoting Thigpen v.
Locke, 363 S.W.2d 247, 251 (Tex. 1962)). And when a party fails to
exercise such diligence, it is “charged with knowledge of all facts that
would have been discovered by a reasonably prudent person similarly
situated.” See AKB, 380 S.W.3d at 232. To this end, that party “cannot
blindly rely on a representation by a defendant where the plaintiff’s
knowledge, experience, and background warrant investigation into any
representations before the plaintiff acts in reliance upon those
representations.” See Shafipour v. Rischon Dev. Corp., No. 11-13-00212-CV,
2015 WL 3454219, at *8 (Tex. App.—Eastland May 29, 2015, pet.
denied) (mem. op.).
Id. at 654.
The Texas Supreme Court went on to explain how “red flags” can negate
justifiable reliance:
17
In Grant Thornton . . . , we held that “a person may not justifiably rely on
a misrepresentation if ‘there are “red flags” indicating such reliance is
unwarranted.’” 314 S.W.3d at 923 (quoting Lewis v. Bank of Am. NA,
343 F.3d 540, 546 (5th Cir. 2003)). In that case, investors claimed to
have justifiably relied on certain representations when purchasing bonds
from a corporation. Id. We held they could not have justifiably relied
because before the acquisition, the investors’ senior portfolio manager
learned the corporation had lost its primary source of funding and was
financially at risk. Id. Before reaching this conclusion, we noted that the
portfolio manager was “an experienced bond investor” who held a
finance degree and an MBA and who ultimately admitted the purchases
“reflected a substantial risk.” Id.In adopting the “red[-]flags” impediment to justifiable reliance in
Grant Thornton, we were persuaded by the Fifth Circuit’s decision in
Lewis . . . , 343 F.3d at 540. The Fifth Circuit analyzed the justifiable-
reliance element as follows:
Lewis, an individual with both a business background and
familiarity with retirement accounts, should have viewed
this series of events as a red flag warranting further
investigation of the tax consequences of the loan
transaction. Viewing the circumstances in their entirety,
including Lewis’s access to professional accountants, the
amount of money involved in the transaction, and the
ambiguous nature of [the defendant’s] “assurance,” Lewis’s
decision to enter into the transaction without undertaking
additional investigation into its tax consequences was not
justifiable.
Id. at 547 (footnote omitted).
Id. at 655.
C. Analysis
1. Appellees negated the element of reliance as a matter of law.
Appellees argued in their summary-judgment motion that Conestoga was
required to use due diligence to investigate the life-expectancy estimates before relying
18
on them and that Conestoga, as a savvy participant to an arm’s-length transaction,
should have recognized the many red flags indicating that reliance was not warranted.
Specifically, Appellees contended that the following “red flags” precluded Conestoga
from justifiably relying on the life-expectancy estimates:
• McDermott and James and JSS were [all] sued by the [r]eceiver for
the TSSB in 2011 while McDermott was running Conestoga and
buying policies from James and JSS. McDermott was made well
aware of . . . James[’s] being involved with and knowing about the
background of Midwest Medical[, which] was manipulating life
expectancies to make them shorter and more attractive to
investors. McDermott and Conestoga continued buying
life[-]insurance policies and obtaining LE reports from James and
JSS after all the revelations in the [Retirement Value case].
• The [p]ress [r]elease, [which] McDermott made on behalf of
Conestoga about the reliability of LE reports, . . . shows [that]
McDermott and Conestoga were well aware of the unreliability of
life[-]expectancy reports[ and] were aware of problems in the
life[-]expectancy industry[,] which McDermott recited in his press
release—the same issues flagged by the [r]eceiver in the
[Retirement Value] case.
• The press release also shows that McDermott had performed
some type of investigation or [had] read and [had] relied on a
study and [had] concluded that Conestoga would no longer rely
on LE reports because through his investigation, he had
determined that [the] Social Security Administration Tables were
more reliable.
• McDermott admitted in [his] deposition that he [had] arbitrarily
added a few years to whatever average of LE expectancies James
[had] provided him. He claims that the reason was to “better
protect the investors[,]” but his press release admits that the Social
Security Tables are longer and reduce the need for “premium
calls[,”] i.e.[,] asking investors to put more money into a policy
after they purchased it to keep the premiums paid and prevent
19
cancellation of the policy. McDermott’s solution to simply add
years to the expected life expectancy in order to cover potential
extended premium payments was purely arbitrary. It had nothing
to do with the accuracy of the life[-]expectancy projection; it had
everything to do with adding years to the insured’s life so they
could collect the premium funds from investors instead of
Conestoga[’s] having to come out of pocket to pay the premiums.
The press release was made at the latest by 2013. Thus,
[Conestoga] cannot prove critical elements of justifiable or
reasonable reliance on anything regarding [Appellees’]
life[-]expectancy reports. [Exhibit references omitted.]
In addition to these red flags, Appellees noted in their summary-judgment
motion that Conestoga had attempted to have “it both ways” with regard to due
diligence: McDermott testified in his deposition that he had totally relied on JSS and
had never bothered to educate himself on life expectancies, but
[h]e did in fact perform due diligence on [l]ife [e]xpectancies after he was
sued in 2011 in the [Retirement Value] case and he did put out a press
release in May 2013 that says he looked into life expectancies and he was
aware of problems of reliability[,] . . . [so] he employed data from the . . .
Social Security Administration Tables.
Appellees further argued that the life-expectancy reports contained disclaimers that
the estimates were not guarantees and that “[n]o reasonable businessperson like
McDermott in the business of buying and selling life settlements could receive a
life[-]expectancy report and think an LE [p]rovider could precisely predict and
promise that an individual would die on a date certain.” Appellees noted that
McDermott had acknowledged in his declaration from the Neukranz matter that life-
expectancy projections are only estimates based on available information and that
Conestoga had provided the same disclaimers in its Private Placement Memoranda.
20
To their summary-judgment motion, Appellees attached eighteen exhibits,
spanning almost 500 pages.7 Based on our review, the summary-judgment evidence
establishes as a matter of law that Conestoga’s alleged reliance on the life-expectancy
estimates prepared by Appellees was not justified, as shown by the following:
• The “Receiver’s Third Amended Cross-Claim and Third-Party Claim”
that was filed in August 2011 in the Retirement Value case8 stated that
McDermott’s involvement in Retirement Value “was pervasive,” that he
was thought of as part of Retirement Value’s leadership, that he was
heavily involved in Retirement Value’s marketing efforts and created
documents used to recruit licensees, that he was part of the initial due
diligence performed by Retirement Value on Midwest Medical, that he
was very aware of the questions raised by the SEC and others as to the
reliability and honesty of Midwest Medical’s life-expectancy projections,
and that he and the James Defendants were engaged in a general scheme
7
The record does not contain any objection from Conestoga related to
Appellees’ summary-judgment evidence.
8
This pleading, and other pleadings mentioned below, were attached to
Appellees’ motion for summary judgment. See generally Souder v. Cannon, 235 S.W.3d
841, 848 (Tex. App.—Fort Worth 2007, no pet.) (noting that authenticated pleadings
from other lawsuits are proper summary-judgment evidence).
21
(conceived by Ronald James)9 to defraud investors by making false and
misleading statement to the investors.
• The October 2018 “Complaint in Intervention of Conestoga Trust
Services, LLC” and the August 2019 amended complaint in the Houchins
suit stated that JSS was the exclusive agent and provider of life-
settlement policies for Conestoga, that JSS had failed to conduct due
diligence and properly vet the policies that it had provided Conestoga,
and that JSS had fraudulently induced Conestoga to purchase a certain
policy by providing false and misleading information regarding the
insured’s life expectancy.
• In spite of all the negative information that he had received about James,
McDermott’s deposition from August 2019 stated that he had trusted
James “to basically choose good policies to put in the portfolio for
Conestoga to offer” and that he had “relied totally on them,” that James
knew what kind of policies to look for because he had provided policies
to Retirement Value, that McDermott had relied on JSS to provide life-
expectancy estimates because he had no relationship with life-expectancy
9
The pleading explains that JSS provided the life-expectancy calculations, which
were calculated by Midwest Medical, and that Retirement Value and the James
Defendants were fully aware that the Midwest Medical calculations were unreasonably
optimistic—calculations by reputable underwriters were 180% longer than those
calculated by Midwest Medical.
22
providers, that he averaged the life-expectancy estimates and the Social
Security tables and then added another two and a half to three years, that
he did not take any steps to educate himself about life-expectancy
reports “[b]ecause that was the responsibility of James Settlement
Services” and because he had “relied on their vast experience,” that he
had determined which policies to purchase based on the information
that JSS had sent him regarding the policies, and that he had looked to
James to provide the policies with accurate information.
• The motion to dismiss that Conestoga filed in June 2021 in the Neukranz
suit instituted by investors (who alleged that the transaction documents,
including the Private Placement Memoranda, that they were provided by
Conestoga contained misrepresentations and omissions) emphasized that
the investors were provided “estimates prepared by third-party
professionals of how long the insureds were expected to live”; that the
investors “[were] alleging fraud by hindsight” because some of the
estimates that they were provided turned out to be incorrect; that the
investors’ complaint “ignore[d] ‘red flags’ in the transaction documents
that directly refute[d]” their claims, including the wording of the Private
Placement Memoranda that cautioned that “no one can with certainty
predict the date of death of the insured person,” “life[-]expectancy
predictions are only . . . estimates of the expected longevity of an insured
23
and are inherently uncertain,” and Conestoga made “no guarantee or
assurance that any life[-]expectancy estimate obtained with respect to the
expected maturity [of] a life[-]insurance policy [would] be accurate or
correct”; and that the investors had alleged no facts that “ma[d]e it
plausible that ‘Conestoga’ would have itself overpaid JSS for the same
policies based on the same LE and premium estimates despite knowing
those estimates were somehow ‘false.’”10
• McDermott’s declaration made in June 2021 in the Neukranz case stated
that James was responsible for conducting due diligence to vet policies
before offering them to Conestoga, that James was also responsible for
calculating the minimum average cost of premium payments, that
Conestoga relied on James’s premium calculations, that James touted the
accuracy and reliability of the premium calculations and sent an email to
Conestoga stating that “JSS does not make mistakes[] with anything,”
that James was responsible for obtaining life-expectancy reports and for
providing them to Conestoga, that Conestoga started averaging the life-
expectancy estimates with the life-expectancy data provided by the Social
Security Administration in 2013, and that Conestoga’s documents stated
10
Conestoga made this argument in its June 2021 motion to dismiss, despite
Conestoga’s having filed suit against Appellees based on the opposite of this
contention in June 2019.
24
that the life expectancies were estimates only (as detailed in block quotes
from the Private Placement Memoranda).
• Conestoga’s January 17, 2014 Private Placement Memoranda (pertinent
sections of which are quoted in the background section above)
repeatedly described the life expectancies as estimates, forecasts,
uncertain, inaccurate, and not guaranteed.
• The sworn declaration of the president of Appellee Clarity Evaluations
stated that the life-expectancy estimates that it provided had disclaimers.
The sample life-expectancy certificate prepared by Clarity and attached
to the declaration included the following:
Disclaimers: A [l]ife [e]xpectancy cannot be precisely determined
for any specific patient[] but rather is the average life expectancy of a
large group of patients with similar clinical and individual profiles.
No one can guarantee or warrant the accuracy of any patient’s precise
life expectancy. The information contained in this facsimile is
privileged and confidential information for the use of the individual or
entity named.
....
A Mortality Forecast is not a guarantee of the
duration of the patient’s life. It is the sum of medical and
statistical analysis to provide the best prediction possible
for that individual.
This review was compiled solely for James
Settlement Services, LLC and may not be used by any other
company.
25
• The sworn declaration of the president of Appellee Convergence
Medical Underwriting, LLC stated that the life-expectancy estimates that
it provided all had disclaimers. The sample life-expectancy certificate
prepared by Convergence and attached to the declaration included the
following:
Important: Life[-e]xpectancy estimates are statistical
averages based on the life expectancy of a large group of
persons with similar individual[] and clinical[] analyses.
Convergence Medical Underwriting, LLC does not
represent that an insured will die on or near a projected
date. There may be information that has not been
provided to Convergence Medical Underwriting, LLC that
may affect life expectancy. This report does not warrant or
guarantee life expectancy.
. . . Your state or the insured’s state laws may
prohibit you from making further disclosure without the
expressed written consent of the person to whom it
pertains. The information in this report is proprietary and
may not be distributed to any other party without the
expressed written consent of Convergence Medical
Underwriting, LLC[] or the insured.
• The sworn declaration of the managing partner of Appellee Focus
Medical Underwriters, LLC stated that the life-expectancy estimates that
it provided all had disclaimers. The sample life-expectancy certificate
prepared by Focus and attached to the declaration included the
following:
Life [e]xpectancy is an estimation of the number of years
that a person is expected to live based on statistical data of
26
the average life expectancy of a large group of persons with
similar clinical and individual profiles. There is no
guarantee or warrant[y] implied in this report[,] and [it] is an
estimate only and does not constitute a recommendation of
any nature.
. . . The information in this report is for the
requesting party only and may not be distributed to any
other party without the expressed written consent of Focus
Medical Underwriters, LLC[] or the insured. This report is
valid for 90 days from date of certificate.
Appellees’ summary-judgment evidence established that Conestoga, through
McDermott, was well acquainted with James’s history of using fraudulent life-
expectancy estimates; that despite this knowledge, Conestoga had still tasked James
with hiring life-expectancy estimate providers for Conestoga and had relied solely on
his claims of accuracy without performing any due diligence on the life-expectancy
estimate providers; that Conestoga had started distrusting the life-expectancy
estimates in 2013 and had begun averaging them with the Social Security Life-
Expectancy Tables and then adding several years to that average; and that Conestoga
had ignored the disclaimers for purposes of this suit but had touted them as its main
defense for purposes of defending itself in the Neukranz suit. 11 As further stated by
11
As part of its arguments responding to the no-justifiable-reliance ground,
Conestoga argues in its brief that the trial court granted the summary judgment on
grounds that were not before it. Specifically, Conestoga argues that based on the trial
court’s questioning at the hearing regarding the parties’ lack of privity and the
language in the life-expectancy reports, the trial court relied on disclaimer language
from the life-expectancy reports that the information was for the requesting party
only and could not be distributed without the life-expectancy estimate provider’s
consent. The trial court’s questioning and statements during the hearing do not
27
Appellees, “[Conestoga] had overwhelming knowledge of facts that would make a
constitute evidence, nor do the court’s comments alter our standard of review of the
trial court’s broadly worded summary-judgment order. See generally Farmer v. State, No.
2-06-113-CR, 2006 WL 3844169, at *4 n.8 (Tex. App.—Fort Worth Dec. 28, 2006,
pet. ref’d) (mem. op., not designated for publication) (“We have reviewed the trial
court’s comments during the charge conference related to the sufficiency of the
evidence and note that they are not evidence.”). And we therefore do not rely on the
comments in our analysis.
To the extent that Conestoga’s argument can be broadly read as contending
that the Rule 11 agreement removes the disclaimers from consideration, we disagree.
The parties’ Rule 11 agreement did not say that Appellees would not argue the
disclaimers, only that they would not argue “no duty.” Appellees made the following
argument about the disclaimers in their amended traditional motion for summary
judgment:
Moreover, all of [Appellees’] [r]eports contain disclaimers of what a life
expectancy is and is not, and they provide no guarantees. It is clear that
[Conestoga] clearly read and understood the [r]eports and the disclaimers
because [Conestoga] provided the same disclaimers about life[-
]expectancy reports in their [Private Placement Memoranda] as the
disclaimers [that Appellees] included in their reports. [Conestoga] knew
that life expectancies were estimates and averages only based on
statistical information of people with similar ages and conditions. LE
reports do not contain promises of how long someone will live or when
they will die. Conestoga understood this because they adopted the same
type of disclaimers in their Private Placement Memorandum.
[References to summary-judgment exhibits omitted.]
Conestoga filed a response to the reply stating that “[a]s agreed by the parties,
[Appellees’] Amended MSJ omits entirely their previously asserted argument regarding
whether [they] intended or expected the life expectancies to be relied on by persons
such as Conestoga” and that “[Appellees’] Amended MSJ is solely a ‘traditional’
motion for summary judgment and omits entirely previously asserted ‘no evidence’
grounds.” Conestoga thus agreed that Appellees’ amended traditional summary-
judgment motion complied with the Rule 11 agreement, despite containing arguments
related to the disclaimers. Because the portion of the disclaimers—that the life-
expectancy estimates provide no guarantees—is separate from the no-duty portion,
we consider only the no-guarantee portion in our review of the summary-judgment
evidence.
28
reasonable person [(1)] avoid doing any business with James and JSS and [(2)] if he is
going to do business with JSS[,] he had plenty of knowledge to investigate the validity
of the life expectancies.” Viewing the circumstances in their entirety, including the
numerous red flags listed above and McDermott’s sophistication in the life-settlement
industry in which he acquired a portfolio for Conestoga worth over $100 million, we
conclude that Appellees presented summary-judgment evidence that conclusively
negated Conestoga’s justifiable reliance. See Barrow-Shaver Res. Co., 590 S.W.3d at 501
(holding that there were sufficient red flags in the entirety of the circumstances to
negate justifiable reliance).
2. Conestoga did not raise a fact issue on the reliance element.
The burden then shifted to Conestoga to come forward with competent
controverting evidence that raises a fact issue. See Phan Son Van, 990 S.W.2d at 753.
Conestoga argued in its response to Appellees’ traditional summary-judgment motion
and argues in its brief that Appellees’ contention—that Conestoga could not have
relied on the life-expectancy estimates because Conestoga knew that the estimates
were inherently uncertain and were not guarantees of when an individual will die—is
based on a mischaracterization of what constitutes a life expectancy in the life-
settlement context and ignores the critical role that such estimates play in the context
of buying and selling life settlements. Conestoga points to McDermott’s declaration,
29
which is attached to Conestoga’s response,12 and urges that a “‘life[-]expectancy
[estimate] is always a significant component of the value of a life settlement’” and that
life expectancy is “‘the most important consideration in comparing the investment
value of otherwise similar life settlements.’” Conestoga also quotes McDermott’s
statement that “‘[j]ust because life[-]expectancy prediction is inherently imprecise
hardly means life expectancies are not a critical component of life[-]settlement
valuation.’”
With regard to Appellees’ argument that Conestoga could not reasonably rely
on the life-expectancy estimates prepared by Appellees because James was involved
and had been previously accused of using improper life expectancies prepared by
Midwest Medical, Conestoga responds that it had expressly prohibited James from
using Midwest Medical and that it had no reason to doubt Appellees’ integrity and
qualifications; thus, Conestoga contends that Appellees “point[ed] to no ‘red flags’
concerning . . . Appellees.” Conestoga further points to McDermott’s declaration in
which he stated that he had relied on the life-expectancy estimates prepared by
12
The other documents attached to Conestoga’s response include a chart
showing the purchase date of various life-insurance policies and the number of
months the insured was expected to live as calculated by each of the life-expectancy
providers (but not listing how long each insured actually lived), emails from 2014
between McDermott and James requesting that James send life-expectancy reports for
new policies and attaching three life-expectancy certificates from Appellee
Convergence, emails between McDermott and James in 2013 discussing the use of the
Social Security mortality tables, and emails between McDermott and James regarding
a policy that McDermott said that he did not want to buy to which James responded
by lowering the price.
30
Appellees because he “did not have any training or expertise regarding the preparation
of life expectancies or the use of mortality tables.”
On the heels of this argument—that McDermott did not know how to use
mortality tables—Conestoga responds to Appellees’ argument that Conestoga had
stopped relying on the life-expectancy estimates in 2013 and had begun using the
Social Security Administration mortality tables. Conestoga contends that it did not
stop using and relying on Appellees’ life-expectancy estimates but rather added
additional information—i.e., the data from the Social Security Administration
mortality tables—to create a blended life expectancy. Conestoga quotes McDermott’s
declaration in which he stated that Conestoga had continued to “‘constantly,
expressly, and heavily rely on life expectancies [prepared] by [Appellees] . . . when
deciding whether to buy . . . policies.’” Conestoga contends that the life-expectancy
estimates prepared by Appellees continued to constitute a material component of the
life expectancy it relied on.13
13
In addition to the arguments that Conestoga raised in the trial court in
response to the summary-judgment motion, Conestoga addresses the disclaimer
argument for the first time on appeal. Conestoga contends that the “language used in
the so-called ‘disclaimers’ was in fact part of . . . Appellees’ effort[s] to make their life
expectancies appear to be legitimate life expectancies” and that the “‘disclaimers’ [did]
little more than define what a life expectancy is supposed to be.” Conestoga further
responds that Appellees’ life-expectancy estimates were not statistical averages based
on the life expectancy of a large group of persons with similar clinical and individual
profiles but were instead purposefully, consistently, and materially shorter than they
would have been if they were in fact statistical averages as stated in the disclaimers.
However, “all theories in support of a summary judgment, as well as all opposing
issues, must be presented in writing to the court at the hearing.” See Hearne v.
31
In Appellees’ reply to Conestoga’s response to the summary-judgment motion,
they argued that Conestoga failed to raise a genuine issue of material fact because
(a) McDermott’s self-serving declaration was not proper summary-judgment
evidence14 and (b) even if it were, McDermott’s statements—asserting his “reliance”
on the life-expectancy reports prepared by Appellees—even if true, are irrelevant in
determining reliance in light of the disclaimers in the life-expectancy certificates,
especially when Conestoga repeated the same language in its Private Placement
Memoranda. 15
Riversource Life Ins. Co., No. 06-22-00046-CV, 2023 WL 3468315, at *10 n.12 (Tex.
App.—Texarkana May 16, 2023, no pet. h.) (first citing Casso v. Brand, 776 S.W.2d
551, 553 (Tex. 1989); and then citing Tex. R. Civ. P. 166a(c) (“Issues not expressly
presented to the trial court by written motion, answer[,] or other response shall not be
considered on appeal as grounds for reversal.”)). Because we may not reverse a trial
court’s summary judgment on issues not expressly presented to it in a written
response and because Conestoga did not present summary-judgment evidence raising
a genuine issue of material fact as to the red flags created by the disclaimers, we need
not consider the arguments that Conestoga raised in its brief and in its reply brief
related to the disclaimers. See id.; see also Tex. R. App. P. 47.1.
14
Appellees filed an objection to Conestoga’s summary-judgment evidence,
seeking to have the trial court strike Conestoga’s summary-judgment evidence in its
entirety or to strike the specific paragraphs of McDermott’s declaration cited in its
objection (which included paragraphs 7, 8, 12–14, 16, and 18–26). The trial court
overruled the objection.
15
Conestoga filed an objection and response to Appellees’ reply in which
Conestoga complained that Appellees’ reply violated the Rule 11 agreement by
asserting no-duty arguments. Our analysis of the reliance element touches only on the
portion of the disclaimers stating that the estimates are not guarantees; we do not
delve into the disclaimers’ statements regarding the intended recipient. We therefore
do not set forth the no-duty arguments.
32
In its reply brief, Conestoga responds to Appellees’ attacks on McDermott’s
declaration. Conestoga contends that “[a]lthough the declaration may be self-serving,
it is not conclusory.” Conestoga states that McDermott’s declaration properly sets
forth objective facts that could be readily controverted. Conestoga points to factual
statements in McDermott’s declaration that he did not have any training or expertise
regarding the preparation of life expectancies or the use of mortality tables, that
Conestoga did not have all medical records and other information that was available
to and used by Appellees when they created the life-expectancy estimates, that
Appellees were held out to Conestoga as being licensed in the State of Texas as life-
expectancy providers and medical doctors who were properly qualified to prepare life-
expectancy estimates, and that Conestoga was not aware of any reason to doubt
Appellees’ qualifications or integrity with regard to the life-expectancy estimates they
prepared.
Viewing the evidence in the light most favorable to Conestoga, we conclude
that Conestoga failed to raise a genuine issue of material fact. Conestoga’s attempts
to emphasize the materiality of the life-expectancy estimates does not eliminate its
duty of due diligence. Conestoga claims that it took as gospel the life-expectancy
reports from the life-expectancy providers selected by James despite knowing (1) his
prior reputation for using life-expectancy providers that produced drastically low
estimates and (2) the inherent unreliability of life-expectancy estimates generally.
Conestoga was required to protect its investors through the exercise of ordinary care
33
and reasonable diligence, and such diligence was not excused by blindly relying on a
disreputable party’s selecting Appellees and by assuming that Appellees would provide
honest and accurate estimates because James said they would. See Orca Assets, 546
S.W.3d at 654; cf. Va. Oak Venture, LLC v. Fought, 448 S.W.3d 179, 186–87 (Tex.
App.—Texarkana 2014, no pet.) (stating that appellant’s “argument is that she relied
upon the lenders’ reliance upon the appraiser” and that “[s]tretching reliance through
another party in that fashion is not supported by the law”). The argument also
ignores that Conestoga had reasons to know that James was a flawed conduit for
information about life expectancies; he was accused of acting dishonestly in selecting
the sources of information he had transmitted to prior life-settlement buyers. Rather
than cease using a suspect conduit, Conestoga simply told James not to use Midwest
Medical but to hire different life-expectancy providers and apparently expected that
James would change his ways. Conestoga, in essence, argues that its admonition to
James excused Conestoga from taking steps to confirm that he had mended his ways
and from doing anything to verify that he was using reliable estimates. This appears
to violate the principle of where fault lies for a party who has already been fooled
once. Conestoga’s decision to rely on the life-expectancy estimates without
undertaking any investigation into the life-expectancy providers was not justifiable in
light of the many red flags that were apparent and thus precludes Conestoga’s claim of
justifiable reliance as a matter of law. See Barrow-Shaver Res. Co., 590 S.W.3d at 501;
Orca Assets, 546 S.W.3d at 660.
34
3. Disposition
Justifiable reliance is an essential element of each of Conestoga’s remaining
causes of action. Orca Assets, 546 S.W.3d at 653–54. Because we have determined
that Appellees have established as a matter of law that Conestoga’s alleged reliance on
the life-expectancy estimates was not justified, we overrule Conestoga’s sole issue.16
IV. Conclusion
Having overruled Conestoga’s sole issue, we affirm the trial court’s summary
judgment.
/s/ Dabney Bassel
Dabney Bassel
Justice
Delivered: June 29, 2023
16
Because Appellees’ conclusive negation of the reliance element defeats both
of Conestoga’s pleaded claims, we need not address the statute-of-limitations defense.
See Tex. R. App. P. 47.1.
35