The other party to a business deal made a representation I now know was false. I had some doubts at the time but went ahead anyway. Can I sue for fraud?
The Supreme Court of Texas addressed nearly that situation in Maya Walnut LLC v. Ly, No. 24-0171 (Tex. June 26, 2026). A Dallas grocery tenant negotiating a lease renewal was assured the space remained available; the landlord had in fact already leased it to a competitor. A jury found that the landlord had misrepresented the availability of the premises and awarded the tenant roughly $20.8 million, including exemplary damages. The court of appeals reversed, and the Supreme Court affirmed, holding that the tenant’s reliance on the landlord’s representations was not justifiable as a matter of law.
Justifiable reliance is an element of fraud in Texas, and the Court has held for some time that a sophisticated party dealing at arm’s length must exercise ordinary care for the protection of its own interests. Grant Thornton LLP v. Prospect High Income Fund, 314 S.W.3d 913, 923 (Tex. 2010); JPMorgan Chase Bank, N.A. v. Orca Assets G.P., L.L.C., 546 S.W.3d 648, 654 (Tex. 2018); Barrow-Shaver Res. Co. v. Carrizo Oil & Gas, Inc., 590 S.W.3d 471, 496–97 (Tex. 2019). Under those cases, “red flags” surrounding a representation may negate reliance as a matter of law when the circumstances make actual reliance extremely unlikely, although the question is ordinarily one for the fact-finder.
Maya Walnut appears to develop that doctrine in several respects. First, the Court did not require an accumulation of warning signs; it treated the tenant’s awareness of the competitor’s planned “big surprise” as sufficient on its own to call for inquiry. Second, the Court’s formulation focuses on the plaintiff’s actual state of mind: “When a sophisticated party engaged in arm’s-length negotiations becomes suspicious that a representation may be false, its blind reliance on that representation without further investigation is per se unjustifiable.” Third, the inquiry the Court described was modest — the tenant “easily could have asked Walnut Creek if the property remained available” — and the failure to ask was treated as dispositive. Finally, the tenant was a grocery operator negotiating its own lease rather than an institutional party of the kind involved in the earlier cases, which may suggest a broad reading of who counts as “sophisticated” in commercial dealings.
Chief Justice Blacklock, joined by Justices Lehrmann and Sullivan, concurred in the judgment but not in the red-flag analysis, reasoning instead that the landlord’s statements were non-committal and that no reasonable business would have relied on them to the extent the tenant did. The majority’s formulation therefore carries the Court’s authority, but the separate writing indicates some difference of view about how the doctrine should be framed, and later cases may test its limits — for example, where the suspicious party does ask and receives a further misrepresentation, or where the parties are not on equal footing.
The opinion does not change the elements of fraud, and it does not purport to reach consumers or relationships in which one party owes the other a duty of disclosure. What it does suggest is that, in a commercial negotiation in Texas, the point at which a party becomes uneasy may also be the point at which the law expects that party to ask a direct question and document the answer.
See also our earlier post, “Read Before Signing,” on the related principle that a party generally may not rely on the other side’s description of what a written document says.
