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 a return to the Fifth Circuit after an earlier panel opinion affirmed an antisuit injunction, the Court applied the Lauritzen-Rhoditis factors to conclude that Liberian law, rather than American, governed a boat crewmember’s claim about catching malaria aboard the ship:

Considered in the context of this case, involving traditional maritime shipping activities and assertions of wrongdoing yielding a seaman’s “shipboard injury,” none of the Lauritzen-Rhoditis factors that the Supreme Court has deemed significant to the choice of-law determination in traditional maritime shipping cases involve the United States. Specifically, the law of the flag factor, which generally is “of cardinal importance” in the traditional maritime shipping context, points to Liberia.

Ganpat v. Eastern Pacific Shipping PTE, No. 22-30758 (May 1, 2024).

Under Wyoming law, an indemnity agreement related to an oil-field injury could not be enforced; under Texas law, it could be. Applying the Restatement’s choice-of-law framework, the Fifth Circuit concluded:

1. More significant relationship. “The section 188 contacts rack up points for Wyoming. Cannon started negotiations by contacting KLX’s Wyoming office, and the parties executed the agreements in Wyoming and West Virginia. These place-of-negotiation-and-contracting contacts favor Wyoming and overwhelmingly disfavor Texas. … The only debatable section 188 contact is the principal place of business. Cannon leans on this contact, arguing that it favors Texas because the agreement was drafted by a Texas-based company. But although KLX’s principal place of business is in Texas, its Texas presence is negated by Cannon’s Wyoming domicile.”
2. Materially greater interest. “Wyoming’s interest in promoting worker safety in its oilfields is at its zenith on these facts. The underlying state court proceeding—in which a Wyoming resident was injured in Wyoming by the alleged negligence of a Wyoming oil company—implicates Wyoming’s policy with precision. Enforcing the indemnity provision would discourage what Wyoming hopes to encourage Cannon’s taking steps to avoid injuries in its oilfield operations. On the other side of the scale, Texas’s interest in this dispute is more attenuated. Its interest in enforcing the contract of one of its businesses is lessened when the contract was not negotiated, drafted, or performed within its borders.”
3. Fundamental policy. “Wyoming’s ban on oilfield indemnification is codified and voids any such agreement as being ‘against public policy.’ … Because Wyoming “has taken the unusual step of stating [the policy] explicitly” in a statute, and “will refuse to enforce an agreement” contrary to the policy even when other states connected to the agreement would enforce it, the anti-indemnity policy is a fundamental one.” (citations omitted).

Cannon Oil & Gas Servcs., Inc. v. KLX Energy Services, L.L.C, No. 21-20115 (Dec. 10, 2021).

Section 9.343 of the Texas UCC contains a nonuniform provision, “which grants a first
priority purchase money security interest in oil and gas produced in Texas as well as proceeds in the hands of any ‘first purchaser.’ A ‘first purchaser,’ is in pertinent part, ‘the first person that purchases oil or gas production from an operator or interest owner after the production is severed.’  The statute’s purpose is to ‘provide[] a security interest in favor of interest owners, as secured parties, to secure the obligations of the first purchaser of . . . production, as debtor, to pay the purchase price.’ It effectuates a ‘security interest’ that is ‘perfected automatically without the filing of a financing statement.'” (citations omitted). But Delaware lien-priority law does not recognize nonuniform UCC provisions, and in Deutsche Bank Trust Co. Americas v. U.S. Energy Devel. Corp., the Fifth Circuit affirmed the bankruptcy court’s conclusion that Delaware law applied to the case before it. The Court observed: “The bankruptcy court adroitly untangled a thorny conflicts of law issue, the result of which, unfortunately, undermines the efficacy of a non-standard UCC provision intended to protect Texas oil and gas producers. . As a result, producers must beware ‘the amazing disappearing security interest’ and continue to file financing statements. The Texas legislature should take note.” No. 19-50646 (Feb. 3, 2021) (citations and footnote omitted).

A Houston-based engineering firm negotiated a contract with a New Jersey town. The town then sought to avoid paying, arguing that no contract had been formed because it had not obtained proper approvals as required by New Jersey’s statutes about public contracts. The firm countered that the parties’ agreement had a Texas choice-of-law provision, which should also control as to contract formation. Noting that while this dispute seemed to form a “chicken-or-the-egg problem,” the Fifth Circuit ruled for the town as “the choice-of-law provision has force only if the parties validly formed a contract.” It remanded for consideration of potential quantum meruit liability. EHRA Engineering v. Downe Township, No. 19-20176 (March 19, 2020).

“Since the issue of whether the district court applied the correct state’s law to resolve the matters before it is of primary importance in determining whether the district court ultimately reached the correct result in granting Gray’s request for summary judgment, we reject Gray’s categorization of its appeal as ‘conditional.’ Either the district court applied the correct law, or it did not. Whether the district court applied the correct law cannot and does not revolve on whether it reached a result that benefits Gray. Thus, we will address the propriety of the district court’s decision to apply Texas law regardless of whether we agree with the court’s conclusion under Texas law.” Aggreko LLC v. Chartis Specialty Ins. Co., No. 18-40325 (Nov. 11, 2019).

DeJoria v. Maghreb Petroleum Exploration, S.A. presents, at first blush, an epic dispute in which “[t]he facts of this case are littered across the pages of the Federal Reporter.” A failed oil-development project in Morocco led to a $130 million judgment from the Moroccan courts. But after years of legal wrangling about the enforceability of that judgment in Texas, “despite the seeming complexity of this case—royal intrigue, a foreign proceeding, almost a billion dirhams at stake—it ends up being resolved on one of the most basic principles of appellate law: deference to the factfinder.” After confirming the correct legal framework, the Fifth Circuit found no clear error in the district court’s fact-findings. No. 18-50348 (Aug. 16, 2019).

Fishback Nursery v. PNC Bank involved a lien dispute between two branches of creditors of a failed farm – the bank, and two nurseries who sold millions of dollars of trees and shrubs to the farm. That dispute turned on a choice-of-law analysis, as to which the Fifth Circuit observed:

• It was fruitless for the nurseries to rely on choice-of-law provisions in contracts between them and the farm, as this dispute was between the nurseries and the bank, who was not involved in those contracts;
• Similarly, the nurseries barked up the wrong tree by relying upon a Restatement provision about contract disputes: “This case—as we have taken pains to emphasize—involves not a contractual dispute but rather a dispute over competing lien priorities in a bankrupt company’s assets. Analysis of choice-of-law in lien priority disputes begins, not with section 188, but with the ‘most significant relationship’ test in section 6.”
• And, that analysis is straightforward where Article 9 of Texas’s UCC has a specific provision about these disputes (that priority is determined by the law of the state where the agricultural products are located).

Finding that the district court’s analysis was well-rooted in these observations, the Court affirmed. No. 18-10090 (April 10, 2019).

Oubre, struck by an errant forklift, sued Schlumberger for his injuries. To avoid a limitations problem, he cited a choice-of-law provision in the Master Service Agreement between his employer and Schlumberger. The provision ultimately did not help him, and the Fifth Circuit observed that it “does not pose a renvoi issue.” Oubre v. Schlumberger, Ltd., No. 16-41446 (April 5, 2017, unpublished). That term, accurate although infrequently-used, is defined by Black’s as “[t]he doctrine under which a court, in resorting to foreign law, also adopts the foreign law’s conflict-of-laws principles, which may in turn refer the court back to the law of the forum.”

An Italian company sued the American subsidiary of the Venezuelan national oil company in Louisiana over a contract obligation. “Why did the Italian company file suit in a forum located many thousands of miles away from both where it is headquartered and where it performed the contracts? To try and take advantage of the single business enterprise theory under which Louisiana courts have allowed companies in certain circumstances to be held liable for the acts of their affiliates.” This manuever did not succeed, as the American subsidiary was incorprated in Delaware: “Applying Louisiana law to hold a Delaware corporation responsible for its foreign affiliate’s alleged breach of a contract in Venezuela would substantially undermine the high bar Delaware sets for disregarding corporate separateness. It would also be at odds with the expectations of the parties. Given the provision in its contract providing that Venezuelan law would govern any disputes, Energy Coal had no reasonable expectation that it could seek recourse under the laws of Louisiana.” Energy Coal SPA v. Citgo, No. 15-30863 (Sept. 1, 2016, unpublished).

After an underwater tether chain broke, expensive oil production equipment sank to the bottom of the Gulf of Mexico, and Petrobras America sued the chain manufacturer for over $400 million.  The key issue was whether admiralty law applied – creating a serious problem for Petrobras under the economic loss doctrine – or whether Louisiana law applied by operation of the Outer Continental Shelf Lands Act.  The Fifth Circuit found that the OCLSA applied, that its choice-of-law provisions were not waivable, and that Louisiana law controlled: “Here, expressed in general terms, a component failed on an underwater structure . . . and caused the structure to fall into the sea floor.  Such an incident does not have the potential to disrupt maritime commercial or navigational activities on or in the Gulf of Mexico.” Petrobras America, Inc. v. Vicinay Cadenas, S.A., No. 14-20589 (March 7, 2016). (A later supplement clarified the limted scope of the waiver holding.)

The Pyes’ home, valued at $195,000 before Hurricane Ike, was destroyed by that storm.  After they recovered under various insurance policies, the Fifth Circuit found that further recovery under a flood insurance policy would be an impermissible double recovery. Noting that federal common law applied in this area rather than Texas law, the Court nevertheless found that Texas’s emphasis on fair market value was persuasive, and set the $195,000 valuation as the cap on recovery.  While reaching this result, the Court reminded that “the question of the proper measure of recovery under a policy, which is controlled by policy language when defined in the contract as it is here, as distinct from the question of how the bar on double recovery is applied.”  Pye v. Fidelity Nat’l Prop. & Cas. Ins. Co., No. 14-40315 (Nov. 6, 2015).

Cardoni v. Prosperity Bank, an appeal from a preliminary injunction ruling in a noncompete case, involved a clash between Texas and Oklahoma law, and led to these noteworthy holdings from the Fifth Circuit in this important area for commercial litigators:

• Under the Texas Supreme Court’s weighing of the relevant choice-of-law factors, Oklahoma has a stronger interest in the enforcement of a noncompete than Texas, “with the employees located in Oklahoma and employer based in Texas”;
• As also noted by that Court, “Oklahoma has a clear policy against enforcement of most noncompetition agreements,” which is not so strong as to nonsolicitation agreements;
• The district court did not clearly err in declining to enforce a nondisclosure agreement, given the unsettled state of Texas law on the “inevitable disclosure” doctrine; and
• “[T]he University of Texas leads the University of Oklahoma 61-44-5 in the Red River Rivalry.”

No. 14-20682 (Oct. 29, 2015).

The Fifth Circuit affirmed liability under the Texas fraudulent transfer statute as to several investors who actually earned returns from the Ponzi scheme run by Allen Stanford.  Janvey v. Brown, No. 13-10266 et al. (Sept. 11, 2014).  First, the Court dismissed a choice-of-law issue as presenting a “false conflict,” since Antigua had no real interest in the application of its laws to the Stanford scheme when compared to Texas.  The Court then endorsed the district court’s approach to the situation, which found that the investors gave reasonably equivalent value to the extent they received back their principal, while requiring the return of interest: “allowing [them] to keep their fraudulent above-market returns in addition to their principal would simply further victimize the true Stanford victims, whose money paid the fraudulent interest.”

Mississippi law allows a “bad faith” claim relating to handling of workers’ compensation; Alabama law does not.  Williams, a Mississippi resident, was injured in Mississippi while working for an Alabama resident contract.  Williams v. Liberty Mutual, No. 11-60818 (Jan. 28, 2014).  The Fifth Circuit reversed the choice-of-law question, finding that section 145 of the Restatement (governing tort claims) applied rather than other provisions for contract claims.  Under that framework, Mississippi would give particular weight to the place of injury, and thus apply Mississippi law. The opinion highlights the importance of the threshold issue of properly characterizing a claim before beginning the actual choice-of-law analysis.

Alphonse lost his home to foreclosure.  He then sued in federal court, alleging unfair trade practices.  Alphonse v. Arch Bay Holdings LLC, No. 13-30154 (Dec. 11, 2013, unpublished).  The district court dismissed based on the Rooker/Feldman doctrine, but by the time the Fifth Circuit took up the case, all parties conceded that ruling was incorrect because of Truong v. Bank of America, 717 F.3d 377, 381-83 (5th Cir. 2013).  The appellees urged affirmance based on res judicata from the foreclosure proceeding, but the Fifth Circuit remanded for further factual development.  The party to the foreclosure proceeding was a “Series 2010B” that owned the mortgage; the parties to the federal case were that entity’s parent and its mortgage servicer; and the Court was not convinced that the pleadings — standing alone — established the right relationships to find preclusion.  The Court also remanded for further consideration of whether Delaware law about 2010B entities applied to third party claims, noting a potential exception the “internal affairs” doctrine in choice-of-law analysis.

Persons upset about posts on the Mississippi blog “slabbed.org” sued for defamation in Nova Scotia (some of the content related to a lodge owned there by a Mississippi resident).  After obtaining a default judgment, they sought to domesticate it in Mississippi; the defendant removed and resisted domestication under the SPEECH Act, 28 U.S.C. § 4102.  Trout Point Lodge v. Handshoe, No. 13-60002 (Sept. 5, 2013).  That law, enacted in 2010, intends to prevent “libel tourism” by plaintiffs who obtain judgments in jurisdictions with less protection of speech than the First Amendment. The Court concluded that the plaintiffs failed to meet its burden under the Act to prove either (1) that Canadian law (which allocates the burden to prove falsity differently than American law) offers as much free speech protection as Mississippi, or (2) a Mississippi court reviewing the allegations of the pleading would have found liability for defamation.  The Court found some of the pleading’s allegations conclusory and that others involved language that “[t]hough offensive . . . are not actionable . . . .”

The insured in Mid-Continent Casualty v. Eland Energy recovered a multi-million dollar verdict against its insurer, alleging that the insurer’s efforts to unilaterally settle a claim for environmental damage after Hurricanes Katrina and Rita undermined the defense of an ongoing class action about similar claims.  No. 11-10649 (Feb. 22, 2013).   The district court granted JNOV and the Fifth Circuit affirmed.  Recognizing that “[the insured] is understandably upset,” the court rejected a common-law duty of good faith under Texas law in the handling of third-party insurance claims, dismissing as dicta or distinguishing several cases cited by the insured.   Potential claims under Louisiana law failed for  choice-of-law reasons since the claim was handled in Texas. Claims based on the Texas Insurance Code failed to establish a causal link between the alleged misconduct and the ultimate settlement terms of the class action.

In re Atlantic Marine Construction denied a mandamus petition about enforcement of a forum selection clause, finding no “clear abuse of discretion.”  No. 12-50826 (Nov. 19, 2012).  The majority and specially concurring opinions exchanged detailed views on whether Fed. R. Civ. P. 12(b)(3) or 28 U.S.C. § 1404(a) controls a forum selection issue when the parties did not select state law to govern enforcement of the clause and venue would otherwise be proper in the district of suit.  The majority opinion reflects a continuing conservatism in recent mandamus cases after 2008’s en banc Volkswagen opinion.

In National Union v. American Eurocopter, a contribution suit arising from settlement of claims about a helicopter crash, a Hawaii district court found no personal jurisdiction and transferred venue to Texas.  No. 11-10798 (Aug. 27, 2012).  The appellant challenged that ruling, and the Fifth Circuit held that it lacked jurisdiction over that issue.  Id at 4 (quoting 28 U.S.C. § 1294, defining appellate jurisdiction as reaching “appeals . . . [f]rom a district court of the United States to the court of appeals for the circuit embracing the district”).  On the merits, the Court affirmed a dispositive choice-of-law ruling for Texas law, noting a Texas choice-of-law provision in a relevant contract, a rough balance between the place of the accident (Hawaii) and the defendants’ headquarters (Texas), and the relatively weak interest of an out-of-state insurer.  Id. at 5-7 (noting Beech Aircraft v. Jinkins,  739 S.W.2d 19 (Tex. 1987)).

The parties in Ballard v. Devon Energy disputed when a provision in an oil field joint operating agreement, about the effect of “surrendering” certain leases, would apply.  No. 10-20497 (April 19, 2012)  The Court affirmed the denial of leave to amend the plaintiff’s contract claims to add a fiduciary duty count, based on a lengthy delay in raising the issue.  Op. at 6.  The Court then, applying Montana law, concluded that while the parties had both advanced “facially plausible” readings of the provision in isolation, the defendant’s reading was more persuasive in the overall context of the entire development project.  Id. at 12-15.  The Court affirmed summary judgment for the defendant, although it criticized the trial court for considering “extrinsic evidence” before attempting to construe the document on its face.  Id. at 9-10.

A bankruptcy trustee sued to avoid an alleged fraudulent transfer, in the form of payments under a guarantee, in MC Asset Recovery v. Commerzbank AG, No. 11-10070 (March 20, 2012).  The Court found that the trustee had standing, even though the debtor’s creditors had been paid in full, because recovery would benefit the estate.  Op. at 7.  Then, applying the Restatement’s “significant relationship” framework and focusing on policy issues, the Court applied New York fraudulent conveyance law (which reached guarantees) as opposed to Georgia law (which did not).  Op. at 12-13.  The lower court’s dismissal of the case was vacated and reversed.