In TIG Ins. Co. v. Woodsboro Farmers Coop., the Fifth Circuit identified fact issues that precluded summary judgment in an insurance-coverage case.

A key is whether damage to certain grain silos was “property damage” under a CGL policy. The diistrict court concluded that damage was due to defective construction. The Fifth Circuit credited the insured’s evidence that wind and weather caused the silos’ metal parts to degrade, bend, and fatigue. This evidence, including testimony from an inspector who saw the damage, supported the insured’s argument that the damage was not merely cosmetic but a “harmful change in appearance, shape, composition, or some other physical dimension to the claimants’ property.”

The Court also noted a fact issue about whether the damage occurred during the policy period, emphasizing that under Texas law, “occurred means when damage occurred, not when discovery occurred,” making it irrelevant that the damage was first observed after the policy period expired. No. 23-40435, Sept. 20, 2024.

In Favre v. Sharpe, a Hall of Fame NFL player contended that another Hall of Fame player defamed him during a TV broadcast. The Fifth Circuit affirmed the dismissal of the defamation claim, reasoning:

Sharpe’s statements–in response to facts widely reported in Mississippi news and specifically in the just-released Mississippi Today article–could not have been reasonably understood as declaring or implying a provable assertion of facts. His statements are better viewed as strongly stated opinions about the widely reported welfare scandal. 

No. 23-6010 (Sept. 16, 2024).

An old adage cautions that “house guests, like fish, begin to smell after too long.” So too with exotic arugments about jury-trial rights, fueled by the Supreme Court’s vindication of such rights in an SEC enforcement action in SEC v. Jarkesy.

Specifically, in In re Abbott, Texas sought mandamus relief to compel a jury trial in its dispute with the United States about floating obstacles in the Rio Grande, arguing that the U.S.’s claim was analogous to a common-law claim for ejectment. The Fifth Circuit rejected that argument … because it isn’t:

Even if we did agree that this suit concerns competing claims over the rights to “possess” and “exclude” from the Rio Grande, it is no mere garden-variety dispute about “sticks in the bundle of rights that are commonly characterized as property.” … The only appropriate analogy for a [Rivers and Harbors Act] claim that has been presented by the parties is abatement of a public nuisance or  purpesture. As the United States points out, there is a long tradition of equitable suits to clear obstructions upon public highways.

No. 24-50620 (Sept. 20, 2024).

In Keck v. Mix Creative Learning Center, LLC, the Fifth Circuit affirmed summary judgment for art studio that used the plaintiff’s copyrighted artworks (image of dogs) in online art kits for children. The Fifth Circuit found fair use, because the studio’s use of the artwork was transformative and did not harm the market for the plaintiff’s works; as the district court had observed, the studio “drew on Plaintiff’s art not for its inherent expressive value but for what it, accompanied by materials and instruction in art theory and history, could teach students.”  No. 23-20188 (Sept. 18, 2024).

Nat’l Infusion Center Ass’n v. Becerra returns to the issue of standing in administrative law cases–a topic where the Fifth Circuit has had an unfortunate track record before the Supreme Court. The majority holds that the that the National Infusion Center Association has standing to challenge the “Drug Price Negotiation Program” established by the Inflation Reduction Act, noting procedural and economic injury.

As to economic injury, the Court held: “NICA has shown that at least one of its members’ drugs will be subject to the Program, that the Program will lower the price for that drug, and that the lower price will lead to lower revenue for the member that administers the drug.” Critical to this holding–and the distinction of recent precedent about probabilistic future injury–was the majority’s conclusion that:

“predicting a profit seeking business’s response to changing economic incentives simply requires determining the direction in which the incentives are changing. Because the third-party decisions in NICA’s theory are guided by basic economic rationality, NICA has ‘thread[ed] the causation needle’ …”

(emphasis added). A dissent emphasized that NICA’s members do not have a concrete interest in profiting from Medicare reimbursements, as the statute does not entitle them to a profit, and that the complaint was filed before HHS announced the drugs selected for negotiation–creating tension iwth the rule that standing must exist at the time suit is filed. No. 24-50180 (Sept. 20, 2024).

Fittingly for a Friday, 600Camp celebrates its thirteenth anniversary of reasonably faithful reporting, comment, analysis, and meme-making about business-related cases in the U.S. Court of Appeals for the Fifth Circuit. You can celebrate by making some bread pudding with this classic recipe from Galatoiires, the grande dame of New Orleans Creole restaurants.

Occidental Petroleum Corp. v. Wells Fargo Bank, N.A. presents an Erie case, governed by Texas substantive law, as to whether the parties formed a contract. No. 23-20318 (Sept. 18, 2024).

The Fifth Circuit held that Wells Fargo was judicially estopped from arguing that a contract was not formed. Under its precedent: “Judicial estoppel ‘prevents a party from asserting a position in a legal proceeding that is contrary to a position previously taken in the same or some earlier proceeding.’” (emphasis added).

But as a matter of Texas substantive law: “[J]udicial estoppel applies only if the successful representation arose in a different case or, at most, ‘in another phase’ of the same case. … By contrast,  “[c]ontradictory positions taken in the same proceeding may raise issues of judicial admission but do not invoke the doctrine of judicial estoppel.”  Fleming v. Wilson, No. 22-0166 (Tex. May 17, 2024). (emphasis added).

The question whether judicial estoppel is substantive or procedural, and thus whether Erie applies to a federal court’s choice of law about that matter, is not addressed.

In Century Surety Co. v. Colgate Operating, LLC:

• The parties’ contract required Colgate (an oil well operator) and Triangle (a consultant) “to purchase indemnity insurance with limits the lesser of (1) ‘not less than $5 million’, or (2) ‘the maximum amount which may be required by law, if any, without rendering this mutual indemnification obligation void, unenforceable or otherwise inoperative.'”
• Clause 2 referred to a potential legislative restriction on indemnity agreement that didn’t come to pass.
• The district court say Clause 1 as setting a ceiling but not a floor on the indemnity obligation, but the Fifth Circuit saw the clause as setting both: “At heart, Century’s position assumes that Colgate set out a $76 million dollar indemnity obligation without clearly saying so in the contract by virtue of policies that Colgate acquired years after it had entered into the [contract].”

No. 23-50530 (Sept. 10, 2024).

28 U.S.C. § 1782 allows foreign parties to petition U.S. federal courts for assistance with discovery. When a district court rules on such an application, the Fifth Circuit expects an explanatoin:

… the district court’s order denying Paramo’s motion to quash is plainly deficient because it does not meaningfully engage with any of part of the § 1782 inquiry. Indeed, it does not engage at all beyond a barebones reference to “the Motion, the Response, the record and the applicable law.” And the Banorte Parties’ contention that the ruling is salvageable because “the district court referenced and analyzed the relevant factors” in its initial order granting § 1782 assistance is unavailing because, even there, the court did no more than recite the applicable factors. Had the court analyzed the factors, even summarily, either in the instant order denying Paramo’s motion or by reaffirming substantive analysis articulated in granting the initial § 1782 petition, this would be a different case.

Banco Mercantil de Norte, S.A. v. Paramo, No. 24-20007 (Aug. 28, 2024).

In Tesla, Inc. v. Louisiana Automobile Dealers Assoc., the Fifth Circuit addressed Tesla’s challenges to Louisiana’s automobile dealership regulations, which prohibit manufacturers from selling directly to consumers and performing warranty services for cars they do not own.

• Due Process. The Court found that Tesla had plausibly alleged a due process violation. The Commission’s composition, with members who are direct competitors of Tesla, created a “possible personal interest” that could bias their decisions, which was sufficient for the Rule 12 stage.
• Antitrust. From there, the Court vacated and remanded the dismissal of Tesla’s antitrust claim, noting that the due process ruling fundamentally altered the grounds on which Tesla’s alleged antitrust injury was based. Tesla’s allegations of exclusion from the market due to the Commission’s actions could constitute a plausible antitrust injury.
• Equal Protection. The Court affirmed dismissal of Tesla’s equal protection claim, concluding that preventing vertical integration and potential abuses of market power were legitimate state interests justifying the regulations.

A dissent saw matters differently, focusing primarily on the due-process claim and its reliance on board structure. No. 23-30480, August 26, 2024.

In Reule v. Jackson, the Fifth Circuit affirmed that a plaintiff lacks standing to challenge procedural rules, when those rules apply to meaningless substantive activity. A group of plaintiffs, declared as “vexatious litigants” under Texas law claimed that the procedural requirements thus placed on them by Chapter 11 of the Texas Civil Practice & Remedies Code were unconstitutional. The Court held that they lacked standing because their real grievance was with the original court orders declaring them vexatious, not with the officials who enforced those orders. Even if the procedural requirements were lifted, the plaintiffs would still face dismissal as a substantive matter. No. 23-40478, August 19, 2024

Shinsho Am. Corp. v. TransPecos Banks, SSB concluded that TransPecos Banks authorized HyQuality to sell its inventory, including the steel at issue, free of TransPecos’s security interest as allowed by section 9.315 of the UCC. This decision was based on the understanding between TransPecos and HyQuality that selling inventory was essential for HyQuality’s business operations, and that the proceeds from these sales would not be used to repay TransPecos’s loans directly. The proceeds were intended to be reinvested into the business, a practice TransPecos encouraged to avoid violating SBA rules and to support HyQuality’s ongoing operations. No. 23-20520 (Aug. 19, 2024).

In Arms of Hope v. City of Mansfield, the Fifth Circuit examined when a case becomes moot during an interlocutory appeal. The Court distinguished between the mootness of the entire case, on the one hand, and the mootness of the specific issues presented in an interlocutory appeal, on the other.

Here, because the City of Mansfield amended its ordinances about “Unattended Donation Boxes,” the issues on interlocutory appeal from a preliminary injunction no longer had practical significance.

Citing U.S. Navy SEALs 1-26 v. Biden, the Court explained that when an interlocutory appeal becomes moot, it doesn’t stop the lower court from dealing with the remaining issues. Although the new ordinances didn’t completely address all concerns, the Court determined that these issues should be resolved by the district court rather than through a moot appeal. No. 23-10656, August 21, 2024.

In Kansas City So. Rwy. Co. v. Sasol Chemicals (USA), LLC, the Fifth Circuit addressed whether “track” in a lease agreement included the track that forms part of the switches.

The district court found the contract ambiguous because “track” was not explicitly defined to include or exclude switches.

The Fifth Circuit disagreed, noting that dictionaries define “track” as the continuous line of rails on which railway vehicles travel. “Switches,” as movable rails, are part of the track infrastructure. From there, the Court noted that throughout the lease, treating “track” and “switches” as mutually exclusive would lead to absurd results, such as gaps in maintenance obligations, liability allocations, and safety requirements.

The Court acknowledged the parts of the lease relied upon by the district court, which referred to “track infrastructure, switches, and tracks,” but reasoned that while these terms are sometimes listed separately, that doesn’t mean they were mutually exclusive. The separate references likely reflected the need to address different components of the railyard in detail. No. 23-10048, August 20, 2024.