Preservation twofer in contract case

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   Blessey Marine Services, Inc. v. Jeffboat, LLC, No. 13-30731 (Nov. 10, 2014, unpublished).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.”])

Abstract Art, Clear Error.

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).

 

Disbelief of the untruth

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 . . . .”

Negligence, in whole or in part.

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.”)

 

Evidence paves way to plaintiff’s judgment in joint venture case

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.

Tortious interference damages affirmed

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.

Cumulative evidence establishes age discrimination.

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.

$40+ million trade secret judgment affirmed.

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.

Federal Circuit affirms 9-figure verdict under 5th Circuit standards

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.)

Reversal for charge error

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.

Damages affirmed for incorrect credit reporting

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)).