In Texas state court, is a TRO application an answer?

answerbuttonAmerijet sued Zero Gravity in Texas state court, seeking emergency relief about the handling of certain aircraft engines subject to their contract.  Zero Gravity responded with its own request for emergency relief. After some initial rulings by the state court, Zero Gravity removed to federal court.  Amerijet then filed a notice of dismissal under Fed. R. Civ. P. 41(a)(1)(A)(i). The matter proceeded in federal court, however, based on its jurisdiction over the TRO bond and a counterclaim for declaratory relief, as the parties tried to settle.  Their dealings culminated in the district court enjoining further litigation by Amerijet in Florida federal court, which then led to an appeal about the district court’s power over the case in light of the dismissal notice.  Amerijet Int’l, Inc. v. Zero Gravity Corp., No. 14-20521 (May 15, 2015).

Observing that a Rule 41 notice takes effect automatically if the defendant has not answered or moved for summary judgment, the Fifth Circuit found that Zero Gravity’s pre-removal filing “barely” qualified as an answer under Texas law, which meant that the notice no longer had automatic effect.  Even though the filing was styled as a TRO application (and accompanying motion to dissolve) and was not called an “answer,” the Court noted that it asserted defenses, a counterclaim for declaratory relief, and facts in support and thus met the “minimal characteristics of an answer” under Texas law  (The question whether a defendant’s pre-removal counterclaim waives the right to remove did not appear to be before the Court.)   Accordingly, the district court was not bound to dismiss the matter, and it did not abuse its discretion in enjoining parallel federal litigation under the first-to-file rule.

E.D. Tex. Mandamus Update

In the press of year-end business, I neglected to cover a notable mandamus opinion in 2014 from the Federal Circuit, In re Google, Inc, No. 2014-147, 2014 WL 5032336 (Oct. 9, 2014).  Reminiscent of that Court’s opinion in In re Genentech, 566 F.3d 1338 (2009), and the Volkswagen/Radmax line of cases from the Fifth Circuit, In re: Google addresses the denial of a motion to transfer patent litigation from the Eastern District of Texas.

The district court focused on “each defendant mobile phone manufacturer’s ability to modify and customize” the relevant platform. The Federal Circuit disagreed and granted mandamus relief, emphasizing the  “substantial similarity involving the infringement and invalidity issues in all the suits.”   That Court also rejected an argument based on the first-filed rule, finding that on these facts, “the equities of the situation do not depend on this argument.”  (quoting Kerotest Mfg. Co. v. C-O-Two Fire Equip Co., 342 U.S. 180, 186 n.6 (1952).  Concluding with a review of the practical considerations listed by 1404(a), the Court noted that the product at issue was developed in the Northern District of California, and thus the “bulk of the relevant evidence” is there as well.

Debt extinguished, guaranty extinguished, summary judgment affirmed.

A creditor successfully made a “credit bid” under the Bankruptcy Code for assets of a failed golf resort.  Litigation followed between the creditor and guarantors of the debt, ending with a terse summary judgment order for the guarantors: “This is not rocket science.  The Senior Loan has been PAID!!!!”  Fire Eagle LLC v. Bischoff, No. 11-51057 (Feb. 28, 2013).  The Fifth Circuit affirmed in all respects, holding: (1) the bankruptcy court had jurisdiction over the dispute with the guarantors because it had a “conceivable effect” on the estate; (2) the issue of the effect of the credit bid was within core jurisdiction and did not raise a Stern v. Marshall issue; (3) core jurisdiction trumped a forum selection clause on the facts of this case; (4) a transfer into the bankruptcy court based on the first-to-file rule was proper; and (5) the creditor’s bid extinguished the debt.  On the last holding, the Court noted that the section of the Code allowing the credit bid did not provide for fair-market valuation of the assets, unlike other Code provisions.

Colorado River abstention 101

Overlapping state and federal cases about the rights to settlement proceeds led the district court to abstain under the Colorado River doctrine in Saucier v. Aviva Life & Annuity Co., No. 11-60503 (Nov. 16, 2012).  The Fifth Circuit reversed, finding no “exceptional circumstances” warranting abstention.  In reviewing each of the relevant factors, the Court distinguished “duplicative litigation” — which does not warrant absention — from “piecemeal” litigation in which a state court case has more relevant parties than a federal one.  Id. at 7-8.  The Court also reminded that “how much progress has been made” is more important in comparing the status of parallel cases than their respective filing dates.  Id. at 8.

“First-to-File” Rule Not Applicable

The case of International Fidelity Insurance v. Sweet Little Mexico Corporation (No. 11-40449, Dec. 22, 2011) rejected an argument that the U.S. Court of International Trade (“CIT”) had exclusive jurisdiction over a case between an importer and its surety about certain customs liabilities.  Op. at 4-10.  The Court then found no abuse of discretion in proceeding with that case even though there was a first-filed action in the CIT between the importer and U.S. Customs.  Acknowledging some overlap between the basic issue of customs liability and the secondary issue of the surety’s responsibility for that liability, the Court found that on these facts, “the ‘core issues’ in the two forums are not the same.”  Op. at 11.  The Court concluded that, based on the terms of the surety contract, the importer had to reimburse the surety for payments made “regardless of the outcome of the proceedings before the CIT.”  Op. at 13-16.  While the Court’s analysis of the “first-filed” and surety issues turns on the specific facts of the case, the issues addressed and the basic legal principles cited are broadly applicable to those topics.