In the district court, Bank of America won and Fulcrum lost. Fulcrum appealed. The Fifth Circuit noticed that the pleadings identified Fulcrum as “a limited liability company organized and existing under the laws of the State of Nevada.” As that allegation does not in fact establish Fulcrum’s citizenship, the Court asked for amendment pursuant to 28 U.S.C. § 1653 (“Defective allegations of jurisdiction may be amended, upon terms, in the trial or appellate courts.”) In response, Fulcrum alleged that is members were from Georgia, Nevada, New York, and North Carolina. Because Bank of America is also a citizen of North Carolina, and because “we find no evidence in the record, and Fulcrum has cited none, supporting Fulcrum’s recent assertions that it is a citizen of North Carolina,” the court remanded for the purpose of discovery and findings on the citizenship question. Bank of America v. Fulcrum Enterprises LLC, No. 14-20532 (March 18, 2016, unpublished).
A class sought damages from attorneys involved in Allen Stanford’s business affairs. The Fifth Circuit, reversing the district court, found the claims barred by attorney immunity under Cantey Hanger LLP v. Byrd, 467 S.W.3d 484 (Tex. 2015): “Plaintiffs alleged that, in representing Stanford Financial in the SEC’s investigation, [Attorney] Sjoblom: sent a letter arguing, using legal authorities, that the SEC did not have jurisdiction; communicated with the SEC about its document requests and about Stanford Financial’s credibility and legitimacy; stated that certain Stanford Financial executives would be more informative deponents than others; and represented a Stanford Financial executive during a deposition. These are classic examples of an attorney’s conduct in representing his client.” The Court rejected the “fraud exception” relied upon by the district court, and among arguments for other exceptions, rejected the argument that immunity only extended to litigation as not having been raised below. Troice v. Proskauer Rose LLP, No. 15-00500 (March 10, 2016).
Justice Blackmun famously declared, “From this day forward, I no longer shall tinker with the machinery of death.” Callins v. Collins, 510 U.S. 1141 (1994). In less dramatic fashion, in the 9th appeal from a ruling about the administration of the Deepwater Horizon settlement, the Fifth Circuit has declared: “If the discretionary nature of the district court’s review is to have any meaning, the court must be able to avoid appeals like this one which involve no pressing question of how the [BP] Settlement Agreement should be interpreted or implemented, but simply raise the correctness of a discretionary administrative decision in the facts of a single claimant’s case.” In re Deepwater Horizon, No. 15-30395 (March 8, 2016).
In the latest of a long line of cases about arbitration clauses in employment documents that the employer can amend at will, the Fifth Circuit reversed the grant of a motion to compel arbitration in Nelson v. Watch House Int’l, LLC: “Here, the Plan provides that Watch House may make unilateral changes to the Plan, purportedly including termination, and that such a change ‘shall be immediately effective upon notice to’ employees. Watch House’s retention of this unilateral power to terminate the Plan without advance notice renders the plan illusory under a plain reading of Lizalde [v. Vista Quality Markets, 746 F.3d 222 (5th Cir. 2014)].” The opinion details recent cases about a “savings clause” in employee manuals that limit the power to change as to present disputes, following the analysis of In re: Halliburton Co., 80 S.W.3d 566 (Tex. 2002). I am interviewed about this line of cases in this Legal News Line article.
In Dodds v. Terracon Consultants, the Fifth Circuit accepted an interlocutory appeal about whether a terminated employee had a Sabine Pilot claim when he also had a statutory remedy. After oral argument, the Court decided that the appeal had been improvidently accepted, as there was a fact issue about whether the employee had actually been fired for violating the law. An adverse finding on that issue would moot the legal issue. The Court also noted that certification — a possible resolution of the federal appeal — is only available “if the certifying court is presented with determinative questions of Texas law.” No. 15-20313 (Feb. 17, 2016, unpublished).
The Texas anti-SLAPP law (the “TCPA”) imposes a number of deadlines that can fit awkwardly with federal practice. The panel majority in Cuba v. Pylant concluded that when no hearing is held on a TCPA motion as required by the statute (hearings being common in Texas state practice but not in federal court), appeal-related deadlines that start from the hearing date do not begin to run. A dissent said: “Applying an Erie analysis, I conclude that the TCPA is procedural and must be ignored.” Nos. 15-10212 & -10213 (Feb. 23, 2016).
Bechuck sued Home Depot and Advantage Sales for injuries allegedly suffered in a Home Depot store. After a pretrial conference at which the district court expressed skepticism about the claims against Home Depot, and a flurry of resulting orders and motions, a final order of dismissal resulted that Bechuck challenged in several ways. The Fifth Circuit largely agreed with him, concluding, (1) placing a a restriction on where a case can be refiled is not appropriate for a Rule 41(a)(1) or (a)(2) voluntary dismissal, absent any prior history of forum-shopping or other forum-related gamesmanship; and (2) while labelling a Rule 12 dismissal as one under Rule 41(a)(2) is an abuse of discretion, so long as it without prejudice or undue condition, there is no harm because the matter can be freely refiled. Bechuck v. Home Depot USA, No. 15-20219 (Feb. 17, 2016).
Continuing to rhyme with “-ata,” the Fifth Circuit rejected an attempt to create appellate jurisdiction in Luvata Grenada LLC v. Danfoss Industries S.A. de C.V., No. 15-60477 (Feb. 11, 2016). Luvata Grenada sued Danfoss US and Danfoss Mexico. Danfoss Mexico won a motion to dismiss for lack of personal jurisdiction, after which Luvata and Danfoss US stipulated to a voluntary dismissal without prejudice. “However, it is well settled in this circuit that parties cannot manufacture appellate jurisdiction by agreeing to dismiss remaing claims without prejudice. . . . The parties did not obtain a Rule 54(b) certification from the district court, and they cannot achieve the same result by ‘self help.'”
The district court abstained under the “primary jurisdiction” doctrine in deference to a FERC proceeding. On the threshold question of appellate jurisdiction, the Court concluded that Hines v. D’Artois, 531 F.2d 726 (5th Cir. 1976) was still good law, and allowed it to consider an otherwise-interlocutory appeal: “[T]he district court’s order resulted in Occidental being ‘effectively out of court’ and therefore functioned as a final decision.” On the merits, the Court remanded with instructions to not stay the court case indefinitely, but to instead stay for 180 days and assess the status then. Occidental Chem. Corp. v. Louisiana Public Service Comm’n, No. 15-30100 (Jan. 4, 2016).
After 15-plus years of litigation, the remaining issues in Art Midwest Inc. v. Clapper related to the calculation of prejudgment interest. No. 14-10973 (Nov. 9, 2015, last before the Fifth Circuit in Art Midwest Inc. v. Atl. Ltd. P’ship XII, 742 F.3d 206 (5th Cir. 2014)). The Court reversed as to the starting date for calculating interest — even though the first judgment by the district court was reversed in part, the date of that judgment was still the proper starting point under Fed. R. App. P. 37(a) and Masinter v. Tenneco Oil Co., 929 F.2d 191 (5th Cir. 1991), aff’d in relevant part, 938 F.2d 536 (5th Cir. 1991). The opinion also touches on waiver and law-of-the-case issues addressed in the 2014 appeal.
In 2013, a Fifth Circuit panel reversed the NLRB and held that “an employer does not engage in unfair labor practices by maintaining and enforcing an arbitration agreement prohibiting employee class or collective actions and requiring employment-related claims to be resolved through individual arbitration.” D.R. Horton, Inc. v. NLRB, 737 F.3d 344 (5th Cir. 2013). The NLRB, not bound in other jurisdictions by that holding, reaffirmed its original holding in the D.R. Horton case in another matter involving Murphy Oil. Unfortunately for the NLRB, the venue rules for review of its decisions allowed Murphy to appeal to the Fifth Circuit, which – unsurprisingly – again reversed the NLRB. As in the prior case, the Court did not reverse as to a requirement that the employer clarify its documents to be clear that employees were not waiving the right to make Board charges. Murphy Oil USA, Inc. v. NLRB, No. 14-60800 (Oct. 26, 2015).
Ybarra sued the Dish Network, alleging that he received seven calls from it in violation if the Telephone Consumer Protection Act. The trial court granted partial summary judgment for Ybarra on three of the calls, after which the parties agreed to the dismissal of the remaining claims. Dish appealed, and Ybarra objected because the final judgment did not reserve Dish’s right to appeal. Distinguishing the much-criticized case of Amstar Corp. v. Southern Pacific, 607 F.2d 1100 (5th Cir. 1979), the Fifth Circuit concluded: “Amstar only precludes the appeal of a claim directly covered by the consent judgment. Here, claims subject the partial summary judgment are independent of the settled claims. The reservation of a right to appeal [in the settlement agreement] was effective.” Ybarra v. Dish Network, No. 14-11316 (Oct. 20, 2015).
Hilda Garza sued Starr County for wrongfully discharging her as a county attorney, in retaliation for announcing her candidacy for the local school board, and she won a $1.4 million verdict for front pay at trial. The district court set aside the verdict as advisory, reasoning that it went to an issue of equitable relief, and allowed the County to offer her reinstatement as an alternative remedy. The Fifth Circuit reversed. While Fed. R. Civ. P. 39(c) allows an advisory jury, it does not apply when: (1) the parties voluntarily submit an issue to a jury without formal objection, and (2) the district court does not announce in advance that the verdict is advisory. Garza v. Starr County, Texas, No. 14-41343 (Oct. 20, 2015, unpublished) (citing, inter alia, Alcatel USA, Inc. v. DGI Techs., Inc., 166 F.3d 772 (5th Cir. 1999)). (The County also challenged the award as excessive; while noting that the “more prudent course” would have been for the County to cross-appeal, the Court allowed the County to raise that issue on remand — although noting that the County’s lack of earlier objections would limit what it could raise.)
In a bankruptcy appeal to district court, the appellant’s brief was due on November 4. It did not file; the appellee moved to dismiss a month later, and the appellant was denied leave to file late. The Fifth Circuit found no abuse of discretion in that decision, looking to the factors about leave for late filings identified in Salts v. Epps, 676 F.3d 468, 474 & n.13 (5th Cir. 2012). The Court noted: “In the order granting Tarbox’s motion to dismiss, the district court found: 1) ‘the delay of over one month has prejudiced Appellee’ in its state court suit against [Appellant]; 2) the ‘thirty-four day delay’ ‘is substantial, and could have been easily avoided through basic diligence’; 3) ‘Appellant’s failure to exercise diligence in filing and pursuing its appeal was the sole reason for the delay’; and 4) ‘“Appellant has not shown good cause to excuse the late filing.” Neurology & Neurophysiology Assocs., P.A. v. Tarbox, No. 15-50105 (Oct. 15, 2015, unpublished).
In the case’s second trip to the Fifth Circuit, the Court considered whether – after an earlier remand for “limited discovery” on jurisdictional facts related to the contract-making authority of the Mexican consulate – the district court erred by reconsidering its earlier substantive ruling about the basis for subject matter jurisdiction. Blake Box v. Dallas Mexican Consultate General, Nos. 14-10744 & 14-10954 (Aug. 19, 2015, unpublished).
Reviewing both the law-of-the case doctrine and the “mandate rule,” the Court found error and reversed: “[W]hether the Consulate [o]fficials had authority from the Mexican government to form a joint venture is a separate question from whether they exercised that authority in their dealings with [plaintiff]. Simply put, here, the first question was answered by the district court on remand in Box I and the second question was defaulted by the Consulate” when it failed to answer after service. Accordingly, a $3 million default judgment was reinstated. Congratulations to my LTPC colleagues Jason Dennis and Sam Hardy on this win!
Plaintiff challenged a proposed development plan as violating the Fair Housing Act. Defendants argued “that because the planned redevelopment is both inchoate and designed to be mixed income and to attract a variety of tenants, [Plaintiff] can only speculate as to whether, if redevelopment proceeds, it will deprive her of the social and economic benefits of diversity,” and thus lacked standing. The Fifth Circuit disagreed, finding that her “asserted injury would be concretely felt in the logical course of probably events flowing from an unfavorable decision by this court: (1) HUD approves the already-pending plan for redevelopment; (2) redevelopment occurs according to the approved plan; [and] (3) segregation and minority- and poverty-concentration occur in [Plaintiff’s] neighborhood as specifically anticipated in several expert reports contained in the record.” The Court distinguished Clapper v. Amnesty International, 133 S. Ct. 1138 (2013), a recent case about the Foreign Intelligence Surveillance Act, as “depend[ing] on a long and tenuous chain of contingent events[.]” McCardell v. U.S. Dep’t of Housing & Urban Devel., No. 14-40955 (July 23, 2015).
The district court overseeing the settlement process for Deepwater Horizon claims ordered that the program could not have access to a certain set of “claim-specific information” before making an initial determination about a claim’s eligibility. BP sought to appeal this ruling as a collateral order. The Fifth Circuit dismissed for lack of jurisdiction, acknowledging that it had taken three earlier appeals about the settlement. The Court concluded that those appeals involved uniquely important issues about interpretation of the underlying agreement, and expressed concern about inviting significantly more interlocutory appeals given “the increasing frequency of court-supervised settlement agreements and consent decrees.” Lake Eugenie Land & Development v. BP Exploration & Production. No. 14-30823 (July 16, 2015).
A business dispute about a telephone service provider’s billing system leads to 2 holdings of broad interest, one procedural and the other substantive:
1A. Waiver. “Although [defendant] moved for a directed verdict at the close of evidence, it did not argue in its motion that the Supply Contract was unenforceable.” Accordingly, under Fed. R. Civ. 50(b), that argument could not be raised post-trial. (Here, in fact, because defendant took the opposite position about the contract in the directed verdict motion, judicial estoppel also barred the later argument.)
1B. Waiver of Waiver. When defendant relied on a certain letter agreement in its Rule 50(b) motion, and plaintiff “did not argue waiver in its response . . . [plaintiff] has forfeited its right to raise the waiver issue on appeal.”
2. Speculative damages. A “strained business relationship” between the parties supported a holding that plaintiff’s $10 million lost profits award, assuming six years of business dealings, was not proven with “reasonable certainty.” Transverse LLC v. Iowa Wireless Services, LLC, No. 13-51098 (revised Aug. 5, 2015, unpublished).
Disputes between borrowers and mortgage servicers are common; jury trials in those disputes are rare. But rare events do occur, and in McCaig v. Wells Fargo Bank, 788 F.3d 463 (5th Cir. 2015), a servicer lost a judgment for roughly $400,000 after a jury trial.
The underlying relationship was defined by a settlement agreement in which “Wells Fargo has agreed to accept payments from the McCaigs and to give the McCaigs the opportunity to avoid foreclosure of the Property; as long as the McCaigs make the required payments consistent with the Forbearance Agreement and the Loan Agreement.” Unfortunately, Wells’s “‘computer software was not equipped to handle’ the settlement and forbearance agreements meaning ‘manual tracking’ was required.” This led to a number of accounting mistakes, which in turn led to unjustified threats to foreclose and other miscommunications.
In reviewing and largely affirming the judgment, the Fifth Circuit reached several conclusions of broad general interest:
- The “bona fide error” defense under the Texas Debt Collection Act allows a servicer to argue that it made a good-faith mistake; Wells did not plead that defense here, meaning that its arguments about a lack of intent were not pertinent to the elements of the Act sued upon by plaintiffs;
- The economic loss rule did not bar the TDCA claims, even though the alleged misconduct breached the parties’ contract: “[I]f a particular duty is defined both in a contract and in a statutory provision, and a party violates the duty enumerated in both sources, the economic loss rule does not apply”;
- A Casteel – type charge issue is not preserved if the objecting party submits the allegedly erroneous question with the comment “If I had to draft this over again, that’s the way I’d draft it”;
- The plaintiffs’ lay testimony was sufficient to support awards for mental anguish; and
- “[A] print-out from [plaintiffs’] attorney’s case management system showing individual tasks performed by the attorney and the date on which those tasks were performed” was sufficient evidence to support the award of attorneys fees.
A dissent took issue with the economic loss holding, and would find all of the plaintiffs’ claims barred; “[t]he majority’s reading of these [TDCA] provisions specifically equates mere contract breach with statutory violations[.]”
A shipbuilder, under contract to the federal government, sought to remove an asbestos claim to federal court under the “Federal Officer Removal Statute,” 28 U.S.C. § 1442. The Fifth Circuit concluded that the shipbuilder was acting at the direction of the federal government, but that the plaintiff’s pleading did not establish a link between his alleged exposure and the shipbuilder’s boat (a seemingly fundamental causation problem, but not implicated at this initial procedural stage). Wilde v. Huntington Ingalls, Inc. (June 19, 2015, unpublished).
Garofolo paid off her home equity note, but did not then receive the cancelled promissory note and a release of lien from the servicer, as required by the Texas Constitution, and the terms of the note. She sued for forfeiture of principal and all interest paid under the Constitution; the servicer admitted not having sent the papers, but contended that having the provision in the note was sufficient to comply with the Constitutional requirement. The Fifth Circuit certified this issue to the Texas Supreme Court: “Garofolo’s construction appears to give rise to a drastic remedy, but Ocwen’s construction appears to render the requirement a virtual nullity except in the (hopefully rare) circumstance where a lender unscrupulously attempts to enforce a paid note resulting in recoverable damages.” Garofolo v. Ocwen Loan Servicing, LLC, No. 14-51156 (June 9, 2015).
In a 2-1 decision, the Fifth Circuit has denied the federal government’s request to stay the district court’s injunction against key elements of President Obama’s immigration policy. Texas v. United States, No. 15-40238 (May 26, 2015). Judge Higginson’s dissent concludes that the issues before the Court are nonjusticiable. Judge Smith’s majority (joined by Judge Elrod), made these key points:
- On standing — “Texas’s forced choice between incurring costs and changing its fee structure is itself an injury: A plaintiff suffers an injury even if it can avoid that injury by incurring other costs. And being pressured to change state law constitutes an injury,”‘
- On the statutory merits — “[E]ven granting ‘special deference,’ the INA provisions cited by the government for that proposition cannot reasonably be construed, at least at this early stage of the case, to confer unreviewable discretion,” and
- On the APA issue — “But a rule can be binding if it is ‘applied by the agency in a way that indicates it is binding,’ and the states offered evidence from DACA’s implementation that DAPA’s discretionary language was pretextual.”
Lincoln Insurance sued several defendants, who it accused of charging excessive fees and otherwise engaging in self-dealing to the detriment of Lincoln. Lincoln won a $16.5 million judgment against two of them for tortious interference. In a “grab bag” of holdings after both sides appealed, the Fifth Circuit held:
- It did not need to reach a difficult Erie issue about when a tortious interference claim accrues under Texas law, where some of the conduct occurs outside the limitations period, because the trial court found sufficient facts to establish that the discovery rule applied;
- Voluntary dismissal of a claim in amended pleading, in response to a dismissal order “based on a technical defect or withdrawal,” waives the right to appeal that order;
- The economic loss rule barred conversion claims where contract provisions dealt with the underlying rights and responsibilities; and
- When a contract provision expressly created a fiduciary duty as to the handling of funds in a particular account, that duty necessarily extended that duty to the handling of those funds before their deposit (and the trial court erred in holding otherwise, requiring a remand).
The Court noted: “[A] litigation strategy with a narrower focus on certain claims and Defendants might reduce the complications, both procedural and substantive, that arose the first go-around.” Lincoln General Ins. Co. v. U.S. Auto Ins. Servcs., Inc., No. 13-10589 (May 18, 2015).
Satterwhite appealed an adverse ruling from the bankruptcy court, and then to the district court. In the district court, after judgment, he filed a motion for new trial, to modify the judgment, and for findings of fact and conclusions of law. After the trial court denied those motions, he filed a notice of appeal that would have been timely in an “ordinary” appeal under Fed. R. App. P. 4. Unfortunately, this bankruptcy appeal fell under Fed. R. App. P. 6, which only allows a motion for rehearing filed within 14 days of judgment to extend the appellate deadline. Satterwhite v. Guin, No. 14-20430 (March 31, 2015, unpublished).
Allstate did not request a jury trial in its original complaint, but did in response to the defendant’s answer and counterclaim (which also included a jury demand, and which Allstate was entitled to rely upon). After a summary judgment ruling, Allstate made a limited jury waiver on the remaining issue of damages. The district court then vacated its summary judgment ruling and held a bench trial on all issues in the case — liability and damages.
The Fifth Circuit found that, “[a]lthough deference is generally accorded to a trial judge’s interpretation of a pretrial order,” this was “[a]t the very least . . a ‘doubtful situation'” that did not support the finding of “a knowing and voluntary relinquishment of the right” to jury trial pursuant to the Seventh Amendment. The Court also found harm because Allstate’s case could survive a JNOV motion, noting that “the district court relied heavily on its weighing of the credibility of the witness’s testimony at trial” in its fact finding. Accordingly, the Court reversed and remanded for jury trial. Allstate Ins. Co. v. Community Health Center, Inc., No. 14-30506 (March 16, 2015, unpublished).