In April 2014, Burger King Europe sued on a guaranty to recover allegedly unpaid franchise fees (the “Personal Guarantee Litigation”). In September 2014, that guarantor and the franchise owners sued Burger King Europe for tortious interference and a declaratory judgment (the “Franchise Agreement Litigation”). Burger King asserted the defense of forum non conveniens, in favor of Germany, as specified in the parties’ agreement. Acknowledging some confusion about the applicable legal standard for waiver, the Fifth Circuit agreed with the district court that the filing of the Personal Guarantee Litigation did not waive Burger King’s ability to assert forum non conveniens in the later case against it. That said, the Court found an abuse of discretion in denying the plaintiffs’ leave to amend to add new defendants and new tort claims, noting that the motion was timely and not obviously moot. SGIC Strategic Global Investment Capital, Inc. v. Burger King Europe GMBH, No. 15-10943 (Oct. 10, 2016).
Thomas v. Chevron USA involved a suit for damages after a pirate attack off the shore of Nigeria. The Fifth Circuit reversed the districr court’s denial of leave to amend; on the key issue of duty, the Court observed: “Thomas alleged that Chevron knew about of the real risk of piracy in the region and of the specific threats received by the [ship]. He alleged that despite its knowledge, Chevron requested that the [ship] take an unaccompanied support trip that would pass by the source of the recent threats. Finally, he alleged that Chevron broadcast his route information and locations over easily-accessible VHF radios, through which they could be heard by pirates known to be in the area. These allegations are sufficient to suggest that the harm suffered by Thomas was reasonably foreseeable to Chevron and that Chevron consequently owed him a duty not to subject him to the conditions he encountered . . . .” No. 15-20490 (Aug. 11, 2016).
In Century Surety Co. v. Blevins, the district court dismissed two causes of action related to handling of insurance claims, and then sua sponte dismissed three other related causes of action — breach of contract, estoppel, and vicarious liability. The Fifth Circuit reversed, reminding: “While the district court has great discretion in how it manages its cases, in the Fifth Circuit litigants must — with certain exceptions – be given notice and an opportunity to respond before a district court dismisses claims sua sponte.” No. 14-31131 (Aug. 18, 2015).
Electrostim, a provider of medical electrical stimulation services, sued Blue Cross for several reimbursement issues, as well as wrongful contract termination. The Fifth Circuit found that the district court improperly denied leave to amend on the key issue, noting that in Electrostim’s briefing: “Electrostim specifically drew the district court’s attention to . . . partially paid claims and argued that its lawsuit challenged not only the denial of claims, but also the rate at which claims were paid. As we have explained, ERISA does not preempt state-law claims based on an allegedly improper rate of payment in violation of a provider agreement. Therefore, Electrostim has demonstrated, both to the district court and to this court, that because Electrostim can amend its complaint to put at issue the rate at which BCBSTX paid the partially paid claims, amendment would not be futile.” Electrostim Medical Services, Inc. v. Health Care Service Corp., No. 13-20649 (June 16, 2015, unpublished).
Lincoln Insurance sued several defendants, who it accused of charging excessive fees and otherwise engaging in self-dealing to the detriment of Lincoln. Lincoln won a $16.5 million judgment against two of them for tortious interference. In a “grab bag” of holdings after both sides appealed, the Fifth Circuit held:
- It did not need to reach a difficult Erie issue about when a tortious interference claim accrues under Texas law, where some of the conduct occurs outside the limitations period, because the trial court found sufficient facts to establish that the discovery rule applied;
- Voluntary dismissal of a claim in amended pleading, in response to a dismissal order “based on a technical defect or withdrawal,” waives the right to appeal that order;
- The economic loss rule barred conversion claims where contract provisions dealt with the underlying rights and responsibilities; and
- When a contract provision expressly created a fiduciary duty as to the handling of funds in a particular account, that duty necessarily extended that duty to the handling of those funds before their deposit (and the trial court erred in holding otherwise, requiring a remand).
The Court noted: “[A] litigation strategy with a narrower focus on certain claims and Defendants might reduce the complications, both procedural and substantive, that arose the first go-around.” Lincoln General Ins. Co. v. U.S. Auto Ins. Servcs., Inc., No. 13-10589 (May 18, 2015).
The plaintiff in Law v. Ocwen Loan Servicing, L.L.C., a mortgage servicing case, asked the Fifth Circuit for leave to amend if it affirmed the dismissal of the complaint under Rule 12. No. 14-20019 (Oct. 16, 2014, unpublished). The Court affirmed on the merits and as to the denial of leave to amend, noting these basic and important principles on the point:
* “A party who neglects to ask the district court for leave to amend cannot expect to receive such dispensation from the court of appeals.”
* A district court’s sua sponte discussion of amendment is not a request, and neither is this language in a response: “[T]he only relief possibly available to [the defendant] at this stage of the case is that [the plaintiff] replead.”
* While new factual allegations in response to a summary judgment motion can be construed as a request for leave to amend, that does not hold for a response to a Rule 12 motion.
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.
- Thompson sued Defendants in Arkansas in 2011, alleging he was a citizen of Arkansas. That lawsuit was dismissed for improper venue.
- Thompson sued Defendants again in Florida in 2012, and voluntarily dismissed that action after the magistrate concluded that diversity was lacking.
- Thompson sued Defendants again in Alabama in 2012, alleging that he was a citizen of Arkansas. That action was transferred to Mississippi. It was then dismissed for lack of jurisdiction because Thompson and one of the citizens were both Florida citizens at the time of filing in 2012.
Thompson argued that the relevant facts related to the original 2011 filing, not the 2012 re-filing. HELD: “[T]he [Alabama] complaint does not relate back to the [Arkansas] complaint because the second complaint was not an amendment, but rather the commencement of a separate action.” Dismissal affirmed.
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.
In the earlier case of Levy Gardens Partners v. Commonwealth Land Title Ins. Co., the Fifth Circuit concluded that a pleading about the extent of coverage was “fundamental to the complaint” and “did not raise a new matter outside of the complaint”; accordingly, it did not implicate the rules about the pleading of affirmative defenses. 706 F.3d 622, 633 (5th Cir. 2013). In contrast, in LSRef2 Baron LLC v. Tauch, the Court held that a guarantor’s defense of payment by the primary obligor was an affirmative defense. After a review of Louisiana law on the topics of offset and setoff, which characterizes those matters as defenses, the Court concluded that “[Plaintiff] simply had to allege in its complaint that there was an event of default, which is defined in the Loan Agreement, not in the Guaranty.” The Court also agreed that the issue had not been raised in a “pragmatically sufficient time,” as “all of the critical pretrial deadlines had passed or were about to expire.”
The plaintiff in Marucci Sports LLC v. NCAA alleged that the “Bat-Ball Coefficient of Restitution Standard” — a testing protocol “to ensure that aluminum and composite bats perform like wood bats” — was in fact an anticompetitive device calculated to protect the NCAA’s relationship with large bat manufacturers. No. 13-30568 (May 6, 2014). The Fifth Circuit affirmed dismissal, finding: (1) inadequate pleading of a conspiracy under Twombly; (2) inadequate pleading of an injury to “competition among non-wood baseball bat manufacturers” as opposed to its own; and (3) that the standard could fairly be called a procompetitive “rule and condition” of athletic competition. Denial of leave to amend was also affirmed.