Earlier this month, the Fifth Circuit found an abuse of discretion, under Texas substantive law, in not modifying a noncompetition agreement at the preliminary-injunction stage. Calhoun v. Jack Doheny Cos., Inc. But because the parties had settled their case in the meantime, notifying the district court but not the Fifth Circuit, the case had become moot at the time of that opinion, prompting the Court to withdraw its opinion and dismiss the matter with prejudice. No. 20-20068 (Aug. 28, 2020).

(This activity about a case named Calhoun prompted me to check in on the M/V CALHOUN, a ship that under another name created a memorable mootness argument– “The ship has sailed!” – when it left the Fifth Circuit before creditors could seize it. The ship continues to be elsewhere, arriving in Venezuela as of the date of this post.)

In 1971, the Five Man Electrical Band decried an overabundance of signs, complaining that they were “[b]locking out the scenery, breakin’ my mind.” Similarly, in recent years, the City of Austin grew weary of the many highway billboards in Central Texas. It enacted an ordinance that stopped a large number of them from being updated to a new, digital format, so long as the sign involved “off-premises” business activity. The Fifth Circuit found that the ordinance was unconstitutional in Reagan National Advertising of Austin v. City of Austin, No. 19-50354 (Aug. 25, 2020) (applying Reed v. Town of Gilbert, U.S. 155 (2015)).

The specific question was whether the regulation’s limit to “off-premises” businesses was a restriction on content, or one on time, place, or manner, under the framework established by the Supreme Court in Reed. The Court focused on a series of challenging hypotheticals it has posed to the City’s counsel at oral argument, including, inter alia:

• Could Barbara and Tom maintain a digital sign in their yard that says “We love hamburgers” that contained the logo and address to a Whataburger location two miles away?

• Could Sarah place a digital sign in her yard that said “Vote for Kathy” if Kathy did not live at Sarah’s house?

• How could one determine whether a digital bilboard that said “God Loves You” is on-premises or off-premises?

Finding these hypotheticals as challenging as the City’s counsel did, the Court concluded that the regulation forced a consideration of content to determine its applicability, making it a content restriction under Reed.

The London Underground reminds its riders to “Mind the Gap” so they do not trip when entering or exiting a train. The Fifth Circuit’s new typography places a notable gap between paragraphs and footnotes. While this sort of line-spacing does not have a technical label like “kerning,” it is nevertheless an important part of the overall look and feel of a piece of legal writing. What are your thoughts on inter-paragraph line spacing? 

The long-running litigation about 3D printed firearms (to the right, the single-shot “Liberator” returned to the Fifth Circuit in Defense Distributed v. Grewal, in which a manufacturer sought relief in Texas from the New Jersey AG. The Court found personal jurisdiction in Texas, noting: “Grewal’s conduct beyond sending the cease-and desist letter confirms his intent to crush Defense Distributed’s operations and not simply limit the dissemination of digital files in New Jersey. Grewal’s enforcement actions are selective. He has not targeted the many similarly-situated persons who publish Defense Distributed’s files on the internet. Instead, he has focused solely on Defense Distributed.” No. 19-50723 (Aug. 19, 2020) (distinguishing Stroman Realty, Inc. v. Wercincki, 513 F.3d 476 (5th Cir. 2008).

After reviewing comparable ethical rules nationwide, the Fifth Circuit held that under the Louisiana attorney-conduct rules: “[A] contingency fee arrangement resulting in an attorney owning part of the client’s business is a business transaction under Rule 1.8(a). Because the terms of the 2013 CFA give the Firms an ownership interest in LTSG, Rule 1.8(a) applies, and the Firms were required to advise Fox to seek the advice of independent counsel. Fox did not have to take this advice, but the Firms were obligated to give it. Thus, the 2013 CFA is void.”  Wiener, Weiss, & Madison v. Fox, No. 19-30688 (Aug. 21, 2020).

In the early 1900s, railroad shareholders sued Minnesota’s Attorney General, the spectacularly-mustachioed Edward Young (right), to enjoin the enforcement of price limitations; the Supreme Court found that their request for injunctive relief did not violate the Eleventh Amendment. Ex parte Young, 209 U.S. 123 (1908). It is easier to state the rule of Young than apply it, however, especially in often-complex jurisdictional situations.

Green Valley Special Utility District v. City of Schertz presented an arcane regulatory dispute about “two orders of the Texas Public Utility Commission decertifying territory from the certificate of convenience and necessity issued to [Green Valley] for sewer (wastewater) service.” (cleaned up). Resolution of that dispute required en banc review, and produced a lead opinion with a two-page summary of the Court’s holdings, along with four concurrences on Young and the statutory-interpretation issue in the case. No. 18-51092 (Aug. 7, 2020).

Sanchez v. Smart Fabricators, No. 19-20506 (Aug. 14, 2020), held that Sanchez was a Jones Act seaman. All three judges specially concurred in the result, observing:

Two causes of action under Texas law, frequently asserted but rarely tried, were rejected by the Fifth Circuit in BBX Operating v. Bank of America, No. 19-11050 (Aug. 11, 2020, unpublished):

• Conversion. “They are conclusory allegations, which merely ‘parrot the words needed to create a claim’ without providing any factual basis for how BBX maintained an ownership interest in the funds. Perhaps recognizing this deficiency, the amended complaint characterized the funds at issue as ‘trust funds,’ and claimed that Murphy ‘held the funds . . . in trust for BBX’—the rightful owner. Yet that label is again unsupported by any factual allegations. The complaint said nothing of when or how this alleged trust was formed. And there are no allegations that Murphy entered into an agreement to create a trust.” (emphasis added)
• Money had and received. “BBX has not alleged facts demonstrating that the funds Bank of America swept from Murphy’s account belong to BBX. Nothing in the sales contract or any other agreement between BBX and Murphy demonstrates that funds Murphy collected and placed in a Bank of America account in Murphy’s name belong to BBX. Furthermore, BBX is no more the owner of those funds than the working interest owners and royalty owners that were supposed to receive payment after Murphy remitted a portion of the funds to
  BBX. At most, the amended complaint demonstrates that BBX has an unsecured breach of contract claim against Murphy for failing to satisfy whatever amounts Murphy owed BBX under the sales contract that governed their relationship. It does not demonstrate that these particular funds belong to BBX. Thus, the district court properly dismissed BBX’s money had and received claim.” (emphasis added)

A notable feature of the Fifth Circuit’s new typography is the amount of kerning (spacing between of letters) in certain elements of an opinion’s first page. (And for those who are weary of the “cases in footnotes,” “1-space, 2-space,” or “anything but Times New Roman” topics, kerning offers an entirely new topic of discussion.) What are your thoughts on appellate kerning? 

“Applying Skidmore, we ask whether EPA’s interpretation of Title V in the Hunter Order is persuasive. Specifically, we inquire into the persuasiveness of EPA’s current view that the Title V permitting process does not require substantive reevaluation of the underlying Title I preconstruction permits applicable to a pollution source. As we read it, the Hunter Order defends the agency’s interpretation based principally on Title V’s text, Title V’s structure and purpose, and the structure of the Act as a whole. Having examined these reasons and found them persuasive, we conclude that EPA’s current approach to Title V merits Skidmore deference.” Environmental Integrity Project v. EPA, No. 18-60384 (Aug. 13, 2020) (emphasis added).

My newest Coale Mind podcast episode looks forward to this fall, when the Supreme Court will consider two decisions by the en banc (full) U.S. Court of Appeals for the Fifth Circuit, the federal appellate court for Texas.

In the first, California v. Texas, a Fifth Circuit panel found that the individual mandate of the Affordable Care Act was  unconstitutional after the repeal of the relevant tax, and the en banc court denied review in a close vote. In the second, Collins v. Mnuchin, the en banc Fifth Circuit found that Fannie Mae’s regulator was structured unconstitutionally.

These cases, important in their own right, also reflect a fascinating encounter between two “conservative” federal courts. Will the Fifth Circuit, widely seen as a particularly conservative court after President Trump’s many appointments, be seen by the Roberts Court as having gone too far? Or will the two courts by “in synch” with each other on these important constitutional issues?

In Six Dimensions, Inc. v. Perficient, Inc., the Fifth Circuit concluded that under California noncompete law, the parties’ “2014 Agreement” was unenforceable.  A key question was whether their “2015 Agreement” was also subject to that conclusion, or whether it was separate and the arguments against it had been waived in the trial court. The Court found no waiver, concluding that the below language was insufficient notice that the plaintiff was seeking summary judgment about that contract.

“Defendant argues that Brading was permitted to engage in this wrongful conduct because the contract that she signed, contained a provision that is not allowed under California law. Defendant argues that even though the Amended Complaint does not accuse Brading of breaching the non-competition portion of the 2014 Agreement [Dkt 10-2], that its presence in the 2014 Agreement invalidates that agreement. Texas has no such provision. It is respectfully submitted, as asserted in the Complaint, that the law of Texas applies and as such, the 2014 Agreement is clearly breached by Brading’s undisputed conduct in violating both portions of the 2014 Agreement. Further, there is no noncompetition portion for the Termination Certification signed by Brading in June of 2015 and as such, under the law of either State, Brading is responsible for violating the 2015 Agreement.” 

No. 19-20505 (Aug. 7, 2020) (emphasis added).

The Fifth Circuit found it was an abuse of discretion to not reform a noncompetition agreement at the preliminary-injunction stage, rejecting the argument that reformation “is a remedy to be granted at a final hearing, whether on the merits or by summary judgment, not as interim relief.” The Court held: “This argument runs against the clear majority practice of Texas courts, which have on many occasions reformed contracts for the purposes of granting interim relief. The Texas case that has most thoroughly considered the question has rejected the argument Calhoun makes here, finding that reformation ‘is not only a final remedy’ and may be made ‘as an incident to the granting of injunctive relief.'” Calhoun v. Jack Doheney Cos., No. 20-20068 (Aug. 7, 2020).

“The Texas Supreme Court has held that a Texas court of civil appeals does not have jurisdiction to initiate an award of appellate attorneys’ fees because ‘the award of any attorney fee is a fact issue which must [first] be passed upon the trial court.’” In Texas state courts, requesting appellate fees at the original trial is a placeholder requirement to ensure the state trial courts maintain jurisdiction over the issue. Those are procedural rules that do not apply in federal court. Our local rules provide for appellate litigants to petition this court for. Local Rule 47.8 does not require a party seeking appellate attorneys’ fees to first request appellate attorneys’ fees in the district court as a placeholder.” Atom Instrument Corp. v. Petroleum Analyzer Co., No. 19-20151 (Aug. 7, 2020) (citations omitted).

The ABA House of Delegates has recently adopted a comprehensive set of best practices for litigation funding–an important topic in modern law practice.

OSHA regulations have an exemption for “diving performed solely as a necessary part of a scientific, research, or educational activity by employees whose sole purpose for diving is to perform scientific research tasks. Scientific diving does not include performing any tasks usually associated with commercial diving such as: Placing or removing heavy objects underwater; inspection of pipelines and similar objects; construction; demolition; cutting or welding; or the use of explosives.”

OSHA concluded that the divers who clean the tanks at the Houston Aquarium were not “scientific divers” under this regulation; the Fifth Circuit saw otherwise: “The divers are engaged in a ‘studious … examination’ and ‘detailed study’ when they observe the animals for abnormalities, and when they work to keep the animals in the Aquarium alive, healthy, and breeding. That an organization collaborates among employees and engages in verbal communication does not mean that the examination and study of the animals in the tanks is not ‘studious’ or ‘detailed.’ Nothing about the feeding and cleaning dives renders the information that the trained scientists performing the dives gather during these dives outside of the definition of ‘research.’” Houston Aquarium, Inc. v. OSHRC, No. 19-60245 (July 15, 2020).