On rehearing, the Fifth Circuit withdrew its original opinion and substituted a certification request to the Texas Supreme Court in Ranger Insurance v. Transocean Offshore Deepwater Drilling, Inc., No. 12-30230 (Aug. 29, 2013).  The request asks for guidance about Evanston Ins. Co. v. ATOFINA Petrochems., Inc., 256 S.W.3d 660 (Tex. 2008), and whether (1) it compels coverage for BP under the language of umbrella insurance policies if contractual “additional insured” and indemnity provisions are “separate and independent,” and (2) whether the contra proferentem doctrine would apply to the contract containing those provisions.  Thanks to Don Cruse’s SCOTX blog for picking this up, and that blog will be following the handling of the request in the state court.

In BP Exploration v. Johnson, the plaintiff in a Deepwater Horizon case sued in Texas to enforce an alleged settlement agreement.  No. 12-20512 (Aug. 8, 2013, unpublished).  BP asked the MDL panel to consolidate the case with the other Deepwater Horizon matters in the Eastern District of Louisiana.  Before the panel could rule, however, the Texas judge asked for summary judgment briefing and granted summary judgment to the defense on the ground that no agreement had been created.  The Fifth Circuit vacated the judgment and remanded with instructions to transfer to the MDL case, noting the complexity of the Deepwater Horizon litigation, and more generally: “It is typical in such scenarios for the court before which the tort claims are pending to determine whether a binding settlement agreement has arisen, as that court is already familiar with the parties and the claims and the proceedings.”

As part of broader disputes about the bankruptcy of Pilgrim’s Pride, chicken growers alleged that its decision to shut down a large facility violated the Packers and Stockyards Act of 1921.  Relying on its earlier [9-7] en banc decision which found that a broader provision of the Act required proof of anticompetitive conduct, the Fifth Circuit found that section 192(e) of the Act imposes the same requirement.  Agerton v. Pilgrim’s Pride Corporation, No. 12-40085 (August 27, 2013) (citing Wheeler v. Pilgrim’s Pride Corporation, 591 F.3d 355 (5th Cir. 2009)).  The Court then reversed a $25 million judgment for the growers, reasoning: “In the instant case, PPC had overextended itself into the commodity chicken market, was producing more chicken than the market appeared to need, and was thereby driving the market price of chicken down at great cost to itself. Recognizing the damage inflicted by its own excess production, PPC wisely decided to stop flooding the market with unprofitable chicken.  . . . Far from being a nefarious goal, higher prices are the natural consequence of a reduction in supply.  If it is lawful for a business to independently control its own output, then it is also lawful for the business to hope for the natural consequences of its actions.”

Texas allows charitable bingo if the sponsoring organization does not use the proceeds for political advocacy; several charities challenged that restriction on First Amendment grounds.  Department of Texas, VFW v. Texas Lottery Commission, No. 11-50932 (August 21, 2013).  In a new opinion issued on panel rehearing, the Fifth Circuit rejected a standing challenge based on the interplay of the relevant law with other gambling laws (which the state argued made the lawsuit irrelevant), and then reversed an injunction against the law.  The Court saw the case as controlled by Rust v. Sullivan, 500 U.S. 173 (1991), noting: “The challenged provisions in this case do nothing to restrict speech outside the scope of the State’s bingo program. Charities are free to participate in the bingo program and engage in political advocacy; they simply must not use bingo proceeds to do so.”  For similar reasons, it distinguished Citizens United v. Federal Election Commission, 130 S.Ct. 876 (2010).  A dissent argued that Rust did not control and the law was invalid under the “unconstitutional conditions” doctrine.

Verdin v. Fannie Mae rejected several claims against a mortgage servicer.  No. 12-40895 (August 15, 2013, unpublished).  As to a negligent misrepresentation claim, the Fifth Circuit held: “[the servicer’s] only allegedly false representation—that [the borrower]  should submit a request for postponement and ‘not worry about the foreclosure’—relates to a promise to do something in the future.”  The claim also failed because “Texas requires pecuniary loss independent from the loan agreement to support a negligent-misrepresentation claim,” and alleged mental anguish did not satisfy that requirement. Finally, the Court rejected waiver and misrepresentation claims: “[Borrower] is unable to demonstrate that Wells Fargo made an absolute repudiation of an obligation because providing mixed signals of an intent to foreclose—i.e., suggesting that it would consider a postponement and not to worry about a foreclosure—does not rise to an absolute declaration of intent to abandon an obligation.”

A district court vacated a previously-granted class certification in a securities case in 2004.  The putative class refiled in Texas in 2009.  The district court found the action time-barred, concluding that any tolling effect under American Pipe & Construction Co v. Utah, 414 U.S. 538 (1974) ended with the order of vacatur.  Hall v. Variable Annuity Life, No. 12-20440 (August 15, 2013).  The Fifth Circuit affirmed, finding no meaningful distinction in this context between a vacatur order and a decision not to certify in the first instance.

Plaintiff voluntarily dismissed a Texas suit under Rule 41, refiled in New York, and then voluntarily dismissed that action as well.  Because the second dismissal was with prejudice under the Federal Rules, Plaintiff sought relief under Rule 60(b) to allow reinstatement of the original case.  Yesh Music v. Lakewood Church, No. 12-20520 (August 14, 2013). Defendant argued that a voluntary dismissal is not a “final proceeding” for Rule 60 purposes.  The Fifth Circuit affirmed the grant of 60(b) relief.  The Court acknowledged Harvey Specialty & Supply, Inc. v. Anson Flowline Equipment, Inc., 434 F.3d 320 (5th Cir. 2005), which found no preclusive effect for a Rule 41 voluntary dismissal, but concluded that one was still a “final . . . proceeding” within Rule 60 because of its practical effect.  The Court noted that the weight of authority from other Circuits agreed with this conclusion.

Sims v. Carrington Mortgage certified four questions to the Texas Supreme Court about home equity loans – whether a specified transaction was a “modification” or a “refinance” under Texas law, and what rules would apply to the transaction if characterized as a modification.  No. 12-10978 (August 14, 2013, unpublished).  Don Cruse’s SCOTX blog has more detail.

The sole issue for bench trial in Union Oil v. Buffalo Marine Services was the amount of damages causedby an oil spill.  No. 12-40848 (August 16, 2013, unpublished).  Both sides appealed.  The Fifth Circuit affirmed.  As to the methodology used by the district court, the Court said: “Contrary to Buffalo’s assertion, the ‘reasonable certainty’ with which Unocal was required to prove lost profits did not require it to identify lost opportunities from specific vessels that would have visited the terminal but for its closure following the spill. Considering figures from adjacent months was more than adequate.”  The Court found “no support in the actual numbers” for an argument about a seasonal spike in revenue during the relevant period.  Finally, the Court agreed that a claim determination from the National Pollution Fund Center was inadmissible as proof of damages under Fed. R. Evid. 408.

For the third time in 2013, the Fifth Circuit has reversed, at least in part, the dismissal of foreclosure-related claims under Rule 12 – this time in a published opinion.  Miller v. BAC Home Loans Servicing LP, No. 12-41273 (August 13, 2013).  The Court began by reminding that the Texas fair debt collection statute is broader than the federal one, and can encompass a servicer.  Here, the borrower stated a cognizable claim about the servicer misrepresenting its services (the status of a foreclosure), while failing to do so on several other misrepresentation claims based on other statutory provisions.  The Court rejected a DTPA claim because the allegations related to a loan modification — an entirely financial transaction that did not involve a “good” or “service” — and the plaintiffs thus lacked standing.  In so doing, the Court distinguished authority finding consumer status as to an original home loan transaction, where the goal can be called obtaining a house.  The Court also found that the defendant properly raised the Statute of Frauds as a defense as a Rule 12 ground in opposition to the plaintiff’s promissory estoppel claims.

The FTC sued debt negotiation companies, claiming that their ads deceptively promised substantial reductions in consumers’ credit card debt.  The district court concluded that “deception” under section 5 of the FTC Act should be evaluated on the basis of all information disclosed by the companies to consumers up to the point of purchase, and entered judgment for the defendants.  FTC v. Financial Freedom Processing Inc. No. 12-10520 (Aug. 12, 2013, unpublished). The Fifth Circuit thought that the district court’s analysis was “dubious,” noting authority in other circuits that holds “each advertisement must stand on its own merits.”  The FTC, however, elected to challenge the district court’s finding about deceptiveness at the point of purchase.  Here, “while the Companies’ radio ads and websites may be misleading–indeed, it is difficult to conclude that the websites are not deceptive–we are satisfied that substantial evidence supports the district court’s finding . . . .”

The defendant in American General Life v. Bryan owned a company (“IMG Inc.”) through which he routed commission checks that he received for selling life insurance.  No. 12-20435 (Aug. 14, 2013, unpublished).  An insurer rescinded a policy and then sought repayment of the commission.  The agent defended on the ground that the insurer’s agency relationship was actually with another company, “IMG Cap.”  The Fifth Circuit found that issues about the scope of the parties’ contracts were not appropriate for summary judgment, but the case was properly resolved by the doctrine of quasi-estoppel because the agent routinely used IMG Inc. for the handling of commissions and had not used IMG Cap.  Accordingly, it would be “unconscionable to allow [the agent] to hide behind the assignment . . . when his behavior over a multiple-year period was flagrantly inconsistent with the legal arguments he now urges us to adopt on appeal.”

The SEC settled an enforcement action except as to the issue of potential disgorgement. SEC v. Halek, No. 12-11045 (August 5, 2013).  Negotiations then broke down because the SEC did not accept the financial information provided by the defendants.  The district court then entered an order to disgorge over $20 million.  In affirming the district court, the Fifth Circuit: (1) found no abuse of discretion in reopening the case, noting that “[a]n administrative closure is more akin to a stay than a dismissal,” (2) reminded that “[d]istrict courts have ‘broad discretion in fashioning the equitable remedy of a disgorgement order,'” and (3) found no clear error in the court’s determinations about joint and several liablity, the reasonableness of the ordered amount as an approximation of the defendants’ unlawful gain, or its decision not to credit settlement payments against the ordered amount.

An unsecured creditor contended that the gross negligence of a bankruptcy trustee allowed a key asset to escape the estate.  The court agreed and ordered payment from Liberty Mutual’s bond for the trustee.  The Fifth Circuit affirmed, finding: (1) the relevant limitations period was set by a 4-year federal statute rather than a 2-year state one, (2) the finding of gross negligence was not clearly erroneous, and (3) expert testimony was not necessary to establish gross negligence in this situation: “While the precise course of action the Trustee should have taken may be subject to reasonable debate, it requires no technical or expert knowledge to recognize that she affirmatively should have undertaken some form of action to acquire for the bankruptcy estate the assets to which it was entitled.”   Liberty Mutual v. United States, No. 12-10677 (revised August 20, 2013).

A borrower alleged that the servicer mishandled an insurance issue, setting in motion events that led to a wrongful foreclosure.  Gardocki v. JP Morgan Chase, No. 12-20733 (Aug. 8, 2013, unpublished).  Citing Twombly and Iqbal, and criticizing the lack of analysis by the district court, the Fifth Circuit held: “Were Gardocki to prove the facts alleged in his complaint, it is plausible the district court could find that JPMC breached the Mortgage contract by failing to endorse the reimbursement check in a timely manner, thereby causing Gardocki to fail to meet his monthly payment obligations. But for this failure, foreclosure would have been improper. It is equally plausible that Gardocki will fail to meet his burden to prove the above facts, and that JPMC might successfully move for summary judgment.”  Gardocki is the second of two opinions this year ruling for borrowers in Rule 12 situations about wrongful foreclosure claims.

The plaintiff in Morlock LLC v. Bank of New York sued to quiet title, claiming that it had not received notice of a foreclosure sale despite having an interest in the property.  No.12-20832 (August 5, 2013, unpublished).  The Fifth Circuit affirmed judgment on the pleadings for the bank, finding the plaintiff’s allegation of an ownership interest “conclusory,” and stating: “Morlock’s petition pleads the initial transaction between the original borrowers and the lender, but the petition does not even suggest how Morlock acquired an ownership interest in the property in the light of the fact that it was not an original borrower. Although Morlock eventually stated that its ownership interest was derived from a Trustee Deed dated August 5, 2011, no copy of that deed was attached to any of the filings, and the deed is not otherwise contained in the record.”

The Court released a revised opinion in Anadarko Petroleum v. Williams Alaska Petroleum, No. 12-20716 (August 6, 2013), which reversed and rendered for a contract plaintiff based largely on the parties’ course of performance.  The expanded opinion addresses an argument made on rehearing that the panel failed to find the contract ambiguous before examining evidence about course of performance.  The opinion notes that the relevant UCC provision in fact says the opposite, noting that “the course of actual performance by the parties is considered the best indication of what they intended the writing to mean” since that performance can “become an element of the meaning of the words used.”  Tex. Bus. & Comm. Code § 2.202 comment 2.

Acceptance Loan had a lien on a Mississippi office building, which was the principal asset of S. White Transportation (“SWT”) when it went into bankruptcy.  Acceptance Loan Co. v. S. White Transportation, No. 12-60648 (August 5, 2013).  Acceptance received notice of SWT’s bankruptcy several times.  After plan confirmation, Acceptance sought a declaration that its lien survived.  The Fifth Circuit held that “passive receipt of notice” did not constitute “participation” in the bankruptcy under In re Ahern Enterprises, 507 F.3d 817, 822 (5th Cir. 2007).  Therefore, the general rule applied that “a secured creditor with a loan secured by a lien on the assets of the debtor who becomes bankrupt before the loan is repaid may ignore the bankruptcy proceeding and look to the lien for satisfaction of the debt.”

A Louisiana mineral lease provided that the lessee would pay the lessor “one-eighth (1/8) of the market value at the mouth of the well of the gas so sold . . . .”  Cimarex Energy v. Chastant, No. 13-30049 (Aug. 2, 2013, unpublished).  The lessor claimed that the payment obligations extended to the benefits of a hedging program operated by the lessee/producer.  The Fifth Circuit agreed with the district court that it did not: “[T]he mineral lease between Cimarex and Chastant does not require Cimarex to pay royalties on amounts generated through its separate financial activities.  The Court distinguished a case about royalties on take-or-pay payments, noting: “Take-or-pay is, for these purposes, an alternative to actual production, or effectively a minimum production for purposes of rights under the lease.  Hedging transactions do not serve that purpose.  They are supplements to production, not substitutes.”

The Fifth Circuit has affirmed in all respects the high-profile corruption convictions associated with former Dallas City Councilman Don Hill: United States v. Reagan et al. (August 2, 2013).

A remedy provision of the Anti-Kickback Statute provides: “The Federal Government in a civil action may recover from a person that knowingly engages in conduct prohibited by section [53] of this title a civil penalty equal to— (A) twice the amount of each kickback involved in the violation; and (B) not more than $[11,000] for each occurrence of prohibited conduct . . . .”  41 U.S.C. § 55(a)(1). In United States v. Kellogg Brown & Root, the Fifth Circuit found that the provision allows a suit against an employer for its employees’ acts.  No. 12-40447 (July 19, 2013).  The Court grounded its analysis in common-law agency principles, and distinguished an earlier case that imposed a “purpose to benefit [the] employer” requirement in a somewhat analogous situation under the False Claims Act, United States v. Ridglea State Bank, 357 F.2d 495 (5th Cir. 1966).