Double-edged sword about pleading amendment

The plaintiff in Butler v. Taser International sought to amend a negligence suit to add a new fraud claim, after the deadline for motions to amend pleadings.  No. 12-11026 (July 10, 2013, unpublished).  In affirming the denial of leave to amend, the Fifth Circuit noted: “In his first amended complaint, Officer Butler pled a litany of facts that could have supported claims for fraudulent inducement and failure to warn. He alleged that TI had made false representations, and that TI’s warnings regarding the dangers of a Taser shock were inadequate.”  In other words, a point that weighs against a finding of prejudice — that the matters raised by the new pleading were already in issue — also weighed against a finding of good cause and justified denial of leave, especially after the deadline.

Time-bar for Texas Constitution claim to nullify home equity loan

The borrowers in Priester v. JP Morgan Chase alleged two violations of the Texas Constitution about their home equity loan — not receiving notice of their rights 12 days before closing, and closing the loan in their home rather than the offices of a lender, attorney, or title company.  708 F.3d 667 (5th Cir. 2013).  A cure letter was not answered and they sued for forfeiture of interest and principal under the state constitution. The Fifth Circuit affirmed the dismissal of the claim under the Texas 4-year “residual” limitations period, finding that was the prevailing view of courts that had examined the issue, and disagreeing with a district court that had found no limitations period.  That court reasoned that a noncompliant home equity loan was void, but the Fifth Circuit concluded that the cure provision in the Constitution instead made it voidable. Tolling doctrines did not apply since it was readily apparent where the closing occurred.  The Court also affirmed the denial of a motion for leave to amend to add new claims and non-diverse parties, reviewing the factors for both aspects of such a motion.

Home foreclosure 101 — Statute of Frauds bars claim about potential loan mod

The plaintiff in Gordon v. JP Morgan Chase alleged that a home foreclosure was prevented by the lender′s promises of a permanent loan modification under the Home Affordable Mortgage Program (“HAMP”).  No. 12-20323 (Jan. 3, 2013, unpublished).  The Fifth Circuit agreed with the lender that the Statute of Frauds did not allow such a claim to proceed under Texas contract law.  Because the SOF barred the contract claim, promissory estoppel could only arise if the lender orally promised to sign a writing that would satisfy the SOF, and that the writing was in existence at the time of the promise.  Statements about future loan papers did not satisfy this rule.  While the opinion is unpublished, its analysis has the potential for extensive citation in state and federal cases seeking to stop foreclosures because of statements made in the context of HAMP negotiations.

Twombly and a “bad faith” insurance claim

The plaintiff in Patrick v. Wal-Mart alleged: “Defendants have engaged in a continuing pattern of bad faith . . . [and] have among other things, unreasonably delayed and/or denied authorization and/or payment of reasonable, neceessary and worker’s comp related medical treatment, as well as permanent indemnity benefits, as ordered by [the state agency].”  No. 11-60217 at 11-12 (May 17, 2012).  The Court found that this allegation “invokes three potentially cognizable theories of liability,” but was “devoid of facts to make it plausible” under Twombly — the pleading “fails to identify the specific time or nature of such wrongs . . . [and] does not identify by date or amount or type of service, any of the alleged bad-faith denials and delays . . . .”  Id.   It found no abuse of discretion in not allowing further amendment, noting “repeated failure[s] to cure deficiencies . . . .”  Id. at 12-13 (quoting United States v. Humana Health Plan, 336 F.3d 375, 387 (5th Cir. 2003)).

Role of “commercial context” in construing unambiguous contract

The parties in Ballard v. Devon Energy disputed when a provision in an oil field joint operating agreement, about the effect of “surrendering” certain leases, would apply.  No. 10-20497 (April 19, 2012)  The Court affirmed the denial of leave to amend the plaintiff’s contract claims to add a fiduciary duty count, based on a lengthy delay in raising the issue.  Op. at 6.  The Court then, applying Montana law, concluded that while the parties had both advanced “facially plausible” readings of the provision in isolation, the defendant’s reading was more persuasive in the overall context of the entire development project.  Id. at 12-15.  The Court affirmed summary judgment for the defendant, although it criticized the trial court for considering “extrinsic evidence” before attempting to construe the document on its face.  Id. at 9-10.

Effect of third-party payment of bankruptcy retainer fee

In Waldron v. Adams & Reese, LLP, the largest creditor of a bankruptcy debtor paid the retainer fee for debtor’s counsel.  No. 11-30462 (March 29, 2012).  That payment was not disclosed for some time, after which the trustee sought to disgorge counsel’s fees on the grounds of a disqualifying conflict of interest.  The Court affirmed the lower court’s rulings, finding no disqualifying conflict on the “specific facts of [the] case.”  Op. at 8 (quoting and distinguishing In re West Delta Oil Co., 432 F.3d 347 (5th Cir. 2005)).  It reviewed counsel’s conduct during the bankruptcy case as well as prior representations of the debtors.  Then, reminding of the “clear error” standard of review, the Court affirmed a sanction of partial disgorgement (20% of the fee) for the late disclosure.  Op. at 15.  The Court concluded with a thorough review of the standards for allowing pleading amendments and affirmed the denial of leave for the trustee to add new claims.  Op. at 15-16.