The Fifth Circuit reversed a JNOV on liability for breach of contract in Kerr v. Mapei Corp., holding: “The jury was presented with two alternative, but plausible, accounts of the formation and authorization of a contract. The jury reasonably selected one of those alternatives.” As to consequential-type damages for lost profits for other sales, however, the Court affirmed the judgment for the defendants, finding that the plaintiff’s damages model “was not supported by any empirical analysis or any evidence outside of the [contract] relationship . . . (e.g., real-world sales, customer surveys, or current market demand).” In particular, it noted the lack of evidence that the substantial business opportunity related to the contract would recur, the fact that the contract was terminable at will, and the lack of weight for a party’s own “unsubstantiated, self-serving speculations” about future business. No. 16-10430 (June 30, 2017 (revised), unpublished).
Litigation about the intellectual property rights to the name “Communicat-R” (here, applied to a specialized type of whiteboard) led to a jury trial. The Fifth Circuit affirmed, finding no abuse of discretion in this instruction: “Trademarks can be abandoned through non-use. A trademark is abandoned if it is proven by a preponderance of the evidence, that (1) the use of trademark was discontinued; and (2) an intent not to resume such use.” The Court rejected a request for additional language about “excusable nonuse,” finding that it would either be redundant or not entirely accurate in the context of this case. The Court also rejected sufficiency challenges to liability and damages, illustrating the operation of the federal standard for the grant of a new trial. Vetter v. McAtee, No. 15-20575 (March 1, 2017).
Montano v. Orange County, in affirming a substantial jury verdict about the mistreatment of a county prisoner, states several important principles about the appellate review of jury trials. This post focuses on one — the degree of specificity required of a defendant’s JMOL motion under FRCP 50(a), such that arguments in a later 50(b) motion will be seen as renewed rather than new (and thus waived).
The applicable legal standard had three elements; the county moved on the ground that the plaintiff had “no evidence of a constitutionally deficient policy, custom or practice,” going on to focus on the first element. The county later argued that the phrase “constitutionally deficient” necessarily included the other two elements, but the district court and Fifth Circuit disagreed. The purpose of the “specific grounds” requirement in Rule 50(a) is “to make the trial court aware of the movant’s position and to give the opposing party an opportunity to mend its case” – here, the County “did not clearly separate the points upon which [it] requested judgment, did not delineate which of its arguments applied to which of Plaintiffs’ claims, and blurred the lines of Plainitffs’ claims through its obtuse recitation of the case law.” No. 15-41432 (Nov. 29, 2016). Later posts will address other points made by this opinion about the review of jury verdicts.
OneBeacon Ins. Co. v. Welch & Assocs. involved insurance coverage for an attorney malpractice claim, arising for an exclusion for knowledge about “any actual or alleged act, error, omission or breach of duty arising out of the rendering or the failure to render professional legal services.” Since even the carrier agreed that “[o]n its face, this covers every single thing an attorney does or does not do, wrongful or not,” the Fifth Circuit found that the exclusion could not be applied literally without making the contract illusory. Focusing on the alleged “wrongful act,” the Court found that the relevant lawyer’s awareness of a discovery order and potential dispute was not equivalent to knowledge that a rare death-penalty sanction award would result. The Court also sustained an award of additional violations for an intentional violation of the Insurance Code with respect to the handling of the claim. No. 15-20402 (Nov. 14, 2016).
The plaintiff in Cowart v. Erwin achieved the difficult result of winning a jury trial on an Eighth Amendment claim against a detention officer. The opinion details the proof that satisfied a sufficiency review — multiple favorable eyewitnesses (and multiple unfavorable ones as well) throughout the entire incident in question, along with helpful and contemporaneous photographs and medical records (among others). “Objective” video evidence was not dispositive when it “is not necessarily inconsistent with eye witness accounts of what transpired at the jail on the day in question.” No. 15-10404 (Sept. 20, 2016).
Jose Guzman, writer of the Tejano song Triste Aventuerera, sued Hacienda Records, alleging that its affiliated band “The Hometown Boys” infringed his copyright with their song Cartas de Amor (link below). The Fifth Circuit affirmed judgment for the defendants. After reminding about the significant deference due to the trial court on credibility issues, the Court agreed that Guzman’s evidence about radio play and live performance was properly rejected as to the issue of the defendants’ “opportunity to view” his song. Similarly, while acknowledging similarity in the first sixteen words of both songs, expert testimony showed that the words were set to different music and appeared in other songs as well, thus supporting the trial court’s rejection of his alternative “striking similarity” theory. The Court also declined to adopt a “sliding scale” test for infringement that would be weighted by the degree of similarity between the works at issue.
Hilda Garza sued Starr County for wrongfully discharging her as a county attorney, in retaliation for announcing her candidacy for the local school board, and she won a $1.4 million verdict for front pay at trial. The district court set aside the verdict as advisory, reasoning that it went to an issue of equitable relief, and allowed the County to offer her reinstatement as an alternative remedy. The Fifth Circuit reversed. While Fed. R. Civ. P. 39(c) allows an advisory jury, it does not apply when: (1) the parties voluntarily submit an issue to a jury without formal objection, and (2) the district court does not announce in advance that the verdict is advisory. Garza v. Starr County, Texas, No. 14-41343 (Oct. 20, 2015, unpublished) (citing, inter alia, Alcatel USA, Inc. v. DGI Techs., Inc., 166 F.3d 772 (5th Cir. 1999)). (The County also challenged the award as excessive; while noting that the “more prudent course” would have been for the County to cross-appeal, the Court allowed the County to raise that issue on remand — although noting that the County’s lack of earlier objections would limit what it could raise.)
Myers 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).
A business dispute about a telephone service provider’s billing system leads to 2 holdings of broad interest, one procedural and the other substantive:
1A. Waiver. “Although [defendant] moved for a directed verdict at the close of evidence, it did not argue in its motion that the Supply Contract was unenforceable.” Accordingly, under Fed. R. Civ. 50(b), that argument could not be raised post-trial. (Here, in fact, because defendant took the opposite position about the contract in the directed verdict motion, judicial estoppel also barred the later argument.)
1B. Waiver of Waiver. When defendant relied on a certain letter agreement in its Rule 50(b) motion, and plaintiff “did not argue waiver in its response . . . [plaintiff] has forfeited its right to raise the waiver issue on appeal.”
2. Speculative damages. A “strained business relationship” between the parties supported a holding that plaintiff’s $10 million lost profits award, assuming six years of business dealings, was not proven with “reasonable certainty.” Transverse LLC v. Iowa Wireless Services, LLC, No. 13-51098 (revised Aug. 5, 2015, unpublished).
Allstate did not request a jury trial in its original complaint, but did in response to the defendant’s answer and counterclaim (which also included a jury demand, and which Allstate was entitled to rely upon). After a summary judgment ruling, Allstate made a limited jury waiver on the remaining issue of damages. The district court then vacated its summary judgment ruling and held a bench trial on all issues in the case — liability and damages.
The Fifth Circuit found that, “[a]lthough deference is generally accorded to a trial judge’s interpretation of a pretrial order,” this was “[a]t the very least . . a ‘doubtful situation'” that did not support the finding of “a knowing and voluntary relinquishment of the right” to jury trial pursuant to the Seventh Amendment. The Court also found harm because Allstate’s case could survive a JNOV motion, noting that “the district court relied heavily on its weighing of the credibility of the witness’s testimony at trial” in its fact finding. Accordingly, the Court reversed and remanded for jury trial. Allstate Ins. Co. v. Community Health Center, Inc., No. 14-30506 (March 16, 2015, unpublished).
‘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.
Eastman Chemical, the manufacturer of a plastic resin used in water bottles and food containers, successfully sued Plastipure under the Lanham Act, alleging that Plastipure falsely advertised that Eastman’s resin contained a dangerous and unhealthy additive. Eastman Chemical Co. v. Plastipure, Inc., No. 13-51087 (Dec. 22, 2014). Relying on ONY, Inc. v. Cornerstone Therapeutics, Inc., 720 F.3d 490 (2d Cir. 2013), Plastipure argued that “commercial statements relating to live scientific controversies should be treated as opinions for Lanham Act purposes.” The Fifth Circuit disagreed, noting that Plastipure made these statements in commercial ads rather than scientific literature, and observing: “Otherwise, the Lanham Act would hardly ever be enforceable — ‘many, if not most, products may be tied to public concerns with the environment, energy, economic policy, or individual health and safety.'” The Court also rejected challenges to the jury instructions and to the sufficiency of the evidence as to falsity.
The parties to a contract about the construction of a barge disputed whether an amendment required price adjustments based on the price of steel. Blessey Marine Services, Inc. v. Jeffboat, LLC, No. 13-30731 (Nov. 10, 2014, unpublished). In a pretrial summary judgment ruling, the district court rejected the plaintiff’s argument that the contract was unambiguous, and held a jury trial to hear extrinsic evidence and resolve the ambiguity. On appeal, the Fifth Circuit held:
1. Because the plaintiff did not renew the ambiguity argument in a Rule 50 motion (although it did raise the point in a motion in limine and in opposition to the other side’s motion), the Court could not consider it on appeal; and
2. “By adducing some of the same extrinsic evidence at trial that it had sought to exclude in its motion in limine, [Plaintiff] waived its right to challenge the district court’s admission of that evidence.” (citing Fed. R. Evid. 103(b) and Ohler v. United States, 529 U.S. 753, 755 (2000) [“[A] party introducing evidence cannot complain on appeal that the evidence was erroneously admitted.”])
Estate of Elkins v. Commissioner of Internal Revenue presented a dispute about the taxable value of a decedent’s fractional ownership in an extremely valuable art portfolio, including works by Picasso, Jackson Pollock, and Cezanne. No. 13-60742 (Sept. 15, 2014). Before the U.S. Tax Court, the IRS “steadfastly maintained that absolutely no fractional-ownership discount was allowable.” The estate offered expert testimony that “any hypothetical willing buyer would demand significant fractional-ownership discounts in the face of becoming a co-owner with the Elkins descendants, given their financial strength and sophistication, their legal restraints on alienation and partition, and their determination never to sell their interests in the art.”
The Tax Court applied a “‘nominal’ discount of 10 percent only.” The Fifth Circuit reversed: “[T]he Estate’s uncontradicted, unimpeached, and eminently credible evidence in support of its proferred fractional-ownership discounts is not just a ‘preponderance’ of such evidence; it is the only such evidence. Nowhere is there any evidentiary support for the Tax Court’s unsubstantiated declaration” about the 10% discount (emphasis in original). In reviewing the IRS’s “no discount” position at trial, the Court noted in footnote 7: “The Commissioner appears to have ignored, or been unaware of, the venerable lesson of Judge Learned Hand’s opinion in Cohan: In essence, make as close an approximation as you can, but never use a zero.” Cohan v. Commissioner, 39 F.2d 540, 543-44 (2d Cir. 1930).
The bankruptcy debtor in McClendon v. Springfield had lost a defamation judgment for $341,000. No. 13-41030 (Aug. 26, 2014, unpublished). Because “the jury’s verdict could be sustained either on intentionality or recklessness,” the bankruptcy court held an evidentiary hearing to determine whether the claim resulted from a “wilful and malicious” injury. Concluding that it did, the court denied discharge of that claim. On appeal, the debtor argued that “a trial judge may not use his disbelief of a witness as affirmative support for the proposition that the opposite of the witness’s testimony is the truth.” (citing Seymour v. Oceanic Navigating Co., 453 F.2d 1185, 1190-91 (5th Cir. 1972)) (Texas state practitioners are familiar with similar sufficiency principles from City of Keller v. Wilson, 168 S.W.3d 802 (Tex. 2005)). The Fifth Circuit rejected this argument, both in light of the entire record received by the bankruptcy court, and because: “[H]here, the factual inquiry was binary, a question whether [the debtor] acted willfully and maliciously or not. . . . [T]he bankruptcy court’s disbelief of [the debtor’s] statements that he did not know the statements were false leaves only the alternative that he did know . . . .”
A builder obtained a 6-figure judgment against an architect, for cost overruns and lost profits, resulting from the architect’s negligence. Garrison Realty LP v. Fouse Architecture & Interiors, PC, No. 12-40764 (Oct. 21, 2013, unpublished). The jury awarded distinct sums for negligence and negligent misrepresentation. The Fifth Circuit found that the causes of action were duplicative in this context and reversed as to the inclusion of the smaller award in the final judgment. The Court also held that the defendant had waived an argument for a partial offset as a result of a prior lawsuit, finding that offset had not been pleaded as a defense, and that the plaintiff was prejudiced because it could have changed its trial proof had the issue been raised earlier. (On the pleading issue, the Court noted that the defendant had alleged offset, but only claimed it was a bar “in whole” rather than “in whole or in part.”)
After a jury trial, the plaintiff won judgment of $336,000 for breach of a joint venture to bid a contract with the Air Force about upgrades to the storied Paveway laser-guided bomb program. X Technologies v. Marvin Test Systems, No. 12-50230 (June 11, 2013). On the issue of causation, the Fifth Circuit quickly dismissed two challenges to a key witness’s qualifications since he was not testifying as an expert, and also dismissed the effect of a claimed impeachment in light of the full record developed at trial. The Court went on to affirm a directed verdict on a claimed defense of prior breach, finding that the agreement only imposed a one-way bar on multiple bids for the contract, and to affirm the judgment of breach, noting multiple uses of “team” in the record to describe the parties’ relationship.
In Homoki v. Conversion Services, a check processing company sued its sales agent and a competitor. No. 11-20371 (May 28, 2013). It won judgment for $700,000 against the competitor for tortious interference with the sales agent’s contract with the company, and $2.15 million against the agent for past and future lost profits. The company and competitor appealed. First, the Fifth Circuit — assuming without deciding that the plaintiff had to show the competitor’s awareness of an exclusivity provision in the agent’s contract — found sufficient evidence of such knowledge in testimony and the parties’ course of dealing, and affirmed liability for tortious interference. Second, the Court found that the plaintiff’s “experience in managing his business for sixteen years” supported his damages testimony, and that “[w]hile [plaintiff]’s presentation of its damages evidence was far from ideal,” also found sufficient evidence of causation on the interference claim. Finally, the Court found that the plaintiff had given adequate notice of its claim of conspiracy to breach fiduciary duties (the joint pretrial order was not signed by the judge), but the plaintiff waived jury trial on that issue by not requesting a damages question — particularly given the significant dispute about causation in the evidence presented.
In Miller v. Raytheon Co., the Fifth Circuit affirmed liability for age discrimination and affirmed in part on damages. No. 11-10586 (revised, July 30, 2013). Among holdings of broader interest in civil litigation, the Court: (1) affirmed the verdict of liability, noting: “Considered in isolation, we agree with Raytheon that each category of evidence presented at trial might be insufficient to support the jury’s verdict. But based upon the accumulation of circumstantial evidence and the credibility determinations that were required, we conclude that ‘reasonable men could differ’ about the presence of age discrimination”; (2) reversed an award of mental anguish damages because “plaintiff’s conclusory statements that he suffered emotional harm are insufficient”; and (3) rejected a challenge, based on the Texas Constitution, to the statutory punitive damages cap in the TCHRA.
In Wellogix, Inc. v. Accenture, LLP, LLP the district court entered judgment for the plaintiff — $26.2 million in compensatory damages and $18.2 million in punitives, after a remittitur — in a trade secrets case about software to make oil exploration more efficient. No. 11-20816 (May 15, 2013, revised Jan. 15, 2014). Affirming, the Court: (1) reminded, in the opening paragraph, of the deference due to a jury verdict; (2) detailed the sufficient evidence before the jury of a trade secret, of its inappropriate use by the defendant, of damages, and malice; (3) rejected Daubert arguments about the scope of the plaintiff’s computer science expert’s testimony and the material considered by its damages expert; and (4) affirmed the punitive damages award because it was less than the compensatory damages and the issue of “reprehensibility” was neutral. The Court also analyzed aspects of the relationship between trade secret claims and the patent process. Footnote 4 of the opinion provides a useful guide to the federal courts’ treatment of a “Casteel problem” in Texas jury submissions.
In Versata Software v. SAP America, the Federal Circuit affirmed jury verdicts that will likely lead to a judgment in excess of $400 million. That Circuit’s review of a verdict is “reviewed under regional circuit law,” as to which the Court observed: “The Fifth Circuit applies an ‘especially deferential’ standard of review ‘with respect to the jury verdict.'” (citing Brown v. Bryan County, 219 F.3d 450, 456 (5th Cir. 2000)). In affirming the award for a reasonable royalty, the Court quoted the recent case of Huffman v. Union Pacific R.R., which discussed “inference on the basis of common sense, common understanding and fair beliefs, grounded on evidence consisting of direct statement by witnesses or proof of circumstances from which inferences can fairly be drawn.” 675 F.3d 412, 421 (5th Cir. 2012). (Huffman is nominally about the causation requirements of FELA, but its analysis easily extends to other basic Daubert issues.)
The plaintiff in RBIII, L.P. v. City of San Antonio sought damages after the City of San Antonio razed a property without providing prior notice. No. 11-50626 (April 23, 2013). After a jury trial it recovered $27,500 in damages. The Fifth Circuit found that a key jury instruction on the City’s defenses “improperly cast the central factual dispute as whether or not the Structure posed an immediate danger to the public, when the issue should have been whether the City acted arbitrarily or abused its discretion in determining that the Structure presented an immediate danger.” Accordingly, “[b]ecause this error in the instructions misled the jury as to the central factual question in the case,” the Court reversed and remanded for further proceedings. The Court’s analysis summarizes how federal courts address the issue of harm in erroneous jury instructions that the Texas Supreme Court has engaged in the Casteel line of cases.
The plaintiff in Smith v. Santander Consumer USA received $20,43.59 in damages for violation of the Fair Credit Reporting Act. No. 12-50007 (Dec. 20, 2012). The Fifth Circuit agreed that damages were not recoverable solely for a reduced line of credit, but found sufficient other evidence about harm to the plaintiff’s business and personal finances to affirm. Enthusiasts of appellate arcana will find it interesting to compare the Court’s analysis of a general federal verdict under the Boeing standard with the Texas damages submissions required by Harris County v. Smith, 96 S.W.3d 230 (Tex. 2002) (applying Crown Life Ins. v. Casteel, 22 S.W.3d 378 (Tex. 2000)).
Baisden v. I’m Ready Productions involved several challenges to a defense verdict in a copyright infringement case. No. 11-20290 (Aug. 31, 2012). Among other holdings, the Fifth Circuit reminded that “[c]onsent for an implied [nonexclusive] license may take the form of permission or lack of objection,” making the Copyright Act’s requirement of a writing inapplicable. Id. at 9-10 (reviewing Lulirama Ltd. v. Axcess Broad. Servs., 128 F.3d 872 (5th Cir. 1997)). The Court also reviewed a jury instruction that allegedly conflated the question of license with that of infringement — a potential problem since the burdens are different on the two points — but found that while “the question is not a model of clarity” it did not give rise to reversible error. Id. at 19-21.
Vanderbilt Mortgage v. Flores, arising from a collection suit about the financing for a mobile home, involved a substantial recovery on counterclaims for wrongful debt collection and filing of a fraudulent lien. 692 F.3d 357 (5th Cir. 2012). The Fifth Circuit affirmed in part and reversed in part, finding: (1) the release of the debtors unambiguously reached only the lien and not the underlying debt (thereby mooting some counterclaims); (2) property owners in the position of these debtors did not have an ongoing duty, for limitations purposes, to check deed records; (3) Tex. Civ. Prac. & Rem Code chapter 12, about fraudulent liens, does not require actual damages before penalties may be awarded; (4) Chapter 12 does not violate the Excessive Fines Clause; and (5) personal jurisdiction over one defendant was appropriate, particularly given the confusion in its own records about its activities.