Continuing a theme in cases involving attorney liability (most notably the recent Stanford-related opinion in Troice v. Proskauer Rose, 816 F.3d 341 (5th Cir. 2015)), the Fifth Circuit affirmed summary judgment for the law firm involved in a disputed foreclosure: “Under Texas law, the doctrine of qualified immunity has ‘long authorized attorneys to practice their profession, to advise their clients and interpose any defense or supposed defense, without making themselves liable for damages.” Lassberg v. Bank of America, No. 15-40196 (Aug. 23, 2016, unpublished).
In Ortega v. Young Again Products, the plaintiff sued a judgment creditor and its counsel, claiming that they took assets that belonged to him rather than the judgment debtor. No. 12-20592 (Nov. 27, 2013, unpublished). The Fifth Circuit recognized that Texas extends qualified immunity to claims by a third-party against an attorney for conduct requiring the “office, professional training, skill, and authority of an attorney.” The focus is on the type of conduct, not its merit. Accordingly, removal of the case was proper because the attorney was fraudulently joined, and dismissal for various reasons was affirmed.
The Court affirmed almost all of a series of immunity rulings by the district court in the consolidated litigation against the Corps of Engineers arising from Hurricane Katrina. In re Katrina Canal Breaches Litigation (March 2, 2012). While most of the opinion focuses on issues unique to flood control, it provides a crisp summary of the requirements of the National Environmental Policy Act as to environmental impact statements, and concludes with a brief summary of the standards for mandamus relief in the federal system. Op. at 27. The Court declined to grant a writ of mandamus to stay an upcoming trial because its opinion affirmed the immunity rulings that the district court would use for that trial. (A subsequent opinion mooted the mandamus issue because it changed the disposition of the merits.)
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.
Defendants moved for summary judgment, on the ground of qualified immunity, in a case arising from a fatal police shooting. The district court “disregarded the testimony of [Officer] Copeland and two eyewitnesses, finding that because there was ‘no video evidence of the actual shooting[,]’ the ‘testimony of Copeland, the eyewitness, and the 9-1-1 caller . . . should not be accepted until subjected to cross examination.'” The Fifth Circuit reversed; in addition to a ground based on qualfied immunity law, the Court held that under general Rule 56 principles: ”There is no evidence to suggest that the pair was biased, and the district court specifically found that the heirs ‘[did] not offer any evidence to contradict the eyewitnesses’ statements.’ Because their testimony was ‘uncontradicted and unimpeached,’ the district court was required to give it credence. Failure to do so amounted to an inappropriate ‘credibility determination.'” Orr v. Copeland, No. 16-50023 (Dec. 22, 2016).
A class sought damages from attorneys involved in Allen Stanford’s business affairs. The Fifth Circuit, reversing the district court, found the claims barred by attorney immunity under Cantey Hanger LLP v. Byrd, 467 S.W.3d 484 (Tex. 2015): “Plaintiffs alleged that, in representing Stanford Financial in the SEC’s investigation, [Attorney] Sjoblom: sent a letter arguing, using legal authorities, that the SEC did not have jurisdiction; communicated with the SEC about its document requests and about Stanford Financial’s credibility and legitimacy; stated that certain Stanford Financial executives would be more informative deponents than others; and represented a Stanford Financial executive during a deposition. These are classic examples of an attorney’s conduct in representing his client.” The Court rejected the “fraud exception” relied upon by the district court, and among arguments for other exceptions, rejected the argument that immunity only extended to litigation as not having been raised below. Troice v. Proskauer Rose LLP, No. 15-00500 (March 10, 2016).
A set of “kaleidoscopic claims” about the Houston ISD’s contracting process produced several RICO holdings of note in Ramirez Group v. Houston ISD, No. 13-20753 (May 18, 2015):
- To show the requisite injury, “[a] plaintiff need not show that the other party would have been obliged to confer a benefit, only that the other party would have conferred the benefit.” This can be shown by a substantial drop in work assignments coupled with other suspicious activity.
- The Houston ISD is immune from suit under RICO, because a governmental entity cannot form the requisite criminal intent, and because municipal entities enjoy common law immunity from punitive damages.
- Official immunity does not extend to a school trustee accused of acting “wholly outside the legitimate scope” of his duties by allegedly accepting bribes.
- The requisite mental state for tortious interference can be shown “[w]here only a limited number of . . . contractors would be selected, [so] all of the participants in the scheme ‘knew the interference was substantially certain to occur as a result of the conduct.'”
Earlier this year, the Fifth Circuit largely affirmed a series of rulings about governmental immunity in litigation about flood damage from Hurricane Katrina, allowing some cases to proceed and finding the government immune as to others. On rehearing, the Court found that the “discretionary-function exemption” to the Federal Tort Claims Act created immunity even if the Flood Control Act did not. In re Katrina Canal Breaches Litigation at 25-26 (Sept. 24, 2012) (“Our construction of the FCA leaves undisturbed the district court’s ruling on that issue. Our application of the DFE, however, completely insulates the government from liability.”).
I wrote a short article in May 2016 about the Fifth Circuit’s approach to mandamus.
In re Volkswagen, 545 F.3d 304 (5th Cir. 2008) (en banc), is a leading opinion about appellate review of the denial of a motion to transfer venue for convenience reasons. The development of the law on that issue is detailed in Ashby, Coale & Kratovil, “The Increasing Use and Importance of Mandamus in the Fifth Circuit,” 43 Tex. Tech. L. Rev. 1049 (2011).
A counterpoint about the availability of mandamus relief in federal courts appears in In re Crystal Power, 641 F.3d 82 (5th Cir. 2011), denying mandamus review of a refusal to remand, and citing case law from the late 19th Century. A recent law review article thoughtfully reviews Crystal Power — Ryan, Meier, and Counsellor, “Interlocutory Review of Orders Denying Remand Motions,” 63 Baylor L. Rev. 734 (2011). See generally In re Amy Unknown, 701 F.3d 749, 756-57 (5th Cir. 2012) (en banc) (in criminal restitution context, reviewing mandamus standards generally and stating: “Mandamus traditionally ‘is not to be used as a substitute for an appeal, or to control the decision of the trial court in discretionary matters.'”) (This case was also later reversed by the Supreme Court on the merits).
In the same spirit, the case of In re Atlantic Marine Construction denied mandamus relief to enforce a forum selection clause, finding no clear abuse of discretion by the district court, although a special concurrence details differences of opinion on the controlling issue in that case. 701 F.3d 736 (5th Cir. 2012). (The Supreme Court later reversed 9-0 on the forum selection issue, 134 S. Ct. 568 (2013), but did not engage the mandamus posture in which the case arose.)
Two other recent cases of note have declined to grant mandamus relief. A limited opinion about mandamus review of an expert fee order under the CJA, In re Marcum LLP, reminds that the All Writs Act’s grant of authority to issue a writ of mandamus is not an independent grant of federal jurisdiction. 670 F.3d 636 (5th Cir. 2012). And in the case of In re Katrina Canal Breaches Litigation, in the context of affirming several governmental immunity issues, the Court declined to grant a writ of mandamus to stay an upcoming trial because its opinion affirmed the immunity rulings that the district court would use for that trial. 673 F.3d 381 (5th Cir. 2012). (A later opinion mooted the mandamus issue because it changed the disposition of the merits.) See also All Plaintiffs v. Transocean Offshore, No. 12-30237 (Jan. 3, 2013, unpublished) (following Mohawk Industries v. Carpenter, 130 S. Ct. 599 (2009), finding that the collateral order doctrine did not allow appeal of an order requiring a psychiatric exam, and discussing the unavailability of mandamus in a concurrence).
In In re Radmax, Ltd., 720 F.3d 285 (5th Cir. 2013), the Fifth Circuit found a clear abuse of discretion in declining to transfer a case from the Marshall Division of the Eastern District of Texas to the Tyler Division. It found that the district court incorrectly applied the eight relevant 1404(a) factors, giving undue weight to potential delay and not enough weight to witness inconvenience, and quoting Moore’s Federal Practice for the principle that “‘the traditional deference given to plaintiff’s choice of forum . . . is less’ for intra-district transfers.” A pointed dissent agreed that the 1404(a) factors favored transfer but saw no clear abuse of discretion, noting that there was no clear Fifth Circuit authority on several of the points at issue in the context of intra-district transfers. The full court subsequently denied en banc review by a 7-8 vote. 736 F.3d 1012 (5th Cir. 2013).
The 2-1 decision in In re: Rolls Royce Corp., 775 F.3d 671 (5th Cir. 2014), built on Atlantic Marine. 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 where only one of several defendants has a clause, 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.” Despite that observation, it granted mandamus to enforce the clause. A 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.”
In In re Lloyd’s Register North America, Inc., 780 F.3d 283 (5th Cir. 2015), the Fifth Circuit granted mandamus on a forum non conveniens issue. The point of division between the majority and dissent — whether an error is “clear” or not — resembles a similar split between the majority and dissent in In re Radmax. And most recently, a panel divided on whether a federal court has jurisdiction over a suit brought by an assignee of a receiver, finding no “clear and indisputable” error. A dissent disagreed. In re American Lebanese Syrian Associated Charities, No. 15-11188 (March 3, 2016).
A “big picture” summary of Rule 12, even after Twombly and Iqbal, appears at the start of Breton Energy LLC v. Mariner Energy Resources Inc.: “Well-pleaded factual allegations may perfectly shield a complaint from dismissal under Rule 12(b)(6), and our inquiry’s ’emphasis on the plausibility of a complaint’s allegations does not give district courts license to look behind those allegations and independently assess the likelihood that the plaintiff will be able to prove them at trial.'” 764 F.3d 394, 396 (5th Cir. 2014) (quoting Harold H. Huggins Realty, Inc. v. FNC, Inc., 634 F.3d 787, 804 n.44 (5th Cir. 2011)).
Supreme Court. In the 9-0 per curiam opinion of Johnson v. City of Shelby, the Supreme Court reversed the Fifth Circuit’s dismissal of a civil rights claim for failure to cite the applicable statute: “Our decisions in [Twombly and Iqbal] are not in point, for they concern the factual allegations a complaint must contain to survive a motion to dismiss. A plaintiff, they instruct, must plead facts sufficient to show that her claim has substantive plausibility. Petitioners’ complaint was not deficient in that regard. Petitioners stated simply, concisely, and directly events that, they alleged, entitled them to damages from the city. Having informed the city of the factual basis for their complaint, they were required to do no more to stave off threshold dismissal for want of an adequate statement of their claim.” 135 S. Ct. 346, 347 (2014). (Here is the pleading at issue.)
Twombly satisfied. The most recent detailed statement by the Fifth Circuit in this area appears in Richardson v. Axion Logistics, No. 14-30306, ___ F.3d ___ (March 3, 2015). Richardson alleged that his employer terminated him, in violation of Louisiana’s whistleblower statute, for revealing overbilling. The district court dismissed and the Fifth Circuit reversed. Applying the Twombly “plausibility” standard, the Court found adequate pleading about his employer’s knowledge of the alleged misconduct, as well as the timeline of events up to his termination. The pleading itself is available here; the specific paragraphs identified by the Court as to the employer’s knowledge are highlighted in yellow, and those identified about his termination in orange.
A similar analysis appears in Wooten v. McDonald Transit Associates, No. 13-11035, ___ F.3d ___ (June 7, 2015), in the context of reviewing the record in support of a default judgment: “Wooten’s complaint contains the following factual allegations: (1) Wooten is a former employee of McDonald Transit; (2) Wooten was employed by McDonald Transit from 1999 until May 1, 2011; (3) at the time he was fired, Wooten was a Class B mechanic earning $19.50 per hour, plus benefits; (4) in October 2010, Wooten filed an age-discrimination claim with the EEOC, after which McDonald Transit ‘discriminated and retaliated against [Wooten], and created a hostile work environment, until such time
that [Wooten] was constructively discharged on or about May 1, 2011’; and (5) McDonald Transit’s unlawful conduct caused Wooten harm, including damages in the form of lost wages and benefits, mental anguish, and noneconomic damages. We hold that these allegations, while perhaps less detailed than McDonald Transit would prefer, are nevertheless sufficient to satisfy the low threshold of Rule 8.” The Court acknowledged that the “complaint could have specified the nature of the discrimination and the retaliation he experienced,” but did not have to do so, comparing the pleading with Form 11 (negligence) in the Federal Rule (a notable citation, since serious commentators have questioned whether those forms are still viable after Twombly and Iqbal.)
The Court has also reversed the Rule 12 dismissal of a claim on an oral contract, in large part because of the role that industry custom played in the plaintiff’s allegations. Highland Capital Management v. Bank of America, 698 F.3d 202 (5th Cir. 2012). In Martin-Janson v. JP Morgan Chase, the Court found that the five specific representations alleged by the plaintiff, from which she sought “discovery to reveal either the draft loan modification agreement that JPMorgan allegedly prepared, or the terms of her promised modification based on the lender’s standard formulae,” could support a promissory estoppel claim that would survive the Statute of Frauds. No. 12-50380 (July 15, 2013, unpublished). And, building on the substantive analysis of Bowlby v. City of Aberdeen (discussed infra), the Court noted the importance of pleading the mayor’s alleged motive and specific opportunity to affect land use decisions, helping to overcome a motion to dismiss on immunity grounds. Jabaray v. City of Allen, No. 12-41054 (Nov. 25, 2013, unpublished).
Twombly not satisfied. The Court reviewed Twombly and Iqbal in Merchants & Farmers Bank v. Coxwell, in which the issue was whether the plaintiff pleaded a conversion claim relating to an attorney’s distribution of certain funds in alleged violation of a court order. The Court noted that while such a claim was cognizable under Mississippi law, and the plaintiff’s pleading might have satisfied Conley v. Gibson, under Twombly:
”The complaint did not specify what court issued the order, when it was issued, or to whom it was directed; the complaint did not describe what the order required and therefore whether the allegation of a violation is plausible or merely fantastical. Further, merely alleging a perfected security interest is insufficient to establish ownership, and the complaint did not describe whether the court order established M&F’s possessory interest in the funds by reducing its claim to judgment.”
No. 13-60368 (Feb. 7, 2014, unpublished) (citing Funk v. Stryker Corp., 631 F.3d 777, 782 (5th Cir. 2011)).
Two other recent cases have found pleadings inadequate under Twombly. Patrick v. Wal-Mart rejected a claim of bad-faith handling of insurance claims. 681 F.3d 614 (5th Cir. 2012). Bowlby v. City of Aberdeen rejected an equal protection claim about the handling of a permit to operate a snow cone stand. Both opinions identify specific matters that the Court felt the inadequate pleadings should have addressed. 681 F.3d 215 (5th Cir. 2012).
While largely unique to the securities context, Owens v. Jastrow describes several impermissible inferences of scienter: “Considered holistically, plaintiffs’ allegations of knowledge of Guaranty’s undercapitalization, a large misstatement, red flags, and ignorance of internal warnings, do not raise a strong inference of severe recklessness that is equally as likely as the competing inference that [Defendants] negligently relief on the AAA ratings and believed that Guaranty’s internal models were accurate.” No. 13-10928, ___ F.3d ___ (June 12, 2015).
Several cases about mortgage servicing have addressed Twombly issues:
- Dismissal affirmed – inadequate facts. This allegation does not satisfy Twombly as to the intent requirement of the Texas fraudulent lien statute: “the transactions by the Defendants jointly and severally were designed to defraud the Plaintiff out of her property.” The Fifth Circuit found that “this allegation is, at most, a legal conclusion that [Defendant Law Firm] acted with the requisite intent; it lacks any ‘factual content’ that would ‘allow the court to draw the reasonable inference that the intent element was met.” Trang v. Taylor Bean & Whitaker Mortgage Corp., No. 14-5028 (Jan. 7, 2015, unpublished).
- Dismissal affirmed — missing elements. Estes sued JP Morgan Chase, alleging violations of the Texas Constitution with respect to a home equity loan. The Fifth Circuit affirmed dismissal on a basic ground: “Estes’s complaint fails to allege any connection between himself and JPMC except that Estes ‘notified [JPMC] that the original promissory note had not been returned,’ and that ‘[m]ore than 60 days have passed since plaintiff notified [JMPC] of its failure to cancel and return the promissory note.’ Considering the allegations in Estes’s complaint, and taking those allegations as true, Estes has not alleged that JPMC possessed the Note at the relevant time. He also has not alleged that he made payments to JPMC, nor has he alleged any other facts from which the Court could reasonably infer that the Note was made payable to “bearer” or to JPMC, as the definition of “holder” set forth in Tex. Bus. & Com. Code § 1.201 requires.” Estes v. JP Morgan Chase Bank, N.A., No. 14-51103 (May 20, 2015, unpublished).
- Dismissal affirmed — missing element. After initially holding that the borrowers’ complaint survived a Twombly challenge as to whether the “grossly inadequate sales price” element of a wrongful foreclosure claim had been properly pleaded, the Fifth Circuit reversed field and issued a revised opinion that affirms dismissal: “We agree with the district court that Plaintiffs’ wrongful foreclosure claim should be dismissed, but for a different reason—Plaintiff’s abandoned the claim on appeal. In challenging the district court’s dismissal, Plaintiffs did not argue that their wrongful foreclosure claim should survive because they adequately pleaded a grossly inadequate sales price. They only argued that the claim should survive because they need not plead that element at all. However, our precedent requires this element in all but a specific category of cases that does not include the instant case.” Guajardo v. JP Morgan Chase, No. 13-51025 (March 10, 2015).
- Dismissal reversed — plausible allegation of prior breach. The district court dismissed a borrower’s breach of contract claim against a mortgage servicer because the borrower was in substantial arrears, and “as a general principle . . . an individual in breach cannot bring a cause of action for breach against another contracting party.” The Fifth Circuit reversed, finding that the borrower had alleged plausible claims that the servicer breached first; specially, that “the misapplication of [the borrrower’s] payments to an escrow account, resulting in default . . . constituted a material breach,” and that “Chase’s rejection of her mortgage payments, even if not a material breach, rendered performance impossible and that, as a result, any subsequent breach does not bar her claim.” Peters v. JP Morgan Chase, No. 13-50157 (Jan. 23, 2015, unpublished). The actual pleading is available here, the key averment appears in paragaph 8: “According to the information received from the bank, Defendant believes Plaintiff is over $50,000 in arrears. According to the accounting done by Plaintiff, Plaintiff only owes $31, 437.30. Only $15,000 of this amount is on past due payments. Plaintiff believes that the disparity between the two figures is due to the fact that Chase has misapplied her payments under the mortgage to escrow fund, thereby causing her to be in default under the mortgage.”
Defenses. A district court within the Fifth Circuit, applying prior Circuit precedent, has concluded that Twombly and Iqbal do not apply to the pleading of defenses. See EEOC v. Courtesy Buildings (N.D. Tex. Jan. 21, 2011) (“Given that the requirement in Rule 8(a) to show entitlement to relief is essential to the holdings of Iqbal and Twombly . . . , and considering that this requirement does not appear in Rule 8(b) and (c), the court declines in today’s case, and in the absence of complete briefing and guidance from the Fifth Circuit or the Supreme Court, to extend the Iqbal and Twombly plausibility standard to the pleading of affirmative defenses.”).
Other issues. A pre-Twombly case of note, General Electric Capital Corp. v. Posey, 415 F.3d 391 (5th Cir. 2005), distinguishes between the requirements of Rule 8 and Rule 9(b) in the context of negligent misrepresentation claims. In Garrison Realty LP v. Fouse Architecture & Interiors, PC, No. 12-40764 (Oct. 21, 2013, unpublished), the Court noted a meaningful distinction between pleading that an offset was a complete bar to plaintiff’s recovery, as opposed to pleading that it was a bar “in whole or in part.”