A picture is worth a thousand words –

Press coverage of Judge Neil Gorsuch’s nomination to the Supreme Court has noted his intelligent and accessible writing style, including use of a sentence diagram (left) in a criminal case that turned on what elements of the crime required proof of intent. In the same spirit, in dissent from the denial of en banc rehearing in a highly technical case about protection of the dusky gopher frog (right), Judge Edith Jones used a pair of Venn diagrams to illustrate her view of how the Endangered Species Act should operate (below left), contrasted with the panel opinion’s (below right). Markle Interests v. U.S. Fish & Wildlife Service, No. 14-31008 (Feb. 14, 2017).

 

Several wrongs don’t make a right.

CitiMortgage sought to foreclose on Maldonado’s home; in the subsequent litigatoin, it offered summary judgment evidence that he owed a balance of $533,960.80. In response, Maldonado “disputed the amounts that CitiMortgage claimed in attorneys’ fees, inspection fees, escrow, taxes, and late charges,” but did “not provide any evidence of what the correct amounts should be.”  Maldonado v. CitiMortgage, No. 16-20541 (Jan. 23, 2017, unpublished).

Who can kickback?

The issue in United States ex rel. Vavra v. Kellogg Brown & Root, Inc. was whether KBR was liable for kickbacks taken by two employees. The Fifth Circuit held that the answer is fact-specific: “[T]he proper test for imputing knowledge under [the AKA] is that corporations are liable ‘only for the knowing violations of those employees whose authority, responsibility, or managerial role within the corporation is such that their knowledge is imputable to the corporation.'”  As for the effect of the alleged kickback, even though “[i]t is true that the district court did not make any findings as to particular service problems [the employee] intended to influence in an improper manner through his gratuities . . . it is enough to connect the gratuity with the specific kind of treatment sought in a way that establishes impropriety,” which was done here “[b]ecause of the nature of the treatment [the employee] sought.” No. 15-41623 (Feb. 3, 2017).

No foreclosure, ergo no wrongful foreclosure

Foster sued about a foreclosure; the state court granted a TRO (so no foreclosure occurred); and the mortgage servicer defendants removed and obtained summary judgment. Foster challenged the denial of her motion to remand, arguing that she did not improperly join the substitute trustee appointed to conduct the foreclosure sale. The Fifth Circuit affirmed: “[B]reach of a trustee’s duty does not constitute an independent tort; rather, it yields a cause of action for wrongful foreclosure. A claim of wrongful foreclosure cannot succeed, however, when no foreclosure has occurred.” Foster v. Deutsche Bank, No. 16-11045 (Feb. 8, 2017).

Early contract termination can be a fraudulent transfer.

A group of real estate companies paid Prime LLC for consulting services. While the contract allowed termination with 60 days notice, the group and Prime agreed to end the contract without using the notice provision. A creditor complained that this termination made a fraudulent transfer, and the Fifth Circuit agreed that the claim was at least facially plausible: “While the value of the notice period lost by failure to adhere to the notice provision remains an issue for further development in the district court, at this stage we think the notice requirement secured measurable economic benefit to Prime. Assuming the facts alleged surrounding this transaction to be true, as we must under Rule 12(b)(6), Plaintiff has alleged an asset, cognizable as such under TUFTA, that was constructively transferred.” Hometown 2006-1 1925 Valley View LLC v. Prime Income Asset Management LLC, No. 15-10881 (Feb. 2, 2017)

Waiver of removal rights – law’s the same –

Defendants removed, the plaintiff moved to remand, and the the district court granted the motion. It found a waiver of the right to remove, noting this contract provision: “The Parties hereto hereby irrevocably and unconditionally consent to the sole and exclusive jurisdiction of the courts of Harris County in the State of Texas for any action, suit or proceeding arising out of or relating to this Agreement or the Proposed Transaction . . . .” The defendants claimed ambiguity (which would make the waiver no longer be “clear and unambiguous,” and thus not satisfy the demanding standard in this area) from (1) the definition of “Proposed Transaction,” (2) the definitions of the relevant parties, and the use of “Proposed Transaction” in the above part of the relevant clause, but not in another, similar provision later in it. The Fifth Circuit rejected these arguments and affirmed, but also affirmed the denial of any award of attorneys’ fees. Grand View PV Solar Two, LLC v. Helix Elec., Inc., No. 16-20384 (Feb. 1, 2017). The opinion is a good summary of the law on this topic, which has not been addressed in detail recently.

No arbitration in Stanford cases

The receiver of the Allen Stanford businesses sued several investors for receiving fraudulent conveyances. In earlier appeals, the Fifth Circuit resolved other thresehold issues in these cases; in Janvey v. Alguire, the Court reviewed the denials of the defendants’ motions to compel arbitration. It affirmed, rejecting their arguments based on arbitration clauses in various Stanford-related documents: “Because the Receiver may sue on behalf of any of the Stanford entities that has a claim against the defendants, becausehe has chosen to sue on behalf of the Bank, which has not consented to arbitrate claims against any of the defendants [except for one, who waived the issue], and because none of the equitable doctrines urged by the defendants applies, the Receiver cannot be compelled to arbitate his claims against these defendants.” No. 14-10945 et al. (Jan. 31, 2017).

Carmack the Magnificent

Heniff Transportation, a trucking company, sued Trimac Transportation, alleging that Trimac did not properly clean a tanker-trailer, resulting in contamination and a damages claim against Heniff by its customer. Trimac argued that Heniff’s state law claims were preempted by the Carmack Amendment, a federal law that addresses actions about lost or damaged goods, arising from interstate transportation of the goods by a common carrier. The Fifth Circuit agreed, finding that washing a tanker-trailer was “plainly” such a service, directly analogous to specific examples given by the statute. This statute, not widely known outside trucking litigation, can bear significantly on UCC claims involving transported goods. Heniff Transportation v. Trimac Transportation, No. 16-40553 (Jan. 30, 2017).

Herding Fish

The “Gulf Council” manages fisheries in the federal waters of the Gulf of Mexico.With respect to red snapper, its statutory grant of authority requires it to establish “seprate quotas for recreational fishing . . . and commercial fishing.” A group of private anglers complained that the authority to set those two quotas precluded the ability to set a quota for fishing from charter vessels. The Fifth Circuit disagreed, finding that neither the canon that “expressing one item of a commonly associated group or series excludes another left unmentioned,” nor that “a specific statute prevails over an inconsistent general statute” compelled a ruling in favor of the anglers: “Amendment 40 does not create a separate quota for charter fishing; it subdivides the recreational sector into private and charter components.” Coastal Conservation Association v. U.S. Dep’t of Commerce, No. 16-30137 (revised Jan. 26, 2017).

No punitive damages for insurance claim denial

A church in Hattiesburg, Mississippi proved that its insurer did not properly handle its claim resulting from tornado damage (right), resulting in a damages award of over $1,000,000. The Fifth Circuit affirmed against challenges by both sides; as to the church’s request for punitive damages, it held: “Taking the facts in the light most favorable to Mount Carmel, GuideOne’s alleged conduct did not rise to the necessary level of an independent tort that would warrant punitive damages. Mount Carmel merely alleges that GuideOne had ‘knowledge of the financial harm that would result’ from its cancellation of the policy. But this type of knowledge is likely present for many cancellations and alone is not sufficient to rise to the level of an independent tort. Accordingly, it does not warrant punitive damages.” GuideOne Elite Ins. Co. v. Mount Carmel Ministries, No. 15-60915 (Jan. 23, 2017, unpublished).