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 No. 13-11117 (Oct. 15, 2014, unpublished).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.
Pioneer suffered an oil well blowout and paid millions to restore order. It sued for reimbursement under its umbrella policy and the Fifth Circuit affirmed judgment for the insurer, based largely on the broad language of the relevant exclusions. Pioneer Exploration LLC v. Steadfast Ins. Co., No. 13-30802 (Sept. 22, 2014). Pioneer argued that the “owned, rented or occupied” exclusion did not apply to a mineral lease. The Court disagreed, noting that the mineral lease gave Pioneer some control over surface land, and that the broad language of the exclusion reached activity associated with oil production (citing Aspen Ins. UK, Ltd. v. Dune Energy, Inc., No. 10-30335 (5th Cir. Nov. 8, 2010, unpublished)). Further, noting that Louisiana law allowed debate as to whether an “owned property” exclusion reached remediation costs incurred to minimize liability to third parties, the Court found that this exclusion “specifically excludes containment costs” (reviewing Norfolk Southern Corp. v. California Union Ins., 859 So. 2d 167 (La. App. 2003)).” Finally, as to another exclusion, the Court found that the insured could not meaningfully allocate expense “between controlling costs and plugging costs.”
While preparing a CLE for our associates, I drafted and posted my five tips for good legal writing, along with comments and examples. The tips are:
- Avoid needless words.
- Use shorter words.
- Use shorter sentences.
- Avoid passive voice.
- There is no good writing. Only good re-writing.
I hope you have a chance to read the post, along with some of the linked examples, and that they are of use to you in your work.
This summer, the Fifth Circuit declined to apply the Texas “one satisfaction rule” in a fraudulent transfer case, where the plaintiff had also settled a contract dispute with the seller of the business involved in the transfer. GE Capital Commercial, Inc. v. Worthington National Bank, No. 13-10171 (June 10, 2014). The court returned to the one-satisfaction rule in Structural Metals, Inc. v. S&C Electric Co., in which the jury awarded roughly $300,000 for a breach of warranty (measured as the difference in value between the goods as received, and the goods as warranted). The plaintiff also received an insurance payment for fire damage involving the goods. Again, the Court declined to apply the rule, finding that the plaintiff had suffered two distinct injuries. No. 13-50332 (Oct. 6, 2014, unpublished). Interestingly, in both cases, the Court focused on the one-satisfaction rule rather than the closely-related doctrine of the collateral source rule.
The Fifth Circuit returned to the tension between excess and primary carriers in RSUI Indemnity Co. v. American States Ins. Co., a bad faith case under Louisiana law. After a review of the cases on the issue, the Court held “that under the circumstances of this case, where an excess carrier alleges that a primary insurer in bad faith breached its duty to defend a common insured properly and caused exposure of the insured to an increase in the settlement value of the case above the primary policy limit, which the excess insurer must then satisfy on the insured’s behalf, the excess insurer has a subrogated cause of action against the primary insurer for any payment above what it otherwise would have been required to pay.” No. 14-30033 (Sept. 25, 2014).
Plaintiffs alleged that Amedisys, a provider of home health services, concealed billing improprieties, causing a drop in its stock value when they were revealed. Public Employees’ Retirement System of Mississippi v. Amedisys, Inc., No. 13-30580 (Oct. 2, 2014). The Fifth Circuit reversed the district court’s dismissal on the pleadings, finding adequate allegations of loss causation. It based its holding on the alleged cumulative effect of the five pleaded disclosures of the allegedly concealed information: “This holding can best be understood by simply observing that the whole is greater than the sum of its parts.” In its discussion of the Supreme Court’s treatment of this pleading issue in Dura Phamaceuticals, Inc. v. Broudo, 544 U.S. 336 (2005), the Court pointed out that Dura relied on Conley v. Gibson for its summary of pleading requirements — perhaps inviting a reassessment of that holding in light of later developments under Twombly and Iqbal.