“In 2004, an Iraqi insurgent group kidnapped and murdered twelve Nepali men as they traveled through Iraq to a United States military base to work for . . . a Jordanian corporation that had a subcontract with . . . Kellogg Brown Root.” Adhikari v. Kellogg Brown & Root, Inc., No. 15-20225 (Jan. 3, 2017). The Fifth Circuit affirmed the dismissal of tort claims against KBR brought by the representatives of the deceased, including a claim based on the Alien Tort Statute.
The ATS is a cryptic part of the Judiciary Act of 1798, stating: “The district courts shall have original jurisdiction of any civil action by an alien for a tort only, committed in violation of the law of nations or a treaty of the United States.” In 2013, the Supreme Court clarified and limited the extraterritorial scope of the statute in Kiobel v. Royal Dutch Petroleum Co., 133 S. Ct. 1658. Applying Kiobel, the panel majority found no ATS claim stated, despite the strong policy against the human trafficking that was alleged to be involved in this case. A dissent read Kiobel to establish a “touch and concern” test as to contact with the United States, and would have found a cognizable ATS claim pleaded on these facts.
The Romans sued Ford Motor Co. and a Houston AutoNation dealer. The dealer moved to compel arbitration; the district court denied the motion; and the dealer appealed. Unfortunately, the Fifth Circuit was “not satisfied, based on the record before it, that [the dealer] does not share citizenship with the Romans.” Reminding that the Federal Arbitration Act is not an independent basis for federal jurisdiction, the Court vacated the district court’s order and remanded for determination of subject matter jurisdiction — with instructions to dismiss if diversity was not established. Roman v. AutoNation Ford Gulf Freeway, No. 16-20047 (Oct. 13, 2016, unpublished).
The plaintiff in GlobeRanger Corp. v. Software AG won a $15 million judgment for misappropriation of trade secrets. The Fifth Circuit affirmed, holding:
- After a thorough review of Circuit precedent – not all entirely consistent – “that GlobeRanger’s trade secret misappropriation claim requires establishing an additional element than what is required to make out a copyright violation: that the protected information was taken via improper means or breach of a confidential relationship. Because the state tort provides substantially different protection than copyright law, it is not preempted.”
- Recognizing the “jurisdictional Catch-22” created by that ruling, and referring back to an earlier panel opinion from the time of the case’s removal: “As the complaint [then] alleged only conversion of intangible property for which there is equivalency between the rights protected under that state tort and federal copyright law, complete preemption converted the conversion claim into one brought under the Copyright Act that supported federal question jurisdiction at the time of removal and supplemental jurisdiction after it was dismissed.”
- Found that GlobeRanger had offered sufficient evidence of: (1) what specifically constituted its claimed trade secrets; (2) whether Software AG acquired trade secrets improperly or with notice of impropriety, particularly in light of federal contracting regulations; and (3) whether Software AG “used” any trade secret.
The opinion concluded with an unfortunately apt observation about the business litigation that is the focus of this blog: “This case demonstrates the unfortunate complexity of much of modern civil litigation. A trial involving a single cause of action—misappropriation of trade secrets (plus a derivate conspiracy claim)—has resulted in an appeal raising numerous issues that span the lifecycle of the lawsuit: jurisdiction; preemption; federal contracting regulations; expert testimony on damages; and jury instructions.
The plaintiff in Watson v. City of Allen sued, in Texas state court, several Texas cities about the operation of their “red light camera” programs.No. 15-10732 (May 5, 2016). The cities removed based on his RICO claim and CAFA. Plaintiff then dropped the RICO claim and sought remand based on CAFA’s “local controversy” and “home state” exceptions. The district court kept the case, finding it untimely as to CAFA, finding supplemental jurisdiction over the remaining state-law claims, and dismissing many claims for lack of standing. The Fifth Circuit reversed, concluding:
- The 30-day deadline in 28 U.S.C. § 1447(c) does not apply to CAFA mandatory abstention provisions, since it “does not deprive federal courts of subject matter jurisdiction, but rather, acts as a limitation upon the exercise of jurisdiction granted by CAFA.”
- The CAFA motion was filed within a reasonable time of removal, when “[a]ll indications are that [Plaintiff] acted diligently to gather evidence,” and because “fifty-two days is simply not a very long time.”
- The “home state” exception applied because “[t]his suit’s primary thrust is an attempt to declare unconstitutional red light camera scheme,” meaning that the State of Texas and its municipalities were the “primary defendants,” and not the companies hired to carry out the program.
- The district court should have declined to exercise supplemental jurisdiction, since “Texas courts have a strong interest” in the remaining issues and the plaintiff’s “motion to amend . . . to delete the federal claims is not a particularly egregious form of forum manipulation, if it is manipulation at all.”
Appellants, investors who lost money in their dealings with Allen Stanford, began a FINRA arbitration against Pershing LLC, a clearing broker. The panel rejected appellants’ $80 million claim, awarding only $10,000 in arbitration-related expenses. Pershing sought confirmation in federal court and encountered a split in authority about the amount-in-controversy requirement — the “demand” approach, which would allow jurisdiction, and the “award” approach, which would not. The Fifth Circuit sided with the “demand” approach, finding that it “recognizes the true scope of the controversy between the parties,” and was consistent with the corresponding test for claims filed in district court. A lengthy concurrence suggested that a “general approach” was not needed, given the different fact patterns that can give rise to this kind of dispute about the amount in controversy. Pershing LLC v. Kiebach, No. 15-30396 (April 6, 2016).
The attorney general of Mississippi served Google with a broad administrative subpoena about Google’s efforts to reduce copyright infringement, drug trafficking, and other undesirable uses of its search technology. Google responded with a federal lawsuit seeking an injunction against the subpoena and further proceedings about it. The Fifth Circuit found federal jurisdiction, as “Google’s claims seeking to enjoin a state officer’s alleged violations of federal law invoke federal-question jurisdiction,” and found no reason to abstain under Younger v. Harris. But the Court went on to find that the action was not yet ripe: “there is no current consequence for resisting the subpoena and the same challenges raised in the federal suit could be litigated in state court.” Google, Inc. v. Hood, No. 15-60205 (April 8, 2016). Accordingly, it vacated the injunction granted by the trial court, and remanded with instructions to dismiss.
Alleging that a toe joint implant did not work properly, Flagg sued “Manufacturing Defendants” (who built the implant) and “Medical Defendants” (who surgically installed it in Flagg’s foot.) The Manufacturing Defendants were diverse from Flagg, a Louisiana citizen, while the Medical Defendants were not.
Affirming the district court while reversing the panel, an 11-4 en banc opinion holds “the plaintiff had improperly joined the non-diverse defendants because [he] has not exhausted his claims against those parties as required by statute.” That Louisiana statute requires review by a “medical review panel” before suit is filed against a health care provider; the Fifth Circuit concluded that pursuant to it, “there is no doubt that the state court would have been required to dismiss the Medical Defendants from the case,” as no such review had occurred at the time of removal. A vigorous dissent raised questions about the Court’s standard for analyzing claims of improper joinder, as well as whether this kind of state statute (“a non-adjudicative, non-comprehensive, waivable process since concluded in this case”) was a proper foundation for an improper joinder claim. Flagg v. Stryker Corp., No. 14-31169 (March 24, 2016) (en banc).
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.'”
Boaz Legacy LP sued Roberts about ownership of land. Roberts argued that the land was located to the north of “the vegetation line along the south bank of the Red River,” which places the land in Oklahoma under the terms of the Red River Boundary Compact. Accordingly, Texas state and federal courts lacked subject matter jurisdiction under the “local action doctrine.” Boaz argued that the Compact did not apply to a boundary dispute among private landowners, but the Fifth Circuit disagreed: “[T]his argument conflates the underlying dispute with the present determination, which is purely jurisdictional.” Boaz Legacy LP v. Roberts, No. 15-10439 (Jan. 11, 2016, unpublished).
Collins challenged bankruptcy court jurisdiction over “illusory indemnity and contribution claims” that he alleged had no conceivable effect on the bankruptcy estate due to their lack of merit. The Fifth Circuit rejected his argument: “Both the Supreme Court and this court have gravitated away from conflating jurisdiction and merits, and Collins’s proposed standard results in exactly that conflation.” The Court also noted that the claims, based on a principal’s alleged commitment to indemnify its agent, were not “wholly insubstantial and frivolous” on their merits. Collins v. Sidharthan, No. 14-41226 (Dec. 15, 2015).
In one of its infrequent but steady appearances in the Fifth Circuit, the Rooker/Feldman doctrine arose in a federal court lawsuit alleging misconduct in state court about the confirmation and enforcement of a large arbitration award. Building on Truong v. Bank of America, 717 F.3d 377 (5th Cir. 2013), the Court affirmed the dismissal of claims about collection efforts, finding that “the [state court judgment itself was the source of these injuies.” As to civil rights claims about the proceedings leading up to confirmation, however, “the timing of the injury was before the state court entered judgment. And unlike . . . the conversion claim described above, none of the alleged conspirators was acting under the authority of the turnover orders in seeking to obtain a remedy.” Land & Bay Gauging, LLC v. Shor, No. 14-40259 (Aug. 21, 2015, unpublished).