Heniff Transportation, a trucking company, sued Trimac Transportation, alleging that Trimac did not properly clean a tanker-trailer, resulting in contamination and a damages claim against Heniff by its customer. Trimac argued that Heniff’s state law claims were preempted by the Carmack Amendment, a federal law that addresses actions about lost or damaged goods, arising from interstate transportation of the goods by a common carrier. The Fifth Circuit agreed, finding that washing a tanker-trailer was “plainly” such a service, directly analogous to specific examples given by the statute. This statute, not widely known outside trucking litigation, can bear significantly on UCC claims involving transported goods. Heniff Transportation v. Trimac Transportation, No. 16-40553 (Jan. 30, 2017).
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.
Health Care Service Corporation (known in Texas as Blue Cross and Blue Shield of Texas), serves as the administrator of various insurance plans. It had a dispute with Methodist Hospitals of Dallas about its potential liability under the Texas Prompt Pay Act, which sets penalties for insurance claims that are not processed within the deadlines set out by the Act. The Fifth Circuit agreed with the district court that the Act did not apply when Blue Cross “did not provide benefits through its administrator and preferred provider agremeents, but instead merely distributes claim payments from plans to providers[.]” The Court also found federal preemption of claims under the Act related to claims under the Federal Employees Health Benefits Program. Health Care Service Corp. v. Methodist Hospitals of Dallas, No. 15-10154 (Feb. 10, 2016).
Greenwich Insurance Company made a number of errors in its internal accounting about crop insurance premiums. When those mistakes ultimately led to a substantial assessment against it by a state authority, Greenwich argued that the state standards were preempted by regulations associated with the Federal Crop Insurance Act. The Fifth Circuit agreed with the district court that they were not, as the true source of Greenwich’s problems was not the state rules but its own “acts of unjustifiable incompetence”: “The FCIC did not intend to hamstring . . . the operations of state programs . . . simply to protect inattentive insurers from their own mistakes.” Greenwich Ins. Co. v. Mississippi Windstorm Underwrting Ass’n, No. 15-60405 (Dec. 15, 2015).
The Texas Securities Act has a five-year statute of repose. The issue in FDIC v. RBS Securities was whether that statute was preempted by a 3-year “extender” provision in FIRREA, which “works by hooking any claims that are alive at the time of the FDIC’s appointment as receiver and pulling them forward to a new, federal, minimum limitations period — six years for contract claims, three years for tort claims.” No. 14-51055 (Aug. 10, 2015).
The Fifth Circuit concluded that the Texas statute of repose was preempted, and reversed a judgment on the pleadings in a securities fraud suit arising out of the failure of Guaranty Bank, holding: “The text, structure, and purpose of the FDIC Extender Statute all evince a Congressional intent to grant the FDIC a three-year grace period after its appointment as receiver to investigate potential claims. Therefore, the statute displaces any limitations period that would interfere with that reprieve — whether characterized as a statute of limitations or as a statute of repose.” The Court distinguished the analysis of a CERCLA limitations provision in CTS Corp. v. Waldburger, 134 S. Ct. 2175 (2014), finding that “many of the considerations that the [Supreme] Court found disfavored preemption in CTS suggest preemption when applied to the FDIC Extender Statute.”
In Barzelis v. Flagstar Bank, F.S.B., No. 14-10782 (Apr. 22, 2015), the Fifth Circuit addressed the preemption of state-law mortgage claims under “HOLA,” the Home Owners’ Loan Act of 1933, a statute governing federal savings associations. The Court held:
1. Notice and cure. “It may be the case, for example, that a state law regulating interest-rate adjustments to protect borrowers is preempted by HOLA. But that does not prevent a bank and a borrower from voluntarily agreeing to substantially the same protections in their contract . . . .”
2. Misrepresentation. “[W]here a negligent-misrepresentation claim is predicated not on affirmative misstatements but instead on the adequacy of disclosures or credit notices, it has a specific regulatory effect on lending operations and is preempted.”
3. Debt collection. Consumer protection laws “‘that establish the basic norms that undergird commercial transactions’ do not have more than an incidental effect on lending and thus escape preemption.”
Various products liability claims against both generic and brand-name drug manufacturers were found to be preempted in Johnson v. Teva Pharmaceuticals, No. 12-31011 (July 11, 2014). The Court relied on recent Circuit precedent after the Supreme Court’s opinion in Pliva, Inc. v. Mensing, 131 S. Ct. 2567 (2011). As to the brand defendants, the Court declined to certify “the question of whether a brand-name manufacturer can be held liable for injuries caused by a plaintiff’s ingestion of a generic product that was neither manufactured nor distributed by the brand-name manufacturer, reviewing several relevant considerations and authorities. A dissent would certify, seeing the issue as having “potentially grave ramifications” and taking a different view of the strength of the relevant authority.
The plaintiff in McKay v. Novartis, Inc. challenged the dismissal on preemption grounds, by an MDL court in Tennessee, of products liability claims about drugs made by Novartis. No. 13-50404 (May 27, 2014). The Fifth Circuit rejected an argument about inadequate time to get certain medical records, noting that the plaintiffs “sought formal discovery of evidence that was available to them through informal means” (citing other cases from the Court on that general topic), and also observing that two years passed from the filing of suit until Novartis sought summary judgment. The Court also affirmed the MDL court’s grant of summary judgment on Texas state law grounds about a breach of warranty claim, finding inadequate notice; as an Erie matter: “the majority of Texas intermediate courts have held that a buyer must notify both the intermediate seller and the manufacturer.”
Eckhardt v. Qualitest Pharmaceuticals reviewed tort claims under Texas law against generic drug manufacturers. No. 13-40151 (May 15, 2014). The Fifth Circuit found that labeling claims were preempted under PLIVA, Inc. v. Mensing, 131 S. Ct. 2567 (2011), and products liability claims were preempted under Mutual Pharmaceutical Co. v. Bartlett, 133 S.Ct. 2466 (2013). Misrepresentation claims against brand-name drug manufacturers were rejected under state law for lack of a duty from them to generic-drug users. Law360 provides some further discussion.
Several Louisiana parishes sought damages under a state statute for damages arising from the Deepwater Horizon incident. In re Deepwater Horizon, No. 12-30012 (Feb. 24, 2014). Condensing a much more nuanced opinion — the Fifth Circuit held that the claims were preempted by the Clean Water Act under International Paper v. Oulette, 479 U.S. 481 (1987), because the pollution arose from a source outside Louisiana. The Court rejected arguments that the Oil Pollution Act of 1990 (prompted by the Valdez disaster) changed that analysis, and concluded that the Supreme Court ruled consistently with this result in Arkansas v. Oklahoma, 503 U.S. 91 (1992).
In a straightforward analysis of “conflict preemption,” the Fifth Circuit agreed that the Federal Power Act (the enabling statute for FERC) “preempts property damage claims under state law where the claim alleges negligence for failing to act in a manner FERC expressly declined to mandate while operating a FERC-licensed project.” Simmons v. Sabine River Authority, No. 12-30494 (Oct. 9, 2013). Here, plaintiffs claimed damages from flooding after spillway gates along the Sabine River were opened in late 2009; the Court concluded that the claims “infringe on FERC’s operational control” because “FERC, not state tort law, must set the appropriate duty of care for dam operators.”