A federal jury awarded $4 million in compensatory damages for a car wreck.  The district judge interpreted the award to include $2.2 million in noneconomic damages, and then reduced that portion of the award to $1 million because of Mississippi’s statutory cap on noneconomic damages.  Learmonth v. Sears, Roebuck & Co., No. 09-60651 (Feb. 27, 2013, revised March 20, 2013).  The plaintiff challenged the cap as violating the Mississippi Constitution’s jury trial guarantee and separation of power provisions.  The Mississippi Supreme Court declined to answer certified questions about those issues.  The Fifth Circuit found that the cap did not violate the Mississippi Constitution.  The Court declined to consider an argument that the Erie doctrine prevented the district judge from segregating the verdict as a matter of state substantive law, finding that the point was not asserted timely and was thus waived.

In First American Title v. Continental Casualty, the Court analyzed a “claims-made-and-reported” policy under the Louisiana direct action statute, which allows an injured third party to directly sue the responsible party’s insurer.  No. 12-30336 (Feb. 28, 2013).   Notice was not given to the insurer during the required period.  The Court concluded that unlike an occurrence policy, where a notice requirement is intended to protect the insurer and a failure to give notice will not bar a direct action, proper notice under this policy was a condition precedent to coverage and thus barred the direct action.  A concurrence agreed with the result but advocated a narrower ground for decision.

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

In 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.

The insured in Jamestown Insurance v. Reeder successfully minimized its liability with a winning appeal to the Texas Supreme Court.  No. 12-20437 (Jan. 17, 2013, unpublished).  He only gave notice of a claim at that point, however, and despite the result, ran afoul of the concept that “[o]ne of the purposes of a notice provisions . . . is to allow an insurer ‘to form an intelligent estimate of its rights and liabilities before it is obligated to pay.'”  Id. at 5 (emphasis in original).  Because the insurer could have helped influence the trial result, or negotiated a settlement at the appellate level, the “delayed tender thwarted the recognized purposes of the notice provisions” and summary judgment was affirmed for the insurer.  Id.   

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.

Demahy v. Schwarz Pharma, Inc. involved the aftermath of the Supreme Court’s reversal of the Fifth Circuit in Pliva, Inc. v. Mensing, 131 S. Ct. 2567 (2011).  No. 11-31073 (Oct. 25, 2012, published Dec. 27).  Pliva held that federal law preempted state laws that would require generic drug manufacturers to change a drug’s label.  Id. at 3.  The plaintiff’s counsel sought relief under Fed. R. Civ. P. 59(e) from the rulings of the district court after remand from the Fifth Circuit, principally arguing that Pliva impliedly overruled a line of Louisiana authority.  The Court affirmed the district court’s denial of relief, finding that the plaintiff’s argument stretched Erie too far and that its mandate had been properly interpreted and applied.  Another recent case in the “expanding cohort controlled by Pliva v. Mensing” is Morris v. Pliva, Inc., No. 12-30319 (Feb. 14, 2013).

ACE American Insurance v. Freeport Welding presents a thorough analysis of coverage, in the duty to defend context, under Texas law for a party claiming to be an “additional insured.”  No. 12-20002 (Oct. 19, 2012).  Before analyzing the allegations under Texas’s “eight corners” rule, the Court first reviewed whether the party was within the scope of the policy under general contract principles, and found that it was not.  The key to the Court’s analysis was the clarity of the policy documents about the dates for coverage.  Summary judgment was affirmed for the insurer as to the duty to defend, and the related indemnity issues were remanded for further consideration in light of the parties’ settlement.

In affirming the dismissal of a warranty claim under Louisiana law about the construction of a home, the Fifth Circuit reviewed basic requirements for an “Erie guess” about state law.  Gines v. D.R. Horton Inc., No. 12-30183 (Oct. 17, 2012).  The analysis requires that the federal court “attempt to predict state law, not to create or modify it,” and does not allow it “to fashion new theories of recovery.”  Id. at 4 (quoting American Waste & Pollution Control Co. v. Browning-Ferris, Inc., 949 F.2d 1384, 1386 (5th Cir. 1991)).  Intermediate state court decisions receive deference “unless [we are] convinced by other persuasive data that the higher court of the state would decide otherwise.”  Id. (quoting Cerda v. 2004-EQR1 LLC, 612 F.3d 781, 794 (5th Cir. 2010)).

In Cambridge Integrated Services Group v. Concentra Integrated Services, after reminding that a district court located in a state does not get deference in making an Erie guess about that state’s law, the Fifth Circuit examined the effect of a release obtained by an indemnitor for potential claims against its indemnitee.  No. 11-31032 (Sept. 26, 2012).  The Court found that the release precisely matched the terms of the indemnitor’s obligations to the indemnitee, and thus extinguished its duty to indemnify against such claims in ongoing litigation.  As to the duty to defend, however, the Court found summary judgment improper as issues about the claims “remained to be clarified through litigation.”  Id. at 10.

The plaintiff in Coe v. Chesapeake Exploration won a $20 million judgment for breach of a contract to buy rights in the Haynesville Shale formation, against the background of a a “plummet[]” in the price of natural gas.  No. 11-41003 (Sept. 12, 2012).  The Fifth Circuit affirmed.  After review of other analogous energy cases, the Court found that  the parties’ writing had a sufficient “nucleus of description” of the property to satisfy the Statute of Frauds, even though some review of public records was required to fully identify the property from that “nucleus.”  Id. at 11-12.  The Court also found that the parties had reached an enforceable agreement and that Plaintiff had tendered performance, finding an “adjustment clause” specifying a per-acre price particularly relevant on the tender issue.  Id. at 16, 17-18.

The Court vacated its earlier panel opinion in Sawyer v. du Pont, which rejected claims of fraudulent inducement by employees who the Court concluded were “at-will.”  The issue of whether at-will employees can bring such claims (which here, also involves the application of a notice provision in the employees’ CBA with their employer), has now been certified to the Texas Supreme Court.  No. 11-40454 (July 27, 2012).  The Texas Lawyer Blog has some interesting insight on the procedural history of this ruling.

“What follows is the tale of competing mineral leases on the Louisiana property of Lee and Patsy Stockman during the Haynesville Shale leasing frenzy.”  Petrohawk Properties v. Chesapeake Louisiana at 1, No. 11-30576 (as rev’d Aug. 2012).  The Fifth Circuit affirmed a finding that one of the dueling leases was procured by fraudulent misrepresentations as to the legal effect of a lease extension, rejecting several challenges to whether such a representation was actionable under Louisiana law, as well as an argument that the fraud had been “confirmed [ratified].”  The Court also rejected a counterclaim for tortious interference with contract, noting that Louisiana has a limited view of that tort and requires a “narrow, individualized duty” between plaintiff and tortfeasor.  Id. at 20-24 (citing 9 to 5 Fashions v. Spurney, 538 So.2d 228 (1989)).

While resolving an issue of Mississippi state property law, the Court provides a good example of an “Erie guess” involving canons of statutory interpretation in Marlow LLC v. BellSouth Telecommunications, No. 11-60394 (June 27, 2012).

In Greenwood 950 LLC v. Chesapeake Louisiana LP, the Court found an ambiguity in a Louisiana mineral lease, seeing two reasonable ways to harmonize clauses about obligations to “repair all surface damages” and “pay . . . all damages.”  No. 11-30436 (June 12, 2012) at 5-7 (emphasis added).  On the threshold Erie issue, the Court reminded: “[W]e look first and foremost ‘to the final decisions of Louisiana’s highest court’ rather than this Court’s prior applications of Louisiana law.”  Op. at 4 n.11 (quoting Holt v. State Farm, 627 F.3d 188, 191 (5th Cir. 2010)).

Sawyer v. DuPont presented employee claims of fraudulent inducement to leave jobs with DuPont for new positions at a wholly-owned subsidiary.  No. 11-40454 (April 20, 2012).   The Court began by reminding of the deference for intermediate appellate opinions in making an “Erie guess” about state law — here, the “at will” employment doctrine in Texas and its prohibition of fraudulent inducement claims about employment relationships.  Op. at  5.  Based on intermediate court authority, the Court concluded that a CBA that was terminable on notice did not change the employees’ at-will status, which thus barred their claims.  Op. at 9.  The Court also found that oral representations to another group of employees were not sufficiently definite to change their at-will status, citing Montgomery County Hospital District v. Brown, 965 SW.2d 501 (Tex. 1998).  Op. at 10.  Summary judgment for DuPont was affirmed.

LRK Architects v. State Farm presented the question whether a “breach of contract” exclusion should be analyzed under a “but for” or an “incidental relationship” test to determine whether an insurance policy covered a claim for copyright infringement.  No. 11-30121 (April 4, 2012).   After reminding that under Erie its job “is to attempt to predict state law, not to create or modify it,” the Court concluded that Louisiana would use a “but for” test.  Op. at 7-8.  Because the copyright claim “would exist even in the absence” of the parties’ contractual relationship, the exclusion did not apply and the insurer had a duty to cover and defend.  Op. at 9, 10.

The case of Gilbane Building Co. v. Admiral Insurance (No. 10-20817, Dec. 12, 2011) involved an insurer’s duty to defend and indemnify an injury claim under Texas law.  The Court first reviewed the basic rules in the Circuit for an “Erie guess” about state law.  Op. at 4-5 & 8 n.2.  The Court found that Texas’s “express negligence” rule was limited to contractual indemnity and did not bear on whether the plaintiff was an “additional insured.”  The Court then applied Texas’s “eight corners” rule and found no duty to defend, reminding that this rule “consider[s] only the facts alleged in the pleadings and . . . not . . . factual assumptions or inferences that were not pleaded.”  Id. at 13.   The Court declined to recognize an exception to the “eight corners” rule for claims involving a plaintiff’s unpleaded contributory negligence.  Id. at 14-17.  The Court concluded by affirming the district court’s summary judgment for the insured on the duty to indemnify, applying a broader standard based on “the facts proven in the underlying suit.”  Id. at 17-18 & n.4 (acknowledging that “this may seem like an unusual result,” but referring to a similar result in D.R. Horton v. Markel Int’l Ins., 300 S.W.3d 740, 744 (Tex. 2009)).