August 27, 2004, Austin TX: After a ten-day jury trial, on Thursday, August 26, 2004, John Thomas, a partner with George and Brothers, LLP and Walter Williams, a solo practitioner, obtained a verdict in excess of $10,000,000 against Switch and Data Company, based in Tampa, Florida. The Travis County, Texas jury found for the plaintiff, KFP Brooks Building, Ltd on all claims submitted to them, including breach of contract, negligent misrepresentation, fraud and piercing the corporate veil. The verdict included $5,000,000 in punitive damages after the jury found by clear and convincing evidence that Switch and Data had committed both common law fraud and statutory fraud.
The lawsuit originated from the breach of a lease signed in March of 2000 by one of over 50 Switch and Data shell companies, Switch and Data Texas Two, LLC. In the lease, the landlord agreed to build two floors of new shell space on top of the Perry-Brooks Building garage, at 7th and Brazos Street. In exchange, Switch and Data Texas Two, LLC promised to build out the 38,000 square foot space and pay almost $9 million in rent over ten years.
Switch and Data and their real estate broker had represented that the tenant company would be well funded from a $108 million capital infusion, but when it came time to build out the tenant space and pay rent, Switch and Data invented a host of fake excuses about why it could not take the space. Switch and Data refused to fund the tenant company, move in and pay rent. Switch and Data’s conduct in this regard was repeated throughout the country on unsuspecting landlords.
In a case involving an almost identical set of facts, Mr. Thomas and Mr. Williams represent another landlord against Switch and Data, Trammell Crow and Partners National Real Estate Group involving Switch and Data’s lease of a building in West Palm Beach, Florida. In the Florida case, the landlord purchased the building based on Switch and Data’s promise to lease two floors for ten years and representations that the tenant was a national company that would be well-funded through venture capital. Switch and Data has admitted it terminated the lease but relies now on the same defense that didn’t work in the Austin case – that because a judgment proof shell company signed the lease, the parent company has no responsibility.
Thursday’s verdict is one of the largest in Travis County this year. |
