SXSW, LLC v. Federal Ins. Co., an insurance-coverage case arising out of the 2020 cancellation of South by Southwest because of COVID-19, presented some “evergreen” issues about LLCs and diversity jurisdiction that led to a remand for further development of the record. The Fifth Circuit noted “at least three potential jurisdictional
defects” on the record presented–

• “First, there is a potentially important difference between LLC membership and LLC ownership. State law governs LLC formation and organization. Several states permit LLC membership without ownership. … SXSW has not shown the relevant LLCs were formed in States that equate membership and ownership.”
• “Second, SXSW stated that Capshaw [an LLC owner] was a Virginia resident. But residency is not citizenship for purposes of § 1332.”
• “Finally, there is a timing issue. For diversity jurisdiction, we look to citizenship at the time the complaint was filed. The complaint makes no allegations about the citizenship of SXSW’s members. Federal’s December 14, 2021 exhibit contains some additional information, as does SXSW’s February 22, 2023 appellant brief.But we have no way of knowing whether those later documents reflect SXSW’s membership structure as of October 6, 2021.”

No. 22-50933 (Oct. 5, 2023) (citations omitted, emphasis added).

The Chitimacha Indian tribe owns a casino. The casino’s former CFO sued the tribe for allegedly violating his civil rights by reporting him to law enforcement. He sued in state court, the defendants removed, and the district judge both denied the CFO’s motion to remand and dismissed the case with prejudice, citing the tribe’s sovereign immunity.

The Fifth Circuit reversed, noting that the controlling statute (28 USC § 1447(c)) requires that a removed case “shall be remanded” if the court lacks subject matter jurisdiction. Because that language “admits of no exceptions,” it “requires remand even when the district court thinks it futile” (here, because the district court concluded that the same immunity problems would also bar state-court litigation against the tribe.

Further, the dismissal should not have been with prejudice–“it’s precisely because the jurisdiction-less court cannot reach the merits that it also cannot issue with-prejudice dismissals that would carry res judicata effect.” Montie Spivey v. Chitimacha Tribe of Louisiana, No. 22-30436 (Aug. 16, 2023).

A frustrated district court imposed sanctions in Ben E. Keith Co. v. Dining Alliance, Inc., citing the persistent failure of defendant Dining Alliance LLC to identify its members (and thus, allow resolution of the question whether the federal courts had diversity jurisdiction). The sanction included a dismissal with prejudice.

The defendant protested that the district court lacked jurisdiction to do so (an awkward position, given that the entire problem arose from the defendant’s difficulty with jurisdictional infomation). The Fifth Circuit disagreed:

“A case-dispositive sanction does not require the district court to assess a claim’s merits, weigh the evidence proffered in support of or against them claim, or decide an issue that bears on the claim’s legal substance. It is a purely procedural order.”

The Court observed that Rule 41(b) refers to “the merits,” but noted Supreme Court authority holding that “the phrase on the merits ‘has come to be applied to some judgments … that do not pass upon the substantive merits of a claim.” No. 22-10340 (Sept. 12, 2023).

Complex litigation about the settlement of a patent dispute led to two straightforward jurisdictional holdings in National Oilwell Varco, LP v Auto-Dril, Inc.:

1. Res judicata still applies. While “[p]arties may not waive the issue of subject matter jurisdiction,” it is also true that “[a] party that has had an opportunity to liitgate the question of subject-matter jurisdiction may not … reopen that question in a collateral attack upon an adverse judgment.” That principle disposed of an argument that, in the earlier case where the settlement was reached, the district court lacked jurisdiction because of problems with the underlying patent.
2.  “‘Interpretation’ means — interpretation. In that earlier case, the district court’s order implementing the settlement said that it retained jurisdiction “in the event of a dispute concerning that agreement, to interpret and enforce the agreement, if necessary.” That langugage did not extend to subject-matter jurisdiction over a fraudulent-inducement claim, as that “is a tort claim falling outside the scope of the district court’s retained jurisdiction.”

No. 21-40648 (May 12, 2023).

The en banc Fifth Circuit affirmed a nationwide injunction against President Biden’s federal-employee vaccine mandate, concluding that the relevant statute did allow federal jurisdiction over such issues. The breakdown of opinions in Feds for Medical Freedom v. Biden is as follows:

The Fifth Circuit concluded that an effort to collect a judgment in federal court failed for lack of a sufficient amount in controversy:

    … As pre-judgment interest has completely accrued during the prior case, this sum can be precisely calculated and does not vary depending on the other awards and when the plaintiff files suit. Because pre-judgment interest is an accrued component of the judgment sued upon at the time the claim to enforce the judgment arose, and because pre-judgment interest’s value does not depend on the passage of time after entry of the state court judgment, pre-judgment interest can be fairly said to constitute an ‘essential ingredient in the . . . principal claim.

As to the post-judgment interest accruing after entry of the Texas Judgment, however, we conclude that it may not be included in determining the amount in controversy in an action to enforce that Judgment. Excluding post-judgment interest from the calculation furthers § 1332(a)’s statutory purpose of preventing plaintiffs from delaying in filing suit until sufficient interest has accrued such that they can reach the jurisdictional amount.

Cleartrac LLC v. Lantrac Contractors, LLC, No. 20-30076 (Nov. 17, 2022).

Levy (a citizen of Louisiana) sued Dumesnil (also a citizen of Louisiana), along with Zurich American Insurance Company (not a citizen of Louisiana), and another entity that “claims to be citizen of Louisiana, and nothing in the record indicates otherwise.”

Complete diversity thus did not exist. A citizen of Louisiana was on both sides of the “v.”

Nevertheless, Zurich persisted. It removed to federal court. At the time it removed, it was the only defendant that had been served. Thus, argued Zurich, it had successfully completed a “snap” removal under Texas Brine Co. v. American Arbitration Association, Inc., 955 F.3d 482 (5th Cir. 2020).

The Fifth Circuit granted mandamus relief as to the trial court’s denial of the plaintiff’s motion to remand. Yes, Zurich had removed before the in-state defendant had been served, and thus satisfied that requirement for a successful snap removal. But Zurich had not satisfied the more basic requirement for a snap – or for that matter, any – removal based on diversity: complete diversity of citizenship.

Because “the existence of diversity is determined from the fact of citizenship of the parties named and not from the fact of service,” removal was improper. In re Levy, No. 22-30622 (5th Cir. 2022) (applying New York Life Ins. Co. v. Deshotel, 142 F.3d 873, 883 (5th Cir. 1998))

In Dune, Duke Leto Atreides cautions his son about the family’s move to Arrakis, telling him to watch for “a feint within a feint within a feint…seemingly without end.” In that spirit, Advanced Indicator & Mfg. v. Acadia Ins. Co. analyzed a complex removal issue, noting:

• “Ordinarily, diversity jurisdiction requires complete diversity—if any plaintiff is a citizen of the same State as any defendant, then diversity jurisdiction does not exist.”
• “‘However, if the plaintiff improperly joins a non-diverse defendant, then the court may disregard the citizenship of that defendant, dismiss the non-diverse defendant from the case, and exercise subject matter jurisdiction over the remaining diverse defendant.’ … A defendant may establish improper joinder in two ways: ‘(1) actual fraud in the pleading of jurisdictional facts, or (2) inability of the plaintiff to establish a cause of action against the non-diverse party in state court.’”
• But see: “[T]he voluntary-involuntary rule … dictates that ‘an action nonremovable when commenced may become removable thereafter only by the voluntary act of the plaintiff.’”

These principles applied to this situation:  Advanced Indicator (a Texas business) sued Acadia Insurance (diverse) and its Texas-based insurance agent (not-diverse). But after suit was filed, Acadia invoked a Texas statute “which provides that should an insurer accept responsibility for its agent after suit is filed, ‘the court shall dismiss the action against the agent with prejudice.'”

The Fifth Circuit, noting different district-court opinions about this statute and carefully reviewing its own precedents, concluded that “because [the agent] was improperly joined at the time of removal, Acadia’s removal was proper.” No. 21-20092 (Oct. 3, 2022) (emphasis added, citations removed).

The Fifth Circuit found that the federal courts had “related to” jurisdiction because of the relationship between litigation and a bankruptcy plan:

“In Zale, the dispute between NUFIC and Cigna risked disrupting Zale’s reorganization by threatening Zale’s recovery from and access to the Cigna policy funds. Here, NFC’s claims risked the same disruptions: GenMa had pledged to pay the Lessors lots of money and to keep specified cash reserves as part of a global settlement between several parties to GenOn’s restructuring. By threatening GenMa’s ability to fulfill those commitments, NFC’s claims pertained to ‘the implementation and execution’ of that crucial settlement, which was part of GenOn’s plan. Craig’s Stores, 266 F.3d at 390. So we have related-to jurisdiction. 28 U.S.C. § 1334(b).”

Natixis Funding Corp. v. Gen-On Mid-Atlantic, LLC, No. 21-20557 (July 29, 2022).

Louisiana Indep. Pharmacies Ass’n v. Express Scripts, Inc. “presents a novel issue concerning the amount in controversy requirement for diversity jurisdiction in cases brought by organizations on behalf of their members.” An association of Louisiana pharmacists sought a declaration about their appropriate Medicare reimbursement, and while the total value of all their claims exceeded $75,000, the Fifth Circuit concluded that the law required that “at least one pharmacy would have to allege that Express Scripts shortchanged it on the provider fee for over 750,000 Medicare Part D prescriptions.” Accordingly, it dismissed for lack of subject matter jurisdiction. No. 21-30331 (July 20, 2022).

Preble-Rich, a Haitian company, had a contract with a Haitian government agency to deliver fuel. A payment dispute developed and Preble-Rich started an arbitration in New York, pursuant to a broad clause in the parties’ contract (“In the event of a dispute between the [Parties] under this Contract, the dispute shall be submitted by either party to arbitration in New York. … The decision of the arbitrators shall be final, conclusive and binding on all Parties. Judgment upon such award may be entered in any court of competent jurisdiction.”). 

Preble-Rich obtained “a partial final award of security” from the arbitration panel requiring the posting of $23 million in security. Litigation to enforce that award led to Preble-Rish Haiti, S.A. v. Republic of Haiti, No. 22-20221, which held that the above clause was not an explicit waiver of immunity from attachment as required by the Foreign Sovereign Immunity Act, 28 U.S.C. § 1610(d). “The arbitration clause is relevant to whether BMPAD waived its sovereign immunity from suit generally, but a waiver of immunity from suit has ‘no bearing upon the question of immunity from prejudgment attachment.’” (citation omitted).

The Fifth Circuit reversed the denial of a motion to remand when:

1. The defendant’s claimed amount in controversy did not tie to the plaintiff’s specific claim. “Deutsche Bank failed to establish by a preponderance of the evidence that the amount in controversy was over $75,000. Deutsche Bank submitted evidence of the Property’s value [$427,662], which obviously exceeded the jurisdictional threshold. But Deutsche Bank failed to show that the automatic stay at issue here put the house’s value in controversy.”
2. The plaintiff stipulated it sought no more than $74,500. Citing a statement in the plaintiff’s pleading and an near-identical one in a later declaration, the Court said: “The best reading of these two statements is that Durbois is seeking–and will accept–no more than $74,500.” It continued: “Deutsche Bank claims these statements are insufficient. We don’t see why. Durbois used two forms of the word ‘stipulation’ and even bolded it once. A reasonable reader would understand that Durbois was limiting not only what he demanded but what he would accept from the suit. Perhaps Deutsche Bank thinks Durbois “should have used CAPITAL LETTERS …. [o]r maybe … should have added: ‘And [I] really mean it!!!’” But we don’t think such measures are necessary.” (The opinion did not address the potential role of semaphore signals in providing emphasis.)

Durbois v. Deutsche Bank, No. 20-11082 (June 16, 2022) (emphasis added, citation omitted)). The opinion thoroughly reviews the case law on these basic issues, and the “CAPITAL LETTERS” point may prove meme-worthy in the months ahead.

The PREP Act — a 2005 law allowing the HHS secretary to make a declaration that immunizes certain disaster responders from liability — was held not to completely preempt state-law negligence claims in Mitchell v. Advanced HCS. The Fifth Circuit noted:

• “First, the only cause of action [the PREP Act] creates is for willful misconduct. Assuming—without deciding—that the willful misconduct cause of action is completely preemptive, the question is whether Mitchell ‘could have brought’ the instant claims under that cause of action. He could not. The Act clearly states that its willful-misconduct cause of action creates ‘a standard for liability that is more stringent than a standard of negligence in any form or recklessness.'”
• “Second, the compensation fund that the Act creates is not completely preemptive under this court’s precedents. To begin, a ‘compensation fund is not a cause of action.’ It may be a civil-enforcement provision, but such provisions must nevertheless ‘create[] a cause of action.’ … Assuming arguendo that the compensation fund suffices as a cause of action, the Act nevertheless does not create ‘a specific jurisdictional grant to the federal courts for enforcement of the right.’ Instead, the Secretary oversees administration of the fund. Worse, the statute expressly withdraws jurisdiction from any court, state or federal, concerning ‘any action [taken] by the Secretary’ in doing so.”

No. 21-10477 (March 10, 2022) (citations omitted, emphasis added).

“Karen does indeed have Article III standing to bring this suit. She seeks money damages to address the death of her son, which was allegedly caused by Defendants’ conduct. So she has sufficiently alleged all three elements required to establish Article III standing at this stage. … The defect here, by contrast, is one of prudential standing. And prudential standing does not present a jurisdictional question, but ‘a merits question: who, according to the governing substantive law, is entitled to enforce the right?’ … And a violation of this rule is a failure of “prudential” standing. ‘[N]ot one
[of our precedents] holds that the inquiry is jurisdictional.’ It goes only to the validity of the cause of action. And ‘the absence of a valid … cause of action does not implicate subject-matter jurisdiction.'” Abraugh v. Altimus, No. 21-30205 (Feb. 14, 2022) (citations omitted) (emphasis added, citations omitted).

An unexpected cameo by William Butler Yeats . . .

. . . set the tone for an issue of ancillary jurisdiction, and a holding that when a case is dismissed per a settlement, the district court may keep jurisdiction to enforce that settlement — and no more:

“When the parties settle their dispute and seek dismissal, the court may choose to treat the parties’ settlement as part of its dismissal order, either by retaining jurisdiction to enforce the settlement or by directly integrating the settlement into the dismissal order. If the court does that, breaching the settlement would violate the court’s order, and ancillary jurisdiction to enforce the agreement would therefore exist.’ [” Kokkonen v. Guardian Life, 511 U.S. 375, 381 (1994)].

…

But the power to enforce a settlement is just that. It’s not a blank check. It doesn’t authorize the district court to reach new issues or issues that only relate to the settlement. The court may decide ‘whether and under what terms’ to enforce the settlement, but it may go no further without an
independent basis for jurisdiction. Wise v. Wilkie, 955 F.3d 430, 436 (5th Cir. 2020) (cleaned up)).”

Vikas WSP, Ltd. v. Economy Mud Prods. Co., No. 20-20309 (Jan. 10, 2022).

A Louisiana-based defendant removed a class action brought by an individual citizen of Louisiana, contending that a co-defendant’s “non-diverse Louisiana citizenship could be disregarded because the [statutory] claims against [the co-defendant] were ‘improperly and egregiously misjoined’ with the assignment-based bad faith claim against the removing defendant.”

This concept — called “fraudulent misjoinder” and reliant upon state-law procedural rules — is distinct from the traditional concept of “improper joinder” (a/k/a “fraudulent joinder”), which focuses on the viability of the claim against the nondiverse defendant.

The panel majority in Williams v. Homeland Ins. Co., written by Judge Haynes and joined by Judge Ho, soundly rejected removal based on fraudulent misjoinder, emphasizing the doctrine’s practical consequences: “Adopting the fraudulent misjoinder doctrine will dramatically expand federal jurisdiction, putting the federal district courts in this circuit in the position of resolving procedural matters that are more appropriately resolved in state court—all without a clear statutory hook.” No. 20-30196 (Nov. 30, 2021).

A concurrence by Judge Ho emphasized the importance of the statutory text in rejecting the doctrine; a dissent by Judge Jones focused on “the unusual circumstances here, which bespeak obvious joinder machinations undertaken to avoid federal court.” (both opinions are in the above link). The trio of opinions suggests that this case may receive serious consideration for en banc review.

• In reviewing a claim of improper joinder, a court may “conduct a Rule 12(b)(6)-type analysis” to determine if the claim against the in-state defendant “is plausible on its face.”
• Alternatively, if “discrete and undisputed facts . . . would preclude plaintiff’s recovery against the in-state defendant,” then “the district court may, in its discretion, pierce the pleadings and conduct a summary inquiry.”
• But, “unlike summary judgment, which can be granted when there is ‘lack of substantive evidence’ to support a plaintiff’s claim, improper joinder requires the defendant to ‘put forward evidence that would negate a possibility of liability on the part of ‘ the in-state defendant.

Accordingly, the Fifth Circuit reversed a finding of improper joinder in Hicks v. Martinrea Automotive Structures (USA), Inc., No. 20-60926 (Sept. 7, 2021), noting that the defendant’s argument about the tortious-interference element of malice “rel[ies] on evidence developed during merits discovery, which is far afield from Rule 12(b)(6) [and] the evidence they cite relates to the crucial question of Clark’s motive in terminating Hicks.” No. 20-60926 (Sept. 7, 2021).

The Fifth Circuit affirmed a jurisdiction-based collateral attack on a judgment in Bessie Jeanne Worthy Revocable Trust, reasoning that in the prior litigation, “the Estate’s Texas citizenship defeated diversity among the parties,” creating a “‘total want of jurisdiction’ to enter judgment[.]” No. 20-10492 (Aug. 10, 2021). In so doing, the Court distinguished Picco v. Global Marine Drilling Co., 900 F.2d 846 (5th Cir. 1990), as turning on a distinct question about the effect of the automatic bankruptcy stay. The able Rory Ryan from Baylor’s law school cautions against an overly broad reading of this new opinion.

Roe v. Wade famously named Dallas County DA Henry Wade (right) as its defendant, because he was the official charged with enforcement of the criminal statute at issue. The Texas Legislature has passed a new abortion law — a “heartbeat bill” — that features a novel enforcement procedure involving private litigants. The statute disclaims any public enforcement, relying on a private right of action against abortion providers that features an extremely broad definition of standing. The Texas Tribune correctly notes that the Fifth Circuit’s en banc opinion in Okpalobi v. Foster, 244 F.3d 501 (5th Cir. 2001), declined to extend Ex Parte Young (left) to a Louisiana statute that created a somewhat-analogous private cause of action against abortion providers. Assuming that the Governor signs the new Texas law, Okpalobi will likely be cited frequently in federal-court challenges to it. (I recently did a an interview with Fox 4’s “Good Day” about this new law.)

In an arbitrability dispute, the Fifth Circuit reviewed the basis for federal jurisdiction, noting: “[Vaden v. Discover Bank, 556 U.S. 49 (2009)] then went on to point out a wrinkle. ‘As for jurisdiction over controversies touching arbitration, however, the [Federal Arbitration] Act is something of an anomaly in the realm of federal legislation: It bestows no federal jurisdiction but rather requires for access to a federal forum an independent jurisdictional basis over the parties’ dispute.'” Applied to the case at hand: “Under that “look through” analysis, we hold that this underlying dispute presents a federal question. Polyflow’s arbitration demand included at least three federal statutory claims under the Lanham Act …. What matters is that a federal question—the Lanham Act claims—animated the underlying dispute, not whether Polyflow listed them in its original complaint.” Polyflow LLC v. Specialty RTP LLC, No. 20-20416 (March 30, 2021).

28 USC § 1631 says: “Whenever a civil action is filed in a court as defined in section 610 of this title . . . and that court finds that there is a want of jurisdiction, the court shall, if it is in the interest of justice, transfer such action or appeal to any other such court . . . in which the action or appeal could have been brought at the time it was filed . . ., and the action or appeal shall proceed as if it had been filed in . . . the court to which it is transferred on the date upon which it was actually filed in . . . the court from which it is transferred.” In Franco v. Mabe Trucking Co., the Fifth Circuit concluded that “want of jurisdiction” included both personal and subject-matter jurisdiction, observing:  “[I]t appears no circuit split currently exists on this issue, and while we cannot predict how those circuits who have left the question open will ultimately resolve the matter, we decline to now create a split by adopting an overly restrictive reading of § 1631. Because no amount of legislative history can defeat unambiguous statutory text, we join the weight of circuit authority and conclude that the use of the term ‘jurisdiction’ in § 1631 encompasses both subject-matter and personal jurisdiction.” No. 19-30316 (March 18, 2021) (footnote and citation omitted). The Court also found no Erie problem in section 1631’s definition of the relevant filing date for limitations purposes.

The Fifth Circuit concluded that a magistrate judge lacked jurisdiction to enter final judgment. The parties had conducted an entire wrongful-foreclosure case before a magistrate judge–but, early in the case, on the standard form, PNC expressly declined to allow trial by a magistrate judge. The Court concluded that consent could not be implied in the face of this express refusal. PNC Bank v. Ruiz, No. 20-50255 (March 2, 2021).

A Louisiana statute lets private citizens sue to enforce certain state environmental laws, provided that “any injunction the citizen might obtain must be entered in favor of the Commissioner of Louisiana’s Office of Conservation.” Straightforward substantively, this statute raises federal-jurisdiction questions “that would make for a tough Federal Courts exam.” Grace Ranch LLC v. BP Am. Prod. Co., No. 20-30224 (Feb. 26, 2021). Specifically:

• Is Louisiana a party to the suit? If so, diversity jurisdiction does not apply. The Fifth Circuit concluded that it was not a party, notwithstanding the potential for relief issued in its name, “because [Louisiana] has not authorized landowners to sue in its name” in the relevant statute. Similarly, Louisiana is not a real party in interest because the potential for an injunction in its favor is a “contingency,” which would make it “highly inefficient to remand the case to state court only at the end stage of the lawsuit when the injunction might issue.”
• Does the 5th Circuit have jurisdiction? The matter was removed to federal court and the district court decided to abstain. Reviewing the not-always-clear history of 28 USC § 1447(c) and the cases applying it, the Court concluded that “a discretionary remand such as one on abstention grounds does not involve a removal ‘defect’ within the meaning of section 1447(c).”
• Was Burford abstention appropriate? Grace Ranch involved the remediation of environmental damage caused by a now-outlawed way of storing waste from oil and gas production. The Court reversed the district court’s decision to abstain, agreeing that the case presented “the potential need to decide an unsettled question of state law, in an area of general importance to the State”–but also finding that the case does not involve “an integrated state regulatory scheme in which a federal court’s tapping on one block in the Jenga tower might cause the whole thing to crumble.”

An error in pleading jurisdiction led to an inconclusive end in Accordant Communications v. Sayer Construction, No. 20-50169 (Dec. 4, 2020):

1. Accordant won a $1.4 million arbitration award against Sayer.
2. Accordant sued to confirm the award in federal court.
3. “As to the citizenship of the parties, Accordant alleged that it ‘is a limited liability company organized under the laws of Georgia with its principal place of business in Seminole County, Florida” and that Sayers ‘is a limited liability company organized under the laws of Texas with its principal place of business in Travis County, Texas.'” 
4. Sayer declined to answer postjudgment discovery, and on appeal argued that the district court lacked subject-matter jurisdiction (as the above allegations are based on the standards for a corporation rather than an LLC).
5. Despite this ‘clearly deficient’ and ‘basic’ pleading problem, the Fifth Circuit did not dismiss the case: “Considering the evidence in the record on appeal … we find that ‘jurisdiction is not clear from the record, but there is some reason to believe that jurisdiction exists.’ Therefore, we exercise our discretion under [28 USC] § 1653 and ‘remand the case to the district court for amendment of the allegations and for the record to be supplemented,’ if necessary.” (citation omitted).

The dispute in Smith v. Toyota Motor Corp., No 19-60938 (Oct. 20, 2020), was whether there was diversity jurisdiction over two business entities with diverse business activities, one of which was named . . . Diversity Vuteq LLC. Despite the abundant diversity in the case, the Fifth Circuit reminded that there is not a diversity of opinion about how to properly plead citizenship:

• “To adequately allege the citizenship of Toyota, a corporation, Smith needed to ‘set out the principal place of business of the corporation as well as the stat e of its incorporation.'” (citations omitted);
• “To adequately allege the citizenship of Diversity, a limited liability corporation, Smith needed to ‘specifically allege the citizenship of every member of every LLC or partnership involved in a litigation.'”

In the early 1900s, railroad shareholders sued Minnesota’s Attorney General, the spectacularly-mustachioed Edward Young (right), to enjoin the enforcement of price limitations; the Supreme Court found that their request for injunctive relief did not violate the Eleventh Amendment. Ex parte Young, 209 U.S. 123 (1908). It is easier to state the rule of Young than apply it, however, especially in often-complex jurisdictional situations.

Green Valley Special Utility District v. City of Schertz presented an arcane regulatory dispute about “two orders of the Texas Public Utility Commission decertifying territory from the certificate of convenience and necessity issued to [Green Valley] for sewer (wastewater) service.” (cleaned up). Resolution of that dispute required en banc review, and produced a lead opinion with a two-page summary of the Court’s holdings, along with four concurrences on Young and the statutory-interpretation issue in the case. No. 18-51092 (Aug. 7, 2020).

Plaintiff, suing in his capacity as “God of the Earth Realm” and “Trust Protector of the American Indian Tribe of משֶׁ ה Moses,” complained of, inter alia, conspiracy between the United States and Louisiana to monopolize “intergalactic foreign trade” and sought a “declaration of rights guaranteed . . . by the 1795 Spanish Treaty with the Catholic Majesty of Spain.” Perhaps a Martian or Venusian court will have jurisdiction over his claim, but the Western District of Louisiana does not, as the Fifth Circuit affirmed its finding that it lacked jurisdiction “because the claim[s] asserted [are] so attenuated and unsubstantial as to be absolutely devoid of merit.” Atakapa Indian de Creole Nation v. Louisiana, No. 19-30032 (Dec. 10, 2019).

In Williams v. TH Healthcare Ltd., No. 19-20134 (Nov. 14, 2019, unpubl.), the Fifth Circuit made two broadly-applicable points about the deadline running from receipt of an EEOC right-to-sue letter:

• Extra days for the weekend. Williams received a right-to-sue letter for her Title VII and ADA claims on July 29, 2018. The ninety-day deadline for filing suit fell on Saturday, October 27, 2018. Williams thus had until the following Monday, October 29, 2018, to file suit. Williams filed suit that day. Her lawsuit was therefore timely and the district court erred in dismissing it.
• Substantive, but not jurisdictional. “he district court concluded that it “d[id] not have jurisdiction over Dovie Williams’s claims because she did not sue within ninety days of receiving the [right-to-sue] letter.” The ninety-day filing requirement, however, “is not a jurisdictional prerequisite, but more akin to a statute of limitations.” Harris v. Boyd Tunica, Inc., 628 F.3d 237, 239 (5th Cir. 2010). The court therefore treats the district court’s order as a dismissal of Williams’s claims pursuant to Rule 12(b)(6) for failing to comply with the ninety-day filing requirement.

Double Eagle Energy Services filed for Chapter 11 bankruptcy protection and then sued two defendants for breach of contract in federal district court. Double Eagle then assigned that claim to one of its creditors; the defendants argued that this assignment destroyed federal subject matter jurisdiction. The Fifth Circuit disagreed, relying upon the “time-of-filing” rule to find that the “related to bankruptcy” jurisdiction existing when the case was filed continued to exist after the assignment. The separate question–whether the district court should nevertheless its exercise discretion to dismiss the case–was remanded, as the Court’s “ordinary practice for discretionary decisions is remanding to ‘allow the district court to exercise its discretion in the first instance.'” Double Eagle Energy Services v. Markwest Utica EMG, No. 19-30207 (Aug. 26, 2019).

Moss and Keating sued Princip, Martin, and the partnership to which the four of them belonged. The defendants removed the case, but after an adverse verdict, raised a problem with subject matter jurisdiction: Moss and Keating were diverse from Princip and Martin – but the partnership, as a citizen of every place the partners lived, was not. The district court dismissed the partnership from the case, finding it necessary but dispensable, and the Fifth Circuit affirmed:

“Although the plaintiffs raised claims for damages derivative of the partnership’s rights, the partnership’s presence in the suit was not necessary to protect the partnership or any of the parties from prejudice. The partnership was a party throughout the litigation, but its role was purely passive, reflecting the reality that its interests did not diverge from the interests represented by the four individual partners and that its  presence played no distinct role in the outcome of the suit against the individuals.”

Moss v. Princip, No. 16-10605 (Jan. 16, 2019).

A pro se complaint in a mortgage servicing dispute stated a federal claim, and thus allowed removal, when “[I]n the ‘Facts’ section . . . [Plaintiffs’] wrote: ’17. In April, 2009 BANK OF AMERICA CORPORATION claimed to be the new mortgage servicer and payments were to be made to them. BANK OF AMERICA CORPORATION was not an “original party” to the “original negotiable instrument” which the “borrowers” negotiated. BANK OF AMERICA CORPORATION was a 3rd party debt collector, pretending to be the Lender. BANK OF AMERICA CORPORATION failed to adhere to the Fair Debt Collection Practice Act, as all 3rd party debt collectors are required to do.'”  The Fifth Circuit observed: “[P]laintiffs may state a claim for relief by pleading facts that support the claim. The Smiths did just that—and cited the legal theory underlying their claim. The Smiths’ explicit reference to the ‘Fair Debt Collection Practice[s] Act’ (and its position in the U.S. Code), coupled with a description of conduct that could subject the Defendants to liability under the Act, solidifies our conclusion” about federal question jurisdiction. Smith v. Barrett Daffin Frappier Turner & Engel LLP, No. 16-51010  (June 12, 2018, unpublished).

In 16 Front Street v. Mississippi Silicon, the Fifth Circuit addressed a fundamental issue about federal question subject matter jurisdiction, with surprisingly little guidance in the current case law. A plaintiff sued in federal court under the Clean Air Act; in response to the trial judge’s concerns  about subject matter jurisdiction, the plaintiff amended to add a new defendant and invoke another provision of that Act. The Fifth Circuit concluded that while this amendment could be problematic in a removed case under the “time-of-filing” rule, it did not present that problem when the case was initially filed in federal court and did not implicate the removal statute. The Court’s analysis involves two important Supreme Court – Mollan v. Torrance, 22 U.S. 537 (1824), in which Chief Justice Marshall first stated the “time-of-filing” rule (albeit, in a diversity case), and Caterpillar, Inc. v. Lewis, 519 U.S. 61 (19960, a recent treatment of a “cure” of a problem with subject matter jurisdiction. No. 16-60050 (March 30, 2018).

Gotech, a Chinese company, “knowingly chose to ignore” a lawsuit filed against it by Nagravision in the Southern District of Texas, “and even the ensuing $100 million-plus default judgment” in favor of Nagravasion. After Nagravision began enforcement proceedings in Hong Kong, Gotech then sought relief from the judgment under Fed. R. Civ. P. 60(b)(4). The Fifth Circuit rejected challenges based on standing, federal question jurisdiction, and service of process, finding fundamental problems with each. As for personal jurisdiction based on Fed. R. Civ. P. 4(k)(2), which applies “where the defendant has contacts with the United States as a whole sufficient to satisfy due process concerns and the defendnat is not subject to jurisdiction in any particular state,” the Court acknowledged some disagreement about who has the burden of proof, especially in the Rule 60(b)(4) context, but found that Nagravision had met its initial burden and Gotech had not overcome it. Nagravision, S.A. v. GoTech bInt’l Tech. Ltd., No. 16-20817 (Feb. 7, 2018).

Griffith sued his former employer under state law, referring in the pleading to a charge he filed with the EEOC and its issuance of a right-to-sue notice. Alcon removed based on federal question jurisdiction; the district court accepted the removal and granted summary judgment to the employer. The Fifth Circuit reversed: “Although Griffith indeed referenced his dealings with the EEOC in his complaint, he did not mention Title VII or any similar federal statute. As such, the district court lacked subject-matter jurisdiciton and was not entitled to render judgment in Alcon’s favor.” Griffith v. Alcon Research, No. 17-20290 (Dec. 6, 2017, unpublished).

PlainsCapital asserted federal jurisdiction over a collection action on two large notes, contending that it would have to establish holder in due course status under federal law to recover (the notes came to PlainsCapital via assignment from the FDIC after a bank failure). The Fifth Circuit disagreed, reversing the district court’s summary judgment for the bank. As to the well-pleaded complaint rule, the Court observed: “PlainsCapital conflates the terms ‘holder’ and ‘holder in due course.’ A ‘holder is ‘the person in possession of a negotiable instrument that is payable either to bearer or to an identified person that is the person in possession. By contrast, a party’s status as a holder ‘in due course’ merely ‘determines the applicable defenses which a defendant . . . ‘ may assert.” PlainsCapital Bank v. Rogers, No. 16-41654 (Oct. 25, 2017).

In a 2-1 decision, the Fifth Circuit found that Ezekiel Elliott failed to exhaust remedies within the NFL’s dispute-resolution process before filing suit, meaning that the federal courts lacked subject matter jurisdiction over his complaints. A dissent found a sufficient question about the adequacy of the process to justify the exercise of jurisdiction under the relevant authorities. NFLPA v. NFL, No. 17-40936 (Oct. 12, 2017). While of enormous interest to Cowboys fans, so far as arbitration goes, the opinion is centered on issues unique to collective bargaining agreements.

At oral argument, the appellant in a technical dispute about the appointment of arbitrators “argued for the first time that ‘if maritime jurisdiction applies, then . . . there is appellate jurisdiction over the appeal.'” The Fifth Circuit observed: “We do not usually allow parties to raise a new argument for the first time at oral argument. . . . Of course, an argument that this court lacks jurisdiction cannot be waived, but here the argument is that the court has jurisdiction, a matter the appellant is required to prove.” Bordelon Marine, LLC v. Bibby Subsea ROV, LLC, No. 16-30847 (April 14, 2017, unpublished).

“In 2004, an Iraqi insurgent group kidnapped and murdered twelve Nepali men as they traveled through Iraq to a United States military base to work for . . . a Jordanian corporation that had a subcontract with . . . Kellogg Brown Root.” Adhikari v. Kellogg Brown & Root, Inc., No. 15-20225 (Jan. 3, 2017). The Fifth Circuit affirmed the dismissal of tort claims against KBR brought by the representatives of the deceased, including a claim based on the Alien Tort Statute.

The ATS is a cryptic part of the Judiciary Act of 1798, stating: “The district courts shall have original jurisdiction of any civil action by an alien for a tort only, committed in violation of the law of nations or a treaty of the United States.” In 2013, the Supreme Court clarified and limited the extraterritorial scope of the statute in Kiobel v. Royal Dutch Petroleum Co., 133 S. Ct. 1658. Applying Kiobel, the panel majority found no ATS claim stated, despite the strong policy against the human trafficking that was alleged to be involved in this case. A dissent read Kiobel to establish a “touch and concern” test as to contact with the United States, and would have found a cognizable ATS claim pleaded on these facts.

The Romans sued Ford Motor Co. and a Houston AutoNation dealer. The dealer moved to compel arbitration; the district court denied the motion; and the dealer appealed. Unfortunately, the Fifth Circuit was “not satisfied, based on the record before it, that [the dealer] does not share citizenship with the Romans.” Reminding that the Federal Arbitration Act is not an independent basis for federal jurisdiction, the Court vacated the district court’s order and remanded for determination of subject matter jurisdiction — with instructions to dismiss if diversity was not established. Roman v. AutoNation Ford Gulf Freeway, No. 16-20047 (Oct. 13, 2016, unpublished).

The plaintiff in GlobeRanger Corp. v. Software AG won a $15 million judgment for misappropriation of trade secrets. The Fifth Circuit affirmed, holding:

1. After a thorough review of Circuit precedent – not all entirely consistent – “that GlobeRanger’s trade secret misappropriation claim requires establishing an additional element than what is required to make out a copyright violation: that the protected information was taken via improper means or breach of a confidential relationship. Because the state tort provides substantially different protection than copyright law, it is not preempted.”
2. Recognizing the “jurisdictional Catch-22” created by that ruling, and referring back to an earlier panel opinion from the time of the case’s removal: “As the complaint [then] alleged only conversion of intangible property for which there is equivalency between the rights protected under that state tort and federal copyright law, complete preemption converted the conversion claim into one brought under the Copyright Act that supported federal question jurisdiction at the time of removal and supplemental jurisdiction after it was dismissed.”
3. Found that GlobeRanger had offered sufficient evidence of: (1) what specifically constituted its claimed trade secrets; (2) whether Software AG acquired trade secrets improperly or with notice of impropriety, particularly in light of federal contracting regulations; and (3) whether Software AG “used” any trade secret.

The opinion concluded with an unfortunately apt observation about the business litigation that is the focus of this blog: “This case demonstrates the unfortunate complexity of much of modern civil litigation. A trial involving a single cause of action—misappropriation of trade secrets (plus a derivate conspiracy claim)—has resulted in an appeal raising numerous issues that span the lifecycle of the lawsuit: jurisdiction; preemption; federal contracting regulations; expert testimony on damages; and jury instructions.

The plaintiff in Watson v. City of Allen sued, in Texas state court, several Texas cities about the operation of their “red light camera” programs.No. 15-10732 (May 5, 2016). The cities removed based on his RICO claim and CAFA. Plaintiff then dropped the RICO claim and sought remand based on CAFA’s “local controversy” and “home state” exceptions. The district court kept the case, finding it untimely as to CAFA, finding supplemental jurisdiction over the remaining state-law claims, and dismissing many claims for lack of standing. The Fifth Circuit reversed, concluding:

1. The 30-day deadline in 28 U.S.C. § 1447(c) does not apply to CAFA mandatory abstention provisions, since it “does not deprive federal courts of subject matter jurisdiction, but rather, acts as a limitation upon the exercise of jurisdiction granted by CAFA.”
2. The CAFA motion was filed within a reasonable time of removal, when “[a]ll indications are that [Plaintiff] acted diligently to gather evidence,” and because “fifty-two days is simply not a very long time.”
3. The “home state” exception applied because “[t]his suit’s primary thrust is an attempt to declare unconstitutional red light camera scheme,” meaning that the State of Texas and its municipalities were the “primary defendants,” and not the companies hired to carry out the program.
4. The district court should have declined to exercise supplemental jurisdiction, since “Texas courts have a strong interest” in the remaining issues and the plaintiff’s “motion to amend . . . to delete the federal claims is not a particularly egregious form of forum manipulation, if it is manipulation at all.”

Appellants, investors who lost money in their dealings with Allen Stanford, began a FINRA arbitration against Pershing LLC, a clearing broker. The panel rejected appellants’ $80 million claim, awarding only $10,000 in arbitration-related expenses. Pershing sought confirmation in federal court and encountered a split in authority about the amount-in-controversy requirement — the “demand” approach, which would allow jurisdiction, and the “award” approach, which would not. The Fifth Circuit sided with the “demand” approach, finding that it “recognizes the true scope of the controversy between the parties,” and was consistent with the corresponding test for claims filed in district court. A lengthy concurrence suggested that a “general approach” was not needed, given the different fact patterns that can give rise to this kind of dispute about the amount in controversy. Pershing LLC v. Kiebach, No. 15-30396 (April 6, 2016).

The attorney general of Mississippi served Google with a broad administrative subpoena about Google’s efforts to reduce copyright infringement, drug trafficking, and other undesirable uses of its search technology. Google responded with a federal lawsuit seeking an injunction against the subpoena and further proceedings about it. The Fifth Circuit found federal jurisdiction, as “Google’s claims seeking to enjoin a state officer’s alleged violations of federal law invoke federal-question jurisdiction,” and found no reason to abstain under Younger v. Harris. But the Court went on to find that the action was not yet ripe: “there is no current consequence for resisting the subpoena and the same challenges raised in the federal suit could be litigated in state court.”  Google, Inc. v. Hood, No. 15-60205 (April 8, 2016).  Accordingly, it vacated the injunction granted by the trial court, and remanded with instructions to dismiss.

Alleging that a toe joint implant did not work properly, Flagg sued “Manufacturing Defendants” (who built the implant) and “Medical Defendants” (who surgically installed it in Flagg’s foot.)  The Manufacturing Defendants were diverse from Flagg,  a Louisiana citizen, while the Medical Defendants were not.

Affirming the district court while reversing the panel, an 11-4 en banc opinion holds “the plaintiff had improperly joined the non-diverse defendants because [he] has not exhausted his claims against those parties as required by statute.”  That Louisiana statute requires review by a “medical review panel” before suit is filed against a health care provider; the Fifth Circuit concluded that pursuant to it, “there is no doubt that the state court would have been required to dismiss the Medical Defendants from the case,” as no such review had occurred at the time of removal.  A vigorous dissent raised questions about the Court’s standard for analyzing claims of improper joinder, as well as whether this kind of state statute (“a non-adjudicative, non-comprehensive, waivable process since concluded in this case”) was a proper foundation for an improper joinder claim.  Flagg v. Stryker Corp., No. 14-31169 (March 24, 2016) (en banc).

Continuing to rhyme with “-ata,” the Fifth Circuit rejected an attempt to create appellate jurisdiction in Luvata Grenada LLC v. Danfoss Industries S.A. de C.V., No. 15-60477 (Feb. 11, 2016).  Luvata Grenada sued Danfoss US and Danfoss Mexico.  Danfoss Mexico won a motion to dismiss for lack of personal jurisdiction, after which Luvata and Danfoss US stipulated to a voluntary dismissal without prejudice.  “However, it is well settled in this circuit that parties cannot manufacture appellate jurisdiction by agreeing to dismiss remaing claims without prejudice. . . . The parties did not obtain a Rule 54(b) certification from the district court, and they cannot achieve the same result by ‘self help.'”

Boaz Legacy LP sued Roberts about ownership of land.  Roberts argued that the land was located to the north of “the vegetation line along the south bank of the Red River,” which places the land in Oklahoma under the terms of the Red River Boundary Compact.  Accordingly, Texas state and federal courts lacked subject matter jurisdiction under the “local action doctrine.”  Boaz argued that the Compact did not apply to a boundary dispute among private landowners, but the Fifth Circuit disagreed: “[T]his argument conflates the underlying dispute with the present determination, which is purely jurisdictional.”  Boaz Legacy LP v. Roberts, No. 15-10439 (Jan. 11, 2016, unpublished).

Collins challenged bankruptcy court jurisdiction over “illusory indemnity and contribution claims” that he alleged had no conceivable effect on the bankruptcy estate due to their lack of merit.  The Fifth Circuit rejected his argument: “Both the Supreme Court and this court have gravitated away from conflating jurisdiction and merits, and Collins’s proposed standard results in exactly that conflation.”  The Court also noted that the claims, based on a principal’s alleged commitment to indemnify its agent, were not “wholly insubstantial and frivolous” on their merits.  Collins v. Sidharthan, No. 14-41226 (Dec. 15, 2015).

In one of its infrequent but steady appearances in the Fifth Circuit, the Rooker/Feldman doctrine arose in a federal court lawsuit alleging misconduct in state court about the confirmation and enforcement of a large arbitration award.  Building on Truong v. Bank of America, 717 F.3d 377 (5th Cir. 2013), the Court affirmed the dismissal of claims about collection efforts, finding that “the [state court judgment itself was the source of these injuies.”  As to civil rights claims about the proceedings leading up to confirmation, however, “the timing of the injury was before the state court entered judgment.  And unlike . . . the conversion claim described above, none of the alleged conspirators was acting under the authority of the turnover orders in seeking to obtain a remedy.”  Land & Bay Gauging, LLC v. Shor, No. 14-40259 (Aug. 21, 2015, unpublished).

A medical group sued a payor for underpayments.  The payor removed under ERISA complete preemption, contending that “about 98% of [Plaintiff’s] claims are claims for ERISA plan benefits.”  The district court kept the case and entered judgment for the payor; the Fifth Circuit reversed: “a claim that implicates the rate of payment as set out in the Provider Agreement, rather than the right to payment under the terms of the benefit plan, does not run afoul of [Aetna Health, Inc. v. Davila, 542 U.S. 200 (2004)] and is not preempted by ERISA.”  Kelsey-Seybold Medical Group v. Great-West Healthcare of Texas, No. 14-20506 (Aug. 10, 2015, unpublished).

1.  Improper joinder when the acts of the nondiverse employee that allegedly tortiously interfered with the plaintiff’s contract were ratified by the employer.  Denson v. Beavex, Inc., No. 14-20534 (May 22, 2015, unpublished).

2.  No appellate jurisdiction when the district court administratively closed the case in favor of arbitration.  “[A]n order by the district court administratively closing a case is tantamount to a stay, and bars appellate review.”  Walker v. TA Operating, LLC, No. 14-41046 (May 22, 2015, unpublished).

3. “[A] district court cannot permissively abstain from exercising jurisdiction in proceedings related to Chapter 15 [cross-border bankruptcy] cases.”   Firefighters’ Retirement System v. Citco Group Ltd., No. 14-30857 (revised August 6, 2015).

4.  A lawyer who intervenes in a client’s case to protect a fee interest must independently establish diversity of citizenship and the requisite amount in controversy.  Samuels v. Twin City, No. 14-31203 (May 18, 2015, unpublished).