In Homoki v. Conversion Services, a check processing company sued its sales agent and a competitor.  No. 11-20371 (May 28, 2013).  It won judgment for $700,000 against the competitor for tortious interference with the sales agent’s contract with the company, and $2.15 million against the agent for past and future lost profits.  The company and competitor appealed.  First, the Fifth Circuit — assuming without deciding that the plaintiff had to show the competitor’s awareness of an exclusivity provision in the agent’s contract — found sufficient evidence of such knowledge in testimony and the parties’ course of dealing, and affirmed liability for tortious interference.  Second, the Court found that the plaintiff’s “experience in managing his business for sixteen years” supported his damages testimony, and that “[w]hile [plaintiff]’s presentation of its damages evidence was far from ideal,” also found sufficient evidence of causation on the interference claim.  Finally, the Court found that the plaintiff had given adequate notice of its claim of conspiracy to breach fiduciary duties (the joint pretrial order was not signed by the judge), but the plaintiff waived jury trial on that issue by not requesting a damages question — particularly given the significant dispute about causation in the evidence presented.

Plaintiff sued for violations of Louisiana’s version of RICO; defendants removed and moved to dismiss.  The trial court said in part: “there is no standing, there is no jurisdiction and the court will grant the Motion to Dismiss pursuant to 12(b)(1).”  Cox, Cox, Filo, Camel & Wilson LLC v. Sasol North America, Inc., No. 12-31123 (May 24, 2013, unpublished).  The Fifth Circuit found error in dismissing with prejudice, noting that “to dismiss with prejudice under Rule 12(b)(1) is to disclaim jurisdiction and then exercise it.”  The Court also found it unclear whether the trial court had dismissed on constitutional standing grounds or standing under the racketeering statute, “[b]ut instead of rewriting the district court’s order to affirm on the merits,” it vacated and remanded for further proceedings consistent with its opinion.

Plaintiffs, “waste haulers that operate throughout the City of San Antonio and its surrounding counties,” claimed that a fee imposed by San Antonio for a waste collection permit violated the Commerce Clause.  Cibolo Waste, Inc. v. City of San Antonio, No. 12-50153 (May 15, 2013).  Examining their standing, the Fifth Circuit found that they showed an injury-in-fact because the fee increased their cost of doing business.  The plaintiffs, could not, however, show that they fell within zone of interest protected by the dormant Commerce Clause, since “[t]heir business is purely intrastate,” and “the only parties that have standing to bring a dormant Commerce Clause challenge are those who both engage in interstate commerce and can show that the ordinance at issue has adversely affected their commerce.”

The case of Woman’s Hospital Foundation v. National Public Finance Guarantee Corp. turned on a claimed conflict between clause 2.2(f) of a bond insurance contract, which capped the amount of “indebtedness” the borrower could assume, and clause 2.6, which gave the insurer a right to consent to new “obligations.”  No. 12-30701 (May 14, 2013, unpublished).  The Fifth Circuit affirmed dismissal of the borrower’s claims, agreeing that as the instrument was written, the cap applied the the borrower’s overall financial condition and “indebtedness,” of which “obligations” were the subset that was secured by the insurer.  While unpublished, the opinion reminds of the technical, transaction-specific definitions that sophisticated deal instruments can give to terms such as “obligations.”

In Kenyon International Emergency Services, Inc. v. Malcolm, the Fifth Circuit found no abuse of discretion in an award of attorneys fees under a Texas statute to the defendants in a suit to enforce a noncompetition agreement. No. 12-20306 (May 14, 2013, unpublished).  The Court clarified that “the key determination is [plaintiff’s] knowledge of reasonable limits, not . . . its knowledge of the reasonableness of the agreement” (emphasis in original).  As it saw the record, the plaintiff’s CEO testified that the restrictions “were worldwide, overreaching in scope of activity, and basically indefinite in time.”  The Court also reversed a sanction on the plaintiff’s lawyer related to the unsealed filing of a “sexually-explicit Internet chat,” reminding that “[i]ssuing a show-cause order is a mandatory prerequisite to imposing monetary sanctions sua sponte,” and finding that the lawyer did not have an improper purpose in making the filing and thus did not fall within Rule 11.

In Colonial Freight Systems v. Adams & Reese, the Fifth Circuit affirmed summary judgment for a law firm on a malpractice claim and for unpaid fees.  No. 12-30853 (May 15, 2013, unpublished).  The plaintiff claimed, under Louisiana law, that the firm’s “negligent failure to advise the company of its right to a jury” was malpractice.  The Court rejected that claim because the plaintiff could only speculate about any loss resulting from that alleged failure.  (In the context of criminal law, a different framework applies because the policies at play are different, see United States v. Mendez, 102 F.3d 126 (5th Cir. 1996)).

The plaintiff served its suit on a guaranty obligation by using the Texas longarm statute, which requires that the plaintiff provide the Texas Secretary of State with the defendant’s “home or home office address.”  Tex. Civ. Prac. & Rem. Code §§ 17.044(a), 17.045(a).  The defendants in Moody National Bank v. Bywater Marine alleged that the plaintiff had only served a “mailing address,” but the Fifth Circuit disagreed, holding that service on the address specified in the parties’ contract for service of process satisfied the statute.  No. 12-40946 (May 14, 2013, unpublished) (citing Mahon v. Caldwell, Haddad, Skaggs, Inc., 783 S.W.2d 769, 771 (Tex. App. — Fort Worth 1990, no writ)).

The EPA and its state equivalent sued the owner of the “Big Cajun II,” a coal power plant in Louisiana, seeking penalties, injunctive relief, and remediation of alleged environmental damage.  Louisiana Generating LLC v. Illinois Union Ins. Co., No. 12-30651 (May 15, 2013).  Applying New York law, the Fifth Circuit found that “Claims, remediation costs, and associated legal defense expenses . . . as a result of a pollution condition” potentially encompassed some of the relief sought by the EPA for past environmental problems.  The Court also found that an exclusion for “[p]ayment of criminal fines, criminal penalties, punitive, exemplary or injunctive relief” did not unambiguously exclude coverage for remediation required by an injunction order, reasoning that such a broad reading “would potentially swallow” the coverage for remediation costs.  Having found a duty to defend, the Court did not reach a question about whether New York law allowed indemnification for civil penalties imposed under the Clean Air Act.

In Miller v. Raytheon Co., the Fifth Circuit affirmed liability for age discrimination and affirmed in part on damages.  No. 11-10586 (revised, July 30, 2013).  Among holdings of broader interest in civil litigation, the Court: (1) affirmed the verdict of liability, noting: “Considered in isolation, we agree with Raytheon that each category of evidence presented at trial might be insufficient to support the jury’s verdict.  But based upon the accumulation of circumstantial evidence and the credibility  determinations that were required, we conclude that ‘reasonable men could differ’ about the presence of age discrimination”; (2) reversed an award of mental anguish damages because “plaintiff’s conclusory statements that he suffered emotional harm are insufficient”; and (3) rejected a challenge, based on the Texas Constitution, to the statutory punitive damages cap in the TCHRA.

In Wellogix, Inc. v. Accenture, LLP, LLP the district court entered judgment for the plaintiff — $26.2 million in compensatory damages and $18.2 million in punitives, after a remittitur —  in a trade secrets case about software to make oil exploration more efficient.  No. 11-20816 (May 15, 2013, revised Jan. 15, 2014).  Affirming, the Court: (1) reminded, in the opening paragraph, of the deference due to a jury verdict; (2) detailed the sufficient evidence before the jury of a trade secret, of its inappropriate use by the defendant, of damages, and malice; (3) rejected Daubert arguments about the scope of the plaintiff’s computer science expert’s testimony  and the material considered by its damages expert; and (4) affirmed the punitive damages award because it was less than the compensatory damages and the issue of “reprehensibility” was neutral.  The Court also analyzed aspects of the relationship between trade secret claims and the patent process.  Footnote 4 of the opinion provides a useful guide to the federal courts’ treatment of a “Casteel problem” in Texas jury submissions.

The original lawsuit in Comer v. Murphy Oil alleged tort claims against several oil companies about the effect of global warming on Hurricane Katrina.  The district court dismissed the claims in that original suit on standing and political question grounds; then, after a Fifth Circuit panel initially reversed in part; the appeal was dismissed after recusals made en banc review impossible after a vote to grant review by the full Court.  In this new case, the plaintiffs refiled, the district court dismissed on the grounds of res judicata since its original ruling was not affected by the appeal, and the Fifth Circuit affirmed.  No. 12-60291 (May 14, 2013).  The Court reviewed the policies behind the doctrine of res judicata and declined to create an equitable exception to the doctrine for this case.

After sidestepping an issue about the Rooker-Feldman doctrine in the context of mortgage servicing earlier this year, the Fifth Circuit revisited the topic in Truong v. Bank of America, 717 F.3d 377 (2013).  After a review of the doctrine (“‘Reduced to its essence, the Rooker/Feldman doctrine holds that inferior federal courts do not have the power to modify or reverse state court judgments’ except when authorized by Congress.”), the Court found that it did not prevent a claim arising from alleged misconduct during the course of a foreclosure case. On the merits, however, the claim failed because of an exemption in Louisiana’s unfair trade practices act for “[a]ny federally insured financial institution,” and the Court affirmed dismissal on that basis.

In 2011 in J. McIntyre Machinery v. Nicastro, the Supreme Court revisited the issue of specific personal jurisdiction over a manufacturer based on putting a product into the “stream of commerce.”  131 S. Ct. 2780 (2011).  While the fractured Court did not produce a majority opinion, the plurality and a 2-Justice concurrence expressed concern about a view of that doctrine that would allow jurisdiction in a particular state based on a manufacturer’s general intent to do business across the country.  The Fifth Circuit directly addressed that language in Ainsworth v. Moffett Engineering, No. 12-60155 (May 9, 2013), finding that the plurality was not controlling, and that the 2-Justice concurrence was decided on the limited ground that no formulation of the doctrine would allow jurisdiction based on that manufacturer’s small number of shipments into the forum.  Because the defendant in Ainsworth had over 100 shipments during the relevant time, jurisdiction was appropriate. Language from past Circuit cases that may be inconsistent with McIntyre was noted but kept in place for now.

After the Army disclosed that a property was once a bomb range, the developer sued the law firm that advised on the issuance of bonds for the development. Coves of the Highland Development District v. McGlinchey Stafford PLLC, No. 12-30096 (May 7, 2013, unpublished).The Fifth Circuit affirmed summary judgment for the firm, principally on the ground that the developer bought the property before it retained the firm as bond counsel.  Of general interest, the parties’ dispute about the engagement letter pitted a general description of the firm’s work “regarding the source of payment and security for the Bonds” against a specific statement that the firm would rely on the developer for “complete and timely information on all developments pertaining to the Bonds . . . .”

Another 2013 mortgage case affirmed judgment for a mortgage servicer on contact, promissory estoppel and tort claims about an unsuccessful HAMP modification negotiation.  The holding of note is that the plaintiffs’ DTPA claim failed as a matter of law.  James v. Wells Fargo Bank, No. 12-10861 (May 3, 2013, unpublished). (quoting Montalvo v. Bank of America, 864 F. Supp. 2d 567, 595 (W.D. Tex. 2012) (“Texas federal courts have recently addressed DTPA claims like [plaintiff]’s claim and concluded that a person seeking a loan modification under the HAMP using a loan servicer is not a consumer under the DTPA.”)

This blog’s author will speak on federal litigation trends at the Dallas Bar Association’s Business Litigation Section meeting next Tuesday, May 14, at noon in the Belo Mansion in downtown Dallas.  Here is a copy of the PowerPoint.  Also, LTPC colleague Richard Smith, who presides over 600 Commerce about the Dallas Court of Appeals, will speak about recent cases from that Court at the DBA Appellate Section meeting on Thursday May 16, also at Belo.  Please come by, we look forward to seeing you in person.

While of limited precedential value because it uses “plain error” review, Ward v. Rhode touches on the role of websites in personal jurisdiction.  No. 12-41201 (May 3, 2013, unpublished).  Plaintiff alleged that the defendants placed a false “Scam Alert” about Plaintiff’s debt settlement services on a website.  The court observed: “The [Defendants’] website is interactive to the extent that it allows users to post their opinions about the debt-counseling services that they have used.  However, it neither allows users to purchase products online, nor sells subscriptions to view its content.  Therefore, the nature of the exchange of information is not commercial.”  (citing Mink v. AAAA Dev. LLC, 190 F.3d 333, 336 (5th Cir. 1999)).  Accordingly, it was “not clear or obvious” that the website’s interactivity with Texans and the commercial nature of that interaction was sufficient to establish jurisdiction.

The Supreme Court has granted certiorari in the case of In re Atlantic Marine Construction,   701 F.3d 736 (5th Cir. 2012), which declined to grant mandamus relief to enforce a forum selection clause.  The questions for review indicate that the Court plans to resolve a circuit split about the standard for enforcement of a forum selection clause, when the forum of suit would otherwise be proper under the federal venue statutes.  One view uses the test for “improper venue,” while another analyzes the issue under a 1404(a) convenience framework.

The insurance policy said: “Whenever any Assured has information from which the Assured may reasonably conclude that an occurrence covered hereunder involves an event likely to involve this Policy, notice shall be sent to Underwriters as soon as practicable . . . ”  Ins. Co. of N. Am. v. Board of Commissioners of the Port of New Orleans, No. 12-30705 (May 1, 2013, unpublished). Clarifying an earlier opinion (and mandate) about this notice provision, the Fifth Circuit held: “[T]he duty of coverage is triggered for each underwriter who receives notice under the policy. . . We do not, however, hold the converse of this conclusion.  In other words, we do not hold that all underwriters under the policy must receive notice as a condition precedent to a duty of coverage being triggered for any individual underwriter under the policy.”

The Fifth Circuit affirmed the district court’s confirmation of an arbitration award against challenges by both sides.  One party argued that there was no agreement to arbitrate, and the Court resolved that issue under general contract law principles: “Signature[] lines may be strong evidence that the parties did not intend to be bound by a contract until they signed it. But the blank signature blocks here are insufficient, by themselves, to raise a genuine dispute of material fact.”  The other party disputed the handling of postjudgment interest, but the Court concluded that the panel had only awarded post-award interest, leaving the district court free to impose the statutory postjudgment rate upon confirmation. The Court noted that parties may contract to have the arbitrator resolve the appropriate postjudgment rate.  Tricon Energy Ltd. v. Vinmar Int’l, Ltd., No. 12-20100 (May 3, 2013).

The plaintiffs in AFLAC v. Biles sued in state court, alleging that AFLAC paid death benefits to the wrong person, and that the signature on the policy application was forged.  No. 12-60235 (April 30, 2013).  AFLAC moved to compel arbitration in the state court case and simultaneously filed a new federal action to compel arbitration. The state court judge denied AFLAC’s motion without prejudice to refiling after discovery on the issue of the signatures’ validity.  In the meantime, the federal court granted AFLAC’s summary judgment motion and compelled arbitration after hearing expert testimony from both sides on the forgery issue.  The Fifth Circuit affirmed, finding that Colorado River abstention in favor of the state case was not required, and that the order compelling arbitration was allowed by the Anti-Injunction Act because it was “necessary to protect or effectuate [the federal] order compelling arbitration.”  The Court also found no abuse of discretion in the denial of the respondents’ FRCP 56(e) motion, since it sought testimony that would only be relevant if the witness admitted outright to forgery.

In Versata Software v. SAP America, the Federal Circuit affirmed jury verdicts that will likely lead to a judgment in excess of $400 million.  That Circuit’s review of a verdict is “reviewed under regional circuit law,” as to which the Court observed: “The Fifth Circuit applies an ‘especially deferential’ standard of review ‘with respect to the jury verdict.'”  (citing Brown v. Bryan County, 219 F.3d 450, 456 (5th Cir. 2000)).  In affirming the award for a reasonable royalty, the Court quoted the recent case of Huffman v. Union Pacific R.R., which discussed “inference on the basis of common sense, common understanding and fair beliefs, grounded on evidence consisting of direct statement by witnesses or proof of circumstances from which inferences can fairly be drawn.”  675 F.3d 412, 421 (5th Cir. 2012).  (Huffman is nominally about the causation requirements of FELA, but its analysis easily extends to other basic Daubert issues.)

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.”

A putative plaintiff class alleged violations of federal securities law by alleged misstatements about asbestos liabilities, the quality of certain receivables and the claimed benefits of a merger.  Erica P. John Fund Inc. v. Halliburton, Inc., No. 12-10544 (April 30, 2013).  Reviewing recent Supreme Court cases about relevant evidence at the certification stage, including one that reversed the Fifth Circuit about proof of loss causation, the Court held: “price impact fraud-on-the-market rebuttal evidence should not be considered at class certification. Proof of price impact is based upon common evidence, and later proof of no price impact will not result in the possibility of individual claims continuing.” (citing Amgen, Inc. v. Connecticut Retirement Plans and Trust Funds, ___ U.S. ___ (Feb. 27, 2013))  The Court rejected a policy argument about the potential “in terrorem” effect of not considering such potentially dispositive evidence about the merits at the certification stage.  The district court ruling about this evidence, and the resulting class certification, were affirmed.