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Appeals court irons out $500,000 investment dispute, affirms award

SOUTHEAST TEXAS RECORD

Thursday, November 21, 2024

Appeals court irons out $500,000 investment dispute, affirms award

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Texas Fourteenth Court of Appeals Chief Justice Kem Thompson Frost | txcourts.gov

A half a million dollar judgment was affirmed for a company that sued over an investment project gone wrong.

Chief Justice Kem Frost and Justices Ken Wise and Meagan Hassan made the judgment in the Fourteenth Court of Appeals Jan. 14. The 53rd District Court in Travis County, Texas initially ruled on the case after ACSWD, LP took legal action against Great Southwest Regional Center.

Great Southwest first claimed that the lower court didn’t have subject matter jurisdiction and that ACSWD failed to prove it was injured.


“Contrary to Great Southwest’s argument, the record contains legally sufficient evidence supporting the trial court’s implied finding that, at the time ACSWD intervened in the underlying proceeding in February 2017, ACSWD was or was likely to be injured by Great Southwest’s actions,” wrote Justice Hassan.

Great Southwest relied on its expert witness, economist Kenneth Lehrer, who said since the Frost Rains loan wasn’t due, there was no way to show that ACSWD suffered anything more than speculative damages. Still, the judges disagreed and wrote that Great Southwest failed to point to any law or statute that speculative damages cancel out the maturity of a claim.

Great Southwest also said the lower court erred when it “declared SWD Investment Recovery Fund properly was appointed as ACSWD’s general partner,” according to the lawsuit.

The judges vetoed Great Southwest’s idea of what the partnership agreement meant. While section 14.1(I)(iv) alone bars the “admission of a successor general partner without the current general partner’s written consent,” when included with the other sections, the idea that Great Southwest had concerning the agreement didn’t hold up, according to the opinion.

The judges also affirmed the $500,000 award.

The investment at the center of the case was aimed to make money from an EB-5 immigrant investor program managed by the U.S. Citizenship and Immigration Services (USCIS). The program allows foreign investors to get a green card when they invest in a U.S. business that subsequently develops 10 jobs. Great Southwest, which is owned by Frost Rain Holdings, LLC, sponsored an EB-5 project that dealt with salt water disposal wells. Great Southwest in turn developed ACSWD for the project and became ACSWD’s general partner. ACSWD was the center of a promotion where if one invests $500,000, they’ll receive a limited partnership interest in ACSWD. Atlantic Investment International Group was retained to find immigrant investors. The only investor who participated was Chinese citizen Lu Jun, who received a green card through the program. Jun wired Great Southwest $575,550 for the investment and an administration fee, attorney’s fees and other related costs. Jun ultimately became the sole limited partner with 99% interest as there weren’t any other EB-5 investors who participated. Jun asked Robert Frost, the CEO of Frost Rain Holdings, who also owns 66% of the company, to give her the $575,550 back. Unfortunately, her money wasn’t returned.

Great Southwest sued Atlantic Investment for not securing the necessary number of investors, and that case was sent to arbitration. Jun initially stated the claims, alleging that as the sole limited partner of ACSWD, she removed Great Southwest as ACSWD’s general partner and selected SWD Investment Recovery Fund to replace it. Jun nonsuited her lawsuit against ACSWD and ACSWD filed a plea in intervention against Great Southwest, Frost Rains Holdings, Robert and Kenneth Frost. ACSWD asked for a declaratory judgment for the status of ACSWD’s general and limited partners. After a realignment order from the lower court, ACSWD was the only plaintiff with claims against Great Southwest, Frost Rain Holdings, Kenneth Frost and his brother Robert Frost. ACSWD was awarded $500,000 in damages. Great Southwest then appealed.

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