Loy v. Rehab Synergies, LLC allowed a dispute about overtime pay to proceed as a collective action, when the 22 plaintiffs were subject to a similar program that required 90% productivity,” for which “a therapist needed to record 54 minutes of billable time for every hour on-the-clock, leaving the equivalent of just six minutes per hour to complete non-billable tasks.” Given that shared foundation, the Fifth Circuit found no abuse of discretion by the district court in its assessment of the relevant factors. No. 22-40411 (June 21, 2023).

Just a few days before the Supreme Court’s opinion in 303 Creatiive, a Fifth Circuit panel reached a similar result in a related setting (here, the hiring and workpace practices of a church and a “Christian business”):

[W]e decide that RFRA requires that Braidwood, on an individual level, be exempted from Title VII because compliance with Title VII post-Bostock would substantially burden its ability to operate per its religious beliefs about homosexual and transgender conduct. Moreover, the EEOC wholly fails to carry its burden to show that it has a compelling interest in refusing Braidwood an exemption, even post-Bostock.

Braidwood Management v. EEOC, No. 22-10145 (June 20, 2023).

In CAE integrated, LLC v. Moov Techs., aoLtd., the plaintiff (CAE) sought a preliminary injunction, alleging that a former employee (Meissner) improperly took confidential information about customers to his new employer (Moov). The district court found otherwise and the Fifth Circuit affirmed on the record presented, noting:

  1. “Meissner’s knowledge of whom he worked with while at CAE, absent other evidence, is insufficient to support a finding that he misappropriated trade secrets.”
  2. “CAE has not identified a single contact whose information was not publicly available or ascertainable through proper means. Semiconductor industry participants are available in third-party directories, meet at conventions and trade shows, and can be found through online searches.”

The Court also noted that the employee had lost access to the relevant Google Drive some time before the injunction hearing. No. 22-50034 (Aug. 9, 2022).

While expediting consideration of the merits, a Fifth Circuit panel declined to stay a national injunction against a vaccination requirement for federal employees; a detailed dissent would have granted an interim stay of the injunction. Feds for Medical Freedom v. Biden, No. 20-30090 (Feb. 11, 2022). A thorough (albeit, highly partisan) article about the case recently appeared in Slate.

The en banc court divided along atypical lines in Hewitt v. Helix Energy, a dispute about overtime-pay obligations for highly compensated employees in the oil-and-gas industry. The Texas Lawbook and Houston Chronicle have covered the opinion thoroughly; below is a chart showing which judges joined the majority opinion and which judges dissented in some way.  Note that Senior Judge Wiener participated in this en banc case because he was part of the original panel.

Longtime observers of the Court may see echoes of the divided en banc court in Mississippi Poultry Ass’n v. Madigan, 31 F.3d 293 (5th Cir. 1994) (en banc), a dispute about the import of the word “same” in the Poultry Products Inspection Act.

There’s always “that” customer, who brings rude remarks and behavior along with repeat business. In Sansone v. Jazz Casino Co., No. 20-30640 (Sept. 1, 2021), “that” customer led to a prima facie case about a hostile work environment: “The unidentified Harrah’s customer frequently asked Sansone about her sex life and expressed his desire to sleep with her. He commented on her breasts and physical appearance and directed sexual gestures towards her. His comments were made in the presence of others and occurred at least two times a week for a significant period of time. This contrasts with instances where we have held a smaller stint within a lengthy period of employment was not sufficiently pervasive to support a hostile work environment claim.” (citations omitted, applying Farpella-Crosby v. Horizon Health Care, 97 F.3d 803, 806 (5th Cir. 1996)).

A triable fact issue on the issue of pretext arose in Lindsey v. Bio-Medical Applications: “As anyone who has ever worked in an office environment can attest, there are real deadlines and hortatory ones—and everyone understands the difference between the two. Missing real deadlines results in actual adverse consequences for employer and employee alike—while failing to meet hortatory deadlines does not. BMA does not point to any adverse impact that Lindsey’s tardy reports had on the company. And in any event, there is no evidence BMA ever warned Lindsey that failure to submit the reports on time could jeopardize her job. So there is a genuine issue of material fact as to whether BMA’s assertion that it fired Lindsey for this reason is ‘unworthy of credence.'” No. 20-30289 (Aug. 16, 2021).

While Olivarez v. T-Mobile involved the high-profile topic of Title VII’s protection for  transgendered individuals, it turned on a basic and common proof problem in such cases: “Olivarez has failed to plead any facts indicating less favorable treatment than others ‘similarly situated’ outside of the asserted protected class.  In fact, the Second Amended Complaint does not contain any facts about any comparators at all. The complaint simply indicates that Olivarez took six months of leave from September 2017 to February 2018—including an extension granted by T-Mobile and Broadspire—and that when Olivarez requested additional leave in March 2018, T-Mobile denied the request and terminated Olivarez’s employment in April 2018. Notably, there is no allegation that any non-transgender employee with a similar job and supervisor and who engaged in the same conduct as Olivarez received more favorable treatment.” No. 20-20463 (May 12, 2021) (emphasis added).

The appropriate “gatekeeping” procedures for FLSA cases, which involve the question whether claims are “similarly situated” and thus trigger notice obligations, was thoroughly reviewed in Swales v. KLLM Transport Services, No. 19-60847 (Jan. 12, 2021): “This case poses an issue that has been under-studied but whose importance cannot be overstated: how stringently, and how soon, district courts should enforce § 216(b)’s ‘similarly situated’ mandate. As explained above, the FLSA’s similarity requirement is something that district courts should rigorously enforce at the outset of the litigation.” In reaching this conclusion, the Fifth Circuit disapproved of the widely-cited analysis of this issue in Lusardi v. Xerox Corp., 975 F.2d 964 (3d Cir. 1992).

The complexities of the McDonnell-Douglass framework were not at issue in Lindsley v. TRT Holdings, Inc., No. 10-`10623 (Jan. 7,  2021), in which the Fifth Circuit found that the appellant established a prima facie case of sex discrimination:

It is undisputed that Lindsley was paid less than her three immediate predecessors as food and beverage director of Omni Corpus Christi. As a result, she has established a prima facie case of pay discrimination, and the district court erred in concluding otherwise.

First, it is undisputed that Lindsley was paid $4,149 less than Walker and $6,149 less than Pollard. It is also undisputed that Lindsley held the same job title at the same Omni hotel as those men. What’s more, Omni agrees that Lindsley established a prima facie case of pay discrimination as to Cornelius, who held the position directly after Pollard and Walker—and there is no evidence that the position has changed since then. This establishes a prima facie case of pay discrimination.

The district court therefore erred in concluding that Lindsley failed to establish a prima facie case because she “provide[d] no evidence that her job as Food and Beverage Director was in any way similar to Pollard and Walker’s jobs, aside from the fact that they shared the same job title.” Far from failing to show that her job was “in any way similar,” Lindsley showed that she held the same position as Walker and Pollard did, at the same hotel, just a few years after they did—and that she was paid lessthan they were. No more is needed to establish a prima facie case.

Badgerow v. REJ Properties, Inc., No 19-30584 (Sept. 11, 2020), applying the McDonnell-Douglas burden-shifting framework, reached the issue of whether there was a fact question on pretext and concluded that there was:

The timing of Badgerow’s firing is highly indicative of motive. According to Badgerow’s version of events the day she was fired, she received a call from Walters who said that he had ‘just got off the phone with Marc Cohen’ and would call her back. When Walters called Badgerow back, he asked her to travel from her office in Houma to his office in Thibodaux so that he could speak with her in person. During their in-person meeting, Walters terminated Badgerow’s employment. Thus, Badgerow’s firing occurred in the immediate aftermath of Walters being informed of Badgerow’s complaints to Cohen. And Badgerow has adduced other significant evidence of pretext. For example, although REJ states that Walters fired Badgerow due to constant complaints from her coworkers, Badgerow asserts that the only explanation he gave for her firing was that she had ‘dinged his perfect . . . record’ with Ameriprise. And Walters admits that immediately before firing Badgerow he ‘told her that Cohen had said he needed to hire a labor attorney and asked “[d]o I have to worry about you suing me?” Finally, although Walters testified that Badgerow’s coworkers had been complaining to him about her behavior for months, Walters seemed determined to keep Badgerow as one of his AFAs until his conversation with Cohen. A reasonable fact finder could infer from this evidence that REJ’s proffered reason for Badgerow’s firing was pretext for unlawful retaliation.”

(citation omitted, emphasis added).

The Fifth Circuit found it was an abuse of discretion to not reform a noncompetition agreement at the preliminary-injunction stage, rejecting the argument that reformation “is a remedy to be granted at a final hearing, whether on the merits or by summary judgment, not as interim relief.” The Court held: “This argument runs against the clear majority practice of Texas courts, which have on many occasions reformed contracts for the purposes of granting interim relief. The Texas case that has most thoroughly considered the question has rejected the argument Calhoun makes here, finding that reformation ‘is not only a final remedy’ and may be made ‘as an incident to the granting of injunctive relief.'” Calhoun v. Jack Doheney Cos., No. 20-20068 (Aug. 7, 2020).

OSHA regulations have an exemption for “diving performed solely as a necessary part of a scientific, research, or educational activity by employees whose sole purpose for diving is to perform scientific research tasks. Scientific diving does not include performing any tasks usually associated with commercial diving such as: Placing or removing heavy objects underwater; inspection of pipelines and similar objects; construction; demolition; cutting or welding; or the use of explosives.”

OSHA concluded that the divers who clean the tanks at the Houston Aquarium were not “scientific divers” under this regulation; the Fifth Circuit saw otherwise: “The divers are engaged in a ‘studious … examination’ and ‘detailed study’ when they observe the animals for abnormalities, and when they work to keep the animals in the Aquarium alive, healthy, and breeding. That an organization collaborates among employees and engages in verbal communication does not mean that the examination and study of the animals in the tanks is not ‘studious’ or ‘detailed.’ Nothing about the feeding and cleaning dives renders the information that the trained scientists performing the dives gather during these dives outside of the definition of ‘research.’” Houston Aquarium, Inc. v. OSHRC, No. 19-60245 (July 15, 2020).

In re Spiros Partners is the second recent mandamus opinion by the Fifth Circuit about  notice in large collective actions under the Fair Labor Standards Act. The plaintiff–an exotic dancer with the stage name “Syn”–had an “Entertainer’s License Agreement” with an arbitration clause, the trial court entered an order about other parties and their agreements, and the Fifth Circuit held:

  1.  “[The district court] determined there was a genuine dispute as to the arbitration agreements’ validity and ordered Spiros to produce the names of the putative members along with their respective ELAs containing the arbitration agreements. The district court did not err by taking this step in deciding which putative members are subject to valid arbitration agreements, and thus which putative members will not receive notice.”
  2. “The only way a putative member with a valid arbitration agreement might receive notice is if ‘nothing in the agreement’ prohibits their participation in the collective action. We conclude the district court went too far by requiring submission of evidence regarding whether Spiros has arbitrated claims with other would-be collective members.” (citation omitted).

No. 20-50318 (June 19, 2020, unpublished).

In affirming a preliminary injunction in a noncompete case, Realogy Holdings Corp. v. Jongeblood suggested that the district court could “when determining the term of any injunction, to reweigh the equities . . . in light of the time that has passed during the pendency of th[e] appeal.” Interestingly, this suggestion came after the Fifth Circuit had granted a stay during the preliminary-injunction appeal, which it also expedited. Specifically, the relevant covenants last for a year, the injunction was granted on November 15, 2019; the appellate stay was granted on January 24, 2020, and the opinion issued on April 27. No. 19-20864.

Realogy Holdings Corp. v. Jongeblood offers several practical tips about litigating a noncompetition agreement:

  • Oral findings of fact at the hearing can satisfy the requirements of Fed. R. Civ. P. 52, when the “oral findings together with [the] written order nonetheless give us ‘a clear understanding of the factual basis for the decision'”;
  • Testimony about confidential information given to the employee established the Texas-law requirements about adequate consideration for a noncompete, even when the employer did not make an express promise to do so at the time of contracting; abd
  • After an unsuccessful appellate challenge to a preliminary injunction that enforces a noncompete, it can be appropriate to ask the trial court to “when determining the term of any injunction, to reweigh the equities . . . in light of the time that has passed during the pendency of th[e] appeal.”

No. 19-20864 (April 27, 2020).

An issue in Novick v. Shipcom Wireless, Inc., was whether the district court erred in not letting the defendant employer open and close arguments, when it had the burden of proof on the remaining disputed issues in an overtime-pay case. The Fifth Circuit held: “Shipcom has not cited, and we have not found, any case where this court has held a trial court’s decision as to which party presents argument first to be an abuse of discretion. Many legal presentations, like the FLSA claim in this case, have a beginning, a middle, and an end. It was within the discretion of the trial court to decide that in this case the jury should hear the beginning of the story first, even though the legal effect of the beginning was not in dispute.” No. 19-20056 (Jan. 7, 2020).

  • In the 1200s, Henry III was protected from suit by sovereign immunity, as chronicled by the prolific Bracton;
  • In the 1780s, “Brutus,” the Anti-Federalist, debated with Alexander Hamilton about whether the Constitution would undermine sovereign immunity by allowing debilitating federal-court lawsuits against states about Revolutionary War debts;
  • The Eleventh Amendment was ratified in 1796 to address those concerns and prevent, inter alia, federal-court suits “prosecuted against one of the United States by Citizens of another State . . . .” (emphasis added);
  • Some time later, Kathie Cutrer sued the Tarrant County Local Workforce Development Board, in federal court under federal law, for discriminating against her because of severe back problems;
  • The Fifth Circuit reversed the dismissal of her claim on sovereign-immunity grounds, observing, inter alia: “Because Tarrant County, the City of Arlington, and the City of Fort Worth are not the State of Texas, they obviously cannot confer the State’s sovereign immunity upon a board by interlocal agreement. They can’t give what they don’t have.” (emphasis added). Cutrer v. Tarrant County Local Workforce Development Board, No. 18-11092 (Nov. 22, 2019) (Oldham J., joined in the judgment only by Graves and Wiener, JJ.)  (Footnote 1 of the opinion also explains why Texas refers to a county adminstrator as a “county judge,” tracing the answer to the position of “alcalde” in Spanish law.)

In Williams v. TH Healthcare Ltd., No. 19-20134 (Nov. 14, 2019, unpubl.), the Fifth Circuit made two broadly-applicable points about the deadline running from receipt of an EEOC right-to-sue letter:

  • Extra days for the weekend. Williams received a right-to-sue letter for her Title VII and ADA claims on July 29, 2018. The ninety-day deadline for filing suit fell on Saturday, October 27, 2018. Williams thus had until the following Monday, October 29, 2018, to file suit. Williams filed suit that day. Her lawsuit was therefore timely and the district court erred in dismissing it.
  • Substantive, but not jurisdictional.he district court concluded that it “d[id] not have jurisdiction over Dovie Williams’s claims because she did not sue within ninety days of receiving the [right-to-sue] letter.” The ninety-day filing requirement, however, “is not a jurisdictional prerequisite, but more akin to a statute of limitations.” Harris v. Boyd Tunica, Inc., 628 F.3d 237, 239 (5th Cir. 2010). The court therefore treats the district court’s order as a dismissal of Williams’s claims pursuant to Rule 12(b)(6) for failing to comply with the ninety-day filing requirement.

The Coen Brothers’ 2008 movie, Burn After Reading, a comedy about spy agencies in pursuit of a “secret” document that is anything but, ends with the leaders of the CIA saying: “‘I guess we learned not to do it again,’  . . . despite not knowing exactly what they did[,]” Similarly, the revised panel majority in Nall v. BNSF Railway Co., in again finding a triable issue on the plaintiff’s disability-discrimination claim, observes:

“The dissent from our original opinion, as well as the petition for rehearing en banc and two amicus curiae submissions in support of it, expressed concern that the panel majority had imposed a new requirement for assertion of the direct-threat defense, to-wit: that in addition to showing that the employment decision was objectively reasonable, the employer must also establish that the process itself that was utilized in reaching that decision, considered separately, was objectively reasonable. Without commenting further on the efficacy of such an approach or on whether the panel majority actually adopted it, we emphasize that nothing in this substitute opinion should be understood as employing that reasoning.”

No. 17-20113 (revised Feb. 15, 2019) (emphasis added).A revised special concurrence continued to mourn the sprawl of the McDonnell-Douglas framework; a revised dissent praised the “well articulated” en banc petition and “persuasive” amicus submissions. The original opinions can be read here.

The Coston Flare, the first technically and commercially viable maritime flare, was a universal attention-getting sign at sea for many years. Similarly, the “Rule of Orderliness Opinion” attracts en banc review in the Fifth Circuit; the most recent example being a January 17 panel dissent about circuit precedent on the viability of a patient’s implied right of action under the Medicaid Act, which led to a February 5 vote to take the issue en banc. In that spirit, yesterday’s 3-opinion panel resolution of Wittmer v. Phillips 66 Co.raises the question whether circuit precedent addresses Title VII’s applicability to discrimination based on sexual orientation. No. 18-20251 (Feb. 6, 2019).

Nall, who worked for BNSF as a trainman, suffered from Parkinson’s disease, and sued BNSF for disability discrimination. The panel majority noted that BNSF had provided different descriptions of a trainman’s duties at different times, and that a key BNSF witness agreed with a version that helped Nall’s position. It thus found a fact issue, specifically described as follows:

We emphasize that our inquiry on the issue of objective  reasonableness does not ask whether BNSF’s conclusion that Nall could not perform his job duties safely was a reasonable medical judgment. Instead, we ask whether  BNSF actually exercised that judgment. In other words, the question on appeal is not whether it was reasonable for BNSF to conclude that Parkinson’s disease symptoms prevented Nall from safely performing his duties; the question is whether BNSF came to that conclusion via a reasonable process that was not, as Nall alleges, manipulated midstream to achieve BNSF’s desired result of disqualifying him. More precisely, the question is whether there is any evidence in the record which, if believed, would be sufficient to support a jury finding.

(emphasis in original). A dissent observed: “There is no basis for imposing liability under the ADA based on process concerns alone. There is liability only if the employer’s determination of a direct threat is objectively unreasonable.” A concurrence noted the “kudzu-like creep” of the McDonnell-Douglas burden-shifting framework, and as to dissent, observed that it “reminds me of the baseball player who said, ‘They should move back first base a step to eliminate all those close plays.'” Nall v. BNSF Railway Co., No. 17-20113 (Dec. 27, 2018).

In-N-Out attempted to keep its employees from wearing buttons in support of the”Fight for $15″ minimum wage campaign (right, approximately actual size). The NLRB found this was an unfair labor practice and the Fifth Circuit affirmed. Presumptively unreasonable under federal labor law, In-N-Out argued that the ban fell within a “special circumstances” exception for reasons of the company’s public image and food safety. Both arguments failed, in large part because the company required the wearing of significantly larger buttons during the Christmas season and a charitable fund drive each April. In-N-Out-Burger v. NLRB, No. 17-60241 (July 6, 2018).

 

In-N-Out-Burger v. NLRB

Calderone alleged that he was terminated, in retaliation for reporting a car dealership’s alleged refusal to finance cars for racial minorities, in violation of the Consumer Financial Protection Act.  Unfortunately for Calderone, no matter how reasonable his belief may have been, car dealers are exempt from the CFPA by its plain terms, as other agencies have regulatory authority in that sector of the economy. “Under the CFPA, a plainitff may have a reasonable, but mistaken, belief of fact or law that a statute has been violated. But the CFPA does not permit a plaintiff’s reasonable beliefs to expand the CFPB’s jurisdiction.” Calderon v. Sonic Houston JLR, L.P., No. 17-20029 (Jan. 9, 2018).

In Hills v. Entergy Operations, Inc., a case about overtime pay for security guards, the Fifth Circuit reversed a summary judgment based upon a conclusion about two guards’ lack of damage. While the Court’s holding was based upon technical issues of employment law, its underlying reasoning is of broader applicability: “We reverse the district court’s summary judgment that the fluctuating workweek method applies here as a matter of law. The underlying factual issue upon which the applicabilty of that method is predicated, what the employees clearly understood, should be decided at trial in due course.” No. 16-30924 (Aug. 4, 2017). Also, in a ruling of general interest about administrative law, the Court declined to follow an interpretive letter by the Department of Labor.

A good reminder about following the right substantive standard appears in Clark v. Boyd-Tunica Inc., in which an employee of “Sam’s Town” disputed her termination for drinking at work. The employer relied on tests performed by a reputable company, which it rechecked after she complained about them. The Fifth Circuit sided with the employer: “The focus of the pretext inquiry is not whether the alcohol in Clark’s sample was, in fact, attributable to her improper consumption of alcohol, but whether Sam’s Town reasonably believed it was and acted on that basis.” No. 16-60167 (Dec. 9, 2016).

texas-ouCardoni v. Prosperity Bank, an appeal from a preliminary injunction ruling in a noncompete case, involved a clash between Texas and Oklahoma law, and led to these noteworthy holdings from the Fifth Circuit in this important area for commercial litigators:

  • Under the Texas Supreme Court’s weighing of the relevant choice-of-law factors, Oklahoma has a stronger interest in the enforcement of a noncompete than Texas, “with the employees located in Oklahoma and employer based in Texas”;
  • As also noted by that Court, “Oklahoma has a clear policy against enforcement of most noncompetition agreements,” which is not so strong as to nonsolicitation agreements;
  • The district court did not clearly err in declining to enforce a nondisclosure agreement, given the unsettled state of Texas law on the “inevitable disclosure” doctrine; and
  • “[T]he University of Texas leads the University of Oklahoma 61-44-5 in the Red River Rivalry.”

No. 14-20682 (Oct. 29, 2015).

nlrb_1In 2013, a Fifth Circuit panel reversed the NLRB and held that “an employer does not engage in unfair labor practices by maintaining and enforcing an arbitration agreement prohibiting employee class or collective actions and requiring employment-related claims to be resolved through individual arbitration.”  D.R. Horton, Inc. v. NLRB, 737 F.3d 344 (5th Cir. 2013).  The NLRB, not bound in other jurisdictions by that holding, reaffirmed its original holding in the D.R. Horton case in another matter involving Murphy Oil. Unfortunately for the NLRB, the venue rules for review of its decisions allowed Murphy to appeal to the Fifth Circuit, which – unsurprisingly – again reversed the NLRB.  As in the prior case, the Court did not reverse as to a requirement that the employer clarify its documents to be clear that employees were not waiving the right to make Board charges. Murphy Oil USA, Inc. v. NLRB, No. 14-60800 (Oct. 26, 2015).

jackup rigMyers slipped in the shower while working aboard a drilling rig in the Gulf of Mexico.  In an echo of Blanton v. Newton Associates (a recent employment cases that turned on a prompt investigation into the facts), the rig operator quickly obtained a statement from Myers that said: “When getting out of shower, my shower shoe on left foot broke causing my left foot to slip and twist and resulted in falling out of shower.”  When Myers took an inconsistent position in trial (arguing that he fell because of inadequate rails and mats), this statement was key to affirmance of a defense judgment.  The Fifth Circuit also rejected an argument about the trial court’s review of the evidence: “Myers does not allege that the court did not see the flip flops; instead, he appears to object to the court’s failure to inspect them more closely. . . . When physical evidence is introduced at a bench trial, neither caselaw nor common sense establishes a minimum distance the judge must be from that evidence before the judge’s obligation to consider the evidence is satisfied.”  Myers v. Hercules Offshore Services, No. 15-30020 (Sept. 25, 2015, unpublished).

40_percent_off_light_redA security company required that its employees travel to a designated break location at lunchtime, substantially eating into their 30-minute lunch break.  The Fifth Circuit reversed summary judgment for the company on FLSA claims, reasoning:  “Unlike a requirement that the employee stay in uniform, or even one that may result in the employee having to perform a duty on rare occasions, a jury could find that preventing the employee from eating—ostensibly the main purpose of the break—for twelve out of thirty minutes during every break is a meaningful limitation on the employee’s freedom. The travel obligation thus cannot be deemed a mere ‘inconvenience’ as a matter of law.”  Naylor v. Securiguard, Inc., No. 14-60637 (Sept. 15, 2015).  Whether the “40 percent rule” carries over to other areas of summary judgment practice remains to be seen, but Naylor still stands as a cogent and highly readable review of a basic part of the modern workplace.

bricks blocksWallace sued Tesoro Corporation for retaliation, alleging he was fired for activity protected by the Sarbanes-Oxley Act.  he district court dismissed.  The Fifth Circuit affirmed in part, finding that Wallace had not exhausted his administrative remedies as to his claims about Tesoro that he did not present to OSHA.  Wallace v. Tesoro Corp., No. 13-51010 (July 31, 2015).  The Court reversed as to other claims dismissed on the pleadings, holding:

  • As to the objective reasonableness of Wallace’s belief about an accounting practice — “The basis for that belief in this case, including the level and role of Wallace’s accounting expertise and how that should weigh against him, are grounded in factual disputes that cannot be resolved at this stage of the case.”
  • As for Wallace’s reasonable belief that a fraud was occurring, Rule 9(b) is not implicated because “an employee who is providing information about potential fraud or assisting in a nascent fraud investigation might not know who is making the false representations or what that person is obtaining by the fraud; indeed, that may be the point of the investigation.”
  • Wallace adequate pleaded the basis for his reasonable belief that Tesoro was not making proper SEC disclosures, and that Tesoro acted with the requisite mental state (primarily by detailing the steps he took to inform Tesoro management).  The opinion provides more detail about the specific allegations made by Wallace.

bellAfter the EEOC sent two inconsistent letters about a claimant’s case – one in June, and one in July – a confusing limitations problem arose.  The Fifth Circuit found that equitable tolling applied and prevented a bar to filing suit.  It agreed with the district court that testimony about what the EEOC told counsel on the phone was inadmissible for the truth of the matter asserted, but disagreed that it was completely inadmissible — when offered to prove why counsel acted as he did, the conversation was not offered for a hearsay purpose.  The Court also noted that counsel, and his client, had proceeded diligently throughout the matter, noting: “Th[e] desire to have an EEOC letter with all the t’s crossed and i’s dotted is a sign of diligence rather than dawdling.”  Alvarado v. Mine Service, Ltd., No. 14-50668 (July 30, 2015, unpublished).

An architectural firm sued a former employee and a competitor.  The Fifth Circuit affirmed judgment for the defendants in Hunn v. Dan Wilson Homes, No. 13-11297 (June 15, 2015).  As to the firm’s claim for breach of fiduciary duty, the Fifth Circuit found no error in the district court’s finding that “the plans in the AutoCAD files were the same as the physical copies of the plans that [had] already been disseminated by [Plaintiff]” to various homeowners.  A noncompete claim failed for lack of an express promise related to confidential information.  Other claims based on copyright, the Lanham Act, contract, and the Computer Fraud and Abuse Act failed for similar proof problems.  Particularly as to the elements of a noncompete claim under Texas law, the opinion provides a practical summary of potential claims related to an employee’s departure, as well as several commonly-litigated factual issues related to those claims.

chopperDan Peterson sued his former employer, Bell Helicopter Textron, for age discrimination under the TCHRA. The jury found that age was a motivating factor in his termination, but also found that Bell would have terminated him even without consideration of his age.  The district court awarded no damages, but imposed an injunction on Bell about future age discrimination, and awarded Peterson attorneys fees of approximately $340,000.  The Fifth Circuit reversed.  Noting that the TCHRA allowed an injunction even in light of the unfavorable causation finding, the Court found that plaintiff’s request came too late, as Fed. R. Civ. P. 54(c) “assumes that a plaintiff’s entitlement to relief not specifically pled has been tested adversarially, tried by consent, or at least developed with meaningful notice to the defendant.”  Here, Bell showed that it would have tried the case differently had it known an injunction was at issue.  Accordingly, the fee award was also vacated. Peterson v. Bell Helicopter Textron, Inc., No. 14-10249 (June 4, 2015).  A revised opinion honed the opinion’s analysis as to a potential alternative ground of fee recovery; the same day it issued, the full Court denied en banc review over a lengthy dissent.

causationA medical practice hired an employment agency, which recommended an office manager who then embezzled $60,000.  The practice sued the agency and lost.  The Fifth Circuit observed that under the Texas definition of a “producing cause”:

  • “when boys meet a man because he volunteers with their Boys Club, but the boys and their family then befriend the man outside of the club context, the club’s misrepresentation that it thoroughly checks the background of its volunteers is not a producing cause of the man’s later molestation of the boys outside of the club,” and
  • “when a church advertises a teenage boy as a babysitter and parents hire him, the
    church’s advertisement is not the producing cause of his later molestation of
    their children because the parents themselves chose to hire the teenager as a
    babysitter.”

Accordingly, “[b]ecause the doctors of the Medical Group decided to hire Brown based upon their own observations, we conclude that [the agency’s] conduct was not the producing cause of the Medical Group hiring Brown and its resulting injuries.”  Cox, Chanez & Williams v. Howroyd-Wright Employment Agency, Inc., No. 14-10799 (May 14, 2015, unpublished).

stopsignHalliburton obtained an injunction in an arbitration against a former employee.  The employee sought vacatur under the FAA, arguing that it allows judicial review of an injunction for vagueness.  After reviewing some dispute as to whether such review is allowed after Hall Street, the Court rejected the challenge.  The employee challenged a provision that enjoined him from “utilizing in any fashion” certain documents “that concern [Halliburton’s] products or services, arguing that “utilization” was undefined, the limitation had no time period, and the document description was vague.  The Court found that, “read in context,” it was clear that the arbitrator was referring to material that the employee had improperly taken from Halliburton.  Because this gave the employee “fair notice of what he may, and must not, do,” it was “clearly capable of being implemented and enforced.” McVay v. Halliburton Energy Services, No. 10-10172 (April 22, 2015).  The entire injunction appears on pages 6-7 of the opinion and is of general interest to noncompete and trade secret litigation.

In November, a Fifth Circuit panel affirmed the NLRB’s $30,000 award in a retaliation case based on the employer’s handling of a whistleblower.  Halliburton Co. v. Administratve Review Board, U.S. Dep’t of Labor, No. 13-60323.  The full court has now denied the petition for en banc review, by the close margin of 7 judges for review and 8 against.  A 3-judge dissent criticizes the “ad hoc nature” of the panel opinion and warns that it will lead to confusion about what specific conduct can amount to a materially adverse employment action in the context of a retaliation claim.

Richardson alleged that he was terminated, in violation of Louisiana’s whistleblower statute, for revealing fraudulent time records and overbilling.  The district court granted summary judgment and the Fifth Circuit reversed.  Richardson v. Axion Logistics, No. 14-30306 (revised March 23, 2015).  Applying the Twombly “plausibility” standard, the Court found adequate pleading about his employer’s knowledge of the alleged misconduct, as well as the timeline of events leading up to his termination.  The pleading itself is available for review here; the specific paragraphs identified by the Court as to the employer’s knowledge are highlighted in yellow, and those identified about his termination in orange.

‘Blanton sued for employment discrimination, and after trial, “[t]here is no question that Blanton was subjected to egregious verbal sexual and racial harassment by the general manager of the Pizza Hut store where he worked.”  Blanton v. Newton Associates, Inc., No. 14-50087 (Feb. 10, 2015, unpublished).  The issue on appeal was whether the employer had established “the Ellerth/Faragher affirmative defense”; essentially, that the employer acted reasonably to stop the harassment and the employee unreasonably failed to enlist the employer’s aid.  The evidence showed a lack of training about the employer’s anti-discrimination policies, and that two low-level supervisors hesitated to report the harassment for fear of retaliation by the general manager, but that “[o]nce Blanton did complain to a manager with authority over the general manager, Pizza Hut completed an investigation and fired her within four days.”  Accordingly, the verdict and resulting judgment for the employer was affirmed.

Menendez complained about his employer’s accounting practices to the SEC.  The employer received a letter from the SEC asking for retention of certain documents.  The employer then emailed Menendez’s colleagues, “instructing them to start retaining certain documents because ‘the SEC has opened an inquiry into the allegations of Mr. Menendez.'”  Relations with his co-workers deteriorated and he ultimately resigned.  In a detailed opinion, the Fifth Circuit affirmed a $30,000 damages award to Menendez on his claim for retaliation: “The undesirable consequences, from a whistleblower’s perspective, of the whistleblower’s supervisor telling the whistleblower’s colleagues that imagehe reported them to authorities for what are allegedly fraudulent practices, thus resulting in an official investigation, are obvious.”  Halliburton, Inc. v. Administrative Review Board, U.S. Dep’t of Labor, No. 13-60323 (Nov. 12, 2014).  The case has received considerable attention in employment and compliance circles; the Wall Street Journal‘s coverage is a short example.

A cousin to U.S. Bank, N.A. v. Verizon Communications, Inc., the case of Murphy v. Verizon Communications, Inc. presented an ERISA-based challenge to the spinoff of Idearc by Verizon.  No. 13-11117 (Oct. 15, 2014, unpublished).  The appellate issue was the plaintiffs’ right under ERISA’s “catch-all provision” to request, as “other instruments under which the [ERISA] plan is established or operated,” various documents about the plan’s investment guidelines.  The Fifth Circuit held: “We agree with the majority of the circuits which have construed [the] catch-all provision narrowly so as to apply only to formal legal documents that govern a plan.”

The Fifth Circuit sees many challenges to decisions under ERISA about benefits.  In McCorkle v. Metropolitan Life Ins. Co., the Court reminded that “district courts hearing complaints from disappointed ERISA plan members or their beneficiaries for the administrative denial of benefits are not sitting, as they usually are, as courts of first impression.  Rather, they are serving in an appellate role.”  No. 13-30745 (July 3, 2014). After summarizing the deferential standard of review in that capacity, the Court then emphasized: “We had thought that by now this was understood and accepted by all district judges of this circuit.  But, as this case demonstrates that we were wrong, at least as to one of them, we try yet again to drive that message home.”

The Fifth Circuit revisited the issue of an arbitrator’s authority to fashion a remedy — nominally an issue of labor union law, but of broader general interest — that it recently addressed in Albermarle Corp. v. United Steel Workers, 703 F.3d 821 (5th Cir. 2013). Observing that the parties’ CBA “did not establish criteria for determining cause to discharge,” it found that the arbitrator’s decision to suspend rather than discharge was within the bounds of an arguable construction of the contract.  United Steel v. Delek Refining, Ltd., No. 12-41119 (July 14, 2014, unpublished).

After the Deepwater Horizon disaster, BP’s share price declined and several employee benefits sustained major losses. An ERISA lawsuit on behalf of the beneficiaries was dismissed, noting that an ERISA fiduciary’s to maintain an investment in company stock receives a “presumption of prudence,” sometimes referred to as the Moench presumption. Whitley v. BP, P.L.C., No. 12-20670 (July 15, 2014, unpublished).  In June 2014, the Supreme Court eliminated that presumption and held that ERISA fiduciaries managing a plan invested in company stock are subject to the same duty of  prudence as any other ERISA fiduciary, “except that they need not diversify the fund’s assets.” Fifth Third Bancorp v. Dudenhoeffer, No. 12-751 (U.S. June 25, 2014).   Accordingly, the Fifth Circuit vacated the district court’s dismissal and remanded the appeal for reconsideration in light of that opinion.

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.

The defendant in Advanced Nano Coatings, Inc. v. Hanafin “entered into an employment agreement with [plaintiff] in which [defendant] agreed to devote 100% of his professional time and effort to [plaintiff] or its subsidiary . . . .”  No. 13-20109 (Feb. 19, 2014, unpublished).  “The district court . . . found that Hanafin breached his fiduciary obligations . . . a finding Hanafin does not dispute on appeal.”  Quoting ERI Consulting Engineers v. Swinnea, 318 S.W.3d 867, 872 (Tex. 2010), the Fifth Circuit noted that under Texas law, “if the fiduciary . . . acquires any interest adverse to his principal, without a full disclosure, it is a betrayal of his trust and a breach of confidence, and he must account to his principal for all he has received.” The Court then held: “Accordingly, [defendant’s] breach of fiduciary duties obligates him to repay everything he gained by virtue of his position, including payments for his salary and any expenses he may have incurred.”

1.  The Fifth Circuit vacated its panel opinion in Sawyer v. duPont to certify two questions to the Texas Supreme Court — paraphrased slightly, they were (1) whether an at-will employee can sue for fraud for loss of employment, and (2) whether a 60-day “cancellation-upon-notice” collective bargaining agreement would change a “no” answer to (1).  The Texas Supreme Court has now answered those questions: “no” as to the basic question about a fraud claim arising from at-will employment, and “in the situation presented, no” to the second question about the effect of the CBA.  “The Employees argue that it would contravene public policy to allow an employer to benefit from its duplicity, but public policy is not better served by allowing contracting parties to circumvent their agreement.”  No. 12-0626 (Tex. April 25, 2014).  (The Fifth Circuit formally adopted that reasoning and affirmed on June 11, 2014).

2.  Similarly, the Court vacated its panel opinion in Ewing Construction v. Amerisure Insurance Corp. to certify the question whether a CGL policy’s “Contractual Liability Exclusion” would reach a contract in which a contractor commits to work in a “good and workmanlike manner.”  The Texas Supreme Court answered “no”: “[A] general contractor who agrees to perform its construction work in a good and workmanlike manner, without more, does not enlarge its duty to exercise ordinary care in fulfilling its contract, thus it does not ‘assume liability’ for damages arising out its defective work so as to trigger the Contractual Liability Exclusion.”  No. 12-0661 (Tex. Jan. 17, 2014).  The opinion has been called a “significant reassurance” to policyholders in the construction business.

In Grimes v. BNSF Railway, the district court applied collateral estoppel to a Federal Railway Safety Act (“FRSA”) suit, based on a fact finding made by a type of arbitral panel called a Public Law Board (“PLB”) after an investigation and hearing by railroad personnel. No. 13-60382 (Feb. 17, 2014).  The Fifth Circuit reversed, noting: (1) the hearing was conducted by the railroad; (2) the plaintiff was represented by the union rather than an attorney; (3) the termination decision was made by a railroad employee, not by “an impartial fact finder such as a judge or jury”; (4) the rules of evidence did not appear to have controlled in the arbitral proceedings; and (5) “most crucially,” the PLB’s affirmance was based solely on the record developed at the hearing administered by the railroad.  The Court noted authority that rejects res judicata in this context, but also noted that “estoppel may apply in federal-court litigation to facts found in arbitral proceedings as long as the court considers the ‘federal interests warranting protection.’”

After recent opinions finding that credibility determinations led to fact issues in cases about whether a barge hit a bridge and a prison fight, the Fifth Circuit again so held in Vaughan v. Carlock Nissan of Tupelo, No. 12-60568 (Feb. 4, 2014, unpublished). Vaughan alleged that a car dealership unlawfully terminated her after she reported several irregularities there to Nissan.  The Fifth Circuit affirmed summary judgment for the dealership as to Mississippi’s “illegal act” exception to at-will employment, but reversed as to her tortious interference claim against the supervisor who terminated her.  That claim requires proof of bad faith, which Vaughan sought to establish by showing that she was not fired until making a complaint that specifically named the supervisor.  The supervisor admitted that, at the time of termination, he knew Vaughan had complained to Nissan but said “he did not know the contents of the complaint.”  The Fifth Circuit found that credibility issues about his claimed justifications for the firing, coupled with the ambiguity of his statement that Vaughn had “no right to report these things to Nissan,” and the timing of the termination, created a fact issue that made summary judgment unwarranted.

Villanueva worked for a Colombian affiliate of a publicly-traded entity subject to Sarbanes-Oxley.  He alleged that he was terminated after reporting a scheme by his employer to understate revenue to Colombian tax authorities.  Villanueva v. U.S. Department of Labor, No. 12-60122 (Feb. 12, 2014).  The Fifth Circuit affirmed the DOL’s rejection of his claim for whistleblower protection under SOX, concluding: “Villanueva did not provide inforotmation regarding conduct that he reasonably believed violated one of the six provisions of U.S. law enumerated in § 806; rather, he provided information regarding conduct that he reasonably believed violated Colombian law.”  (Footnote 1 notes that the Court did not reach the broader issue whether section 806 applies extraterritorially.)  Law 360 has reported on the case and collected opinion from both sides of the employment bar.

 

In D.R. Horton Inc. v. NLRB, the Fifth Circuit reviewed an NLRB decision that invalidated an arbitration agreement as to collective or class claims related to employment.  No. 12-60031 (Dec. 3, 2013).  The court deftly sidestepped a difficult constitutional issue, presently before the Supreme Court, about President Obama’s “recess appointments” to the NLRB.  On the merits, the Court reversed the NLRB.  The Board relied upon Section 7 of the NLRA, which guarantees the right “to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection.”  The Court found that this statute did not create a right to pursue collective or class claims in court that trumped the language and policy goals of the Federal Arbitration Act.  A recent Texas Lawbook article discusses the significance of this opinion for employers.

Mid-Continent Casualty v. Davis presented an insurance coverage dispute about a wrongful death claim by a construction worker.  No. 11-10142 (June 8, 2012).  Coverage turned on whether the worker was an employee or an independent contractor.   Applying the five-factor test from Limestone Products Distribution v. McNamara, 71 S.W.3d 308 (Tex. 2002), the Court affirmed a finding that the worker was an independent contractor.  Key facts were that the worker provided his own tools and supplies, largely controlled his own schedule and tasks, and was provided a 1099 rather than a W-2.  Op. at 13-14.