Reminder about FRAP 28(j) submissions –

The Fifth Circuit website has recently posted an “Important Note Regarding FRAP 28(j) Filings,” which reminds: “Counsel sometimes file a FRAP 28(j) letter after oral argument, ostensibly to provide information requested by the court, but make supplemental argument in the filing. . . . [U]nless authorized or requested by the panel, it is improper to make supplemental argument in the letter.”

Dental regulations gummed up by the First Amendment

Longtime Texas practitioners will remember when lawyer ads had to contain a cumbersome notice that the attorney was “NOT BOARD CERTIFIED – TEXAS BOARD OF LEGAL SPECIALIZATION” if he or she did not have a TBLS certification.  The dental field bit into a similar regulation in American Academy of Implant Dentistry v. Parke, which prohibited claims of specialization in areas not recognized by the American Dental Association. The Fifth Circuit panel majority, after chewing on the First Amendment framework for the regulation of commercial speech, found a poor bridge between the asserted government interest and the scope of the regulation, making it unconstitutional. A dissent would have affirmed the regulation as addressing “inherently misleading” speech, which is rooted in a different First Amendment framework. No. 16-50157 (June 19, 2017).

No claim yet? Then no estoppel, either.

In ASARCO LLC v. Montana Resources, Inc., a case involving the interplay of a business’s bankruptcy with a later lawsuit for breach of contract by that business, the Fifth Circuit observed:

  • “[A] declaratory claim on its own typically will not preclude future claims involving the same circumstances (as noted, issue preclusion may still apply to any declaration the court issues). But in a case involving both declaratory claims and ones seeking coercive relief, the former will not serve as an antidote that undoes the preclusive force that traditional claims would ordinarily have.” (applying the “seminal case” on the point, Kaspar Wire Works, Inc. v. Leco Engineering & Machine, Inc., 575 F.2d 530 (5th Cir. 1978))
  • As to the damages claim, “ASARCO’s claim for failure to reinstate did not accrue until MRI rejected the tender in 2011. . . .  ASARCO may or may not have attempted to cure, and MRI may or may not have denied ASARCO’s reinstatement. Because the present breach of contract claim was contingent on future events, ASARCO could not have brought it during the adversary proceeding.”
  • For the same reasons, the plaintiff was not judicially estopped by allegedly inadequate disclosures during the earlier bankruptcy: “MRI cites no case requiring a party to disclose a potential claim for breach of contract when the contract had not yet been breached. This makes sense, because MRI’s position would require a debtor to scour its contracts looking for hypothetical claims that another party could maybe breach in the future.”

No. 16-40682 (June 2, 2017).

Wonkier than the Rooker-Feldman doctrine . . .

For those who enjoy topics even more arcane than the basic Rooker-Feldman doctrine, there is Kreit v. Quinn, No. 16-20744 (June 13, 2017, unpublished). A state court appointed a receiver for a hospital, which then entered bankruptcy. The bankruptcy court approved a sale, a doctor strenuously objected to the sale after the fact, and the court sanctioned the doctor for his filings. On appeal, the receiver contended that the doctor’s filings were barred by the Rooker-Feldman doctrine as a collateral, federal attack on a state court order. The doctor asked the Fifth Circuit to recognize an exception to that doctrine for orders that are void ab initio. But while noting a circuit split on the point, the Court declined to weigh in, finding that the state court had the needed authority.

Not admissible, but genuine –

Lee sued for his injuries from a fall on the M/V BALTY (right). In resolving the defendant’s summary judgment motion, “[t]he district court dismissed Captain Jamison’s report solely because it was not sworn without considering Lee’s argument that Captain Jamison would testify to those opinions at trial and without determining whether such opinions, as testified to at trial, would be admissible.” The Ffith Circuit remanded for reconsideration in light of a 2010 amendment to Fed. R. Civ. P. 56 that says (as summarized by Moore’s Federal Practice): “Although the substance or content of the evidence submitted to support or dispute a fact on summary judgment must be admissible . . . , the material may be presented in a form that would not, in itself, be admissible at trial.” Lee v. Offshore Logistical & Transport, LLC, No. 16-31049 (June 9, 2017).

Dec action not ripe

Total Gas, the American subsidiary of the large French energy concern, sued for a declaratory judgment that FERC could not impose certain penalties under the Natural Gas Act. But while FERC had begun an administrative proceeding against Total, that case had to proceed through several more steps before any penalty would be assessed. Accordingly, the dispute was not ripe for adjudication. The “step by step” analysis of ripeness in this case appears to be of general applicability to other cases involving conditions precedent. Total Gas v. FERC, No. 16-20642 (June 8, 2017).

Sign, on the line.

The common situtation of a loan modification raised two general issues – (1) given the princple that “all parts of a contract should be read so that none will be rendered meaningless,” the outcome is not clear if a modification has a signature line, when companied by “contratual language [that] indicated that once the [borrowers] performed, their loan would be modified automatically and [the servicer] would be bound by the Agreement” – and (2) given that the Statute of Frauds in Texas for loan agreements generally involves oral agreements or agreements that clearly require signature by both parties, it is not clear if “the written offer itself, along with the attached Modification Agreement” would satisfy that status. Owens v. Specialized Loan Servicing LLC, No. 16-20557 (June 5, 2017).

Arbitration right waived by litigation conduct

Vine v. PLS Financial Services presents the infrequently-encountered waiver of arbitration rights by litigation conduct. PLS made a short-term loan to Vine; to obtain such a loan, a PLS customer must present a blank or post-dated check sufficient to cover the loan amount and a finance charge. PLS and Vine had a broad, general arbitration agreement. The Fifth Circuit found that PLS waived that right when it submitted inaccurate “worthless check affidavits” under Texas law after Vine defaulted. It held that the issue of waiver by litigation conduct, as distinct from waiver by failure to comply with a contractual condition precedent, was appropriate for the court rather than an arbitrator. And, the general clause here did not have specific language about that particular waiver issue. A dissent questioned whether submitting the affidavits amounted to “substantial invocation” of the judicial process, as required for waiver of an arbitration right. No. 16-50847 (May 19, 2017, unpublished).

Buyer beware. Or get an assignment of the seller’s rights.

Guilbeau bought real property and sued Hess Corporation for alleged contamination resulting from oil and gas drilling done several years before. Acknowledging that the Louisiana Supreme Court had not ruled on the precise issue presented – whether the “subsequent purchaser” rule applied to mineral interests – the Fifth Circuit concluded that Louisiana law would bar Guilbeau’s claim. A consensus of Louisiana intermediate courts, applying the most analogous authority from that state’s Supreme Court, reasoned “that while mineral rights in the lessee are real rights, a lessor’s rights, including the right to sue for damages, are personal and do not automatically transfer with the property” absent an assignment. Guilbeau v. Hess Corp., No. 16-30971 (April 18, 2017).

Well, you proved liability . . .

The Fifth Circuit reversed a JNOV on liability for breach of contract in Kerr v. Mapei Corp., holding: “The jury was presented with two alternative, but plausible, accounts of the formation and authorization of a contract. The jury reasonably selected one of those alternatives.” As to consequential-type damages for lost profits for other sales, however, the Court affirmed the judgment for the defendants, finding that the plaintiff’s damages model “was not supported by any empirical analysis or any evidence outside of the [contract] relationship . . . (e.g., real-world sales, customer surveys, or current market demand).” In particular, it noted the lack of evidence that the substantial business opportunity related to the contract would recur, the fact that the contract was terminable at will, and the lack of weight for a party’s own “unsubstantiated, self-serving speculations” about future business. No. 16-10430 (May 23, 2017, unpublished).

BP settlement gets real, more or less.

The Herculean effort of settling the many lost-profits claims related to the Deepwater Horizon accident led to a claims process described by the Fifth Circuit as follows – “Somewhat simplified, and more than somewhat condensed, the claims process works as follows: The Claims Administrator compares a claimant’s financial performance prior to and after the spill. If the former is greater than the latter, BP is liable for the difference.
Causation is, in all other respects, presumed.”

Efforts to implement this process led to guidelines “requiring the Claims Administrator to move, smooth, or otherwise reallocate revenue for claimants engaged in construction, education, agriculture, and professional services. Claimants in these four industries tend to be paid in lump sums, which are capable of generating damages awards that do not comport with tort principles.”

Mindful that in an earlier dispute about these issues, the Court had reminded that “[i]n interpreting a settlement, surely some weight has to be given to what damages recoverable in civil litigation actually are,” the Court reversed the use of these particular guidelines: “[W]e decline to re-write the Settlement Agreement under the guise of contractualinterpretation. When we said . . . that the Claims Administrator should ‘process claims in accordance with economic reality,’ we assumed that doing so would comport with the text of the Settlement Agreement. . . . [, which] grants claimants the right to choose their own Compensation Period.” Lake Eugenie Land & Devel. v. BP, No. 15-30377 (May 23, 2017).

Objectively unreasonable removal

A business named “Renegade Swish” sued Wright in Texas state court for breach of an employment agreement. Wright counterclaimed for violations of the FLSA. For reasons not explained in the opinion, Swish then nonsuited its contract claims, moved to realign the parties so it would be the new defendant, and removed the case to federal court based on federal jurisdiction. The Fifth Circuit held that Swish lacked an objectively reasonable basis for removal, citing both precedent (primarily, Holmes Group, Inc. v. Vornado Air Circulation Systems, Inc., 535 U.S. 826 (2002)), and the text of 28 U.S.C. § 1441(a), which refers to removal by “defendants.” The Court did not credit Swish’s reliance on the pending motion to realign, declining to “invite federal courts to dream of counterfactuals when actual litigation has defined the parties’ controversy,” and rejected the cases cited by Swish as not presenting a meaningful conflict: “As compared to [a controlling case]m where the disagreement among the courts was ‘hotly contested,’ any disagreement here is tepid and lopsided.” Renegade Swish v. Wright, No. 16-11152 (May 22, 2017).

SCOTUS 8-0 – fewer patent cases to EDTEX

While arising from the Federal Circuit’s patent jurisdiction rather than the Fifth Circuit, the Supreme Court’s unanimous May 22 decision in TC Heartland LLC v. Kraft Foods Group Brands LLC is of great interest to all local corporations involved in patent litigation: “As applied to domestic corporations, ‘reside[nce]’ in [28 U.S.C.] § 1400(b) refers only to the State of incorporation.”

Filed first, but not first-to-file –

Green Tree Servicing, LLC v. Clayton involved an unusual argument about the “first-to-file rule, in the context of two actions pending before the same district judge. The Fifth Circuit observed: “[T]he concerns undergirding the firstto-file rule are not triggered when the cases are before the same judge. The first-to-file rule is aimed at avoiding both conflicting rulings on similar issues and duplicative rulings. But when the same judge is deciding both cases, there is no danger of conflicting rulings.” No. 16-60726 (May 18, 2017, unpublished).

How not to maintain privilege – 4 key points for privilege logs

Document logs are a necessary, if unloved, feature of privilege disputes. A privilege log is inherently difficult to create, since it must describe the relevant documents but not reveal the privileged information in them. And because a log often lists many documents on the same subject, it can quickly become dull and repetitive. But proper preparation of a log is key to litigating about privilege, as the Fifth Circuit recently held in EEOC v. BDO Seidman LLP when it rejected the sufficiency of the defendant’s log in an employment case. No. 16-20314 (May 4, 2017). The opinion provides four practical tips for attorneys involved in privilege disputes.

The case began when Hang Bower, a former HR manager at BDO Seidman, alleged that she had been subjected to gender discrimination. In response to an EEOC subpoena, BDO prepared a privilege log listing 278 documents. The EEOC filed an enforcement action in federal court, offering a declaration from Bower in support. In it, she said that many of the communications “were made for the primary purpose of conveying business directives or factual information.” She also said that “BDO required her . . . to include in HR-related emails a false designation that the communication was prepared ‘at the request of legal counsel.’”

The magistrate judge found that BDO’s log was adequate, declined to do an in camera review of the documents, and denied relief to the EEOC. The district judge affirmed and the Fifth Circuit reversed, identifying four particular areas of concern:

  1. Substance. “[N]umerous log entries fail to identify a sender, recipient, date, or provide a substantive description of the subject matter . . . [s]ome entries have only vague descriptions such as ‘discrimination claim,’ ‘internal investigation,’ or ‘work environment claim’”
  2. Email chains. “Emails involving counsel are also problematic, as the log’s descriptions do not indicate whether a particular entry consists of one email or a string of emails – a distinction that may be dispositive as to whether the privilege applies.”
  3. Business/Legal distinction. “[N]ot only does the log include conclusory descriptions of ‘legal advice,’ it does so in the context of communications with in-house counsel – an area court have acknowledged presents unique challenges . . . further compounded where HR personnel, such as Bower, are involved.” The Court noted the issues raised in Bower’s declaration.
  4. Disclosure. “[T]he log leaves open questions about (1) whether emails courtesy copied to a third party remained privileged . . . (2) whether matters communicated to attorneys were done so with the intention of remaining privileged . . . and (3) whether non-attorney individuals to whom communications were sent were within the sphere of confidence . . . .”

Because the log lacked sufficient detail to establish BDO’s prima facie case of attorney-client privilege as to all the entries, the Fifth Circuit found that the magistrate judge’s legal analysis was flawed and remanded. The Court observed: “Although we leave to the district court’s discretion how to proceed on remand, we note that in camera review will likely be necessary given the facts and circumstances of this case.”

In addition to reminding about four key components of a good privilege log, this opinion reinforces the importance of evidence in resolving a privilege dispute. Bower’s declaration raised questions about the information in the log, which could not be resolved by the log entries themselves. Counsel preparing a privilege log thus needs to not only consider the completeness of the log entries, but how those entries will be supported by evidence and in camera review if there are further proceedings.

Case goes to arbitration, case stays in arbitration.

The district court in Salas v. GE Oil & Gas ordered arbitration in 2014 and dismissed the case. The arbitration did not proceed. Each side blamed the other; the district court had a status conference in 2016; and afterwards, withdrew its earlier order and reopened the case. The Fifth Circuit found that the district court lacked jurisdiction to do so, as its 2016 order “did not fall within the narrow scope of th[e] ancillary jurisdiction” provided by section 4 of the FAA: “The court neither determined whether the parties’ agreement to arbitrate was valid nor enforced that agreement. Instead, the court found that the parties had ‘failed’ to arbitrate and withdrew its prior order compelling arbitration. This was not permitted under the FAA.” No. 16-20379 (May 12, 2017).

Scylla, Charybdis, and Class Certification

In Slade v. Progressive Insurance, a putative class survived a challenge to its damages model based on Comcast Corp. v. Behrend, 133 S. Ct. 1426 (2013). The Fifth Circuit concluded that the class avoided Scylla “by essentially rerunning Defendant’s calculation of actual cash value [for a damaged car] but with a lawful base value, Plaintiffs’ damages theory only pays damages resulting from the allegedly unlawful base value.” But the class then encountered Charybdis when a new issue arose from that calculation: “[B]y accepting Defendant’s condition score calculation as is, [named] Plaintiffs may have impermissibly waived unnamed class members’ ability to assert a future claim contesting Defendants’s computation” of a figure called “the condition factor.” This potential waiver raised a question as to whether the class representatives could adequately represent the class memebrs who might wish to challenge that factor, and the Court remanded for further consideration of that aspect of class certification. The Court also reminded that “a fraud class action cannot be certified when individual reliance will be an issue”; a particularly relevant reminder after the recent approval of class certification in Torres v. SGE Management, 838 F.3d 629 (5th Cir. 2016) (en banc). No. 15-30010 (May 9, 2017).

No gold for the Allen Stanford receiver.

The receiver for the Allen Stanford businesses alleged that Stanford Coins and Bullion made fraudulent transfers to Dilllon Gage, a wholesaler of coins and precious metals. The receiver lost at trial and the Fifth Circuit affirmed in Janvey v. Dillon Gage, Inc., No. 15-1121 (May 5, 2017). The Court noted conflicting evidence about SCB’s subjective belief as to its ability to pay all creditors, supported by objective evidence about its saleable inventory at the relevant time. The Court also found no reversible error in a jury charge that did not expressly define “intent,” or in the instructions given on other aspects of a fraudulent transfer claim under Texas law.

How not to answer the judge’s questions.

In the case of In re Hermesmeyer, No. 16-11189 (May 2, 2017, unpublished), the Fifth Circuit found no abuse of discretion in the $500 sanction imposed by the district court as a result of the below Q-and-A between the court and counsel:

THE COURT: Okay. Let’s see. There were some—there were two objections filed, and I believe both of them were related to the possibility of a sentence above the top of the advisory guideline range. Did I read those correctly, Mr. Hermesmeyer?

MR. HERMESMEYER: Your Honor, I think they have more to do with legality of whether such a sentence would be permissible or appropriate.

THE COURT: I’m sorry, I was wondering if I’m correct in thinking that both of the objections have to do with the possibility of a sentence above the top of the advisory guideline range. What is the answer to that?

MR. HERMESMEYER: Your Honor, just what I said.

THE COURT: I’m not sure I understand how that answered my question. I’ve asked the question again. Would you please answer the question either yes or no.

MR. HERMESMEYER: Your Honor, I would stand on what I previously said. Thank you.

THE COURT: Mr. Hermesmeyer, you get very close to being held in contempt of court. Would you answer my question?

MR. HERMESMEYER: I have no further response, your Honor.

THE COURT: Okay. Mr. Hermesmeyer, I’ve ordered you to answer my question, and you’ve refused to answer it. I conside that you’re in civil contempt of court, and also you’re in violation of one of the local rules that requires attorneys to appropriately conduct themselves and to respond and answer orders of the Court. I’m going to give you another opportunity to answer my question. And if you would like, if you decline to answer my question, I’ll give you an opportunity at this time to respond to my suggestion that you will be held in civil contempt of court and held in violation of the local rule concerning the conduct of attorneys, if you refuse to answer my question. You may proceed.

[Pause in proceedings.]

THE COURT: Okay. Apparently you’re not going to respond. I’m ordering that you are in violation of the local rule. Let me get the exact number of it.

HERMESMEYER: Your Honor, at this point I would move to withdraw from the representation of [the defendant] given the indications that the Court has made. [He] needs an attorney that’s not under the threat of civil contempt or whatever sort of contempt
that the Court is indicating at this point.

THE COURT: I deny that motion. Rule of Criminal Procedure LCR 57.8(b) says: A presiding judge, after giving an opportunity to show cause to the contrary, may take any appropriate disciplinary action against a member of the bar for conduct unbecoming a member of the bar and failure to comply with any order of the Court. I consider that you have violated that rule in both respects. I’ll give you an opportunity—I’ve given you an opportunity to show cause why you shouldn’t be disciplined for that and you’ve declined to respond, so I’m ordering that you pay a $500 fine, and that it be paid by 2:00 today, and be paid to the office of the clerk of court here in Fort Worth.

 

Mopping up fact issues

In Austin v. Kroger Texas LP, the Fifth Circuit reversed a summary judgment for the defendant in a slip-and-fall case. On the merits, among other holdings of general interest, the Court noted:

  • “[A] janitor with fifteen years’ experience is competent to testify about the effectiveness of cleaning products and methods.”;
  • When coupled with evidence from “Kroger’s handbook” and the manager’s testimony about “the safety practice at the store,” the plaintiff raised a fact issue;
  • “[T]he fact that [Plaintiff] had successfuly cleaned a much smaller spill . . . with a dry mop does not conclusively demonstrate that Spill Magic was not necessary for [him] to safely clean a much larger and more serious spill.”

Procedurally, the Court instructed that the trial court should proceed under “the more flexible Rule 54(b)” on remand rather than “the heightened standard of Rule 59(e),” asking that it “construe the procedural rules with a preference toward resolving the case on the merits and avoiding any dismissal based on a technicality.” No. 16-10502 (April 14, 2017).

Judicial admissions are strong.

An insured disputed whether he had claimed ownership of a particular piece of property in a conversation with an insurance agent, Specifically, while testifying in his deposition that he did not remember the specific questions asked, the conversation did not last very long – implying that the agent simply assumed his ownership of the propertuy. “[H]owever,  n both his answer to State Farm’s complaint and his response to State Farm’s request for admission, [the insured] admitted to telling the agent who took his insurance application that he was the owner of the property and to stating as much in his application. The district court concluded that these facts were judicially admitted, and therefore rejected Appellants’ argument as an impermissible ‘attempt to create a dispute around a material fact already admitted.’” State Farm v. Flowers, No. 16-60310 (April 26, 2017).

Practical tip for private eyes

In a break from the usual topics about federal procedure, today’s post about the case of Foster v. Woods provides some practical advice for private investigators. Foster, a licensed private investigator, tailed a car into a school parking lot and observed it for a short period before realizing that the driver was his target’s teenaged son. Unfortunately for Foster, the son observed him and told a friend, whose father was the local sheriff. After Foster left the school grounds the sheriff arrested him and unsuccessfully attempted to prosecute him for having brought a firearm onto school grounds (although Foster held a concealed-carry permit, and neither he nor the firearm left the car while in the school parking lot. Foster sued for wrongful arrest; the Fifth Circuit affirmed summary judgment for the sheriff: “Relevant here, Woods knew that Foster was not a student, that he followed a student’s vehicle into a student parking lot posted with a ‘no trespassing” sign, and that Foster remained in the lot for some time as students were arriving for school. . . . Given the facts known to Woods, he had knowledge that would warrant a reasonable officer to believe that Foster violated the trespass statute.” Advice – use caution when entering private property.

Fee award affirmed in Texas’s Obergefell case

In DeLeon v. Abbott, the Fifth Circuit affirmed an award of $585,470.30 in attorneys’ fees and $20,202.90 in costs arising from the Texas counterpart to Obergefell v. Hodges, 135 S. Ct. 2584 (2015). The panel majority observed that “the essential goal in shifting fees (to either party) is to do rough justice,” and that as a result, “[w]e can hardly think of a sphere of judicial decisionmaking in which appellate micromanagement has less to recommend it.” A dissent, observing that “deference is a blank check,” approved of the bulk of the award but took issue with it as to time spent on (a) an unsuccessful third-party motion to intervene; (b) interacting with the media; and (c) coordinating with supportin amici. No. 15-51241 (April 18, 2017, unpublished).

Jurisdiction over remand order

The case of Decatur Hospital Authority v. Aetna Health Inc. involved a remand order, granted on the basis of timelieness (a ruling not ordinarily appealable because of 28 USC § 1447(c)), but where the notice of removal referred to the federal officer removal statute (made reviewable by the less-well-known § 1447(d)). The Fifth Circuit concluded that its review involved “[n]ot particular reasons for an order, but the order itself,” and went to affirm the remand and a related fee award, finding that the defendant did not learn new facts from an interrogatory answer that were not also contained in the original petition. No. 16-10313 (April 18, 2017).

Au Renvoi

Oubre, struck by an errant forklift, sued Schlumberger for his injuries. To avoid a limitations problem, he cited a choice-of-law provision in the Master Service Agreement between his employer and Schlumberger. The provision ultimately did not help him, and the Fifth Circuit observed that it “does not pose a renvoi issue.” Oubre v. Schlumberger, Ltd., No. 16-41446 (April 5, 2017, unpublished). That term, accurate although infrequently-used, is defined by Black’s as “[t]he doctrine under which a court, in resorting to foreign law, also adopts the foreign law’s conflict-of-laws principles, which may in turn refer the court back to the law of the forum.”

You can’t waive jurisdictional arguments, except when you can waive them.

At oral argument, the appellant in a technical dispute about the appointment of arbitrators “argued for the first time that ‘if maritime jurisdiction applies, then . . . there is appellate jurisdiction over the appeal.'” The Fifth Circuit observed: “We do not usually allow parties to raise a new argument for the first time at oral argument. . . . Of course, an argument that this court lacks jurisdiction cannot be waived, but here the argument is that the court has jurisdiction, a matter the appellant is required to prove.” Bordelon Marine, LLC v. Bibby Subsea ROV, LLC, No. 16-30847 (April 14, 2017, unpublished).

Streamlined path to reversal in trademark case – UPDATED

Streamline Production Systems v. Streamline Manufacturing involved trademark litigation between businesses with similar names. The Fifth Circuit affirmed theury’s findings about the distinctiveness of the plaintiff’s mark and the likelihood of confusion, observing that the various factors did not all point the same way but “there is not a complete absence of evidence” to support what the jury found. The court reversed on remedy, however, finding that the “reasonable royalty” damages went beyond the scope of the infringement, and that the award of unjust enrichment was not supported by evidence of lost profits or willful action by the defendant. No. 16-20046 (revised April 14, 2017).

Terms of Engagement

Sun-Tzu famously counseled, “[a]ll armies prefer high ground to low and sunny places to dark.” The defendant airline in Conservation Force v. Delta Air Lines artfully changed the ground for conflict in a case about its policies toward shipments involving big game hunts. The plaintiff complained that the airlines’ policy of not accepting the shipment of lion, leopard, elephant, rhino and buffalo hunting trophies violated the airlines’ legal duty to treat all shippers equally. The Fifth Circuit agreed with the district court’s conclusion “that, despite a duty to treat all shippers equally, a common carrier does not have to treat all cargo equally.” No. 16-11062 (March 20, 2017, unpublished).

Not so fast!

In Smitherman v. Bayview Loan Servicing LLC, the Fifth Circuit order a limited remand to the district court, so that court could supplement the record about the defendant’s citizenship and then make findings. The district court, however, went on to vacate the judgment it had entered previously and remand the case to state court. The Fifth Circuit observed: “Because the district court lacked the authority to do so, we construe it[]s order to be an indicative ruling made pursuant to Federal Rule of Civil Procedure 62.1(a)(2). Accordingly, we REMAND this case to the district court and DISMISS the appeal as moot and relinquish jurisdiction pursuant to Federal Rule of Appellate Procedure 12.1(b).” No. 16-20328 (March 29, 2017, unpublished).

No general causation in toxic tort case

“[W]here a plaintiff seeks to rely on epidemiological evidence, Texas law requires that the stifues show a statistically significant doubling of the risk of developing their alleged inuiries. . . . The studies relied on by the Plaintiffs and their experts do not . . . One of these studies did not quantify the risk of developing Plaintiffs’ chromuim-related-acute-irritation injuries at all and the other study did not find a doubling of the risk.” McManaway v. KBR, Inc., No. 15-20641 (March 27, 2017) (applying Merck & Co. v. Garza, 347 S.W.3d 256 (Tex. 2011)).

Limitation Clarification

In Ocwen Loan Servicing LLC v. Berry, a dispute about a home equity loan, the Fifth Circuit confirmed that “we now must follow the Texas Supreme Court’s holding in [Wood v. HSBC Bank USA, N.A., 505 S.W.3d 542 (Tex. 2016)] that no statute of limitations applies to a borrower’s allegations of violations of section 50(a)(6) of the Texas Constitution in a quiet title action, rather than our prior holding in [Priester v. JP Morgan Chase Bank, N.A., 708 F.3d 667 (5th Cir. 2013)].” In so doing, the Court reminded that “the issues-not-briefed-are-waived rule is a prudential construct that requires the exercise of discretion,” and addressed the applicability of Wood notwithstanding the appellant not discussing the case in its opening brief, noting that the underlying issues had been briefed, and that the Court had received supplemental briefing on the pure question of law presented about the application of Wood. No. 16-10604 (March 29, 2017).

No standing to sue about state flag design

Moore sued the Governor of Mississippi, alleging that the presence of the Confederate battle flag in the Mississippi state flag (right) violated Moore’s rights under the Equal Protection Clause. The Fifth Circuit affirmed dismissal on standing grounds, distinguishing cases involving the First Amendment’s Establishment Clause because of the distinct injuries addressed by the two Constitutional provisions. The Court concluded: “The assumption that if [Plainitff] had no standing to sue, no one would have standing, is not a reason to find standing.” (citations omitted). Moore v. Bryant, No. 16-60616 (March 31, 2017).

No causation in 9-1-1 case

Plaintiffs alleged that a terrible crime would have been averted with a faster response to a 9-1-1 call. The Fifth Circuit, applying City of Dallas v. Sanchez, 494 S.W.3d 722 (Tex. 2016), found a lack of proximate cause (and thus, immunity applied) because “plaintiffs have not plausibly alleged that any of the intervening parties would have acted differently,” including the call center operator and emergency personnel on the scene. The allegations on the general subject of response time were too speculative to satisfy Twombly (footnote 4)And “‘even if the brief delay in relaying Cook’s location ‘contributed to circumstances that delayed potentially life-saving assistance, the [delay] was too attenuated from the cause of [Cook’s] death . . . to be a proximate cause.” Cook v. City of Dallas, No. 16-10105 (March 29, 2017).

No crawfishing about this summary judgment

Several crawfishermen sued about the effects of canal dredging on the Atchafalaya Basin fisheries. As to one defendant company, the Fifth Circuit affirmed summary judgment in its favor, reviewing each of the documents cited by plaintiffs and finding that none raised a genuine issue of material fact as to actual dredging activity by that company, on the pipelines at issue in this case. As to another, the Court reversed on procedural grounds, finding that the district court should have considered a deposition transcript and responses to requests for admissions offered by the plaintiffs when (1) their proffer had a foundation in the terms of the case management order, (2) the evidence was probative, and (3) it was information obtained from that defendant.  In re Louisiana Crawfish Producers, No. 16-30353 (March 28, 2017). (The opinion notes that crawfish are known by several other names, including “yabbies,” a tidbit that was not known to this author.)

Copyright, volition, and hair.

Defendant hosted a website with a public forum called “HairTalk.” Plaintiffs sued for copyright infringement when celebrity photos, to which they owned the rights, were posted by third-party users on HairTalk without their consent. The Fifth Circuit affirmed summary judgment for Defendant, adopting the “volitional conduct” requirement for direct infringement cases, and observing: “[I]t does not make sense to adopt a rule that could lead to the liability of countless parties whose role in the infringement is nothing more than setting up and operating a system that is necessary for the functioning of the Internet.” BWP Media USA v. T&S Software, No. 16-10510 (March 27, 2017).

Much blame, but lame claim.

An architecture firm held a large judgment against a bankruptcy debtor, and contended that the failure of the debtor’s insurer to object to that claim barred further dispute about the insurer’s liability. The Fifth Circuit disagreed, concluding that “in this no asset bankruptcy case, nothing in the court proceedings required claims allowance, no notice was provided to parties in interest to object to claims, and no bankruptcy purpose would have been served by the bankruptcy court’s adjudicating [the firm’s claim.” Kipp Flores Architects v. Mid-Continent Casualty Co., No. 16-20255 (March 24, 2017).

Null estoppel

Reviewing the requirements for the application of judicial estoppel, the Fifth Circuit reversed the resolution of a case about insurance coverage of attorneys fees in Aldous v. Darwin Nat’l Assurance Co., No. 16-10537 (March 16, 2017). The Court found that the district court misapplied judicial estoppel when it “unjustifiably read the [key] supplemental declaration in isolation,” and made several “small antecedent errors” leading up to that ruling, including its reading of the relevant earlier decision.

Ex Parte Young goes airborne

Air Evac contended that the Airline Deregulation Act preempted Texas workers compensation laws about reimbursement for air-ambulance services. This claim led to a dispute about the scope of Eleventh Amendment liability and the landmark Constitutional case of Ex parte Young, 209 U.S. 123 (1908). In a methodical analysis of Young’s history and purpose, the Fifth Circuit concluded that Air Evac could sue: “[T]he balance-billing prohibition works in concert with state defendants’ implementation of the reimbursement system, serving as a backstop against alternative methods of fee collection. State defendants’ pervasive authority to oversee and enforce Texas’ workers’-compensation system satisfies the Ex parte Young exception.” Air Evac EMS, Inc. v. State of Texas, No. 16-51023 (March 20, 2017).

What’s in a name?

Adams LLC, formed in July 2010, bought a number of assets from Adams Produce Company, Inc., and sought to prosecute a Deepwater Horizon claim for damages suffered by Adams Inc. Unfortunately, “[a]lthough substantially alll of Adams Inc.’s assets and liabilities were transferred as part of the transaction, it is undisputed that Adams Inc. retained certain assets and liabilities. Adams Inc. and Adams LLC are two distinct entities, and the asset transfer that occurred here was not just a change in form.” BP Exploration v. Claimant ID 100169608, No. 16-30482 (March 8, 2017, unpublished).

The Man from Atlantis

The Fifth Circuit affirmed a summary judgment for the defendants in the FCA case of Abbott v. BP Exploration & Production; after describing the alleged fact issues about “whether engineers approved the various stages of construction of the Atlantis [offshore oil platform],” it noted: “Rarely does the pursuit of an individual’s FCA claims lead to an investigation requested by Congress. But that is the case with these Plaintiffs, whose insistence on the alleged issues with the Atlantis led to Congressional hearings, an investigation by a federal agency, and the [De[artment of the Interior] Report,” which “found no grounds to suspend the operation of the Atlantis or revoke BP’s designation as an operator.” No. 16-20028 (March 14, 2017).

First Amendment v. Security – not about travel bans –

In an interesting parallel to the ongoing litigation about travel bans (which most recently produced a District of Hawaii opinion granting a TRO), the Fifth Circuit denied en banc review in Defense Distributed v. U.S. Dep’t of State, which affirmed a preliminary injunction about the use of 3-D printing technology to make certain firearms. A dissent observes: “Certainly there is a strong public interest in national security. But there is a paramount public interest in the exercise of constitutional rights, particularly those guaranteed by the First Amendment . . . ” No. 15-50759 (March 15, 2017).

To every garnishment there is a season –

Tower Credit garnished the debtor’s wages. In defense of a later preference action, Tower argued that its garnishment was effective when served (taking it outside the preference period), not when the debtor in fact received money. The Fifth Circuit disagreed: “The combination of Supreme Court precedent and the overwhelming weight of persuasive authority applying § 547(e)(3) make clear that a debtor’s wages cannot be transferred until they are earned. Thus, we hold that a creditor’s collection of garnished wages earned during the preference period is an avoidable transfer made during the preference period even if the garnishment was served prior to that period.” Tower Credit v. Schott, No. 16-30274 (March 13, 2017).

Warning signs of sanctionability

In affirming sanctions for vexatious litigation in connection with bankruptcy proceedings, the Fifth Circuit noted, in particular: “Appellants’ . . . repeated attempts to litigate issues that have been conclusively resolved against them or that they had no standing to assert and by their unsupported and multiple attempts to remove . . . the trustee.” Carroll v. Abide, No. 16-30996 (March 13, 2017).

Attorneys immune, again.

Attorney Martinez sued another law firm (“HLG”) for various torts related to the firm contacting his clients about alleged overbilling. The firm asserted absolute immiunity as a defense and the Fifth Circuit agreed, in a fact-specific holding, that the evidence “demonstrate[s] that the allegedly tortious statements at issue in this case were made in relation to a proposed arbitration and are therefore absolutely privileged under Texas law.” The firm already represented two Martinez clients in connection with the potential arbitration; the new clients did not originate contact with the firm; and all of them ultimately retained the firm. Martinez v. Hellmich Law Group, PC, No. 16-50305 (March 8, 2017, unpublished). This case joins a line of similar holdings in recent years in favor of attorney immunity.

Don’t gamble with construction liens.

The owner of the Golden Nugget casino in Lake Charles withheld $18.7 million from payments to its general contractor, who then filed a statutory lien (a “privilege” in Louisiana parlance) on the property. The relevant statute requires the contractor to file “within sixty days after the filing of the notice of termination or substantial completion of the work.” If “substantial completion” refers to an event, the contractor’s filing was not timely; if, however, it refers to a filing that certifies substantial completion, the contractor’s filing was timely, as the owner did not record such a certification. The Fifth Circuit concluded that, while the statute was ambiguous, the related provisions and the apparent industry practice supported the contractor’s position: “The [statute] places the burden on an owner to cut of potential claims when a contract has been recorded, whether it is a general contractor or a subcontractor.” Golden Nugget Lake Charles LLC v. W.G. Yates & Sons Constr. Co., No. 16-30496 (March 6, 2017).

No mistake about the mistake.

In Richard v. Anadarko Petroleum Corp., the Fifth Circuit required reformation of a contract on the grounds of mutual mistake, to the detriment of non-party Liberty Mutual, acknowledging that “[c]ourts must guard against parties’ ‘attempts to make an end-run around the parol-evidence rule,’ which forecloses the use of parol evidence to interpret unambiguous terms, ‘by framing [their] argument[s] as a request for reformation.” Here, reformation was appropriate even considering the effect on Liberty Mutual, given (1) its lack of reliance on the contract, (2) the general consistency of the terms in the reformed contract with industry practice, and (3) course of performance. No. 16-30216 (March 2, 2017).

Sorry, the policy limits apply there too.

Federal Insurance agreed to pay defense costs in ongoing commercial litigation against its insureds, subject to its position that under the policy, payment of defense costs deplete the policy limits. The relevant clause said: “[T]he Limit of Liability under the Fiduciary Coverage Section is $1 million, subject to a $1 million aggregate limit, and a $10,000.00 Retention, with Defnse Costs eroding or depleting those limits.” The Fifth Circuit agreed with Federal, rejecting arguments based on the limit potentially implicating conflict-of-interest concerns for counsel, and policy issues raised by applicable state statutes in the health care area. In sum: “Under Mississippi law, insurance policies are to be enforced according to their provisions.” Federal Ins. Co. v. Singing River Health System, Ni. 15-60774 (March 1, 2017).

A failure to Communicat-R

Litigation about the intellectual property rights to the name “Communicat-R” (here, applied to a specialized type of whiteboard) led to a jury trial. The Fifth Circuit affirmed, finding no abuse of discretion in this instruction: “Trademarks can be abandoned through non-use. A trademark is abandoned if it is proven by a preponderance of the evidence, that (1) the use of trademark was discontinued; and (2) an intent not to resume such use.” The Court rejected a request for additional language about “excusable nonuse,” finding that it would either be redundant or not entirely accurate in the context of this case. The Court also rejected sufficiency challenges to liability and damages, illustrating the operation of the federal standard for the grant of a new trial. Vetter v. McAtee, No. 15-20575 (March 1, 2017).

Hot Potatoes

Gatheright bought sweet potatoes from Clark, paying with two post-dated checks. When they were returned for insufficient funds, Clark instituted criminal proceedings against Gatheright, which were ultimately dismissed after Gatheright spent several weeks in jail. Gatheright then sued Clark for malicious prosecution and abuse of process. The Fifth Circuit affirmed summary judgment for Clark, observing that “$16,000 in bad checks . . . [is] a sum greater than what the Mississippi Supreme Court has previously found would prompt a reasonable person to institute criminal proceedings.” Based on that observation, the Court rejected arguments about whether a post-dated check was a proper basis for a “false pretenses” prosecution in Mississippi, and about the effect of Gatheright’s filing for personal bankruptcy. Gatheright v. Clark, No. 16-60364 (Feb. 23, 2017, unpublished).

Summary of circuit split about “cross-appeal” rule –

It is well-settled nationally that “an appellate court may not alter a judgment to benefit a nonappealing party” because “it takes a cross-appeal to justify a remedy in favor of an appellee.” Greenlaw v. United States, 554 U.S. 237, 244–45 (2008). The Fifth Circuit treats that principle as jurisdictional. See, e.g., Amazing Spaces, Inc. v. Metro Mini Storage, 608 F.3d 225, 250 (5th Cir. 2010) (“[T]his circuit follows the general rule that, in the absence of a cross-appeal, an appellate court has no jurisdiction to modify a judgment so as to enlarge the rights of the appellee or diminish the rights of the appellant.”) Some other Circuits, however, take a different view. See, e.g., Am. Roll-On Roll-Off Carrier LLC v. P&O Parts Baltimore, Inc., 479 F.3d 288, 295 (4th Cir. 2007) (“This circuit views the cross-appeal requirement as one of practice, rather than as a strict jurisdictional requirement.”) (Thanks to my LPCH colleague Russ Herman for pointing this out.)

Credit Claim Credited

Recipients of Section 8 housing assistance sued mortgage originators, complaining that the originators either denied or discouraged the recipients’ credit applications by not considering their Section 8 income, in violation of the Equal Credit Opportunity Act. The Fifth Circuit affirmed the dismissal of claims by recipients who had only inquired about, rather than actually starting, the application process, as well as claims based on Wells Fargo’s policies about the purchase of mortgages in the secondary market. It reversed as to one group of applicants, however, finding under Iqbal and the substantive law that they “plausibly alleged that AmeriPro refused to consider their Section 8 income in assessing their creditworthiness as mortgage applicants, and that they received mortgages on less favorable terms and in lesser amounts than they would have had their Section 8 income been considered.” Alexander v. AmeriPro, No. 15-20710 (Feb. 16, 2017).

A house divided against itself cannot transfer.

Just before filing for bankruptcy, Mr. Wiggins signed a “Partition Agreement” in which he and his wife divided their ownership of their home into two separate property interests. The Fifth Circuit affirmed the bankruptcy court’s conclusion that this was a fraudulent transfer: “When it became clear that Mr. Wiggains would file bankruptcy to satisfy his outstanding debts, the couple entertained various options and made their best estimate on ultimate financial benefits by having only Mr. Wiggains file after the Partition Agreement was recorded. Allowing Mrs. Wiggains to sidestep the statutory limits for homestead exemptions and obtain approximately $500,000 in proceeds that otherwise are for creditors would lay waste to the provisions of the Bankruptcy Code involved here.” Wiggains v. Reed, No. 15-11249 (Feb. 14, 2017).

Potential new Fifth Circuit judges

Texas Lawyer reports that six candidates are under consideration for the two vacancies on the Fifth Circuit – “Texas Supreme Court Justice Don Willett; U.S. District Court Judge Reed O’Connor of Fort Worth; former Texas solicitor general James Ho; Andy Oldham, a deputy general counsel to Gov. Greg Abbott; Michael Massengale, a justice on Houston’s First Court of Appeals; and Brett Busby, a justice on Houston’s Fourteenth Court of Appeals” – the full story appears here.

A picture is worth a thousand words –

Press coverage of Judge Neil Gorsuch’s nomination to the Supreme Court has noted his intelligent and accessible writing style, including use of a sentence diagram (left) in a criminal case that turned on what elements of the crime required proof of intent. In the same spirit, in dissent from the denial of en banc rehearing in a highly technical case about protection of the dusky gopher frog (right), Judge Edith Jones used a pair of Venn diagrams to illustrate her view of how the Endangered Species Act should operate (below left), contrasted with the panel opinion’s (below right). Markle Interests v. U.S. Fish & Wildlife Service, No. 14-31008 (Feb. 14, 2017).

 

Several wrongs don’t make a right.

CitiMortgage sought to foreclose on Maldonado’s home; in the subsequent litigatoin, it offered summary judgment evidence that he owed a balance of $533,960.80. In response, Maldonado “disputed the amounts that CitiMortgage claimed in attorneys’ fees, inspection fees, escrow, taxes, and late charges,” but did “not provide any evidence of what the correct amounts should be.”  Maldonado v. CitiMortgage, No. 16-20541 (Jan. 23, 2017, unpublished).

Who can kickback?

The issue in United States ex rel. Vavra v. Kellogg Brown & Root, Inc. was whether KBR was liable for kickbacks taken by two employees. The Fifth Circuit held that the answer is fact-specific: “[T]he proper test for imputing knowledge under [the AKA] is that corporations are liable ‘only for the knowing violations of those employees whose authority, responsibility, or managerial role within the corporation is such that their knowledge is imputable to the corporation.'”  As for the effect of the alleged kickback, even though “[i]t is true that the district court did not make any findings as to particular service problems [the employee] intended to influence in an improper manner through his gratuities . . . it is enough to connect the gratuity with the specific kind of treatment sought in a way that establishes impropriety,” which was done here “[b]ecause of the nature of the treatment [the employee] sought.” No. 15-41623 (Feb. 3, 2017).

No foreclosure, ergo no wrongful foreclosure

Foster sued about a foreclosure; the state court granted a TRO (so no foreclosure occurred); and the mortgage servicer defendants removed and obtained summary judgment. Foster challenged the denial of her motion to remand, arguing that she did not improperly join the substitute trustee appointed to conduct the foreclosure sale. The Fifth Circuit affirmed: “[B]reach of a trustee’s duty does not constitute an independent tort; rather, it yields a cause of action for wrongful foreclosure. A claim of wrongful foreclosure cannot succeed, however, when no foreclosure has occurred.” Foster v. Deutsche Bank, No. 16-11045 (Feb. 8, 2017).

Early contract termination can be a fraudulent transfer.

A group of real estate companies paid Prime LLC for consulting services. While the contract allowed termination with 60 days notice, the group and Prime agreed to end the contract without using the notice provision. A creditor complained that this termination made a fraudulent transfer, and the Fifth Circuit agreed that the claim was at least facially plausible: “While the value of the notice period lost by failure to adhere to the notice provision remains an issue for further development in the district court, at this stage we think the notice requirement secured measurable economic benefit to Prime. Assuming the facts alleged surrounding this transaction to be true, as we must under Rule 12(b)(6), Plaintiff has alleged an asset, cognizable as such under TUFTA, that was constructively transferred.” Hometown 2006-1 1925 Valley View LLC v. Prime Income Asset Management LLC, No. 15-10881 (Feb. 2, 2017)

Waiver of removal rights – law’s the same –

Defendants removed, the plaintiff moved to remand, and the the district court granted the motion. It found a waiver of the right to remove, noting this contract provision: “The Parties hereto hereby irrevocably and unconditionally consent to the sole and exclusive jurisdiction of the courts of Harris County in the State of Texas for any action, suit or proceeding arising out of or relating to this Agreement or the Proposed Transaction . . . .” The defendants claimed ambiguity (which would make the waiver no longer be “clear and unambiguous,” and thus not satisfy the demanding standard in this area) from (1) the definition of “Proposed Transaction,” (2) the definitions of the relevant parties, and the use of “Proposed Transaction” in the above part of the relevant clause, but not in another, similar provision later in it. The Fifth Circuit rejected these arguments and affirmed, but also affirmed the denial of any award of attorneys’ fees. Grand View PV Solar Two, LLC v. Helix Elec., Inc., No. 16-20384 (Feb. 1, 2017). The opinion is a good summary of the law on this topic, which has not been addressed in detail recently.

No arbitration in Stanford cases

The receiver of the Allen Stanford businesses sued several investors for receiving fraudulent conveyances. In earlier appeals, the Fifth Circuit resolved other thresehold issues in these cases; in Janvey v. Alguire, the Court reviewed the denials of the defendants’ motions to compel arbitration. It affirmed, rejecting their arguments based on arbitration clauses in various Stanford-related documents: “Because the Receiver may sue on behalf of any of the Stanford entities that has a claim against the defendants, becausehe has chosen to sue on behalf of the Bank, which has not consented to arbitrate claims against any of the defendants [except for one, who waived the issue], and because none of the equitable doctrines urged by the defendants applies, the Receiver cannot be compelled to arbitate his claims against these defendants.” No. 14-10945 et al. (Jan. 31, 2017).

Carmack the Magnificent

Heniff Transportation, a trucking company, sued Trimac Transportation, alleging that Trimac did not properly clean a tanker-trailer, resulting in contamination and a damages claim against Heniff by its customer. Trimac argued that Heniff’s state law claims were preempted by the Carmack Amendment, a federal law that addresses actions about lost or damaged goods, arising from interstate transportation of the goods by a common carrier. The Fifth Circuit agreed, finding that washing a tanker-trailer was “plainly” such a service, directly analogous to specific examples given by the statute. This statute, not widely known outside trucking litigation, can bear significantly on UCC claims involving transported goods. Heniff Transportation v. Trimac Transportation, No. 16-40553 (Jan. 30, 2017).

Herding Fish

The “Gulf Council” manages fisheries in the federal waters of the Gulf of Mexico.With respect to red snapper, its statutory grant of authority requires it to establish “seprate quotas for recreational fishing . . . and commercial fishing.” A group of private anglers complained that the authority to set those two quotas precluded the ability to set a quota for fishing from charter vessels. The Fifth Circuit disagreed, finding that neither the canon that “expressing one item of a commonly associated group or series excludes another left unmentioned,” nor that “a specific statute prevails over an inconsistent general statute” compelled a ruling in favor of the anglers: “Amendment 40 does not create a separate quota for charter fishing; it subdivides the recreational sector into private and charter components.” Coastal Conservation Association v. U.S. Dep’t of Commerce, No. 16-30137 (revised Jan. 26, 2017).

No punitive damages for insurance claim denial

A church in Hattiesburg, Mississippi proved that its insurer did not properly handle its claim resulting from tornado damage (right), resulting in a damages award of over $1,000,000. The Fifth Circuit affirmed against challenges by both sides; as to the church’s request for punitive damages, it held: “Taking the facts in the light most favorable to Mount Carmel, GuideOne’s alleged conduct did not rise to the necessary level of an independent tort that would warrant punitive damages. Mount Carmel merely alleges that GuideOne had ‘knowledge of the financial harm that would result’ from its cancellation of the policy. But this type of knowledge is likely present for many cancellations and alone is not sufficient to rise to the level of an independent tort. Accordingly, it does not warrant punitive damages.” GuideOne Elite Ins. Co. v. Mount Carmel Ministries, No. 15-60915 (Jan. 23, 2017, unpublished).

False claims relator does not skate by.

The relator in a reverse False Claims Act case alleged that DuPont concealed its obligation to pay penalties under the Toxic Substances Control Act. After a careful review of the statute, its history, and policy considerations, the Fifth Circuit reversed the denial of summary judgment to DuPont: “Simoneaux’s position yields an extraordinarily broad construction of the FCA. If his reading . . . were correct, reverse-FCA liability could attach from the violation of any federal statute or regulation that imposes penalties. . . . For example, 45 C.F.R. § 3.42(e) prohibits roller-skating at the National Institutes of Health, and a person violating that regulation “shall be fined under title 18, United States Code, imprisoned for not more than 30 days, or both.” 40 U.S.C. § 1315(c)(A). Under Simoneaux’s reasoning, roller-skating at the NIH results in a penalty ‘of not less than $5,000’ and three times the fine assessed under Title 18. And any private person who saw the roller-skater could bring a qui tam action against him. The statutory definition of ‘obligation’ cannot bear the weight of that interpretation.” United States ex rel. Simoneaux v. duPont, No. 16-30141 (revised Dec. 14, 2016).

No, that’s not a genuine issue of material fact.

Defendants moved for summary judgment, on the ground of qualified immunity, in a case arising from a fatal police shooting. The district court “disregarded the testimony of [Officer] Copeland and two eyewitnesses, finding that because there was ‘no video evidence of the actual shooting[,]’ the ‘testimony of Copeland, the eyewitness, and the 9-1-1 caller . . . should not be accepted until subjected to cross examination.'” The Fifth Circuit reversed; in addition to a ground based on qualfied immunity law, the Court held that under general Rule 56 principles: ”There is no evidence to suggest that the pair was biased, and the district court specifically found that the heirs ‘[did] not offer any evidence to contradict the eyewitnesses’ statements.’ Because their testimony was ‘uncontradicted and unimpeached,’ the district court was required to give it credence. Failure to do so amounted to an inappropriate ‘credibility determination[].'” Orr v. Copeland, No. 16-50023 (Dec. 22, 2016).

Watch the clock on BK notices of appeal.

In Netsch v. Sherman, the appellants’ counsel missed the 14-day deadline for an appeal from bankruptcy court. The district court denied relief and the Fifth Circuit affirmed; while noting that all relevant factors were either neutral or favored appellants, it concluded:”[T]he bankruptcy court concluded that the reason for the delay weighed strongly against finding excusable neglect. In its analysis of this factor, the bankruptcy court emphasized that the parties had been subject to the Federal Rules of Bankruptcy Procedure throughout the adversary proceeding, these rules were unambiguous, and Appellants’ counsel confused the Federal Rules of Bankruptcy Procedure with the Federal Rules of Civil Procedure. The bankruptcy court also indicated that confusing bankruptcy procedure with civil procedure does not constitute excusable neglect. Consequently, the court held that the reason for the delay should be given greater weight than other factors.” No. 16-10432 (Dec. 22, 2016, unpublished).

IP Defendants Win – Something . . .

Defendants won an intellectual property dispute with Plaintiff, and then sought recovery of $1 million in attorneys fees. This request led to the surprisingly complicated question of exactly what claims were in the case when the Defendants won. The Fifth Circuit concluded: “The [Texas Theft Liability Act] claim in the [First Amended Complaint]–the operative complaint at
the time of the attorneys’ fee award—was never held to be preempted [by federal copyright law]. [Our earlier opinion on the merits] addressed only the TTLA claim as it was pleaded in the Original Petition and did not consider the TTLA claim in the FAC. This is significant because the TTLA claim in the FAC was distinct from that in the Original Petition and specifically omitted allegations that were equivalent to copyright, with the intention of avoiding preemption. And the district court also never held that the FAC’s TTLA claim was preempted. Rather, the TTLA claim in the FAC was litigated and dismissed on the merits during summary judgment, and therefore it was proper to award attorneys’ fees under the TTLA because that law supplied the rule of decision.” Spear Marketing v. Bancorpsouth Bank, No. 16-10155 (revised Jan. 12, 2017). This opinion echoes the complexity in other recent cases that addressed the substance of preemption issues involving federal copyright law.

No harm from 404(b) evidence

Foremost Insurance declined to pay a claim made by Charles Pendleton about the destruction in a fire of his 1956 Mercedes 190SL (an example of which appears to the right), arguing that he set the fire. A jury agreed and the Fifth Circuit affirmed. One of Pendleton’s grounds was that the district judge exceeded the scope of Fed. R. Evid. 404(b) by allowing evidence about other “similar accidents surrounded by similar circumstances regarding insurance” involving Pendleton. The Court found no harm as “ample evidence” supported the jury’s verdict in favor of Foremost, including the police investigation of the accident scene, further review of the accident by a forensic fire investigator and a mechanic/accident reconstructionist, and evidence about ownership of the other vehicle. Foremost Ins. Co. v. Pendleton, No. 16-60240 (Jan. 13, 2017, unpublished).

NNNot the “borrower.”

NNN Realty disputed its obligations under a guaranty, noting that the definition of “borrower” in the instrument listed sixteen entities (all of which contained “NNN” in some fashion), concluding with the conjunction “and.” Thus, argued NNN, all of those entities had to be in default to trigger its obligations. The Court rejected this argument, noting the overall structure of the guaranty and related security instrument, as well as the usage of similar terms. It gave little weight to textual arguments about the definition that arose from a misplaced parenthetical. While many of the grammatical arguments – especially as to the the erroneous parenthetical – are unique to the facts of this case, the broader analysis about the interplay between a collectively-defined term and individual obligations applies in many business settings. WBCMT 2007 C33 Office 9720, LLC v. NNN Realty Advisors, Inc., No. 15-20086 (Dec. 22, 2016).

No claim on engagement letter, no arbitration.

Lowe brough a class action, alleging that company management breached its fiduciary duties to the employee pension plan, and that KPMG aided those breaches by ignoring the underfunding of the plan. KPMG contended that these claims necessarily implicated its engagement agreement with the company, which contained an arbitration clause, and thus required arbitration under the “direct-benefit estoppel” doctrine. Here, “Lowe did not know about the Engagement Letters, and has disclaimed any reliance on the Letters, and her claims rely on common law tort theories, not on the Letters.” The Court concluded that “[i]f that choice makes it harder for [Lowe] to prove her case, so be it,” but her claims as currently stated did not depend on KPMG’s engagment agreement and thus did not have to be arbitrated.” Lowe v. KPMG, No. 16-60263 (Jan. 5, 2017, unpublished).

PRACTICE TIP – Determining Diversity Details

Several unpublished opinions from the Fifth Circuit in recent weeks, most recently Smitherman v. Bayview Loan Servicing LLC, No. 16-20328 (Jan. 11, 2017, unpublished), have ordered limited remands to the district court “to permit supplementation of the record and to make findings regarding . . . citizenship.” Once completed, “the district court’s amended opinion shall return” to the panel “for appropriate action.” It appears that the Court is reviewing case files not only to confirm appellate jurisdiction, but also the necessary facts to support federal subject matter jurisdiction as well.

Fishy claim

Jarrod Burle, a commercial fisherman, made a claim for lost income with the Deepwater Horizon settlement. He then obtained loans, in the form of “pre-settlement funding contracts,” from Woodbridge Baric Pre-Settlement Funding, LLC. After receiving payment from the settlement system, he paid $20,000 back to Woodbridge. A special master then sought to recover that payment from Woodbridge after Burle was found to have made a fraudulent claim. The Fifth Circuit reversed a judgment against Woodbridge, rejecting an analogy between Woodbridge and an attorney with a contingent fee contract, and applying the more general rule that “[b]ecause Woodbridge Baric’s claim for the repayment of the loan was not purely contingent upon the success of Burrle’s claims for compensation, the failure of this contingency did not extinguish [its] claim and does not prevent [it] from asserting its valid interest in defense of its right to retain the funds as a bona fide payee.” In re Deepwater Horizon, No. 15-30599 (revised Jan. 9, 2017).

More on notices of appeal

Johnson-Williams sued MERS about a foreclosure. She lost a Rule 12(b)(6) motion filed by MERS, then her own motion for leave to amend, and finally a motion for reconsideration. She appealed, and the Fifth Circuit observed the limited scope of her appeal, as the notice referred only to the district court’s order as to the amendment.  Johnson-Williams v. MERS, No. 16-10276 (Jan. 4, 2017, unpublished).

No jurisdiction under Alien Tort Statute

“In 2004, an Iraqi insurgent group kidnapped and murdered twelve Nepali men as they traveled through Iraq to a United States military base to work for . . . a Jordanian corporation that had a subcontract with . . . Kellogg Brown Root.” Adhikari v. Kellogg Brown & Root, Inc., No. 15-20225 (Jan. 3, 2017). The Fifth Circuit affirmed the dismissal of tort claims against KBR brought by the representatives of the deceased, including a claim based on the Alien Tort Statute.

The ATS is a cryptic part of the Judiciary Act of 1798, stating: “The district courts shall have original jurisdiction of any civil action by an alien for a tort only, committed in violation of the law of nations or a treaty of the United States.” In 2013, the Supreme Court clarified and limited the extraterritorial scope of the statute in Kiobel v. Royal Dutch Petroleum Co., 133 S. Ct. 1658. Applying Kiobel, the panel majority found no ATS claim stated, despite the strong policy against the human trafficking that was alleged to be involved in this case. A dissent read Kiobel to establish a “touch and concern” test as to contact with the United States, and would have found a cognizable ATS claim pleaded on these facts.

Good records defeat tort liability, again.

The unsuccessful plaintiff in Dawson v. RockTenn Services, Inc. sued because of injuries he suffered while delivering sulfuric acid to a paper mill. In yet another opinion that endorses careful recordkeeping, the Fifth Circuit affirmed judgment for the defendants: “Under Rock-Tenn’s operating procedures, Martin Transport’s drivers were required to, and apparently did, check that the pressure-release line was ‘free from defects and
void of other materials’ prior to each delivery. Martin Transport’s drivers delivered acid to the mill at least daily, often twice daily, without ever apparently notifying Rock-Tenn of any defect in the pressure-release line. In the absence of any countervailing evidence to suggest that a reasonable person in Rock-Tenn’s position would have undertaken further inspection or maintenance of the pressure-release line, there is no basis for imputing RockTenn with constructive knowledge of an alleged defect in that line.” No. 16-30112 (Dec. 27, 2016, unpublished).

No, that judgment is not final either.

In LLOG Exploration Co. v. Signet Maritime Corp., after affirming a declaratory judgment about delay damages under a maritime towage contract, the Fifth Circuit found that it lacked jurisdiction over the related award of attorneys’ fees: “[I]n its award of fees and costs to LLOG, the district court did not set a set a specific amount. This court held in S. Travel Club, Inc. v. Carnival Air Lines, Inc., 986 F.2d 125, 131 (5th Cir. 1993), ‘that an order awarding attorney’s fees or costs is not reviewable on appeal until the award is reduced to a sum certain.'” No. 15-31123 (Dec. 23, 2016, unpublished).

No, that judgment is not final.

In a dispute about a home loan, the district court wrote an opinion found for the defendant mortgage servicer in all respects, including its counterclaim for judicial foreclosure. The final judgment, unfortunately, did not address that claim or otherwise contain “catch-all” language. Because “[t]he district court’s ‘final judgment’ neither adjudicates ‘all claims . . . of all parties,’ nor expressly styles itself as a partial final judgment pursuant to Rule 54(b). . . . this Court has no appellate jurisdiction and cannot review the merits of the case.” Wease v. Ocwen Loan Servicing LLC, No. 16-10521 (Dec. 29, 2016, unpublished).

Moot dispute gets the boot.

Sessa Capital, a hedge fund, supported the election of certain directors to the board of Ashford Prime, a hotel business. Ashford’s management rejected their applications, contending that they were incomplete. Litigation ensued, in which Sessa sought an injunction against the June 10, 2016 board election. The district court denied relief; Sessa appealed, and a motions panel of the Fifth Circuit denied an interim stay.

Since that election proceeded, mootness became an obvious appellate issue. The Fifth Circuit noted that “Sessa did not ask the district court to stay the [June 10] election,” and also “never sought the invalidation of the shareholder election in the district court” — requests that, had they been made, could potentially have kept the dispute alive. To the contrary, the Court observed that “Sessa repeatedly made a tactical decision to seek only prospective relief. When the district court contemplated pressing the reset button by staying the shareholder election and allowing Sessa to resubmit the questionnaires, Sessa vehemently opposed this solution.” Accordingly, the Court dismissed the appeal as moot. Ashford Hospitality Prime, Inc. v. Sessa Capital, No. 16-10671 (Dec. 16, 2016, unpublished).

What the contract says is a “product,” is a product.

Two manufacturers of baby products (specifically, pacifiers and “sippy cups”), disputed the enforcement of a contract provision that said: “Distributor hereby acknowledges and agrees not to copy or utilize any of LNC’s . . . product design . . . without LNC’s written permission.” While “the district court imposed the requirement that the design be either confidential or protectable as intellectual property in order to fall within the definition of ‘product design,'” the Fifth Circuit disagreed and reversed because of the plain meaning of the terms chosen by the parties: “On its face, the clause applies to any of LNC’s product designs, which would include those in the public domain.” The court rejected arguments based on analogies and appeals to principles of (non-contractual) intellectual property law. Luv N’ Care, Ltd. v. Gruopo Rimar, No. 16-30039 (Dec. 16, 2016).

No standard? No review.

While the Court did address the merits, and its enthusiasm for the appeal was tempered by the many cases brought to it about the BP Deepwater Horizon settlement, the Fifth Circuit offered this cautionary note about briefing the standard of review: “Bailey’s opening brief skips this step — it does not acknowledge the standard of review, and offers no arguments to show that the district court abused its discretion. Bailey therefore has waived an issue necessary to the success of the appeal.” Claimant v. BP Exploration & Production, No. 16-30642 (Dec. 13, 2016, unpublished).

Sanctions for inadequate Rule 26 disclosures

blue-white-number-rounded-rectangle-26-roundPlaintiff accused defendant (and his employer) of sexual assault while incarcerated at a privately-run detention center. Defense counsel had recordings of calls made by the plaintiff, from the facility, suggesting that the encounters were consensual. Counsel did not identify the recordings in their Rule 26 initial disclosures, and did not make the recordings available until the plaintiff’s deposition, after questioning her about the conversations. The district court sanctioned defense counsel for inadequate disclosure and the Fifth Circuit affirmed, concluding that “some evidence serves both substantive and impeachment functions and thus should not be treated as ‘solely’ impeachment evidence” under Rule 26. Olivarez v. GRO Group, Inc., No. 16-50191 (Dec. 12, 2016).

Don’t be right, be reasonable.

A good reminder about following the right substantive standard appears in Clark v. Boyd-Tunica Inc., in which an employee of “Sam’s Town” disputed her termination for drinking at work. The employer relied on tests performed by a reputable company, which it rechecked after she complained about them. The Fifth Circuit sided with the employer: “The focus of the pretext inquiry is not whether the alcohol in Clark’s sample was, in fact, attributable to her improper consumption of alcohol, but whether Sam’s Town reasonably believed it was and acted on that basis.” No. 16-60167 (Dec. 9, 2016).

How to move for directed verdict

jury-sketchMontano v. Orange County, in affirming a substantial jury verdict about the mistreatment of a county prisoner, states several important principles about the appellate review of jury trials. This post focuses on one — the degree of specificity required of a defendant’s JMOL motion under FRCP 50(a), such that arguments in a later 50(b) motion will be seen as renewed rather than new (and thus waived).

The applicable legal standard had three elements; the county moved on the ground that the plaintiff had “no evidence of a constitutionally deficient policy, custom or practice,” going on to focus on the first element. The county later argued that the phrase “constitutionally deficient” necessarily included the other two elements, but the district court and Fifth Circuit disagreed. The purpose of the “specific grounds” requirement in Rule 50(a) is “to make the trial court aware of the movant’s position and to give the opposing party an opportunity to mend its case” – here, the County “did not clearly separate the points upon which [it] requested judgment, did not delineate which of its arguments applied to which of Plaintiffs’ claims, and blurred the lines of Plainitffs’ claims through its obtuse recitation of the case law.” No. 15-41432 (Nov. 29, 2016). Later posts will address other points made by this opinion about the review of jury verdicts.

No, that’s not anticipatory repudiation.

angrymanPlaintiff sued Defendant for breach of contract, alleging a failure to deliver Defendant’s 2010 cotton crop to Plaintiff. Defendant contended that an anticipatory repudiation occurred. The Fifth Circuit reminded that the proposal of new contract terms, absent a statement of intent not to perform the present contract, does not create an anticipatory repudiation. As a counterpoint, the Court cited a Texas appellate case in which the appellant not only proposed new terms, but also “‘definitely manifested’ that he would not longer perform the terms of his original contract when he . . . drove the appellee out to a deserted county road, threatened to sue him, [and] stated that he was ‘mad enough to smash the appellee’s face in.'” Plains Cotton Cooperative Ass’n v. Gray, No. 16-10806 (Dec. 5, 2016) (unpublished).

Tortious, but not anticompetitive.

antitrust cartoon elephantThe Fifth Circuit’s recent opinion in Retractable Technologies Inc. v. Becton Dickinson Co. reversed a $340 million antitrust judgment and placed significant limits on the activity to which the antitrust laws apply. Judge Edith Jones wrote for the panel, joined by Judges Jacques Wiener and Stephen Higginson. No. 14-41384 (Dec. 2, 2016).

Plaintiff Retractable Technologies Inc. (“RTI”) and Defendant Beckton Dickinson (“BD”) were competing manufacturers of syringes. Retractable sued for false advertising under the Lanham Act, and alleged that BD attempted to monopolize the syringe market in violation of section 2 of Sherman Act.

As summarized by the Court, the antitrust verdict in RTI’s favor “rest[ed] upon three types of ‘deception’ by its rival: [1] patent infringement . . . [2] two false advertising claims made persistently; and [3] BD’s alleged ‘tainting the market’ for retractable syringes in which it alone competed with RTI.”

The Court found that each of these three liability theories failed.

First, as to patent infringement, the Court observed that by its very nature, a patent grants a limited monopoly. Thus, “patent infringement invades the patentee’s monopoly rights, causes competing products to enter the market, and thereby increases competition,” meaning that it “is not an injury cognizable under the Sherman Act.”

Second, the false advertising claims involved BD’s admittedly inaccurate claims to have the “world’s sharpest” needles with “low waste space.” But even these statements “may have been wrong, misleading, or debatable,’ . . . they were all “arguments on the merits, indicative of competition on the merits.” (quoting Stearns Airport Equip. Co. v. FMC Corp., 170 F.3d 518, 522 (5th Cir. 1999)).

syringeAfter a thorough analysis of different standards used to evaluate antitrust claims based on allegedly false advertising, the Court concluded: “The broader point . . . is the distinction embodied in our precedents between business torts, which harm competitors, and truly anticompetitive activities, which harm the market.” RTI did not make such a showing here.

Finally, the “taint” claim alleged that BD refused to make needed repairs to its retractable needle design, in hopes of persuading purchasers that all such syringes – including RTI’s – were inherently unreliable, until some time after RTI’s patents expired and BD could use RTI’s design to revitalize and take over the retractable syringe market. The Court called this theory “illogical,” since selling a bad product would only serve to benefit RTI’s competitors, and would not serve BD well in any attempt to expand its brand once RTI’s technology became available.

While reversing on the antitrust claim and the substantial damages associated with it, the Court went on to remand for reconsideration of what Lanham Act remedies for false advertising might still be appropriate.

This case is a forceful reminder that a good business tort claim does not equate to a good antitrust claim – or, even any antitrust claim at all. It is also a reminder of two broader points about how the Fifth Circuit approaches business tort claims arising from federal law.

On the one hand, that Court allows vigorous litigation of federal claims within their proper boundaries, as it recently did in affirming a nine-figure judgment arising from an antitrust conspiracy claim in MM Steel LP v. JSW Steel (USA), Inc., 806 F.3d 835 (5th Cir. 2015). (Notably, Judge Stephen Higginson, who was on the panel in the Retractable case, wrote the opinion in MM Steel.)

But on the other hand, the Court carefully polices the boundaries of those claims, as it did here, and as it also did in its painstaking comparison between state law trade secret claims and federal copyright claims in GlobeRanger Corp. v. Software AG, 836 F.3d 477 (5th Cir. 2016). The “siren song” of treble damages under the Sherman Act is a compelling one, but the pathway to such damages is carefully guarded.

When is a bank not a bank?

bank-errorThe issue in Moneygram Int’l v. Commissioner of Internal Revenue was whether MoneyGram could take advantage of a favorable deduction rule for “banks,” unhelpfully defined in the Internal Revenue Code with a sentence beginning: “[T]he term ‘bank’ means a bank or trust company . . . .” Turning to the specific requirements of the definition, the Fifth Circuit concluded that the Tax Court “erred by interpreting TexasBarToday_TopTen_Badge_VectorGraphic‘deposit’ to include the requirement that MoneyGram ‘hold its customers’ funds for extended periods of time,'” and by requiring that a “loan” be made for interest. A dissent criticized the majority’s “[n]itpicking some of the definitions of a loan . . . .” No. 15-60527 (Nov. 15, 2016, unpublished).

It’s a long way to Antigua.

animated-flag-of-antigua-and-barbuda-1Plaintiffs alleged that the government of Antigua was complicit in Allen Stanford’s fraudulent scheme; it defended under the Foreign Sovereign Immunities Act. With respect to liabilty under the “commercial activity” exception to the Act, the Fifth Circuit found too attenuated a connection to the United States. As to the scheme itself, “[w]hile Antigua may have helped facilitate Stanford’s sale of the fraudulent CDs, Stanford’s criminal activity served as an intervening act interrupting the causal chain between Antigua’s actions and any effect on investors.” And as to a more specific claim based on Antigua’s failure to repay loans to Stanford, “the financial loss in this case was not directly felt by Plaintiffs, who are investors and customers of Stanford . . . The financial loss due to Antigua’s failure to repay the loans was most directly felt by Stanford who was the actual lender in the loan transactions.” Frank v. Commonwealth of Antigua & Barbuda, No. 15-10788 (Nov. 22, 2016).

No known claim about potential future discovery sanctions

iillusionistOneBeacon Ins. Co. v. Welch & Assocs. involved insurance coverage for an attorney malpractice claim, arising for an exclusion for knowledge about “any actual or alleged act, error, omission or breach of duty arising out of the rendering or the failure to render professional legal services.” Since even the carrier agreed that “[o]n its face, this covers every single thing an attorney does or does not do, wrongful or not,” the Fifth Circuit found that the exclusion could not be applied literally without making the contract illusory. Focusing on the alleged “wrongful act,” the Court found that the relevant lawyer’s awareness of a discovery order and potential dispute was not equivalent to knowledge that a rare death-penalty sanction award would result. The Court also sustained an award of additional violations for an intentional violation of the Insurance Code with respect to the handling of the claim. No. 15-20402 (Nov. 14, 2016).