754 F.3d 272 (5th Cir. 2014), 13-30827, Bluebonnet Hotel Ventures, L.L.C. v. Wells Fargo Bank, N.A.
|Court:||United States Courts of Appeals, Court of Appeals for the Fifth Circuit|
|Attorney:||For Bluebonnet Hotel Ventures, L.L.C., Plaintiff - Appellant: James Richard Swanson, Attorney, Jason W. Burge, Fishman Haygood Phelps Walmsley Willis & Swanson, L.L.P., New Orleans, LA. For Wells Fargo Bank, N.A., Defendant - Appellee: Nancy Scott Degan, Esq., Roy C. Cheatwood, Matthew Charles Ju...|
|Judge Panel:||Before REAVLEY, JONES, and GRAVES, Circuit Judges.|
|Opinion Judge:||EDITH H. JONES, Circuit Judge:|
|Party Name:||BLUEBONNET HOTEL VENTURES, L.L.C., Plaintiff--Appellant v. WELLS FARGO BANK, N.A., Defendant--Appellee|
|Case Date:||June 06, 2014|
|Citation:||754 F.3d 272|
Appeal from the United States District Court for the Middle District of Louisiana.
This appeal arises from the district court's grant of summary judgment for Appellee Wells Fargo Bank, N.A. (" Wells Fargo" ) on Appellant Bluebonnet Hotel Ventures' (" Bluebonnet" ) claim for rescission of contract. For the following reasons, we affirm.
Bluebonnet is a single-purpose corporate entity that was established to construct and operate a hotel in Baton Rouge, Louisiana. In order to finance the hotel's construction, Bluebonnet obtained an allocation of tax-exempt Gulf Opportunity Zone bonds, which Bluebonnet intended to sell to investors. In late 2006, Bluebonnet contacted Wells Fargo1 to provide a letter of credit for the bonds and underwrite their sale. In March 2007, the parties agreed upon and executed a term sheet outlining the terms for a proposed letter of credit. Among other things, the term sheet specifically provided: " This letter is not a commitment or agreement to lend money or extend credit[.]" Subsequent negotiations between the parties regarding the letter of credit eventually broke down, and ultimately Wells Fargo did not finance the bonds. Bluebonnet instead closed on a $2.5 million letter of credit with Regions Bank in order to meet state deadlines and preserve its bond allocation. Bluebonnet was only able to issue $2.5 million of its bond allocation, and those bonds were never sold to the public.
Meanwhile, shortly before the execution of the term sheet, Wells Fargo asked Bluebonnet whether it would be interested in entering into a swap agreement, which
would reduce the risk associated with floating interest rates on the bonds that Bluebonnet planned to sell. As described by the lower court, a swap agreement
is a separate agreement whereby parties agree upon a fixed, baseline interest rate (usually including a certain spread above the market interest rate), and one party makes payment to the other based on whether the floating market interest rate (usually a specified interest rate index) moves above or below the fixed interest rate. The payments are calculated based on the difference between the fixed and floating interest rates over a given interval, multiplied by a hypothetical amount of " notional" principal agreed to in advance.
Bluebonnet Hotel Ventures, L.L.C. v. Wachovia Bank, N.A., No. 3:10-cv-00489-JJB-RLB (M.D. La. Sept. 29, 2011) (order granting in part and denying in part motion to dismiss). Under the agreement, the parties' payments would theoretically offset each other as the variable interest rate on the bonds fluctuated, resulting in Bluebonnet's ultimately paying a fixed interest rate on the bonds. While the parties were in negotiations over the agreement, Wells Fargo sent Bluebonnet a presentation on how the swap transaction would work, which included the following disclaimer:
Although this proposal describes how the customer could use the proposed transaction to hedge against the interest expense of an existing or future loan or other financing, the proposed transaction would be a separate and independent obligation of the customer and would not be contingent on whether [such financing closes, is outstanding, or is repaid].
Despite the fact that the bonds had yet to be issued, and a letter of credit had yet to be executed, Bluebonnet entered into the swap agreement with Wells Fargo.
In the summer of 2007, after the swap agreement was executed...
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