An insurer settled with its insured; the settlement “did not contain an admission of liability under the Policy and both parties dispute whether the Policy covered the four claims at issue.” Accordingly, the insured had no claim under the Texas Prompt Payment Act for an alleged breach of the settlement. Tremago, L.P. v. Euler-Hermes American Credit Indemnity Co., No. 13-41179 (Feb. 25, 2015, unpublished). The Court also found that a trio of statements such as “[Plainitff] has not alleged, let alone proffered any evidence of any act on [Defendant’s] part that fairly can be characterized as ‘so extreme’ that it would cause ‘injury independent of the policy claim’ was sufficient to place the plaintiff on notice that its extra-contractual claims were within the scope of the defendant’s summary judgment motion.
A design firm proved at trial that Hallmark Design Homes built hundreds of houses such as the one on the right, using its copyrighted plans without permission. Hallmark filed for bankruptcy; the remaining issue was whether the claim was “advertising injury” under Mid-Continent’s various liability policies. Mid-Continent Casualty Co. v. Kipp Flores Architects, LLC, No. 14-50649 (Feb. 26, 2015, unpublished).
The Fifth Circuit affirmed judgment for the insured. After reminding that additional evidence can be offered in a coverage dispute about matters addressed in a prior lawsuit, the Court held: “[I]t is undisputed that Hallmark’s primary means of marketing its construction business was through the use of the homes themselves, both through model homes and yard signs on the property of infringing homes it had built, all of which were marketed to the general public . . . .” Because the homes themselves were “advertisements,” Mid-Continent’s policies covered the prior judgment.
(This post’s title comes from an exchange between Falstaff and Mistress Ford in The Merry Wives of Windsor.)
As part of a sale transaction, the board of “Gold Kist” (more widely known as Pilgrim’s Pride), decided to abandon certain securities for no consideration. For tax purposes, the company then reported a $98.6 million ordinary loss. Pilgrim’s Pride Corp. v. Commissioner of Internal Revenue, No. 14-60295 (Feb. 25, 2015). The IRS contended that this was a capital loss, rather than an ordinary loss, creating a tax deficiency of close to $30 million. The Court agreed with the company, finding: “By its plain terms, [26 U.S.C.] § 1234A(1) applies to the termination of rights or obligations with respect to capital assets (e.g. derivative or contractual rights to buy or sell capital assets). It does not apply to the termination of ownership of the capital asset itself.” In rejecting a contrary view of the statute, Judge Elrod gives a powerful summary of several canons of construction: “We disagree. Congress does not legislate in logic puzzles . . . “
In 2012, the Fifth Circuit remanded a False Claims Act case with the direction: “The district court should determine whether the public disclosures identified in the motion for summary judgment reveal either (i) that Shell was deducting gathering expenses prohibited by program regulations, or (ii) that this type of fraud was so pervasive in the industry that the company’s scheme, as alleged, would have been easily identified.” Little v. Shell Exploration, 690 F.3d 282 (5th Cir. 2012). On remand, the district court again granted summary judgment for the defense, and a displeased Fifth Circuit reversed. Little v. Shell Exploration II, No. 14-20156 (Feb. 23, 2015, unpublished).
The Court found: “Not only did the district court fail to follow these explicit instructions, but the analysis set out in its short opinion is so broad, conclusory, and unsupported by the summary judgment record that we are compelled to conclude it did not comply with our instructions.” On the merits, the Court held that “the district court erred with respect to every category of supposed public disclosures.” The Court went on to order reassignment to a different district judge on remand, concluding: ” Facing a lengthy and detailed summary judgment record, the district judge issued a five-page opinion with few
citations to either record evidence or relevant legal authority—not surprising given that neither the summary judgment evidence nor the law support the conclusions he reached.”
Pennzoil has several well-known trademarks for its motor oil products. It sued Miller Oil, which operates a quick-stop oil change facility in Houston, for infringing those marks. Miller defended on the ground that after its original contract with Pennzoil lapsed in 2003, Pennzoil’s dealings with Miller amounted to an acquiescence in Miller’s use of the marks. The district court agreed but the Fifth Circuit reversed. Pennzoil-Quaker State Co. v. Miller Oil & Gas Operations, No. 13-20558 (Feb. 23, 2015).
The Court thoroughly reviewed its own, and other Circuits’, approaches to the elements of the acquiescence defense, as well as the relationship of that defense to laches. The Court concluded that an element of the defense was undue prejudice to the defendant from the plaintiff’s conduct, which usually involves “some form of ‘business building.'” Here, the defendant’s expenses associated with removing Pennzoil’s marks did not satisfy that requirement, because they would not be related to business expansion. While the defendant’s claim about a “loss of identity” from removing Pennzoil’s marks could qualify, on this record: “Miller Oil does not proffer evidence of, for example, changes in its customer base, higher profits, or new business opportunities it was able to exploit because of the re-brand.” Accordingly, Miller Oil did not meet its burden of proof.
In Frey v. First National Bank Southwest, No. 13-10375 (Feb. 20, 2015), an appeal that was stayed in deference to the ruling in Mabary v. Home Town Bank, N.A., 771 F.3d 820 (5th Cir. 2014), the Fifth Circuit again affirmed the certification of a class related to notice requirements about ATM fees: “The primary questions with regard to First National’s liability are whether and when First National failed to provide the on-machine fee notice in violation of the EFTA’s requirements during the class period; if so, the appropriate amount of statutory damages; and whether the bank can avail itself of either of the two statutory defenses to liability. The answers to these questions will affect all class member’s claims.”
The Fifth Circuit has withdrawn its high-profile opinion (as to damages) in Forte v. Wal-Mart Stores, which found that civil penalties were not available absent actual damages in a suit under a Texas statutory cause of action about optometry. The controlling issues have now been certified to the Texas Supreme Court.
Superior MRI Services sued for tortious interference with contract; the defendant argued that Superior lacked standing because it never acquired rights under the relevant contracts, and the Fifth Circuit agreed. Superior MRI Services, Inc. v. Alliance Imaging, Inc., No. 14-60087 (Feb. 18, 2015). The record showed that P&L Imaging, a bankruptcy debtor, listed “MRI service agreements” on its schedule of assignments to Superior, with an assignment date of October 1, 2011. Superior, however, did not exist as a legal entity until November 28, 2011. No evidence showed that Superior ratified the contract after its formation, and the Court was unwilling to accept Mississippi’s approval of Superior as a vendor as evidence of a ratification. The Court distinguished the recent case of Lexmark, Int’l v. Static Control Components, 134 S. Ct. 1377 (2014), as relating to another aspect of the standing requirement.
Pearl Seas sued Lloyd’s Register North America (“LRNA”) for inadequate performance in certifying a cruise ship (the “Pearl Mist,” seen to the right.) LRNA moved to dismiss on the grounds of forum non conveniens in favor of England, citing a forum selection clause contained in its rules. The district court denied the motion without explanation and the Fifth Circuit reversed in a 2-1 panel opinion. In re Lloyd’s Register North America, Inc.. No. 14-20554 (Feb. 24, 2015), re-released after initial publication as a per curiam opinion on February 18.
The Court held: (1) as in the case of In re: Volkswagen, 545 F.3d 304 (5th Cir. 2008) (en banc), which involved the denial of a motion to transfer venue, mandamus is appropriate in the context of forum non conveniens; (2) it is an abuse of discretion to “grant or deny a[n FNC] motion without written or oral explanation” as to the relevant factors; and (3) the plaintiff was plainly bound by LRNA’s rules under the doctrine of direct-benefit estoppel, since its claim “referenced duties that must be resolved by reference to the classification society’s rules.” (citing Hellenic Inv. Fund v. Det Norkse Veritas, 464 F.3d 514 (5th Cir. 2006)).
A dissent by Judge Elrod argued that the majority’s analysis of direct-benefit estoppel expanded the Court’s prior holdings in two areas — the degree to which the claim incorporated the relevant rules, and the timing of when the plaintiff learns of the rules. The dissent also expressed concern that the substantive claim would not be recognized in England.
The point of division between the majority and dissent — whether an error is “clear” or not — resembles a similar split between the majority and dissent in the mandamus case of In re Radmax, 720 F.3d 285 (5th Cir. 2013), which granted the writ as to the erroneous denial of an “intra-district” motion to transfer venue. Interestingly, Judge Higginson was the dissenter in Radmax, and also dissented from the denial of en banc review of that panel opinion, while here he forms part of the two-judge majority that grants mandamus relief. Judge Smith, who was in the majority of the Radmax panel opinion, is the author of this opinion after its initial release as per curiam.
In the case of In re Deepwater Horizon, the Texas Supreme Court has answered the certified questions raised in a significant insurance case about BP’s coverage related to the Deepwater Horizon disaster. (No. 130670, Tex. Feb. 13, 2015.) The issue is whether BP was an additional insured under policies obtained by Transocean, the operator of the ill-fated rig. Applying Evanston Ins. Co. v. ATOFINA Petrochemicals, Inc., 256 S.W.3d 660 (Tex. 2008), the Court held that “it is possible for a named insured to purchase a greater amount of coverage for an additional insured than an underlying service contract requires,” and that “the scope of indemnity and insurance clauses in service contracts is not necessarily congruent.” From that foundation, the court concluded: “The Drilling Contract required Transocean to name BP as an additional insured only for the liability Transocean assumed under the contract. Accordingly, Transocean had separate duties to indemnify and insure BP for certain risk, but the scope of that risk for either indemnity or insurance purposes extends only to above-surface pollution.”
Monday evening, a district judge in South Texas enjoined President Obama’s immigration program; the full text of his opinion is available here. (The case has the remarkably awkward caption of “Texas v. United States.”) An appeal has not yet been docketed with the Fifth Circuit. As with the recent gay marriage arguments, the makeup of the panel will be critical to the resolution of this extremely important case. The Washington Post story is a good example of the media coverage of the ruling.
Fernando Ramirez died after a beating by security guards at a nightclub. His estate sued the guards and the business that owned the club, as well as subsequent owners, alleging a scheme to hide assets. This lawsuit led to an insurance coverage dispute between the subsequent owners and the CGL carrier at the time of the incident. Colony Ins. Co. v. Price, No. 14-10317 (Feb. 12, 2015, unpublished). The specific allegations against the later owners in the underlying suit are far from clear, and appear to be obscured by broad use of the term “Defendants.” Nevertheless, the district court and Fifth Circuit agreed that these parties were not covered as “employees” under the policy: “Most obviously, the Price Defendants fail to explain how MTP and TOM, a partnership and a limited liability company, can be employees at all, let alone employees who falsely imprisoned Ramirez on October 1, 2008, particularly given that the Petition alleges that they were not formed until December 31 of the following year.”
1. I am speaking at the Dallas Bar Appellate Section meeting on March 19 at the Belo Mansion, with an update on recent Fifth Circuit opinions of general interest.
2. This year’s Super Lawyers nomination deadline is Wednesday, February 18 (two days from now). Take a few minutes to support the publication and your colleagues; the nomination form is here.
The defendants in a wrongful foreclosure case removed and the district court dismissed the borrower’s claims on the pleadings. The Fifth Circuit reversed for jurisdictional reasons. Smith v. Bank of America, No. 14-50256 (Feb. 11, 2015, unpublished).
As to federal question jurisdiction (and in contrast to some recent opinions that have presented close questions) the Court held that this sentence in a pro se pleading did not state a federal claim: “[Bank of America] failed to adhere to the Fair Debt Collection Practice Act, as all 3rd party debt collectors are required to do.”
As to diversity jurisdiction, which was based on improper joinder of several defendants, the Court reminded: “[W]hen confronted with an allegation of improper joinder, the court must determine whether the removing party has discharged its substantial burden before proceeding to analyze the merits of the action.”