A borrower claimed that a mortgage servicer was unjustly enriched when it obtained an expensive “force-placed” insurance policy on the property.  Baxter v. PNC Bank, No. 12-51181 (Sept. 26, 2013, unpublished).  The Fifth Circuit reminded that a remedy based on restitution or unjust enrichment is not ordinarily available when an express contract deals with the same subject matter.  Here, the deed not only allowed the purchase of force-placed insurance, but warned that the ” “cost of the [forced-placed] insurance might significantly exceed the cost of insurance that [Baxter] could have obtained.”

Two employees entered a series of unauthorized loan transactions on behalf of their employer and took the proceeds.  BJ Services v. Great American Insurance Co., No. 12-20527 (Sept. 6, 2013, unpublished).  The employer’s carrier denied coverage, arguing that the losses did not “directly” result from employee dishonesty, in part because the company never actually got the money.  The district court agreed but the Fifth Circuit reversed, noting that the employees had “apparent” authority to enter the transactions, even if they did not have “actual” authority, and thus created binding contracts on behalf of their employer that made the losses “direct” within the meaning of the policy.

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

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  No. 12-20512 (Aug. 8, 2013, unpublished).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

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

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

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

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

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

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

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

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

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

A heavy, awkwardly-shaped boiler fell while being loaded onto a ship and sustained significant damage.  The issue in Pt. Jawamanis Rafinasi v. Coastal Cargo Co. was whether a limitation of liability in the Carriage of Goods at Sea Act, inapplicable by its terms to this accident on shore, was nevertheless incorporated in the parties’ contract.  No. 12-30668 (July 24, 2013, unpublished).   The Court found that the limitation applied because it was included in the shipper’s bill of lading, even though the purchaser of the boiler lacked actual knowledge of the bill’s terms.  “Case law in the Fifth Circuit demonstrates that an unissued bill of lading nevertheless binds the parties.”  (citing, inter alia, Luckenbach S.S. Co. v. American Mills Co., 24 F.2d 704, 705 (5th Cir. 1928)).

Deep Marine Technology provided construction support vessels to BHP, an offshore drilling company.  A BHP contractor sued for injuries arising from an “offshore personnel basket transfer” between a Deep Marine vessel and a BHP platform.  There was no dispute that the parties’ Master Services Agreement required BHP to defend and indemnify Deep Marine from this claim.  The issue in Duval v. Northern Assurance Co. was whether BHP had to defend and indemnify Deep Marine’s insurers, who were joined to the litigation under Louisiana’s Direct Action Statute.  No. 12-31102 (July 5, 2013).  The Fifth Circuit noted that indemnity provisions are strictly construed and that: “The parties could have included the Contractor’s insurers within the definition of ‘Contractor Group,’ as parties in other cases have done . . . . ” (citation omitted).  Based on that conclusion, the Court rejected several theories about how the insurers could benefit from the indemnity provision, and affirmed summary judgment against them.

The issue in FDIC v. SLE, Inc. was whether a party could assert rights under a prior judgment in favor of the FDIC, where evidence established that it was the FDIC’s successor-in-interest and assignee, but the party did not substitute in as plaintiff in the case under Fed. R. Civ. P. 25.  No. 12-30539 (July 2, 2013, unpublished).  The Fifth Circuit affirmed the denial of Rule 60(b)(4) relief, noting that the plain language of Rule 25(c) and (a)(3) is permissive, not mandatory, and distinguishing two cases on the issue.

The borrower in Martin-Janson v. JP Morgan Chase alleged waiver and promissory estoppel claims arising from a foreclosure — claims which the Fifth Circuit has not encouraged in 2013 opinions.  Here, however, after reviewing the plaintiff’s five allegations about the specific statements made, the Court reasoned: “Based on the foregoing factual allegations, Martin-Janson asserts that she seeks discovery to reveal either the draft loan modification agreement that JPMorgan allegedly prepared, or the terms of her promised modification based on the lender’s standard formulae. In these ways, Martin-Janson argues, she would be able to prove that JPMorgan ‘promise[d] to sign a written agreement which itself complies with the statute of frauds,’  Viewing Martin-Janson’s factual allegations, and the reasonable inferences to be drawn therefrom, in the light most favorable to her, we conclude that she has pled a plausible promissory estoppel claim that potentially avoids JPMorgan’s statute of frauds defense.”  (citations omitted).  Accordingly, the Court reversed a Rule 12 dismisal of the promissory estoppel claim, while affirming as to waiver. No. 12-50380 (July 15, 2013, unpublished). 

The contract between Anadarko (oil producer) and Williams Alaska (refinery operator) had monthly invoicing, which they customarily “trued up” the following month to reflect the findings of an independent third party about the quality of oil transported.  After their contract terminated, FERC discovered an error in how the quality of oil was determined. The issue in Anadarko Petroleum v. Williams Alaska Petroleum was whether the compensation for that error — an almost $9 million credit to Williams Alaska by the third party — was in turn owing to Anadarko.  No. 12-20716 (July 10, 2013).  In addition to other holdings unique to the parties’ contract, the Fifth Circuit reminded that under the Texas UCC: “Although the terms of a written agreement may not be contradicted by contemporaneous or antecedent evidence, terms may be explained by course of dealing or course of performance.”  Here, the parties “consistently made [true-up] adjustments,” supporting a reading that favored Anadarko, and the Court reversed and rendered judgment for Anadarko for the $9 million credit amount.

2013 has seen a steady stream of unpublished opinions favoring mortgage servicers, followed by a published opinion affirming a MERS assignment, and now a second published opinion rejecting arguments about the alleged “robosigning” of assignment documents.  In Reinagel v. Deutsche Bank, a suit arising out of foreclosure on a Texas home equity loan, the Fifth Circuit held: (1) borrowers could challenge the validity of assignments to the servicer, since they were not asserting affirmative rights under those instruments; (2) alleged technical defects in the signature on the relevant assignment created rights only for the servicer and lender, not the borrower; (3) the assignment did not have to be recorded, mooting challenges to defects in the acknowledgement; and (4) a violation of the relevant PSA related to the transfer of the note did not create rights for the borrower.  The opinion concluded with two important caveats: it was not deciding whether the Texas Supreme Court would adopt the “note-follows-the-mortgage” concept, and it reminded: “We do not condone ‘robo-signing’ more broadly and remind that bank employees or contractors who commit forgery or prepare false affidavits subject themselves and their supervisors to civil and criminal liability.”  735 F.3d 220 (5th Cir. 2013).

In Temple v. McCall, the Fifth Circuit confronted a series of property conveyances with ambiguous language about whether mineral rights were included.  No. 12-30661 (June 20, 2013).  The Court affirmed, approving the weight given by the district court to expert testimony about “customary interpretation” of similar deed language in Louisiana.  The Court discussed the proper weight that Erie gives to an intermediate state appellate opinion, but ultimately found the relevant Louisiana case distinguishable on its facts.  (The proper role of extrinsic evidence in contract cases is a recurring issue in the Court’s diversity cases, although the express finding of ambiguity in this dispute simplifed the analysis on that point.)

In its first published opinion of 2013 about the merits of a wrongful foreclosure claim, the Fifth Circuit rejected the plaintiff’s “show-me-the-note” and “split-the-note” arguments.  Martins v. BAC Home Loans Servicing LP, 722 F.3d 249 (5th Cir. 2013).  In footnote 2, the Court noted that much of the relevant law is federal because of diversity between the borrower and the foreclosing entity.  As to the first theory, the court cited authority that allowed an authenticated photocopy to prove a note, and said: “We find no contrary Texas authority requiring production of the ‘original’ note.”  As to the second, acknowledging some contrary authority, the Court reviewed the relevant statute and held: “The ‘split-the-note’ theory is . . .  inapplicable under Texas law where the foreclosing party is a mortgage servicer and the mortgage has been properly assigned.  The party to foreclose need not possess the note itself.”  An unpublished opinion, originally released a day before Martins, was revised to closely follow its analysis and result.  Casterline v. OneWest Bank, No. 13-50067 (revised July 5, 2013, unpublished).

The salesman’s compensation guidelines in Kellerman v. Avaya, Inc. said on the first page:  “Avaya Inc. has the right to amend, change, or cancel the sales compensation policies solely at its discretion and without prior notice, except in countries where it is a violation of applicable law.”  Later provisions had more detail about the types of decisions reserved to Avaya.  The salesman claimed that the company had manipulated its revenue recognition to reduce his compensation, but the Fifth Circuit affirmed a summary judgment for the company: “where an employer exercises rights reserved in the contract[,] there can be no breach of contract.” (citing Nichols v. Enterasys Networks, 495 F.3d 185, 186-87 (5th Cir. 2007) (reviewing similar compensation arrangement)).

On June 18, two separate panels — one addressing a chemical spill, the other a vessel crash into an oil well — reached the same conclusion in published opinions:  when an insured fails to give notice within the agreed-upon period, as required by a “negotiated buyback” endorsement to a policy, the insurer does not have to show prejudice to void coverage.   Settoon Towing LLC v. St. Paul Surplus Lines Ins. Co., No. 11-31030; Starr Indemnity & Liability Co. v. SGS Petroleum Service Corp., No. 12-20545.  The notice provision was seen as part of the basic bargain struck about coverage.  Both opinions — especially Starr, arising under Texas law — recognized the continuing viability of Matador Petroleum v. St. Paul Surplus Lines Ins. Co., 174 F.3d 653 (5th Cir. 1989), in this situation, notwithstanding later Texas Supreme Court cases requiring prejudice in other contexts arising from the main body of a policy.  Settoon went on to address other issues under Louisiana insurance law, including whether the Civil Code concept of “impossibility,” which focuses on a failure to perform an obligation, applies to a failure to perform a condition precedent such as giving notice.

After a jury trial, the plaintiff won judgment of $336,000 for breach of a joint venture to bid a contract with the Air Force about upgrades to the storied Paveway laser-guided bomb program.  X Technologies v. Marvin Test Systems, No. 12-50230 (June 11, 2013).  On the issue of causation, the Fifth Circuit quickly dismissed two challenges to a key witness’s qualifications since he was not testifying as an expert, and also dismissed the effect of a claimed impeachment in light of the full record developed at trial.  The Court went on to affirm a directed verdict on a claimed defense of prior breach, finding that the agreement only imposed a one-way bar on multiple bids for the contract, and to affirm the judgment of breach, noting multiple uses of “team” in the record to describe the parties’ relationship.

Several companies resolved their responsibility for environmental litigation in a series of three agreements.  The second one (the “Merger Agreement”) had a “hold harmless” provision between two parties; the third (the “Master Settlement Agreement”) did not.  Alford v. Kuhlman Electric Corp., No. 11-60728 (May 24, 2013).  The beneficiary of the hold harmless provision in the Merger Agreement argued that the Master Settlement Agreement incorporated that provision via this language: “BorgWarner shall make payments of the Settlement Funds on behalf of [KEC] pursuant to the [Merger Agreement.]”  Noting that “[t]he term ‘pursuant to’ has multiple meanings and its use does not automatically trigger incorporation of the referenced agreement or statute,” the Fifth Circuit found that this “mere reference” did not incorporate the Merger Agreement.  The Court also rejected a similar argument based on a provision in the MSA which said it should not “be construed to impair, change, or modify any separate agreement” among the parties.

The case of Nexstar Broadcasting v. Time Warner Cable presented the appeal of the denial of a preliminary injunction, sought by an operator of TV stations (and creator of content) against a large cable company.  No. 12-10935 (May 30, 2013, unpublished).  The dispute focused on whether the defendant could relay signals, originally created by the plaintiff, out of local broadcast markets.  The key contract provision said: “[Nexstar] hereby gives [Time Warner] its consent, pursuant to Section 325(b) of the Act and the FCC Rules, to the nonexclusive retransmission of the entire broadcast signal of each Station (the “Signal”) over each System pursuant to the terms of this Agreement,” with “System” defined to mean all Time Warner Systems, with no geographic limitation.  Citing Bryan Garner’s dictionary of legal usage, the Fifth Circuit held: “The adverb ‘each’ is distributive—that is, [it] refer[s] to every one of the several or many things (or persons) comprised in a group.”  Accordingly, the grant of authority included all Time Warner systems, and no abuse of discretion in denying injunctive relief was found.

The case of Woman’s Hospital Foundation v. National Public Finance Guarantee Corp. turned on a claimed conflict between clause 2.2(f) of a bond insurance contract, which capped the amount of “indebtedness” the borrower could assume, and clause 2.6, which gave the insurer a right to consent to new “obligations.”  No. 12-30701 (May 14, 2013, unpublished).  The Fifth Circuit affirmed dismissal of the borrower’s claims, agreeing that as the instrument was written, the cap applied the the borrower’s overall financial condition and “indebtedness,” of which “obligations” were the subset that was secured by the insurer.  While unpublished, the opinion reminds of the technical, transaction-specific definitions that sophisticated deal instruments can give to terms such as “obligations.”

In Kenyon International Emergency Services, Inc. v. Malcolm, the Fifth Circuit found no abuse of discretion in an award of attorneys fees under a Texas statute to the defendants in a suit to enforce a noncompetition agreement. No. 12-20306 (May 14, 2013, unpublished).  The Court clarified that “the key determination is [plaintiff’s] knowledge of reasonable limits, not . . . its knowledge of the reasonableness of the agreement” (emphasis in original).  As it saw the record, the plaintiff’s CEO testified that the restrictions “were worldwide, overreaching in scope of activity, and basically indefinite in time.”  The Court also reversed a sanction on the plaintiff’s lawyer related to the unsealed filing of a “sexually-explicit Internet chat,” reminding that “[i]ssuing a show-cause order is a mandatory prerequisite to imposing monetary sanctions sua sponte,” and finding that the lawyer did not have an improper purpose in making the filing and thus did not fall within Rule 11.

After the Army disclosed that a property was once a bomb range, the developer sued the law firm that advised on the issuance of bonds for the development. Coves of the Highland Development District v. McGlinchey Stafford PLLC, No. 12-30096 (May 7, 2013, unpublished).The Fifth Circuit affirmed summary judgment for the firm, principally on the ground that the developer bought the property before it retained the firm as bond counsel.  Of general interest, the parties’ dispute about the engagement letter pitted a general description of the firm’s work “regarding the source of payment and security for the Bonds” against a specific statement that the firm would rely on the developer for “complete and timely information on all developments pertaining to the Bonds . . . .”

The insurance policy said: “Whenever any Assured has information from which the Assured may reasonably conclude that an occurrence covered hereunder involves an event likely to involve this Policy, notice shall be sent to Underwriters as soon as practicable . . . ”  Ins. Co. of N. Am. v. Board of Commissioners of the Port of New Orleans, No. 12-30705 (May 1, 2013, unpublished). Clarifying an earlier opinion (and mandate) about this notice provision, the Fifth Circuit held: “[T]he duty of coverage is triggered for each underwriter who receives notice under the policy. . . We do not, however, hold the converse of this conclusion.  In other words, we do not hold that all underwriters under the policy must receive notice as a condition precedent to a duty of coverage being triggered for any individual underwriter under the policy.”

The Fifth Circuit affirmed the district court’s confirmation of an arbitration award against challenges by both sides.  One party argued that there was no agreement to arbitrate, and the Court resolved that issue under general contract law principles: “Signature[] lines may be strong evidence that the parties did not intend to be bound by a contract until they signed it. But the blank signature blocks here are insufficient, by themselves, to raise a genuine dispute of material fact.”  The other party disputed the handling of postjudgment interest, but the Court concluded that the panel had only awarded post-award interest, leaving the district court free to impose the statutory postjudgment rate upon confirmation. The Court noted that parties may contract to have the arbitrator resolve the appropriate postjudgment rate.  Tricon Energy Ltd. v. Vinmar Int’l, Ltd., No. 12-20100 (May 3, 2013).

The defendant in R&L Investment Property LLC v. Hamm alleged fraudulent inducement into a land sales contract, and the plaintiff responded that a ratification occurred when the defendant signed a modification of a related lien note and deed of trust.  (April 19, 2013).  The Fifth Circuit agreed with the plaintiff, following the principle that “instruments pertaining to the same transaction may be read together . . . as if they were part of a single, unified instrument.”  Because the defendant not only executed the ratification, but received the benefit of the related bargain, its claim for damages was foreclosed.  (citing Fortune Production Co. v. Conoco, Inc., 52 S.W.3d 671, 678 (Tex. 2000)).

Hari Aum LLC v. First Guaranty Bank examined how Louisiana law handles documentation about a mortgage securing future indebtedness.  No. 11-31218 (April 16, 2013).  Article 3298 of the Civil Code recognizes such mortgages so long as basic requirements are satisfied. Articles 1839 and 3338 require the filing of certain instruments in the public record for them to have full legal effect.  The Court concluded that a pledge and a modification to the original mortgage did not need to be recorded “as long as these alterations did not exceed the total indebtedness under the pre-existing [mortgage], which they did not.”

The plaintiff in Hyde & Hyde, Inc. v. Mount Franklin Foods LLC asserted conversion claims about certain packaging equipment, based on an alleged assignment as part of a settlement agreement.  No. 12-50675 (Apr. 15, 2013, unpublished).  Applying Connecticut law, the Court  distinguished between assignments of claims involving property damages as opposed to personal injury: “When a tort is committed against a person, the injury is fixed to that individual; when a tort involving property occurs, the harm is claimed by whoever owns or has the right to the property at issue.”  Id. at 8.  While concluding that Connecticut thus allows assignment of conversion claims,  the Court found that general language in the agreement about “all” of the other party’s “rights and interests in the equipment” was not sufficient to make an assignment as it did not “describe the assignment of claims ‘with such particularity as to render [them] capable of identification.'”  Id. at 9.

Arbitrators awarded a videogame developer a perpetual license in certain intellectual property.  The district court vacated the award on the ground that the award went against the essence of the developer’s contractual relationship with the game publisher.  Timegate Studios, Inc. v. Southpeak Interactive, LLC (April 9, 2013).  The Fifth Circuit acknowledged that the FAA’s deference to arbitrators reaches its boundary if they “utterly contort[] the evident purpose and intent of the parties” with an award that does not “draw its essence” from the parties’ contract.  Here, particularly in light of the arbitrator’s findings about the publisher’s intentional wrongdoing, the Court found the license “was a permissible exercise of the arbitrator’s creative remedial powers” even if it was not wholly consistent with the parties’ contract.  The Court reviewed cases about arbitrators who exceeded their given authority and found them inapplicable to this situation: “Timegate committed an extraordinary breach of the Agreement, and an equally extraordinary realignment of the parties’ original rights [was] necessary to preserve the essence of the Agreement.”

A steady flow of mortgage servicing cases in 2013 continued with Smith v. JPMorgan Chase (March 22, 2013, unpublished).  In affirming summary judgment for the lender on several issues, the Court made two holdings of note.  First, an incomplete RESPA response, provided less than sixty days before suit was filed, could not support a contract or negligent misrepresentation claim when it caused no damage.  Second, the statement: “Defendants’ agents made harassing phone calls 8-10 times per day.  I quit answering our phone, but the constant ringing caused us to have to unplug our home phone and to only use our cell phones” did not raise a fact issue on a claim of unreasonable collection efforts, when “Defendants’ detailed call records, on the other hand, indicated that calls were not answered, phone numbers were disconnected, and messages were left, but, on days when there were multiple calls, only two calls were made.”

The parties in Silver Dream LLC v. 3MC Inc. settled a copyright dispute about jewelry sales “by agreeing, among other things, that the [individual defendants] would provide affidavits disclosing details of the infringing items.”  No. 11-30968 (March 18, 2013, unpublished).  The defendants warranted the affidavits would be “true, complete, and exact” but the agreement allowed termination only if the affidavits were discovered to be false within a year.  The plaintiff took issue with the “qualified nature” of the affidavits as a reason to terminate the settlement, but the district court and Fifth Circuit stressed that the cancellation right was limited to a “false” statement. The plaintiff’s proof of alleged affirmative falsehoods in the affidavits was found to lack specificity.  The Fifth Circuit also found no abuse of discretion in denying a motion for continuance to depose the individual defendants, noting delay in the request and a lack of specificity about what the plaintiff planned to establish.

An assignment of royalty interests for a continental shelf project had this “calculate or pay” clause:  “The overriding royalty interest assigned herein shall be calculated and paid in the same manner and subject to the same terms and conditions as the landowner’s royalty under the Lease.”  The parties disputed whether the clause simply required calculation of royalties in the same way as the government’s royalty, or allowed suspension of the assigned payments during a period when the government’s royalty right was suspended. Total E&P USA, Inc. v. Kerr-McGee Oil & Gas, No. 11-30038 (revised June 20, 2013).  Applying Louisiana law, the majority found the clause ambiguous on that issue, and further reasoned that at the time of contracting, legal principles that eventually became settled and could resolve the ambiguity were not yet settled.  Noting that no cross-appeal was taken, the Court reversed a summary judgment and remanded for consideration of extrinsic evidence.   A succinct concurrence noted an additional reason for finding ambiguity based on the grammar of the clause.  A dissent took issue with the majority’s analysis of other contract provisions and applicable law, and would have affirmed summary judgment about interpretation but reversed as to reformation for mutual mistake.    Both the majority and dissent endorsed consideration of extrinsic evidence, for different reasons and purposes — a general topic which recurs with some regularity in the Court’s contract opinions.

Con-Drive contracted to provide an offshore diving system to ARV Offshore, did not perform, and was found liable for millions of dollars that it cost ARV to arrange a substitute system for an oil-drilling project.   ARV Offshore Co. v. Con-Dive LLC, No. 12-20098 (Feb. 22, 2013, unpublished).  A key damage issue was whether ARV was reimbursed by its customer for a substantial amount of the costs for the substitute.  The Fifth Circuit affirmed the judgment, noting a potential waiver issue because Con-Dive had not adequately pleaded offset as a defense, and found that the relevant testimony from an ARV representative was “non-specific and did not establish a basis for the district court to recompute the damage amount.”  The opinion is fact-specific but this observation has broader applicability in commercial damages litigation.

The case of Tekelec, Inc. v. Verint Systems, Inc. presented a contract dispute, sufficiently intricate that the Court attached a four-color chart to its opinion to illustrate the facts.  No. 11-40418 (Feb. 13, 2013).  In affirming summary judgment for the plaintiff on largely case-specific grounds, the Court reached two principal holdings: (1) an assignee has a right to enforce a payment obligation even if the contract documents do not create an express enforcement right, and (2) the contract payments were not “royalties or other patent damages” within the specific context of these parties’ dealings, or as the terms “royalty” and “reasonable royalty” are generally understood.  The first holding draws upon the general principle in Texas law that a contract construction leading to an exclusive remedy is disfavored unless that intent is clearly stated; an issue arising in contract litigation generally when potential equitable remedies are evaluated.

An apartment developer sought recovery on a title insurance policy after unfortunate zoning stopped the project.  Levy Gardens Partners v. Commonwealth Land Title Insurance, No. 12-30010 (Jan. 31, 2013).  The Fifth Circuit affirmed the finding of coverage, concluding, among other matters, that: (1) state court rulings about zoning laws deserved deference by federal courts in later coverage litigation; (2) the state court preliminary injunction litigation about zoning had become a sufficiently “final decree” to trigger coverage; (3) delay in giving notice did not cause prejudice; and (4) the policy did not require the developer to invoke a “conditional use process.”  The Court also found, however, that the policy “unambiguously restricts liability to the difference in the value of the title with and without the zoning encumbrance,” thus limiting the insured’s recovery to roughly $650,000 rather than several million in development expenses.  In rejecting the insured’s arguments about the policy, the Court also found no prejudicial violation of Fed. R. Civ. P. 8(c) about the pleading of defensive matters.

A group of chicken farmers supplied poultry to Pilgrim’s Pride.  After the company terminated its contracts and entered bankruptcy, the farmers sued for damages under a promissory estoppel theory, alleging that its oral promises of a long-term relationship induced them to invest in chicken houses.  Clinton Growers v. Pilgrim’s Pride, No. 12-10063 (Jan. 31, 2013) at 2.  The Court affirmed summary judgment for Pilgrim’s Pride, finding that the plain language of the contract specified a contract duration (“flock-to-flock,” roughly 4-9 weeks), and foreclosed an estoppel claim about that topic.  Id. at 7.  Similarly, contract provisions about the farmers’ compensation and maintenance obligations foreclosed other attempts to recast the subject of the estoppel claim.  Id. at 8.   The Court distinguished a prior Arkansas case about a commitment by Tyson Foods to supply hogs to a hog grower, both on legal grounds and on the strength of the evidence about the alleged misrepresentations by Tyson.  Id. at 8-10.  The Texas Law Book covered the opinion shortly after its release.

In the fourth of a series of unrelated cases about mortgages and foreclosures in 2013, the Fifth Circuit affirmed the dismissal of claims about the foreclosure on a home used as collateral for a business loan.  Water Dynamics v. HSBC Bank, No. 12-10307 (Jan. 30, 2013, unpublished).  The holdings included: (1) the foreclosure price exceeded 50 of the claimed value, and was thus not “grossly inadequate” and appellants could not state a wrongful foreclosure claim, (2) appellants’ prior breach of contract foreclosed their contract claims, and the contract modifications they alleged were barred by the Texas statute of frauds, (3) acts of the lender alleged to be inconsistent with the loan documents did not state a waiver claim, especially given the deed of trust’s anti-waiver provision, and (4) “Appellants’ allegations may demonstrate a failure to communicate between themselves and the lender, but they fall far short of . . . [showing] ‘a course of harassment that was willful, wanton, malicious, and intended to inflict mental anguish and bodily harm'” so as to state a claim for unreasonable collection efforts.

In Ergon-West Virginia, Inc. v. Dynegy Marketing & Trade, the Fifth Circuit found that Dynegy had no duty under two natural gas supply contracts to attempt to get replacement gas after a declaration of force majeure in response to hurricane damage, affirming the district court as to one contract and reversing as to the other.  No. 11-60492 (Jan. 22, 2013).  The first contract’s force majeure clause required Dynegy to “remed[y] with all reasonable dispatch” the event.  The Court found that “reasonable” was not ambiguous but that extrinsic evidence of industry standards (favorable to Dynegy) was properly admitted to give it full meaning (contrasting its approach with the district court’s, which found the term ambiguous and admitted the testimony to resolve the ambiguity).  The second contract’s provision had language about “due diligence” by Dynegy.  The Court found the term ambiguous as both parties’ readings of it were reasonable, and then held that the district court should have credited the same evidence here as it did for the first contract.

In the third mortgage servicing opinion of 2013, the Fifth Circuit affirmed the dismissal of contract, promissory estoppel, and tort claims under Texas law arising from the attempted negotiation of a loan modification during a foreclosure situation.   Milton v. U.S. Bank, No. 12-40742 (Jan. 18, 2013, unpublished); see also Gordon v. JP Morgan Chase (contract and estoppel claims under Texas law) and Pennell v. Wells Fargo Bank (negligent misrepresentation claim under Mississippi law).  The Court also found that this mortgagor-mortgagee relationship did not create an independently actionable duty of good faith, and that reliance on alleged representations that were inconsistent with the loan documents and foreclosure notice was not reasonable.  Id. at 5, 6.

Continuing a theme begun a few days ago in Gordon v. JP Morgan Chase, the Fifth Circuit affirmed summary judgment for a servicer on a negligent misrepresentation claim under Mississippi law based on statements during loan modification discussions.  Pennell v. Wells Fargo Bank, No. 12-60595 (Jan. 9, 2013, unpublished).  The Court saw the statements as unactionable promises of future conduct.  In reviewing the relevant cases, the Court distinguished two federal district court cases on their facts, while also diminishing their effect under Erie compared to controlling state court authority.

The sales agreement for two tugboats provided for $250,000 in liquidated damages if the boat was used in violation of a noncompetition provision.  International Marine LLC v. Delta Towing LLC, No. 12-30280 (Jan. 8, 2013).  The Fifth Circuit applied federal admiralty law, using section 356 of the Second Restatement of Contracts as the guide, and placing the burden on the party seeking to invalidate the provision as a penalty. The Court quickly concluded that the second factor of that section — difficulty in proving damages — was established by evidence about the nature of the boat charter business to which the clause applied.  Id. at 9.  The Court also found that the first factor — reasonableness of the estimated anticipated loss — was satisfied by evidence about the range of expected fees and contract duration.  Id. at 9-10.  (citing Farmers Exp. Co. v. M/V Georgis Prois, 799 F.2d 159 (5th Cir. 1986)).  The clause was thus enforceable.

The plaintiff in Gordon v. JP Morgan Chase alleged that a home foreclosure was prevented by the lender′s promises of a permanent loan modification under the Home Affordable Mortgage Program (“HAMP”).  No. 12-20323 (Jan. 3, 2013, unpublished).  The Fifth Circuit agreed with the lender that the Statute of Frauds did not allow such a claim to proceed under Texas contract law.  Because the SOF barred the contract claim, promissory estoppel could only arise if the lender orally promised to sign a writing that would satisfy the SOF, and that the writing was in existence at the time of the promise.  Statements about future loan papers did not satisfy this rule.  While the opinion is unpublished, its analysis has the potential for extensive citation in state and federal cases seeking to stop foreclosures because of statements made in the context of HAMP negotiations.

The parties’ agreement said: “State Farm agrees not to remove any Hurricane Ike cases filed by your firm to Federal Court.”  Horn v. State Farm Lloyds, No. 12-40410 (Dec. 21, 2012).  Roughly a year later, the firm filed a 100,000-member class action against State Farm, who removed the case.  State Farm argued that the agreement was intended to resolve large numbers of individual claims and extending it to a class action was not consistent with the specific consideration given.  The Fifth Circuit affirmed the remand order, finding that the terms “any” and “cases” were not ambiguous.  The Court’s emphasis on contract wording, especially in the insurance context, is consistent with other recent cases, see, e.g., Ballard v. Devon Energy, 678 F.3d 360 (5th Cir. 2012).

The plaintiff in Arthur J. Gallagher & Co. v. Babcock obtained a $1.2 million judgment for violation of a noncompetition agreement in the insurance field.  No. 11-30452 (Dec. 18, 2012).   The Fifth Circuit affirmed the enforceability of the agreement.  As to its substance, the Court held that Gallagher’s prohibition of employees from competing for accounts on which they actually worked at Gallagher was “less restrictive than allowed under state law.”  As to geographic scope, the Court affirmed the district court’s narrowing of the provision from 64 parishes to the 9 in which Gallagher actually provided insurance services.  The Court vacated the damages because the key witness conflated (a) the group of clients who chose to leave Gallagher after the employee left with (b) the group of clients who actually followed Gallagher to his new employer.  See id. at 18 (“Defendants did not breach their agreements by leaving GBSI, but by accepting work from clients who departed along with them.”)