Enough parties at the party

bookNational Casualty sued its insured in federal court for a declaratory judgment that there was no coverage.  The insured sued National Casualty and the insured’s insurance brokers in state court for misleading it about coverage.  The district court found that those additional parties were indispensable for the federal action (and would destroy diversity if joined), and abstained under Colorado River from proceeding further.  Reminding “that it is not necessary for all joint tortfeasors to be named as defendants in a single lawsuit,” the Fifth Circuit reversed as to the joinder analysis, and also as to abstention, noting in particular that “the federal action has proceeded to summary judgment . . . [and] the state court action has involved little more than an original petition, answers, and a stay of proceedings.”  National Casualty Co. v. Gonzalez, No. 15-10478 (Feb. 4, 2016, unpublished).

Permissible declaratory judgment action re: coverage

Fencing_girlMcGowan successfully sued his employer, Tractor Supply Co., for over $8 million in damages after a severe workplace injury.  In the meantime, TSC’s umbrella carrier sued TSC and another carrier for a declaration about coverage obligations.  The district court dismissed for lack of standing, and pursuant to its discretion under the Declaratory Judgment Act.  The Fifth Circuit reversed; its principal holdings were: (1) under Texas insurance law, this sort of suit is justiciable after a liability determination at trial, and does not require exhaustion of appellate remedies; (2) the issues and parties were different in the two actions; and (3) the declaratory judgment suit was filed after the state case and otherwise showed “no indication of procedural fencing.”  Ironshore Specialty Ins. Co. v. Tractor Supply Co. 14-51164 (Aug. 25, 2015, unpublished)

A good day for MERS

MERSThree counties sued MERS (“Mortgage Electronic Registration Systems, Inc.”) for violations of various statutes related to the recording of deeds of trust (the Texas equivalent of a mortgage).  In a nutshell, MERS is listed as the “beneficiary” on a deed of trust while the note is executed in favor of the lender.  “If the lender later transfers the promissory note (or its interest in the note) to another MERS member, no assignment of the deed of trust is created or recorded because . . . MERS remains the nominee for the lender’s successors and assigns.”  The counties argued that this arrangement avoided significant filing fees.  The Fifth Circuit affirmed judgment for MERS, finding (1) procedurally, that the Texas Legislature did not create a private right of action to enforce the relevant statute and (2) substantively, that the statute was better characterized as a “procedural directive” to clerks rather than an absolute rule.  Other claims failed for similar reasons.  Harris County v. MERSCORP Inc., No. 14-10392 (June 26, 2015).

Jury verdict of no copyright infringement affirmed

Baisden v. I’m Ready Productions involved several challenges to a defense verdict in a copyright infringement case.  No. 11-20290 (Aug. 31, 2012).  Among other holdings, the Fifth Circuit reminded that “[c]onsent for an implied [nonexclusive] license may take the form of permission or lack of objection,” making the Copyright Act’s requirement of a writing inapplicable.  Id. at 9-10 (reviewing Lulirama Ltd. v. Axcess Broad. Servs., 128 F.3d 872 (5th Cir. 1997)).  The Court also reviewed a jury instruction that allegedly conflated the question of license with that of infringement — a potential problem since the burdens are different on the two points — but found that while “the question is not a model of clarity” it did not give rise to reversible error.  Id. at 19-21.

No jurisdiction over petition to compel arbitration

In a dispute about termination of a Volvo truck franchise, Volvo sued the dealership under section 4 of the Federal Arbitration Act to compel arbitration.  Volvo Trucks v. Crescent Ford Truck Sales, No. 09-30782 (Jan. 5, 2012).  Both businesses were Delaware corporations.  The district court found federal question jurisdiction because some relief requested involved interpretation of a federal statute.  The Fifth Circuit applied the “look-through” approach of the Supreme Court in Vaden v. Discover Bank, 556 U.S. 49 (2009), under which a court first “assume[s] the absence of the arbitration agreement” to determine if federal jurisdiction would exist without it.  Under Vaden, the Court found that the substantive issues in dispute were governed by state law.  Op. at 6-9.  It also found that the federal issue on which declaratory relief was requested did not create jurisdiction because it “arises only as a defense or in anticipation of a defense.”  Op. at 12.