After an unusual pretrial mandamus ruling by the Fifth Circuit in a high-profile False Claims Act case, and after the jury returned a plaintiff’s verdict for $175 million — which could be trebled upon final judgment — the defendants returned to the Fifth Circuit last week. They filed a renewed mandamus petition — drawing on the Court’s statements in the prior ruling — supported by amici filings from Texas A&M and another company. In re: Trinity Industries, Inc., No. 14-41297. The Court has requested a response, presently due on December 1. Further briefing, and the ultimate disposition of this mandamus petition, will be of interest both procedurally and substantively. (Disclaimer: I am not counsel of record in this proceeding, but do represent Trinity.)
In an intellectual property dispute with several pending motions, the district court held a telephone conference and said the following about the pending application for preliminary injunction:
“I can see that there at least would be a fact issue as to whether or not the contract’s violated, but that’s a different proposition from concluding that a preliminary injunction should be granted. There are a lot of factors to take into account to decide whether or not, ultimately there would — a breach of contract would be found to exist, such as, whether or not there’s a possibility for some relief besides injunctive relief, such as the recovery of damages. I haven’t found anything in the papers to indicate to me that the defendant couldn’t respond to a judgment in damages, if required to do so. I don’t — I don’t think a preliminary injunction is necessary or appropriate in this case, so I’m going to deny that request.”
Observing that the district court’s statmeent in damages “seems to relate to [Defendant’s] ability to respond to a judgment in damages, which does not relate to whether damages would be an adequate remedy,” the Fifth Circuit vacated and remanded for a lack of findings of fact and conclusions of law under Fed. R. Civ. P. 52(a). Software Development Technologies v. Trizetto Corp., No. 13-10829 (Nov. 5, 2014, unpublished).
Mabary withdrew money from an ATM machine. While she received an on-screen notice about a $2.00 fee, the machine did not have a posted external notice about the fee — a violation of the Electronic Funds Transfer Act at the time. After amendments to the EFTA that eliminated the Bank’s liability (if applicable), the district court dismissed Mabary’s claim and denied certification of a related class. Mabary v. Home Town Bank, N.A., No. 13-20211 (Nov. 5, 2014). The Fifth Circuit reversed, holding: (1) Mabary had Article III standing as a result of EFTA’s definition of injury, even though she did receive a form of notice; (2) a Rule 68 offer of proof to her – precertification – did not moot her claim; and (3) EFTA’s amendments did not fall within the exception to the general presumption against statutory retroactivity. A dissent took issue with the standing holding as “respectfuly, silly stuff,” reasoning: “Mabary cannot show that she suffered a cognizable injury in fact, so she can sue only if the existence of her statutory cause of action sufficed to satisfy Article III.”
World Wrestling Entertainment sought ex parte seizure and temporary restraining orders, against unnamed defendants selling fake WWE merchandise at live events, under the Trademark Counterfeiting Act. The district judge denied relief, noting concerns about WWE’s ability to prove a likelihood of success against an unknown defendant. The Fifth Circuit (who reviewed the case because the district court certified the matter for interlocutory appeal) took a different view, noting: “WWE does not license third parties to sell merchandise at live events . . . The resulting confined universe of authorized sellers of WWE merchandise necessarily ‘identifies’ any non-WWE seller as a counterfeiter.” The opinion also observed that “the very nature of the ‘fly-by-night’ bootlegging industry” involves “counterfeiters who, upon detection and notice of suit, disappear without a trace and hide or destroy evidence, only to reappear later at the next WWE event down the road.” World Wrestling Entertainment, Inc. v. Unidentified Parties, No. 14-30489 (Nov. 4, 2014).
Menendez complained about his employer’s accounting practices to the SEC. The employer received a letter from the SEC asking for retention of certain documents. The employer then emailed Menendez’s colleagues, “instructing them to start retaining certain documents because ‘the SEC has opened an inquiry into the allegations of Mr. Menendez.'” Relations with his co-workers deteriorated and he ultimately resigned. In a detailed opinion, the Fifth Circuit affirmed a $30,000 damages award to Menendez on his claim for retaliation: “The undesirable consequences, from a whistleblower’s perspective, of the whistleblower’s supervisor telling the whistleblower’s colleagues that he reported them to authorities for what are allegedly fraudulent practices, thus resulting in an official investigation, are obvious.” Halliburton, Inc. v. Administrative Review Board, U.S. Dep’t of Labor, No. 13-60323 (Nov. 12, 2014). The case has received considerable attention in employment and compliance circles; the Wall Street Journal‘s coverage is a short example.
Consistent with a 2014 line of cases that reversed summary judgments on credibility issues, the Fifth Circuit reversed a summary judgment for the insurer in a bad faith case in Santacruz v. Allstate Texas Lloyds, No. 13-10786 (Nov. 13, 2014, unpublished). The insured alleged inadequate investigation into her claim of covered wind damage to her home, and the Court found fact issues on two matters.
First, as to liability for bad faith, the Court noted: “The extent of Allstate’s inquiry into the claim consisted of its adjuster taking photographs of the damaged home. Significantly, Allstate did not attempt to talk to the contractor, who submitted an affidavit in this case describing what he observed concerning the roof and attributing the cause to wind damage. Nor is there any evidence showing that Allstate obtained weather reports or inquired with neighbors to see if they suffered similar damage, which would tend to show the damage was caused by wind rather than normal wear and tear.”
Second, as to damages, the Court said: “Santacruz claimed three types of damages: (1) the replacement of the roof, supported by an invoice from Pedraza providing that Santacruz paid him $3,900 to repair the roof; (2) a list of damaged personal and household items compiled by Santacruz and his family with an estimate of the value of all the belongings; and (3) repair work needed for the damaged interior of the home, supported by an estimate from a contractor listing the repairs to be done. Further, Pedraza submitted an affidavit testifying to the necessity of repairing the roof, and Santacruz submitted photographs showing the extensive damage to the home’s interior to support his claim that repairs were necessary.”
Among other theories, the borrowers in Shaver v. Barrett Daffin LLP alleged that a servicer “was unjustly enriched by failing to apply credit default swap payments and other payments to their loan balance.” No. 14-20107 (Nov. 5, 2014, unpublished). This argument — apparently addressed for the first time by the Fifth Circuit in this opinion — was rejected by the Court, which noted similar results in other jurisdictions.
In the 9-0 per curiam opinion of Johnson v. City of Shelby, the Supreme Court reversed the Fifth Circuit’s dismissal of a civil rights claim for failure to cite the applicable statute: “Our decisions in [Twombly and Iqbal] are not in point, for they concern the factual allegations a complaint must contain to survive a motion to dismiss. A plaintiff, they instruct, must plead facts sufficient to show that her claim has substantive plausibility. Petitioners’ complaint was not deficient in that regard. Petitioners stated simply, concisely, and directly events that, they alleged, entitled them to damages from the city. Having informed the city of the factual basis for their complaint, they were required to do no more to stave off threshold dismissal for want of an adequate statement of their claim.” No. 13-1318, 574 U.S. ___ (Nov. 10, 2014). Law360 has covered the case. Here is the actual pleading at issue.
Vaillancourt sued a mortgage servicer, the substitute trustee for a foreclosure, and her husband. The defendants removed, claiming fraudulent joinder of the in-state defendants, and the district court rejected that argument and remanded. In so doing, it declined to exercise supplemental jurisdiction over the accompanying state-law claims. Vaillancourt v. PNC Bank, N.A., No. 14-40303 (Nov. 5, 2014). A good exam question for a Federal Courts class resulted.
Because the district court based its remand order on its decision to decline supplemental jurisdiction, the Fifth Circuit (under its prior precedents) had appellate jurisdiction over that ruling, which necessarily included review of the predicate ruling about original jurisdiction. The Court noted that this result “is in some tension with 28 U.S.C. § 1447(d)’s command that ‘[a]n order remanding a case to the State court from which it was removed is not reviewable on appeal or otherwise,’ which the Supreme Court has construed to insulate from appellate review remands made on the basis of subject matter jurisdiction.”
The Court went on to reverse the ruling about fraudulent joinder, finding no cognizable claim pleaded against the trustee or the husband. Accordingly, because “‘the district court had diversity jurisdiction over the state law claims at the time of remand,’ and ‘the exercise of that jurisdiction is mandatory,'” it reversed the remand order.
This summer, in the panel opinion of Barron & Newburger, P.C. v. Texas Skyline, Ltd., No. 13-50075 (July 15, 2014), the Fifth Circuit affirmed the partial denial of a fee application based on its earlier opinion of In re: Pro-Snax Distributors, Inc., 157 F.3d 414 (5th Cir. 1998). That earlier opinion rejected a “reasonableness” test in the application of Bankruptcy Code § 330 — which would have asked “whether the services were objectively beneficial toward the completion of the case at the time they were performed” — in favor of a “hindsight” approach, asking whether the professionals’ work “resulted in an identifiable, tangible, and material benefit to the bankruptcy estate.” All three panel members joined a special concurrence asking the full Court to reconsider Pro-Snax en banc, and that invitation was recently accepted by a majority of active judges. Law360 provides some good additional commentary about the en banc vote.
“[Attorney] Grodner filed a motion requesting that certain inmates housed in the same correctional facility as [Grodner’s client] be allowed to provide testimony by video. The state did not oppose this form of testimony. Judge Jackson denied the order, however, requiring the incarcerated inmates to appear in court. As a result, Grodner filed five new motions requesting that the district court subpoena certain inmates to testify in court. Grodner styled those motions ‘unopposed,’ although she admittedly never contacted opposing counsel to confirm this. Even after opposing counsel filed a memorandum clarifying their opposition to the subpoenas, Grodner proceeded to file three more ‘unopposed’ motions requesting subpoenas.” In re Grodner, No. 14-98001 (Nov. 3, 2014, unpublished). The Fifth Circuit affirmed the district court’s sanction of a 60-day suspension from practice before the Middle District of Louisiana.
The Fifth Circuit has launched an attractive new website, with the customary features and some great pictures of the John Minor Wisdom courthouse and surrounding landmarks.
A mortgage servicer sued two individuals, alleging a conspiracy to defraud; the defendants argued that the servicer lacked standing because the notes in question were not properly conveyed. The case settled during trial, and as part of the settlement “the parties stipulated to several facts, including the fact that the Trusts were the owners and holders of the Loans at issue.” An agreed judgment followed. BAC Home Loans Servicing, L.P. v. Groves, No. 13-20764 (Nov. 3, 2014, unpublished).
The defendants then moved to vacate under FRCP 60(b), arguing that the plaintiff lacked standing. The district court denied the motion and the Fifth Circuit affirmed. It first noted that “the court will generally enforce valid appeal waivers, [but] a party cannot waive Article III standing by agreement . . .” Further noting that “parties may stipulate to facts but not legal conclusions,” the Court held: “That is exactly what happened here. [Defendants] conceded facts that establish [plainitiff’s] status; thus, the district court appropriately reached the resulting legal conclusion that [plaintiff] has standing.”
EnCana Oil & Gas hired Seiber as a general contractor, who in turn hired Holt and TAUG as subcontractors. Seiber failed to make timely payments. EnCana interpleaded the funds at issue, and Seiber then filed for bankruptcy — before entry of a final order in the interpleader case. Holt Texas, Ltd. v. Zayler, No. 13-41153 (Nov. 3, 2014).
Holt and TAUG alleged that they had materialmen’s liens under Texas law that removed the funds from Seiber’s bankruptcy estate; Seiber’s bankruptcy trustee argued that the filing of the interpleader action “automatically satisfied its liability to Seiber, thus transferring legal possession of the funds to Seiber and the bankruptcy estate.”
The Fifth Circuit disagreed with the trustee and reversed the bankruptcy court, reasoning: “If this were so, the interpleader would be the final judge of its own legal obligations relative to the dispute, by depositing a sum solely determined by it, washing its hands of any relationship to the dispute and walking away whistling Yankee Doodle.”