The Houston Professional Towing Association, a persistent if unsuccessful litigant, brought its third challenge to the City of Houston’s “SafeClear” freeway towing program. It argued that recent changes to those ordinances had changed the facts enough to remove a res judicata bar from a previous lawsuit. The Fifth Circuit disagreed, concluding that the purpose of the law remained the same (“to promote safety by expeditiously clearing stalled and wrecked vehicles”), and statistics about collisions after the program began were either indeterminate or showed that it enhanced safety. Houston Professional Towing Association v. City of Houston, No. 15-20117 (Feb. 3, 2016).
National Casualty sued its insured in federal court for a declaratory judgment that there was no coverage. The insured sued National Casualty and the insured’s insurance brokers in state court for misleading it about coverage. The district court found that those additional parties were indispensable for the federal action (and would destroy diversity if joined), and abstained under Colorado River from proceeding further. Reminding “that it is not necessary for all joint tortfeasors to be named as defendants in a single lawsuit,” the Fifth Circuit reversed as to the joinder analysis, and also as to abstention, noting in particular that “the federal action has proceeded to summary judgment . . . [and] the state court action has involved little more than an original petition, answers, and a stay of proceedings.” National Casualty Co. v. Gonzalez, No. 15-10478 (Feb. 4, 2016, unpublished).
In Banco Popular v. Kanning, a dispute over entitlement to life insurance proceeds produced two reminders about important, but not often-litigated, principles in business law. No. 15-50342 (Jan. 29, 2016, unpublished). First, an argument that a purported assignment required further actions to become effective failed when the document in question unambiguously said “hereby assign.” The opinion reviews other language in other cases that obscured the assignor’s intent. Second, insurance policy proceeds — while obviously monetary in nature — are sufficiently specific to support an action for conversion (applying Paschal v. Great Western Drilling, 215 S.W.3d 437 (Tex. App.–Eastland 2006, pet. denied)).
Dr. Barrash, a member of a professional association of neurosurgeons, testified against Dr. Oishi, who was also a group member. Dr. Oishi settled his case and filed a complaint with the association about Dr. Barrash, alleging (among other claims) that Dr. Barrash failed to review all relevant records. The association censured Dr. Barrash, who then sued the association, claiming a denial of due process and a breach of the association’s contract with its members.
The district court found a denial of due process as to part of the censure, which the association did not appeal. The Fifth Circuit affirmed the Rule 12 dismissal of the rest of Dr. Barrash’s claims: “Dr. Barrash received sufficient due process, including notice, a hearing, and multiple levels of appeal, before he was censured for failing to review all pertinent and available records prior to testifying. Because the district court found only one basis of the censure to be unsupported by due process, the district court was correct in setting aside only that portion of the censure. Furthermore, no Texas court has recognized a breach of contract challenge to a private association’s disciplinary process.” Barrash v. American Association of Neurological Surgeons, No. 14-20764 (Feb. 3, 2016).
The forum selection clause in Weber v. Pact XPP Technologies AG, written in German, referred to the “Sitz” of defendant Pact AG, which could be translated as “residence” or “corporate seat.” After determining that a mixed de novo / abuse of discretion standard of review was appropriate after Atlantic Marine, the Fifth Circuit affirmed dismissal of a Texas case in favor of Germany. The Court found that the defendant’s broader reading of the clause was better-reasoned, that German law applied to its review (“A contract between a German corporation and a member of its board seems strongly to implicate German policy”), and that the plaintiff did not have a legally cognizable policy argument against enforcing the clause. No. 15-40432 (Jan. 26, 2016).
Cal Dive settled a hard-fought lawsuit against Schmidt, one of its divers, who alleged that he suffered a debilitating brain injury on the job. A year after the settlement, having continued with surveillance that it conducted during the litigation, Cal Dive brought an “independent action” under Fed. R. Civ. P. 60(b)(1) to set aside the settlement, alleging “that, after reaching the Agreement but before signing the Release, Schmidt had acquired a driver’s license and purchased a new car. In the months following the settlement, Schmidt was observed “cutting his grass, shopping, driving, and jogging for at least two miles.” The Fifth Circuit affirmed dismissal of Cal Dive’s action for failure to plead reliance, noting that during the litigation, “Cal Dive did not believe Schmidt’s allegations or testimony and hired its own experts to examine him over several years.” Cal Dive Int’l v. Schmidt, No. 15-30300 (Jan. 21, 2016, unpublished).
In unsurprising but still important news, the Supreme Court has decided to review the Fifth Circuit’s opinion in Texas v. United States, the challenge to President Obama’s immigration initiatives. The order granting the petition notes: “In addition to the questions presented by the petition, the parties are directed to brief and argue the following question: ‘Whether the Guidance violates the Take Care Clause of the Constitution, Art. II, §3.'”
Construction Funding filed a timely, sworn, proof of loss that “itemized the claim into general categories” such as “building structures” and “personal property.” Unfortunately, the relevant policy (incorporating a background federal law), required a “complete” inventory with attached documents. In this context “substantial compliance . . . is not enough,” and Construction Funding had no coverage for its loss. Construction Funding, LLC v. Fidelity Nat’l Indem. Ins. Co., No. 15-30040 (Jan. 8, 2016, unpublished).
Here is a reprint of my article this week in the Texas Lawbook, Federal Litigation in the Fifth Circuit in the New Year. I hope you find it informative and helpful.
In the cases of In re: Radmax and In re: Volkswagen of America, the Fifth Circuit asserted its power to oversee the transfer of cases under 28 USC § 1404(a). In the recent case of In re: Archer Directional Drilling Co., the Court stayed and partially remanded a venue appeal for the district court to make findings on the relevant factors: “Here, unlike in Volkswagen and Radmax, the district court failed to provide any analysis supporting its denial of Archer’s motion to transfer the case. Articulating the basis for the denial of a change of venue motion is ‘the better practice’ for a district court. . . . In the present case, the lack of explanation makes it impossible for us to determine whether the district court clearly abused its discretion, which is required in order for us to decide whether to
grant mandamus relief.” (citations omitted). No. 15-41539 (Jan. 13, 2016, unpublished).
In Local 731 Pension Trust Fund v. Diodes, Inc., the Fifth Circuit affirmed the dismissal of securities claims related to the alleged nondisclosure of labor problems at a Shanghai manufacturing plant, finding a failure to adequately allege scienter. Most basically, the Court observed — “It is important to note the curious nature of the Fund’s claims. To recap the relevant facts: during the class period, Diodes repeatedly warned investors of a labor shortage that would affect its output in the first two quarters of 2011; Diodes accurately warned the precise impact this labor shortage would have on its financial results, not once, but twice. Yet the Fund contends that more disclosure was required.” The Court went on to reject arguments about the unique knowledge of the relevant executives, the company’s decision to make an early product shipment (noting this would have made the labor problem worse and more apparent), and circumstances of an insider’s stock sales. No. 14-41141 (Jan. 13, 2016).
Boaz Legacy LP sued Roberts about ownership of land. Roberts argued that the land was located to the north of “the vegetation line along the south bank of the Red River,” which places the land in Oklahoma under the terms of the Red River Boundary Compact. Accordingly, Texas state and federal courts lacked subject matter jurisdiction under the “local action doctrine.” Boaz argued that the Compact did not apply to a boundary dispute among private landowners, but the Fifth Circuit disagreed: “[T]his argument conflates the underlying dispute with the present determination, which is purely jurisdictional.” Boaz Legacy LP v. Roberts, No. 15-10439 (Jan. 11, 2016, unpublished).
Collins challenged bankruptcy court jurisdiction over “illusory indemnity and contribution claims” that he alleged had no conceivable effect on the bankruptcy estate due to their lack of merit. The Fifth Circuit rejected his argument: “Both the Supreme Court and this court have gravitated away from conflating jurisdiction and merits, and Collins’s proposed standard results in exactly that conflation.” The Court also noted that the claims, based on a principal’s alleged commitment to indemnify its agent, were not “wholly insubstantial and frivolous” on their merits. Collins v. Sidharthan, No. 14-41226 (Dec. 15, 2015).
The district court abstained under the “primary jurisdiction” doctrine in deference to a FERC proceeding. On the threshold question of appellate jurisdiction, the Court concluded that Hines v. D’Artois, 531 F.2d 726 (5th Cir. 1976) was still good law, and allowed it to consider an otherwise-interlocutory appeal: “[T]he district court’s order resulted in Occidental being ‘effectively out of court’ and therefore functioned as a final decision.” On the merits, the Court remanded with instructions to not stay the court case indefinitely, but to instead stay for 180 days and assess the status then. Occidental Chem. Corp. v. Louisiana Public Service Comm’n, No. 15-30100 (Jan. 4, 2016).