In Alta Power v. General Electric, the Fifth Circuit held that a mutual contractual waiver of consequential damages was enforceable and barred the plaintiff’s tort claims, even though the party invoking it was a non-signatory subcontractor accused of fraud and intentional wrongdoing.

The waiver said that neither party, nor their “contractors[,] or subcontractors,” would be liable for “any incidental, indirect[,] or consequential damages arising out of or connected in any way to” the agreement. Applying Texas law, the court concluded that the subcontractor was an intended third-party beneficiary entitled to enforce the waiver, reasoning that the contracting parties “bargained only for a scope limitation”—that disputes have a connection to the contract—rather than a restriction as to capacity or timing about who was a subcontractor.

The Court also rejected the argument that alleged fraudulent inducement made the waiver unenforceable, noting Texas authority holding that sophisticated parties can bargain to limit fraud damages without waiving a fraud claim altogether. Finally, the Court held that the waiver included intentional torts, in that the provision’s references to “any cause of action,” and its illustrative list of claims, signaled an intent for the clause to have broad coverage. No. 25-10774; Jul. 1, 2026.

In Williams v. Rent 2 Own Trailers, LLC, the Fifth Circuit held that the defendants in a lease dispute waived any protection by a provision requiring that any controversy “shall be settled first by good faith mediation” within 30 days after notice of the dispute.

The Court credited the complaint’s allegation that the plaintiff gave notice on June 15, 2023, and emphasized that the defendants neither sought mediation during the ensuing 30 days nor pursued it afterward. Instead, they waited until after suit was filed and invoked the clause as a barrier to litigation rather than as a genuine settlement mechanism. The Court also noted the defendants’ later litigation conduct, including their failure to request mediation after acknowledging in a case management plan that court or magistrate mediation could be an effective dispute-resolution technique. No. 25-20352, Jun. 18, 2026.

A frequently reversed issue in commercial cases before the Fifth Circuit is contract ambiguity. The newest example is Porch.com v. Gallagher Re, where a contract term required an insurance broker to provide “Administrative Services,” defined to include “all servicing duties customarily performed by a reinsurance intermediary-broker after the placement of the reinsurance contract, including but not limited to . . . administering all reserve funding.”

The insured alleged that its reinsurance broker failed to recognize the difference between a mere collateral letter and a letter of credit—the specific instrument that the reinsurance contract called for—and then repeatedly misrepresented the collateral as valid.

The district court dismissed the claim, reasoning that the insured’s allegations related only to the initial placement of reinsurance. The Fifth Circuit disagreed, concluding that the contract term was, at a minimum, ambiguous as to the broker’s duties, explaining that “it is at least reasonable to interpret that provision as including [the broker’s] duties with respect to the letter of credit.”

The Court also emphasized that determination of what servicing duties are “customarily performed” by a reinsurance intermediary-broker is a fact question that cannot properly be resolved on a motion to dismiss. In so doing, the Court rejected the broker’s argument that the insured was seeking to transform purely ministerial tasks into broad duties to investigate the solvency of third parties. The Court found that the complaint simply alleged that the broker did not perform the routine administrative oversight contemplated by the contract’s broad language. No. 25-10489 (Apr. 2, 2026).

In Dentons US LLP v. Stairway Legacy Assets, LP, the Fifth Circuit held that the Dentons law firm was not a third-party beneficiary of a contract  (while also concluding the merits of this point had been forfeited.).

Under Delaware law, a third-party beneficiary must show that the contracting parties intended to benefit the third party, that any benefit was a gift or in satisfaction of a preexisting obligation, and that the intent to benefit was a material part of the contract’s purpose, with courts looking to the contract’s language to discern that intent. .

The contract did not identify Dentons or its predecessor, and the claimants did not  “facts which could reasonably lead to the inference” that the parties intended to benefit Dentons, not crediting an argument about the general “Net Revenues” definition in the contract. No. 25-40235; Feb. 2, 2026

Jones v. City of Hutto reversed a judgment for a former mayor based on 42 § 1981, while also describing the limits for municipal liability for breach of contract claims,

On the contract issue, the Court noted that the Texas Local Government Code waives governmental immunity for certain written contracts, permitting a breach claim against a city, and held that a municipality’s attempted rescission of a valid separation agreement constituted a breach even where the employee retained the severance payment. At the same time, the Court reminded that Section 271.153(b) bars recovery of consequential damages such as lost profits or reputational harm. Here, the plaintiff “pursued and prevailed on his right to retain the separation payment made under the contract,” which was sufficient to support a potential award of attorney’s fees, but not to open the door to consequential losses.

The Court also clarified attribution principles relevant to contract liability. Disparaging statements by individual councilmembers did not establish breach by the municipality because they were not actions of the city or the council as a body; conversely, a formal council resolution purporting to rescind the agreement was attributable to the city and was the breach that impaired contractual rights. No. 24-50096, Oct. 7, 2025.

I&I Hair v. Beauty Plus The Fifth Circuit rejected a takings claim against the City of Mesquite when that claim arose from the “alleged ‘thwarting of [plaintiffs’] previously approved development and reimbursement rights” governed by their contracts with the City and the Management District.”

The plaintiffs argued that the City had to have acted in its sovereign capacity because “only a governmental entity acting in its governmental or sovereign capacity can change the regulations and rules mid-stream ….”

The Court disagreed: “Although only government entities can alter a regulatory scheme, any party to a contract may attempt—or refuse—to renegotiate the terms of an
agreement midstream. In such circumstances, any resulting dispute is contractual. That conclusion does not change merely because the party is a governmental entity.”

Mesquite Asset Recovery Group v. City of Mesquite, No. 24-11025 (Sept. 23, 2025).

In WorldVue Connect Global, LLC v. Szuch, the Fifth Circuit largely upheld a preliminary injunction enforcing one-year non-solicitation and confidentiality covenants arising from a business sale, whille narrowing the confidentiality restraint. It addressed these specific matters:

• Geographic scope: The non-solicitation covenant applies to recruiting employees and contractors who perform work in the Restricted Area, even if they live and work abroad, aligning the covenant with contact language about “supporting … networks in the Restricted Area.”
• Covered personnel: Workers supplied through staffing agencies can still be “independent contractors” of the buyer and are within the covenant’s protection.
• Specific hires: Barring the hiring of eleven named contractors was proper given evidence they had already been solicited and to prevent the breaching party from reaping the benefit of the breach.
• Confidential information: The court modified the injunction to exclude the seller’s pre-existing personal knowledge of worker identities: “The term ‘confidential information’ … does not include the Szuch Group’s personal knowledge regarding the identity of personnel who worked for or with WorldVue.” Company-developed information (e.g., assessments of skills and value created after the 2022/2024 transactions) remains protected.

The Court also affirmed as to the trial court’s assessment of other equitable factors related to injunctive relief. No. 24-20571, Sept. 16, 2025

Fire Protection Service, Inc. v. Servitec addressed whether several key terms in the “Texas Fair Practices of Equipment Manufacturers, Distributors, Wholesalers, and Dealers Act ” are ambiguous.

The threshold question was whether the plaintiff engaged in the sale of “equipment” as defined by that statute, which in turn raised the question whether its products–a type of lifeboat–are used by a kind of commercial activity referenced by the statute, and if so, whether their use is “in connection with” that activityu.

As for the type of activity, examining the terms “mining” and “industrial activities,” the Court canvassed dictionaries and long-standing Texas precedent and ruled that each term carries a settled, ordinary meaning broad enough to encompass offshore oil and gas operations, commercial shipping, and similar endeavors.

Turning to the statutory phrase “used … in connection with,” the court again found no textual uncertainty. Citing recent Texas Supreme Court authority, the panel emphasized that the words “in connection with” are inherently expansive and “cannot ‘imply more than a tangential connection’ unless the statute’s text constricts its ordinary meaning.” Because the Act contains no such limiting language, the court held that the statute unambiguously sweeps in equipment—such as life rafts—that bears even a tangential relationship to the covered commercial contexts. Noi. 24-20405 (Aug. 21, 2025).

Anticipatory breach, or the lack of it, was the question in Penthol LLC v. Vertex Energy Operating LLC. Applying Texas law, the panel emphasized that repudiation requires an “absolute and unconditional” refusal to perform, and a trading company’s  letter did not meet that standard–it merely warned that the distributor would terminate the agreement if the manufacturer failed to cure an alleged breach within thirty business days.

Because that warning was both conditional (performance could still be rendered) and prospective (termination would occur only after the cure period), the court concluded it was not a repudiation. As the opinion summarized: “Letter 1 neither constituted nor served as the starting point for a repudiation, because [the] threat of nonperformance was neither absolute nor unconditional.”No. 24-20329, Aug. 14, 2025.

A civilian treatement of contract formation appears in CAM Logistics LLC v. Pratt Indus., Inc., which applied Louisiana law to the question whether parties can be bound to a contract when they have not executed a written agreement, despite ongoing negotiations and partial performance.

The court held that when both parties contemplate a written contract as the form of their agreement, there is a presumption under Louisiana law that they do not intend to be bound until the contract is executed in that form. The presumption applied here because both sides “bargained for a written contract” and took steps such as exchanging draft agreements and seeking legal review, but never finalized or signed any document. ”

The court further rejected the argument that the parties’ performance—such as providing services and making payments—could override the lack of a signed contract (or in civilian parlance, “evidence the intention to cure its relative nullity”). No. 24-30806, Aug. 6, 2025.

In Angelina Emergency Medicine Associates v. Blue Cross, the Fifth Circuit addressed the ambiguity of language used in various assignments of benefits, including terms such as “health care providers” or “practitioners providing care and treatment.”

The Court found that these terms were ambiguous as to whether they encompassed physician groups as assignees, noting that the assignments used “plain English for a lay audience” and that the descriptive, role-based language could reasonably be interpreted to include a class of people such as the physicians providing care to the patients. The court observed that there was no clear legal or contractual definition of “provider” in this context, and that the term could refer to both individual doctors and groups of doctors.

The Court further emphasized that the absence of “more precise form-language that explicitly delegates rights to the management entities to which the facility-based physicians belong” does not invalidate the assignment, given the ambiguity present. As a result, the court vacated summary judgment on this issue, holding that the ambiguity in the assignment language created a fact issue that precluded summary judgment. No. 24-10306, Aug. 8, 2025.

Providing a counterpoint to another recent case about contractual conditions, in UniWell Labs v. Frain Indus., the Fifth Circuit an invoice that detailed payment terms and said that “[l]ead time is 10 weeks from receipt of deposit payment, signed lease agreement[,] and testing materials ….”

Despite UniWell making the required payments, it never signed the lease agreement, even after multiple requests from Frain. Accordingly, “UniWell’s entire breach-of-contract claim against Frain, predicated on the lease agreement, fails because UniWell did not sign any lease agreement. There was thus no enforceable lease agreement between the parties.” No. 24-10204 (Apr. 14, 2025).

The issue in Equistar Chemicals, LP v. Indeck Power Equip. Co. was whether the below contract provision, coupled with another provision requiring that all notices be in writing, created a condition precedent of notice to a damages claim under a contract:

The Fifth Circuit held that no condition precedent was created:

[T]here is no conditional language connecting that notice requirement to Equistar’s ability to seek a contractual remedy. Article 8(b) does not use the words “if,” “provided that,” “on the condition that,” “prior to,” or any other similar phrase to create a condition. It also does not limit Equistar’s ability to exercise its contractual remedies. In other words, there is no link between a condition precedent (notice) and a conditioned obligation (suing for breach of warranty or contract).

No. 21-20345 (April 23, 2025).

Ramsey v. Sheet Pile LLC presents an interesting issue about the “prior material breach” doctrine under Texas law. In that case, the issue went nowhere because it had not been raised below and did not rise to the level of plain error. The specific question, though, is the extent to which “there is a bright-line legal rule that suing under a contract prohibits a plaintiff from relying on a defendant’s prior material breach to excuse his own breach” – a question that can become complicated if a contract dispute involves both monetary issues and nondisclosure-type obligations. No. 23-50911 (March 3, 2025).

In McDonnell Grouo, LLC v. Starr Surplus Lines Ins. Co., the Fifth Circuit addressed the perennial topic of contract ambiguity; in this case, in the context of a builder’s risk insurance policy. The court affirmed the district court ‘s conclusion that the flood deductible provision in the policy was ambiguous.

The ambiguity arose from the language: “5% of the total insured values at risk at the time and place of loss subject to a $500,000 minimum deduction as respects … FLOOD.” The plaintiffs and the insurers had reasonable interpretations of this provision, but extrinsic evidence, in the form of industry standards and expert testimony, resolved the ambiguity. That extrinsic evidence clarified the term “VARTOL” (value-at-risk-at-time-of-loss) to mean the total value of the project at the time of loss, favoring the insurers’ interpretation. No. 23-30824, Jan. 29, 2025.

This notice, under Fifth Circuit precedent, abandoned the lender’s intent to accelerate a note obligation:

To the extent you have received demand letters with intent to accelerate the obligations under the above subject Note and any notice of acceleration of said Note prior to the date of this demand letter, be advised that any such demands or notices of acceleration have been withdrawn, cancelled, and abandoned.

No. 23-50662 (Dec. 20, 2024) (emphasis in original). The opinion discusses how the Circuit’s “rule of orderliness” applies to the issue at hand.

In a commerical fiduciary-duty dispute, DALF Energy v. GS Oilfield Services holds: “DALF proved each element of its breach of fiduciary duty claims based on Scribner’s falsification of production records, failure to disclose his relationship to O&GH, and failure to disclose his father’s relationship to TROFA”; and also: “DALF proved Scribner breached his fiduciary duty by placing ;P.E.’ after his name and failing to disclose his relationship to GSOS.” No. 24-50032 (Dec. 30, 2024).

In Willis v. Barry Graham Oil Service, L.L.C., the Fifth Circuit read the relevant contract provisions differently than the district court.

The district court concluded that Barry Graham Oil Service did not fall within the defense, indemnification, and insurance provisions of the Master Services Contract (MSC) between Shamrock Management and Fieldwood Energy. Specifically, it found that Graham was not covered by the MSC’s indemnity provisions because it was not part of the “Third Party Contractor Group” defined in the contract.

The Fifth Circuit held that Graham was covered under the MSC’s indemnity provisions. The MSC required Shamrock to “release, indemnify, protect, defend, and hold harmless such other Third Party Contractor(s) (and any such Third Party Contractor Group),” from claims arising from injuries to Shamrock’s employees.

Therefore, Graham, as part of Kilgore Marine Services’ Third Party Contractor Group, was entitled to indemnification. The contractual trigger for these obligations—cross indemnification “substantially similar” to Shamrock’s—was satisfied, obligating Shamrock to defend and indemnify Graham. No. 23-30609, Nov. 20, 2024.

Contractual ambiguity is easily the #1 issue, in commercial cases, where thoughtful judges disagree. An example appears in Barrios v. Centaur LLC, where both the district court and the Fifth Circuit concluded that a maritime contract had two conflicting “escape” (i.e., “other insurance”) clauses. The district court found ambiguity, but the Fifth Circuit applied a Louisiana rule that “when faced with two escape clauses threatening coverage, courts must find them ‘mutually repugnant’ and make both policies liable for the claim” on a pro rata basis. No. 23-30892 (Nov. 15, 2024).

The 2008 financial crisis produced a bumper crop of Fifth Circut opinions about basic issues involving home loans, because diversity jurisdiction drove much of that litigation into the federal courts. While (thankfully) there are far fewer cases about those issues now, the Fifth Circuit still writes in that important area, most recently in Couch v. Bank of New York Mellon, holding:

• Clock for foreclosure. “The Couches contend that [CPRC] § 16.025(a) and (b) require mortgagees to file suit and sell within four years to preserve the lien. Texas courts disagree. Section 16.035(a) ‘does not require that the actual foreclosure occur within the four-year limitation period, but rather, requires only that the party seeking foreclosure “bring suit … not later than four years after the day the cause of action accrues.”‘”
• Clock for adverse possession. “[T]he adverse possession clock did not start until the Bank acquired the property at the constable’s sale. The Couches have not adversely possessed the property for a sufficient period of time under any of the potentially applicable periods.”

No. 24-10297 (Oct. 11, 2024, unpublished).

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).

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.

In Mission Pharmacal Co. v. Molecular Biologicals, Inc., the Fifth Circuit reversed the district court’s conclusion that a contract was “unambiguously silent” about certain reimbursements.

The case turned on the term “chargeback management.” The Court emphasized that the contract contemplated credits being issued to wholesalers, which undermined Molecular’s argument that Mission unilaterally assumed that obligation without contractual support:

“[F]aced with the question of whether the meaning of chargeback services includes reimbursement from Molecular, the fact that one answer leads to a harmonious contract, while the other leads to a dissonant one, is informative in determining the meaning of the term.”

No. 23-50321 (consolidated with No. 23-50446), August 16, 2024.

Mieco LLC v. Pioneer Natural Resources USA, Inc. involved a dispute over a natural gas supply contract affected by Winter Storm Uri.

Pioneer Natural Resources invoked the contract’s force majeure clause to excuse its failure to deliver gas during the storm. The clause defined force majeure as an “event or circumstance which prevents one party from performing its obligations,” and specified that the event must be beyond the party’s reasonable control and not due to its negligence. The clause further required the party to be “unable to overcome or avoid” the event “by the exercise of due diligence.”

The Fifth Circuit upheld the district court’s conclusion that “prevent” does not mean performance must be impossible, but can also include a significant hindrance or impediment. That said, the Court reversed summary judgment on whether Pioneer exercised the necessary “due diligence” to mitigate the storm’s effects. The clause required Pioneer to make reasonable efforts, and the Court identified  factual disputes about whether Pioneer could have purchased spot market gas to fulfill its obligations, leading to a remand for further proceedings. No. 23-10575 (July 16, 2024).

Examples of contract ambiguity don’t come along every day, so they deserve careful study when they do. Keiland Construction v. Weeks Marine found ambiguity because of tension in a contract between Section 5, titled “COMPENSATION”:

This language was followed by a schedule of lump-sum prices for various services. The other clause was Section 9, titled “TERMINATION FOR CONVENIENCE, which said in relevant part:The Fifth Circuit agreed with the district court that the combination of these two provisions produced ambiguity: “Keiland’s reading, that the sections required compensation for pre-termination work on a lump-sum basis and post-termination work on a cost-plus basis, is plausible. But so is Weeks’s, namely that Section 9 operated to convert all compensation due Keiland to cost-plus upon termination—particularly given that Section 9 specifies payment for 21% of costs “for overhead and profit associated with Work through the date of termination.”  No. 23-30357 (July 25, 2024).

In 1949, a pipeline company received a grant from the Board of Mississipi Levee Commissioners to build and operate two crude oil pipelines in Issaquena County, Mississippi (the least populated county in the U.S. located to the east of the Mississippi River). A dispute arose over permitting fees, and the pipeline company sued the Levee Board for, inter alia, violating the Contract Clause of the U.S. Constitution.

The Fifth Circuit affirmed dismissal: “Despite its significant investment in its pipelines, including their 2007 relocation, Mid Valley does not identify any affirmative or mutual obligations the Levee Board owed stemming from the 1949 Permit—because none are apparent in its express terms.” Accordingly, the Court distinguished this situation, where the permit clearly left complete discretion with the Board, from other permitting cases that did create some consideration / mutuality of obligation. Mid Valley Pipeline Co., LLC v. Rodgers, No. 23-60536 (June 5, 2024).

In a dispute about insurance coverage for a freak accident at a drag-racing event, the Fifth Circuit rejected the argument that the policy was ambiguous, reasoning:

“[W]e must construe every part of the CGL Policy—the CGL Declaration, the CGL Form, and the CGL Endorsements simultaneously. So construed, the CGL Policy is not ambiguous.

Begin by considering the relationship between the CGL Form and the CGL Endorsements. Generalia specialibus non derogant. Given that the CGL Form provides general statements regarding coverage, a CGL Endorsement’s more specific statement regarding the same will control where the two conflict. … 

As the CDE Endorsement and MV Endorsement illustrate, the CGL Endorsements modify express subsets of provisions in the CGL Form. They do not, however, expressly purport to modify the CGL Declaration, other provisions in the CGL Form, or other CGL Endorsements. So, relative to the CGL Form, each of the CGL Endorsements addresses a narrower set of provisions in greater detail.

Kinsale Ins. Co. v. Flyin Diesel Performance & Offroad, LLC, No. 23-50336 (April 26, 2024).

The contract between Catalyst (a consulting firm) and CBS (an equipment-rental company), required payment of a substantial fee if CBS satisfied the contract’s requirements as to a “Transaction.” The Fifth Circuit held that the contract supplanted the “procuring cause doctrine” recognized by Texas law as a default rule for such business situations, and further held that under the contract, Catalyst had made the required showing to recover its fee. Catalyst Strategic Advisors LLC v. Three Diamond Capital SBC LLC, No. 23-20030 (Feb. 22, 2024).

Shaw v. Restoration Hardware, Inc. carefully describes the unique heritage of Louisiana law, and then reached a holding well known to the common law:

“By Shaw’s own allegations, the alleged contract was conditioned on RH wanting to use the at-issue artisans to produce nonlicensed designs and the outcome of the parties’ future negotiations regarding compensation. Because the at-issue agreement left the terms of potential compensation “wide open” to future negotiation, RH and Shaw never entered into an enforceable contract.”

No. 22-30277 (Feb. 15, 2024).

The question in Elmen Holdings, LLC v. Martin Marietta Mat’ls, Inc. was whether a gravell-mining lease had terminated. The district court included that it had been terminated, and the appellant’s first issue was that the court’s analysis went too far under the “party-presentation” principle — a concept given new life and relevance by United States v. Sineneng-Smith, 140 S. Ct. 1575 (2020).

The Fifth Circuit concluded that while the appellant’s argument “had some merit,” the trial court did not go too far:

“[T]he magistrate judge recommended granting Elmen’s motion for summary judgment because Martin Marietta had been late on several royalty payments. The magistrate judge did not ‘radical[ly] transform[]’ this case to such an extent as to constitute an abuse of discretion; she merely took a different route than Martin Marietta and Elmen had suggested to ;decide . . . questions presented by the parties.’ Therefore, the magistrate judge did not violate the party presentation principle by interpreting the Gravel Lease to terminate automatically upon a missed royalty payment, even if that interpretation was contrary to the parties’ reading of their contract.”

No. 23-20023 (Nov. 15, 2023); cf. United Natural Foods v. NLRB, 66 F.4th 536 (5th Cir. 2023) (majority and dissent disagree about whether a particular line of argument is allowed by the party-presentation principle).

Anytime Fitness LLC v. Thornhill Bros. Fitness LLC, an opinion about a bankruptcy debtor’s power to partially assign a contract, quotes the useful but infrequently heard principle of “Nemo dat quod non habet” (“No one can give what they do not have.”). The principle is quoted in a suprising variety of situations and has inspired academic commentary about its interplay with related ideas.

The quesions in Louisiana Newpack Shrimp Co. v. Longhai Indigo Seafood Partners, Inc. was whether Louisiana Newpack (an importer and seller of seafood) owed $995,188.03 to Longhai (a crabmeat exporter) for three orders of crabmeat.

A properly-instructed jury found that the parties did not have a contract, but did have an enforceable “open account” as recognized by Louisiana law. The district court entered judgent for Longhai, but then amended the judgment under Fed. R. Civ. P. 59 to award it nothing.

The Fifth Circuit reversed, noting that Rule 59(e) requires the movant to “clearly establish … a manifest error of law or fact.’ Noting “conflicting case law” in Louisiana on the question whether an open-account claim requires the existence of a contract, the Fifth Circuit held “that it was not a manifest error of law to allow Lonhai to recover on its open account claim.” No. 22-30653 (Aug. 17, 2023, unpublished) (emphasis in original).

A boat sank during a hurricane, leading to an insurance-coverage dispute about whether the boat was in not located in the place warranted by the insured.

The insurance policy at issue had two “incorporation” clauses. “The first provides that ‘[t]his insuring agreement incorporates in full [Gray Group’s] application for insurance[.]’ The second states that ‘[t]his is a legally binding insurance document between [Gray Group] and [Great Lakes], incorporating in full the application form signed by [Gray Group].'”

The Fifth Circuit agreed with the district court that these clauses were ambiguous as to what specific documents were referenced. Unfortunately for the plaintiff, though, the extrinsic evidence showed that the parties intended “application for insurance” to include a document about the boat’s location–and thus, made a warranty that the boat would be in New Orleans during hurricane season. Great Lakes Ins. v. Gray Group Investments, LLC, No. 22-30041 (Aug. 1, 2023).

An alleged requirements contract for a supply of auto parts did not satisfy the statute of frauds, when it did not say in writing that it was a requirements contract or otherwise establish a quantity, when:

• The email in question referenced a $10,000 credit limit (“Our credit manager is on the conservative side. He has given you a credit limit of $10K until he sees a credit history pattern. Your terms are net 30 days.t had a $10,000.”) The Fifth Circuit held: “The $10,000 figure is a credit limit; it is not a ‘specif[ication of] a quantity’ of goods that Wesden would buy from ITW.”
• The email attached a price list. The Court held: “Wesden contends that the attachment satisfies the quantity-term requirement because it shows that the parties agreed to an ‘”‘unlimited” quantity in writing, which is very specific.’ But this is not so. The attachment is an empty order form listing the per-unit price for each Auto Magic product. There is no quantity or exclusivity term in the price list.”

Wesdem LLC v. Illinois Tool Works, Inc., No. 22-50769 (June 9, 2023).

Sidestepping questions of equitable mootness, in Texxon Petrochemicals LLC v. Getty Leasing, Inc., No. 22-40357 (May 3, 2023), the Fifth Circuit affirmed the lower courts’ conclusions that this two-email exchange did not establish a contract to sell a North Austin gas station:

Following Pepi Corp. v. Galliford, 254 S.W.3d 457, 462 (Tex. App.—Houston [1st Dist.] 2007, pet. denied.), the Fifth Circuit summarized when a quantum meruit claim could be pursued even when an express contract applies:

“First, recovery in quantum meruit is allowed when a plaintiff has partially performed an express contract but, because of the defendant’s breach, the plaintiff is prevented from completing the contract. …

Second, “[r]ecovery in quantum meruit is sometimes permitted when a plaintiff partially performs an express contract that is unilateral in nature.” [and]

Third, “a breaching plaintiff in a construction contract can recover the reasonable value of services less any damages suffered by the defendant if the defendant accepts and retains ‘the benefits arising as a direct result of the plaintiff’s partial performance.’”

Credos Indus. Supplies & Rentals, LLC v. Targa Pipeline Mid-Cont. WestTex, LLC, No. 22-20480-CV (March 24, 2023).

Valiant efforts to argue that various things were not “assets” under a contract did not succeed in Sanare Energy Partners LLC v. PetroQuest Energy, LLC:

The Properties are “Assets” under the PSA, including section 11.1, even if the Bureau’s withheld consent prevented record title for the Properties from transferring to Sanare. This conclusion is plain from the PSA’s text, which excludes Customary Post-Closing Consents such as the Bureau’s from the category of consent failures that alter the parties’ bargain. Consent failures that do not produce a void-ab-initio transfer also do not alter the parties’ bargain, so the Agreements, too, are Assets under the PSA’s plain text.

No. 21-20677 (Nov. 29, 2022).

“Foreseeability is a fundamental prerequisite to the recovery of consequential damages for breach of contract.” T & C Devine, Ltd. v. Stericycle, Inc., No. 21-20310 (Nov. 15, 2022) (citation omitted); see also Hadley v. Baxendale, [1854] EWHC J70.

Consistent with that principle, the Fifth Circuit affirmed a summary judgment on a consequential-damage claim when the parties’ contract said that “[a]ll information obtained by [Plaintiff] in any Annual Report . . . shall be retained in the highest degree of confidentiality,” and went on to say: “Neither party may disclose the other party’s Confidential Information to any third party without the other party’s prior written approval.”

Thus: “Devine’s damages were not a probable consequence of the breach from Stericycle’s perspective at the time of contracting because it was not foreseeable that failing to provide confidential cost and expense data would deprive Devine of the opportunity to share that information with potential licensees.”

Central Crude, Inc. v. Liberty Mutual confirms that under Louisiana law, a pollution exclusion doesn’t require the insured to have the ultimate fault for the alleged pollution:

Neither the CGL policy nor [the Louisiana Supreme Court’s opinion in Doerr] requires identification of the party at fault for the oil spill in determining whether the total pollution exclusion applies here. The CGL policy’s total pollution exclusion broadly precludes coverage for bodily injury or property damage that “would not have occurred in whole or in part but for the actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of ‘pollutants’ at any time.” The provision requires a dispersal of pollutants but makes no requirement that the party responsible for the dispersal be determined. 

No. 21-30707 (Oct. 26, 2022).

Among other issues from an insurance-coverage case arising from a building collapse, in Hudson Specialty Ins. Co. v. Talex Enterprises, LLC, the Fifth Circuit considered whether the expense of fire and police personnel was “maintenance” within the meaning of a policy exclusion. The Court found that term ambiguous as to those expenses, and thus construed it against the insurer:

The City paid for the around-the-clock presence of its fire and police personnel to protect the integrity of the site and keep people out.

On the one hand, it is reasonable to read this police and fire department presence as maintenance. By keeping watch over the site and keeping people out, these public safety officials were “upholding or keeping in being” the property in its current state. This aligns with one of the definitions of maintenance listed above.

On the other hand, the definitions of maintenance as “[t]he action of keeping something in working order” or “[t]he care and work put into property” both imply that actions are taken upon the property to keep it in working order. Keeping watch is an action, but it is not performed upon the property and does not involve putting work into the property. Thus, there are at least two reasonable meanings for the term maintenance—one where these expenses would fall under the exclusion and one where they would not.

No. 21-60794 (Oct. 28, 2022) (paragraph breaks added).

Summary judgment was affirmed in a contract case, despite the appellants’ claim that genuine issues of material fact existed about the overlap between two material parties: “Imperial and Harrison are—and always have been—separate entities with their own employees, customers, and warehouses. As the district court explained, A-Z and Ali do not allege, let alone present evidence, ‘that A-Z experienced any changes in ordering procedures, pricing, delivery schedules, type or brand of goods, inventory availability, or any other indicia that . . . [shows] it was no longer doing business with Harrison.'” Harrison Co., LLC v. A-Z Wholesalers, Inc., No. 21-11028 (Aug. 11, 2022).

Echoing the Fifth Circuit’s recent opinion in King v. Baylor Univ., in Jones v. Administrators of the Tulane Education Fund, the Court again allowed a breach-of-contract claim about virtual education to proceed past the Rule 12 stage, concluding:

“First, we hold that the claim is not barred as a claim of educational malpractice because the Students do not challenge the quality of the education received but the product received. Second, we reject Tulane’s argument that the breach-of-contract claim is foreclosed by an express agreement between the parties, because the agreement at issue plausibly does not govern refunds in this circumstance. And third, we conclude that the Students have not plausibly alleged that Tulane breached an express contract promising in-person instruction and on-campus facilities because the Students fail to point to any explicit language evidencing that promise. But we hold that the Students have plausibly alleged implied-in fact promises for in-person instruction and on-campus facilities.“

No. 21-30681 (Oct. 11, 2022) (emphasis in original).

Scylla and Charybdis, the “double threat” foes of Ulysses in the Odyssey (right), would have been interested in Denning v. Bond Pharmacy, Inc., where the plaintiff successfully “show[ed] an injury in fact through her breach of contract claims.” So far so good. But the Court continued: “Athough Denning has established injury in fact, she cannot get past the redressability prong required to establish standing. This is because her injury, as she alleges it, is not redressable by the compensatory and punitive damages that she seeks. Put another way, rendering an award of damages in favor of Denning does not redress her insurer’s injury of being subjected to AIS’s unauthorized billing practices.” No. 21-30534 (Sept. 30, 2022).

The plaintiff in King v. Baylor Univ. contended that Baylor had breached a contract with her (the “Financial Responsibility Agreement” pursuant to which she paid her tuition). During the COVID-19 pandemic, students at Baylor University were promised that they would have live classes on campus, but the university went “all-virtual” instead. She contended that she had made an informed decision to attend Baylor “live” when in fact her education was delivered remotely. The Fifth Circuit found potential ambiguity in the phrase “educational services” in the parties’ contract and remanded for further development of that issue. No. 21-50352 (Aug. 23, 2022).

In addition to the Court’s holding about the dormant Commerce Clause, NextEra Energy Capital v. Lake explained why the plaintiff’s claim based on the Commerce Clause was properly rejected (with citations omitted, although the citations are valuable and instructive):

          One of the original Constitution’s only express limitations on state power, it directs that “No State shall … pass any …  Law impairing the Obligation of Contracts.” The Contracts Clause was a response to the state laws relieving debtors during the 1780s. In the first century or so of the Republic, before the Bill of Rights restricted states, the Contracts Clause was “the primary vehicle for federal review of state legislation.”  Some of the greatest hits of the antebellum Supreme Court were Contracts Clause cases.

          But unlike the dormant Commerce Clause, the Contracts Clause is not what it once was. The Supreme Court substantially narrowed its scope during the Great Depression. Under modern caselaw, states have some leeway to alter parties’ contractual relationships “to safeguard the vital interests of [their] people.”

          A related principle that has sapped the Contracts Clause of its earlier force applies here. We now recognize that parties contract with an expectation of possible regulation. That is especially true in highly regulated industries like power. That history of regulation put NextEra on notice that Texas could enact additional regulations affecting its two projects.  After Order 1000, there was substantial uncertainty about how state regulators would respond.

          Despite PUCT’s declaration that transmission-only companies could enter the market, Texas courts never weighed in on the issue. Moreover, the emergence of state rights of first refusal signaled that Texas could enact something similar, if not more restrictive.

No. 20-50160 (Aug. 30, 2022).

While the district court and the Fifth Circuit largely saw eye-to-eye on the contract in Otteman v. Knights of Columbus (a dispute between the Catholic lay organization and an affiliated insurance salesman), they differed on one provision related to the handling of “high-value prospects”:

The parties differ in their understanding of this conduct. Ottemann’s interpretation of this provision, as alleged in his complaint, is that “[S]ection[] 4 of the [GA] Agreement … stated that Plaintiff was an independent contractor that was ‘free to exercise independent judgment as to eligible persons from who applications for insurance will be solicited’ and have ‘freedom of action.’”

The Order responds that the GA contract explicitly stated that Ottemann had no “authority to bind the Order to issue any insurance policy,” and that it was no breach to tell Ottemann not “to waste his (and the Order’s) time and resources soliciting that person.” The Order also argues there would be no damages to sustain a claim because, even if Ottemann was allowed to solicit Lombardi, the Order contractually reserved rights to refuse the issuance of policies.

We hold that Ottemann’s claim as to Section 4 is plausible at the motion to dismiss stage. Although there is nothing particularly surprising about the Order’s interest in diverting high-value prospects into a special sales program, the contract states that the rules and procedures set up by the Order “shall not be construed as interfering with the freedom of action of the General Agent.” The contract does not demarcate the boundary between Ottemann’s freedom of action as a GA and the scope of the Order’s ability to dictate “rules and procedures” that would divert otherwise available insurance prospects from his territory.

No. 21-30138 (June 2, 2022) (additional spacing added).

A contract involving the acquisition of delinquent debt was not unenforceable for lack of a specific price term in Capio Funding LLC v. Rural/Metro Operating Co., LLC, reversing a district-court ruling to the contrary:

The crucial question is whether the term “additional Accounts” rendered the Forward Flow Amendment unenforceable. AMR urges a Shakespearean take—claiming it was but an indefinite promise to the ear, broken only to Capio’s hope.  Capio counters that “additional Accounts” governed all accounts that met the agreed-upon standards. Capio carries the day for two reasons. First, read in context, the term “additional Accounts” has enforceable meaning. Taken together, the plain meaning of the word “additional,” the contract’s clear architecture, and various settled principles of interpretation reveal that “additional Accounts” refers to all qualifying accounts that accrue quarterly.

No. 20-11218 (May 18, 2022). (The Shakespearean reference is to Act V, Scene 8 of Macbeth, when Macbeth reacts in horror to MacDuff explaining that he was not “of woman born”).

Hess Corp. v. Schlumberger Tech. Corp. notes an interesting, and seemingly unanswered, question about section 2.608 of the UCC, which says that a “buyer may revoke his acceptance of a lot or commercial unit whose non-conformity substantially impairs its value to him if he has accepted it …..” (emphasis added). One side suggested that this phrase should be read in conjunction with section 2.715, which allows a buyer to recover damages “resulting from the seller’s breach,” while another advocated looking to a line of cases that ask whether a contract breach was a “producing cause” of an injury. The Court noted a dearth of Texas authority tying either suggested approach to this specific UCC provision. No. 20-20663 (Feb. 7, 2022).

In Newman v. Cypress Env. Mgmnt.:

• Newman, a pipeline inspector, had an Employment Agreement with Cypress, a business that supplied pipeline inspectors for client projects, and that agreement had an arbitration clause;
• A Cypress affiliate entered a contract to supply services to Plains, a pipeline company
• Newman brought an FLSA action against Plains for unpaid overtime, and Plains sought to compel arbitration, citing the provision of the Newman-Cypress contract.

The Fifth Circuit held that Plains was not a third-party beneficiary of that contract and could not enforce it, noting: “First, Newman’s incorporated-by-reference Pay Letter [between the Cypress affiliate and Plains] did not clearly and fully spell out that Plains could take legal action if either Newman or Cypress breached its terms. To the extent that it named Plains at all, the Pay Letter merely list ‘Plains-Pipeline’ as the ‘Client.’ … [and] Second, the Employment Agreement itself did not clearly and fully spell out that Plains could take legal action if Newman decided to breach its other terms.” No. 21-5023 (Jan. 7, 2022) (emphasis in original).

In Jungian psychology, the “Trickster” archetype (right) has been called “the embodiment of ambiguity.” In McDonnel Group, LLC v. Jung, LLC, the Fifth Circuit found an embodiment of ambiguity in an insurance policy provision that defined the flood-damage deductible as:

“5% of the total insured values at risk at the time and place of loss subject to a $500,000 minimum deduction as respects … FLOOD.”

The Court observed that “the plaintiffs read the deductible as saying ‘5% of the total insured values at risk … as  respects FLOOD,'” and that “the insurers read the provision as ‘5% of the total insured values at risk at the time and place of loss, subject to a $500,000 minimum deduction … as respects FLOOD.” In other words: “[U]nder the plaintiffs’ theory, ‘as respects FLOOD’ modifies ‘total insured values at risk,'” while “[u]nder the insurer’s theory, ‘as respects FLOOD’ pertains only to the ‘$500,000 minimum deduction.'” The Court concluded that “[b]oth parties’ interpretations are reasonable, so the policy is ambiguous.” No. 20-30140 (Sept. 24, 2021).

• “While litigants should, when possible, identify specific contractual provisions alleged to have been breached, Rule 8 does not require that level of granularity. ‘So long as a pleading alleges facts upon which relief can be granted, it states a claim even if it “fails to categorize correctly the legal theory giving rise to the claim.”‘ ” (citations omitted).
• That said — “That the pleading was sufficient in this contract dispute, governed by an agreement neither exceedingly long nor rife with addenda, exhibits, and multiple parts, does not mean that Rule 8 would necessarily be satisfied by general allegations involving more complex contracts.” 

Sanchez Oil & Gas Corp. v. Crescent Drilling & Prod., Inc., No. 20-20304 (July 30, 2021).

The key contract provision in Papalote Creek II LLC v. Lower Colorado River Authority said that “[LCRA]’s damages for failure to perform its material obligations under this Agreement shall likewise be limited in the aggregate to sixty million dollars ($60,000,000).” The Fifth Circuit concluded that read in context, this provision referred to damages that LCRA would owe to Papalote (acknowledging authority that, in the abstract, would suggest damages that LCRA would be owed).

The Court went on to conclude that this provision capped damages available under a specific liquidated-damages provision, finding that another clause dealing with those specific remedies did not displace the language of the cap (It said that “for any provision for which an express and exclusive remedy or measure of damages is provided, such express remedy or measure of damages shall be the sole and exclusive remedy, [and] the obligor’s liability shall be limited as set forth in such provision[.]”). No. 19-50850 (July 16, 2021).

The relevant policy language in a data-breach coverage dispute provided insurance for:
In Landry’s, Inc. v. Ins. Co. of the State of Penn., the Fifth Circuit found that this language created coverage, observing, inter alia:

• “Publication”: “[C]overage is triggered by a ‘publication, in any manner.’ It follows that the Policy intended to use every definition of the word ‘publication’—even the very broadest ones. And some of the dictionary definitions of ‘publication’ are quite broad.”
• Scope: “[T]he Policy does not simply extend to violations of privacy rights; the Policy instead extends to all injuries that arise out of such violations. … [I]t’s undisputed that a person has a ‘right of privacy’ in his or her credit-card data.” (emphasis in original).
• Injury: “[E]veryone agrees that the facts alleged in the Paymentech complaint constitute an injury arising from the violation of customers’ privacy rights, as those terms are commonly understood. It does not matter that Paymentech’s legal theories sound in contract rather than tort. Nor does it matter that Paymentech (rather than individual customers) sued Landry’s. Paymentech’s alleged injuries arise from the violations of customers’ rights to keep their credit-card data private.”

The Fifth Circuit harmonized two insurance-policy provisions in Miller v. Reliance Std. Ins. Co.:

“[T]he phrase ‘active, full-time’ employees must be construed in the insured’s favor to include those who, on the relevant date, are current employees even if not actually working. We also agree that the term ‘regular work week’ must be construed to refer to an employee’s job description, or to his typical workload when on duty.

 

To hold otherwise, as Reliance urges, would render the second paragraph of the Transfer Provision virtually redundant with the first. On Reliance’s reading, the paragraph would cover employees who actually maintain a full-time work schedule at the time of transfer. But this is barely different, if at all, from the previous paragraph’s provision for employees who at the time are ‘Actively at Work,’ defined to mean ‘actually performing on a Full-time basis the material duties pertaining to his/her job'[.]

 

Effectively, Reliance’s reading is that the second paragraph covers employees who are not “actually performing” work duties but are ‘otherwise’ actually working. We reject this convoluted construction as the unambiguous meaning of the provision.”

No. 20-30240 (June 2, 2021) (emphasis in original, breaks added).

Equity takes many forms; in Louisiana landlord-tenant law, it manifests as the doctrine of “judicial control.” In Richards Clearview LLC v. Bed Bath & Beyond, the Fifth Circuit observed: “[E]ven assuming arguendo that BB&B defaulted on the lease, the ‘unusual circumstances’ of this case—pandemic-related office closures causing delays in the receipt of notice coupled with prompt efforts to rectify the asserted underpayments— warranted the district court’s exercise of judicial control.” No. 20-30614 (March 8, 2021) (unpublished).

WickFire won a tortious-interference judgment against TriMax. It claimed that TriMax “committed ‘click fraud’ by repeatedly clicking on WickFire’s advertisements without any intention of making purchases,” which has the effect of driving up WickFire’s costs without any corresponding increase in revenues. The Fifth Circuit reversed, noting:

• Tortious interference with contract. “WickFire produced evidence that a third party had a deleterious financial effect on its bottom line. But as was the case in El Paso Healthcare System, the record here fails to indicate that WickFire’s damages occurred because a co-contracting party breached its agreement with WickFire.”
• Tortious interference with prospective business relations. “WickFire’s damages theory for this claim was grounded in the assertions that TriMax’s tortious conduct delayed the development of TheCoupon.co website by six months and that WickFire lost $334,000 in profits because of that delay. When WickFire’s damages expert was asked how he calculated that dollar figure, the expert said that he had ‘quantified those damages by calculating the amount of profits that [WickFire] lost because of the six-month delay.’ He did not testify as to how he performed that calculation, nor did he point to any data concerning the business generated by TheCoupon.co. This evidence is threadbare and conclusory.”

Wickfire LLC v. Woodruff, No. 17-50340 (Feb. 26, 2021).

Mississippi Silicon (“MSH”), a manufacturer, was tricked into paying approximately $1 million to a cybercriminal, believing that it was in fact paying one of its regular vendors.  MSH sought reimbursement under the “Computer Transfer Fraud” provision of an insurance policy, and the Fifth Circuit affirmed the district court’s conclusion that there was no coverage.

The provision said: “The insurer will pay for loss of . . . Covered Property resulting directly from Computer Transfer Fraud that causes the transfer, payment, or delivery of Covered Property from the Premises or Transfer Account to a person, place, or account beyond the Insured Entity’s control, without the Insured Entity’s knowledge or consent.”

But here: “Coverage under the Computer Transfer Fraud provision is available only when a computer-based fraud scheme causes a transfer of funds without the Insured’s knowledge or consent. Here, three MSH employees affirmatively authorized the transfer; it therefore cannot be said that the fraud caused a transfer without the
company’s knowledge. … [T]he agreement plainly limits coverage to instances in which the transfer is made without knowledge or consent.” 

Mississippi Silicon Holdings v. Axis Ins. Co., No. 20-60215 (Feb. 4, 2021) (all emphasis in original).

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).

At issue in Big Binder Express LLC v. Liberty Mutual Ins. Co. was the meaning of the term “you.” The Fifth Circuit concluded that the term “you” in the key endorsement about a large deductible, when given its “ordinary and generally accepted meaning,” referred only the named insured and not additional insureds. The Court also rejected the insured’s argument that “damages” meant only a court award of damages. No. 20-60188 (Jan. 27, 2021).

The Fifth Circuit affirmed a summary judgment in favor of a business that had been accused of being a “control person” under Louisiana securities laws. “As the district court recognized, the contract between STC and SEI is strong evidence that SEI was unable to control STC’s primary violations. The contract made STC responsible for pricing the SIBL CDs and for providing accurate information to SEI. The contract does not assign any role to SEI in the sale or valuation of SIBL CDs. Further, as the district court noted, the investors’ ‘pleadings contain no evidence demonstrating that the relationship between the companies differed from that contemplated in the
contract.'” The Court then reviewed, and rejected, evidence about the types of work done by the defendant as a service provider. Ahders v. SEI Private Trust Co., No. 20-30186 (Dec. 3, 2020).

“In November 2015, over a year after Richter claims that an implied contract had been formed, the parties exchanged a letter of intent. The letter stated that it was to be construed as securing a “preliminary understanding” between the parties and to serve as “a preliminary basis for negotiating a written agreement that will contain additional material terms, conditions and provisions not yet agreed upon by the parties.” The letter explicitly stated that it did not constitute a binding contract. We agree with the district court that this renders implausible any inference that the prior 2014 e-mail was intended by the parties to represent assent to be bound by contract …”  Richter v. Carnival Corp., No. 20-10480 (Dec. 1, 2020).

An “area developer” for Pizza Inn did not timely renew his option contract related to the potential development of new stores. The Fifth Circuit reversed a judgment for the developer, finding that Texas’s doctrine of “equitable intervention” did not apply. The alleged harms from nonrenewal–“a partial forfeiture of a $1,250,000 purchase price, a forfeiture of future profits . . . , and the shuttering of a Pizza Inn franchise store”–were either within the scope of the contractual bargain or simply not unconscionable, as required by the doctrine. Pizza Inn v. Cairday, No. 19-11302 (Nov. 4, 2020).

The issue in 9503 Middlex, Inc. v. Continental Motors, Inc., No. 19-50361 (Nov. 2, 2020) (unpublished), was whether a commercial tenant was “holding over in possession,” and the Fifth Circuit held it was not: “Here, the district court found that the combination of (1) the retention of the keys to the gate, (2) the use of the gate as a shortcut, and (3) the use of the premises as a break area “constituted holding over.” We agree they are relevant evidence, but we do not agree that they are sufficient. Continental did not occupy the premises of Buildings E and F, nor did Continental exercise dominion over the premises. Continental surrendered the properties to the plaintiffs, though it retained a key to an outside gate. We do not see support in the caselaw that a tenant occupies or controls property when something occurs as insignificant as when employees eat lunch at picnic tables on that property.”

A dispute about an allegedly malfunctioning power generator led to an ingenious but flawed attempt to resolve it in Imperial Indus. Supply Co. v.. Thomas, in two steps:

1. “[Thomas] began by sending Imperial a document titled “ConditionalAcceptance for the Value/For Proof of Claim/Agreement” (“Alleged Agreement”) which purported to be a “binding self-executing irrevocable contractual agreement” evidencing Thomas’s acceptance of Imperial’s offer. , , , The Alleged Agreement further provided that Imperial would need to propound fifteen different “Proofs of Claim” to Thomas in order to avoid (1) breaching the Alleged Agreement; (2) admitting, by “tacit acquiescence,” that the generator caused the fire; and (3) participating in arbitration proceedings.”
2. “Then, Thomas sent Imperial two notices related to the Alleged Agreement. The first notice purported that Imperial breached the Alleged Agreement by failing to provide the proofs of claim. This notice allowed Imperial to cure the alleged breach by providing the proofs of claim within three days. In addition, the notice stated that Imperial’s refusal to follow the curing mechanism would result in Imperial’s admission and confessed judgment to the alleged breach. The second notice stated that Imperial owed the balance for the “entire contract value”1 because it did not cure the breach.”

Thomas than obtained a favorable arbitration award against Imperial. Unimpressed, the Fifth Circuit affirmed the district court’s order that vacated the award, noting: “If Thomas’s argument was valid, it would turn the notion of mutual assent on its head in ordinary purchase cases like this one: buy an item from a dealer or manufacturer, then mail a letter saying “you agree if you don’t object,” and you can have whatever deal you want if the dealer/manufacturer doesn’t respond. Thomas fails to cite a single case that would support such a ridiculous notion.” No. 20-60121 (Sept. 2, 2020).

Samuel Williston reviewed many opinions (right) in drafting his influential works on contract law. So too did D2 Excavating, “[a] subcontractor doing excavation work [who] ended up having to remove a lot more dirt from the construction site than the parties anticipated.” But D2 was unable to escape Williston’s black-letter principles, as the Fifth Circuit held:

• As to the original contract, it noted “tthe basic contract principle that ‘where one agrees to do, for a fixed sum, a thing possible to be performed, he will not be excused or become entitled to additional compensation, because unforeseen difficulties are encountered.'”
• As to a change order: “D2 acknowledges that the alleged consideration was its exporting excess soil. The original contract already obligated D2 to do so without any compensation beyond the contract price. Hauling the dirt, therefore, cannot serve as consideration. The oral change order is void.”

D2 Excavating v. Thompson Thrift Constr., No. 19-40745 (Sept. 2, 2020) (citations omitted).

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).

Many forum-selection disputes, particularly about arbitration clauses, turn on whether the parties’ contract incorporates another document. A variation on this common fact pattern appeared in Sierra Frac Sand v. CDE Global, No. 19-40489 (May 26, 2020),”Sierra concedes that some document was incorporated into the contract. Indeed, by making the agreement ‘subject to’ the ‘Standard Terms and Conditions of Sale” that were available on request, the contract explicitly refers to another document. The question for us is whether the document titled ‘CDE General Conditions – June 2016’ is the incorporated document.”

The answer was “yes,” given evidence that:

• “before this lawsuit commenced …, CDE sent Sierra the 2016 addendum as an attachment to a letter about the project’s timeline,” and “CDE’s financial director attested that the 2016 addendum was the document referred to in the order acknowledgement”;
• “CDE explained that the addendum was dated 2016, even though the contract was executed in 2017, because when the agreement was signed, the 2016 addendum was the most current version of CDE’s terms and conditions”; and,
• “… as the district court found, the 2016 addendum contained the kind of terms and conditions one would expect to accompany the parties’ agreement.”

No. 19-40489 (May 26, 2020).

The parties in Acadian Diagnostic Laboratories v. Quality Toxicology, LLC disputed what the phrase “customary billing practices” meant in their contract. QT argued that it meant “the billing practices that [Acadian] habitually or usually used with its customers in general,” while Acadian “asserts that it agreed to use the billing practices that it habitually or usually used with QT.” The Fifth Circuit resolved this dispute by reference to the parties’ performance, finding that “the record is entirely one-sided,” and that Acadian’s interpretation was consistent with the parties’ performance both before and after the formatoin of their contract. No. 19-30320 (July 13, 2020).

Soren Kierkegaard wondered, “What is the Absurd?” Contemporary artist Michael Cheval creates thought-provoking works of absurdist art (to the right, “Echo of Misconception” (2015)). And the Fifth Circuit plumbed the meaning of the absurd in Geovera Specialty Ins. Co. v. Joachin, No. 19-30604 (July 6, 2020), in a coverage dispute about a homeowners’ insurance policy, bserving: “Absurdity requires a result ‘that no reasonable person could approve.’ An insurance policy is thus absurd if it ‘exclude[s] all coverage’ from the outset. So is one that broadly excludes coverage without reasonable limitations. But the GeoVera policy is not absurd on its face. The policy makes perfect sense for a  homeowner who purchases it while already living in the home.”  No. 19-30605 (July 6, 2020) (citations omitted).

Hoover Panel Systems contracted with HAT Contract to design a component for office desks. The Fifth Circuit found their contract ambiguous, noting the tension between its introductory and first-numbered paragraphs. While both address confidentiality, the introduction is general and paragraph 1 describes a particular process:

“Both parties agree that all information disclosed to the other party, such as inventions, improvements, know-how, patent applications, specifications, drawings, sample products or prototypes,[]engineering data, processes, flow diagrams, software source code, business plans, product plans, customer lists, investor lists, and any other proprietary information shall be considered confidential and shall be retained in confidence by the other party.

 

1. Both parties agree to keep in confidence and not use for its or others benefit all information disclosed by the other party, which the disclosing party indicates is confidential or proprietary or marked with words of similar import (hereinafter INFORMATION). Such INFORMATION shall include information disclosed orally, which is reduced to writing within five (5) days of such oral disclosure and is marked as being confidential or proprietary or marked with words of similar import.”

The Court noted “[s]everal plausible interpretations” of these paragraphs:

• Different materials. “Hoover reads the opening paragraph to apply to the prototype, the primary property the confidentiality agreement was entered into to protect. Hoover argues that the first numbered paragraph applied to other information and communications that were not obviously confidential under the opening paragraph.”
• General v. specific. “HAT reads the opening paragraph to speak generally about the content of the agreement, and the first numbered paragraph to provide the specific instructions needed to put the confidentiality agreement into effect.”
• Different procedures. “[Another possible] interpretation is that under the agreement, proprietary information is automatically confidential while all other information must be marked. The opening paragraph states that “proprietary material shall be considered confidential,” and in the first numbered paragraph, “all information . . . which the disclosing party indicates is confidential or proprietary or marked with words of similar import” is considered confidential.”
• Substance v. housekeeping. “Another plausible reading is that the opening paragraph provides the scope for all information that is confidential while the first numbered paragraph functions as a housekeeping paragraph, providing instruction on how to mark information as confidential, but not requiring labeling as a condition precedent.”

Hoover Panel Systems, Inc. v. HAT Contract, Inc., No. 19-10650 (June 17, 2020).

Last week, I noted the holding in Gulf Engineering Co. v. Dow Chemical Co. about the construction of the parties’ contract (Dow had the right, but not the obligation, to assign work to Gulf Engineering during the relevant period of time). Not surprisingly, this holding caused trouble for the plaintiff’s damages model:

“… The only evidence of how the details of daily or weekly assignments can be known is that Dow used oral and written communication that included the issuing of work orders and job schedules. What Gulf needed to offer were details about any assigned work. That would include evidence of such variables as the nature of the work, the number of employees needed, and the number of days needed to complete the work. In other words, what was needed in some form was evidence relevant to allow a calculation of what Dow would have paid and what Gulf’s expenses would have been, i.e., what Gulf’s profit would have been. Instead, the only evidence was an average from an historic time period, where all those variables were blended.

As we explained earlier, the evidence of any assigned work after the notice of termination barely suffices to show liability. For us then to allow the evidence offered of daily-average profits over one or five years to substitute for actual profits for actual assigned work is a bridge too far. …”

No. 19-30395 (June 9, 2020) (emphasis added).

The contract-interpretation question in Gulf Engineering Co. v. Dow Chemical Co. was whether, after giving notice of termination, Dow Chemical was obligated to provide work to Gulf Engineering for another 90 days, or whether Dow had the “right but no contracted-for obligation to continue assigning work to Gulf.”

The Fifth Circuit found that the contract unambiguously meant that Dow had the right but not the obligation to give work to Gulf, and that the trial court thus erred in denying Dow’s summary-judgment motion on that point. The Court further found that the district court “compounded the error” by instructing the jury that it had found the relevant contract term to be ambiguous. Nevertheless, the error was harmless because the trial court also gave an instruction about the contract that substantially agreed with Dow’s reading of it. No. 19-30395 (June 9, 2020).

The original party to an oilfield-services agreement assigned its rights to Motis Energy. Motis sued on the agreement, lost, and sought to avoid the agreement’s attorneys-fee provision. The Fifth Circuit ruled against it: “Motis is a nonparty to the Agreement. But Motis embraced the Agreement by seeking to enforce its terms. Motis’s argument–that it did not embrace the entirety of the Agreement because it was assigned the right to Motis-DI’s claims, not the entire contract–lacks merit. When a plaintiff sues to enforce a contract to which it was not a party, the Supreme Court of Texas has held, as have we, that the plaintiff subjects itself to the entirety of the contract terms.” Motis Energy LLC v. SWN Prod. Co. LLC, No. 19-20495 (April 28, 2020) (unpublished) (emphasis added).

O’Shaughnessy v. Young Living Essential Oils presents the classic contract-law problem of an agreement contained in more than one document; here, it led to the Fifth Circuit rejecting the defendant’s effort to compel arbitration. O’Shaughnessey’s “Member Agreement” with Young Living had three salient features:

1. A “Jurisdiction and Choice of Law” clause – “The Agreement will be interpreted and construed in accordance with the laws of the State of Utah applicable to contracts to be performed therein. Any legal action concerning the Agreement will be brought in the state and federal courts located in Salt Lake City, Utah.”
2. A merger clause – “The Agreement constitutes the entire agreement between you and Young Living and supersedes all prior agreements; and no other promises,
   representations, guarantees, or agreements of any kind will be valid unless in writing and signed by both parties.”
3. And it incorporated by reference a “Policies and Procedures” document.

The Policies and Procedures, in turn, had an arbitration clause with a carve-out for certain kinds of injunctive relief.  The Court held: “The arbitration clause’s exemption of certain litigatory rights from its purview does not cure its inherent conflict with the Jurisdiction and Choice of Law provision. The two provisions irreconcilably conflict and for this reason, we agree that there was no ‘meeting of the minds’ with respect to arbitration in this case.” No. 19-51169 (April 28, 2020). (The above picture, BTW, is Mary Astor playing Brigid O’Shaughnessey in 1941’s The Maltese Falcon.)

In Golden Spread Electric Co-op v. Emerson Process Management, the Fifth Circuit affirmed the dismissal of business-tort claims under Texas’s economic loss rule.

Golden Spread, a public utility, contracted with Emerson to provide “a new, customized control system” for a steam turbine generator. During testing of the new system, the software installed by Emerson issued a mistaken command that caused the turbine to overheat and become damaged.

The Fifth Circuit reviewed Golden Spread’s claims in light of two policy considerations identified by Texas cases in the area.  First, “[p]urely economic harms proliferate widely and are not self-limiting in the way that physical damage is ….” Second, “the risk of economic harms are better suited to allocation by contract” because the parties “usually have a full opportunity” to negotiate such risks before finalizing a contract.

The Court’s reasoning may prove relevant to future lawsuits involving business issues arising from the current COVID-19 crisis.

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).

This is a cross-post from 600Commerce, which follows the Dallas Court of Appeals.

One Dallas Court of Appeals case addresses the breach-of-contract defense of impracticability, Hewitt v Biscaro, 353 S.W.3d 304 (Tex. App.—Dallas 2011, no pet.). Relevant to the current crisis, it involves a government order that allegedly made performance more difficult. The Court examined whether:

• the performance issue was a basic assumption of the contract;
• the government’s action was an official order or regulation (in that case, the SEC’s contact with the defendant was not); and
• the defendant was acting in good faith.

The Court relied on an earlier Texas Supreme Court case and the relevant Restatement (Second) of Contracts provision. Application of this opinion will be important in upcoming commercial disputes created by the novel coronavirus.

Casalicchio received a pre-foreclosure notice that “contained a deadline thirty days from the day the notice was printed, even though the deed of trust called for a deadline thirty days from the day the letter was mailed.” (emphasis in original). Unfortunately for Casalicchio, while the Fifth Circuit acknowledged older Texas cases that refer to an “absolute” right to “strict compliance” with a deed of trust, the Court concluded: “Since the 1980s, the Texas Supreme Court has repeatedly moderated its rule that the ‘terms of a deed of trust must be strictly followed,’ clarifying recently that harmless mistakes do not void otherwise-valid foreclosure sales.” The defect in his notice was thus “but a ‘minor defect,’ insufficiently prejudicial to justify setting aside an otherwise valid foreclosure sale.” Casalacchio v. BOKF, N.A., No. 19-20246 (March 6, 2020) (applying, inter alia, Hemyari v. Stephens, 355 S.W.3d 623 (Tex. 2011)).

The Texas Supreme Court’s recent opinion in JP Morgan Chase v. Orca Assets, 546 S.W.3d 648 (Tex. 2018) has significantly influenced commercial litigation, particularly with its focus on “red flags” about a questionable transaction. In Universal Truckload, Inc. v. Dalton Logistics, Inc., Ni. 17-20725 (Jan. 3, 2020), a promissory estoppel case, the Fifth Circuit observed: “[T[his case differs from JPMorgan in at least three crucial ways. First, the letter of intent at issue in JPMorgan was a binding contract signed by both parties. The [Indication of Interest (“IOI”] that Universal Truckload sent Dalton is expressly nonbinding. Second, the letter of intent in JPMorgan included a clause disclaiming any oral agreements. Universal Truckload’s IOI does not. And third, the letter of intent in JPMorgan directly contradicted the oral promise, and Universal Truckload’s IOI does not. The Supreme Court of Texas explained in JPMorgan, ‘there is no direct contradiction if a reasonable person can read the writing and still plausibly claim to believe the [oral] representation.’ The conditions laid out in the IOI explain what would need to happen if Universal Truckload was to enter a contract to purchase Dalton. But the jury did not find in favor of Dalton on a contract theory. Dalton succeeded on a promissory estoppel theory, which requires the absence of a contract.”

The issue in BNSF Railway v. Panhandle Northern Railroad was whether a “handling-carrier” relationship between two railroads was terminable at will. BNSF contended that it was not; Panhandle Northern, a short line operating between BNSF’s cross-country track and a large complex of chemical plants in the Texas Panhandle, argued that it was. The Fifth Circuit made a detailed “Erie guess” about the construction of the parties’ contract under the controlling Illinois law, and rendered judgment in favor of Panhandle Northern:

“[I]in making an Erie guess, we must determine, in our best judgment, how we believe the Illinois Supreme Court would resolve whether the handling-carrier relationship between PNR and BNSF is terminable at will. And, as reflected in the [key Illinois Supreme Court] decision, careful analysis of the text of the contract is paramount in making such a determination. Moreover, in the cases BNSF relies upon, the courts discussed the economics of the parties’ agreements only after first examining closely the text of the contracts at issue and determining that there were termination provisions sufficient to take the contracts of indefinite duration out of the general rule of at-will termination. Although the courts could have ended their decisions upon making those determinations, they then went on to discuss the economics of the parties’ agreements to further bolster their decisions that the contracts were not terminable at will.”

No. 18-11416 (Jan. 3, 2020). (LPCH represented the successful appellant in this case.)

Appellants complained about the treatment of their claims by the system established to resolve the “Chinese-Manufactured Drywall Products Liability Multi-District Litigation.”  They contended that “a disagreement with the District Court’s interpretation and application of the settlement agreement invalidates the waivers” of appeal rights in that agreement. The Fifth Circuit disagreed, concluding that this argument “negates the entire purpose of the appeal waiver and would render these agreed upon terms meaningless,” and reminding that to make such a waiver, “a party need only understand the right to appeal that is given up, not all the facts relating to all potential challenges that could be raised on appeal.” Asch v. Gebrueder Knauf, No. 18-31223 (Dec. 12, 2019, unpublished).

“[T]he plain language of the [Louisiana Lease of Movables Act] forbids a lessor from both repossessing leased equipment and collecting accelerated future rental payments. Because the Lease’s liquidated damages clause authorizes just this combination of remedies, the district court properly held it unenforceable. We, like the district court, ‘agree[] with Prince that lessors cannot be allowed to circumvent Louisiana law by simply including a lease provision allowing liquidated damages in the amount of future rent payments.’” Bank of the West v. Prince, No. 18-30970 (Nov. 12, 2019).

The Fifth Circuit affirmed a preliminary injunction that enforced a (reformed) noncompetition agreement under Louisiana law, observing, inter alia:

• The reformed scope was acceptable. “Rogillio’s non-compete provision specified particular parishes and the municipality of New Orleans. The reformation served only to narrow the provision’s scope by removing catch-all clauses that went beyond the listed parishes, not to identify specific parishes after the fact”; and
• Parol evidence was admissible to resolve an ambiguity in the agreement about the significance of the defendant’s physical presence in the relevant parishes, as the agreement’s integration clause dealt with a different and distinct issue.

Brock Services LLC v. Rogillio, 936 F.3d 290 (5th Cir. 2019).

David Russell paid money to Ellen Yarrell, and by doing so argued that he discharged a debt to his ex-wife Janna Russell. The Fifth Circuit agreed with the district court that this payment was ineffective because Yarrell was not Janna’s agent at the time,

As to express agency, the relevant court order required  that any negotiable instrument “shall be made payable to ‘Janna Russell’ only and shall not have any other endorsement.” As to apparent agency, while Yarrell was still an attorney of record for Janna at the time, that general relationship did not control over David’s specific awareness that Yarrell was not authorized to serve as Janna’s agent on this specific issue. Russell v. Russell, No. 18-20643  (Oct. 21, 2019).

Practice tip: The Court noted the black-letter principles that “whether . . . authority exists ‘depends on some communication by the principal either to the agent (actual or express authority) or to the third party (apparent or implied authority).’ It does not depend on whether the principal benefits from the transaction.“ (citation omitted, emphasis added). The Court noted, though, that neither party had raised the issue of ratification. Principles of restitution could also potentially come into play depending on the relationship between the alleged principal and agent.

The Cenacs sued Orkin after Formosan termites damaged their house. Based largely on the contract documents, the Fifth Circuit affirmed summary judgment for Orkin, with the exception of the Cenacs’ negligence claim:

None of the contracts between the Cenacs and Orkin—the 1991 Agreement, the CPP, or the SSA—required Orkin to recommend, instruct, or direct its customers on how to remedy conditions conducive to termite infestation. . . .  Under these circumstances, the Cenacs’ claim that Orkin recommended installation of a vapor barrier and approved its allegedly negligent installation does not involve the breach of a specific contractual duty. Rather, Orkin undertook the task of recommending and directing installation of a vapor barrier, which . . . it had no obligation to do under its contracts with the Cenacs.

Cenac v. Orkin LLC, No. 18-31121 (Oct. 18, 2019).

If you are litigating a Texas contract-law case and feel the need to scratch an equitable itch – don’t: “The Supreme Court of Texas has observed that the interpretive role of judges ‘is to be neither generous nor parsimonious’ but unswervingly faithful to what the words actually say. Looser atextual readings may scratch an equitable itch, or at times seem more pragmatic. But the Texas High Court adheres to this centuries-old principle—’law, without equity, though hard and disagreeable, is much more desirable for the public good, than equity without law: which would make every judge a legislator, and introduce the most infinite confusion.’ Texas precedent is no-nonsense about giving words their most forthright, contextual meaning. Plain language forbids judicial ad-libbing. Here, the text is clear. And, at least in Texas, clear text = controlling text.” Weaver v. Metropolitan Life Ins. Co., No. 18-10517 (Sept. 20, 2019).

A surprisingly subtle problem can arise under secction 2.316 of the UCC when a party urges a role for implied warranties, even though the parties’ agreement contains express ones. A comment to that section advises: “The situation in which the buyer gives precise and complete specifications as to the seller is not explicitly covered in this section, but this is a frequent circumstance by which the implied warranties may be excluded.”  In Baker Hughes v. UE Compression, the Fifth Circuit found such a situation when:

. .. this Agreement included 18 single-space pages of Baker Hughes’s Specification and a 21-page responsive set of specifications comprising UE’s Quote. Baker Hughes ordered exactly what it required in the boosters. Other contractual provisions cited above confirm Baker Hughes’s ultimate responsibility for the design, its duty to supply technical information, its ability to modify specs during the fabrication, and its right to approve any drawings or specifications prepared by UE

Mo. 17-20709 (Sept. 12, 2019) (Our firm’s state-court brief on the topic in an unrelated case shows some of the potential complexities about this UCC issue.)

A concise case study in when a jury may evaluate contractual intent appears in Apache Corp. v. W&T Offshore, No. 7-20599 (July 16, 2019), in which the parties disputed how their Joint Operating Agreement about an offshore drilling project dealt with a $40 million charge associated with using a particular drilling rig.

On the one hand, section 6.2 said that the operator “shall not make any single expenditure . . . costing $200,000 or more” unless an Authorization for Expenditure (“AFE”) is approved. A related provision, about accounting, says that an “acceptable reason[] for non-payment or short payment” includes the situation “when an AFE is not approved.” The defendant cited these provisions in declining to pay, arguing that it had not an AFE on the subject of the rig.

But the operator cited section 18.4, which addresses government-mandated plugging & abandonment operations, and said that the operator “[s]hall conduct” such activity as “required by a governmental authority,” with “the Costs, risks and net proceeds . . . shared by the Participating Parties in such well . . . .” It argued that the rig was necessary to carry out such activity.

The Fifth Circuit agreed with the district court that “[a]pplying Section 6.2’s expenditure provision to a government-mandated P&A undertaken pursuant to Section 18.4 would lead to an absurd consequence: namely a situation is empowered to hold an operator hostage, preventing the operator from completing a legally required P&A, in order to extract a better bargain or avoid cost-sharing altogether.” Accordingly, whether section 6.2 applied to a section 18.4 undertaking “is ambiguous and was properly put to the jury.”

“The complaint alleges that during the April and October 2016 phone calls, the defendants negligently misrepresented to Mr. Dick that ‘reinstatement was not an option’ and that ‘there was nothing [the] Plaintiff could do to stop a foreclosure.’ The plaintiff’s claim that these misrepresentations prevented her from reinstating the loan merely repackages her claim for breach of contract based on the duty to cooperate. It is therefore barred by the economic loss rule.” Dick v. Colorado Housing Enterprises LLC, No. 18-10900 (July 5, 2019) (unpublished).

Texas Capital Bank sued Zeidman for the alleged breach of a guaranty obligation. The Bank moved for summary judgment; in response, one of Zeidman’s arguments was that the Bank’s claim was barred by quasi-estoppel. He testified that “the Bank orally agreed to accept a $500,000 payment in satisfaction of the Guaranty, Zeidman wired that amount to the Bank, the Bank accepted the payment, and it later demanded additional payment under the Guaranty.” The Bank countered that this defense was barred by the statute of frauds, and the Fifth Circuit agreed that “oral modification of the Guaranty appears to be prohibited by the text of the Guaranty and the statute of frauds . . . .” But the Court found the Bank’s position about the statute of frauds to be inapplicable “because it improperly recharacterizes Zeidman’s affirmative defense as a claim that the underlying Guaranty was modified.” Texas Capital Bank N.A. v. Zeidman, No. 18-1114 (June 27, 2019) (unpubl.)

Several parties entered an “Area of Mutual Interest” (AMI) agreement, a common feature of oil-and-gas development projects. The AMI included various interests “which were or are acquired after” the agreement’s effective date, “by a Party” to the agreement. But it excluded “all interests, leases or agreements owned by a Party prior to the Effective Date.” Thus, when a party bought interests from another party after the effective date, that sale was not within the scope of the AMI. The Fifth Circuit observed: “If Appellees sought to prohibit the type of activity in which EnerQuest engaged, they could have easily done so through the contract.” Glassell Non-Operated Interests, Ltd. v. EnerQuest Oil & Gas, LLC, No. 18-20125 (June 12, 2019).

While “[t]he Texas Supreme Court has not had occasion to determine whether a contract that is unsigned but otherwise enforceable may incorporate an unsigned document by reference,” that was the issue presented in Int’l Corrugated & Packing Supplies, Inc. v. Lear Corp. But in the context of an interlocutory appeal from denial of a motion to compel arbitration, the Fifth Circuit “declined[d] to resolve this novel question of Texas law here because the district court has not yet ruled on the enforceability of Lear’s purchase orders. Specifically, . . . how the parties entered the agreements at issue in this case—either through purchase orders, or phone calls or emails prior to the sending of purchase orders, or some other conduct—nor has it determined what effect, if any, the parties’ course of dealing has on such agreements [under the UCC].” No. 18-50167 (May 3, 2019) (unpublished).

“[Mister Mudbug, Inc.] asserts that it relied on [Bloomin’ Brands, Inc.]’s representation that ‘MMI would have to substantially enlarge its production and manufacturing facilities’  if it wanted ‘to produce all of the food products that BBI would need in its nationwide restaurant operations.’ The district court held that this representation is a factual declaration, not a promise. We agree. It is not an assurance that BBI would award MMI larger contracts if it did expand; it is a statement informing MMI of the preconditions necessary to be in the running for a larger contract.” Mr. Mudbug, Inc. v. Bloomin’ Brands, Inc., No. 18-30626 (May 1, 2019) (unpublished) (emphasis added).

The losing party in Alonso v. Westcoast Corp., No. 17-30877 (Apr. 8, 2019), contended that it was plain error to submit the below jury question about a contract claim, without also asking whether the plaintiff had itself breached:

The Fifth Circuit held that it was not plain error, noting that earlier in the charge as part of the instructions, the jury had been told that if “one party to a contract substantially breaches the contract, then the breaching party cannot enforce the contract it has breached or demand damages form the other party to the contract.” The Court cited Baisden v. I’m Ready Prods., Inc., 693 F.3d 491, 506 (5th Cir. 2012), which allowed a question that “conflated the question of license (an affirmative defense . . . ) with that of infringement (a claim on which [plaintiff] carried the burden),” even though that  question was “not a model of clarity.”

This was a Louisiana case; by way of comparison (background only, given the deferential standard of review in this case), the Texas pattern charge on this point uses questions about both parties’ breach, drawing from Mustang Pipeline Co. v. Driver Pipeline Co., 134 S.W.3d 195 (Tex. 2004).

Wease established ambiguity in two aspects of a deed of trust. With respect to when a servicer could pay the borrower’s property taxes by the servicer, the key provision used the fact-specific phrase “reasonable or appropriate”; other provisions both suggested that the power was limited to back taxes, but also that it could be made “at any time.” Accordingly, “Wease was entitled to proceed to trial on his claim that Ocwen breached the contract by paying his 2010 taxes before the tax lien attached and before they became delinquent.” This analysis led to finding a triable fact issue as to whether Ocwen provided adequate notice of its actions. Wease v. Ocwen Loan Servicing, No. 17-01574 (Jan. 4, 2019). A revised opinion eliminated some statements about tax liens and when they took effect.

In an Erie guess based on prior Circuit precedent and intermediate Texas authority, this limitation-of-liability provision was found to not waive a claim for attorneys’ fees under CPRC § 38.001: “[E]ither Party’s liability, if any, for damages to the other Party for any cause whatsoever arising out of or related to this Agreement, and regardless of the form of the action, shall be limited to the damaged Party’s actual damages. Neither Party shall be liable for any indirect, incidental, punitive, exemplary, special or consequential damages of any kind whatsoever sustained as a result of a breach of this Agreement or any action, inaction, alleged tortuous conduct, or delay by the other party.” Ferrari v. Aetna Life Ins. Co., No. 17-20556 (Nov. 7, 2018, unpublished).

Property rights are often called a “bundle of sticks”; a particularly tangled bundle was the subject of RPD Holdings LLC v. Tech Pharmacy Servcs. Careful examination of both sides’ specific obligations under a patent license led to the conclusion that it was an executory contract, rejected by operation of law during one of the parties’ Chapter 7 bankruptcy case. No. 17-11113 (Oct. 29, 2018).

In a win for our firm’s client, the Fifth Circuit affirmed last year’s $3 million trial win by Mike Lynn and John Volney for Prince Mansour bin Abdullah Al-Saud, in a succinct opinion touching on the parol evidence rule, speculative damages, and ways to cure a pleading problem with respect to the recovery of attorneys’ fees. Al-Saud v. Youtoo Media, No. 17-10622 (Oct. 22, 2018).

A standard form of an oil-and-gas project’s Joint Operating Agreement contains an attorneys’ fee provision that says: “In the event any party is required to bring legal proceedings to enforce any financial obligation of a party hereunder, the prevailing party in such action shall be entitled to recover . . . a reasonable attorney’s fee.” In Seismic Wells LLC v. Sinclair Oil & Gas Co., the Fifth Circuit found that this provision did not allow fee recovery as to a successful claim about a well damaged by a water leak. “Turning over operatorship rights and running the well on Seismic’s preferred erms are not financial obligations. Sinclair did not refuse to make some payment specified in the agreement.” (emphasis in original). No. 17-10500 (Sept. 13, 2018, unpublished).

A retail business sold its defaulted accounts to a debt collector; litigation ensued about the retailer’s warranty in the sales contract that the accounts “have been originated, serviced, and collected in accordance with all applicable laws.” Conn Credit I LP v. TF Loanco III, LLC, No. 17-40148 (Sept. 10, 2018). This requirement created an “unambiguous condition precedent” when contained in a provision stating that the defendant was “obligated to transfer Accounts on a Closing Date only if . . . the representations and warranties of the Buyer or the Seller, respectively, in this Agreement are true and correct as of such Closing Date” (emphasis added). The Fifth Circuit declined to imply a prejudice requirement into the parties’ agreement, noting that “Conn does not identify a single Texas case applying a prejudice requirement outside of the insurance context” involving untimely claim notification.

Villareal sought to redeem five certificates of deposit purchased in the early 1980s. His primary legal theory, apparently selected to avoid problems with suing on the instruments themselves, was the quasi-contractual / restitution theory recognized in Texas law for “money had and received.” That theory ordinarily does not apply when an express contract (here, the CDs) addresses the subject. To escape that limitation, Villareal relied on Texas authority under which “an overpayment beyond what a contract provides may sometimes be recovered as unjust enrichment. If an overpayment qualifies as unjust enrichment, reasoned the district court, so should an underpayment.” (citation omitted, emphasis in original). The Fifth Circuit disagreed: “Overpayment typically falls outside a contract’s terms and, in that event, the contract would not ‘cover[] the subject matter of the parties’ dispute.’ By contrast, here the dispute involved the claimed non-payment of a debt evidenced by express contracts (the CDs). Unjust enrichment has no role to play.” (citation omitted, emphasis in original). Villareal v. Presidio Nat’l Bank (revised), No. 17-50765 (July 27, 2018, unpublished). (Picture above of Professor Samuel Williston eyeing some of his extensive work on express contracts).

Huckaba signed an arbitration agreement with her employer, Ref-Chem – but Ref-Chem did not sign the agreement. The agreement had signature blocks for both parties, referred to the “signature affixed hereto” and the legal effect of “signing this agreement,” and also said that it “may not be changed, except in writing and signed by all parties.” The Fifth Circuit concluded that the agreement was not enforceable, focusing on the distinction between acceptance of the offer, and the separate requirement of “execution and delivery of the contract with intent that it be mutual and binding.” Huckaba v. Ref-Chem, L.P., No. 17-50341 (June 11, 2018).

A lease dispute turned on the agreement’s effective date. The lease was found ambiguous on that point (and the subsequent trial result based on parol evidence affirmed), when it said:

• On the last page – “IN WITNESS WHEREOF, the parties hereto have duly executed this Lease as of the day and year first written above.”
• And on the first page – “This Ground Lease (“Lease”), dated for reference purposes as ________, 2014, is made and executed by and between Malik and Sons, LLC (“Landlord”), and CIRCLE K STORES INC., a Texas corporation (“Tenant”).”

The Fifth Circuit concluded “Circle K offers a plausible interpretation, but Malik offers an alternative, credible interpretation to Circle K’s proposed interpretation. It seems equally—if not more likely—that the ‘day and year first written above’ is referencing a date the parties should have written on the last page. Therefore, although the last page references an execution date ‘written above,’ there is no date on that page. The only other date in the document is labeled as ‘for reference purposes.’ Even though Circle K is correct that parties ‘are free to specify the date of a contract’s execution,’ the issue here is whether they did.” Malik & Sons v. Circle K Stores, No. 17-30113 (May 15, 2018, unpublished).

A useful reminder about contract litigation appears in a recent insurance coverage dispute: “Neither party argues that the Hartford policy is ambiguous. Rather, the parties dispute whether the policy unambiguously provides coverage—Axis’s contention—or unambiguously excludes coverage—Hartford’s contention.” Bennett v. Hartford Ins. Co., No. 17-30311 (May 18, 2018) (emphasis in original).

Plaintiff argued, for purposes of a UCC Article 2 damages calculation, that a pollution monitoring system was worthless because it was not practically repairable. The Fifth Circuit disagreed – language in an earlier Mississippi case about whether a good “could not be repaired and was worthless” was not “the same as ‘the goods were worthless because they could not be repaired.’ While it is true that an unrepairable good may also be worthless, it does not follow that such a good is always worthless.” The Court also found, as to a limitation-of-remedy provision: “Here, Altech provided an exclusive repair or replace warranty. The warranty failed of its essential purpose when Altech—over the course of years—was continually unable to repair the [system].” Steel Dynamics v. Alltech Environment, No. 17-60298 (May 17, 2018, unpublished).

The parties’ licensing agreement referred to “Iced tea, Ready-to-Drink (RTD) Teas, RTD Beverages.” One side argued that the term “Ready-to-Drink Beverages” included “all beverages that are as-is ready for consumption including energy shots and vitamin water”; the other contended that, “as tea (i.e., the main product under the Agreement) is part of a category of beverages that generally require an additional step of preparation prior to consumption, the term may only cover only the beverages within this category.” Drinking deeply from principles of contract interpretation, the Fifth Circuit found the contract ambiguous because both positions were reasonable. Turning then to the testimony of the witnesses involved in drafting the contract, the Court found undisputed testimony in favor of the narrower view, and gave no weight to testimony from witnesses who had opinions but “did not participate in the negotiations.” The Court also avoided a dispute about who drafted the term, noting that “it is not necessary to determine who the drafter was because the term is only construed against the drafter ‘[I]n case of doubt that cannot be otherwise resolved.” Chinook USA v. Duck Commander, Inc., No. 17-30596 (March 15, 2018, unpublished).

Centerboard Securities sued Benefuel for not paying certain “success fees” on two transactions. Benefuel countered that the transactions were not “investments” within the meaning of their contract, as they included debt and equity aspects instead of solely equity. Tthe Fifth Circuit disagreed: “The term ‘investment’ is unambiguous and includes debt and equity. . . . Delaware courts have used the term ‘investment’ to refer to equity and debt.” Similarly, the phrase “current investor” in the contract could not be read to include a party’s subsidiaries or affiliates: “Delaware courts take the corporate form and corporate formalities very seriously. . . . and will disregard the corporate form only in the ‘exceptional case.'” Centerboard Securities LLC v. Benefuel Inc., No. 17-10344 (March 12, 2018) (citations omitted).

While the mortgage debtor was in default, a notice provision in the related deed of trust was an independent obligation, the breach of which could support a stand-alone action against the foreclosing party. “If performance of the terms of a deed of trust governing the parties’ rights and obligations in the event of default can always be excused by pointing to the debtor’s default under the terms off the note, the notice terms have no meaning.” That said, the Court noted that on remand, the claim would have to withstand attacks on thie measure of damage as well as causation. Williams v. Wells Fargo Bank, No. 16-20507 (Feb. 26, 2018).

“[Kansas City] Southern [Railway] was caught between hundreds of thousands of tons of rock and a hard place.”  Problems with the construction of a new rail line in South Texas resulted in a dispute about payment for 74,260 tons of “rail ballast” – crushed stone that forms the base for the train tracks. The railway won the resulting litigation against its contractor, and the Fifth Circuit rejected several rocks thrown at the damages model, observing:

• Acknowledging that the payments made had to be reasonable, the Court reminded that “magic words” are not needed, and found that on this record: “Reasonableness can thus be demonstrated by the general market prices Southern was paying for these expenses before it had any knowledge that some excess ballast costs would be passed on to Balfour via litigation.
• Evidence of post-breach costs was appropriate, as the substantive damage calculation looks at the difference between “what Southern expected” and “the cost Southern ultimately had to pay (value received)”;
• Southern acted appropriately, and the defenses of waiver and quasi-estoppel did not apply: “It could have refused to ship additional ballast at Balfour’s request, but that would have necessitated stopping the project, finding a new contractor, and
  resuming later, all of which likely would have cost substantially more than the
  damages awarded here. Southern had a duty to mitigate as much as possible.
  It did so by allowing Balfour to finish the project and then determining the
  extent of damages.”

Concluding that the record was rock-solid, the Court affirmed. Balfour Beatty Rail v. Kansas City Southern Railway, No. 16-11645 (Feb. 15, 2018, unpublished).

The issue in Fort Worth 4th Street Partners LP v. Chesapeake Energy Corp. was whether a payment provision in a “Surface Use Agreement,” signed at the same time as a mineral lease, created an obligation that ran with the land. On the element of whether the covenant “touched and concerned” the property, the Fifth Circuit observed that the benefit of the provision “is not merely the right to receive payment but also how the method of calculating this payment preserves the land’s value to its owner. By basing the payment due on the square footage occupied by the lessee, the terms of the provision operate to incentivize the lessee to use, and consequently, damage, as little of the surface land as possible. Critically, structuring the payment in this way does not merely compensate FWP for any such damage; it impacts how the lessee will
use the land, thereby preserving its value to its owner.” No. 17-10040 (Feb. 15, 2018).

The uncommon animal of an “absurd result” was not only sighted, but used as the basis for reversing summary judgment, in Star Financial Services v. Cardtronics USA, a dispute about the obligation to update account information associated with an ATM network. The Court reasoned: “R]eading the Contract to not impose an obligation upon Cardtronics to use correct account information after receiving updated Terminal Set-Up Forms leads to the absurd consequence that Star Financial can never make effective changes to a Terminal Set-Up Form despite an explicit provision to the contrary. Cardtronic’s obligation to deploy account information in an updated Terminal Set-Up Form is implicit in the contractual process for updating a Terminal Set-Up Form.” No. 17-30258 (Feb. 2, 2018).

Among other holdings in a breach-of-warranty dispute about an aircraft engine, the Fifth Circuit reversed a finding that the manufacturer breached an express warranty by not repairing the engine in a timely manner. Because, under Texas law, “courts will not rewrite agremeents to insert provisions parties could have included,” “time is not of the essence of a contract unless the contract explicitly makes it so . . . .”  Becker v. Continental Motors, Inc., No. 16-10166 (Oct. 3, 2017).

In a reminder of the surprising complexity that can surround litigation about a party’s standing to bring a claim, in Intrepid Ship Mgmnt v. Malin Int’l Ship Repair, the Fifth Circuit noted a source of potential confusion about the applicable procedure: “Although a dismissal for lack of standing is appropriately judged under Federal Rule of Civil Procedure 12(b)(1), which allows a court to make limited findings of fact, the parties have argued this case under the standards applicable to ordinary summary judgment motions. Compare Lane v. Halliburton, 529 F.3d 548, 557 (5th Cir. 2008) (explaining that the district court can resolve disputed facts as necessary to decide a challenge to subject atter jurisdiction), withInt’l Marine LLC v. Integrity Fisheries, Inc., 860 F.3d 754, 759 (5th Cir. 2017) (applying de novo review to summary judgment cases, explaining that “[s]ummary judgment is appropriate when ‘there is no genuine dispute as to any material fact.’”)”. No. 16-41074 (Oct. 11, 2017) (unpublished).

The parties in IQ Products Co. v. WD-40 Co.disputed whether an arbitration agreement was limited to “propane/butane-propelled produicts” or also “carbon dioxide-propelled products.” The party who prevailed in the arbitration relied mainly on the parties’ subsequent conduct to justify the broader reading, and the Fifth Circuit agreed (applying California law): “Considering . . . ‘the words used . . . as well as extrinsic evidence of such objective matters and the surrounding circumstances under which the parties negotiated [and] entered into the contract; the object, nature and subject matter of the contract; and the subsequent conduct of the parties . . . WD-40’s assertion is . . . not wholly groundless.” No. 16-20595 (Sept. 13, 2017).

Yahoo cancelled its contract with SCA related to a billion-dollar “perfect bracket contest” for 2014’s March Madness. The parties disputed the appropriate termination payment, defined in the contract as “50% of the fee” – Yahoo contending the “fee” was 50% of the $1.1 million deposit that it already paid SCA; SCA contending that the “fee” was the rull $11 million contract fee, credited for the deposit. The Fifth Circuit reversed and rendered judgment for SCA, noting that the contract “clear[ly] incorporated by reference two invoices that specified the $11 million figure,” and identifying several other contract provisions consistent with SCA’s reading. The issue of what documents comprise a contract, and the related legal issue of when a court may consider “parol” evidence, continues to be a frequent – if not the most frequent – point of disagreement between the Fifth Circuit and trial courts. SCA Promotions v. Yahoo!, No. 15-11254 (Aug. 21, 2017).

A recurring issue in contract litigation is whether a provision creates a “condition precedent” to the performance of other obligations. In Red Hook Communications I, LP v. On-Site Manager, Inc., the Fifth Circuit identified this provision as one that “plainly creates a condition precedent that both [parties] must comply with before either can bring suit (and thus, denying subject matter jurisdiction if it is not complied with): “[T]he Indemnifying Party and the Indemnified Party will, for a period of sixty (60) days following delivery of such objection, use good faith efforts to resolve the Dispute.” No. 16-11351 (July 3, 2017, unpublished).

Servisair bought a workers’ compensation policy from Liberty Mutual, “There is no dispute that Servisair significantly over-allocated payroll to clerical employees, which is a considerably less expensive classification.” Thus, after the payroll period ended and an audit concluded, Liberty Mutual billed Servisair for $3.6 million in additional premium. Servisair alleged a mistake in the “underlying factual basis” relied upon “in negotiating and agreeing to the policy,” but the Fifth Circuit sided with Liberty Mutual, noting that the policy expressly stated: “If the final premium is more than the premium [Servisair] paid to [Liberty Mutual], [Servisair] must pay [Liberty Mutual the balance.” In other words, “[t]his is an open-ended obligation with no limit on the amount of additional premium Servisair might ultimately owe.” In sum: “Servisair made a deal that, in retrospect, it did not like. That does not allow it to rewrite or avoid its obligations.” Liberty Mutual Ins. Co. v. Servisair, LLC, No. 16-20472 (June 27, 2017, unpublished).

In ASARCO LLC v. Montana Resources, Inc., a case involving the interplay of a business’s bankruptcy with a later lawsuit for breach of contract by that business, the Fifth Circuit observed:

• “[A] declaratory claim on its own typically will not preclude future claims involving the same circumstances (as noted, issue preclusion may still apply to any declaration the court issues). But in a case involving both declaratory claims and ones seeking coercive relief, the former will not serve as an antidote that undoes the preclusive force that traditional claims would ordinarily have.” (applying the “seminal case” on the point, Kaspar Wire Works, Inc. v. Leco Engineering & Machine, Inc., 575 F.2d 530 (5th Cir. 1978))
• As to the damages claim, “ASARCO’s claim for failure to reinstate did not accrue until MRI rejected the tender in 2011. . . .  ASARCO may or may not have attempted to cure, and MRI may or may not have denied ASARCO’s reinstatement. Because the present breach of contract claim was contingent on future events, ASARCO could not have brought it during the adversary proceeding.”
• For the same reasons, the plaintiff was not judicially estopped by allegedly inadequate disclosures during the earlier bankruptcy: “MRI cites no case requiring a party to disclose a potential claim for breach of contract when the contract had not yet been breached. This makes sense, because MRI’s position would require a debtor to scour its contracts looking for hypothetical claims that another party could maybe breach in the future.”

No. 16-40682 (June 2, 2017).

The common situtation of a loan modification raised two general issues – (1) given the princple that “all parts of a contract should be read so that none will be rendered meaningless,” the outcome is not clear if a modification has a signature line, when companied by “contratual language [that] indicated that once the [borrowers] performed, their loan would be modified automatically and [the servicer] would be bound by the Agreement” – and (2) given that the Statute of Frauds in Texas for loan agreements generally involves oral agreements or agreements that clearly require signature by both parties, it is not clear if “the written offer itself, along with the attached Modification Agreement” would satisfy that status. Owens v. Specialized Loan Servicing LLC, No. 16-20557 (June 5, 2017).

The Fifth Circuit reversed a JNOV on liability for breach of contract in Kerr v. Mapei Corp., holding: “The jury was presented with two alternative, but plausible, accounts of the formation and authorization of a contract. The jury reasonably selected one of those alternatives.” As to consequential-type damages for lost profits for other sales, however, the Court affirmed the judgment for the defendants, finding that the plaintiff’s damages model “was not supported by any empirical analysis or any evidence outside of the [contract] relationship . . . (e.g., real-world sales, customer surveys, or current market demand).” In particular, it noted the lack of evidence that the substantial business opportunity related to the contract would recur, the fact that the contract was terminable at will, and the lack of weight for a party’s own “unsubstantiated, self-serving speculations” about future business. No. 16-10430 (June 30, 2017 (revised), unpublished).

The Herculean effort of settling the many lost-profits claims related to the Deepwater Horizon accident led to a claims process described by the Fifth Circuit as follows – “Somewhat simplified, and more than somewhat condensed, the claims process works as follows: The Claims Administrator compares a claimant’s financial performance prior to and after the spill. If the former is greater than the latter, BP is liable for the difference.
Causation is, in all other respects, presumed.”

Efforts to implement this process led to guidelines “requiring the Claims Administrator to move, smooth, or otherwise reallocate revenue for claimants engaged in construction, education, agriculture, and professional services. Claimants in these four industries tend to be paid in lump sums, which are capable of generating damages awards that do not comport with tort principles.”

Mindful that in an earlier dispute about these issues, the Court had reminded that “[i]n interpreting a settlement, surely some weight has to be given to what damages recoverable in civil litigation actually are,” the Court reversed the use of these particular guidelines: “[W]e decline to re-write the Settlement Agreement under the guise of contractualinterpretation. When we said . . . that the Claims Administrator should ‘process claims in accordance with economic reality,’ we assumed that doing so would comport with the text of the Settlement Agreement. . . . [, which] grants claimants the right to choose their own Compensation Period.” Lake Eugenie Land & Devel. v. BP, No. 15-30377 (May 23, 2017).

Adams LLC, formed in July 2010, bought a number of assets from Adams Produce Company, Inc., and sought to prosecute a Deepwater Horizon claim for damages suffered by Adams Inc. Unfortunately, “[a]lthough substantially alll of Adams Inc.’s assets and liabilities were transferred as part of the transaction, it is undisputed that Adams Inc. retained certain assets and liabilities. Adams Inc. and Adams LLC are two distinct entities, and the asset transfer that occurred here was not just a change in form.” BP Exploration v. Claimant ID 100169608, No. 16-30482 (March 8, 2017, unpublished).

The owner of the Golden Nugget casino in Lake Charles withheld $18.7 million from payments to its general contractor, who then filed a statutory lien (a “privilege” in Louisiana parlance) on the property. The relevant statute requires the contractor to file “within sixty days after the filing of the notice of termination or substantial completion of the work.” If “substantial completion” refers to an event, the contractor’s filing was not timely; if, however, it refers to a filing that certifies substantial completion, the contractor’s filing was timely, as the owner did not record such a certification. The Fifth Circuit concluded that, while the statute was ambiguous, the related provisions and the apparent industry practice supported the contractor’s position: “The [statute] places the burden on an owner to cut of potential claims when a contract has been recorded, whether it is a general contractor or a subcontractor.” Golden Nugget Lake Charles LLC v. W.G. Yates & Sons Constr. Co., No. 16-30496 (March 6, 2017).

In Richard v. Anadarko Petroleum Corp., the Fifth Circuit required reformation of a contract on the grounds of mutual mistake, to the detriment of non-party Liberty Mutual, acknowledging that “[c]ourts must guard against parties’ ‘attempts to make an end-run around the parol-evidence rule,’ which forecloses the use of parol evidence to interpret unambiguous terms, ‘by framing [their] argument[s] as a request for reformation.” Here, reformation was appropriate even considering the effect on Liberty Mutual, given (1) its lack of reliance on the contract, (2) the general consistency of the terms in the reformed contract with industry practice, and (3) course of performance. No. 16-30216 (March 2, 2017).

Heniff Transportation, a trucking company, sued Trimac Transportation, alleging that Trimac did not properly clean a tanker-trailer, resulting in contamination and a damages claim against Heniff by its customer. Trimac argued that Heniff’s state law claims were preempted by the Carmack Amendment, a federal law that addresses actions about lost or damaged goods, arising from interstate transportation of the goods by a common carrier. The Fifth Circuit agreed, finding that washing a tanker-trailer was “plainly” such a service, directly analogous to specific examples given by the statute. This statute, not widely known outside trucking litigation, can bear significantly on UCC claims involving transported goods. Heniff Transportation v. Trimac Transportation, No. 16-40553 (Jan. 30, 2017).

NNN Realty disputed its obligations under a guaranty, noting that the definition of “borrower” in the instrument listed sixteen entities (all of which contained “NNN” in some fashion), concluding with the conjunction “and.” Thus, argued NNN, all of those entities had to be in default to trigger its obligations. The Court rejected this argument, noting the overall structure of the guaranty and related security instrument, as well as the usage of similar terms. It gave little weight to textual arguments about the definition that arose from a misplaced parenthetical. While many of the grammatical arguments – especially as to the the erroneous parenthetical – are unique to the facts of this case, the broader analysis about the interplay between a collectively-defined term and individual obligations applies in many business settings. WBCMT 2007 C33 Office 9720, LLC v. NNN Realty Advisors, Inc., No. 15-20086 (Dec. 22, 2016).

Two manufacturers of baby products (specifically, pacifiers and “sippy cups”), disputed the enforcement of a contract provision that said: “Distributor hereby acknowledges and agrees not to copy or utilize any of LNC’s . . . product design . . . without LNC’s written permission.” While “the district court imposed the requirement that the design be either confidential or protectable as intellectual property in order to fall within the definition of ‘product design,'” the Fifth Circuit disagreed and reversed because of the plain meaning of the terms chosen by the parties: “On its face, the clause applies to any of LNC’s product designs, which would include those in the public domain.” The court rejected arguments based on analogies and appeals to principles of (non-contractual) intellectual property law. Luv N’ Care, Ltd. v. Gruopo Rimar, No. 16-30039 (Dec. 16, 2016).

Plaintiff sued Defendant for breach of contract, alleging a failure to deliver Defendant’s 2010 cotton crop to Plaintiff. Defendant contended that an anticipatory repudiation occurred. The Fifth Circuit reminded that the proposal of new contract terms, absent a statement of intent not to perform the present contract, does not create an anticipatory repudiation. As a counterpoint, the Court cited a Texas appellate case in which the appellant not only proposed new terms, but also “‘definitely manifested’ that he would not longer perform the terms of his original contract when he . . . drove the appellee out to a deserted county road, threatened to sue him, [and] stated that he was ‘mad enough to smash the appellee’s face in.'” Plains Cotton Cooperative Ass’n v. Gray, No. 16-10806 (Dec. 5, 2016) (unpublished).

The plaintiff in Isner v. Seeger Weiss LLP alleged that counsel misrepresented the compensation that she would receive under a large Vioxx settlement. The defendants won; two features of the master settlement agreement were particularly important. First, it said that claimants would receive a payment under  “criteria to be determined by the Claim Administrator” and “according to guidelines to be established by the Claims
Administrator” — thus, “the method of calculation was . . . specifically reserved for
the decision of the Claims Administrator at a later date.” Second, under the heading “NO GUARANTEE OF PAYMENT,” the release said: “I FURTHER ACKNOWLEDGE THAT I UNDERSTAND THIS RELEASE AND THE AGREEMENT AND THAT THERE IS NO GUARANTEE THAT I WILL RECEIVE ANY SETTLEMENT PAYMENT OR, IF ANY SETTLEMENT PAYMENT IS MADE, THE AMOUNT THEREOF.” No. 15-31070 (Oct. 11, 2016, unpublished).

Hoffman v. L&M Arts arose from the sale of a 1961 Rothko painting (right) by Sotheby’s in 2010; a previous owner alleged that this sale revealed facts about her own sale, in violation of a confidentiality provision in the sales contract that said: “All parties agree to make maximum efforts to keep all aspects of this transaction confidential indefinitely.” The Fifth Circuit ruled for the defense in all respects, concluding that:

• The original owner did not state a fraud claim against the relevant gallery, based on its alleged misrepresentation of its authority to act on behalf of an unnamed buyer, or its alleged misrepresentation about representing an entity or individual.  (Notably, the owner did not argue in the district court that equitable relief could still be appropriate without proof of damage), or its claim that the piece would “disappear” into its client’s private collection.
• The contract did not require secrecy about the fact of the sale, based on the plain meaning of the term “aspect,” other provisions in the agreement, and the Texas policy against restraints on alienability.
• The questions about damages associated with the alleged breach either reflected speculative bargains, incorrect damages measures, or a disgorgement theory that is not well-supported as a Texas contract remedy.

No. 15-10046 (Sept. 28, 2016).

In Smith Group JJR, PLLC v. Forrest General Hospital, a dispute about an architect’s fee, the appellant argued that “the district court erred by considering extrinsic evidence bearing on the meaning of the term ‘actual contstruction cost’ in the parties’ agreement. This issue – the proper role of extrinsic evidence in determining the meaning of a contract, produces frequent litigation and frequent differences of opinion between district courts and the Fifth Circuit. Here, the court found a waiver of these arguments before the trial court, reminding that “citing cases that may contain a useful argument is simply inadequate to preserve that argument for appeal; ‘to be preserved, an argument must be pressed, and not merely intimated.'” No. 16-60134 (Sept. 9, 2016, unpublished). (This post was picked as one of the top five of the week by the Appellate Advocacy blog on the Law Professor Blogs Network!)

A former employee of a defense contractor sued for unpaid benefits; the forum selection clause said: “This Contract shall be governed by and interpreted exclusively under the laws of Kuwait and all disputes between the Parties shall be resolved exclusively in Kuwait.” Noting a potential threshold issue as to whether federal or Texas law governs the “validity” of a forum selection clause (while federal law clearly governs their “enforceability”), the Fifth Circuit found it enforceable under either standard. Kuwait – where the work was done – had a stronger interest in application of its laws than Texas, and the most relevant law was a statute of repose rather than limitation, which “operates as ‘a substantive definition of, rather than a procedural limitation on, rights.'” Barnett v. Dyncorp Int’l LLC, No. 15-10757 (July 26, 2016).

American Construction, the general contractor on a hotel construction project, signed a “joint check” agreement, by which it would pay its subcontractor (Cratus Development) and its supplier (Shelter Products) jointly for building materials. American’s agreement also included this term: “If Cratus Development does not start or complete work on this project, and/or becomes past due with Shelter Products, Inc. to the extent that Shelter Products, Inc. can no longer extend credit to Cratus Development[,] American Construction will make payments directly to Shelter Products, Inc. for all outstanding and unpaid invoices for materials delivered to the jobsite . . . . ” The Fifth Circuit affirmed the district court’s conclusion that this language, in the overall context of the parties’ business dealings, created a suretyship by American. Shelter Products Inc. v. American Construction Hotel Corp., No. 16-30001 (July 27, 2016, unpublished).

Extensive tornado damage to a building at the University of Southern Mississippi led to a hard-fought dispute among insurers. The Fifth Circuit’s detailed affirmance of the district court’s opinion turned on this observation about the losing insurer’s postition: “Were this construction adopted, insurers who covered the same risk would be incentivized to enter into a stare-down, each waiting for the other to blink first in order to seize the opportunity to deny coverage. Such an outcome is neither reasonable nor commercially practicable.” Southern Ins. Co. v. Affiliated FM Ins. Co., No. 15060742 (July 21, 2016). (The opinion also features a rare appellate shout-out to T.S. Eliot’s The Hollow Men.)

Walker, a farmer, received a loan from Guaranty Bank, which acquired a production-money security interest in his crops. Walker then sold the crops to Agrex. Agrex applied a setoff to the sales price, based on problems in other dealings between Walker and Agrex. Guaranty then sued Agrex to recover the entire — pre-setoff — sales price. The Fifth Circuit affirmed judgment for Guaranty, reviewing the applicable UCC section and commentary, under which there is “no requirement that property by ‘received’ . . . for the property qualify as proceeds,” but only “that the property be traceable, directly or indirectly, to the original collateral.” Guaranty Bank & Trust Co. v. Agrex, Inc., No. 15-60445 (revised June 6, 2016).

Among other points raised in a challenge to a foreclosure on a Texas home equity loan, the trial court observed: “the curious backdating of the [assignment] confirms the suspicion that this document was generated to obscure the chain of title inquiry rather than to illuminate it.” In reversing the judgment below, on this point the Fifth Circuit held: “At least two Texas Courts of Appeals have considered this very question, and both have held that an assignment may have a retroactive ‘effective date.'”  Deutsche Bank v. Burke, No. 15-20201 (June 9, 2016, unpublished).

To acquire rights to use patented check processing technology, Chase paid for a license which contained a “Most Favored Licensee” clause. The licensor granted a similar license to another entity for what Chase contended was a significantly lower royalty. Chase sued and won judgment for roughly $70 million. The Fifth Circuit affirmed, agreeing with Chase’s characterization of the royalty as “paid-up lump sum” rather than “running,” and thus concluding that the MFL clause could apply retroactively and require a refund. A dissent saw the clause as only applying prospectively. The opinions identify a number of practical problems that can arise in drafting sophisticated royalty agreements about intellectual property. JP Morgan Chase Bank NA v. Dixon, No. 15-40905 (May 19, 2016).

The parties in DFW Airport Board v. Inet Aiport Systems sued each other about problems in the installation of rooftop air conditioning units.  Key issues were “who breached first” and whether the parties had a meeting of the minds about a solution; the evidence consisted of a fast-moving, complicated exchange of emails and letters. The Fifth Circuit reversed a summary judgment, noting: “In these circumstances the Contract required both parties to participate in resolving defects. Any contractual modification or change order required the mutual assent of the parties, and questions of mutual assent are fact based. Sifting through the evidence to determine whether the parties reached agreement on a contractual modification is a task ill-suited for summary judgment on this record.”  Nos. 15-10390, 15-10600 (April 12, 2016).

Appellant “Why Not LLC” (unfortunately, not the appellee, despite the perfect name for that side of an appeal) complained of a frozen yogurt franchise termination by Yumilicious. The district court granted summary judgment on Why Not’s many causes of action, and the Fifth Circuit affirmed, principally on grounds relating to Yumilicious’s lack of intent and the terms of the franchise agreement. In the course of doing so, the opinion offers a primer on commonly-litigated issues about basic business torts in Texas. The Court observed that Why Not’s pleading had presented “a large serving of claims and counterclaims piled precariously together,” and concluded: “This saccharine swirl of counterclaims suggests that litigants, like fro-yo fans, should seek quality over quantity.” Yumilicious v. Barrie, No. 15-10508 (April 6, 2016). (The opinion is silent as to whether Why Not has any relation to the left fielder on Bud Abbott’s famous baseball team.)

In the second case in a week about the seizure of maritime fuel supplies, the Fifth Circuit addressed a recurring issue in international business transactions — the incorporation of a general set of standards by reference in a less-detailed, but party-specific contract. Applying Singapore law to the substantial fuel bunkers of the M/V BULK JULIANA (right), the Court concluded: “Although [the expert’s] testimony did not address the bunker delivery notes, he affirmed the incorporation of the General Terms by reference to the bunker confirmation email, which provided all the relevant terms and conditions of the contract. We recognize that neither Bulk Juliana nor the vessel was a party to the bunker confirmation email, and therefore did not have access to and/or awareness of the specific document at all material times. [The expert], however, testified about the ready availability of the contractual terms via the internet, as well as the prevalence of the practices employed here with respect to sales of necessaries in the shipping industry. Importantly, [he] pointed out that [Plaintiff’s] incorporation of the General Terms was ‘commonplace in the bunkering industry worldwide, and ought to be in the contemplation of ship operators and ship-owners such as [Bulk Juliana].'”  World Fuel Services v. Bulk Juliana, Ltd., No. 15-30239 (April 1, 2016).

Malin Ship Repair sought to attach boat fuel (“bunkers” in admiralty parlance) of defendant OSA, and thus gain personal jurisdiction over OSA in a Texas federal court.  As of the attachment date, OSA had taken delivery of the boat and the fuel on it, but had not paid for the fuel or been invoiced for it.  Under the UCC, title would have passed under delivery.  Under the common law, the answer turns on the parties’ intent, and the Court concluded that “the parties contemplated a credit transaction.”  Thus, title had passed to OSA and the attachment was sufficient to confer personal jurisdiction under the applicable admiralty rule.  Malin Int’l Ship Repair & Drydock v. Oceanografia, S.A. de C.V., No. 15-40463 (March 23, 2016).

The financially unfortunate City of New Orleans, saddled with a “just above junk” credit status, hired Ambac to provide insurance for its municipal bonds.  Ambac’s AAA rating slipped after the 2008 financial crisis, causing New Orleans to incur tens of millions of dollars in additional debt service and refinancing costs.  The City sued Ambac on several legal theories for not maintaining a high credit rating.  The Fifth Circuit affirmed their dismissal: “[T]he resolutions that the City so heavily relies upon show only that the City purchased a bond insurance policy from a highly rated insurer, which, at the time of issuance, lessened the perceived credit risk of the City’s bonds.  Any alleged representation by Ambac to provide a larger credit enhancement is foreclosed by the clear language of the Policy.”  New Orleans City v. Ambac Assurance Corp., No. 15-30532 (March 2, 2016).

The Gagosian Gallery – for reasons not explained in the opinion, but doubtless interesting ones – wanted to display a work of art that featured a tower of 101 identical gold bars.  For approximately $3 million, it contracted to buy the gold from Stanford Coins and Bullion (“SCB”), owned by the now-disgraced Allen Stanford.  SCB in turn contracted with Dillon Gage, a wholesale gold supplier, to ship the gold directly to the gallery.  SCB forwarded payment to Dillon Gage, who applied to a balance that the gallery had with Dillon Gage as a result of unrelated transactions.

Before the shipment was made, however, the Stanford empire collapsed.  When the dust settled, the gallery sued Dillon Gage, alleging that it was a third-party beneficiary of its contract with SCB.  The case went to a jury trial and a verdict for Dillon Gage, and the Fifth Circuit affirmed, finding no error in the jury instructions and sufficient evidence to support the verdict.  Page 5 of the opinion details the facts, which offer a classic illustration of the roles of knowledge and industry custom in determining contract liability.  Pre-War Art, Inc. v. Stanford Coins & Bullion, No. 15-10033 (Feb. 29, 2016, unpublished).

A highly technical dispute about the applicable law for an offshore salvage operation produced an insurance holding of general applicability in Tetra Technologies, Inc v. Continental Ins. Co., No. 15-30446 (Feb. 24, 2016).  The policy exclusion applied to “[a]ny obligation of the insured under a workers compensation, United States Longshoreman’s and Harbor Workers’ Compensation Act, Jones Act, Death on the High Seas Act, General Maritime Law, Federal Employers’ Liability Act, disability benefits or unemployment compensation law or any similar law . . . ”  The Fifth Circuit concluded that the “any similar law,” while referring generally to employers’ liability (since all the laws specifically named deal with that issue), was still ambiguous and meant that the exclusion would be construed against the insurer.

W&T Offshore operates pipelines and platforms in the Gulf of Mexico.  It hired Triton Diving to help repair a pipeline.  Grogan, an independent contractor, fell and was injured when he went to work on a Triton vessel called the TRITON ACHIEVER.  W&T and Triton both had indemnity rights against the other, giving rise to the case of Grogan v. W&T Offshore, No. 15-30369 (Jan. 27, 2016).  The Fifth Circuit found no clear error in the district court’s conclusion that Grogan was W&T’s invitee and not Triton’s, detailing the control that W&T had over the project.  In sum: “W&T’s project was the ultimate reason for Triton and [Grogan’s] presence on the work site, and any benefit to Triton from [Grogan’s] presence was indirect .”

In Akuna Matata Investments v. Texas Nom Limited Partnership, the panel majority found that a judgment in a state court lawsuit for breach of fiduciary duty and contract was not res judicata as to a later federal case about the winding up of the relevant partnership: “Even if Akunas’s interest was ‘bought out’ by the state court judgment and it was no longer a partner, this would have meant a de facto dissolution (since there were only two partners) and [Appellant] would have been obliged to take other steps necessary to reclaim the assets for itself alone.”  A dissent saw the two judgments as creating an impermissible double recovery: “Through protracted litigation and incomplete legal arguments, [Appellee] has fallen into an investment that defies both Texas law and common sense — a free ride.”  No. 14-51158 (Feb. 11, 2016).

In a long-running dispute about Transocean’s ability to recover “maintenance and cure” payments to Boudreaux, a seaman, the parties reached a “high-low” settlement agreement.  The Fifth Circuit then held — in an outcome not clearly anticipated by the parties’ deal — that Transocean had no affirmative right of recovery as against Boudreaux,but did have a right to make offsets against future payments.  Boudreaux v. Transocean Deepwater, Inc., 721 F.3d 723, 724-25 (5th Cir. 2013).  The district court treated that outcome as a “low,” which hurt Boudreaux, but the panel majority saw it as a “high” — “Because our court’s holding in Boudreaux I did not establish the viability of Transocean’s counterclaim, Boudreaux is entitled to the higher settlement amount.”  Boudreaux v. Transocean Deepwater, Inc., No. 14-30776 (Feb. 5, 2016, unpublished).

Jeff Heck sought to buy property at a foreclosure sale for $63,000; given 20 minutes to obtain a cashier’s check for that amount, he did not return in time and the property was sold to another buyer.  The underlying Texas Property Code provision — the product of a surprising amount of controversy over the years — provides: “The purchase price in a sale held by a trustee . . . is due and payable without delay on acceptance of the bid or within such reasonable time as may be agreed upon[.]”  Here, Heck did not pay without delay on acceptance, and he took more time than had been agreed upon, meaning that no violation of the statute occurred.  Heck v. Citimortgage, Inc., No. 15-40964 (Jan. 29, 2016, unpublished).

The defendant appealed a summary judgment against it on a multi-million dollar claim for breach of a settlement agreement, alleging that a novation had replaced that agreement with a new bargain.  Taj Al Khairat, Ltd. v. Swiftships Shipbuilders, LLC, No. 15-30195 (Dec. 4, 2015, unpublished).  The Fifth Circuit affirmed, noting that while both principals of the defendant were confident about an agreement to resolve the liability under the settlement, a number of unanswered questions remained about subsequent conditions; for example, one testified that the understanding “we will settle all the past dues, and we will move forward if we can procure this contract, the SOC contract, and the performance bond.” (emphasis in opinion). (Another “conditional agreement” case is discussed today on sister blog 600Commerce.)

Cordero, a district sales manager for Avon, contended that she was due a $70,850 bonus for the first quarter of 2013.  Avon paid her $1,200, noting that several sales leaders who reported to her had created roughly $450,000 of fraudulent orders (although Cordero was not involved).  Nevertheless, Cordero contended that the terms “met” and “achievement” in her compensation agreement referred to product that was “ordered, shipped, and notated on Avon’s quarterly report.”  The Fifth Circuit agreed with Avon that those terms necessarily referred to legitimate activity; otherwise, the contract did not advance a sensible business goal.  Cordero v. Avon Products, No. 15-40563 (Oct. 29, 2015, unpublished).

The Fifth Circuit reversed the dismissal of misrepresentation claims about the sale of a house with mold problems, finding that this disclaimer was not dispositive: “Buyer is hereby advised that mold and/or other microscopic organisms may exist at the property known as 1425 MAGNOLIA RIDGE, BOSSIER CITY, LA, 71112. . . . Buyer acknowledges and agrees to accept full responsibility/risk for any matters that may result from microscopic organisms and/or mold and to hold harmless, release, and indemnify Seller and Seller’s managing agents from any liability/recourse/damages (financial or otherwise). Buyer understands that Seller has taken no action to remediate mold. . . . The purpose of this disclaimer is to put Buyers on notice to conduct their own due diligence regarding this matter using appropriate, qualified experts[.]”  Jones v. Wells Fargo Bank, No. 15-30031 (Sept. 28, 2015, unpublished).

The plaintiff in International Marine LLC v. FDT proved 33 breaches of the noncompete provisions of a contract related to the chartering of tugboats.  The district court and Fifth Circuit agreed that a liquidated damages clause applied to the last several breaches. As to the first five, however, the Court reasoned that the clause “would impose an unreasonable penalty, because due to the parties’ conduct, we know the extent of damages [Plaintiff] suffered from each of these breaches.”  It noted: “For over a century, courts have refused to award liquidated damages for contractual breaches solely involving default on payment obligations.” No. 14-31192 (Aug. 10, 2015, unpublished).

A contract dispute about the management of several vessels (among them, the M/V Maurader, right) led to a holding that a termination fee was void as a penalty.  The contract required the boat owner to pay the management company “fifty percent of what [it] would have earned as a Management Fee had [the] Agreement not been so terminated,” and provided a formula for making that calculation, which in this case was $537,246.86.  “The termination fee formula, however, makes no deductions to account for the fact that [management company] would have fewer expenses in the event of termination, and [it] has not quantified the expenses that would remain.”   Comar Marine Co. v. Raider Marine Logistics LLC, No. 13-30156 (July 6, 2015).

Disputes between borrowers and mortgage servicers are common; jury trials in those disputes are rare.  But rare events do occur, and in McCaig v. Wells Fargo Bank, 788 F.3d 463 (5th Cir. 2015), a servicer lost a judgment for roughly $400,000 after a jury trial.

The underlying relationship was defined by a settlement agreement in which “Wells Fargo has agreed to accept payments from the McCaigs and to give the McCaigs the opportunity to avoid foreclosure of the Property; as long as the McCaigs make the required payments consistent with the Forbearance Agreement and the Loan Agreement.” Unfortunately, Wells’s “‘computer software was not equipped to handle’ the settlement and forbearance agreements meaning ‘manual tracking’ was required.”  This led to a number of accounting mistakes, which in turn led to unjustified threats to foreclose and other miscommunications.

In reviewing and largely affirming the judgment, the Fifth Circuit reached several conclusions of broad general interest:

• The “bona fide error” defense under the Texas Debt Collection Act allows a servicer to argue that it made a good-faith mistake;  Wells did not plead that defense here, meaning that its arguments about a lack of intent were not pertinent to the elements of the Act sued upon by plaintiffs;
• The economic loss rule did not bar the TDCA claims, even though the alleged misconduct breached the parties’ contract: “[I]f a particular duty is defined both in a contract and in a statutory provision, and a party violates the duty enumerated in both sources, the economic loss rule does not apply”;
• A Casteel – type charge issue is not preserved if the objecting party submits the allegedly erroneous question with the comment “If I had to draft this over again, that’s the way I’d draft it”;
• The plaintiffs’ lay testimony was sufficient to support awards for mental anguish; and
• “[A] print-out from [plaintiffs’] attorney’s case management system showing individual tasks performed by the attorney and the date on which those tasks were performed” was sufficient evidence to support the award of attorneys fees.

A dissent took issue with the economic loss holding, and would find all of the plaintiffs’ claims barred; “[t]he majority’s reading of these [TDCA] provisions specifically equates mere contract breach with statutory violations[.]”

An architectural firm sued a former employee and a competitor.  The Fifth Circuit affirmed judgment for the defendants in Hunn v. Dan Wilson Homes, No. 13-11297 (June 15, 2015).  As to the firm’s claim for breach of fiduciary duty, the Fifth Circuit found no error in the district court’s finding that “the plans in the AutoCAD files were the same as the physical copies of the plans that [had] already been disseminated by [Plaintiff]” to various homeowners.  A noncompete claim failed for lack of an express promise related to confidential information.  Other claims based on copyright, the Lanham Act, contract, and the Computer Fraud and Abuse Act failed for similar proof problems.  Particularly as to the elements of a noncompete claim under Texas law, the opinion provides a practical summary of potential claims related to an employee’s departure, as well as several commonly-litigated factual issues related to those claims.

Estes sued JP Morgan Chase, alleging violations of the Texas Constitution with respect to a home equity loan.  The Fifth Circuit affirmed dismissal on a basic ground: “Estes’s complaint fails to allege any connection between himself and JPMC except that Estes ‘notified [JPMC] that the original promissory note had not been returned,’ and that ‘[m]ore than 60 days have passed since plaintiff notified [JMPC] of its failure to cancel and return the promissory note.’  Considering the allegations in Estes’s complaint, and taking those allegations as true, Estes has not alleged that JPMC possessed the Note at the relevant time. He also has not alleged that he made payments to JPMC, nor has he alleged any other facts from which the Court could reasonably infer that the Note was made payable to “bearer” or to JPMC, as the definition of “holder” set forth in Tex. Bus. & Com. Code § 1.201 requires.”  Estes v. JP Morgan Chase Bank, N.A., No. 14-51103 (May 20, 2015, unpublished).

Plaintiffs settled a noncompete case with their employer, TXL Mortgage, and signed a broad general release of “all claims and causes of action that were or could have been asserted in the Lawsuit and all claims and causes of action related to or in any way arising from [their] employment with TXL, whether based in tort, contract (express or implied), warranty, deceptive trade practices, or any federal, state or local law, statute, or regulation.”  Plaintiffs then sued for overtime wages under the FLSA.

The district court granted summary judgment for the employer, and the Fifth Circuit reversed, applying Martin v. Spring Break ’83 Productions, LLC, 688 F.3d 247 (5th Cir. 2012): “To deem the plaintiffs as having fairly bargained away unmentioned overtime pay based on a settlement that involves a compromise over wages due for commissions and salary would subvert the purpose of the FLSA: namely, in this case, the protection of the
right to overtime pay. Under these circumstances where overtime pay was never specifically negotiated, there is no guarantee that the plaintiffs have been or will be compensated for the overtime wages they are allegedly due under the Act.” Accordingly, the general prohibition on settlement of FLSA claims applied, and the exception recognized in Martin did not.  Bodle v. TXL Mortgage Corp., No. 14-20224 (June 1, 2015).

Constango Operators Inc. built a pipeline beneath the Atchafalaya Channel.  Unfortunately, the Corps of Engineers neglected to forward information about that new pipeline to its Waterways Division, which supervises dredging operations. A dredging barge operated by Weeks Marine (the G.D. MORGAN, right) then hit the pipeline. The resulting trial awarded damages to Constango, with the U.S. liable for 60% and Weeks 40%, and the Fifth Circuit affirmed.

The opinion turns largely on issues or maritime law and the applicable federal regulations, but has three features of broad general interest:

1. An exceptionally clear definition of “extrinsic evidence” as “anything outside a contract itself,” which excluded consideration of material from the Federal Register and CFR in construing an exculpatory clause;
2. A reminder that a duty of care can arise from common law even though regulations control and define some aspects of the parties’ dealings; and
3. A reminder, under general tort law, that “[t]he fact that Weeks followed the custom of the dredging industry is not dispositive, because a common practice can still be negligent.”

Contango Operators, Inc. v. USA, No. 14-20265 (May 28, 2015, unpublished).

TRC Environmental Corporation, the contractor on a project to decommission a power plant, sued LVI Facilities Services for breach of its subcontract with TRC.  The subcontract said that “All disputes arising under the Contract Documents will be resolved in accordance with the terms of the Project Agreement”; otherwise, they would be arbitrated.  The Project Agreement spelled out various ADR processes but did not require arbitration.  In affirming the rejection of LVI’s motion to compel arbitration, the Fifth Circuit reminded: “The Federal Arbitration Act codifies a ‘liberal federal policy favoring arbitration agreements.’  But, this presumption applies when a court evaluates the scope of an arbitration under the second step of the arbitration analysis, not when a court is determining whether a valid arbitration agreement exists at all.”  TRC Environmental Corp. v. LVI Facility Servcs., No. 14-51269 (May 22, 2015, unpublished).

Lincoln Insurance sued several defendants, who it accused of charging excessive fees and otherwise engaging in self-dealing to the detriment of Lincoln.  Lincoln won a $16.5 million judgment against two of them for tortious interference.  In a “grab bag” of holdings after both sides appealed, the Fifth Circuit held:

• It did not need to reach a difficult Erie issue about when a tortious interference claim accrues under Texas law, where some of the conduct occurs outside the limitations period, because the trial court found sufficient facts to establish that the discovery rule applied;
• Voluntary dismissal of a claim in amended pleading, in response to a dismissal order “based on a technical defect or withdrawal,” waives the right to appeal that order;
• The economic loss rule barred conversion claims where contract provisions dealt with the underlying rights and responsibilities; and
• When a contract provision expressly created a fiduciary duty as to the handling of funds in a particular account, that duty necessarily extended that duty to the handling of those funds before their deposit (and the trial court erred in holding otherwise, requiring a remand).

The Court noted: “[A] litigation strategy with a narrower focus on certain claims and Defendants might reduce the complications, both procedural and substantive, that arose the first go-around.”  Lincoln General Ins. Co. v. U.S. Auto Ins. Servcs., Inc., No. 13-10589 (May 18, 2015).

Johnson submitted a claim about his personal injuries to the “Gulf Coast Claims Facility,” an entity created to facilitate the resolution of claims against BP about the Deepwater Horizon accident.  The GCCF recommended a settlement of roughly $2.7 million. Johnson accepted the proposal and BP allowed its 14-day appeal period to run.  During that period, however, BP made an indemnity demand on another company, who raised serious questions about the veracity of Johnson’s claim.  BP sought to set aside the settlement, and the case of Johnson v. BP Exploration & Production, Inc. ensued.  No. 14-30269 (May 15, 2015).

As to contract formation, the Fifth Circuit found that: (1) “Johnson accepted the offer in the [GCCF] Determination Letter by its own terms by timely submitting the Final Payment Election Form and agreeing to subsequently sign the Release, and because BP declined to appeal that offer within the fourteen-day period, both an offer and acceptance occurred”; and (2) the actual terms of the release were not material to the formation of the settlement agreement, and neither was its actual delivery.  However, after acknowledging the general rule that “simply couching . . . prior litigation as ‘fraudulent,'” will not support a fraudulent inducement claim, the Court concluded that BP had raised a question as to whether an exception applied when “the defendant subsequently uncovers previously unavailable evidence that the plaintiff was in fact not injured at all, or sustained only de minimis injuiries.”  Accordingly, the Court remanded for an evidentiary hearing about the issue of fraudulent inducement.

Amerijet sued Zero Gravity in Texas state court, seeking emergency relief about the handling of certain aircraft engines subject to their contract.  Zero Gravity responded with its own request for emergency relief. After some initial rulings by the state court, Zero Gravity removed to federal court.  Amerijet then filed a notice of dismissal under Fed. R. Civ. P. 41(a)(1)(A)(i). The matter proceeded in federal court, however, based on its jurisdiction over the TRO bond and a counterclaim for declaratory relief, as the parties tried to settle.  Their dealings culminated in the district court enjoining further litigation by Amerijet in Florida federal court, which then led to an appeal about the district court’s power over the case in light of the dismissal notice.  Amerijet Int’l, Inc. v. Zero Gravity Corp., No. 14-20521 (May 15, 2015).

Observing that a Rule 41 notice takes effect automatically if the defendant has not answered or moved for summary judgment, the Fifth Circuit found that Zero Gravity’s pre-removal filing “barely” qualified as an answer under Texas law, which meant that the notice no longer had automatic effect.  Even though the filing was styled as a TRO application (and accompanying motion to dissolve) and was not called an “answer,” the Court noted that it asserted defenses, a counterclaim for declaratory relief, and facts in support and thus met the “minimal characteristics of an answer” under Texas law  (The question whether a defendant’s pre-removal counterclaim waives the right to remove did not appear to be before the Court.)   Accordingly, the district court was not bound to dismiss the matter, and it did not abuse its discretion in enjoining parallel federal litigation under the first-to-file rule.

The Songs deposited $361,200 as earnest money, toward the purchase of a $3.4 million apartment complex.  They then made the successful bid in an auction process, but backed out of the transaction and refused to close.  The Fifth Circuit affirmed the district court’s ruling that the seller could keep the money.  It found that the parties’ agreement had consideration, most notably in the seller’s commitment to review, consider, and accept the Songs’ bid.  It also found that the earnest money was a proper liquidated damages award for the Songs’ termination, finding that it “is reasonable and actual damages were uncertain.”  Song v. 4170 & 4231 & 4271 Altoona Drive Holdings LP, No. 14-11059 (April 8, 2015, unpublished).

Continuing an earlier post about how to sign documents, the issue of effective consent again appeared in Berry v. Fannie Mae, No. 14-10474 (April 17, 2015, unpublished).  A mortgage servicer sent a trial payment plan to a borrower, which said: “This Plan will not take effect unless and until both the Lender and I sign it and Lender provides me with a copy of this Plan with the Lender’s signature.”  Rejecting an argument that the servicer’s letter acknowledging the borrower’s signature waived this language, the Court enforced it and affirmed dismissal of the borrower’s claims.  A similar analysis led to a similar result in Williams v. Bank of America, No. 14-20520 (May 7, 2015, unpublished).

In Angus Chemical Co. v. Glendora Plantation, Inc., an industrial facility had an easement that gave it “the right to construct, maintain, inspect, operate, protect, alter, repair, replace and change” a pipeline.  No. 14-30416 (March 24, 2015).  The company plugged and abandoned its original 12″ pipeline in favor of a new 16″ one.  The key appellate issue was whether the right to “replace” a pipeline allowed the company to simply substitute one pipeline for another, or whether it also “impl[ied] a corresponding duty to remove” the old one.  The Fifth Circuit found the term “replace” was ambiguous in this context, and that there was a material fact issue in the extrinsic evidence about which meaning should prevail.  Therefore, it reversed the district court’s summary judgment in favor of the chemical company.  This topic — the role of extrinsic evidence in contract disputes — was most recently before the Court in a major case in the “Whoomp! There it is” litigation, and as detailed in a link from that post, frequently leads to disagreement between the trial courts and the Fifth Circuit.

Fed. R. Civ. P. 60, titled “Grounds for Relief from a Final Judgment, Order, or Proceeding,” is generally invoked to vacate a judgment because of alleged misconduct, mistake, newly-discovered evidence, or other equitable reasons.  Clause (5) of that rule also allows relief if “the judgment has been satisfied, released, or discharged; it is based on an earlier judgment that has been reversed or vacated; or applying it prospectively is no longer equitable.” That provision — and specifically, its rarely-litigated first clause — was at issue in Frew v. Janek, in which the Texas Health and Human Services Commission argued that it had fully performed under a consent decree related to the operation of a Medicaid program. No. 14-40048 (March 5, 2015).  Construing the decree “according to ‘general principles of contract interpretation,'” and declining to apply the law of the case doctrine to the interpretation of the decree by the judge who entered the order, the Fifth Circuit found no error in the district court’s ruling that the defendants had complied with the order and performed fully.

The L/B Nicole Eymard (right) became stuck while servicing a well in the Gulf of Mexico.  The owner of the boat sued the contractor that hired the boat, in addition to the well owner, and both were found liable for charter fees while the vessel was unable to move.  The well owner obtained indemnity from the contractor because the contractor had agreed to indemnify it for claims “based upon personal injury or death or property damage or loss.”  Unpaid charter fees are a “loss” within the meaning of that language, even without proof of damage to property.  Offshore Marine Contractors, LLC v. Palm Energy Offshore, LLC, No. 14-30059 (March 2, 2015).

Superior MRI Services sued for tortious interference with contract; the defendant argued that Superior lacked standing because it never acquired rights under the relevant contracts, and the Fifth Circuit agreed.  Superior MRI Services, Inc. v. Alliance Imaging, Inc., No. 14-60087 (Feb. 18, 2015).  The record showed that P&L Imaging, a bankruptcy debtor, listed “MRI service agreements” on its schedule of assignments to Superior, with an assignment date of October 1, 2011.  Superior, however, did not exist as a legal entity until November 28, 2011.  No evidence showed that Superior ratified the contract after its formation, and the Court was unwilling to accept Mississippi’s approval of Superior as a vendor as evidence of a ratification.  The Court distinguished the recent case of Lexmark, Int’l v. Static Control Components, 134 S. Ct. 1377 (2014), as relating to another aspect of the standing requirement.

In an earlier opinion, the Fifth Circuit reversed a summary judgment in favor of an insured, finding a fact issue as to whether late notice caused prejudice to the carrier.  “Berkley I,” Berkley Regional Ins. Co. v. Philadelphia Indemnity Ins. Co., 690 F.3d 342 (5th Cir. 2012). After further proceedings, the district court granted summary judgment to the carrier and the Court affirmed.  “Berkley II,”  Berkley Regional Ins. Co. v. Philadelphia Indemnity Ins. Co., No. 13-51180 c/w No. 14-50099 (Jan. 27, 2015, unpublished).  The key issue was whether notice to the broker sufficed to give notice the the carrier; the Court reasoned that even if the broker had a limited agency relationship with the carrier, notice of claims fell outside its scope: “Under the 2002 Agreement, Philadelphia expressly allowed [Agent] to act as an insurance broker and sell Philadelphia policies as Philadelphia’s representative, subject to Philadelphia’s approval.  The 2002 Agreement is silent as to whether [Agent] had the ability to accept notice of claims on behalf of Philadelphia.  Thus, [Agent] did not have express authority to accept notice of claims.”  For the same reasons, an implied agency theory was also rejected.

The insurance coverage case of Mt. Hawley Ins. Co. v. Advance Products & Systems, Inc. illustrates the recurring differences of opinion between the Fifth Circuit and district courts about contract ambiguity.  14-30068  (Jan. 27, 2015, unpublished).  When APS made a claim on its commercial property policy with Mt. Hawley, APS’s recovery was limited by a “coinsurance provision” that applies if it “has not insured the full value of its income.”  The parties differed on whether “income” referred to projected or actual net income; the district court found ambiguity, and the Fifth Circuit reversed: “Although APS has a point—the language used in calculating the coinsurance penalty is imprecise—it does not render the contract ambiguous.”  Based on the relationship between this provision and other parts of the policy, and the general purposes of coinsurance clauses, the Court reversed a summary judgment for the insured.

The note said: “So long as an Event of Default remains outstanding: (a) interest shall accrue at the Default Rate and, to the extent not paid when due, shall be added to the Principal Amount . . . .” The lender said this language meant that interest should be compounded, and the lower courts agreed — in the amount of almost $5 million.  The borrower argued that this language only meant “that any unpaid interest will be added
to the principal amount as the total debt due.”  The Fifth Circuit disagreed, finding that this reading would impermissibly make the provision redundant “because it would operate only to label the accrued interest as money owed by [borrower] to [lender], and the interest was already owed.  TCI Courtyard, Inc. v. Wells Fargo Bank, N.A., No. 14-10635 (Jan. 22, 2015, unpublished).

The case of AAA Bonding Agency v. United States Dep’t of Homeland Security involved the seldom-seen world of “immigration bonds” — a type of surety bond that allows release of an alien from custody while deportation proceedings are ongoing.  No. 14-20057 (Jan. 12, 2015, unpublished).  The Fifth Circuit has previously held that “DHS may only enforce an immigration bond against a surety company or bonding agent that has received notice demanding delivery of the alien covered by the bond.”  This case involved 23 bonds where (1) AAA, the bonding agency, was liable on the bond with Surety National, an insurance company, (2) only AAA had received notice from DHS, and (3) Surety National had settled with DHS, and as part of the settlement, agreed that AAA would not be liable to DHS on these bonds if a court held that AAA’s obligation was joint and several with Surety National’s.  The Court concluded that its prior holding did not alter the joint and several liability of AAA and Surety National as set forth in the language of the bonds, and ruled for AAA.

The same week as the en banc vote in the whooping crane litigation, the Fifth Circuit analyzed “Whoomp! (There It Is).”  The unfortunate song has been mired in copyright infringement litigation for a decade; the district court entered judgment for the plaintiff for over $2 million, and it was affirmed in Isbell v. DM Records, Inc., Nos. 13-40787 and 14-40545 (Dec. 18, 2014).  [The opinion notes: “The word “‘Whoomp!’ appears to be a neologism, perhaps a variant of ‘Whoop!,’ as in a cry of excitement.”]

The main appellate issue was a variant of a frequently-litigated topic — the role of extrinsic evidence in contract interpretation.  The assignment in question was governed by California law, which the Court found to “employ[] a liberal parol evidence rule” with respect to consideration of extrinsic evidence.  The appellant argued that the district  court erred “in interpreting the Recording Agreement without asking the jury to make any findings on the extrinsic evidence.”  The Court disagreed, finding that the record did not present “a question of the credibility of conflicting extrinsic evidence” (emphasis in original): “The only dispute is over the meaning of the Recording Agreement and the inferences that should be drawn from the numerous undisputed pieces of extrinsic evidence.  This is a question of law for the court, not for a jury.”

As chronicled in the sister blog 600Commerce (following business cases in the Dallas Court of Appeals), the issue of whether a guarantor can waive the “fair market value” offset right provided by the Texas Property Code — a problem that arises frequently after foreclosure sales — was hotly-litigated until the Texas Supreme Court settled the matter in Moyaedi v. Interstate 35/Chisam Road, L.P,  438 S.W.3d 1 (Tex. 2014), finding that the right was waivable.

The Fifth Circuit acknowledged and applied that holding in Hometown 2006-1 1925 Valley View, LLC v. Prime Income Asset Management LLC, finding that the waiver there was even clearer than in Moyaedi.  In Moyaedi, the guarantor waived “every . . . defense”; here, the guarantor waived “any . . . offset, claim or defense,” and the guaranty also had a provision saying: “Guarantor WAIVES each and every right to which it may be entitled by virtue of any suretyship law, including any rights it may have pursuant to . . . Section
51.005 of the Texas Property Code.”  No. 14-10182 (Dec. 11, 2014, unpublished).

Sundown Energy could access its oil and gas production facility via the Mississippi River, but had to cross Haller’s land to access it from the highway.  They litigated about Sundown’s rights and reached a settlement, which their counsel read into the record on the day set for trial.  The Fifth Circuit found that the parties had reached a settlement, which the district court had the authority to enforce pursuant to their agreement.  The Court reversed, though, as to the district court’s resolution of several logistical issues: “Here, the district court erred by imposing several terms which either conflicted with or added to the agreement read into the record by the parties. Although the parties gave the district court the authority to enforce and interpret the settlement agreement, the district court did not have the power to change the terms of the settlement agreed to by the parties.”  Sundown Energy L.P. v. Haller, No. 13-30294 et al. (Dec. 8, 2014).

Can a note be endorsed with a photocopied signature?  Yes. Whittier v. Ocwen Loan Servicing, LLC, No. 13-20639 (Dec. 3, 2014, unpublished) (citing Tex. Bus. & Com. Code § 1.201(b)(37)) (“Signed” includes using any symbol executed or adopted with present intention to adopt or accept a writing.”)

Can a “deed of trust . . . upon a homestead exempted from execution,” which “shall not be valid or binding unless signed by the spouse of the owner,” be signed in separate but identical documents?  Yes.  Avakian v. Citibank, N.A., No. 14-60175 (Dec. 9, 2014) (citing Duncan v. Moore, 7 So. 221, 221-22 (Miss. 1890)) (“There is much force in the argument of defendant’s counsel that the statute does not require a joint deed of husband and wife for the conveyance of the husband’s homestead . . . that the substantial thing is the written evidence of such consent; and that this may be as certainly shown by a separate instrument as by signing the deed of the husband.”)

In tour de force reviews of Louisiana’s Civil Code and civilian legal tradition, a plurality and dissent — both written by Louisiana-based judges — reviewed whether a 1923 deed created a “predial servitude” with respect to a right of access.  The deed at issue said: “It is understood and agreed that the said Texas & Pacific Railway Company shall fence said strip of ground and shall maintain said fence at its own expense and shall provide three crossings across said strip at the points indicated on said Blue Print hereto attached and made part hereof, and the said Texas and Pacific Railway hereby binds itself, its successors and assigns, to furnish proper drainage out-lets across the land hereinabove conveyed.”

The analysis involved citation to the Revised Civil Code of Louisiana of 1870 (the Code in effect at the time of conveyance), the 1899 treatise Traité de Droit Civil-Des Biens, and the 1893 work, Commentaire théorique & pratique du code civil.  Despite the arcane overlay, the opinions turn on practical observations.  The plurality notes that the deed uses “successors and assigns” language only with respect to drainage — not access — while the dissent observes that a “personal” access right, limited only to the parties to the conveyance and that does not run with the land, is impractical.  Franks Investment Co. v. Union Pacific R.R. Co., No. 13-30990 (Dec. 2, 2014).

A mortgage servicer sued two individuals, alleging a conspiracy to defraud; the defendants argued that the servicer lacked standing because the notes in question were not properly conveyed.  The case settled during trial, and as part of the settlement “the parties stipulated to several facts, including the fact that the Trusts were the owners and holders of the Loans at issue.”  An agreed judgment followed.  BAC Home Loans Servicing, L.P. v. Groves, No. 13-20764 (Nov. 3, 2014, unpublished).

The defendants then moved to vacate under FRCP 60(b), arguing that the plaintiff lacked standing.  The district court denied the motion and the Fifth Circuit affirmed.  It first noted that “the court will generally enforce valid appeal waivers, [but] a party cannot waive Article III standing by agreement . . .”  Further noting that “parties may stipulate to facts but not legal conclusions,” the Court held: “That is exactly what happened here.  [Defendants] conceded facts that establish [plainitiff’s] status; thus, the district court appropriately reached the resulting legal conclusion that [plaintiff] has standing.”

EnCana Oil & Gas hired Seiber as a general contractor, who in turn hired Holt and TAUG as subcontractors.  Seiber failed to make timely payments.  EnCana interpleaded the funds at issue, and Seiber then filed for bankruptcy — before entry of a final order in the interpleader case. Holt Texas, Ltd. v. Zayler, No. 13-41153 (Nov. 3, 2014).

Holt and TAUG alleged that they had materialmen’s liens under Texas law that removed the funds from Seiber’s bankruptcy estate; Seiber’s bankruptcy trustee argued that the filing of the interpleader action “automatically satisfied its liability to Seiber, thus transferring legal possession of the funds to Seiber and the bankruptcy estate.”

The Fifth Circuit disagreed with the trustee and reversed the bankruptcy court, reasoning: “If this were so, the interpleader would be the final judge of its own legal obligations relative to the dispute, by depositing a sum solely determined by it, washing its hands of any relationship to the dispute and walking away whistling Yankee Doodle.”

Uretek USA developed a process for pavement repair, which it sublicensed to Uretek Mexico under an agreement signed in 2003.  In 2010, the principals of the two companies met to try and resolve disputes about that agreement and other business dealings. During the meeting, the parties initialed an amended sublicense agreement, and Uretek USA accepted four checks from Uretek Mexico with these amounts and memo lines:

1. $10 “As per First Amendment to Sublicense Agreement”
2. $76,950.90 for “Full Payment on Technical Assistance”
3. $225,471.05 for “Full Payment on Royalties”
4. $10 for “Full Release [Uretek USA] to [Uretek Mexico]

Uretek USA later sued to dispute the enforceability of the amendment.  The jury found that Uretek USA ratified it by conduct, principally by cashing these checks.  While Uretek USA made several arguments against that finding on appeal, the number of checks and specificity of the notations on them was sufficient to sustain the verdict.  Uretek (USA), Inc. v. Ureteknologia de Mexico S.A. de C.V., No. 13-20430 (Oct. 29, 2014, unpublished).

Pioneer suffered an oil well blowout and paid millions to restore order.  It sued for reimbursement under its umbrella policy and the Fifth Circuit affirmed judgment for the insurer, based largely on the broad language of the relevant exclusions.  Pioneer Exploration LLC v. Steadfast Ins. Co., No. 13-30802 (Sept. 22, 2014).  Pioneer argued that the “owned, rented or occupied” exclusion did not apply to a mineral lease.  The Court disagreed, noting that the mineral lease gave Pioneer some control over surface land, and that the broad language of the exclusion reached activity associated with oil production (citing Aspen Ins. UK, Ltd. v. Dune Energy, Inc., No. 10-30335 (5th Cir. Nov. 8, 2010, unpublished)).  Further, noting that Louisiana law allowed debate as to whether an “owned property” exclusion reached remediation costs incurred to minimize liability to third parties, the Court found that this exclusion “specifically excludes containment costs” (reviewing Norfolk Southern Corp. v. California Union Ins., 859 So. 2d 167 (La. App. 2003)).”  Finally, as to another exclusion, the Court found that the insured could not meaningfully allocate expense “between controlling costs and plugging costs.”

This summer, the Fifth Circuit declined to apply the Texas “one satisfaction rule” in a fraudulent transfer case, where the plaintiff had also settled a contract dispute with the seller of the business involved in the transfer.  GE Capital Commercial, Inc. v. Worthington National Bank, No. 13-10171 (June 10, 2014).  The court returned to the one-satisfaction rule in Structural Metals, Inc. v. S&C Electric Co., in which the jury awarded roughly $300,000 for a breach of warranty (measured as the difference in value between the goods as received, and the goods as warranted).  The plaintiff also received an insurance payment for fire damage involving the goods.  Again, the Court declined to apply the rule, finding that the plaintiff had suffered two distinct injuries.  No. 13-50332 (Oct. 6, 2014, unpublished).  Interestingly, in both cases, the Court focused on the one-satisfaction rule rather than the closely-related doctrine of the collateral source rule.

Boxcars Properties, the operator of an apartment complex, sued its neighboring landowners West Hills Park and Home Depot in Texas state court, complaining about development activity that led to a “lack of lateral support” and made the complex uninhabitable. Williams v. Home Depot, Inc. (Sept. 22, 2014, unpublished).  Boxcars settled with Home Depot and obtained a $2.4 million verdict against West Hills, which then filed for bankruptcy.

West Hills sought indemnity from Home Depot, and the district court and Fifth Circuit rejected its request.  The indemnity provision contained an exclusion for “the tortious acts of . . . other parties” — such as West Hills.  Noting that “[t]he express negligence doctrine alone may be sufficient to deny [debtor’s] claim,” the Court decided on the basis of issue preclusion, agreeing with the district court that “the negligence finding was essential to the judgment because only that finding allowed for the damages for improvements to land included in the state court verdict.”

In Ferrara Fire Apparatus, Inc. v. JLG Industries, Inc., the Fifth Circuit returned to ground surveyed by the American Law Institute’s Restatement (Third) of Restitution, which the Court recently visited in cases about a faithless employee and the payment of benefits to a seaman.  Here, Gradall Industries manufactured a specialized boom called the “Strong Arm,” designed for firefighting, and Ferrara Fire Apparatus contracted to serve as its exclusive sales representative.  The relationship soured, Gradall terminated the contract, and Ferrara sued.  Ferrara obtained judgment for unjust enrichment for $1 million.  The Fifth Circuit reversed, finding no evidence of “an absence of justification or legal cause for the enrichment” as required by Louisiana law: “Gradall was simply competing in the market, which it was entitled to do after ending its exclusive contract with Ferrara.”  No. 13-30600 (Sept. 9, 2014, unpublished).

CAP agreed to sell a security to VPRO.  Their contract said: “The purchase price is $400,000 and this amount is to be paid to you within 10 business days from the date of transfer of the [security t]o: CITIBANK NY DTC 908 Account 089154 CSC73464, Further Credit to: [CAP], Beneficiary Deposit Account NR. 840 BSI SPA San Marino.” Collective Asset Partners, LLC v. Vtrader Pro, LLC, No. 13-20619 (Aug. 15, 2014, unpublished).

CAP hired a broker, who successfully transferred the security to the DTC account but, because the broker provided inaccurate information, failed to transfer it on to the San Marino account.  VPRO refused to pay.  CAP sold the security to another buyer for $175,069.41 and sued VPRO for the difference.

Applying Texas law, the Fifth Circuit agreed with the district court that VPRO unambiguously had no payment obligation until both transfers occurred, noting both the “Further Credit to” language in the contract, and the fact that the broker in fact tried to make both transfers.

The trustee of a litigation trust formed from the bankruptcy of Idearc, Inc. sued its former parent, Verizon, alleging billions of dollars in damages in connection with its spinoff.  After a bench trial and several other orders, the district court ruled in favor of defendants, and the Fifth Circuit affirmed in U.S. Bank, N.A. v. Verizon Communications, No. 13-10752 (revised Sept. 2, 2014).

The opinion, while lengthy, still only hints at the complexity of the case, and much of its analysis is fact-specific.  Some of the issues addressed include:

1.  A bankruptcy litigation trust does not have a right to jury trial on a fraudulent transfer claim, when the defendant creditor has filed a proof of claim in the bankruptcy, and the bankruptcy court must resolve whether a fraudulent transfer occurred to rule on that claim (analyzing and applying Langemkamp v. Culp, 498 U.S. 42 (1990), in light of Stern v. Marshall, 131 S. Ct. 2594 (2011)).

2.  In the context of determining whether the district court reviewed an earlier ruling correctly, on pages 26-27, the Court provided crisp definitions of the basic concepts of dictum and holding.

3.  In the course of rejecting an argument about the refusal to admit several pieces of evidence, the Court noted that the trustee “does not discuss how each specific piece of evidence was likely to affect the outcome of the trial, in light of all the evidence presented.”

4.  A defense expert, without experience in the particular industry, was still qualified to speak to valuation methodology in the bench trial, and “we cannot reverse the district court for adopting one permissible view over the other.”

5.  The Court thoroughly reviewed the fiduciary duties owed from a parent to a subsidiary under Delaware law, while affirming the district court’s conclusions about causation associated with their alleged breach.

One party to a settlement made the last installment payment several weeks late, triggering an acceleration clause that led to more liability.  Celtic Marine Corp. v. James C. Justice Co., No. 13-30712 (July 29, 2014).  The parties had this email exchange after the last payment was due and before it was made, which the party in default said modified the agreement:

A (1-5-2013):  Are we being paid the $91,666.66 to settle this once and for all?  I have lost faith in the agreement from your side.

A (1-7-2013): Are you paying us the $91,666.66 today?

B(1-7-2013): Fri

A (1-7-2013): o/n check correct and can’t u do it Thurs for Friday devl?

The Fifth Circuit held that this exchange did not modify the agreement, for several reasons: (1) the parties had not agreed to conduct transactions by electronic means [citing Louisiana’s version of the Uniform Electronic Transactions Act], (2) prior contracts had been “typed agreements physically signed,” and (3) factually, the email that talks about payment “to settle this for once and for all” was 1 of 15 demands for payment in a “one-sided” set of communications.

After recently reviewing the phrase “computed at the mouth of the well,” the Fifth Circuit returned to oil royalties in Potts v. Chesapeake Exploration LLC, No. 13-10601 (July 29, 2014).  The lease fixed the royalty as a percentage of “the market value at the point of sale,” and would be “free and clear of all costs and expenses related to the exploration, production and marketing of oil and gas production . . . ”  Since Chesapeake’s sales of gas occured at the wellhead, this language allowed it to deduct a reasonable post-production cost for delivering the gas from the wellhead under Heritage Resources, Inc. v. NationsBank, 939 S.W.2d 118 (Tex. 1996).  The Court said that its conclusion was not affected, under the terms of this lease, by the fact that Chesapeake sold to an affiliate.  The Court also rejected a procedural argument about whether Heritage was binding precedent after the Texas Supreme Court’s 4-4 vote on rehearing.   

A 1404(a) dispute was affirmed in Empire Indemity Ins. Co. v. N-S Corp., where “almost all non-party witnesses and all sources of proof needed to determine whether damages were covered by Empire’s policy are in, or around, Texas, and subject to the district court’s compulsory subpoena power.”  No. 13-40426 (June 12, 2014, unpublished).  On the merits, an aggrieved car wash operator sued its parts supplier and won a verdict for over $3 million.  Several months later, the parts supplier and its primary carrier settled with the plaintiff, all parties mutually released all claims against each other, and the parts supplier assigned its claims against its excess carrier to the plaintiff.  The excess carrier won summary judgment and the Fifth Circuit affirmed: “Following a release, the releasor cannot sue the releasee’s insurer ‘because the release precludes the prerequisite determination of [releasee’s liablity.'”  (quoting Angus Chem. Co. v. IMC Fertilizer, Inc., 939 S.W.2d 138 (Tex. 1997)).

Chesapeake’s lease obliged it to pay the Warrens a royalty based on “the amount realized by Lessee, computed at the mouth of the well.”  A lease addendum said the royalty “shall be free of all costs and expenses related to the exploration, production, and marketing . . . including, but not limited to, costs of compression, dehydration, treatment and transportation.”  Warren v. Chesapeake Exploration LLC, No. 13-10619 (July 16, 2014).

The addendum went on to say that “Lessor will, however, bear a proportionate part of all those expenses imposed upon Lessee by its gas sales contract to the extent incurred subsequent to those that are obligations of Lessee.”  The Warrens contended that this sentence defined certain shared expenses which should not have been deducted from the royalty.  The Fifth Circuit disagreed and affirmed the Rule 12 dismissal of their complaint, finding that the sentence only referred to “the cost of delivering marketable gas to a sales point other than the mouth of the well.”  (distinguishing Heritage Resources, Inc. v. NationsBank, 939 S.W.2d 118 (Tex. 1996)).

The Court reversed, however, as to another pair of plaintiffs with a different lease addendum.  Noting simply that it was different, the Court found that their claim should not have been dismissed, as “[i]t is not apparent from the face of the complaint or its attachments that they could not conceivably state a cause of action.”

In Bluebonnet Hotel Ventures, LLC v. Wells Fargo Bank, N.A., the Fifth Circuit considered whether there had been an “[e]rror that vitiates consent” because of a “failure of cause” about an interest rate swap agreement, so as to allow its cancellation under Louisiana contract law.  No. 13-30827 (June 6, 2014).  In the course of affirming summary judgment for the bank, the Court declined to consider emails written around the time of contracting, noting: “Under Louisiana law, courts may only consider parol evidence when a contract is ambiguous.” To illustrate the sharp edge that separates holdings in the area of extrinsic evidence, cf. Fruge v. Amerisure, 663 F.3d 743 (5th Cir. 2011) ( applying Louisiana law and holding: “Parol evidence is admissible to show mutual error even though the express terms of the policy are not ambiguous.”) (citations omitted).

First case: Highland Capital sued Bank of America for the alleged breach of an oral contract to sell a $15.5 million loan.  After the Fifth Circuit reversed the dismissal of this claim under Rule 12(b)(6), it affirmed summary judgment for the defendant in Highland Capital Management LP v. Bank of America, No. 13-11026 (July 3, 2014). Highland relied upon standard terminology promulgated by an industry association, while the Bank pointed to evidence showing that, in this specific transaction, the Bank was not familiar with that terminology and not want it to control.  “Although industry custom is extrinsic evidence a factfinder can use to determine the parties’ intent to be bound, its value is substantially diminished where, as here, other evidence overwhelmingly shows that the persons involved in the dealings were unaware of those customs.”    The Court also rejected an alternative theory that a prior transaction that involved the terminology continued to govern the parties’ relationship, noting: “Whether a prior contract had a binding effect on the procedures available for future contract-formation is a legal question.”

Second case:  As with the previous case, WH Holdings LLC v. Ace American Ins. Co. was remanded for development of a factual record, this time for extrinsic evidence about a contract ambiguity.  No. 13-30676 (June 26, 2014, unpublished).   And as with the previous case, the Fifth Circuit affirmed a summary judgment, finding that seven pieces of extrinsic evidence were either not relevant to the specific contract issue, or “equally consistent with both” readings.

The agreed protective order said:  “At any time after the delivery of documents designated ‘confidential,’ counsel for the receiving party may challenge the confidential designation of any document or transcript (or portion thereof) by providing written notice thereof to counsel for the opposing party.”  The producing party then has 15 days to seek protection; if it does not do so, “then the disputed material shall no longer be subject to protection as provided in this order.”  Moore v. Ford Motor Co., No. 13-40761 (June 20, 2014).

Pursuant to the order, Ford produced four boxes of documents related to Volvo safety issues.  These communications ensued:

• On May 11, 2004, plaintiffs’ counsel emailed to challenge the confidentiality designations of several documents.
• On June 4, Ford’s counsel asked for Bates numbers.
• On June 23, plaintiffs’ counsel responded, expanded on the confidentiality argument, and said it “will begin passing them out to any and everyone that is interested”
• In July, plaintiffs’ counsel asked: “what’s the word . . . on confidentiality?”
• The next day, Ford’s counsel withdrew its designations as to some documents, said it was “evaluating your claims” as to others, and “expects you to abide by the terms of the Protective Orders in the meantime”
• Plaintiffs’ counsel responded: “I gave Ford adequate time.  I am sending the materials out.  Thanks for trying.”  (He did not specify what “materials”)
• On February 22, 2005, plaintiffs’ counsel asked for an update on the “confidentiality issue”
• On March 8, 2005, Ford responded that “in the spirit of cooperation” it would “officially de-designate from the Protective Order” specified other documents.

In 2012, documents surfaced in other litigation that Ford had produced pursuant to the above protective order; while the opinion does not specify what they were, it seems clear that they were documents which Ford had not formally “de-designated.”  Ford moved to enforce the protective order and the district court agreed, finding no “clear written notice . . . challenging the confidential designation of these documents.”

On appeal, plaintiffs argued that the 15-day period ran from the first email, and Ford thus waived its designations by not moving for protection.  The Fifth Circuit disagreed, finding the protective order ambiguous on this issue, and stating: “This interpretation may well be the better reading without more, but the parties understanding of these agreed orders bears upon the interpretation, and the actions of both parties strongly suggest” otherwise, noting the lengthy dialogue between the parties.    Noting that “[a]lthough on de novo review a different outcome may obtain,” the Court found the district court’s conclusion that no waiver occurred to not be clearly erroneous.

A dissent, among other arguments, noted that (1) the 15-day provision only requires that confidentiality be “in dispute,” (2) Ford drafted the agreement so any ambiguity should be construed against it, and (3) Ford had the burden to establish confidentiality.  The dissent concluded the majority opinion undermined “efficient resolution of discovery disputes” by allowing “Ford . . . to undermine this purpose through vague, non-responsive answers.”

The plaintiff in McKay v. Novartis, Inc. challenged the dismissal on preemption grounds, by an MDL court in Tennessee, of products liability claims about drugs made by Novartis. No. 13-50404 (May 27, 2014).  The Fifth Circuit rejected an argument about inadequate time to get certain medical records, noting that the plaintiffs “sought formal discovery of evidence that was available to them through informal means” (citing other cases from the Court on that general topic), and also observing that two years passed from the filing of suit until Novartis sought summary judgment.  The Court also affirmed the MDL court’s grant of summary judgment on Texas state law grounds about a breach of warranty claim, finding inadequate notice; as an Erie matter: “the majority of Texas intermediate courts have held that a buyer must notify both the intermediate seller and the manufacturer.”

In Songcharoen v. Plastic & Hand Surgery Associates, the district court denied cross-motions for summary judgment about the meaning of a contract and had a trial as to the terms it believed to be ambiguous.  No. 13-60315 (April 2, 2014, unpublished).  Even though both matters present a common issue of law, because “the ‘evidence’ presented at pretrial may well be different from the evidence presented at trial,” the Court reviewed the issue through review of the denial for judgment as a matter of law.  The Court reminded: “because Rule 50 motions for judgment as a matter of law are not required following a bench trial, reviewing a district court’s denial of summary judgment is appropriate following a bench trial.”  (citing Black v. J.I. Case Co., 22 F.3d 568, 570 (5th Cir. 1994), and Becker v. Tidewater, Inc., 586 F.3d 358, 365-66 n.4 (5th Cir. 2009)).

The defendant in Advanced Nano Coatings, Inc. v. Hanafin “entered into an employment agreement with [plaintiff] in which [defendant] agreed to devote 100% of his professional time and effort to [plaintiff] or its subsidiary . . . .”  No. 13-20109 (Feb. 19, 2014, unpublished).  “The district court . . . found that Hanafin breached his fiduciary obligations . . . a finding Hanafin does not dispute on appeal.”  Quoting ERI Consulting Engineers v. Swinnea, 318 S.W.3d 867, 872 (Tex. 2010), the Fifth Circuit noted that under Texas law, “if the fiduciary . . . acquires any interest adverse to his principal, without a full disclosure, it is a betrayal of his trust and a breach of confidence, and he must account to his principal for all he has received.” The Court then held: “Accordingly, [defendant’s] breach of fiduciary duties obligates him to repay everything he gained by virtue of his position, including payments for his salary and any expenses he may have incurred.”

A restaurant showed the pay-per-view broadcast of a boxing championship without the approval of the holder of the licensing rights.  J&J Sports Productions, Inc. v. Mandell Family Ventures, LLC, No. 13-10485 (May 2, 2014).  The licensor sued the restaurant under the Federal Communication Act, and the district court granted summary judgment to the licensor for $350 in statutory damages and $26,730.30 in attorneys fees.  The Fifth Circuit reversed, reviewing two issues.  First, as to the licensor’s claim under section 553 of the Act, the Court found a fact issue as to whether the restaurant had been “specifically authorized . . . by a cable operator” to make the showing, which would bring the restaurant within a statutory safe harbor.  The Court reviewed affidavit testimony of the cable company that at least showed “the Defendants did not steal, intercept, or obtain the broadcast under false pretenses.”  Second, the Court rejected a claim based on section 605 of the Act, finding it limited to radio communications only (thereby siding with the Third Circuit in a split with the Seventh about the applicability of that section to cable television).

The Fifth Circuit released a slightly revised opinion in Excel Willowbrook LLC v. JP Morgan Chase Bank, No. 12-20367 (revised April 24, 2014), a dispute about the FDIC’s rights upon assigning the assets of a failed bank.  Of particular interest is the new footnote 34, which observes: “[T]he continued vitality of prudential ‘standing’ is now uncertain in the wake of the Supreme Court’s recent decision in Lexmark International, Inc. v. Static Control Components, Inc., 134 S. Ct. 1377 (2014).  See id. at 1388 (‘[A] court . . . cannot limit a cause of action . . . merely because “prudence” dictates.’).”