“At will” employment status defeats fraudulent inducement claims

Sawyer v. DuPont presented employee claims of fraudulent inducement to leave jobs with DuPont for new positions at a wholly-owned subsidiary.  No. 11-40454 (April 20, 2012).   The Court began by reminding of the deference for intermediate appellate opinions in making an “Erie guess” about state law — here, the “at will” employment doctrine in Texas and its prohibition of fraudulent inducement claims about employment relationships.  Op. at  5.  Based on intermediate court authority, the Court concluded that a CBA that was terminable on notice did not change the employees’ at-will status, which thus barred their claims.  Op. at 9.  The Court also found that oral representations to another group of employees were not sufficiently definite to change their at-will status, citing Montgomery County Hospital District v. Brown, 965 SW.2d 501 (Tex. 1998).  Op. at 10.  Summary judgment for DuPont was affirmed.

“At-will” employment opinion vacated, issue certified to SCOTX

The Court vacated its earlier panel opinion in Sawyer v. du Pont, which rejected claims of fraudulent inducement by employees who the Court concluded were “at-will.”  The issue of whether at-will employees can bring such claims (which here, also involves the application of a notice provision in the employees’ CBA with their employer), has now been certified to the Texas Supreme Court.  No. 11-40454 (July 27, 2012).  The Texas Lawyer Blog has some interesting insight on the procedural history of this ruling.

False claims relator does not skate by.

The relator in a reverse False Claims Act case alleged that DuPont concealed its obligation to pay penalties under the Toxic Substances Control Act. After a careful review of the statute, its history, and policy considerations, the Fifth Circuit reversed the denial of summary judgment to DuPont: “Simoneaux’s position yields an extraordinarily broad construction of the FCA. If his reading . . . were correct, reverse-FCA liability could attach from the violation of any federal statute or regulation that imposes penalties. . . . For example, 45 C.F.R. § 3.42(e) prohibits roller-skating at the National Institutes of Health, and a person violating that regulation “shall be fined under title 18, United States Code, imprisoned for not more than 30 days, or both.” 40 U.S.C. § 1315(c)(A). Under Simoneaux’s reasoning, roller-skating at the NIH results in a penalty ‘of not less than $5,000’ and three times the fine assessed under Title 18. And any private person who saw the roller-skater could bring a qui tam action against him. The statutory definition of ‘obligation’ cannot bear the weight of that interpretation.” United States ex rel. Simoneaux v. duPont, No. 16-30141 (revised Dec. 14, 2016).

New Year, new dispute about Atlantic Marine —

rollsroycelogoA helicopter crashed in the Gulf of Mexico.  Its owner sued three defendants — Rolls-Royce, who built the engine bearing in question; the designer of the “pontoon flotation” system that deployed after the crash; and a repair company that worked on that system. Rolls-Royce sought severance and transfer to Indiana, based on a forum selection clause in its warranty, and relying on the recent case of Atlantic Marine Construction v. Western District of Texas, 134 S. Ct. 568 (2013).  The district court denied its motions; in a 2-1 decision, the Fifth Circuit reversed.   In re: Rolls Royce Corp., 775 F.3d 671 (5th Cir. 2014).

After confirming that mandamus relief was available, despite the novel procedural context of a combined transfer and venue motion, the majority reviewed the applicability of Atlantic Marine.  “For cases where all parties signed a forum selection contract, the analysis is easy: except in a truly exceptional case, the contract controls.”  For a situation such as this one, however, the analysis is more subtle: “While Atlantic Marine noted that public factors, standing alone, were unlikely to defeat a transfer motion, the Supreme Court has also noted that section 1404 was designed to minimize the waste of judicial resources of parallel litigation of a dispute. The tension between these centrifugal considerations suggests that the need — rooted in the valued public interest in judicial economy — to pursue the same claims in a single action in a single court can trump a forum-selection clause.”

The dissent “believe[s] the majority have erroneously and confusingly diminished the scope of Atlantic Marine,” concluding: “Simple two-party disputes are near a vanishing breed of litigation.  It seems highly unlikely that the Supreme Court granted certiorari and awarded the extraordinary relief of mandamus simply to proclaim that a forum selection clause must prevail only when one party sues one other party.  The Court is not naive about the nature of litigation today.”

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Preservation Twofer

1.  Request a limiting instruction to help preserve evidentiary error:  “Moreover, even if there is merit to this distinction, [Defendant] never requested a limiting instruction during trial that would have enabled the jury to consider the evidence regarding insurance only for permissible purposes. Where ‘counsel never requested a more complete limiting instruction,’ the district court ‘cannot [be] fault[ed] . . . for failing to give one spontaneously.” Eagle Suspensions, Inc. v. Hellmann Worldwide Logistics, Inc. (June 9, 2014, unpublished).

2.  Renew earlier issues to help preserve charge error: “Essentially, [Defendant] now argues that the district court should have recalled [Defendant’s] federal preemption argument from January and February 2013 when drafting the final jury instructions on March 20, 2013, even though [Defendant] itself never referenced this federal preemption argument in [Defendant’s] objections to the proposed jury instructions. . . . [A]  party cannot merely rely on ‘‘the fact that the court is already aware of its position as an excuse for a failure to make a specific, formal objection at the charge conference.’  Rule 51 specifically requires parties to make their objections after the proposed jury charge has been drafted and distributed for comment.”  Id. (quoting Jimenez v. Wood County, 660 F.3d 841, 845-46 (5th Cir. 2011) (en banc)).

Certification Twofer

1.  The Fifth Circuit vacated its panel opinion in Sawyer v. duPont to certify two questions to the Texas Supreme Court — paraphrased slightly, they were (1) whether an at-will employee can sue for fraud for loss of employment, and (2) whether a 60-day “cancellation-upon-notice” collective bargaining agreement would change a “no” answer to (1).  The Texas Supreme Court has now answered those questions: “no” as to the basic question about a fraud claim arising from at-will employment, and “in the situation presented, no” to the second question about the effect of the CBA.  “The Employees argue that it would contravene public policy to allow an employer to benefit from its duplicity, but public policy is not better served by allowing contracting parties to circumvent their agreement.”  No. 12-0626 (Tex. April 25, 2014).  (The Fifth Circuit formally adopted that reasoning and affirmed on June 11, 2014).

2.  Similarly, the Court vacated its panel opinion in Ewing Construction v. Amerisure Insurance Corp. to certify the question whether a CGL policy’s “Contractual Liability Exclusion” would reach a contract in which a contractor commits to work in a “good and workmanlike manner.”  The Texas Supreme Court answered “no”: “[A] general contractor who agrees to perform its construction work in a good and workmanlike manner, without more, does not enlarge its duty to exercise ordinary care in fulfilling its contract, thus it does not ‘assume liability’ for damages arising out its defective work so as to trigger the Contractual Liability Exclusion.”  No. 12-0661 (Tex. Jan. 17, 2014).  The opinion has been called a “significant reassurance” to policyholders in the construction business.

Blame it on Rio.

Indusoft sued in the Southern District of Texas alleging theft of intellectual property.  Two defendants moved to dismiss on the grounds of forum non conveniens (under Gulf Oil Corp. v. Gilbert, 330 U.S. 501 (1947), not 1404(a)).  The Court affirmed dismissal, finding no error in (1) presuming that Brazil was an adequate alternate forum, (2) concluding that certain electronic data was more likely to be preserved in Brazil, (3) discounting the importance of one witness for whom compulsory process would not be available in Brazil, and (4) analyzing the interplay between the Texas case and related litigation in Brazil. Indusoft, Inc. v. Taccolini, No. 13-50042 (March 19, 2014, unpublished). The Court reversed dismissal of the other defendants’ counterclaims, finding that it was erroneous to do so sua sponte (citing Lozano v. Ocwen Federal Bank, 489 F.3d 636, 643 (5th  Cir. 2007)).

Change in coverage with renewed policy; judgment for insurer affirmed.

Materials Evaluation and Technology Corporation (“METCO”) had a CGL policy from Mid-Continent that it renewed annually beginning in 1997.  The 2002 policy covered liability arising from a third-party contractual relationship while the 2003 policy did not.  Two METCO employees were injured at a DuPont facility, DuPont settled their claim and sought indemnity from METCO pursuant to their contract, and Mid-Continent denied coverage based on the 2003 policy.  Materials Evaluation & Tech Corp. v. Mid-Continent Casualty Co., No. 12-40186 (March 18, 2013, unpublished).  METCO appealed a summary judgment for the insurer, arguing that Texas law presumes that an insurance policy renews on the same terms as the original.  The Court reviewed METCO’s authority and found it was limited to those cases’ particular fact situations — generally involving a claim of misrepresentation or an issue of mutual mistake — and affirmed.

Arbitral authority and “cause” for termination

An employer terminated two employees for safety violations.  An arbitrator, appointed under the parties’ collective bargaining agreement, ordered them reinstated after a suspension.  The district court vacated the award, and the Fifth Circuit reversed and reinstated.  Albermarle Corp. v. United Steelworkers, 703 F.3d 821 (2013).  The Court found that “explicating broad CBA terms like ’cause,’ when left undefined by contract, is the arbitrator’s charge.”  Id. at 7.  It distinguished prior cases that left an arbitrator no discretion as to whether certain rule violations required discharge.  Id. at 5-6 (citing E.I. DuPont de Nemours & Co. v. Local 900, 968 F.2d 456 (5th Cir. 1992)).  The Court also rejected a challenge to the award on public policy grounds, reminding that “any such public policy must be explicit, well defined, and dominant.”  Id. at 10.  Cf. Horton Automatics v. Industrial Division of the Communication Workers of America, No. 12-40576 (Jan. 4, 2013, unpublished) (reversing confirmation when labor arbitrator exceeded limited scope).