Several labor unions arbitrated disputes with American Airlines about pilot seniority. Mackenzie v. Air Lines Pilots Association, No. 11-11098 (Dec. 23, 2014, unpublished). Two pilots sought to bring a class action to challenge the arbitration award. The Fifth Circuit dismissed for lack of standing: “[W]hen a CBA formed pursuant to the RLA establishes a mandatory, binding grievance procedure and vests the union with the exclusive right to pursue claims on behalf of aggrieved employees, an aggrieved employee whose employment is governed by the CBA lacks standing to attack the results of the grievance process in court—the sole exception being the authorization of an aggrieved employee to bring an unfair representation claim.” (citing Mitchell v. Continental Airlines, 481 F.3d 225 (5th Cir. 2007)). The Court’s analysis of this issue resembles discussion about the broader topic of claim preclusion, arising from a privity relationship, based on another party’s litigation activity.
Plaintiff bought a Nissan Murano, paying $39,289 in total. She sued for breach of warranty and related state law claims, and the defendants removed. The issue addressed on appeal was whether the claim fell within the $50,000 amount-in-controversy requirement of the Magnuson-Moss Warranty Act. Scarlott v. Nissan North America, Inc., No. 13-20528 (Sept. 30, 2014). The Fifth Circuit found it did not — the plaintiff’s invocation of a “Level One” Discovery Control Plan under the Texas Rules of Civil Procedure did not specify a claim amount, and the defendants did not offer sufficient evidence of dimunution of value, repair costs, or lost profits to bring the claim about the threshold. Notably, under the Magnuson-Moss statute, in calculating the amount in controversy a court may not consider attorneys fees, personal injury damages, or damages associated solely with pendent state-law claims.
In Houston Refining, LP v. United Steel Workers, an arbitrator found that the suspension of a company’s 401(k) plan, after its bankruptcy filing, violated the company’s CBA with a union. No. 13-20384 (Aug. 25, 2014). Two judges agreed that the parties had not “clearly and unmistakably” allowed the arbitrator to decide arbitrability, noting this provision of the parties agreement: “At arbitration, the parties shall reserve all rights to present any and all arguments and advance any and all defenses to them including, without limitation, arguments concerning whether or not an applicable collective bargaining agreement was in effect at the time that a particular grievance arose.” A dissent stressed other provisions of the agreement and the limited scope of review in the CBA context. All three judges agreed that the court had subject matter jurisdiction, but differed on the rationales, in the specific context of an alleged breach of a contract controlled by federal labor law.
In Galaz v. Galaz, a bankruptcy debtor sued her ex-husband for the fraudulent transfer of a royalty interest in the works of the Ohio Players, a popular funk band in the 1970s. Nos. 13-50781, 50783 (Aug. 25, 2014). Her ex-husband brought third-party claims against a music producer, who in turn brought counterclaims. The resulting litigation produced judgments in favor of both the debtor and the producer against the ex-husband. On appeal, in a landscape formed by the legacy of Stern v. Marshall, 131 S. Ct. 2594 (2011), the Fifth Circuit held:
1. While the debtor’s fraudulent transfer claim was not the “paradigmatic” case where assets are transferred out of the estate, it could still “conceivably” affect the estate, and the bankruptcy court thus had statutory jurisdiction because these non-core claims related to her bankruptcy;
2. The producer’s counterclaims, however, had no connection to the estate and the bankruptcy court had no statutory jurisdiction over them;
3. Under Stern, in light of the present posture of cases from this Circuit and one awaiting Supreme Court review, the implied consent of the parties cannot confer constitutional jurisdiction on the bankruptcy court to enter final judgment such as the debtor’s claim here.
Accordingly, the Court reversed and remanded, hinting that the bankruptcy court could prepare proposed findings of fact and conclusions of law for the district court as to the debtor’s claims. The Court also noted that the debtor had standing as a creditor under the Texas Uniform Fraudulent Transfer Act even though her personal interest in the royalties flowed through a business she partly owned.
A bankruptcy court entered judgment against Defendants, who the filed a new federal lawsuit for a declaratory judgment that the bankruptcy court lacked jurisdiction. Jacuzzi v. Pimienta, No. 13-41111 (August 5, 2014). The district court found that it lacked jurisdiction over that suit, and the Fifth Circuit reversed. Noting that as a general matter, it is procedurally proper to attack a judgment for lack of jurisdiction in a collateral proceeding, the Court found that the lawsuit raised federal questions about due process rights and compliance with the federal rules for service of process. Accordingly, there was federal jurisdiction to hear the challenge to the bankruptcy court judgment.
“The central issue in this case is whether a district court has jurisdiction over an inventorship dispute where the contest patent has not yet issued.” Camsoft Data Systems v. Southern Electronics Supply, Inc., No. 12-31013 (June 19, 2014). After a removal based on patent jurisdiction, the plaintiff amended to add federal antitrust and RICO claims. The Fifth Circuit held: “where — as here — a plaintiff [timely] objects to jurisdiction at removal, that plaintiff does not waive her jurisdictional arguments via post-removal amendment to her complaint.” Then, as to patent jurisdiction — acknowledging some uncertainty in the law on this specific topic — the Court found that the Patent & Trademark Office had “sole discretion” over a pending patent, not the federal courts. Returning to the other federal claims, because those claims had not proceeded to trial, a potential argument against remand based on Caterpillar, Inc. v. Lewis, 519 U.S. 61, was unavailable. Accordingly, the district court’s order of remand to state court was affirmed.
Aransas Project v. Shaw presented a challenge to an injunction against the Texas Commission on Environmental Quality, prohibiting the TCEQ from issuing new permits to withdraw water from rivers that feed the estuary where whooping cranes live. No. 13-40317 (June 30, 2014). The whooping crane, described in the opinion as a “majestic bird that stands five feet tall,” is an endangered species, and the only known wild flock lives in Texas during winter.
The Fifth Circuit first rejected an argument for Burford abstention, finding that this case presented a “broader grant of administrative and judicial authority by state law to remedy environmental grievances” than a prior opinion where it allowed abstention in a similar sort of environmental dispute. Cf. Sierra Club v. City of San Antonio, 112 F.3d 789 (5th Cir. 1997).
The Court then reversed the injunction, finding no causation “in the face of multiple, natural, independent, unpredictable and interrelated forces affecting the cranes’ estuary environment.” While couched in language about proximate causation and environmental law, the Court’s analysis is a classic illustration of the recurring Daubert problem of excluding alternate causes. (In the course of this discussion, the butterfly effect theory makes a cameo appearance in footnote 10.)
In the published opinion of Davoodi v. Austin ISD, the Fifth Circuit revisited the recurring question of how substantial a federal question must be to create jurisdiction (and thus, allow removal). No. 13-50823 (June 16, 2014). Notably, the Court did not analyze whether the plaintiff stated a claim under federal law in the causes of action alleged in his pleading. Rather, the decision turns on how much the pleaded facts involved violation of federal law. This focus contrasts with the framework of Howery v. Allstate Ins. Co., which rejected jurisdiction because “[f]rom its context, it appears that Howery’s mention of federal law merely served to describe types of conduct that violated the DTPA, not to allege a separate cause of action under the FCRA,” and because a violation of federal law was not an “essential element” of Howery’s state law claims. 243 F.3d 912, 918-919 (5th Cir. 2001).
Davoodi sued in Texas state court, alleging state law claims for “national origin discrimination” and intentional infliction of emotional distress, and a claim for “retaliation” without a specified basis in state or federal law. The first of the two paragraphs in the “Facts” section of the petition said:
“On or about June 2, 2011 Plaintiff filed a Charge of Discrimination with the EEOC and the Texas Human Rights Commission. (See Charge attached as Exhibit ‘A’ and fully incorporated herein). This charge alleged that Defendant discriminated against Plaintiff based on his National Origin (Iranian). On February 3, 2012 the EEOC issued a Dismissal and Notice of Rights. The Texas Human Rights Commission did not issue a dismissal/right to sue.”
The Court noted that the incorporation of the Charge made it “part of [plaintiff’s] complaint for all purposes,” and created federal jurisdiction because the Charge contained the averment and claim: “I have been and continue to be discriminated against, in violation of Title VII of the 1964 Civil Rights Act, as amended, [and] the Texas Commission on Human Rights Act, as amended, because of my national origin (Iranian).” The Court remanded as to the Rule 12 dismissal of the case, however, to allow the plaintiff a chance to replead under Lozano v. Ocwen Federal Bank, 489 F.3d 636 (5th Cir. 2007).
The movant’s Rule 12 arguments, as reflected in the appellate record excerpts, address whether the plaintiff’s pleading stated a claim for “retaliation” under either state or federal law. The Fifth Circuit did not engage the basis for that claim in its analysis of federal question jurisdiction, focusing entirely on the fact allegations described above and the statement made to the EEOC. Allstate can be reconciled with Davoodi because the mention of federal law in the Allstate pleading is substantially smaller, as a percentage of the overall allegations. That analytical framework — different than Allstate‘s focus — may invite new removals based on a “percentage-based” analysis of a pleading’s factual allegations.
Chesapeake sued two defendants to recover a large overpayment. Harleton Oil & Gas intervened to claim a share of that payment. Chesapeake Louisiana L.P. v. Buffco Prod., Inc., No. 13-40458 (May 7, 2014, unpublished). The Fifth Circuit ruled: (1) Harleton should have been aligned as a plaintiff rather than a defendant, since it “intervened to seek affirmative relief, not to protect its interests . . . .”; (2) that change destroyed diversity and mooted a summary judgment granted by the district court; (3) the case should then be remanded for the district court to consider whether Harleton is indispensable and its joinder requires dismissal of the entire action; but (4) the district court had jurisdiction over the defendants’ counterclaims against Chesapeake, which involved different wells than the one relevant to Harleton. “When an independent basis for jurisdiction exists with respect to a counterclaim, a federal court may adjudicate the claim even if the original claim was dismissed for lack of subject-matter jurisdiction.”
In the recent case of French v. EMC Mortgage Corp., No. 13-50417 (April 29, 2014, unpublished), these allegations were deemed to “reference the FDCPA by way of asserting a cause of action under this federal statute,” and thus allowing removal:
“V. ILLEGAL MORTGAGE SERVICING AND DEBT COLLECTION PRACTICES.
. . .
Specifically in collection calls and notices, monthly statements, payoff statements, foreclosure notices, and otherwise, EMC routinely makes misrepresentations to borrowers about their loans, including: [6 topics]
. . .
Plaintiffs submit that Defendant EMC’s conduct in this matter is in direct violation of the Texas Fair Debt Collection Practices Act, the Federal Fair Debt Collection Practices Act and the above referenced stipulated injunction.”
This case rested on Howery v. Allstate Ins. Co., 243 F.3d 912 (5th Cir. 2001), in which the following allegations did not create federal question jurisdiction, because “[f]rom its context, it appears that Howery’s mention of federal law merely served to describe types of conduct that violated the DTPA, not to allege a separate cause of action under the FCRA”:
The acts, omissions, and other wrongful conduct of Allstate complained of in this petition constituted unconscionable conduct or unconscionable course of conduct, and false, misleading, or deceptive acts or practices. As such, Allstate violated the Texas Deceptive Trade Practices Act, Sections 17.46, et seq., and the Texas Insurance Code, including articles 21.21, 21.21-1, 21.55, and the rules and regulations promulgated thereunder, specifically including 28 TAC Section 21.3, et seq. and 21.203.
Allstate’s destruction of [Howery’s] file … constituted a further violation of the Texas Deceptive Trade Practices Act, for which plaintiff sues for recovery. Allstate also engaged in conduct in violation of the Federal Trade Commission rules, regulations, and statutes by obtaining Plaintiff’s credit report in a prohibited manner, a further violation of the Texas Deceptive Trade Practices Act….
While these holdings are consistent, the line between them is only a few words in a lengthy pleading. They underscore the importance of detail in considering whether removal is appropriate.
A recurring issue in federal litigation arises from cases that “overstay their welcome” in the federal courthouse; for example, where only state law claims remain after dismissal of federal claims. A variation of that situation arose in Energy Management Services LLC v. City of Alexandria, where a city sued its electricity provider. After that litigation was removed to federal court, the city then removed a second suit, brought by its utility consulting firm, on the ground of supplemental jurisdiction — after the first case had been settled. 12-31184 (Jan. 9, 2014). The remand order was certified for interlocutory appeal and the Fifth Circuit reversed, finding that there was no original jurisdiction over the second case as required by the removal statute. The Court acknowledged that the district court could have continuing jurisdiction over matters related to the original settlement, which could potentially even extend to such matters involving third parties — but here, the second case had no connection to those settled matters.
Venable had a heart attack on a drilling barge; he and its owner agreed to settle for $350,000. The Louisiana Workers’ Compensation Corporation initially indicated its agreement, but withdrew consent when it became evident that he would need a heart transplant. Venable v. Louisiana Workers’ Compensation Corporation, No. 12-30965 (Dec. 30, 2013). Litigation ensued as to whether the LWCC could rely upon section 933 of LHWCA, which gives a carrier such as LWCC a veto right with substantial procedural safeguards. The Fifth Circuit reversed summary judgment for Venable. After a thorough and succinct review of the black-letter law on federal question jurisdiction, the Court found that section 933 gave the LWCC a defensive right that did not implicate Venable’s “well-pleaded complaint.” It also found that the tentative nature of the LWCC’s alleged consent foreclosed ancillary jurisdiction over the claimed settlement under Kokonnen v. Guardian Life, 511 U.S. 375 (1994).
Mississippi brought six parens patriae actions alleging inappropriate charges for credit card “ancillary services” in violation of state law. Defendants removed under CAFA and on the ground of complete preemption, and the district court denied remand. Hood v. JP Morgan Chase & Co. (Dec. 2, 2013). The Fifth Circuit reversed. As to CAFA, it found that defendants (who have the burden) did not establish that any plaintiff had a claim of $75,000 – especially when Mississippi offered evidence that the average yearly charge at issue was around $100. The Court also observed that the defendants likely had similar information in their records. The Court acknowledged that federal usury laws have the effect of complete preemption, but found that the charges at issue in these cases could not be characterized as “interest” within the meaning of those laws.
Moore sued PPG Industries and several local parties for injuries at a chemical complex; the defendants removed, arguing fraudulent joinder. After some jurisdictional discovery, Moore sought to add three more local parties, and the district court denied him leave to do so. Moore v. Manns, No. 12-31265 (Oct. 8, 2013). The Fifth Circuit affirmed, first reminding; “If after removal the plaintiff seeks to join additional defendants whose joinder would destroy subject matter jurisdiction, the court may deny joinder, or permit joinder and remand the action to the State court”; accordingly, a district court should review such a proposed amendment “more closely than an ordinary amendment.” Factors include the extent to which the amendment is solely for jurisdictional purposes, whether plaintiff was dilatory, and potential harm to plaintiff of not allowing the amendment. Here, the Court agreed that the “general responsibilit[y]” for safety under which the new parties were sued did not trigger personal fault under Louisiana law, making the amendment tactical and impermissible.
John Doe, a 13-year-old member of the Choctaw Indian tribe, had an internship at a Dollar General store on the Mississippi Choctaw reservation. He was sexually molested in the store and sued the company for damages in tribal court. Dolgencorp Inc. v. The Mississippi Band of Choctaw Indians, No. 12-060668 (Oct. 3, 2013). After losing jurisdictional challenges in the tribal system, the company sued in federal court to enjoin the prosecution of the case. The Fifth Circuit affirmed dismissal in favor of Choctaw jurisdiction. Reviewing the Supreme Court authority in the area, it concluded: “[T]he ability to regulate the working conditions (particularly as pertains to health and safety) of tribe members employed on reservation land is plainly central to the tribe’s power of self-government.” (discussing Plains Commerce Bank v. Long Family Land & Cattle Co., 554 U.S. 316 (2008) and Montana v. United States, 450 U.S. 544 (1981)). A strongly-worded dissent criticized “[t]he majority’s alarming and unprecedented holding,” arguing that it “profoundly upsets the careful balance that the Supreme Court has struck” in the area. Over another dissent, the full Court denied en banc review in 2014.