Three times in the last two months, 600Camp has won recognition from Texas Bar Today for a “Top 10 Post of the Week” among Texas law blogs, “based on subject matter, writing style, headline, and imagery.” The posts were The Regulation, My Friend, is Blowing in the Wind (Sept. 16), My Five Tips for Good Legal Writing (Oct. 9), and Arbitration Here, There, or Nowhere (Oct. 20). Thanks for your support!
“Those who prefer to hunt deer without the use of dogs (still-deer hunters) complain that
dog-deer hunting is disruptive and unsportsmanlike. Adjacent landowners complain that dog-deer hunting leads to shooting near houses and from roads, fights between dog-deer hunters and landowners, roads being blocked by dog-deer hunters, dogs running across private property, and trespass. Dog-deer hunters defend the practice based on its history as a traditional method of hunting in Louisiana dating back to the colonial period.” The plaintiffs in Louisiana Sportsmen Alliance, LLC v. Vilsack sought to enjoin the U.S. Forest Service from banning dog-deer hunting in the Kisatchie National Forest. The Forest Service won on the merits in the district court, and for the first time on appeal, argued that the plaintiff organization lacked standing. Expressing vexation: “The district court was ill-served by the Forest Service in this regard, because the Forest Service never argued that the Alliance lacked organizational standing until this appeal,” the Court nevertheless considered the issue because “Article III standing is a jurisdictional requirement that cannot be waived,” and then dismissed the appeal because the plaintiff association had not shown its standing to bring suit. No.13-31260 (Oct. 28, 2014, unpublished).
River Oaks, an apartment management business originally based entirely in Louisiana, expanded into Mississippi in 2011. It had a workers comp policy with Bridgefield Insurance, which provided “Other States” coverage for Mississippi if River Oaks notified Bridgefield of activity there. After an employee’s injury in Mississippi, Bridgefield denied coverage for failure to comply with this notice requirement. Bridgefield Casualty Ins. Co. v. River Oaks Management, Inc., No. 13-31077 (Oct. 27, 2014, unpublished).
Bridgefiled won the coverage dispute in district court, and the Fifth Circuit agreed that: (1) the provision was not ambiguous; (2) the provision was a condition precedent to coverage, so Bridgefield did not have to show prejudice from the lack of notice; and (3) for similar reasons, the provision did not implicate the Louisiana “anti-technical” statutes.
But, the Court found a material fact issue and reversed — agreeing with the district court that there was a factual dispute about whether an audit by Bridgefield put it on notice of the Mississippi activity (and accepted payments after that time), the Court disagreed with the district court’s conclusion that the dispute was not material: “An insurer may waive a provision that falls short of granting it the right to cancel the entire policy, such as the exclusion-of-coverage provision at issue here.”
Earlier this year, the Texas Supreme Court answered certified questions from the Fifth Circuit about the treatment of home equity loans under the Texas Constitution; that opinion summarizes: “To avoid foreclosure, homeowners and lenders often try to restructure underwater home mortgage loans that are in default by capitalizing past-due amounts as principal, lowering the interest rate, and reducing monthly payments, thereby easing the burden on the homeowners. But home equity loans are subject to the requirements of Article XVI, Section 50 of the Texas Constitution. The United States Court of Appeals for the Fifth Circuit has asked whether those requirements apply to such loan restructuring. We answer that as long as the original note is not satisfied and replaced, and there is no additional extension of credit, as we define it, the restructuring is valid and need not meet the constitutional requirements for a new loan.” Sims v. Carrington Mortgage Services, LLC, No. 13-0638 (Tex. 2014). Following that Court’s recent denial of rehearing, the Fifth Circuit has now formally accepted the answer and ruled accordingly.
Because the Fifth Circuit rarely acts en banc in business-related cases, votes by the full court on civil matters deserve careful review as examples of the judges’ broader philosophical leanings. As detailed in another post, I place particular emphasis on (1) the vote to deny en banc review in the Daubert case of Huss v. Gayden (balancing judicial authority with the jury’s); (2) the vote to grant mandamus relief in the venue dispute of In re Volkswagen (balancing appellate authority with that of the trial court); and (3) the 7-8 vote to deny en banc review in the venue case of In re Radmax (same).
The issue in the recent en banc case of McBride v. Estis Well Service, LLC, No. 12-30714 (revised Oct. 24, 2014), while facially addressing an important but technical issue of admiralty law, offers insight about the judges’ views of another topic — the authority of the judiciary as opposed to Congress’s. The introduction to Judge Higginson’s dissent succinctly captures that point: “The question presented by this case is whether seamen may recover punitive damages for their employer’s willful and wanton breach of the general maritime law duty to provide a seaworthy vessel. Because the Supreme Court has said that they can, and Congress has not said they can’t, I would answer in the affirmative, and REVERSE.”
Nine judges (spread across three opinions) saw the answer differently. The conclusion to the majority opinion begins: “In the words of the Supreme Court, ‘Congress has struck the balance for us.'” (citing Mobil Oil Corp. v. Higginbotham, 436 U.S. 618, 623 (1978)). Two concurrences make similar observations. Notably, all of the active judges appointed by a Democratic president at the time of en banc submission are in dissent.
The State Bar of Texas Litigation Section recently published my article, based on content from this blog, about how the Fifth Circuit has applied Twombly and Iqbal in recent opinions.
A cousin to U.S. Bank, N.A. v. Verizon Communications, Inc., the case of Murphy v. Verizon Communications, Inc. presented an ERISA-based challenge to the spinoff of Idearc by Verizon. No. 13-11117 (Oct. 15, 2014, unpublished). The appellate issue was the plaintiffs’ right under ERISA’s “catch-all provision” to request, as “other instruments under which the [ERISA] plan is established or operated,” various documents about the plan’s investment guidelines. The Fifth Circuit held: “We agree with the majority of the circuits which have construed [the] catch-all provision narrowly so as to apply only to formal legal documents that govern a plan.”
Dawna Casey’s family sued Toyota, alleging that the airbag in a 2010 Highlander did not remain inflated for six seconds and caused her death in an accident. The district court granted judgment as a matter of law and the Fifth Circuit affirmed. Casey v. Toyota Motor Engineering & Manufacturing, No. 13-11119 (Oct. 20, 2014).
As to the claim of manufacturing defect, the Court observed: “Casey . . . established only that the air bag did not remain inflated for six seconds,” and relied on alleged violations of Toyota’s performance standards to prove a defect (rather than a technical explanation of the bag’s performance). The Court rejected those allegations under Texas law and precedent from other jurisdictions: “Each piece of evidence submitted by Casey on this point is result-oriented, not manufacturing-oriented, and provides no detail on how the airbag is constructed.”
As to the claim of design defect, Casey relied primarily on a patent application for an allegedly superior design, which the Court rejected as not having been tested under comparable conditions, and as lacking a real-world track record as to feasibility, risk-benefit, and other such matters. Law360 has written a summary of the opinion.
Sharpe v. Ameriplan re-engages the recurring problem of an arbitration agreement governed by multiple documents. No. 13-10922 (Oct. 16, 2014). Specifically:
— A Policy Manual contained an arbitration clause;
— A Broker Agreement, which incorporated the Policy Manual. This Agreement said that the Agreement could not be changed except by written agreement, but acknowledged that the Manual could be changed at will; and
–3 of 4 plaintiffs had Sales Director Agreements that contained a lengthy dispute resolution provision, which began with a commitment to nonbinding mediation and concluded with detailed language that “claims, controversies, or disputes” be “submitted . . . to the jurisdiction” of courts in Dallas (a fourth had a much shorter provision that was simply a Dallas forum selection provision for “any action” on the agreement).
The Court held that that shorter provision did not trump the arbitration clause, but that the longer one did: “The language in Guarisco’s agreement demonstates that AmeriPlan knew how to draft a narrow forum selection clause, and its decision in later Sales Director Agreements to add far more extensive language establishing a full dispute resolution process must be given effect as creating something beyond that.” The Court distinguished its recent opinion of Klein v. Nabors Drilling USA, L.P., 710 F.3d 234 (5th Cir. 2013), in which it read language about nonbinding mediation as not conflicting with “an exclusive procedural mechanism for the final resolution of all Disputes falling within its terms.” (See also Lizalde v. Vista Quality Markets, No. 13-50015 (March 25, 2014) (enforcing an arbitration agreement in the face of a benefit plan with a broad termination right, noting that both agreements’ termination provisions were limited to “this Agreement” and “this Plan” respectively and thus “clearly demarcate their respective applications”)).
The plaintiff in Law v. Ocwen Loan Servicing, L.L.C., a mortgage servicing case, asked the Fifth Circuit for leave to amend if it affirmed the dismissal of the complaint under Rule 12. No. 14-20019 (Oct. 16, 2014, unpublished). The Court affirmed on the merits and as to the denial of leave to amend, noting these basic and important principles on the point:
* “A party who neglects to ask the district court for leave to amend cannot expect to receive such dispensation from the court of appeals.”
* A district court’s sua sponte discussion of amendment is not a request, and neither is this language in a response: “[T]he only relief possibly available to [the defendant] at this stage of the case is that [the plaintiff] replead.”
* While new factual allegations in response to a summary judgment motion can be construed as a request for leave to amend, that does not hold for a response to a Rule 12 motion.
The meaning of the word “value,” a seemingly simple word, lies at the heart of most economic theory. In the Fifth Circuit, in the context of a defense under section 548(c) of the Bankruptcy Code to a fraudulent transfer claim, “value” is measured “from the perspective of the transferee: How much did the transferee ‘give’?” Williams v. FDIC, No. 12-20687 (Oct. 16, 2014) (discussing Jimmy Swaggart Ministries v. Hayes, 310 F.3d 796 (5th Cir. 2002)). (Although, as footnote 3 of Williams observes, the answer may be different under state law.)
In Williams, a debtor company paid $367,681.35 to a bank, on an obligation owed entirely by the individual who owed the debtor. The bankruptcy trustee proved these payments were a fraudulent transfer, but the bank won below by showing two items of value: (1) forbearance as to eviction, which had substantial value to the debtor’s business, and (2) roughly $250,000 in “reasonable rental rate” for the period when the debtor occupied the premises in question. The Fifth Circuit disregarded the first as irrelevant from the debtor’s perspective under Swaggart. As to the second, the Court required “netting” of the loan payments received by the bank, against the rent the bank could have received, and rendered judgment for the trustee for the difference. This holding turns on a detailed analysis of the term “value” in 548(c), as distinguished from “reasonably equivalent value” in a defense elsewhere in the Code.
The Fifth Circuit and the district court agreed that the plaintiffs/appellants in Mboho USA, Inc. v. Okon had served “abusively excessive, repetitious, and burdensome discovery requests.” No. 13-20449 (Oct. 10, 2014, unpublished). But, the Fifth Circuit found that the district court had acted too hastily in dismissing the case entirely, noting:
(1) the plaintiff, a foreign entity, was not foreclosed from suing in Texas simply because it is not registered to do business there;
(2) one of the appellants had legitimate documents from the Nigerian government authorizing him to bring suit in the US or Canada;
(3) an earlier dismissal in state court for lack of subject matter jurisdiction was not preclusive as to another court with jurisdiction; and
(4) as to one of the claims, plaintiffs were entitled to an opportunity to respond before it was dismissed sua sponte.
The Chemical Safety and Hazard Investigation Board served administrative subpoenas on Transocean in connection with the Deepwater Horizon disaster. United States v. Transocean Deepwater Drilling, Inc., No. 13-20243 (Sept. 18, 2014). Transocean contended that the Board lacked jurisdiction because the ill-fated rig was not a “stationary source” within the meaning of the Board’s enabling statute; the majority disagreed, concluding that at the time of the accident, the rig “was physically connected (though not anchored) at that site and maintained a fixed position.”
Transocean also contended that this sentence deprived the Board of jurisidiction: “The Board shall not be authorized to investigate marine oil spills, which the National Transportation Safety Board is authorized to investigate.” After a foray into the grammatical thicket of “which” v. “that,” the majority concluded that the Board was not categorically barred from investigating oil spills in light of the “overall regulatory scheme.”
A dissent disagreed with both conclusions, reminded that “[f]or the sake of maintaining limited government under the rule of law, courts must be vigilant to sanction improper administrative overreach,” and noted that at least 17 other investigations were conducted into the accident.
Holden, an employee of Buck Kreihs Company (“BKS”), was injured while removing a gangway that connected BKS’s dock to a barge owned by U.S. United Ocean Services (“United”). Holden and United settled their litigation, and United’s liability insurer won summary judgment in United’s suit for insurance coverage. The Fifth Circuit affirmed in Holden v. U.S. United Ocean Services, L.L.C., No. 12-30251 (Sept. 15, 2014, unpublished). The policy — actually issed to BKS, but with United as an additional insured — had a “watercraft” exclusion. The exclusion would otherwise apply to the barge, except for an exemption for a contract under which “the ‘Named Insured’ assumes the tort liability of another party for ‘bodily injury’ or ‘property damage’ to a third party or organization.” The majority found that United was not a named insured, and that the exemption was best read to reach claims by an injured claimant against BKS — not claims by an additional insured for its own liability to the claimant. A dissent argued that this reading did not give effect to the precise terms used in the policy.
On Friday October 10, the Fifth Circuit denied mandamus relief on the eve of trial in a high-stakes False Claims case, In re Trinity Industries, Inc. — but took the unusual step of making an additional statement: “The court is compelled to note, however, that this is a close case. The writ is timely and the litigation stakes–the potential for a $1 billion adverse judgment–are unusually high. This court is concerned that the trial court, despite numerous timely filings and motions by the defendant, has never issued a reasoned ruling rejecting the defendant’s motions for judgment as a matter of law.” The Court went on to cite several specific opinions that caused its concern.