The Clarion-Ledger reports that Judge E. Grady Jolly of Mississippi will retire on his 80th birthday in October 2017, creating another vacancy on the Fifth Circuit for President Trump to fill. The same paper has a good description of the process for filling the vacancy. Judge Jolly has served the Fifth Circuit with distinction for 35 years; his skill and grace will be greatly missed.
In an interesting parallel to the ongoing litigation about travel bans (which most recently produced a District of Hawaii opinion granting a TRO), the Fifth Circuit denied en banc review in Defense Distributed v. U.S. Dep’t of State, which affirmed a preliminary injunction about the use of 3-D printing technology to make certain firearms. A dissent observes: “Certainly there is a strong public interest in national security. But there is a paramount public interest in the exercise of constitutional rights, particularly those guaranteed by the First Amendment . . . ” No. 15-50759 (March 15, 2017).
Tower Credit garnished the debtor’s wages. In defense of a later preference action, Tower argued that its garnishment was effective when served (taking it outside the preference period), not when the debtor in fact received money. The Fifth Circuit disagreed: “The combination of Supreme Court precedent and the overwhelming weight of persuasive authority applying § 547(e)(3) make clear that a debtor’s wages cannot be transferred until they are earned. Thus, we hold that a creditor’s collection of garnished wages earned during the preference period is an avoidable transfer made during the preference period even if the garnishment was served prior to that period.” Tower Credit v. Schott, No. 16-30274 (March 13, 2017).
In affirming sanctions for vexatious litigation in connection with bankruptcy proceedings, the Fifth Circuit noted, in particular: “Appellants’ . . . repeated attempts to litigate issues that have been conclusively resolved against them or that they had no standing to assert and by their unsupported and multiple attempts to remove . . . the trustee.” Carroll v. Abide, No. 16-30996 (March 13, 2017).
Attorney Martinez sued another law firm (“HLG”) for various torts related to the firm contacting his clients about alleged overbilling. The firm asserted absolute immiunity as a defense and the Fifth Circuit agreed, in a fact-specific holding, that the evidence “demonstrate[s] that the allegedly tortious statements at issue in this case were made in relation to a proposed arbitration and are therefore absolutely privileged under Texas law.” The firm already represented two Martinez clients in connection with the potential arbitration; the new clients did not originate contact with the firm; and all of them ultimately retained the firm. Martinez v. Hellmich Law Group, PC, No. 16-50305 (March 8, 2017, unpublished). This case joins a line of similar holdings in recent years in favor of attorney immunity.
The owner of the Golden Nugget casino in Lake Charles withheld $18.7 million from payments to its general contractor, who then filed a statutory lien (a “privilege” in Louisiana parlance) on the property. The relevant statute requires the contractor to file “within sixty days after the filing of the notice of termination or substantial completion of the work.” If “substantial completion” refers to an event, the contractor’s filing was not timely; if, however, it refers to a filing that certifies substantial completion, the contractor’s filing was timely, as the owner did not record such a certification. The Fifth Circuit concluded that, while the statute was ambiguous, the related provisions and the apparent industry practice supported the contractor’s position: “The [statute] places the burden on an owner to cut of potential claims when a contract has been recorded, whether it is a general contractor or a subcontractor.” Golden Nugget Lake Charles LLC v. W.G. Yates & Sons Constr. Co., No. 16-30496 (March 6, 2017).
In Richard v. Anadarko Petroleum Corp., the Fifth Circuit required reformation of a contract on the grounds of mutual mistake, to the detriment of non-party Liberty Mutual, acknowledging that “[c]ourts must guard against parties’ ‘attempts to make an end-run around the parol-evidence rule,’ which forecloses the use of parol evidence to interpret unambiguous terms, ‘by framing [their] argument[s] as a request for reformation.” Here, reformation was appropriate even considering the effect on Liberty Mutual, given (1) its lack of reliance on the contract, (2) the general consistency of the terms in the reformed contract with industry practice, and (3) course of performance. No. 16-30216 (March 2, 2017).
Federal Insurance agreed to pay defense costs in ongoing commercial litigation against its insureds, subject to its position that under the policy, payment of defense costs deplete the policy limits. The relevant clause said: “[T]he Limit of Liability under the Fiduciary Coverage Section is $1 million, subject to a $1 million aggregate limit, and a $10,000.00 Retention, with Defnse Costs eroding or depleting those limits.” The Fifth Circuit agreed with Federal, rejecting arguments based on the limit potentially implicating conflict-of-interest concerns for counsel, and policy issues raised by applicable state statutes in the health care area. In sum: “Under Mississippi law, insurance policies are to be enforced according to their provisions.” Federal Ins. Co. v. Singing River Health System, Ni. 15-60774 (March 1, 2017).
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).
Gatheright bought sweet potatoes from Clark, paying with two post-dated checks. When they were returned for insufficient funds, Clark instituted criminal proceedings against Gatheright, which were ultimately dismissed after Gatheright spent several weeks in jail. Gatheright then sued Clark for malicious prosecution and abuse of process. The Fifth Circuit affirmed summary judgment for Clark, observing that “$16,000 in bad checks . . . [is] a sum greater than what the Mississippi Supreme Court has previously found would prompt a reasonable person to institute criminal proceedings.” Based on that observation, the Court rejected arguments about whether a post-dated check was a proper basis for a “false pretenses” prosecution in Mississippi, and about the effect of Gatheright’s filing for personal bankruptcy. Gatheright v. Clark, No. 16-60364 (Feb. 23, 2017, unpublished).
It is well-settled nationally that “an appellate court may not alter a judgment to benefit a nonappealing party” because “it takes a cross-appeal to justify a remedy in favor of an appellee.” Greenlaw v. United States, 554 U.S. 237, 244–45 (2008). The Fifth Circuit treats that principle as jurisdictional. See, e.g., Amazing Spaces, Inc. v. Metro Mini Storage, 608 F.3d 225, 250 (5th Cir. 2010) (“[T]his circuit follows the general rule that, in the absence of a cross-appeal, an appellate court has no jurisdiction to modify a judgment so as to enlarge the rights of the appellee or diminish the rights of the appellant.”) Some other Circuits, however, take a different view. See, e.g., Am. Roll-On Roll-Off Carrier LLC v. P&O Parts Baltimore, Inc., 479 F.3d 288, 295 (4th Cir. 2007) (“This circuit views the cross-appeal requirement as one of practice, rather than as a strict jurisdictional requirement.”) (Thanks to my LPCH colleague Russ Herman for pointing this out.)
Recipients of Section 8 housing assistance sued mortgage originators, complaining that the originators either denied or discouraged the recipients’ credit applications by not considering their Section 8 income, in violation of the Equal Credit Opportunity Act. The Fifth Circuit affirmed the dismissal of claims by recipients who had only inquired about, rather than actually starting, the application process, as well as claims based on Wells Fargo’s policies about the purchase of mortgages in the secondary market. It reversed as to one group of applicants, however, finding under Iqbal and the substantive law that they “plausibly alleged that AmeriPro refused to consider their Section 8 income in assessing their creditworthiness as mortgage applicants, and that they received mortgages on less favorable terms and in lesser amounts than they would have had their Section 8 income been considered.” No. 15-20710 (Feb. 16, 2017).
Just before filing for bankruptcy, Mr. Wiggins signed a “Partition Agreement” in which he and his wife divided their ownership of their home into two separate property interests. The Fifth Circuit affirmed the bankruptcy court’s conclusion that this was a fraudulent transfer: “When it became clear that Mr. Wiggains would file bankruptcy to satisfy his outstanding debts, the couple entertained various options and made their best estimate on ultimate financial benefits by having only Mr. Wiggains file after the Partition Agreement was recorded. Allowing Mrs. Wiggains to sidestep the statutory limits for homestead exemptions and obtain approximately $500,000 in proceeds that otherwise are for creditors would lay waste to the provisions of the Bankruptcy Code involved here.” Wiggains v. Reed, No. 15-11249 (Feb. 14, 2017).
Texas Lawyer reports that six candidates are under consideration for the two vacancies on the Fifth Circuit – “Texas Supreme Court Justice Don Willett; U.S. District Court Judge Reed O’Connor of Fort Worth; former Texas solicitor general James Ho; Andy Oldham, a deputy general counsel to Gov. Greg Abbott; Michael Massengale, a justice on Houston’s First Court of Appeals; and Brett Busby, a justice on Houston’s Fourteenth Court of Appeals” – the full story appears here.