A Friday diversion from federal practice — from the sister blog that follows the Dallas Court of Appeals, the Texas Supreme Court has written a major opinion reversing a judgment of minority shareholder oppression.  Here is the summary worth a read by any commercial litigator in Texas.

Celebrate Memorial Day this year with a refreshing Ramos Gin Fizz, one of the classic and unique New Orleans cocktails.

After the Supreme Court’s reversal of the Fifth Circuit in Mississippi v. AU Optronics, which held that the case was not a “mass action” under CAFA, AU Optronics argued that federal courts still had jurisdiction over the matter as a “class action.”  The Fifth Circuit disagreed, finding that it had addressed and rejected that argument in its prior panel opinion.  Mississippi v. AU Optronics, No. 12-60704 (March 19, 2014, unpublished).  Its treatment of the issue was not dicta because it was “an explication of the governing rules of law” that received the Court’s “full and careful consideration.” Because that analysis “was a proper holding, the law-of-the-case doctrine forbids its reconsideration.”  Alternatively, the point was waived when AU Optronics did not appeal it to the Supreme Court.  (While the distinction between holding and dicta is fundamental to the common law, much less appellate practice, a formal definition such as this is rare.  A detailed analysis appears in Loud Rules, an article in the Pepperdine Law Review by this blog’s author and Professor Wendy Couture of the University of Idaho Law School.)

Plaintiffs alleged that the members of MERS violated RICO by making fraudulent statements about the legal effect of mortgages nominally recorded in the name of MERS. Welborn v. Bank of New York Mellon, No. 13-30103 (March 5, 2014, unpublished).  The district court dismissed under Rule 12(b)(6) on the ground that Plaintiffs impermissibly sought to enforce the Trust Indenture Act by way of a RICO action.  The Fifth Circuit affirmed, but on the alternative ground that Plaintiffs had not pleaded a RICO injury to their “business or property.”  The alleged injuries — “loss of recording fees and general damage to the integrity of public records” arose “not . . . from commercial activity, but rather from the provision of a public service — that is, a governmental function.”

The Fifth Circuit reversed a summary judgment on a construction subcontractor’s promissory estoppel claim in MetroplexCore, LLC v. Parsons Transportation, No. 12-20466 (Feb. 28, 2014).  The Court noted the specificity of the statements made to it by representatives of the general contractor, the parties’ relationship on an earlier phase of the project, and specific communications describing reliance.  The Court relied heavily on the analysis of a similar claim in Fretz Construction Co. v. Southern National Bank of Houston, 626 S.W.2d 478 (Tex. 1981).

Fat Tuesday is March 4; the Krewe of Zulu starts the day’s parades in New Orleans. Celebrate with some traditional red beans and rice.

During 2013, this blog had a feature that tracked the M/V OCEAN SHANGHAI — in Farenco Shipping Co. v. Farenco Shipping PTE, Ltd., an appeal about an attachment order on that vessel became moot when the ship sailed from Fifth Circuit waters, apparently never to return.  Now under new ownership, the ship is reflagged as the M/V CALHOUN, so the SHANGHAI is no more.

After a recent panel remanded an appeal about the Deepwater Horizon settlement for further proceedings about its payment formula, another panel examined challenges to the settlement based on the guidelines of Rule 23, the Rules Enabling Act, and Article III.  In re Deepwater Horizon — Appeals of the Economic and Property Damage Class Action Settlement, No. 13-30095 (Jan. 10, 2014).  The panel found that, at the stage of certifying a settlement class, it did not violate those guidelines to have class members who may not be able to prove causation or damages on the merits: “It is sufficient for standing purposes that the plaintiffs seek recovery for an economic harm that they allege they have suffered, because we assume arguendo the merits of their claims at the Rule 23 stage.”  In particular, the panel found that outcome consistent with Wal-Mart v. Dukes, 131 S. Ct. 2541 (2011), as it requires evidence “that a particular contention is common, but not that it is correct.”  The panel also found no abuse of discretion in the district court’s handling of subclasses or damage calculations.  A dissent contended: “Absent an actual causation requirement for all class members, Rule 23 is not being used to simply aggregate similar cases and controversies, but rather to impermissibly extend the judicial power of the United States into administering a private handout program.

This blog’s author is giving the Fifth Circuit Update at the State Bar’s Annual Litigation Update Institute in Austin on January 10; here is a draft of the anticipated PowerPoint.

He will also be in an audience debate (open to the public) on the afternoon of January 8 at SMU, hosted by the SMU Communications Department and the Bush Institute.  The topic will be presidential power, the other participants are the debate coaches at the Universities of Houston and North Texas and the director of the Dallas Urban Debate Association.

A business taxpayer claimed a deduction for a loan.  The Fifth Circuit affirmed the Tax Court’s finding that the transaction was not a loan.  DF Systems v. Commissioner of Internal Revenue, No. 13-60322 (Dec. 10, 2013, unpublished).  Noting that “the absence of a formal loan agreement is not determinative,” and acknowledging board minutes and the taxpayer’s testimony supporting the conclusion that it was a loan, the Court stressed the “absence of . . . objective economic indicia of genuine debt” — determinable sum to be repaid, specified interest rate, repayment schedule, maturity date, or collateral.  The Court’s analysis is of general interest in other business situations involving arguments about “form over substance.”

The case of Carey Salt Co. v. NLRB dealt with a technical labor law question as to when negotiations between management and a union had reached an impasse.  No. 12-60757 (Nov. 21, 2013).  The general framework it uses, though, is of broad interest in court-ordered mediation, contractual dispute resolution clauses, and other situations where a party’s good faith in negotiation can come into question.  The opinion is centered on the factors identified in Taft Broadcasting Co., 163 N.L.R.B. 475, 478 (1967): “(1) the parties’ bargaining history; (2) the parties’ good faith; (3) the duration of negotiations; (4) the importance of issues generating disagreement; and (5) the parties’ contemporaneous understanding of the state of negotiations.”  That NLRB case also noted the general importance of overall “good faith.”

Marceaux v. Lafayette City-Parish Consolidated Gov’t was a section 1983 case brought by former and current police officers against leaders of the Lafayette Police Department.  No. 13-30332 (Sept. 30, 2013).  “[T]he Officers communicated with the media concerning the case and maintained a website, www.realcopsvcraft.com (the “Website”), which contained: an image of the Lafayette Police Chief, a party in this suit; excerpts of critical statements made in the media concerning the Lafayette PD Defendants; certain voice recordings of conversations between the Officers and members of the Lafayette Police Department; and other accounts of the Lafayette PD Defendants’ alleged failings.” Acknowledging both the district court’s discretion to issue gag orders about such communications, and the powerful First Amendment protection against prior restraints, the Fifth Circuit found an abuse of discretion in ordering the shutdown of the entire website.  It remanded for consideration of a more narrowly-tailored order.

Auto Parts Manufacturing Mississippi hired Noatex to build a manufacturing facility.  Noatex subcontracted with King Construction.  Noatex then questioned some bills sent by King. King responded with a “Lien and Stop Notice” that trapped roughly $260,000.  Noatex v. King Construction, Nos. 12-60385 & 12-60586 (Oct. 10, 2013).  The Fifth Circuit affirmed the district court’s conclusion that the Mississippi lien statute was unconstitutional, concluding: “The Stop Notice statute is profound in its lack of procedural safeguards.  It provides for no pre-deprivation notice or hearing of any kind . . . The statute even fails to require any affidavit or attestation setting out the facts of the dispute and the legal rationale for the attachment.”  The court rejected an argument that post-attachment penalties for a false filing could save the statute, as well as an argument based on the importance of the interest in “promotion of the health of the construction industry,” noting that no governmental official was involved in the attachment process.

Happy birthday today to 600camp.com.  The year had many great stories — courageous monks, generations of chickens, an itinerant ice-shaving machine and the travels of the M/V OCEAN SHANGHAI (presently on the high seas and out of range). Thanks to all readers and the author’s colleagues at Lynn Tillotson Pinker & Cox.  Please celebrate with some authentic shrimp remoulade from Galatoire’s in New Orleans.

This blog’s author is happy to have won third place in this year’s Twitter Brief contest, sponsored by the State Bar of Texas Appellate Section.  The entry was:

“Plaintiff slipped on #macaronisalad.  Too bad for her but #equalinference.   #reverseandrender  #cityofkeller”

Persons upset about posts on the Mississippi blog “slabbed.org” sued for defamation in Nova Scotia (some of the content related to a lodge owned there by a Mississippi resident).  After obtaining a default judgment, they sought to domesticate it in Mississippi; the defendant removed and resisted domestication under the SPEECH Act, 28 U.S.C. § 4102.  Trout Point Lodge v. Handshoe, No. 13-60002 (Sept. 5, 2013).  That law, enacted in 2010, intends to prevent “libel tourism” by plaintiffs who obtain judgments in jurisdictions with less protection of speech than the First Amendment. The Court concluded that the plaintiffs failed to meet its burden under the Act to prove either (1) that Canadian law (which allocates the burden to prove falsity differently than American law) offers as much free speech protection as Mississippi, or (2) a Mississippi court reviewing the allegations of the pleading would have found liability for defamation.  The Court found some of the pleading’s allegations conclusory and that others involved language that “[t]hough offensive . . . are not actionable . . . .”

A remedy provision of the Anti-Kickback Statute provides: “The Federal Government in a civil action may recover from a person that knowingly engages in conduct prohibited by section [53] of this title a civil penalty equal to— (A) twice the amount of each kickback involved in the violation; and (B) not more than $[11,000] for each occurrence of prohibited conduct . . . .”  41 U.S.C. § 55(a)(1). In United States v. Kellogg Brown & Root, the Fifth Circuit found that the provision allows a suit against an employer for its employees’ acts.  No. 12-40447 (July 19, 2013).  The Court grounded its analysis in common-law agency principles, and distinguished an earlier case that imposed a “purpose to benefit [the] employer” requirement in a somewhat analogous situation under the False Claims Act, United States v. Ridglea State Bank, 357 F.2d 495 (5th Cir. 1966).

The Fifth Circuit released a revised opinion on July 12, 2013 in Boudreaux v. Transocean Deepwater, No. 12-30041.  The holding is the same as its original opinion from March 2013, finding that a Jones Act employer who establishes a defense to ongoing “maintenance and cure” liability because of a seaman’s dishonesty does not have a restitution claim for benefits already paid.  In the new opinion, the dissenting judge now separately concurs, while the majority revises its historic analysis somewhat and notes the effect of the parties’ “bracketed settlement” on the way the issue was presented to the Court.

In Nevada Partners Fund LLC v. United States, the Fifth Circuit affirmed the district court’s approval of several IRS rulings about investment arrangements.  No. 10-60559 (June 24, 2013).  The thorough opinion details a “straddle trade” investment, which in theory can generate profit, but here “as designed and carried out, [the trades] simply could not produce a profit; they were calculated and managed to produce offsetting gains and losses.”  Various penalties based on the partnerships’ negligence and lack of care were also affirmed.

This blog’s author will speak on federal litigation trends at the Dallas Bar Association’s Business Litigation Section meeting next Tuesday, May 14, at noon in the Belo Mansion in downtown Dallas.  Here is a copy of the PowerPoint.  Also, LTPC colleague Richard Smith, who presides over 600 Commerce about the Dallas Court of Appeals, will speak about recent cases from that Court at the DBA Appellate Section meeting on Thursday May 16, also at Belo.  Please come by, we look forward to seeing you in person.

A putative plaintiff class alleged violations of federal securities law by alleged misstatements about asbestos liabilities, the quality of certain receivables and the claimed benefits of a merger.  Erica P. John Fund Inc. v. Halliburton, Inc., No. 12-10544 (April 30, 2013).  Reviewing recent Supreme Court cases about relevant evidence at the certification stage, including one that reversed the Fifth Circuit about proof of loss causation, the Court held: “price impact fraud-on-the-market rebuttal evidence should not be considered at class certification. Proof of price impact is based upon common evidence, and later proof of no price impact will not result in the possibility of individual claims continuing.” (citing Amgen, Inc. v. Connecticut Retirement Plans and Trust Funds, ___ U.S. ___ (Feb. 27, 2013))  The Court rejected a policy argument about the potential “in terrorem” effect of not considering such potentially dispositive evidence about the merits at the certification stage.  The district court ruling about this evidence, and the resulting class certification, were affirmed.

A creditor successfully made a “credit bid” under the Bankruptcy Code for assets of a failed golf resort.  Litigation followed between the creditor and guarantors of the debt, ending with a terse summary judgment order for the guarantors: “This is not rocket science.  The Senior Loan has been PAID!!!!”  Fire Eagle LLC v. Bischoff, No. 11-51057 (Feb. 28, 2013).  The Fifth Circuit affirmed in all respects, holding: (1) the bankruptcy court had jurisdiction over the dispute with the guarantors because it had a “conceivable effect” on the estate; (2) the issue of the effect of the credit bid was within core jurisdiction and did not raise a Stern v. Marshall issue; (3) core jurisdiction trumped a forum selection clause on the facts of this case; (4) a transfer into the bankruptcy court based on the first-to-file rule was proper; and (5) the creditor’s bid extinguished the debt.  On the last holding, the Court noted that the section of the Code allowing the credit bid did not provide for fair-market valuation of the assets, unlike other Code provisions.

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.

If you can’t make it to New Orleans for Fat Tuesday, 600camp suggests you try Emeril Lagasse’s excellent gumbo recipe.

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)).

600camp.com celebrates its first birthday today.  A website can’t serve birthday cake, but it can share the world-famous recipe of the great New Orleans restaurant, Galatoire’s, for bread pudding.  Thanks to Lynn Tillotson and all friends and supporters.

Roman v. Western Manufacturing examined a $1mm-plus verdict about severe injuries from a pump malfunction.  No. 10-31271 (Aug. 17, 2012).  After review of the standards, id. at 5 (“It is not our charge to decide which side has the more persuasive case.”), the Court found that two qualified mechanical engineers met Daubert even though they lacked extensive experience with “stucco pumps,” declining to “make expert certification decisions a battle of labels.”  Id. at 7.  The Court also rejected technical challenges to the type of pump reviewed by the experts and the plausibility of their factual assumptions about its operation, id. at 13 (“There was certainly contrary evidence, but that was for jurors to weigh.”), as well as sufficiency challenges about the inferences made by the jury.  Id. at 16-17.  Additional challenges were found waived under Fed. R. Civ. P. 50.  This opinion is the latest in a series of thoughtful cases about Daubert after the 2009 decision in Huss v. Gayden.

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.

Lawyers in the North Texas area will enjoy the new blog 600commerce.com, which covers the Texas Fifth District Court of Appeals that sits at 600 Commerce in downtown Dallas.

McMurray v. ProCollect, Inc. involved a claim that a debt collector’s demand letter contained language that was inconsistent with, and that also overshadowed, the required notice required by 15 U.S.C. section 1692g(a), the Fair Debt Collection Practices Act.  No. 11-20141 (July 17, 2012).  As to the claim of inconsistency, the Court found no violation because the letter did not contain a deadline for payment that conflicted with the 30-day contest period in the FDCPA.  Op. at 7.  As to the claim of overshadowing, the Court found that the letter simply encouraged payment and did not make threats, and did not use fonts or spacing to minimize the effect of the statutorily-required notice.  Op. at 8.  On both claims, the Court reviewed the letter through the lens of an “unsophisticated consumer standard.”  Op. at 5.