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

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

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

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

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

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

Ayala was killed by a propane heater explosion; his estate sued the manufacturer for damages.  Ayala v. Enerco Group, 13-30532 (May 28, 2014, unpublished).  Ayala’s wife testified that he was generally careful with the heater, although she did not observe him at the time of the accident.  An expert identified several possible defects with the heater, but: “[There was no evidence to suggest the Ayalas’ heater itself was defective. He did not perform a structural analysis of the Mr. Heater or destructive testing of an example unit. His conclusions supporting that there could be a leak were based solely on the nature of the item itself. McPhate also admitted that he could not rule out other potential sources of a propane leak other than a defect in the heater, such as a faulty propane bottle or a failure by Mr. Ayala to secure the valve properly on the heater.”  Accordingly, the estate’s claims failed.  A sanctions award against the plaintiff’s counsel under 28 U.S.C. § 1927 for filing a second lawsuit was reversed because that filing did not show a “persistent” pattern of vexatious litigation as required by that statute.

Two cases warn against skipping foundational steps (or “not showing your work”):

1.  The dismissal of Garcia v. Jenkins Babb, LLP was affirmed for failure to allege facts sufficient under Iqbal to show that an FDCPA claim arose from a consumer transaction; more specifically, “giv[ing] no indication what item was purchased or what service was paid for, much less explain how the item or service was intended for personal or family use.”  No. 13-10886 (May 29, 2014, unpublished).  (The case returned, and dismissal was again affirmed, in Israel v. Primary Financial Services, No. 14-10012 (May 28, 2015, unpublished)).

2.  An award of sanctions was reversed and remanded in Arnold v. Fannie Mae when “the
district court abused its discretion by failing to adequately articulate the authority, the basis, and the reasoning for the sanctions” under Rule 11, inherent power, or 28 U.S.C. § 1927.

In Lawyers Title Ins. Corp. v. Doubletree Partners, L.P., the title insurance company mistakenly left key provisions out of a policy due to a software problem, while the insured’s surveyor erroneously measured the extent of a “flowage easement” held on the development property by Lake Lewisville.  No. 12-40692 (Jan. 14, 2014).  The Fifth Circuit held: (1) reformation was justified, because the insured had reason to know of the title company’s unilateral mistake; (2) both sides had reasonable interpretations of (a) the scope of coverage for survey error, (b) the ‘flowage easement exception,’ (c) and the ‘created, suffered, assumed, or agreed to’ exception, so coverage appeared likely. Summary judgment for the insurer was reversed and the case remanded for further proceedings.  A sanctions award against the insured’s counsel under 28 U.S.C. § 1927 in connection with extracontractual claims was reversed for lack of bad faith by the attorneys.

Twenty-four plaintiffs sued Citgo for alleged violations of the overtime pay laws.  The court’s second discovery order warned against destruction of personal emails by the plaintiff.  Then, after two evidentiary hearings, the court dismissed the claims of seventeen plaintiffs for violating that order (but not of an eighteenth), entering specific factual findings for each plaintiff.  Four more were then dismissed after another hearing and sets of findings.  Moore v. Citgo Refining & Chemicals Co., Nos. 12-41175 and 12-41292 (Nov. 12, 2013, unpublished).  The Fifth Circuit found no abuse of discretion, noting the clarity of the discovery order, the hearing of live testimony, and prejudice to Citgo (loss of the ability to show that the plaintiffs were sending personal emails “on the clock,” which had proven relevant in one of the cases that was not dismissed).  The Court also reversed and rendered for $50,000 in costs, finding that the district court’s reduction of taxable costs to $5,000 because of Citgo’s size and resources was not grounded in the applicable rule.

A preliminary injunction forbade the Department of Health and Human Services from “acting in accordance with the Notice of Termination . . . relative to [a nursing facility’s] Medicare and Medicaid Provider Agreement”.  After the injunction expired, HHS proceeded with termination.  Oaks of Mid City Resident Council v. Sebelius, No. 12-30860 (July 17, 2013).  The Fifth Circuit reversed a contempt finding against HHS, agreeing with the government’s position that the injunction was designed to pause the termination process but not forbid a later termination unrelated to the specified Notice.  The Court’s approach echoes that of another recent case vacating a contempt order against the federal government, Hornbeck Offshore Services v. Salazar, No. 11-30936 (Nov. 27, 2012, revised April 9, 2013).

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.

The Court released a revised opinion in Hornbeck Offshore Services LLC v. Salazar, which reversed a finding of civil contempt against the Department of Interior about the deepwater drilling moratorium after the Deepwater Horizon incident.  No. 11-30936 (Nov. 27, 2012, revised April 9, 2013).  The new opinion is streamlined to answer concerns of the original dissent; a revised dissent acknowledges those revisions but still expresses concern that “the majority opinion’s approach may give incentive for litigants creatively to circumvent district court orders.”

In affirming summary judgment for the defense in an employment case, the Fifth Circuit reminded: “Although we appreciate and encourage vigorous representation by counsel, we will not tolerate representation that is ‘zealous’ to the point of false or misleading statements.  A footnote to that reminder noted: “‘zealous’ is derived from ‘Zealots,’ the sect that, when besieged by the Roman Legions at Masada, took the extreme action of slaying their own families and then committing suicide rather than surrendering or fighting a losing battle.”  Branch v. Cemex, Inc., No. 12-20472 (March 26, 2013, unpublished).

The appellants in Texas Medical Providers v. Lakey sought $60,000 in attorneys fees after successful defense of civil rights claims about new abortion laws.  No. 12-50291 (Feb. 26, 2013, unpublished).  The Fifth Circuit rejected a request based on 42 U.S.C. § 1988, noting: “Lack of merit does not equate to frivolity . . . .”  The Court also rejected a request based on inherent power, which relied upon statements by plaintiff’s counsel that they dismissed several challenges because the initial Fifth Circuit panel had declared all future appeals in the case would be heard by the same panel.  It stated: “The short answer to this charge is that if courts treated as a willful abuse of process every self-serving statement of counsel at the expense of a judge or judges, there would be no end to sanctions motions.”

The judgment debtors in Seven Arts Pictures v. Jonesfilm were found in civil contempt for failure to answer postjudgment discovery and other issues about enforcement of a judgment.  No. 11-31124 (Feb. 18, 2013, unpublished).  The Fifth Circuit affirmed, finding that the district court had general personal jurisdiction over the debtors, that the debtors had waived arguments about the orders by not timely and properly objecting below, and that the district court did not abuse its discretion in awarding $21 thousand in attorneys fees.  While the holdings on jurisdiction, waiver, and attorneys fees draw heavily from the specific facts of the case, the legal framework used is of broad applicability.  Footnote 7 acknowledges the unusual procedural posture of the jurisdiction issue, which had not been raised until after the notice of appeal was filed.

Several aspects of insurance coverage for hurricane damage to a shopping center were addressed in GBP Partners v. Maryland Casualty, No. 11-20912 (Jan. 4, 2013, unpublished).  The Fifth Circuit concluded that the insured: (1) did not establish a “complete interruption” of business activity to trigger coverage for lost income, (2) raised a fact issue as to whether rent abatements were necessary to prevent possible closure of the entire center, (3) did not distinguish repair fees necessary to avoid suspension of operations from other management fees, (4) the insured was responsible for various delays in replacing a damaged roof, and (5) did not allocate window damage between covered and non-covered causes.   The Court also found that a summary judgment affiant did not create an impermissible conflict with earlier deposition testimony that described the effect of the storm on business operations.  Id. at 6-7 & n.7.

“The central issue on appeal is whether a court can establish a receivership to control a vexatious litigant.”  Applying an abuse of discretion standard, the Fifth Circuit answered “no” on the facts of Netsphere v. Baron, No. 10-11202 (Dec. 18, 2012).  The Court reviewed and rejected several rationales for imposing a receivership on a portfolio of disputed domain names, including preservation of jurisdiction, bringing closure to long-running litigation, payment of a series of attorneys and controlling vexatious litigation.  It then addressed how to handle the fees related to the vacated receivership.  The opinion thoroughly reviews prior Circuit precedent about the reasons for and proper boundaries of a receivership. A Dallas Observer article adds some backstory about the dispute.

Servicios Azucareros v. John Deere arose from a suit by a Venezuelan company against a Louisiana-based affiliate of John Deere about the termination of a distributorship agreement in Venezuela.  No. 11-30776 (Dec. 13, 2012).  The district court dismissed, finding that the plaintiff failed to adequately brief an issue of “prudential standing” about the ability of foreign plaintiffs to sue U.S. citizens in federal court.  The Fifth Circuit found the standing issue “totally without merit,” noting that alienage jurisdiction originated to allow British creditors to sue Americans after the 1783 Treaty of Paris and avoid a “notoriously frosty” reception in state court that hurt international commerce.  The Court also disagreed with the conclusion that the briefing amounted to a waiver, reviewing case law about the handling of similar dispositive motions.

Applying Fifth Circuit law, the Federal Circuit found an abuse of discretion in not awarding sanctions under Rule 11 and 38 U.S.C. § 985  for what it saw as a frivolous patent lawsuit, and remanded to the Eastern District of Texas for consideration of an appropriate award.  Raylon LLC v. Complus Data Innovations (Fed. Cir. Dec. 7, 2012).  The court found that the plaintiff’s claim construction was objectively unreasonable and that the district court erred in how it weighed the plaintiff’s subjective motivation.  Only time will tell whether the case leads to a wave of sanctions motions.  The opinion is a strong reminder of the power of Rule 11 in civil litigation generally, where the Fifth Circuit has tended to focus recently on litigation conduct rather than positions taken.

In Hornbeck Offshore Services v. Salazar, the Secretary of the Interior appealed a $530,000 civil contempt award.  No. 11-30936 (Nov. 27, 2012).  After the Deepwater Horizon disaster, the Interior Department imposed an offshore drilling moratorium, which the district court enjoined on the ground that Interior had not properly followed the Adminstrative Procedure Act.  Interior then imposed a new moratorium supported by more detailed findings.  The Fifth Circuit reversed the contempt award, noting that the district court had not based its ruling on a potential ground about Interior’s authority, and stating: “In essence, the company argues that . . . the Interior Department ignored the purpose of the district court’s injunction.  If the purpose were to assure the resumption of operations until further court order, it was not clearly set out in the injunction.”  Id. at 12.  A dissent criticized the majority for “making unreasonably restrictive fact findings of its own to reach an narrow and unworkably technical result.”  Id. at 22.  The Washington Post covers the case here.

In Gonzalez v. Fresnius Medical Care, the Court affirmed a JNOV on claims under the False Claims Act.  Nos. 10-50413, 10-51171 (July 30, 2012).  The Court agreed with the district court’s conclusion that the plaintiff had not shown a wrongful patient referral scheme, noting that the number of referred patients stayed the same over time, whether or  not the alleged conspiracy was in place.  Id. at 8.  The Court also agreed that a line of cases about claims “tainted by fraud” was limited to the fraudulent inducement context.  Id. at 9-11.  Finally, the Court affirmed a sanctions award under 28 USC §  1927 based on the plaintiff’s changing testimony on whether she was asked to cover up the alleged scheme, noting differences between the deposition, the errata sheet afterwards, and then trial testimony.  Id. at 13-16.

The plaintiff’s counsel in Mick Haig Productions v. Does 1-670 served subpoenas on Internet service providers (ISPs) about the alleged wrongful download of pornographic material.  No. 11-10977 (July 12, 2012).   The district court found that the subpoenas violated orders that it had made to manage discovery, and imposed significant monetary and other sanctions on the lawyer.  Op. at 4-5.  The Fifth Circuit found that all of the lawyer’s appellate challenges were waived — either because they were not raised below, or were raised only in an untimely motion to stay filed after the notice of appeal, and thus were waived.  Id. at 5.  The Court declined to apply a “miscarriage of justice” exception to the standard waiver rules, stating that the lawyer’s actions were “an attempt to repeat his strategy of . . . shaming or intimidating [the Does] into settling . . . .”  Id. at 6.

In Smith & Fuller, P.A. v. Cooper Tire & Rubber Co., a law firm had inadvertently distributed documents, designated as confidential under a Rule 26(c) protetive order, during a conference of personal injury lawyers.  No. 11-20557 (June 21, 2012).  Pursuant to Fed. R. Civ. P. 37(b)(2)(C), the Court ordered the firm to reimburse Cooper for its fees and expenses incurred in rectifying the situation.  The Court found that the protective order was an “order to provide or permit discovery” as defined by Rule 37(b)(2), that the award was justified with “specific and well-reasoned grounds . . . that any lesser penalty would not have been an adequate future deterrent,” and that the affidavits of counsel were suficient to establish the amount awarded.  The Court noted that the firm had previously been sanctioned for another violation of a protective order involving Coooper.  Op. at 3 n.2 & 10.

In Waldron v. Adams & Reese, LLP, the largest creditor of a bankruptcy debtor paid the retainer fee for debtor’s counsel.  No. 11-30462 (March 29, 2012).  That payment was not disclosed for some time, after which the trustee sought to disgorge counsel’s fees on the grounds of a disqualifying conflict of interest.  The Court affirmed the lower court’s rulings, finding no disqualifying conflict on the “specific facts of [the] case.”  Op. at 8 (quoting and distinguishing In re West Delta Oil Co., 432 F.3d 347 (5th Cir. 2005)).  It reviewed counsel’s conduct during the bankruptcy case as well as prior representations of the debtors.  Then, reminding of the “clear error” standard of review, the Court affirmed a sanction of partial disgorgement (20% of the fee) for the late disclosure.  Op. at 15.  The Court concluded with a thorough review of the standards for allowing pleading amendments and affirmed the denial of leave for the trustee to add new claims.  Op. at 15-16.

In Shcolnik v. Rapid Settlements, bankruptcy creditors had obtained a $50,000 arbitration award of attorneys fees against the debtor, and appealed a summary judgment that the award was dischargeable.  No. 10-20800 (Feb. 8, 2012).  The Fifth Circuit reversed, finding an issue of fact as to whether the fee award arose from “willful and malicious injury by the debtor” in pursuing meritless claims, and was thus nondischargeable.  Op. at 5-6 (citing 11 U.S.C. § 523(a)(6)).  (The debtor’s threats included a “massive series of legal attacks . . . which will likely leave you disbarred, broke, professionally disgraced, and rotting in a prison cell.”  A thoughtful dissent questioned whether the majority’s ruling would deter legitimate litigation demands, and whether the Court was inserting itself into matters resolved by the arbitrator.  Op. at 9.

In Davis-Lynch, Inc. v. Moreno, a company sued two individuals (among others) alleging RICO violations.  (No. 10-20859, Jan. 10, 2012)  The individuals asserted the Fifth Amendment in their answers, and then withdrew those assertions after the plaintiff filed a summary judgment motion.  The Court allowed one of those withdrawals, stating: “[A] party may withdraw its invocation of the Fifth Amendment privilege, even at a late stage in the process, when circumstances indicate that there is no intent to abuse the process or gain an unfair advantage.”  (Op. at 11)  It affirmed the denial of the other, noting that it was done at the “eleventh-hour” before the close of discovery.   (Op. at 12)  On the merits, the Court reversed a summary judgment for the plaintiff, finding deficiencies with the plaintiff’s allegations and proof of racketeering injury and activity.  (Op. at 13-20)  The Court cautioned against entry of “[a]n order that essentially amounts to a default judgment” in the summary judgment context.  (Op. at 21)   

In Brown v. Oil States (No. 10-31257, revised Dec. 27, 2011), the plaintiff in a wrongful discharge case testified that he left his job because of racial harassment, and while that case was pending, testified in a personal injury case that he left the same job because of a back injury.  Finding that the plaintiff “plainly committed perjury” with this inconsistent testimony, the Court found no abuse of discretion in the sanction of dismissal of his employment suit.  (Op. at 13).