Schlumberger Technology Corp. v. Swanson
959 S.W.2d 171, 41 Tex. Sup. Ct. J. 165, 1997 Tex. LEXIS 128 (1997)
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Rule of Law:
A clear and unequivocal disclaimer of reliance on another party's representations, negotiated at arm's length between sophisticated parties represented by counsel, can conclusively negate the element of reliance and preclude a subsequent claim for fraudulent inducement concerning the specific matters that were in dispute and settled.
Facts:
- The Swanson family entered into an agreement with SEDCO, later acquired by Schlumberger, for a multi-phase project to mine diamonds from the ocean floor off the coast of South Africa.
- After SEDCO's acquisition, Schlumberger entered into a joint venture with DeBeers and Seltrust to continue the project.
- In early 1987, a dispute arose when Schlumberger decided to withdraw from the joint venture, leading to adversarial negotiations with the Swansons over their rights and the project's value.
- During the thirteen-month negotiation period, Schlumberger represented to the Swansons that the sea-diamond project was neither technologically feasible nor commercially viable.
- The Swansons disputed Schlumberger's representations, believed their interest was worth much more, and contemplated suing Schlumberger.
- In February 1988, the Swansons, while represented by legal counsel, agreed to sell their interest to Schlumberger for two million South African rand (about $814,000).
- The settlement and release agreement contained a clause explicitly stating that the Swansons were not relying on any statement or representation by Schlumberger and were instead relying on their own judgment.
Procedural Posture:
- The Swansons sued Schlumberger Technology Corporation in a Texas trial court for fraudulent inducement, breach of fiduciary duty, and statutory fraud.
- A jury returned a verdict in favor of the Swansons, awarding them millions in actual and exemplary damages.
- The trial court granted Schlumberger's motion and rendered a judgment notwithstanding the verdict (JNOV), nullifying the jury's award.
- The Swansons, as appellants, appealed to the Texas court of appeals.
- The court of appeals reversed the trial court's judgment and rendered judgment for the Swansons in accordance with the jury verdict.
- Schlumberger, as petitioner, appealed this decision to the Supreme Court of Texas.
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Issue:
Does a disclaimer of reliance clause within a release agreement preclude a claim for fraudulent inducement when the parties are sophisticated, represented by counsel, engaged in an arm's-length negotiation to resolve a dispute, and the disclaimer specifically addresses the subject matter of the alleged misrepresentations?
Opinions:
Majority - Justice Enoch
Yes, the disclaimer of reliance precludes the fraudulent inducement claim. The court first determined that no fiduciary relationship existed between the parties; they were not partners because there was no agreement to share profits, and no confidential relationship existed because subjective trust is insufficient and the relationship must pre-exist the agreement in dispute. Therefore, the parties were dealing at arm's length. The court reasoned that while fraud can generally void a contract, parties must also be able to fully and finally resolve disputes. The binding effect of a disclaimer of reliance depends on the contract and the circumstances of its formation. Here, the disclaimer is binding because: 1) the parties were sophisticated business players represented by highly competent legal counsel; 2) they were in an adversarial relationship, knowingly settling a dispute over the very subject of the alleged fraud (the project's value and feasibility); and 3) the disclaimer's language was clear and unequivocal. This disclaimer conclusively negates the element of reliance, which is essential to the Swansons' claims for fraudulent inducement, fraud by non-disclosure (which is merely the converse of the misrepresentations), and statutory fraud.
Analysis:
This case provides significant clarity on the enforceability of 'no-reliance' clauses in settlement agreements, particularly in commercial contexts. It establishes that while such clauses are not a per se bar to fraudulent inducement claims, they are highly effective when the surrounding circumstances show a true arm's-length transaction between sophisticated, represented parties who are knowingly resolving a specific dispute. The decision creates a strong incentive for parties wishing to achieve finality in settlements to use clear, specific disclaimer language. It shifts the risk of unknown information onto the releasing party when they explicitly agree to rely on their own judgment rather than the representations of their adversary.
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