Celebrate summer with 600 Summer Camp and five good cases to know from the Fifth Circuit in 2016 — and one special bonus!
Here is a reprint of my article this week in the Texas Lawbook, Federal Litigation in the Fifth Circuit in the New Year. I hope you find it informative and helpful.
Happy Halloween, with the most recent “5 cases to know” update from 600Camp – you can read it here, complete with case links.
At mid-year 2015, you can see here my recommendations for five cases from the last 3 months that are well worth a read.
Can you believe it is April 2015 already? To review the “top five” opinions from the Fifth Circuit in the area of business litigation from the first quarter, please click here — better-formatted compared to the standard WordPress ordinarily used by the blog.
- General jurisdiction is not general. “It is . . . incredibly difficult to establish general jurisdiction in a forum other than the place of incorporation or principal place of business.” Monkton Ins. Servs. v. Ritter, __ F.3d ___ (5th Cir. Sept. 26, 2014) (applying Daimler AG v. Bauman, 134 S. Ct. 746 (2014)).
- “Gateway” arbitration has a gate. A party must only “arbitrate gateway questions of arbitrability if the argument that the dispute falls within the scope of the agreement is not wholly groundless.” In Douglas v. Regions Bank, an agreement about a bank account did not control a later, unrelated embezzlement case. 757 F.3d 460 (5th Cir. 2014).
- “Based on” = Arbitration. The contract said: “Terms and conditions are based on the general conditions stated in the [attached].” While “based on” may have “multiple interpretations . . . in the abstract,” no such reading worked here, given the length and scope of the attachment compared to the contract. Rushaid v. National Oilwell Varco, Inc., 757 F.3d 416 (5th Cir. 2014).
- No actual damages = No civil penalties. Forte v. Wal-Mart Stores, ___ F.3d ___ (5th Cir. Aug. 25, 2014) (rehearing pending).
- Analytical GAAP. An expert reviewed financial documents from A and tax returns from B. His opinions about the finances of C and D were stricken: “It is by no means clear how a [CPA] can obtain personal knowledge of the effects of the actions of one entity on other parties without reviewing the latter’s financial documents . . . .” Meadaa v. K.A.P. Enterprises LLC, 756 F.3d 875 (5th Cir. 2014).
BONUS: Lipan Apaches may use eagle feathers in religious rituals — for now at least. McAllen Grace Brethren Church v. Salazar, ___ F.3d ___ (5th Cir. Aug. 20, 2014).
In the second quarter of 2014, the Fifth Circuit said how to . . .
1. . . . enforce an Agreed Protective Order. Two judges, finding “written notice” ambiguous, found that Ford did not waive confidentiality designations by having a lengthy email exchange rather than moving for protection. The dissent would construe the ambiguity against Ford and faults the majority for encouraging “vague, non-responsive answers.” Moore v. Ford Motor Co., ___ F.3d ___ (June 20, 2014).
2. . . . . remove based on federal question jurisdiction. A petition raised a sufficient federal question for removal when it incorporated this allegation from an EEOC complaint: “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).” Davoodi v. Austin ISD, ___ F.3d ___ (June 16, 2014).
3. . . . protect in-house counsel’s attorney-client privilege. Addressing the common question of “business or legal advice?” the court found a memo privileged because it “deal[t] with any legal liability that may stem from under-disclosure of data, hedged against any liability that may occur from any implied warranties during complex negotiations.” Exxon Mobil Corp. v. Hill, 751 F.3d 379 (2014).
- How close does Twombly come to Fed. R. Civ. P. 9(b)? Consider Merchants & Farmers Bank v. Coxwell, affirming the dismissal of a pleading: “The complaint did not specify what court issued the order, when it was issued, or to whom it was directed; [and] the complaint did not describe what the order required . . . .” No. 13-60368 (5th Cir. Feb. 7, 2014, unpublished).
- Credibility questions create fact issues. See Vaughan v. Carlock Nissan of Tupelo, No. 12-60568 (5th Cir. Feb. 4, 2014, unpublished) (reversing a summary judgment about a manager’s “bad faith,” noting credibility questions about his claimed justifications for a firing, ambiguity in other statements, and the timing of the termination).
- Forum non conveniens factors – the “availability of witnesses” factor is reviewed by Royal Ten Cate USA, Inc. v. TT Investors, Ltd. No. 13-50106 (5th Cir. March 25, 2014, unpublished), and Indusoft, Inc. v. Taccolini, No. 13-50042 (March 19, 2014, unpublished).
- Conflicting documents about arbitration are harmonized in Lizalde v. Vista Quality Markets, ___ F.3d ___ (5th Cir. March 25, 2014) (enforcing an arbitration agreement despite a benefit plan with a broad termination right, noting that both agreements’ termination provisions “clearly demarcate their respective applications”).
- Settlement efforts as prerequisite for arbitration. This language — “the parties agree to negotiate in good faith toward resolution of the issues, and to escalate the dispute to senior management personnel in the event that the dispute cannot be resolved at the operational level” — does not create a requirement of negotiation by senior management before arbitration is invoked. 21st Century Financial Services v. Manchester Financial, ___ F.3d ____ (5th Cir. March 31, 2014).
BONUS: Read about our firm’s recent $319 million verdict in a high-stakes partnership dispute.
From recent cases described on this blog, here are three basic tips for business cases in 2014:
1. Plead like a mystery writer. Like a skilled crime novelist, the civil rights plaintiff in Jabaray v. City of Allen survived a Rule 12 motion by detailing motive and opportunity – the mayor’s alleged personal investment in the real estate at issue, and his role and involvement in the relevant city agencies. No. 12-41054 (Nov. 25, 2013, unpubl.)
2. Eyewitnesses help make fact issues. Plaintiff claimed a barge came loose during Hurricane Katrina and damaged a bridge. Defendant said that Plaintiff’s theory required the impossible – that the barge move upstream against hurricane-force wind. The Fifth Circuit found a fact issue from eyewitnesses who saw and heard things consistent with Plaintiff’s theory. “There is a great deal of testimony supporting Lafarge’s position, to be sure, and little to support the Parish’s, but we are mindful of the summary judgment standard.” St. Bernard Parish v. Lafarge North America, No. 13-30030 (Dec. 19, 2013, unpubl.) This reasoning could extend to admissible testimony about the commercial context of an agreement, or its course of performance.
3. Keep experts on Earth. The Court found that an expert in a toxic tort case made unsupported assumptions about (a) the plaintiff’s work hours, (b) what he did at work, (c) where he worked, and (d) whether the ventilation worked. ”To be sure, reliable expert testimony often involves estimation and reasonable inferences from a sometimes incomplete record. . . . Here, however, the universe of facts assumed by the expert differs frequently and substantially from the undisputed record evidence.” Moore v. International Paint LLC, No. 13-30281 (Nov. 15, 2013, unpubl.)
The Fifth Circuit addressed several important business litigation topics in May-August of 2013:
1. Borrowers survive. Mortgage servicers still won many cases, including a published opinion rejecting claims of “robosigning.” Three times, however, the Fifth Circuit reversed Rule 12 dismissal of borrowers’ pleadings.
2 Personal jurisdiction. The Fifth Circuit applied for the first time a 2011 Supreme Court opinion about the “stream of commerce,” finding jurisdiction over a foreign manufacturer, but noting that the opinion may affect older Circuit cases suggesting that a general intent to sell in the US could create jurisdiction in a specific state.
3. Extrinsic evidence. The proper handling of extrinsic evidence is a recurring challenge in contract litigation. A recent case reminds of the importance of evidence about course of performance, even for an unambiguous contrac
4. Venue. The Court granted mandamus to compel an intra-district transfer from East Texas’s Marshall Division to its Tyler Division.
5. Jury deference. In Wellogix, Inc. v. Accenture, LLP, the Court affirmed a $44 million jury verdict, reminding: “Had we sat in the jury box, we may have decided otherwise.” Three other published opinions substantially affirm jury awards.
BONUS: Where is the M/V OCEAN SHANGHAI? An admiralty appeal was recently found moot, in part because the “ship had sailed” from the Fifth Circuit. Modern technology lets blog readers follow the SHANGHAI to non-Fifth Circuit locations around the globe.
The Fifth Circuit wrote in five areas of particular interest for commercial litigation during the first 1/3 of 2013:
Mandatory arbitration. While an employer’s Dispute Resolution Program encouraged mediation, it still required arbitration if other options did not succeed. Klein v. Nabors Drilling, 710 F.3d 234 (5th Cir. 2013).
Daubert. Opinions about railroad safety were “transparently subjective” when the witness relied solely on “education and experience” and could not tie his opinions to specific safety standards. Brown v. Illinois Central Railroad, 705 F.3d 531 (5th Cir. 2013).
Personal jurisdiction. When the plaintiff bought a shaved-ice machine in Louisiana and “unilaterally transported” it to Mississippi, Mississippi had no jurisdiction over the Louisiana-based manufacturer. Irvin v. Southern Snow Manufacturing, No. 11-60767 (5th Cir. March 13, 2013, unpublished).
Injunctive relief and trade secrets. The Court largely affirmed a preliminary injunction about pharmaceutical development in Daniels Health Sciences v. Vascular Health Sciences, reviewing the standards for proof of a trade secret and irreparable injury. 710 F.3d 579 (5th Cir. 2013).
Mortgage servicing. A series of unpublished opinions rejected claims against mortgage servicers and lenders (usually arising from failed loan modification negotiations) involving the Statute of Frauds, negligent misrepresentation, estoppel, waiver, the validity of a MERS assignment and unreasonable collection efforts.
BONUS: Monks can sell caskets. A Louisiana law that barred a Benedictine monastery from selling caskets was struck down as unconstitutional under “rational basis” review. St. Joseph Abbey v. Castille, ___ F.3d ___, No. 11-30757 (5th Cir. March 20, 2013). “The deference we owe expresses mighty principles of federalism and judicial roles. The principle we protect from the hand of the State today protects an equally vital core principle – the taking of wealth and handing it to others . . . as ‘economic’ protection of the rulemakers’ pockets.”
The Fifth Circuit’s 2012 business litigation opinions suggest these five tips for the New Year:
1. Plead key details. While not removing the limits on Fed. R. Civ. P. 9(b), the Court has reminded twice of the importance of “what,” “how,” and “when” in pleading under Twombly and Iqbal. It also reversed a Rule 12 dismissal in a contract case because the plaintiff adequately pleaded an industry custom about the relevant terms.
2. Plead reasonably. The Federal Circuit, applying Fifth Circuit law, reversed the denial of Rule 11 sanctions for what it saw as an objectively unreasonable construction of a patent.
3. Stretch the long arm carefully. Applying recent Supreme Court authority, the Fifth Circuit found no personal jurisdiction over cases about an “off-the-shelf” software contract, a distributorship arrangement based outside the forum state, and an alleged corporate “alter ego” situation.
4. Watch the eight corners. During 2012, the Court reversed once, and then again, to reject exceptions to Texas’s “eight corners” rule about insurance coverage, but also reversed to allow a mistake claim to proceed despite that rule.
5. Don’t count on mandamus. After granting mandamus in a high-profile venue dispute in 2008, the Court has since declined to grant the writ as to the wrongful denial of a remand motion and an alleged error about a forum selection clause.
From the second third of 2012, here are 5 commercial litigation cases from the U.S. Court of Appeals for the Fifth Circuit worth knowing:
1. Personal jurisdiction. “[O]ff-the-shelf, out-of-the-box” software contract did not create a “long-term interactive business relationship” with Texas. Pervasive Software v. Lexware GMBH & Co., No. 11-50097 (5th Cir. July 20, 2012).
2. Class certification. No “commonality” for claims about “whether each individual qualified for the discount based on the evidence in his or her file.” Ahmad v. Old Republic Nat’l Title Ins., No. 11-10695 (5th Cir. Aug. 13, 2012).
3. Daubert challenges rejected. Several issues about mechanical engineering testimony “ultimately . . . affected the weight of the evidence” rather than admissibility. Roman v. Western Manufacturing, No. 10-31271 (5th Cir. Aug. 17, 2012)
4 and 5. Satisfying Twombly and Iqbal
Not enough: pleading that “invokes three potentially cognizable theories of liability,” but “does not identify by date or amount or type of service, any of the alleged bad-faith denials and delays . . . .” Patrick v. Wal-Mart, 681 F.3d 614 (5th Cir. 2012).
Not enough: “no allegations regarding the types of businesses . . . the size . . . where they are located, or what laws and regulations they have violated.” Bowlby v. City of Aberdeen, 681 F.3d 215 (5th Cir. 2012).
Compare: “Particularity” standard under FRCP 9(b) “require[s] a plaintiff pleading fraud to specify the statements contended to be fraudulent, identify the speaker, state when and where the statements were made, and explain why the statements were fraudulent. . . . the who, what, when, where, and how of the events at issue.” E.g., Dorsey v. Portfolio Equities, 540 F.3d 333, 339 (5th Cir. 2008).
From the first third of 2012, here are 5 commercial litigation cases from the U.S. Court of Appeals for the Fifth Circuit worth knowing:
1. Unenforceable arbitration clause. A clause in an employee manual, which could be amended by giving appropriate notice, was illusory and not enforceable. Carey v. 24 Hour Fitness, 669 F.3d 202 (5th Cir. 2012).
2. Personal jurisdiction. The defendant’s 55 transactions in Mississippi were not sufficiently related to the claim to create personal jurisdiction. This was the Circuit’s first jurisdiction case since two major Supreme Court cases in 2011. ITL International, Inc. v. Sonstenla, S.A., 669 F.3d 493 (5th Cir. 2012).
3. Sufficient causation evidence. A thorough opinion finds that expert testimony was not needed in a personal injury case, but even then, the evidence of causation was not sufficient. Huffman v. Union Pacific Railroad, 675 F.3d 412 (5th Cir. 2012).
4. Business Torts Damages 101. The defendants’ acts were not actionable in fraud, did not amount to fraudulent inducement, but did support liability for misappropriation of trade secrets. Bohnsack v. Varco, 668 F.3d 262 (5th Cir. 2012).
5. Statute of Frauds 101. Sufficient evidence to satisfy the Statute of Frauds is different than what may establish contract liability. Preston Exploration Co. v. GSF, LLC, 669 F.3d 518 (5th Cir. 2012).