Fifth Circuit Upholds Promissory Estoppel Judgment

  • January 6, 2020

On January 3, 2020, the United States Court of Appeals for the Fifth Circuit upheld a $5.7 million promissory estoppel judgment in favor of Beck Redden's client, Dalton Logistics, Inc.

Dalton, an oil field equipment shipping broker, had planned to shut down its operations in North Dakota and return to Texas with the $5.7 million in profits it had earned over the years. But it was approached by Universal Truckload, Inc., which offered to buy the company for $25 million on one condition — it had to continue operating. Although Universal failed to complete this transaction, it continued to string Dalton along with promises that it would "get something done" as long as Dalton continued to "hang in there" by attempting to grow its business and expend its capital. Dalton, acting in reliance on these promises of an acquisition, continued to operate and depleted its assets until it ran out of capital more than a year later.

Dalton secured a jury verdict and judgment on the theory of promissory estoppel, recovering as reliance damages $5.7 million — the full amount of its assets that were depleted in reliance on Universal's promises. Universal appealed.

In a unanimous decision authored by Judge Jennifer Walker Elrod, the Fifth Circuit upheld Dalton's victory. Finding that Universal's promises were "continuous, numerous, and specific," it held that Dalton had reasonably relied on those promises and was entitled to recover the funds it expended in reliance in those promises. Additionally, the Fifth Circuit affirmed the district court's determination that Dalton was entitled to an offset to eliminate Dalton's $1.9 million debt to Universal — a debt which Dalton had only incurred because of its efforts to continue operating until Universal fulfilled its promise to purchase the company.

Beck Redden appellate partner Russell S. Post handled the appeal with his colleague Owen J. McGovern. Mr. Post gave the oral argument. Beck Redden's appellate team worked closely with Dalton's trial attorney, Lawrence Rothenberg.