BMSH I Katy TX, LLC v. Smith Seckman Reid, Inc.

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UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION
BMSH I KATY TX, LLC,
Plaintiff,
v.
SMITH SECKMAN REID, INC.,
Defendant.
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Case No. 4:22-CV-00218
JUDGE PALERMO’S
REPORT AND RECOMMENDATION1
Pending before the Court is Defendant’s motion for summary judgment
against Plaintiff. ECF No. 126. Defendant seeks summary judgment on all of
Plaintiff’s claims, arguing that: (1) as assignee, Plaintiff is only entitled to recover
the Architect’s damages, if any; (2) Plaintiff’s claims are barred by a release;
(3) Plaintiff’s fraud claims are barred by Texas’ Anti-Fracturing Rule; (4) Plaintiff’s
tort claims are barred by the Independent Injury Rule; (5) undisputed evidence
establishes that Plaintiff’s fraudulent inducement and fraudulent concealment fail;
and (6) Plaintiff’s negligence and breach of contract claims are time-barred. ECF
No. 126. 2
1 The district judge to whom this case is assigned referred this matter for all pretrial purposes
pursuant to 28 U.S.C. § 636. See Order, ECF No. 198. A summary judgment motion is dispositive
and therefore is appropriate for a report and recommendation. 28 U.S.C. § 636(b)(1)(B).
2 Plaintiff filed a response, ECF No. 129, Defendant filed a reply, ECF No. 141, and Plaintiff filed
a sur-reply, ECF No. 144.
United States District Court
Southern District of Texas
ENTERED
January 07, 2026
Nathan Ochsner, Clerk
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After considering the briefing, the evidence, and the applicable law, the Court
recommends Defendant’s motion for summary judgment, ECF No. 126, be granted
as to the professional negligence claims which are time barred and denied in all other
respects.
I. 	BACKGROUND
Plaintiff, the owner, contracted PRDG (“the Architect”) to design the Delaney
Project (“the Project”), a senior living facility in Katy, Texas. Plaintiff’s agreement
with the Architect was signed with the former owner on April 2, 2015, and the former
owner subsequently assigned this agreement to Plaintiff. PRDG Agreement, ECF
No. 126-7.
The Architect provided Defendant with a Request for Proposal (“RFP”) and
described the Project and engineering services requested—the request noted that
“[m]akeup air will be preconditioned and provided as required by the Mechanical
Code. Due to the climate, the design team will need to evaluate additional makeup
air requirements to handle the humid environment.” Project Manager Christian Herr
Affidavit, ECF No. 129-2 ¶¶ 16–21. The Architect subcontracted with Defendant for
the mechanical, electrical, and plumbing design. 3 Defendant and PRDG Agreement,
ECF No. 126-4. The agreement detailed the scope of Defendant’s services and stated
3 Lee Nordholm served as the engineer of record for Defendant for the mechanical design at the
Project, and during the course of the Project, Darren Harvey, P.E. assumed the role as principal.
Herr Affidavit, ECF No. 129-2 ¶¶ 13-14.
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that Defendant would “[p]rovide drawings and specification as stated in [the RFP]”
and would perform its services in “a manner consistent with the degree of skill and
care ordinarily exercised by practicing design professionals performing similar
services in same locality, and under the same or similar circumstances and
conditions.” ECF Nos. 129-2 ¶¶ 22-29; 129-3 ¶¶13-15. SSR was tasked with and
contracted to design an HVAC system for the Project that could “handle the humid
environment.” ECF No. 129-2 ¶ 44.
On August 23, 2016, the Project was substantially complete, confirmed by a
Certificate of Substantial Completion issued. Cert. of Completion, ECF No. 126-9.
A Certificate of Occupancy was issued on October 18, 2017. Cert. of Occupancy,
ECF No. 126-14. The Architect issued a letter confirming Project completion on
December 11, 2017. Completion Letter, ECF No. 126-10.
From January 2019 through December 2021, Plaintiff contacted Gregory
Edwards, Inc., the original mechanical subcontractor for the Project, for maintenance
and to make certain repairs on the Amana Vertical Terminal Air Conditioner
(“VTAC”) units at the Project. Project Operator Dennis Tinker Affidavit, ECF
No. 129-4 ¶5. In February 2021, Plaintiff hired Robert B. Elkins, Jr., P.E. to
investigate the HVAC systems of the Project. Plaintiff’s Expert Edward Fronapfel
Affidavit, ECF No. 129-5 ¶ 14. Through Elkins’ report, Plaintiff learned of defects
in Defendant’s design of the HVAC systems. ECF No. 129-5 ¶¶ 17–19.
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Plaintiff raised design and construction claims related to the Project against
the Architect and Defendant in arbitration. BMSH 1 Katy Tx, LLC v. Charles N.
Wihte Construction Co., et al., American Arbitration Association Case No. 01-21-
0005-8435; Pl.’s Demand for Arb., ECF No. 126-5. Plaintiff alleged mechanical
engineering design deficiencies against the Architect and Defendant for professional
negligence, breach of contract, and breach of express warranty. ECF No. 126-5.
Plaintiff also brought claims against the Architect for its contractual liability for the
acts of the Architect’s subconsultants, including Defendant. ECF No. 126-5. Plaintiff
settled with the Architect and signed a release of claims against the Architect.
Settlement Agreement and Release, ECF No. 126-6. As part of the settlement, the
Architect assigned its claims against Defendant to Plaintiff. ECF No. 126-6;
Assignment, ECF No. 126-3. Plaintiff initiated the instant case against Defendant on
January 1, 2022. Pl.’s Compl., ECF No. 1.
During discovery in this case, Plaintiff learned that Defendant had an internal
review of its designs for the Project, and in the review, identified potential humidity
and mold issues. ECF No. 129-2 ¶¶ 47–49, 51–52, 54; Architect Paul Donaldson
Affidavit, ECF No. 129-8 	¶¶ 7–9, 11–14; 	Engineer John Harris 	Deposition
Transcript, May 20, 2024, ECF No. 129-10 at 105:17-22, 106:7-12; Fronapfel
Affidavit, ECF No. 129-5 ¶¶ 25–26; Lee Nordholm Deposition Transcript, May 20,
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2024, ECF No. 129-11 at 176:22-177:8. These concerns were not raised with the
Architect or Plaintiff and so, Defendant’s design moved forward. ECF Nos. 129-2
¶ 50; 129-8 ¶ 10; Plaintiff’s Representative Kathryn Sweeney Affidavit, ECF
No. 129-3 ¶¶ 17, 18, 20; Plaintiff’s Counsel Patrick Casey’s Affidavit, ECF
Nos. 129-9 ¶ 6. Plaintiff now brings claims against Defendant for professional
negligence, fraud, and breach of contract. Pl.’s Amended Compl., ECF No. 105.
As evidence supporting summary judgment, Defendant submitted: (1) Tim
Priddy’s declaration, ECF No. 126-1; (2) Consent to Assignment of Contract, ECF
No. 126-2; (3) Assignment of Contract, ECF No. 126-3; (4) Architect and Defendant
agreement, ECF No. 126-4; (5) Plaintiff’s demand for arbitration, ECF No. 126-5;
(6) settlement and release, ECF No. 126-6; (7) Plaintiff and the Architect’s
agreement, ECF No. 126-7; (8) Edgar Stacy’s report, ECF No. 126-8; (9) Certificate
of Substantial Completeness, ECF No. 126-9; (10) Project Completion Letter, ECF
No. 126-10; (11) summary of resident complaints/maintenance logs, ECF No. 126-
11; (12) Plaintiff’s emails regarding VTAC equipment failures, ECF No. 126-12;
(13) Plaintiff’s emails regarding defective VTAC units, ECF No. 126-13; (14) Fort
Bend County Certificate of Occupancy, ECF No. 126-14; (15) Robert Skeels’
declaration, ECF No. 126-15; (16) excerpts from Lee Lyles’ deposition, ECF
No. 126-16; (17) excerpt of the Project’s Schematic Design Narrative, ECF No. 126-
17; (18) excerpt from contract regarding VRF replacement, ECF No. 126-18;
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(19) excerpts from Michael Rabena’s report, ECF No. 126-19; (20) Plaintiff’s email
to Defendant regarding VRP, ECF No. 126-20; (21) excerpt of the Delaney Waco’s
Schematic Design Narrative, ECF No. 126-21; 	(22) 	excerpt of the 	Delaney
Georgetown’s Schematic Design Narrative, ECF No. 126-22; (23) excerpt of the
Delaney League City’s Schematic Design Narrative, ECF No. 126-23; (24) excerpts
from Chris Manning’s deposition, ECF No. 126-24; (25) excerpts from Kathryn
Sweeney’s deposition, ECF No. 126-25; (26) excerpts from Michael Rabena’s
deposition, ECF No. 126-26; and (27) excerpts from Lee Nordholm’s deposition,
ECF No. 126-27.
As evidence supporting its response, Plaintiff submitted: (1) excerpts of the
scheduling conference transcript, ECF No. 129-1; (2) Christian Herr’s affidavit, ECF
No. 129-2; (3) Kathryn Sweeney’s affidavit, ECF No. 129-3; (4) Dennis Tinker’s
affidavit, ECF No. 129-4; (5) Edward Fronapfel’s affidavit, ECF No. 129-5;
(6) Michael Rabena’s affidavit, ECF No. 129-6; (7) William McConnell’s affidavit,
ECF No. 129-7; (8) Paul Donaldson’s affidavit; ECF No. 129-8; (9) Patrick Casey’s
affidavit; ECF No. 129-9; (10) excerpts from John Harris’s deposition, ECF
No. 129-10; (11) excerpts from Lee Nordholm’s deposition; ECF No. 129-11;
(12) excerpts from Lee Lyles’ deposition, ECF No. 129-12; and (13) excerpts from
Douglas Gregory’s deposition, ECF No. 129-13.
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II. 	LEGAL STANDARDS
Summary judgment is appropriate “if the movant shows that there is no
genuine dispute as to any material fact and the movant is entitled to judgment as a
matter of law.” FED. R. CIV. P. 56(a); see also Celotex Corp. v. Catrett, 477 U.S.
317, 322 (1986). The moving party bears the initial burden of identifying “the basis
for its motion” and any portions of the record that “demonstrate the absence of a
genuine issue of material fact.” Davis v. Fort Bend Cty., 765 F.3d 480, 484 (5th Cir.
2014) (quotations omitted). Where the moving party “bears the burden of proof on
an issue,” such as a plaintiff or counter-plaintiff, it “must establish beyond
peradventure all of the essential elements” for that claim to be entitled to summary
judgment. Fontenot v. Upjohn Co., 780 F.2d 1190, 1194 (5th Cir. 1986) (emphasis
in original). But where the moving party does not bear the burden of proof, summary
judgment is available “simply by disproving the existence of any essential element
of the opposing party’s claim.” Id.
The burden then shifts to the non-moving party, who must “go beyond the
pleadings and . . . designate ‘specific facts showing that there is a genuine issue for
trial.’” Davis, 765 F.3d at 484 (quotations omitted). Summary judgment evidence
“must be viewed in the light most favorable to the non-moving party, and reasonable
inferences must be drawn in that party’s favor.” Warren v. Fed. Nat’l Mortgage
Ass’n, 932 F.3d 378, 383 (5th Cir. 2019).
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III. 	DEFENDANT’S EVIDENTIARY OBJECTIONS ARE OVERRULED.
Defendant objects to various pieces of Plaintiff’s summary judgment evidence
by including the following chart in its reply:
ECF No. 141 at 11. The above objections are conclusory and lack specificity. 4 See
Fed. Trade Comm’n v. Zaappaaz, LLC, No. 4:20-CV-2717, 2023 WL 5020618, at
*4 (S.D. Tex. June 9, 2023), adopted sub nom. Fed. Trade Comm’n v. Zaappaaz,
LLC, No. 4:20-CV-02717, 2023 WL 5018433 (S.D. Tex. Aug. 3, 2023) (overruling
evidentiary objections that were either one-word without explanation or simply cited
a rule).
“Objections lacking specificity do not satisfy the requirements of Rule 103.”
Id. (quoting Patton v. Meridian Sec. Ins. Co., 617 F. Supp. 3d 516, 526 (N.D. Tex.
2022)). “‘A loosely formulated and imprecise objection will not preserve error.
4 For example, the above chart does not identify the specific hearsay statements, instead citing
entire paragraphs, one of which has numerous subparts. ECF No. 129-5.
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Rather, a trial court judge must be fully apprised of the grounds of an objection.’”
Id. (quoting Patton, 617 F. Supp. 3d at 526 (quoting United States v. Polasek, 162
F.3d 878, 883 (5th Cir. 1998)); citing In re Slamdunk Enterprises, Inc., No. 17-
60566, 2021 WL 389081, at *24 (Bankr. E.D. Tex. Jan. 29, 2021) (“Where a hearsay
objection is conclusory and scant at best, such objection is not properly made and
should be summarily overruled.”)). “[I]t is not the Court’s responsibility to comb
through the record to determine the basis for [Defendant’s] cursory objections or to
make arguments on [their] behalf.” Id. (quoting Gilmour v. Intertek USA, Inc.,
No. 3:16-CV-00266, 2018 WL 3059682, at *3 (S.D. Tex. May 30, 2018), adopted,
No. 3:16-CV-00266, 2018 WL 3055749 (S.D. Tex. June 20, 2018) (quoting Hoffman
v. Bailey, 257 F. Supp. 3d 801, 824 (E.D. La. 2017) (overruling party’s objection
where they failed to provide an explanation))). These objections are overruled.
Moreover, the Court overrules Defendant’s objection that Sweeney’s affidavit
is a sham affidavit. “‘[T]he court should not weigh evidence or make credibility
findings’ at the summary judgment stage.” Garcia v. San Benito Consol. Indep. Sch.
Dist., No. 1:21-CV-20, 2022 WL 19830659, at *8 (S.D. Tex. Nov. 14, 2022),
adopted, No. 1:21-CV-020, 2023 WL 2987563 (S.D. Tex. Apr. 18, 2023) (quoting
Seigler v. Wal-Mart Stores Texas, L.L.C., 30 F.4th 472, 476 (5th Cir. 2022)). The
Court may not choose “which testimony to credit and which to discard” at the
summary judgment stage because that would resolve disputed facts. Id. (quoting
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Heinsohn v. Carabin & Shaw, P.C., 832 F.3d 224, 245 (5th Cir. 2016)).
“In considering a motion for summary judgment, a district court must consider
all the evidence before it and cannot disregard a party’s affidavit merely because it
conflicts to some degree with an earlier deposition.” Id. (quoting Seigler, 30 F.4th at
477). But, under the “sham affidavit doctrine,” if it is “inherently inconsistent” with
the witness’s deposition testimony, then the Court must ignore an affidavit. Id.
(quoting Seigler, 30 F.4th at 477). The nonmovant cannot create a genuine issue of
material fact by expressly contradicting his own prior testimony. Id. (quoting
Seigler, 30 F.4th at 477). Importantly, this is a “‘high’ hurdle to clear for the
movant.” Id. (quoting Seigler, 30 F.4th at 477).
“The inquiry, as a whole, is aimed at gleaning whether the later affidavit is
‘so markedly inconsistent with the affiant's prior deposition as to constitute an
obvious sham.’” Equal Employment Opportunity Comm’n v. Modern Group, Ltd.,
725 F. Supp. 3d 577, 600 (E.D. Tex. 2024) (quoting Sabre Indus. Inc. v. Module X
Sols., L.L.C., 845 F. App’x 293, 298 (5th Cir. 2021) (quoting Clark v. Resistoflex
Co., 854 F.2d 762, 766 (5th Cir. 1988))); citing Winzer v. Kaufman County, 916 F.3d
464, 472 (5th Cir. 2019), cert. denied, 141 S. Ct. 85 (2020)).
Defendant argues that Sweeney was deposed on an identical affidavit
submitted in this briefing, and in her deposition, “Sweeney made admissions directly
contradicting her affidavit testimony, including that she lacked personal knowledge
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and that she did not know whether several statements in the affidavit were truthful.”
ECF No. 141 at 11. Defendant’s objection is not specific enough—Defendant
objects to a seven-page affidavit, ECF No. 129-3, but does not identify which
statements should be disregarded as false—numerous statements are statements
included in Defendant’s own recitation of the facts. See ECF No. 129-3. Defendant
also attaches 34 pages of deposition testimony as proof of conflicting testimony.
ECF Nos. 141-1, 141-2. Even so, the Court does not find that Sweeney’s affidavit is
inherently inconsistent with her deposition testimony so as to render her affidavit a
sham. Upon review of the affidavit and deposition testimony, the proper course is to
allow 	the 	jury 	to 	evaluate 	Sweeney’s 	credibility. 	Defendant’s 	objection 	to
Sweeney’s affidavit is overruled.
IV. 	DEFENDANT’S MOTION FOR SUMMARY JUDGMENT SHOULD
BE DENIED.
In its motion, Defendant seeks summary judgment on all of Plaintiff’s claims.
ECF No. 126. Defendant argues that: (1) as assignee, Plaintiff is only entitled to
recover the Architect’s damages, if any; (2) Plaintiff’s claims are barred by a release;
(3) Plaintiff’s fraud claims are barred by Texas’ Anti-Fracturing Rule; (4) Plaintiff’s
tort claims are barred by the Independent Injury Rule; (5) undisputed evidence
establishes that Plaintiff’s fraudulent inducement and fraudulent concealment fail;
and (6) Plaintiff’s negligence and breach of contract claims are time-barred. ECF
No. 126. The Court considers each of these arguments below.
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A. 	The Court Again Rejects Defendant’s Argument that Plaintiff Failed to
Allege Sufficient Injury.
Defendant argues that, because Plaintiff’s claims all arise by virtue of the
agreement between the Architect and Defendant, Plaintiff’s damages, as the
Architect’s 	assignee, 	are 	limited 	to 	the 	Architect’s 	damages—but 	Plaintiff’s
complaint does not seek damage or injury to the Architect, and instead, seeks
Plaintiff’s own damages. ECF No. 126 at 12–13. 5 Plaintiff responds that the Court
already considered and rejected this argument when it ruled on Plaintiff’s motion for
leave to file an amended complaint to add fraud claims, finding that Plaintiff’s
proposed amended complaint, now the operative complaint, properly alleged injury.
ECF No. 129 at 17 (quoting ECF No. 104 at 14). Plaintiff asks the Court to hold to
its prior ruling and provides evidence of the Architect and Plaintiff’s injury,
demonstrating 	that 	the 	Architect 	and 	Plaintiff 	relied 	on 	Defendant’s
misrepresentations and nondisclosures by continuing to perform and move forward
with Defendant’s designs. ECF No. 129 at 18–19.
Although made in the context of a motion to leave and not a summary
5 Defendant alternatively argues that Plaintiff’s damages must be capped at the total amount of the
settlement because this is the most the architect could have pursued from Defendant in a
contractual indemnity claim. The Court reject this two-sentence argument from Defendant as
improperly supported by argument or authority. See Judge Tipton’s Court Procedures 16(f)
(“Citations. Provide pinpoint citation for all legal authority. Do the same for evidence. For
instance, cite to page and line for depositions, to page and paragraph number for affidavits and
pleadings, and to page and section number for contracts and similar materials. Use Bates numbers
as the page reference where available.”).
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judgment motion, the Court’s prior analysis controls, largely because Defendant
argues that Plaintiff’s operative complaint fails to plead injury to the Architect,
utilizing an argument more suitable for a motion to dismiss as opposed to a motion
for summary judgment. ECF No. 126 at 12 (“BMSH’s complaint does not seek
damage or injury to [the Architect] at all.”), 13 (“Summary judgment on all claims
is appropriate because BMSH failed to plead any legally recoverable damages.”).
The Court disagreed that Plaintiff’s claims failed because Plaintiff had “not alleged
any injury to [the Architect],” and explained:
even in light of the contract assignment, BMSH’s injury is relevant to
its new fraud claims because those claims are not limited to the breach
of the assigned contract but are separate and independent of those
contract claims. And even if the Court’s view were limited to the
contract PRDG assigned to BMSH, BMSH’s amended complaint
repeatedly references how SSR’s actions caused PRDG to rely on the
misrepresentations 	or 	nondisclosures, 	induced 	PRDG 	to 	continue
performing under its contract with SSR and caused PRDG to move
forward with SSR’s faulty designs. (See Dkt. No. 81-2 at 43–45). 6
Viewing the factual allegations in the light most favorable to BMSH,
the Court agrees with BMSH that “PRDG would be able to bring these
fraud claims against SSR for damages PRDG would itself owe to
BMSH as a result of SSR’s design defects.” (Dkt. No. 93 at 8). And, at
the very least, SSR has failed to show otherwise. Accordingly, SSR’s
standing arguments fail.
ECF No. 104 at 14. To the extent Defendant rehashes its motion to dismiss argument
that Plaintiff failed to sufficiently plead a claim for relief, that issue has already been
6 In the order granting leave to amend, the Court addressed Plaintiff’s proposed amended
complaint, ECF No. 81-2, which is now the operative complaint, ECF No. 105.
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decided and is not proper summary judgment argument.
Furthermore, Plaintiff has provided sufficient evidence to demonstrate a
genuine issue of material fact as to whether Defendant’s misrepresentations and
nondisclosures injured both the Architect and Plaintiff. Defendant performed an
internal review of the MEP drawings and the engineer who completed this review,
John Harris, informed Defendant of numerous concerns and issues with the
mechanical design. Herr Affidavit, ECF No. 129-2 ¶ 47 (“John Harris, an SSR
engineer, was tasked with the in-house review, and he informed Nordholm and
others at SSR via email on September 15, 2015” of concerns with the mechanical
design); Donaldson Affidavit, ECF No. 129-8 ¶ 7 (same); Casey Affidavit, ECF
No. 129-9 ¶ 5 (“On May 3, 2024, [Defendant] produced as part of its Rule 26
Disclosures an internal emails dated September 17, 2015”); Harris Deposition, ECF
No. 129-10 at 100:3-7 (Harris determined the major design problems based on his
experience in commercial design). Harris and Nordholm exchanged several emails
on this subject, with Harris pointing out a “major design problem” and suggesting
that the owner of the Project be consulted on these issues. ECF No. 129-2 ¶¶ 48, 49
(excerpts of the email exchange between Harris and Nordholm); ECF No. 129-8
¶¶ 8, 9 (same); ECF No. 129-9 ¶ 5 (“On May 3, 2024, [Defendant] produced as part
of its Rule 26 Disclosures [] internal emails dated September 17, 2015”).
Harris also prepared an internal Mechanical Review on September 18, 2015,
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memorializing his concerns and addressing “two major mechanical design issues
that need to be addressed,” noting that “if the Owner directed us to utilize the current
design (i.e. spaces negative), someone from the design team needs to sit down with
the Owner and explain the consequences (mold issues are sure to follow in Katy
TX).” ECF No. 129-2 ¶ 51 (“on September 18, 2015, Harris published an internal
Mechanical Review”); ECF No. 129-8 ¶ 11 (same); ECF No. 129-9 ¶ 6 (“On April
8, 2022, [Defendant] produced as part of its Rule 26 Disclosures an internal
mechanical review dated September 18, 2015”); Fronapfel Affidavit, ECF No. 129-
5 ¶¶ 25, 26 (“[Defendant] issued an internal Mechanical/Plumbing Design Review
for the Project on [September 18, 2015], wherein [Defendant] advised ‘there are two
major mechanical design issues that need to be addressed’ and admitted to known
design failure at the Project.”); Sweeney Affidavit, ECF No. 129-3 ¶ 17 (“During
the course of this litigation through the production of a document from [Defendant],
[Plaintiff] learned that [Defendant] was aware of its flawed designs for the Project’s
HVAC 	systems 	as 	early 	as 	September 	18, 	2015 	based 	on 	an 	internal
Mechanical/Plumbing Design Review that [Defendant] issued for the Project on that
date.”); ECF No. 129-10 at 161:18-162:5 (Harris testified it would be important for
the owner to understand that mold issues were sure to follow).
The evidence further shows that Defendant never shared the in-house review,
these emails, these concerns, or Harris’s Report with the Architect or Plaintiff. ECF
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No. 129-2 ¶¶ 50, 52, 54 (emails, concerns, or Report never provided to Architect);
ECF No. 129-8 ¶¶ 10, 12, 13, 14 (same); ECF No. 129-3 ¶ 18 (“[Defendant] did not
produce the SSR Memo, or communicate the design failures noted therein, to
[Plaintiff] or to [the Architect] at any point during the design and construction of the
Project.”); Lyles Deposition, ECF No. 129-2 at 218:2-5 (Lyles testified that at no
time did Defendant bring their concerns about the mechanical system to the
Architect 	or 	Plaintiff); 	Nordholm 	Deposition, 	ECF 	No. 	129-11 	at 	44:11-20
(Nordholm did not recollect if he spoke to the client about concerns regarding the
systems), 45:6-11 (Nordholm did not recollect if he wrote to the client about
concerns regarding the systems), 176:22-177:8 (Nordholm did not speak to the client
about humidity control issues, or potential mold issues), 183:6-20 (Nordholm saw
the client on the same day as the email from Harris, but did not speak to the client
about concerns regarding the systems), 184:7-11 (Nordholm did not send the
mechanical report to the Architect and would not have sent it to the owner without
sending it first to the Architect).
Because the Architect was unaware of these issues and Defendant did not
inform the Architect of any concerns about the ventilation or the needed alternative
systems, the Architect proceeded with Defendant’s design choice. ECF No. 129-2 ¶
57 (“Because [Defendant] did not raise concerns about the risk is [sic] using
exclusively natural ventilation at the Project and did not inform [the Architect] that
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the use of alternative systems . . . were necessary to ensure that humidity issues did
not impact the Project, [the Architect] relied on [Defendant’s] design and assumed
it was appropriate and safe for the Project.”); ECF No. 129-8 ¶ 16 (same); ECF
No. 129-10 at 178:3-11, 178:21-179:3 (Harris testified that the Architect would not
be aware of his concerns unless the design engineer communicated them to the
Architect).
Had this information been shared with the Architect, the Architect would have
notified Plaintiff and recommended Defendant redesign the Project. ECF No. 129-2
¶ 58 (“Had the communications . . . been provided to [the Architect] or any of the
issues raised in those communications been raised with [the Architect], [the
Architect] would have brought these issues to [Plaintiff] and would rely on
[Defendant] to make recommendations.”); ECF No. 129-8 ¶ 17 (same). Plaintiff’s
experts have opined that without a DOAS, the Project would fail. ECF No. 129-5
¶¶ 27, 28 (“a DOAS system was necessary to provide a safe environment for the
Project’s residents and to provide a thermally comfortable building mechanical
system that would provide the reduction of the risk of bioorganic growth (i.e.,
mold)”). Defendant did not make any changes to the PTAC units or the toilet exhaust
fans designs following the Report. ECF No. 129-11 at 178:3-12, 178:24-179:13
(Nordholm testified no changes were made to the design plan regarding the PTAC
units 	or 	exhaust 	fans 	of 	the 	toilets 	in 	the 	units). 	PRDG 	relied 	on 	SSR’s
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recommendations to its detriment. ECF No. 129-2 ¶ 56, 57 (“Plaintiff relied on
[Defendant’s] recommendations to its detriment.”); ECF No. 129-8 ¶ 15 (same).
The above evidence demonstrates that Plaintiff and the Architect both
suffered injury. Therefore, summary judgment should be denied as to Defendant’s
injury argument.
B. 	The Settlement Agreement’s Release Does Not Bar Plaintiff’s Claims.
Defendant argues that because Plaintiff released all claims against the
Architect, Plaintiff’s claims in this case are barred. ECF No. 126 at 13–14. Defendant
argues that the release settled all claims against the Architect and Defendant. ECF
No. 126 at 15. Defendant argues that, in the arbitration, Plaintiff asserted the same
claims as here, against the Architect and Defendant, in addition to claims for the
Architect’s breach of its obligation to indemnify Plaintiff for acts of subconsultants,
including Defendant. Therefore, because the release “released all conceivable claims
the subject of this suit,” the release bars Plaintiff’s claims brought here. ECF No. 126
at 16.
Plaintiff contends that when deciding the motion for leave, the Court decided
that 	Plaintiff’s settlement with the Architect 	did 	not 	bar the claims 	against
Defendant, or alternatively, there were questions of fact as to the scope of the release.
ECF No. 129 at 19. Plaintiff further asserts that it only settled its Architectural claims
against the Architect, so as a result, the release covered only Plaintiff’s claims
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against the Architect in the arbitration proceedings, specifically stating that the
release shall not “inure to the benefit of a no-signatory,” like Defendant. ECF
No. 129 at 19–20. Plaintiff points out that as part of the settlement, the Architect
assigned Plaintiff any claims it had or may have against Defendant under the
Architect and Defendant’s agreement. ECF No. 129 at 20.
The Court agrees with Plaintiff. The Court’s prior order granting leave to
amend addressed Defendant’s argument that Plaintiff settled all claims against it,
finding:
SSR asserts that BMSH “settled all claims, including design claims like
those it makes here[,] against SSR.” (Dkt. No. 85 at 20) (emphasis
added). Not so. The plain text of the settlement shows that BMSH
settled 	“claims 	of 	construction 	defects, 	improper 	construction 	or
design, . . . at the Project” against PRDG, not SSR. (Id.). And BMSH
clarifies that “the PRDG settlement accounted only for PRDG’s
architectural design defects, expressly excluding damages due to SSR’s
faulty mechanical design—entirely separate injuries for which PRDG
was liable and which BMSH did not settle or release.” (Dkt. No. 93 at
7) (emphases in original). As a result, the Court finds that BMSH has
not settled its claims against SSR, and BMSH’s settlement with PRDG
does not make its new fraud claims futile.
Order, ECF No. 104 at 15. That ruling precludes any need for further analysis.
Under Texas law, 7 “to effectively release a claim in Texas, the releasing
instrument must ‘mention’ the claim to be released.” Barforough v. Nationstar
Mortgage, LLC, No. 01-16-00266-CV, 2017 WL 4413430, at *3 (Tex. App.—
7 Texas law governs the settlement agreement. ECF No. 126-6 at V.7.
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Houston [1st Dist.] Oct. 5, 2017, pet. denied) (quoting Victoria Bank & Trust Co. v.
Brady, 811 S.W.2d 931, 938 (Tex. 1991)). “Any claims not clearly within the subject
matter of the release are not discharged.” Id. (citing Brady, 811 S.W.2d at 938;
Sanus, 837 S.W.2d at 197). Further, “[a]lthough general releases are narrowly
construed, broadly worded general releases are enforceable as long as the claim in
question is included within the wording of the release.” Tempur-Pedic N. Am., LLC
v. Mattress Firm, Inc., No. CV H-17-1068, 2018 WL 4108026, at *2 (S.D. Tex. July
23, 2018) (quoting Southmark Corp. v. F.D.I.C., 142 F.3d 1279, 1998 WL 224537,
at *3 (5th Cir. 1998)). “However, a general release that is not limited to a specific
cause of action or occurrence, and broadly releases all claims and causes of action
between two parties, is valid and enforceable.” Id. (quoting Southmark Corp. v.
F.D.I.C., 142 F.3d 1279, 1998 WL 224537, at *4).
“When a contract’s meaning is unambiguous, [the Court’s] task is to
determine the parties’ intentions as expressed in the written instrument.” Gabbanelli
Accordions & Imports, LLC v. Hermes Music Co., 398 F. Supp. 3d 156, 161 (S.D.
Tex. 2019) (quoting Apache Deepwater, LLC v. McDaniel Partners, Ltd., 485
S.W.3d 900, 906 (Tex. 2016)). The Court “must interpret contracts holistically,”
meaning that “[n]o single provision of a contract is to be read alone; rather, ‘all
provisions are “considered with reference to the whole instrument.”’” 	Id. (quoting
Apache Deepwater, 485 S.W.3d at 906 (quoting J.M. Davidson, Inc. v. Webster, 128
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S.W.3d 223, 229 (Tex. 2003))). The Court must construe contracts “from a utilitarian
standpoint, bearing in mind the particular business activity sought to be served.” Id.
(quoting Apache Deepwater, 485 S.W.3d at 906–07 (quoting Lenape Res. Corp. v.
Tenn. Gas Pipeline Co., 925 S.W.2d 565, 574 (Tex. 1996))).
Here, the settlement agreement stated that Plaintiff:
releases, acquits and forever discharges [the Architect] for any and all
claims, demands, actions or causes of action of whatever kind or
character, to the extent such claims are known or could have been
known which [Plaintiff] may now have or hereafter have against [the
Architect], growing out of or in any way connected with or which may
have arisen or can arise as a result of [Plaintiff]’s purchase, occupancy,
or claims of construction defects, improper construction or design,
foundation 	and/or 	settlement, 	structural 	defects, 	warranty 	claims,
warranty work or repairs at the Project. This Agreement and Release
specifically includes, but is not limited to, all claims brought or claims
that could be have been brought in the Action by BMSH against PRDG
. . . . Nothing contained in this Agreement shall inure to the benefit of
a non-signatory to this Agreement unless identified in Paragraphs I.A
through B. of this Agreement.
ECF No. 126-6 at III.2. As seen above, the only released claims were Plaintiff’s
claims against the Architect and the agreement was not intended to release or benefit
Defendant, a non-signatory. See id.
Furthermore, other provisions of the settlement agreement indicate that
Plaintiff did not release claims against Defendant—maintaining and then pursuing
those claims were obviously an important part of the bargain between Plaintiff and
the Architect. The terms of the settlement agreement set the assignment of the
Architect’s claims against Defendant to Plaintiff as a condition precedent, stating
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that the settlement was not effective “unless and until” “binding if and only if” the
assignment was effective. ECF No. 126-6 at III.1. 8 With the release of those claims,
this provision would be meaningless.
Additionally, 	the 	settlement 	agreement 	contained 	a 	provision 	for 	the
assignment of the Architect’s claims against Defendant, stating that:
[f]or the consideration set forth in this Agreement . . . , [the Architect]
irrevocably assigns, transfers and conveys to [Plaintiff] all rights, title
and/or interest to any claims, demands, causes of action [], damages
and/or rights and obligations that [the Architect] may have or have
against [Defendant] including claims under the SSR Agreement for the
Project. . . .
ECF No. 126-6 at III.8. If the settlement agreement and release released the
Architect’s 	claims 	against Defendant 	as Defendant 	suggests, then 	the above
provision is also meaningless. 9
8 Notably, Defendant consented to the assignment. ECF No. 126-6 at 12. As a condition precedent
to the consent to the assignment, Plaintiff, the architect, and Defendant agreed “that any claim or
cause of action against SSR arising out of or relating in any way to the SSR Contract and the Katy
Senior Living Facility must be brought in litigation only, not arbitration, and “[b]efore bringing
any such lawsuit against SSR, PRDG and BMSH agree to dismiss SSR as a party from the
Arbitration and bear all costs that the AAA may charge against SSR.” ECF No. 126-6 at 1.b.
9 The recitals read together also support the reading that the settlement agreement did not release
Plaintiff’s current claims against Defendant. The recitals explain that the architect hired Defendant
pursuant to the SSR Agreement to provide mechanical, electrical, plumbing and fire protection
engineering services and construction observations for the Project. The architect also promised to
the owner (who later assigned the PRDG Agreement to Plaintiff) that the architect “will be fully
responsible for the acts, errors, and omissions of its Subconsultants and shall fully indemnify,
defend, and save harmless Owner, its agents, employees, and assigns from any and all claims
which arise on account of Services rendered by Consultant’s Subconsultants.” ECF No. 126-6 at
II. When read as a whole, these recitals provide necessary context for the relationship between
Plaintiff, Defendant, and the architect, why the architect assigned claims to Plaintiff, and why
Plaintiff would want the assignment as part of its settlement with the architect.
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Accordingly, the settlement agreement is unambiguous and demonstrates that
Plaintiff’s instant claims against Defendant were not released in the settlement
agreement. 10
C. 	Texas Anti-Fracturing Rule Does Not Bar Plaintiff’s Fraud Claims.
Defendant argues that the Texas anti-fracturing rule, which “bars plaintiffs
from recharacterizing a professional negligence claims as any other claim,” bars
Plaintiff’s fraud claims. ECF No. 126 at 16. Plaintiff responds that its fraud claims
are not barred because they are not repackaged professional malpractice claims—
the fraud claims do not concern Defendant’s “failure to exercise its professional
standard of care,” and the harm to Plaintiff stems from Defendant’s intentional
withholding of knowledge of serious mechanical design defects. ECF No. 129 at 23.
As an initial matter, the Court finds that Defendant’s briefing is sparse, which
waives this argument. See United States v. Scroggins, 599 F.3d 433, 446–47 (5th
Cir. 2010) (party who fails to adequately brief argument is deemed to have waived
it); Flores-Ordones v. Holder, 348 F. App’x 12, 13 (5th Cir. 2009) (failure to
adequately brief an argument constituted abandonment); Burton v. Comm’s of Social
Security, No. 3:20-cv-266, 2021 WL 3674472, at *2 n.11 (N.D. Miss. Aug. 18, 2021)
(“[F]ailure to brief an argument in the district court waives that argument in that
10 Because the Court finds that the contract is unambiguous, it need not reach the parties’
arguments about parol evidence.
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court.”) (internal quotation marks omitted) (quoting Magee v. Life Ins. Co. of N. Am.,
261 F. Supp. 2d 738, 748 n.10 (S.D. Tex. 2003)). Even so, the anti-fracturing rule
does not bar Plaintiff’s fraud claims.
In Texas professional malpractice cases, the “anti-fracturing rule” “limits the
ability of plaintiffs to recharacterize a professional negligence claim as some other
claim—such as fraud or breach of fiduciary duty—in order to obtain a litigation
benefit like a longer statute of limitations.” Pitts v. Rivas, 709 S.W.3d 517, 521 (Tex.
2025). “Under the anti-fracturing rule, if the crux or gravamen of the plaintiff’s claim
is a complaint about the quality of professional services provided by the defendant,
then the claim will be treated as one for professional negligence even if the petition
also attempts to repackage the allegations under the banner of additional claims.” Id.
at 524 (citing J.A. Green Dev. Corp. v. Grant Thornton, LLP, No. 05-15-00029-CV,
2016 WL 3547964, at *8 (Tex. App.—Dallas June 28, 2016, pet. denied); Won Pak
v. Harris, 313 S.W.3d 454, 457 (Tex. App.—Dallas 2010, pet. denied)). Stated
another way, “if the ‘gist of a client’s complaint’ or ‘the real issue’ is that the
professional failed to exercise the degree of care, skill, or diligence that professionals
of ordinary skill and knowledge would exercise, the anti-fracturing rule requires the
claim to be litigated as one for professional negligence, and the plaintiff may not re-
label the allegations under a different claim to obtain a litigation advantage.” Id.
(citing Riverwalk CY Hotel Partners, Ltd. v. Akin Gump Strauss Hauer & Feld, LLP,
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391 S.W.3d 229, 235 (Tex. App.—San Antonio 2012, no pet.); Kimleco Petroleum,
Inc. v. Morrison & Shelton, 91 S.W.3d 921, 924 (Tex. App.—Fort Worth 2002, pet.
denied)).
“Importantly, the anti-fracturing rule does not categorically bar a client from
pursuing multiple causes of action against a professional, including claims for fraud
or breach of fiduciary duty,” but instead “prohibits plaintiffs from attaching these
labels, and others like them, to their allegations when the gravamen of the allegations
is that the defendant failed to exercise the requisite degree of care or skill in the
provision of professional services.” Pitts, 709 S.W.3d at 525. So, “if the gravamen
of the claim ‘goes beyond what traditionally has been characterized as [professional]
malpractice,’ then additional claims beyond professional negligence may be viable.”
Id. (quoting Duerr v. Brown, 262 S.W.3d 63, 70 (Tex. App.—Houston [14th Dist.]
2008, no pet.)).
Plaintiff’s fraud claims are not barred by the anti-fracturing rule because the
gravamen of these claims move past professional malpractice and into deceptive
conduct. See Pitts, 709 S.W.3d at 525–26 (“Thus, if a plaintiff raises a genuine fact
issue on the elements of additional claims that truly extend beyond the scope of what
has traditionally been considered a professional negligence claim, then the additional
claims may survive summary judgment under the anti-fracturing rule.”); see also
Latham v. Castillo, 972 S.W.2d 66, 69 (Tex. 1998)). Plaintiff has not tried to artfully
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recast negligence claims as fraud claims to gain a litigation advantage.
The gravamen of Plaintiff’s fraud claim is Defendant was aware of design
defects in the planning stages of the Project but withheld this information to
encourage Plaintiff to continue with the design plans. ECF No. 105. Plaintiff’s fraud
claims arise from Defendant withholding knowledge of the design defects before
implementing plans—fraud—and not Defendant’s plan having design defects—
professional negligence. Id.
Pitts is inapposite to this case. In Pitts, the Texas Supreme Court found that
the gravamen of the plaintiffs’ fraud claim was “that the Accountants failed to
provide competent accounting services,” made accounting errors, overstated their
competence, and attempted to hide their errors from the plaintiffs. The Texas
Supreme Court found these claims were barred by the anti-fracturing rule because
they were professional malpractice allegations and the harm to the plaintiffs
stemmed from the accounting errors, not the alleged misrepresentations. See Pitts,
709 S.W.3d at 526–27.
As noted above in the Court’s discussion on injury, the evidence at the very
least raises a fact question as to whether Defendants knowingly and intentionally
withheld its knowledge of the design defects to deceive Plaintiff into moving
forward with its faulty plans. Defendant’s deception harmed Plaintiff—had Plaintiff
known of the design defects, it would not have moved forward with the design plan
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and at best, would have required Defendant to return to the drawing board. The anti-
fracturing rules do not bar Plaintiff’s fraud claims. See Pitts, 709 S.W.3d at 526–27.
D. 	The Economic Loss Rule Does Not Bar Plaintiff’s Tort Claims.
Defendant argues that Plaintiff’s negligence and fraud claims are barred by
the economic loss rule. ECF No. 126 at 17. Defendant argues that Plaintiff’s tort
claims do not arise under a duty independent of the agreement and seek identical
damages for identical injuries in tort and in contract. ECF No. 126 at 18. Defendant
continues 	that 	the 	“primary 	rationale” 	for 	applying 	the 	economic 	loss 	rule,
contractual allocation of risk, is satisfied here because the risk of loss was
redressable in Plaintiff’s breach of contract claims against the Architect, who had
agreed to indemnify and hold Plaintiff harmless from the acts or omissions of
subconsultants like Defendant. ECF No. 126 at 19.
“As a general rule, the failure to perform the terms of a contract is a breach of
contract, not a tort,” and therefore, Texas’s economic loss rule “generally precludes
recovery in tort for economic losses resulting from a party’s failure to perform under
a contract when the harm consists only of the economic loss of a contractual
expectancy.” Curtis v. Cerner Corp., 621 B.R. 141, 171 (S.D. Tex. 2020) (quoting
Heller Fin., Inc. v. Grammco Computer Sales, Inc., 71 F.3d 518, 527 (5th Cir. 1996);
Chapman Custom Homes, Inc. v. Dallas Plumbing Co., 445 S.W.3d 716, 718 (Tex.
2014); citing Lamar Homes, Inc. v. Mid-Continent Cas. Co., 242 S.W.3d 1, 12 (Tex.
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2007); LAN/STV v. Martin K. Eby Constr. Co., 435 S.W.3d 234, 235–36 (Tex.
2014)).
Because a party’s actions may breach duties in tort or contract or both, “[t]he
nature of the injury most often determines which duty or duties are breached”—
“[w]hen the injury is only the economic loss to the subject of a contract itself the
action sounds in contract alone.” Id. (quoting Sw. Bell Tel. Co. v. DeLanney, 809
S.W.2d 493, 495 (Tex. 1991) (quoting Jim Walter Homes, Inc. v. Reed, 711 S.W.2d
617, 618 (Tex. 1986)); citing Lamar Homes, 242 S.W.3d at 12–13 (“In operation,
the rule restricts contracting parties to contractual remedies for those economic
losses associated with the relationship, even when the breach might reasonably be
viewed as a consequence of a contracting party’s negligence.”). However, “[a] party
states a tort claim when the duty allegedly breached is independent of the contractual
undertaking and the harm suffered is not merely the economic loss of a contractual
benefit.” Id. (emphasis in original) (quoting Chapman Custom Homes, 445 S.W.3d
at 718). In other words, the economic loss rule does not apply when the “duty was
independent of any obligation in the [contract], and the alleged damages caused by
the breach of that duty extended beyond the economic loss of any anticipated benefit
under the . . . contract.” Hilburn v. Storage Tr. Props., LP, 586 S.W.3d 501, 508
(Tex. App.—Houston [14th Dist.] 2019, no pet.).
To determine “whether a tort claim is merely a repackaged breach of contract
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claim,” the Court considers: “(1) whether the claim is for breach of duty created by
contract, as opposed to a duty imposed by law; and (2) whether the injury is only the
economic loss to the subject of the contract itself.” Curtis, 621 B.R. at 171 (quoting
Stanley Indus. of S. Fla., Inc. v. J.C. Penney Co., No. 3:05-CV-2499L, 2006 WL
2432309, at *5 (N.D. Tex. Aug. 18, 2006)). “The burden is on the plaintiff to
establish evidence of an independent injury.” Id. at 171–72 (quoting McDaniel v.
JPMorgan Chase Bank, N.A., No. 1:12-CV-392, 2012 WL 6114944, at *7 (E.D.
Tex. Dec. 10, 2012) (citing Esty v. Beal Bank S.S.B., 298 S.W.3d 280, 302 (Tex.
App.—Dallas 2009, no pet.), Sterling Chems., Inc. v. Texaco Inc., 259 S.W.3d 793,
797 (Tex. App.—Houston [1st Dist.] 2007, no pet.)).
1. 	The economic loss rule does not bar Plaintiff’s negligence claims.
Plaintiff alleged a claim for professional negligence against Defendant. ECF
No. 105. Plaintiff alleges that independent of any contractual duties, Defendant had
a duty to conduct its operations and perform its services related to the Project’s
design with due care, caution, and skill, and to exercise reasonable care in its
retention of design professionals, consultants, subconsultants and employees, and in
its supervision, inspection, design, observations and/or quality control relating to the
Project. ECF No. 105 ¶¶ 228–29. Plaintiff alleged that Defendant’s breach of these
duties caused Plaintiff “resultant and consequential property and other damages.”
ECF No. 105 ¶ 231.
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“One exception to the economic loss rule is professional malpractice, or
negligence.” Paradyme Asset Mgmt., LLC v. Figurd, LLC, No. SA-24-CV-00737-
XR, 2025 WL 515319, at *4 (W.D. Tex. Jan. 20, 2025) (citing LAN/STV v. Martin
K. Eby Const. Co., 435 S.W.3d 234, 243–44 (Tex. 2014)). As “[c]ertain professional
relationships create duties separate and independent from a contract between a
professional and his or her client,” they “can form the basis for negligence claims
against professionals, including for services performed under a contract.” 	Id.
(quoting Dunn v. Marine, No. H-12-CV-03643, 2015 WL 12778390, at *13 (S.D.
Tex. Oct. 13, 2015) (citing LAN/STV, 435 S.W.3d at 243–44))). “The exception
recognizes that standards governing the professions that ‘are deeply developed and
their application uniform and well-settled,’ reduc[e] the need to defer to the parties’
contractual allocation of duties and risk,” and in situations like this, a party “can
recover purely economic losses.” Id. (quoting Dunn, 2015 WL 12778390, at *13
(citing LAN/STV, 435 S.W.3d at 244)).
The exception has not been extended to “allow nonparties to a contract
between a contracting party and a professional to recover economic losses caused
by the professional’s negligent performance of the contract.” Id. (quoting Dunn,
2015 WL 12778390, at *13). Instead, “[a] nonparty to a contract may recover for a
professional’s negligence only if the professional directed its actions to a ‘known
party for a known purpose.’” Id. (quoting Dunn, 2015 WL 12778390, at *13 (citing
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LAN/STV, 435 S.W.3d at 245)). This “avoid[s] . . . unlimited and uncertain liability
for economic losses in cases of professional mistake.” Id. (quoting Grant Thorton
LLP v. Prospect High Income Funds, Ltd., 314 S.W.3d 913, 920 (Tex. 2010)).
Defendant argues that the professional malpractice exception to the economic
loss rule does not apply here because Plaintiff and Defendant do not have a direct
contractual relationship and the later assignment only created “privity after the fact.”
ECF No. 126 at 19–20. Defendant contends that it may have an independent duty to
the Architect, it does not owe an independent duty to Plaintiff. ECF No. 126 at 20.
Defendant also contends that there is no “injury independent of the contractual
undertaking.” ECF No. 126 at 18. Plaintiff responds that “[o]nce privity was
established through the valid assignment, [Plaintiff] as assignee is entitled to bring
any and every claim that [the Architect] as assignor could bring against the obligor,”
Defendant, and so the professional malpractice exception applies here. ECF No. 129
at 24–25. Plaintiff continues that it seeks property damages beyond the mere loss of
a contractual benefit. ECF No. 129 at 25.
Defendant is a licensed professional engineering firm and therefore falls under
the professional malpractice exception to the economic loss rule. See Dunn v.
Marine, No. CV H-12-03643, 2015 WL 12778390, at *14 (S.D. Tex. Oct. 13, 2015)
(“Licensed professional engineers, such as Edward Turner, and the firms at which
they practice, such as AMASE, fall within the professional malpractice exception to
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the economic loss rule.”) (citing Tex. Civ. Prac. & Rem. Code § 150.001–003
(governing negligence suits against “licensed or registered professionals,” defined
to include a “licensed professional engineer or any firm in which such licensed or
registered professional practices”); LAN/STV, 435 S.W.3d at 244 & n.42 (citing Tex.
Civ. Prac. & Rem. Code § 150.001–03 in discussing “negligence actions against
other professionals”)). Defendant owed a duty to the Architect outside of the
agreement. See id. As Plaintiff established, Plaintiff now stands in the shoes of the
Architect by virtue of the assignment. See In re Enron Corp. Sec., Derivative &
ERISA Litig., 279 F.R.D. 395, 405 n. 12 (S.D. Tex. 2011) (“An assignment functions
as a contract between assignor and assignee and is therefore interpreted according to
the law of contracts. In a valid assignment, the assignee steps into the shoes of the
assignor and is considered under the law to have suffered the same injury as the
assignors and have the same ability to pursue the claims.”) (quoting Southwestern
Bell Tel. Co. v. Mktg. on Hold Inc., 308 S.W.3d 909 (Tex. 2010)). Defendant argues
that, because the assignment took place after the claims accrued, Plaintiff cannot rely
on this exception. Defendant has not provided any authority that the timing of an
assignment is relevant to the application of the exception. ECF No. 126 at n.6.
Moreover, Defendant arguably directed its actions to a known party, Plaintiff
as the owner of the project Defendant designed for, for a known purpose. As pointed
out in Dunn, cited by Defendant:
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For example, if a company contracted with an accounting firm to
prepare financial statements, the firm may be liable to a current trade
creditor 	of 	the 	company 	for 	negligent 	misrepresentations 	in 	the
financial statements if the firm knew that the creditor would rely on the
statements. Blue Bell, Inc. v. Peat, Marwick, Mitchell & Co., 715
S.W.2d 408, 412 (Tex. App.—Dallas, 1986, writ ref’d n.r.e.). But the
accounting firm would not be liable for negligently preparing financial
records to potential investors who had no previous connection to the
corporation 	and 	were 	not 	known 	to 	the 	accounting 	firm. 	Grant
Thornton, 314 S.W.3d. at 921, 923–26.
Dunn, 2015 WL 12778390, at *14. Here, Plaintiff, the owner of the project, hired
the architect, who then hired Defendant to provide mechanical designs for the
project. In other words, Defendant was aware that it was hired to draft designs for
Plaintiff.
This case is distinguishable from LAN/STV. In LAN/STV, the Dallas Area
Rapid Transit Authority (“DART”) contracted with an Architecture firm to draw up
plans for a light rail system and then independently contracted with a construction
company to build the system. LAN/STV, 435 S.W.3d at 236. The construction
company built the system based on the Architecture firm’s plans, but the plans were
faulty and increased the construction company’s costs of performing. Id. at 236–37.
The construction company sued the Architecture firm for negligently preparing the
plans. Id. at 237. The Texas Supreme Court acknowledged that the Architecture firm
could fall within the professional exception to the economic loss rule, but the
exception did not apply because the construction company was a stranger to the
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Architectural firm’s contract with DART and did not “choose the Architect, or
instruct it, or pay it—the Architecture firm had not directed its contract performance
to the construction company. Id. at 244, 247. Here, Plaintiff is not a stranger to the
agreement—as discussed above, Plaintiff stepped into the shoes of the Architect,
with whom Defendant contracted.
Accordingly, 	Defendant 	owed 	Plaintiff 	a 	duty 	as 	a 	firm 	of 	licensed
professional 	engineers. 	Furthermore, 	permitting 	Plaintiff 	to 	recover 	against
Defendant is consistent with the rationale and policy behind the economic loss
rule—Defendant’s concerns about liability to third parties is not present here. 11
2. 	The economic loss rule does not bar Plaintiff’s fraud claims.
Defendant argues that the economic loss rule bars Plaintiff’s fraud claims.
ECF No. 126 at 21. 12 Defendant argues that the source of duty for Plaintiff’s fraud
11 Insofar as Defendant argues Plaintiff’s requested damages fail to establish independent injury,
the Court is unconvinced. Plaintiff has claimed losses suffered that were not the subject of the
agreement between the architect and Defendant. See Constance Joy II, LLC v. Stewart & Stevenson
FDDA LLC, No. 4:20-CV-02967, 2024 WL 4008094, at *7 (S.D. Tex. Aug. 30, 2024) (“Just like
the fire in Scharrenbeck and the flooding in Chapman, the FDDA technician's duty not to flood
the ship was “independent of the contractual undertaking” in the May 29, 2018 SRO.”) (citing
Montgomery Ward & Co. v. Scharrenbeck, 204 S.W.2d 508 (Tex. 1947); Chapman Custom
Homes, Inc. v. Dall. Plumbing Co., 445 S.W.3d 716, 718 (Tex. 2014) (per curiam)). Plaintiff has
shown that it suffered property damage outside of the contract undertaking between Defendant and
the architect. See Fronapfel Affidavit, ECF No. 129-5 ¶¶ 21–24; Rabena Affidavit, ECF No. 129-
6 ¶¶ 6–9.
12 Plaintiff raises a fraudulent inducement claim and a fraudulent concealment claim against
Defendant. ECF No. 105. Regarding fraudulent inducement, Plaintiff alleged that Defendant
knowingly misrepresented that the mechanical systems for the Project would include makeup air
that is preconditioned and that the design team would evaluate additional makeup air requirements
to handle the humid environment in its request for proposal. ECF No. 105 ¶¶ 234–36. Plaintiff
alleges that Defendant intended for Plaintiff to rely, and Plaintiff did rely, to permit the Project to
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claims arises from Defendant’s agreement with the Architect and Plaintiff only seeks
contractual expectancy duties. ECF No. 126 at 21. Plaintiff responds that the Court
has already analyzed and rejected Defendant’s arguments when deciding the motion
for leave to amend discussed above, finding that Plaintiff seeks more than benefit of
the bargain damages and Defendant had an independent duty to not commit fraud.
ECF No. 129 at 26.
As the Court previously found, “[b]oth [fraud] claims involve a duty separate
from the contractual duties because there is “an independent legal duty not to commit
the intentional tort of fraud.” Order, ECF No. 104 at 11 (quoting Eastman Chem.
Co. v. Niro, Inc., 80 F.Supp.2d 712, 717 (S.D. Tex. 2000) (emphasis in original);
Corporativo Grupo R SA de C.V. v. Marfield Ltd., Inc., No. 4:19-CV-01963, 2021
WL 5161736, at *3 (S.D. Tex. Sept. 16, 2021) (“[P]arties to a contract have an
independent duty not to commit the intentional tort of fraud.”)). Indeed, Plaintiff’s
“intentional fraud claims concern a separate, independent duty under Texas common
law rather than a duty imposed solely under the contract.” Id. (emphasis in original)
(citing Eastman Chem. Co., 80 F.Supp.2d at 717 (noting that the economic-loss rule
proceed. ECF No. 105 ¶ 237. Plaintiff alleged that its reliance on the misrepresentation caused
physical harm to the Project, “as well as economic loss to Plaintiff requiring repairs.” ECF No.
105 ¶ 240. Regarding fraudulent concealment, Plaintiff alleged that Defendant knew about design
defects that it was obligated to disclose to Plaintiff but failed to and had the intent that Plaintiff
rely on the non-disclosure and move forward with the Project. ECF No. 105 ¶¶ 245–47. Plaintiff
relied on the non-disclosure, which caused physical harm to the Project and economic loss to
Plaintiff, requiring repairs at the Project. ECF No. 105 ¶¶ 247–49.
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will only preclude a tort cause of action when “the claim is for breach of duty created
solely by contract rather than a duty imposed by law” (emphasis in original))).
Defendant has not pointed to a change in authority that should alter this finding—
“parties to a contract [still] have an independent duty not to commit the intentional
tort of fraud.” Corporativo, 2021 WL 5161736, at *3 (quoting United Health Prod.,
Inc. v. Animal Health Int'l, Inc., No. 4:20-CV-788, 2021 WL 930682, at *5 (S.D.
Tex. Mar. 11, 2021)).
Further, as the Court previously found, Plaintiff pursues damages outside the
economic loss of a contractual benefit. Plaintiff seeks exemplary damages for its
fraud claims. Order, ECF No. 104 at 11 (referring to mechanical design services and
exemplary damages); see Am. Compl., ECF No. 105 at 45 (“an award of exemplary
damages pursuant to Tex. Civ. Prac & Rem. Code § 41.008(b)); see also Gilbreath
v. Horan, 682 S.W.3d 454, 507–08 (Tex. App.—Houston [1st Dist.] 2023, pet.
denied), reh’g denied (Apr. 20, 2023) (“Exemplary damages may be awarded ‘only
if the claimant proves by clear and convincing evidence that the harm with respect
to which the claimant seeks recovery of exemplary damages results from: (1) fraud;
(2) malice; or (3) gross negligence.’”) (quoting Tex. Civ. Prac. & Rem. Code §
41.003(a)). The evidence shows that 	exemplary damages and 	other punitive
measures are not mentioned anywhere in the agreement between Defendant and the
Architect. ECF No. 126-4.
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Thus, the economic loss rule does not bar Plaintiff’s fraud claims.
E. 	Evidence Establishes a Genuine Issue of Material Fact As To Plaintiff’s
Fraud Claims.
Defendant argues that undisputed evidence negates elements of Plaintiff’s
fraud claims. ECF No. 126 at 23. Plaintiff responds that its fraud claims cannot be
determined on summary judgment because Plaintiff’s evidence creates a genuine
issue of material fact on the elements of their fraud claims. ECF No. 129 at 26.
“The basic elements of fraud are[:] (1) a material misrepresentation, (2) made
with knowledge of its falsity or asserted without knowledge of its truth, (3) made
with the intention that it should be acted on by the other party, (4) which the other
party relied on, and (5) which caused injury.” Sugg v. Midwestern Univ., No. 2:20-
CV-00274, 2022 WL 19039612, at *6 (S.D. Tex. Dec. 27, 2022), aff’d, 105 F.4th
345 (5th Cir. 2024) (citing Anderson v. Durant, 550 S.W.3d 605, 614 (Tex. 2018)).
1. 	Plaintiff’s fraudulent concealment claims should survive summary
judgment.
“Fraud by non-disclosure, a subcategory of fraud, occurs when a party has a
duty to disclose certain information and fails to disclose it.” Bombardier Aerospace
Corp. v. SPEP Aircraft Holdings, LLC, 572 S.W.3d 213, 219 (Tex. 2019) (citing
Schlumberger Tech. Corp. v. Swanson, 959 S.W.2d 171, 181 (Tex. 1997)). “To
establish fraud by non-disclosure, the plaintiff must show: (1) the defendant
deliberately failed to disclose material facts; (2) the defendant had a duty to disclose
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such facts to the plaintiff; (3) the plaintiff was ignorant of the facts and did not have
an equal opportunity to discover them; (4) the defendant intended the plaintiff to act
or refrain from acting based on the nondisclosure; and (5) the plaintiff relied on the
non-disclosure, which resulted in injury.” See id. at 219-20. Generally, “there is no
duty to disclose without evidence of a confidential 13 or fiduciary 14 relationship.” Id.
at 220 (citing Ins. of N. Am. v. Morris, 981 S.W.2d 667, 674 (Tex. 1998).
Defendant argues that Plaintiff cannot establish that Plaintiff was ignorant of
the facts because Plaintiff and the Architect investigated the undisclosed options and
rejected them. ECF No. 126 at 25. Defendant also argues that Plaintiff has no
knowledge of communication between Defendant and the Architect and, therefore,
cannot show that Defendant failed to inform the Architect. ECF No. 126 at 26.
Plaintiff argues that the evidence confirms that the issues, risks, and alternative
systems raised in Defendant’s internal report and emails were never raised to
Plaintiff. 	Further, 	Plaintiff 	asserts 	that 	Defendant’s 	evidence 	that 	Plaintiff
investigated and rejected the alternative options relate to a different Project and does
not show that Plaintiff or the Architect were aware of the issues Defendant discussed
13 A confidential relationship is one in which the “parties have dealt with each other in such a
manner for a long period of time that one party is justified in expecting the other to act in its best
interest.” Id. (citing Morris, 981 S.W.2d at 674); Meyer v. Cathey, 167 S.W.3d 327, 331 (Tex.
2005) (per curiam) (recognizing that an informal relationship giving rise to a duty may also be
created by a “special relationship of trust and confidence [which] exist[s] prior to, and apart from,
the agreement”)).
14 A fiduciary duty arises “as a matter of law in certain formal relationships, including attorney-
client, partnership, and trustee relationships.” Id. 220 (citing Morris, 981 S.W.2d at 674).
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internally. ECF No. 129 at 27.
Indeed, the evidence that Defendant cites to supports finding that Plaintiff and
the Architect were familiar with alternative systems like VRF and DOAS systems
and their costs but does not show that Plaintiff and the Architect were aware of the
issues and consequences that Defendant discussed internally that could potentially
be remedied with these alternative systems. See ECF No. 126-20 (email from the
Architect to Defendant dated October 30, 2015 with the subject line “La Cantera
meeting” stating “Thank you for being available for the La Cantera 15 Kick-off
meeting. The group meeting will be pretty high level orientation to the Project.
Currently, we are assuming the systems will be the same as the Katy Project.
However, due to Owner preference and challenges with the energy code, we need to
discuss alternate systems. For alternate systems, I’m thinking DX-split ilo VPACS.
Previously we have done extensive studies on VRF systems and they are just too
expensive for this client, so let’s not mention VRF on Monday. After the group
meeting, Lee Lyles (owner) would like to spend a few minutes with you talking
about options. If you can be prepared to talk about some of the challenges with the
2015 IECC that would be helpful too.”); ECF No. 126-16 at 167:18–168:21
(Plaintiff’s representative, Lee Lyles’ deposition testimony that the VRF system did
not fit into the Project’s model, so to afford it, Plaintiff would have to eliminate other
15 There is no evidence that La Cantera’s climate or environment is similar to the project here.
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elements like the dining room or bar, and that was a decision Plaintiff was not willing
to make because the rest of the market was not using the VRF system); 234:13–
234:22 (Lyles’ deposition testimony that DOAS was not a “generally accepted
practice in these facilities”); 235:12–236:21 (Lyles’ deposition testimony that when
the Project was designed, it would have been unusual to use a DOAS system).
Furthermore, Plaintiff’s evidence demonstrates that there is genuine issue of
material fact as to whether Plaintiff and the Architect were ignorant of the climate
issues and risks Defendant’s designs posed that could be remedied by alternative
systems raised in Defendant’s internal discussions. Defendant was to design an
HVAC system to “handle the humid environment.” Herr Affidavit, ECF No. 129-2
¶ 44. Defendant did an internal review of its designs for the Project and in the internal
review, Harris noted that the current design would not provide sufficient humidity
control, among other issues. ECF No. 129-2 ¶ 47 (Harris tasked with Defendant’s
in-house review and found potential issues with humidity controls); Donaldson
Affidavit, ECF No. 129-8 ¶ 7 (same). Nordholm responded to Harris that he could
“get some de-humidification in the corridors but not a great deal.” ECF Nos. 129-2
¶ 48; 129-8 ¶ 8. Harris again responded that “this is a major design problem” and
“[i]f we were directed by the Owner to use these systems someone should have told
him that they will not work and that he can expect to have humidity control issues
and potential mold issues in the building or that he is going to have one hell of an
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energy bill for us to make them work. Quite frankly I can’t believe that we are going
thru this issue again. . . . in my humble opinion, we need to circle the wagons here
and get George Johnson (or whoever the main Owner contact is for this Project)
make sure we want to proceed down this path before we issue any CDs.” ECF
Nos. 129-2 ¶ 49; 129-8 ¶ 9; Harris Deposition Transcript, May 20, 2024, ECF No.
129-10 at 105:17-22 (the design would not work for a commercial building); 106:7-
12 (Defendant needed to discuss potential humidity control issues and mold issues
with the owner of the Project). These reports were not raised with the Architect. ECF
Nos. 129-2 ¶ 50 (Defendant’s internal review emails and concerns not shared with
the Architect); 129-8 ¶ 10 (same).
Harris also published a Mechanical Review Report that echoed the concerns
about the risk in using exclusively natural ventilation and did not inform the
Architect that the use of alternative systems (such as DOAS or VRF) were necessary
to ensure that humidity issues did not impact the Project. ECF Nos. 129-2 ¶¶ 51;
129-8 ¶¶ 11; Fronapfel Affidavit, ECF No. 129-5 ¶¶ 25–26; Nordholm Deposition
Transcript, May 20, 2024, ECF No. 129-11 at 176:22-177:8 (Nordholm did not tell
the Architect to expect humidity control issues). None of the above concerns were
provided or communicated to Plaintiff or the Architect. ECF Nos. 129-2 ¶¶ 52, 54;
129-8 ¶¶ 12, 13, 14; Sweeney Affidavit, ECF No. 129-3 ¶¶ 17, 18. Plaintiff only
learned of the Report when it was produced in discovery in this case. ECF Nos. 129-
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9 ¶ 6; 129-3 ¶¶ 17, 20.
There are genuine issues of material fact to be determined at trial: the
Architect relied on Defendant’s recommendations and because Defendant did not
raise the above concerns with the Architect, the Architect believed the design to be
safe and appropriate, ECF No. 129-2 ¶¶ 56; 57, ECF No. 129-8 ¶¶15, 16; and had
these issues been brought to the Architect’s attention, then the Architect would have
communicated to Plaintiff and the Architect and Plaintiff would have required
Defendant to make new recommendations, ECF Nos. 129-2 ¶ 58; 129-8 ¶ 17;
Plaintiff’s representative Lee Lyles Deposition Transcript, May 14, 2024, ECF
No. 129-12 at 228:1–229:4 (no discussions where the Architect or Plaintiff informed
the other that the VRF system was too expensive for this Project). Summary
judgment should be denied as to Plaintiff’s fraudulent concealment claims.
2. 	Plaintiff’s 	Fraudulent 	Inducement 	Claims 	Should 	Survive
Summary Judgment.
“Fraudulent inducement is actionable when the misrepresentation is a false
promise of future performance made with a present intent not to perform.” Id.
(quoting 	Anderson, 	550 	S.W.3d 	at 	614); 	see 	also 	Maciel 	Communications
Contractors, LLC v. Lit Fiber, LLC, No. 1:23-CV-00128, 2025 WL 1825537, at *3
(S.D. Tex. Feb. 13, 2025) (“Plaintiff must establish all elements of the common law
fraud claim, plus the added element that the fraud related to an agreement between
the parties.”) (citing Haase v. Glazner, 62 S.W.3d 795, 798 (Tex. 2001)). “A promise
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of future performance constitutes actionable fraud if the promise was made with no
intention of performing at the time it was made.” Civelli v. Mulacek, No. CIVIL
ACTION H-17-3739, 2025 WL 1009075, at *17 (S.D. Tex. Feb. 27, 2025), adopted,
No. 	4:17-CV-03739, 	2025 	WL 	952968 	(S.D. 	Tex. 	Mar. 	31, 	2025), 	and
reconsideration denied, No. 4:17-CV-03739, 2025 WL 2411228 (S.D. Tex. Aug.
20, 2025) (quoting Formosa Plastics, Corp. USA v. Presidio Eng’rs &. Cont’rs, Inc.,
960 S.W.2d 41, 48 (Tex. 1998)).
Failure to perform alone is not evidence of fraud—Plaintiff must produce
evidence that Defendant “made representations with the intent to deceive and with
no intention of performing as represented” at the time the representation was made.
Id. (quoting Formosa, 960 S.W.2d at 48). “A defendant’s intent to perform at the
time of the agreement is generally an issue of fact, but ‘if the evidence of intent is so
weak that it creates only a mere surmise or suspicion’ of the defendant’s ill intent, a
fraud claim should not survive a motion for summary judgment.” Id. at *18 (quoting
Fuller v. Wholesale Elec. Supply Co. of Houston, Inc., 631 S.W.3d 177, 187 (Tex.
App.—Houston [14th Dist.] 2020, pet. denied)).
Defendant argues that Plaintiff cannot prove fraudulent intent because there
is no evidence that at the time of the agreement, Defendant had no intention of
performing—instead, Plaintiff’s expert testified that Defendant’s natural ventilation
could comply with the Mechanical Code, as promised in the agreement. ECF
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No. 126 at 26–27. Plaintiff responds that Defendant misrepresents Plaintiff’s
expert’s testimony and its evidence shows a genuine issue of material fact that
Defendant knew its representation that its mechanical designs could handle the
humid environment was false but made these representations to encourage the
Architect 	and 	Plaintiff 	to 	rely 	on 	the 	misrepresentation 	and 	continue 	with
Defendant’s design. ECF No. 129 at 27–28.
Plaintiff’s evidence shows a genuine issue of material fact as to whether
Defendant lacked the intent to perform at the time the representations to perform
were made. At the beginning of their relationship on the Project, the Architect
provided Defendant with a Request for Proposal (“RFP”) and described the Project
and engineering services requested—the request noted that “[m]akeup air will be
preconditioned and provided as required by the Mechanical Code. Due to the
climate, the design team will need to evaluate additional makeup air requirements to
handle the humid environment.” ECF No. 129-2 ¶¶ 16–21. The agreement between
the Architect and Defendant detailed the scope of Defendant’s services and stated
that Defendant would “[p]rovide drawings and specification as stated in [the RFP]”
and would perform its services in “a manner consistent with the degree of skill and
care ordinarily exercised by practicing design professionals performing similar
services in same locality, and under the same or similar circumstances and
conditions.” ECF Nos. 129-2 ¶¶ 22-29; 129-3 ¶¶13-15. SSR was tasked with and
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contracted to design an HVAC system for the Project that could “handle the humid
environment.” ECF No. 129-2 ¶ 44.
Plaintiff’s expert, Robert Elkins, investigated the Project’s HVAC systems
and found that the Project suffered from HVAC defects out of Defendant’s scope of
mechanical design work—and specifically noted several design defects that were
not code-compliant and/or did not compensate for the humid environment. Fronapfel
Affidavit, ECF No. 129-5 ¶¶18-19; Tinker Affidavit, ECF No. 129-4 ¶ 6 (“[Plaintiff]
did not have any knowledge of the design issues with the HVAC systems at the
Project, including the sizing of the VTAC units or the lack of make-up air, until
[Elkins] investigated the HVAC systems in early 2021.”). Elkins died in 2022, so
Plaintiffs hired Edgar Stacy to continue the investigation—Stacy’s report reached
conclusions consistent with Elkins’ conclusions. ECF No. 129-5 ¶¶ 21–24. Stacy
died in 2023, so Plaintiff hired Michael Rabena. ECF No. 129-5 ¶ 24. Rabena’s
reports reach conclusions consistent with Elkins and Stacy. Michael Rabena
Affidavit and Reports, ECF No. 129-6 at 30 (“The Engineer designed a system that
did not meet code requirements, and was insufficient in maintaining a facility wide,
or individual unit, positive pressure. These failures, in my opinion, based upon my
education and experience, fell below the standard of care for similar engineers in the
same locale. As a result, the Project has had temperature and humidity issues.”). 16
16 Defendant cites to Rabena’s deposition testimony as proof that its design is code-compliant,
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Furthermore, as noted above, Defendant internally discussed that the Project’s
design was ill-suited for the humid environment, yet did not change their design or
communicate these concerns and issues with the Architect or Plaintiff. Defendant
seemingly did not do so because it intended for the Architect to rely on and move
forward with its design.
The evidence demonstrates a genuine issue of material fact as to whether
Defendant intended to comply with the agreement at the time of agreement or
whether Defendant falsely represented its design would include preconditioned
makeup air and handle the humid environment. Summary judgment should be denied
on Plaintiff’s fraudulent inducement claims.
F. 	There is a Genuine Issue of Material Fact as to Whether Plaintiff’s
Breach of Contract Claims are Time-Barred.
Defendant argues that Plaintiff’s negligence and breach of contract claims are
time-barred as they accrued before January 1, 2018 when completion occurred, but
were not filed until 2025, 17 well after negligence’s two-year limitations period and
breach of contract’s four-year limitations period. ECF No. 126 at 27–29. Defendant
argues that the discovery rule does not save these claims because Plaintiff did not
ECF No. 126-26 at 111:15–112:12 (natural ventilation as part of HVAC design is code-compliant
under the International Mechanical Code), but this excerpt does not also demonstrate that
Defendant’s design necessarily met the standard of care or could handle the specifically-noted
humid environment. Rabena’s report lists dozens of other codes. ECF No. 129-6 at 13–14.
17 Although Plaintiff filed the operative complaint in 2025, Plaintiff originally brought these claims
in their complaint on January 21, 2022. ECF No. 1 ¶¶ 64–69; 70–74.
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plead facts demonstrating applicability, comfort complaints are not inherently
undiscoverable, and Plaintiff’s ignorance of the comfort complaints’ cause(s) does
not amount to lack of discovery. ECF No. 126 at 28–29. Plaintiff responds that when
it discovered or should have discovered its injury is a question of fact that should be
determined by the factfinder. ECF No. 129 at 28. Plaintiff contends that it discovered
the design failures that form the basis of its claims in 2021. ECF No. 129 at 29.
The limitations period for a professional negligence claim in Texas is two
years. Tex. Civ. Prac. & Rem. Code § 16.003(a). The limitations period for a breach
of contract claim in Texas is four years. Tex. Civ. Prac. & Rem. Code § 16.051. “[I]t
is well-settled that an action for breach of contract accrues immediately upon
breach.” W. Power, Inc. v. TransAmerican Power Products, Inc., 316 F. Supp. 3d
979, 987 (S.D. Tex. 2018) (quoting Seureau v. ExxonMobil Corp., 274 S.W.3d 206,
227 (Tex. App.—Houston [14th Dist.] 2008, no pet.) (citing Barker v. Eckman, 213
S.W.3d 306, 311 (Tex. 2006))). “As a general rule, a cause of action accrues and the
statute of limitations begins to run when facts come into existence that authorize a
party to seek a judicial remedy.” Love & Joy Services, LLC v. Unity Nat’l Bank, No.
14-19-00082-CV, 2021 WL 1685192, at *6 (Tex. App.—Houston [14th Dist.] Apr.
29, 2021, pet. denied) (quoting Provident Life & Accident Ins. Co., v. Knott, 128
S.W.3d 211, 221 (Tex. 2003)). A cause of action “accrues when a wrongful act
causes a legal injury, regardless of when the plaintiff learns of that injury or if all
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resulting damages have yet to occur.” Id. (quoting Knott, 128 S.W.3d at 221).
The wrongful acts or breaches that underlie Plaintiff’s professional negligence
and breach of contracts claims all took place before completion on January 1, 2018.
ECF Nos.126-9 (certificate of substantial completion issued August 23, 2016); 126-
10 (letter from the Architect dated December 11, 2017 noting “construction of the
Delaney at Parkway Lakes is complete.”). Plaintiff filed these claims on January 21,
2022. ECF No. 1. Accordingly, neither Plaintiff’s breach of contract nor professional
negligence was filed before the statute of limitations passed.
Plaintiff avers that the discovery rule tolled its claims. ECF No. 129.
Defendant argues that the complained of injury is “comfort complaints,” “being ‘too
hot’ or ‘too cold,’” “are the very definition of an injury that is easily discoverable,”
and therefore, the discovery rule does not apply. ECF No. 126 at 28. Defendant also
argues that, if the discovery rule applies, the rule only tolled limitations upon
discovery of the injury, not discovery of the cause, so because Plaintiff knew of its
injuries by late 2017, its claims are still time-barred. ECF No. 126 at 29. Plaintiff
responds that Defendant mistakenly emphasizes comfort issues but ignores that
Plaintiff’s claims are based on Defendant’s design defects, which were undiscovered
until 2021. ECF No. 129 at 29.
When “the discovery rule applies, the statute of limitations does not begin to
run ‘until the plaintiff knew or in the exercise of reasonable diligence should have
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known of the wrongful act and resulting injury.’” Alt Platform, Inc. v. Beckett
Collectibles, LLC, No. 3:22-CV-02867-N, 2024 WL 4376156, at *2 (N.D. Tex. Oct.
1, 2024) (citing Marcus & Millichap Real Est. Inv. Servs. of Nev., Inc. v. Triex Tex.
Holdings, LLC, 659 S.W.3d 456, 462 (Tex. 2023) (quoting S.V. v. R.V., 933 S.W.2d
1, 4 (Tex. 1996))). The discovery rule applies where Plaintiff’s injury is both
inherently undiscoverable and objectively verifiable. 	See id. (citing 	Archer v.
Tregellas, 566 S.W.3d 281, 290 (Tex. 2018)).
“An injury is inherently undiscoverable if it is by nature unlikely to be
discovered within the prescribed limitations period despite due diligence.” Id. at *3
(quoting Berry v. Berry, 646 S.W.3d 516, 524 (Tex. 2022) (quoting S.V., 933 S.W.2d
at 7)). Courts determine “whether the injury is ‘the type of injury that could be
discovered through the exercise of reasonable diligence.’” Id. (quoting Marcus &
Millichap Real Estate Inv. Services of Nevada, Inc. v. Triex Tex. Holdings, LLC, 659
S.W.3d 456, 461 (Tex. 2023) (quoting BP Am. Prod. Co. v. Marshall, 342 S.W.3d
59, 66 (Tex. 2011))). “The touchstone of whether an injury is a relevant injury that
will toll the statute of limitations is whether the injury would put the plaintiff on
notice that he had been injured.” Id. (quoting Van Pelt v. Guild Mortgage Co., No.
1:21-CV-068-H, 2022 WL 2053181, at *4 (N.D. Tex. June 7, 2022)). 18
18 “Under Texas law, to prevail at summary judgment on a limitations defense, the defendant bears
the burden of negating the discovery rule by conclusively establishing that: (1) the discovery rule
does not apply, or (2) the summary judgment evidence negates it.” In re Zachry Holdings, Inc.,
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“While determination of whether an injury is inherently undiscoverable is a
question of law, reasonable diligence is an issue of fact.” In re Zachry Holdings,
Inc., No. 24-90377, 2025 WL 664936, at *5 (Bankr. S.D. Tex. Feb. 27, 2025)
(emphasis in original omitted) (quoting Silo Rest. Inc. v. Allied Prop. & Cas. Ins.
Co., 420 F.Supp. 3d 562, 586 (W.D. Tex. 2019)). “Some courts may determine
reasonable diligence as a matter of law ‘when there is actual or constructive notice,
or when information is readily accessible and publicly available.’” Id. (quoting
Hooks v. Samson Lone Star, LP, 457 S.W.3d 52, 58 (Tex. 2015)).
“The discovery rule ‘need not be specifically pleaded in federal court,’” rather
“[i]t is enough that the plaintiff plead sufficient facts to put the defense on notice of
the theories on which the complaint is based.” In re Zachry Holdings, Inc., No. 24-
No. 24-90377, 2025 WL 664936, at *4 (Bankr. S.D. Tex. Feb. 27, 2025) (citing McGowan v. S.
Methodist Univ., 715 F.Supp. 3d 937, 946 (N.D. Tex. 2024)). But, under Erie principles, federal
courts must apply federal procedural law—although there is some uncertainty as to which party
bears the burden to establish or negate the discovery rule’s application to the statute of limitations,
the Court agrees with the federal courts that utilize the burden-shifting framework under federal
procedural law to find Plaintiff, who bears the burden of establishing application of the discovery
rule at trial, also bears this burden at the summary judgment stage. See id. (citing Compare Tex.
Soil Recycling, Inc. v. Intercargo Ins. Co., 273 F.3d 644, 649 (5th Cir. 2001) (aligning with Texas
law by placing the burden on the defendant to negate the discovery rule), with FDIC v. Shrader &
York, 991 F.2d 216, 220 (5th Cir. 1993) (placing the burden on the plaintiff)); see also Ensley v.
Genworth Life & Annuity Ins. Co., No. 3:22-CV-0183-S, 2023 WL 2605029, at *5 (N.D. Tex.
Mar. 22, 2023) (“To carry its summary judgment burden, Defendant ‘must establish beyond
peradventure that each cause of action in question accrued outside the applicable limitations
period.’ If Defendant carries its burden, Plaintiff then bears ‘the burden to show a material factual
dispute regarding the timeliness of [his] claims, which may include a showing that the claims are
timely through the discovery rule.’”) (citing Silo Rest. Inc. v. Allied Prop. & Cas. Ins. Co., 420 F.
Supp. 3d 562, 576 (W.D. Tex. 2019)). Even so, the outcome is the same—Plaintiff’s evidence
demonstrates a genuine issue of material fact as to whether the discovery rule tolled limitations
such that Plaintiff’s claims are timely, and Defendant’s evidence does not conclusively negate this.
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90377, 2025 WL 664936, at *3 (Bankr. S.D. Tex. Feb. 27, 2025) (quoting Brandau
v. Howmedica Osteonics Corp., 439 F. App’x 317, 320 (5th Cir. 2011) (quoting TIG
Ins. Co. v. Aon Re, Inc., 521 F.3d 351, 357 (5th Cir. 2008))). Plaintiff pled sufficient
facts to put Defendant on notice of its discovery rule theory. See ECF No. 105.
Here, the Court finds that the discovery rule is applicable. Although the
breaches and wrongful acts necessarily took place before the completion of the
Project, arguably injuries from those breaches and acts were not as “easily
discoverable” as Defendant contends—arguably, these injuries could not reasonably
be discovered until residents moved in, utilized the defective A/C and heating
systems in hot and cold weather, and raised comfort complaints such that Plaintiff
was on notice that it suffered from an injury. See In re Zachry Holdings, Inc., 2025
WL 664936, at *4 (utilizing latent injury analysis applicable to discovery rule and
tort 	claims to breach 	of contract 	claims); 	Morningside Ministries v. Koontz
McCombs Constr., Ltd., No. 08-23-00332-CV, 2025 WL 1508641, at *13–14 (Tex.
App.—El Paso May 27, 2025, pet. filed) (“Among other defects, Morningside
alleges improper construction outside the Architectural specifications, systemic
structural issues, deviations from design requirements, and non-compliance with
geo-technical recommendations concerning exterior grading. . . . Because of the very
nature of the defects, the wrong and the injury were unknown to Morningside—and
not due to any fault on its part.”) (citing S.V., 933 S.W.2d at 7; cf., Dallas Market
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Center Hotel Co. v. Beran & Shelmire, 865 S.W.2d 145, 147 (Tex. App.—Corpus
Christi 1993, writ denied) (noting policy considerations underlying discovery rule
application are present in construction context where “aggrieved party frequently
does not discover an injury until months or years after construction is completed”));
Holiday Inn Club Vacations, Inc. v. CBRE, Inc., No. 14-23-00976-CV, 2025 WL
383161, at *9 (Tex. App.—Houston [14th Dist.] Feb. 4, 2025, pet. filed) (discovery
rule applied where alleged faulty construction resulting in water intrusion and other
damages was inherently undiscoverable).
But, the Court finds that Plaintiff’s argument that limitations did not run until
experts discovered Defendant’s design defects causing comfort complaints is
similarly off the mark—here, the application of the discovery rule is based on
discovery of the injury caused by the design defects, not discovery of the design
defects themselves. 19 See Diamond Beach Owners Ass’n v. Stuart Dean Co., Inc.,
No. 3:18-CV-00173, 2018 WL 7081232, at *3 (S.D. Tex. Dec. 19, 2018), adopted,
No. 3:18-CV-00173, 2019 WL 245462 (S.D. Tex. Jan. 17, 2019) (“For limitation
purposes, Plaintiff knew there were problems with the windows in 2011/2012 and
that knowledge put Plaintiff on notice of actual or potential injury-causing conduct,
even if it did not realize the full extent of its injury. Plaintiff therefore had an
19 Plaintiff does not provide any cases that show the discovery rule contemplates discovery of the
design defect instead of the injury caused by the design defect.
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obligation to exercise reasonable diligence to investigate the suspected harm and file
suit, if at all, within the limitations period.”) (internal quotations and citation
omitted).
Defendant’s cited evidence demonstrates that Plaintiff hired experts who
allegedly discovered design defects after looking into comfort complaints, but this
evidence does not provide a date of when the comfort complaints were discovered. 20
Rabena’s Expert Report, ECF No. 126-19; Summary of Work Orders dated
December 13, 2017 to January 21, 2020, ECF No. 126-11. 21 Plaintiff asserts that it
engaged the experts who discovered the design defects after it contacted Gregory
Edwards, 	Inc., 	the 	original 	mechanical 	subcontractor, 	in 	January 	2019 	for
maintenance and repairs on the VTAC units. ECF No. 129 at 9; Tinker’s Affidavit,
ECF No. 129-4 ¶ 5 (“During the period of January 2019 through December 2021,
[Plaintiff] contacted Gregory Edwards, Inc., the original mechanical subcontractor
for the Project, for maintenance and to make certain repairs on the [VTAC] units at
the Project. . . . The repairs included, but were not limited to, adding refrigerant,
addressing coil issues, replacing fan motors, addressing electronic issues, and
20 Defendant also cites to “ECF 1-2, pp. 3:4-6, 4:18-22, 13:13-14,” but this citation does not make
sense. ECF No. 1-2 is a 94-page compilation of several exhibits, so the pin-cites are useless.
21 Most of the summaries are too vague to demonstrate that Plaintiff had knowledge of injuries
caused by the design defects and Defendant does not point out any specific entries as the date when
Plaintiff discovered or should have discovered its injury. ECF No. 126-11 (e.g. “thermostat”).
Without more, these entries do not conclusively establish tolling ended on January 1, 2018—but
they do create a factual dispute as to whether Plaintiff could have discovered its injuries and
subsequently the design defects through reasonable diligence before limitations expired.
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repairing and replacing compressors.”). The evidence establishes that the discovery
rule tolled limitations to January 2019 at the latest, when VTAC issues prompted
Plaintiff to seek maintenance and repair.
Accordingly, there is no genuine issue of material fact that Plaintiff’s
professional negligence claims filed on January 21, 2022, ECF No. 1, are time-
barred and filed more than two years after Plaintiff sought maintenance and repair
in January 2019. However, there is genuine issue of material fact as to whether
Plaintiff’s breach of contract claims, filed on January 21, 2022, ECF No. 1, were
tolled by the discovery rule and filed within four years of discovery. Because there
is a factual dispute regarding the application of the discovery rule to Plaintiff’s
breach of contract claims, summary judgment on limitations grounds is not
appropriate.
V. 	CONCLUSION
The 	Court 	RECOMMENDS 	that 	Defendant’s 	motion 	for 	summary
judgment, ECF No. 126, be GRANTED IN PART, such that Plaintiff’s professional
negligence claims be dismissed as time-barred, and in all other respects be DENIED.
The 	Parties 	have 	fourteen 	days 	from 	service 	of 	this 	Report 	and
Recommendation to file written objections. 28 U.S.C. § 636(b)(1)(C); F ED.
R. C IV . P. 72(b). Failure to file timely objections will preclude appellate review
of factual findings or legal conclusions, except for plain error. Ortiz v. San
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Antonio Fire Dep’t, 806 F.3d 822, 825 (5th Cir. 2015).
Signed on January 6, 2026, at Houston, Texas.
________________________________
Dena Hanovice Palermo
United States Magistrate Judge
ston, Texas.
___________________________	_	_
Dena Hanovice Palermo
nited States Magistrate Judge
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