The dispute presented by the petition for a writ of mandamus in In re Times-Picayune, LLC was a criminal defendant’s ability to have identifying information about online commentators on the defendant’s case produced for in camera review; the defendant contending that the commentators were federal prosecutors.  No. 14-30298 (April 8, 2014, unpublished).  The Fifth Circuit denied the petition, reasoning: “Here, we are not persuaded that the district court’s (1) balancing of the speech rights of anonymous commenters against the due process interests of [defendant] and (2) ordering the Times-Picayune to turn over information for in camera review was clearly and indisputably erroneous. As an initial matter, there is little case law illuminating how the competing interests in situations comparable to this one should be balanced. . . . Even in the absence of precedent, however, we cannot say that the district court here clearly reached the wrong decision.”   [The short opinion is worth comparing to the concurrence in All Plaintiffs v. Transocean Offshore from 2013, about the availability of mandamus relief for discovery matters.]  And subsequently, the district court concluded that the commentator at issue was not a prosecutor.

The plaintiffs in Singha v. BAC Home Loans Servicing LP alleged a number of foreclosure-related claims, most of which were resolved by recent Fifth Circuit precedent.  Among them was a claim for unfair debt collection based on the common situation of failed negotiations about a loan modification.  As to that issue, the Court observed: “We do not announce a rule that modification discussions may never be debt collection activities. We do conclude, though, that the [Plaintiffs’] particular factual allegations here – allegations of what occurred during the course of what they describe as more than fifty phone calls and other contacts during a protracted loan modification process – are not communications in connection with collection of a debt.” (emphasis in original).  No. 13-40061 (April 17, 2014, unpublished).

The plaintiff in Jonibach Management Trust v. Wartburg Enterprises sued the defendant for breach of an oral contract; specifically, an agreement to exclusively market the plaintiff’s products in the US.  No. 13-20308 (April 24, 2014).  The defendant made three counterclaims, two of which were dismissed because they relied on an additional oral modification to the contract and could not satisfy the Statute of Frauds.  The third survived before the Fifth Circuit, however, as it was essentially the mirror image of the plaintiff’s claim — contending that the plaintiff wrongfully supplied goods to other distributors.  Among other reasons for that conclusion, the Court noted that the plaintiff’s “pleadings and testimony regarding the initial contract . . . constitute judicial admissions,” and reviewed the elements of such an admission.

In Aviles v. Russell Stover Candies, the Fifth Circuit again engaged the issue of whether the unilateral power to change an arbitration clause makes it illusory and unenforceable. No. 12-11227 (April 4, 2014, unpublished).  This time, however, the Court observed that the agreement subjected to arbitration “any and all claims challenging the validity or enforceability of the [Waiver and Arbitration] Agreement.”   Accordingly, the Court affirmed the dismissal of her case in favor of arbitration, but vacated the magistrate judge’s resolution of the enforceability issue because it “should have declined to decide either of those two issues.”

The plaintiff in Sanders v. Flanders alleged legal malpractice arising from the handling of patent applications.  The Fifth Circuit did not engage the question whether he had shown lost profits with reasonable certainty, noting: “[C]ounsel admitted during oral argument that [Plaintiff] did not make any offer of proof concerning the lost-profit evidence that he would have otherwise presented but for the district court’s hearsay ruling.”  No. 13-50235 (April 22, 2014, unpublished).

In reviewing a motion to dismiss under Rule 12(b)(6), the district court “must limit itself to the contents of the pleadings, attachments thereto,” and “may also consider documents attached to either a motion to dismiss or an opposition to that motion when the documents are referred to in the pleadings and are central to a plaintiff’s claims.”  Brand Coupon Network LLC v. Catalina Marketing Corp., No. 13-30756 (April 8, 2014).  Here, without converting the Rule 12 motion into a summary judgment motion, the district court considered an affidavit “signed . . . a day before [plaintiff] filed its opposition to Defendants’ motion to dismiss, and weeks after the filing of the petition.”  Accordingly, the Fifth Circuit reversed a dismissal under Rule 12 on limitations grounds.

Compare Sigaran v. U.S. Bank, N.A., No. 13–20367 (April 30, 2014, unpublished): “The district court, however, did not rely on those documents in making its ruling. The additional documents were relevant to the merits of the Sigarans’ claims under the Texas Constitution, but the district court did not reach the merits of those claims and instead dismissed them as barred under the statute of limitations. The mere presence of those documents in the record, absent any indication that the district court relied on them, does not convert the motion to dismiss into a motion for summary judgment.”

At issue in Hess Management Firm, LLC v. Bankston were the damages arising from the termination of a contract about the operation of a gravel pit (sadly, not a magical gravel pit of rule-against-perpetuities lore).  No. 12-31016 (April 18, 2014).  The dispute was whether damages were capped at 180 days — the contract term for adequate notice of closure — or whether the closure of the pit was post-breach activity that is not relevant to damage calculation.  The Fifth Circuit sided with the bankruptcy court and reversed the district court’s enlargement of the damages, concluding: “A contrary result would defeat the maxim of placing a non-breaching party in the same position they would have been had breach not occurred, and award [plaintiff] more than their expectation interest.”

1.  Defendants’ Rule 59 motion was filed a day late, “therefore the district court did not abuse its discretion in denying the motion.”

2.  Post-verdict, the defendant did not renew, under Fed. R. Civ. P. 50(b), an earlier Fed. R. Civ. P. 50(a) motion that challenged the sufficiency of the evidence for the plaintiff’s mental anguish claims.  The Court “decline[d] to review” the issue, noting that the Fifth Circuit’s cases “are not entirely uniform” as to whether this oversight was a waiver or allows review under a plain error standard.

3.  The Court found no plain error from the plaintiff’s closing argument, including the lawyer’s “odd tactic of handing his business card to the jury during argument, especially in light of the court’s curative instructions and [defendant’s] failure to move for a mistrial.” McLendon v. Big Lots Stores No. 13-20338 (April 14, 2014, unpublished).

Class actions were filed about the effects of an explosion at a chemical plant.  The Fifth Circuit agreed that CAFA jurisdiction had not been established.  Citing Berniard v. Dow Chem. Co., 481 F. App’x 859 (5th Cir. 2010), the Court held: “[D]efendants ‘overstate the reach of the plaintiffs’ petitions by improperly equating the geographic areas in which potential plaintiffs might reside with the population of the plaintiff class itself.  Further, the comparisons that the Defendants-Appellants make to damage recovery in similar cases is too attenuated to satisfy their burden.'”  Perritt v. Westlake Vinyls Company, L.P., No. 14-30145 (April 14, 2014, unpublished).  The Court also noted: “Bald exposure extrapolations are insufficient to establish the likely number of persons affected by the release or, for those affected, the severity of their harm.”

The parties’ letter agreement incorporated “AIA Document B51” with respect to “the services provided . . . under this Agreement.”  That document states that all claims shall be adopted under the AAA’s Construction Industry Arbitration Rules. Those Rules state that “the arbitrator shall have the power to rule on his or her own jurisdiction.”  The Fifth Circuit found the agreement’s incorporation of the other documents to be effective, and accordingly the arbitrator had jurisdiction to determine arbitrability — including, whether the parties’ dispute involved “services.”  RW Development, LLC v. Cunningham Group Architecture, P.A., 13-60010 (April 11, 2014, unpublished).

Congress amended the Fair Credit Reporting Act to have a limitations period of “2 years after the date of discovery by the plaintiff of the violation that is the basis for such liability.”   The plaintiff in Mack v. Equable Ascent Financial, LLC argued that this amendment meant that “he could not have ‘discovered’ the violation until he had researched the statute.”  No. 13-40128 (April 11, 2014).  The Fifth Circuit disagreed, finding that the amendment was made to equalize the treatment of different types of claims, and that the plaintiff’s reading “would indefinitely extend the limitations period.”

Several operators of drug stores sued pharmacy chains for misappropriating confidential information.  The defendants successfully compelled arbitration and the Fifth Circuit affirmed.  Crawford Professional Drugs v. CVS Caremark Corp., 748 F.3d 249 (5th Cir.
2014). Specifically (applying Arizona law), the Court found that the plaintiffs’ allegations sufficiently invoked the terms of a contract that contained an arbitration agreement, allowing arbitration to be compelled against nonsignatories on an equitable estoppel theory.  The Court went on to reject the plaintiffs’ argument that the contract, and its arbitration clause, were procedurally unconscionable contracts of adhesion.  It also found insufficient evidence to support their argument that the clause imposed substantively unconscionable litigation costs.  (The Court recently revisited this topic in Muecke Co. v. CVS Caremark Corp., No. 14-41213 (Aug. 25, 2015)).

The unfortunate plaintiff in Robinson v. Wal-Mart Stores LLC argued that her state court petition referenced a $23,500 medical bill, which was in fact only $235. No. 12-41411 (April 9, 2014, unpublished).  The Fifth Circuit affirmed the denial of her motion to remand, reminding: “If at the time of removal it is facially apparent from the state-court petition that he amount in controversy exceeds $75,000, a plaintiff’s subsequent request to amend her petition to ‘clarify’ the amount in controversy cannot divest jurisdiction.”  The Court also observed: “In addition, prior to removal, Wal-Mart proposed to Robinson that she stipulate to no more than $75,000 in damages in exchange for not removing the case to federal court,” and that the plaintiff had declined to make that stipulation.

In Haase v. Countrywide Home Loans, Inc., the district court dismissed the plaintiff’s RESPA claim, declined to exercise supplemental jurisdiction over the remaining state law claims, and remanded them to state court.  No. 12-20806 (April 9, 2014).  Appellees argued that “because this judgment remanded the remaining state claims to the state court without addressing their respective merits, it is not a final disposition of all claims in the case, and therefore not appealable under 28 U.S.C. § 1291.”  The Fifth Circuit disagreed, concluding that “as a practical matter, remands end federal litigation and leave the district court with nothing else to do.”  (applying Quackenbush v. Allstate Ins. Co., 517 U.S. 706 (1996)).

Payne sued Progressive Financial for violations of fair debt collection statutes, seeking statutory damages, actual damages, attorneys fees, and costs.  Payne v. Progressive Financial Services, No. 13-10381 (April 7, 2014).  Progressive made a Rule 68 offer of $1,001 in damages and fees to the date of the offer, to which Payne did not respond.  The district court reasoned that Payne had not pleaded a basis to recover actual damages, and that the unaccepted offer mooted her claim for statutory damages because it exceeded the amount she could recover.  The Fifth Circuit reversed, finding that the district court’s analysis of the actual damages claim conflated jurisdiction with resolution of the merits; accordingly, Progressive’s offer was incomplete because it did not address actual damages.  A footnote reminds that a complete Rule 68 offer can moot a case, and that the Court did not reach the argument that the offer was incomplete because it did not include post-offer fees and costs.

The stark facts of Bierwith v. Countrywide Bank, FSB are: “[A[ppellant’s] notice of appeal was filed on August 16, 2013, thirty-one days after the district court’s entry of final judgment on July 16, 2013.  Federal Rule of Appellate Procedure 4 provides that a notice of appeal ‘must be filed with the district clerk within 30 days after entry of the judgment or order appealed from.’  As the Supreme Court has made clear, a party’s failure to take an appeal within the prescribed time precludes our jurisdiction.   Accordingly, [Appellants’] appeal is DISMISSED.”  No. 13-50755 (April 3, 2014, unpublished) (footnotes omitted).

The State of Louisiana sued several insurers, alleging it was the beneficiary of assignments made by the insured in return for help rebuilding after Hurricane Katrina.  The insurers removed to federal court under CAFA.  After extensive proceedings, the district courts ultimately severed the actions by individual policy and ordered remand to state court.  State of Louisiana v. American National Property & Casualty Co., No. 14-30071 (March 26, 2014).  The Fifth Circuit reversed because “at the time of removal, these claims clearly possessed original federal jurisdiction as an integrated part of the CAFA class action.”  Noting language in Honeywell International v. Phillips Petroleum that “a severed action must have an independent jurisdictional basis,” 415 F.3d 429, 431 (5th Cir. 2005), the Court limited that language as “appl[ying] only to severed claims that are based on supplemental jurisdiction.”

1. How close does Twombly come to Fed. R. Civ. P. 9(b)?  Consider Merchants & Farmers Bank v. Coxwell, affirming the dismissal of a pleading: “The complaint did not specify what court issued the order, when it was issued, or to whom it was directed; [and] the complaint did not describe what the order required . . . .”  No. 13-60368 (5th Cir. Feb. 7, 2014, unpublished).
2. Credibility questions create fact issues.  See Vaughan v. Carlock Nissan of Tupelo, No. 12-60568 (5th Cir. Feb. 4, 2014, unpublished) (reversing a summary judgment about a manager’s “bad faith,” noting credibility questions about his claimed justifications for a firing, ambiguity in other statements, and the timing of the termination).
3. Forum non conveniens factors – the “availability of witnesses” factor is reviewed by Royal Ten Cate USA, Inc. v. TT Investors, Ltd.  No. 13-50106 (5th Cir. March 25, 2014, unpublished), and Indusoft, Inc. v. Taccolini, No. 13-50042 (March 19, 2014, unpublished).
4. Conflicting documents about arbitration are harmonized in Lizalde v. Vista Quality Markets, ___ F.3d ___ (5th Cir. March 25, 2014) (enforcing an arbitration agreement despite a benefit plan with a broad termination right, noting that both agreements’ termination provisions “clearly demarcate their respective applications”).
5. Settlement efforts as prerequisite for arbitration.  This language — “the parties agree to negotiate in good faith toward resolution of the issues, and to escalate the dispute to senior management personnel in the event that the dispute cannot be resolved at the operational level” — does not create a requirement of negotiation by senior management before arbitration is invoked.  21st Century Financial Services v. Manchester Financial, ___ F.3d ____ (5th Cir. March 31, 2014).

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This language — “the parties agree to negotiate in good faith toward resolution of the issues, and to escalate the dispute to senior management personnel in the event that the dispute cannot be resolved at the operational level” — does not create (1) a requirement of negotiation by senior management before arbitration is invoked, or (2) a condition that any senior management negotiation fail before arbitratation is invoked.  It simply requires negotiation at the operational level.  21st Century Financial Services v. Manchester Financial, No. 13-50389 (March 31, 2014).

The district court granted a dismissal in favor of New Zealand, on forum non conveniens grounds, in Royal Ten Cate USA, inc. v. TT Investors, Ltd.  No. 13-50106 (March 25, 2014, unpublished).  The Fifth Circuit remanded for further consideration of what it saw as a key private-interest factor — “whether two key witnesses who reside in Texas would be amenable to process in New Zealand.”   The witnesses in question were former party employees living in Texas, and the parties disputed whether those individuals’ employment contracts obligated them to cooperate with litigation after their employment.  Their importance was heightened because they were particularly significant to one side, while the other side did not appear to have comparable problems with its likely witnesses.  The Court did not express an opinion about the proper result on remand, and noted that “[t]he decision regarding whether or not to take additional evidence is one that we leave to the sound discretion of the district court.”

A law firm appealed the disposition of its fee application.  The district court affirmed the bankruptcy court in part, vacated in part, and remanded for the firm to make another fee request that provided more necessary information.  Okin Adams & Kilmer v. Hill, No. 13-20035 (March 24, 2014).  The firm appealed to the Fifth Circuit, which concluded it had no appellate jurisdiction because the order was not final: “Given that the bankruptcy court must perform additional fact-finding and exercise discretion when determining an appropriate attorney’s fee award, the district court’s order requires the bankruptcy court to perform judicial functions upon remand.”  A detailed dissent concluded that, while the district court’s order required “more than a mechanical entry of judgment,” “it also involves only mechanical and computational tasks that are ‘unlikely to affect the issue that the disappointed party wants to raise on appeal.'”  Accordingly, it warned that “refusing to hear this appeal undermines the long-recognized, salutary purpose of allowing appeals in discrete issues well before a final order in bankruptcy.”

In Lizalde v. Vista Quality Markets, the Fifth Circuit revisited the recurring issue of whether an arbitration agreement becomes illusory because of an employer’s right to amend the terms of employment.  No. 13-50015 (March 25, 2014).The parties’ Arbitration Agreement gave the employer the power to terminate that agreement after following several procedural prerequisites, which made that agreement non-illusory.  In contrast, the parties’ Benefit Plan had a “completely unrestrained” termination power.  And, the Arbitration Agreement acknowledged: “this Agreement is presented in connection with the Company’s [Benefit Plan].  Payments made under the [Benefit Plan] also constitute consideration for this Agreement.”  The district court found the arbitration agreement illusory, based on that connection.  The Fifth Circuit reversed, nothing that both agreements’ termination provisions were limited to “this Agreement” and “this Plan” respectively and thus “clearly demarcate their respective applications.”

The plaintiffs in Moran v. Ocwen Loan Servicing LLC ran afoul of the holding in Priester v. JP Morgan Chase, 708 F.3d 667 (5th Cir. 2013), that “liens that are contrary to the requirements of § 50(a) [of the Texas Constitution] are voidable rather than void from the start.”  No. 13-20242 (March 24, 2014, unpublished).  They sought certification to the Texas Supreme Court to correct what they contended was an erroneous holding in Priester.  The Fifth Circuit gave two valuable general reminders in this area. First: “It is a well-settled Fifth Circuit rule of orderliness that one panel of our court may not overturn another panel’s decision, absent an intervening change in the law, such as by a  statutory amendment, or the Supreme Court, or our en banc court.”  Second, “While the Texas Constitution allows this court to certify questions to the Texas Supreme Court, certification is not a proper avenue to change our binding precedent.”

Indusoft sued in the Southern District of Texas alleging theft of intellectual property.  Two defendants moved to dismiss on the grounds of forum non conveniens (under Gulf Oil Corp. v. Gilbert, 330 U.S. 501 (1947), not 1404(a)).  The Court affirmed dismissal, finding no error in (1) presuming that Brazil was an adequate alternate forum, (2) concluding that certain electronic data was more likely to be preserved in Brazil, (3) discounting the importance of one witness for whom compulsory process would not be available in Brazil, and (4) analyzing the interplay between the Texas case and related litigation in Brazil. Indusoft, Inc. v. Taccolini, No. 13-50042 (March 19, 2014, unpublished). The Court reversed dismissal of the other defendants’ counterclaims, finding that it was erroneous to do so sua sponte (citing Lozano v. Ocwen Federal Bank, 489 F.3d 636, 643 (5th  Cir. 2007)).

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.)

While a host of opinions have addressed basic problems with common plaintiffs’ theories in mortgage servicing cases, the recent case of Williams v. Wells Fargo is a useful guide to a wide range of them in a single opinion, including the statute of frauds and its exceptions, waiver, and basic TDCPA and RESPA violations.  The Court also reminded that a good contract pleading should identify the specific ways in which a contract has been breached, and found waiver when the grounds were not sufficiently detailed until the appellate level.

Even by the standards of tax cases, BNSF Railway Co. v. United States is arcane, but the underlying statutory analysis is of broad general interest.  No. 13-10014 (March 13, 2014). The first issue — the taxability of certain stock options — turned on whether a Treasury regulation about the meaning of the term “compensation” was entitled to Chevron deference.  The Fifth Circuit held that it was — as to the first Chevron factor, the Court found the term ambiguous, noting (1) the lack of a similar statute using the term, (2) variation among dictionary definitions, and (3) ambiguity in business usage, such as there was, at the time the relevant statute was passed in the 1920s-40s.  [Unintentional capitalist wit appears in footnote 63, which refers to the “Rand House Dictionary” rather than the “Random House Dictionary” in a citation about “capital or finance.”]  The Court then found the regulation reasonable, noting its general consistency with the goals and structure of the statute and its legislative history.  A second holding illustrates the application of the “specific-general canon” and “the rule against superfluities.”

A law firm argued that the Texas “anti-SLAPP” statute protected its efforts to solicit former patients of a dental clinic as clients.  NCDR, LLC v. Mauze & Bagby PLLC, No. 12-41243 (March 11, 2014).  (This statute has led to a great deal of litigation about communication-related disputes, often in areas that the Legislature may not have fully anticipated — this blog’s sister details such litigation in the Dallas Court of Appeals.)  In a detailed analysis, the Fifth Circuit agreed that the district court’s ruling against the firm was appealable as a collateral order.  The Court then sidestepped an issue as to whether the anti-SLAPP statute was procedural and thus inapplicable in federal court, finding it had not been adequately raised below.  Finally, on the merits, the Court affirmed the ruling that the law firm’s activity fell within the “commercial speech” exception to the statute:  “Ultimately, we conclude that the Supreme Court of Texas would most likely hold that M&B’s ads and other client solicitation are exempted from the TCPA’s protection because M&B’s speech arose from the sale of services where the intended audience was an actual or potential customer.”

Taylor sued his employer in state court for violations of Texas law.  Taylor v. Bailey Tool & Manufacturing Co., No. 13-10715 (March 10, 2014). Later, he amended his pleading to add federal claims.  Defendant removed and moved to dismiss on limitations grounds.  Under Texas law, Taylor’s new claims would not relate back because the original state law claims were barred by limitations when suit was filed.  Under Fed. R. Civ. P. 15(c), however, the claims would relate back because they “arose out of the conduct, transaction, or occurrence set out” in the original pleading.  Noting that Rule 81(c) says the Federal Rules “apply to a civil action after it is removed,” the Fifth Circuit concluded that they did not “provide for retroactive application to the procedural aspects of a case that occurred in state court prior to removal to federal court.”  Accordingly, it affirmed dismissal.

When a homestead is permanently exempted from a bankruptcy estate, are any proceeds from a subsequent sale of the homestead also permanently exempt? Viegelahn v. Frost found they were not.  No. 12-50811 (March 5, 2014).  Frost argued that In re Zibman, 268 F.3d 298 (5th Cir. 2001), was distinguishable because he sold his homestead after petitioning for bankruptcy, when the homestead was already exempted, while Zimban concerned homestead proceeds obtained before bankruptcy. The Fifth Circuit found that distinction immaterial, concluding that once a debtor sells his homestead the essential character of the homestead changes from “homestead” to “proceeds,” placing it under a more limited six month exemption.  Accordingly, when a debtor does not reinvest the proceeds within that period, they are removed from the protection of Texas law and are no longer exempt from the estate.

In Naquin v. Elevating Boats, LLC, the Fifth Circuit found that the verdict and resulting judgment in a Jones Act case erroneously included compensation for mental anguish from seeing the death of another person.  No. 12-31258 (March 10, 2014).  The Court disposed of the case as follows: “[S]erious practical problems would be presented at trial if we were to save some elements of the damage award and retry only other elements of damage.  ‘Where, as here, the jury’s findings on questions relating to liability were based on sufficient evidence and made in accordance with law, it is proper to order a new trial only as to damages.’  We therefore retain the jury’s liability finding but order a new trial on damages.”  (quoting Hadra v. Herman Blum Consulting Engineers, 632 F.2d 1242, 1246 (5th Cir. 1980)).

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.”

BP’s continuing efforts to reduce the scope of its Deepwater Horizon settlement program again produced three separate opinions from a panel in In re Deepwater Horizon (several cause numbers, March 3, 2014).  Judge Southwick found that the plan’s requirement of a “certification on the document that the claimant was injured by the Deepwater Horizon disaster” resolved any lingering jurisdictional issues.  Judge Dennis concurred in a shorter opinion.  Judge Clement dissented, arguing: “This agreement, as implemented, is using the powers of the federal courts to enforce obligations unrelated to actual cases or controversies.”

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).

Duoline Technologies v. Polymer Instrumentation presents an unusual appellate review of a discovery order, arising from an ancillary proceeding to enforce a subpoena for a Pennsylvania case.  No. 13-50532 (March 5, 2014, unpublished).  Plaintiff Duoline sought to depose Joseph Schwalbach, a former employee, about the business dealings between his new company and Defendant Polymer.  Among other rulings, the district court limited the document requests and deposition scope to events during Schwalbach’s employment by Duroline.  The Fifth Circuit noted that some evidence supported the plaintiff’s theory of a connection between the businesses, and that logically, plaintiff’s theory relied upon events after Schwalbach left his job at Duoline.  The Court did not find an explanatory affidavit from Schwalbach to be dispositive.

Several Louisiana parishes sought damages under a state statute for damages arising from the Deepwater Horizon incident.  In re Deepwater Horizon, No. 12-30012 (Feb. 24, 2014).  Condensing a much more nuanced opinion — the Fifth Circuit held that the claims were preempted by the Clean Water Act under International Paper v. Oulette, 479 U.S. 481 (1987), because the pollution arose from a source outside Louisiana.  The Court rejected arguments that the Oil Pollution Act of 1990 (prompted by the Valdez disaster) changed that analysis, and concluded that the Supreme Court ruled consistently with this result in Arkansas v. Oklahoma, 503 U.S. 91 (1992).

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.

Rowland Trucking’s insurance policy required that it maintain a fence around the entirety of its property.  The fence had gaps on the south and west side.  Thieves entered on the east side and stole $350,000 in videogame consoles.  The Fifth Circuit affirmed judgment for the insured under the Texas Anti-Technicality Statute, which provides: “Unless the breach or violation contributed to cause the destruction of the property, a breach or violation by the insured of a warranty, condition, or provision of a fire insurance policy or contract of insurance on personal property, or of an application for the policy or contract: (1) does not render the policy or contract void; and (2) is not a defense to a suit for loss.”  W.W. Rowland Trucking Co. v. Max America Insurance, No. 13-20341 (Feb. 24, 2014, unpublished).  The Court sidestepped an argument that the statute did not reach liability policies, finding that the policy here was a property policy notwithstanding its occasional use of the word “liability.”

Plaintiff Jongh sued “State Farm Lloyds” and Johnson, a local insurance adjuster, relating to the handling of her property insurance claim for storm damage.  Jongh v. State Farm Lloyds, No. 13-20174 (Feb. 20, 2014, unpublished).  State Farm answered and removed, arguing that (1) Johnson was improperly joined to destroy diversity; (2) Jongh had improperly named Lloyds, a separate entity; and (3) State Farm and Jongh were diverse.  The trial court ruled for the defendants after a 1-day bench trial.   The Fifth Circuit agreed with Plaintiff — who appears to have raised subject matter jurisdiction for the first time on appeal — that “State Farm never became a party in this action. Jongh did not  name State Farm as a defendant in her original petition; although it asserted in its answer and notice of removal that Jongh incorrectly named Lloyds as a defendant, State Farm did not move to intervene or otherwise request that the district court substitute it as the proper party in interest.”  The Court noted that Plaintiff, the “master of her complaint,” consistently asserted that her claim was against Lloyds and not State Farm.  The judgment was vacated and the case remanded.

In Star-Tex Resources, LLC v. Granite State Ins. Co., the parties disputed whether an “auto exclusion” barred coverage in a personal injury case.  553 F. App’x 366 (5th Cir. 2014).  The Fifth Circuit concluded that it was not possible to determine coverage form the plaintiff’s pleading: “The complaint contains only one, brief sentence describing the facts of the accident. Importantly, it contains no description of how Esquivel caused the collision.”  Therefore, it was appropriate to consider extrinsic evidence (beyond the “eight corners” of the pleading and policy) that the insured was driving a car at the time of the accident, as it was relevant to coverage and by itself did not go to liability, citing Northfield Ins. Co. v. Loving Home Care, Inc., 363 F.3d 523 (2004).

In Grimes v. BNSF Railway, the district court applied collateral estoppel to a Federal Railway Safety Act (“FRSA”) suit, based on a fact finding made by a type of arbitral panel called a Public Law Board (“PLB”) after an investigation and hearing by railroad personnel. No. 13-60382 (Feb. 17, 2014).  The Fifth Circuit reversed, noting: (1) the hearing was conducted by the railroad; (2) the plaintiff was represented by the union rather than an attorney; (3) the termination decision was made by a railroad employee, not by “an impartial fact finder such as a judge or jury”; (4) the rules of evidence did not appear to have controlled in the arbitral proceedings; and (5) “most crucially,” the PLB’s affirmance was based solely on the record developed at the hearing administered by the railroad.  The Court noted authority that rejects res judicata in this context, but also noted that “estoppel may apply in federal-court litigation to facts found in arbitral proceedings as long as the court considers the ‘federal interests warranting protection.’”

After recent opinions finding that credibility determinations led to fact issues in cases about whether a barge hit a bridge and a prison fight, the Fifth Circuit again so held in Vaughan v. Carlock Nissan of Tupelo, No. 12-60568 (Feb. 4, 2014, unpublished). Vaughan alleged that a car dealership unlawfully terminated her after she reported several irregularities there to Nissan.  The Fifth Circuit affirmed summary judgment for the dealership as to Mississippi’s “illegal act” exception to at-will employment, but reversed as to her tortious interference claim against the supervisor who terminated her.  That claim requires proof of bad faith, which Vaughan sought to establish by showing that she was not fired until making a complaint that specifically named the supervisor.  The supervisor admitted that, at the time of termination, he knew Vaughan had complained to Nissan but said “he did not know the contents of the complaint.”  The Fifth Circuit found that credibility issues about his claimed justifications for the firing, coupled with the ambiguity of his statement that Vaughn had “no right to report these things to Nissan,” and the timing of the termination, created a fact issue that made summary judgment unwarranted.

Villanueva worked for a Colombian affiliate of a publicly-traded entity subject to Sarbanes-Oxley.  He alleged that he was terminated after reporting a scheme by his employer to understate revenue to Colombian tax authorities.  Villanueva v. U.S. Department of Labor, No. 12-60122 (Feb. 12, 2014).  The Fifth Circuit affirmed the DOL’s rejection of his claim for whistleblower protection under SOX, concluding: “Villanueva did not provide inforotmation regarding conduct that he reasonably believed violated one of the six provisions of U.S. law enumerated in § 806; rather, he provided information regarding conduct that he reasonably believed violated Colombian law.”  (Footnote 1 notes that the Court did not reach the broader issue whether section 806 applies extraterritorially.)  Law 360 has reported on the case and collected opinion from both sides of the employment bar.

The Fifth Circuit found that a subcontractor’s CGL carrier had no duty to defend a construction defect claim against the general contractor.  Carl E. Woodward LLC v. Acceptance Indemnity Ins. Co., No. 12-60561 (Feb. 11, 2014). The pleading alleged that the general contractor, through its subcontractor, “built the foundation piers in non-conformity with plans and specifications.” An accompanying engineer’s report provided detail about related drainage problems.  The Court concluded that the policy language meant that “claims for liability can be brought after ongoing operations are complete, but the underlying liability cannot be due to the ‘completed operations.'”  A contrary holding, reasoned the Court, “effectively converts a CGL policy into a performance bond.”   Here, “[e]ven accepting the district court’s factual finding that damage had occurred during ongoing operations, the only ‘damage’ supported by allegation is the construction that was not in conformity with plans and specifications,” and “[l]iability for such damages arising out of completed operations . . . .”  Law360 has recently published an analysis of this opinion.  An opinion denying rehearing elaborates on the role of the engineering report.

Babalola and Adetunmbi alerted authorities to Medicare fraud by the clinic they worked for. Federal authorities investigated and the clinics’ operators, the Sharmas, were indicted and pleaded guilty, accepting a criminal restitution obligation of over $40 million.  United States ex rel Babalola v. Sharma, No. 13-20182 (Feb. 14, 2014).  During the criminal proceedings, the whistleblowers filed a FCA suit against the Sharmas.  The Sharmas asserted an interest in the restitution proceeds, arguing that it was an “alternate remedy” within the meaning of the FCA that would give them “the same rights in such proceeding as [they] would have had if the action had continued under this section.”  The Fifth Circuit disagreed, finding that other Circuits’ authorities “implicitly recogniz[e] that a qui tam suit must be filed before there is an alternate remedy.”   A dissent conceded that this reading of the FCA was correct, but called for Congressional intervention in situations like this where the plaintiffs “took the path of the Good Samaritan and without delay provided the government with the evidence needed to pursue the defrauders.”

The company’s Collective Bargaining Agreement said: “Discharge for a confirmed positive test under the substance abuse policy shall not be subject to grievance or arbitration. However, relative to such discharge the union continues to maintain the right to grieve and arbitrate issues around the integrity of the chain of custody.”  The union began an arbitration to challenge an employee’s termination for failing a drug test.  ConocoPhillips, Inc. v. Local 13-0555 United Steelworkers Int’l Union, No. 12-31225 (Jan. 30, 2014).  The arbitrator concluded that he had jurisdiction over that claim.  The company successfully opposed confirmation on the ground that he lacked power to decide jurisdiction, and the Fifth Circuit affirmed, finding no provision that “clearly and unmistakably” granted such authority.

The “ART entities” sued the “Clapper entities” for fraud about a real estate transaction, and they countersued for breach of fiduciary duty.  A jury found against both sides.  The Clapper entities appealed; the Fifth Circuit reversed on a legal issue and remanded for new proceedings on liability and damages. The ART entities then sought to raise the fraud claim again; the district court found it barred by the mandate rule, and on appeal from the second trial, the Fifth Circuit affirmed.  ART Midwest Inc. v. Clapper, No. 11-11140 (Feb. 3, 2014).  It reasoned: “We hold that the ART entities’ decision not to cross-appeal the jury’s fraud findings in the first district court proceeding prevented them from raising the same rejected fraud claims in the second district court proceeding. Even though they prevailed on many of their claims in the first district court proceeding, the consensus of circuit authority supports that the ART entities could have filed a ‘protective’ or ‘conditional’ cross-appeal of the adverse fraud finding.”   The Court otherwise affirmed, reversing as to one issue relating to “double-counting” of damages in light of the parties’ correspondence.

The Fifth Circuit released a revised opinion in James v. State Farm, which continues to affirm in part and reverse in part a summary judgment for the defendant in an insurance bad-faith case based on delays in handling the claim.  The majority tightens its description of the requirements for punitive damages under Mississippi law, the dissent heightens its criticism of the majority’s reasoning as to the applicable standard and analytical framework.

Mississippi law allows a “bad faith” claim relating to handling of workers’ compensation; Alabama law does not.  Williams, a Mississippi resident, was injured in Mississippi while working for an Alabama resident contract.  Williams v. Liberty Mutual, No. 11-60818 (Jan. 28, 2014).  The Fifth Circuit reversed the choice-of-law question, finding that section 145 of the Restatement (governing tort claims) applied rather than other provisions for contract claims.  Under that framework, Mississippi would give particular weight to the place of injury, and thus apply Mississippi law. The opinion highlights the importance of the threshold issue of properly characterizing a claim before beginning the actual choice-of-law analysis.

The Fifth Circuit provided its most thorough recent review of the pleading requirements of Twombly and Iqbal in  Merchants & Farmers Bank v. Coxwell, No. 13-60368 (Feb. 7, 2014, unpublished).  The issue was whether the plaintiff pleaded a conversion claim relating to an attorney’s distribution of certain funds in alleged violation of a court order.  The Fifth Circuit noted that such a claim was cognizable under Mississippi law, and that the plaintiff’s pleading might have satisfied Conley v. Gibson.  Under Twombly and Iqbal, however:  “The complaint did not specify what court issued the order, when it was issued, or to whom it was directed; the complaint did not describe what the order required and therefore whether the allegation of a violation is plausible or merely fantastical. Further, merely alleging a perfected security interest is insufficient to establish ownership, and the complaint did not describe whether the court order established M&F’s possessory interest in the funds by reducing its claim to judgment.”  (citing Funk v. Stryker Corp., 631 F.3d 777, 782 (5th Cir. 2011)).

In Credit Union Liqudity Services, LLC v. Green Hills Devel. Co. LLC, the Fifth Circuit found that a creditor lacked standing under section 303(b) of the Bankruptcy Code to file an involuntary bankruptcy proceeding, because the creditor’s debt was subject to a ‘bona fide dispute.’  No. 12-60784 (Feb. 3, 2014).  The Court first held that the debtor had not waived arguments about 303(b) by failing to file a conditional cross-appeal from the district court’s dismissal order, finding that the arguments fell under the rule allowing affirmance on any argument supported by the record.  In reaching its conclusion, the Court noted that the claim had been subject to “unresolved, multiyear litigation.”  The Court also observed that 2005 amendments to the Code defined a bona fide dispute as one “to liability or amount,” a change which drew into question earlier authority that focused only on liability.  That change can allow consideration of counterclaims related to the creditor’s claim.

In Wells Fargo Capital Finance v. Noble, Wells Fargo faced a class action in California.  It attempted to get an antisuit injunction from a Texas bankruptcy court, which was denied. No.13-10468 (Feb. 5, 2014, unpublished).  The Fifth Circuit found the appeal moot, because Wells’s briefing focused on a consolidated complaint in the class case that was amended after the appeal began.  While the Court noted: “An amended complaint supersedes the original complaint and renders it of no legal effect unless the amended complaint specifically refers to and adopts or incorporates by reference the earlier pleading,” it did not resolve the appeal on that basis, simply finding that the new complaint significantly changed the relevant issues.

The Chinese defendant in Germano v. Taishan Gypsum Co., part of the “Chinese Drywall” MDL proceeding, sought to set aside a default judgment for lack of personal jurisdiction.  742 F.3d 576 (5th Cir. 2014).  Applying Fourth Circuit law, which the Court characterized as taking a “more conservative” approach to recent Supreme Court decisions than the Fifth (see Ainsworth v. Moffett Engineering, 716 F.3d 174 (5th Cir. 2013).  The Court found jurisdiction under that Circuit’s “stream-of-commerce plus” test, noting that the defendant sold directly into Virginia, made markings on its product specific to the Virginia customer, modified the design specifically for that customer, and had a plan to expand sales by leveraging the relationship with the customer.  The Court also found a lack of excusable neglect, noting that service was proper under the Hague Convention and that the defendant delayed seeking legal counsel for many months.  

In 2012, the Fifth Circuit held that for purposes of the duty to defend, a mishap while loading a patient into an ambulance was “use” of an auto.  Litigation continued, and the district court concluded that for purposes of the duty to indemnify (where the inquiry is not limited to the “eight corners”), the injury did not arise from auto use.  National Casualty Co. v. Western World Ins., 12-50652 (Jan. 15, 2014, unpubl.)  The Fifth Circuit reaffirmed its earlier conclusion that it did, and also remanded for further review of a potentially applicable exclusion about auto use: “If the EMTs in fact failed to properly secure Rigsby to the gurney before they began to move her toward the ambulance, and if Rigsby’s injury resulted from this failure, Western World’s auto exclusion is inapplicable.” The facts of this case illustrate some awkwardness in common form insurance provisions in this area.

Scott v. Carpanzano affirmed two default judgments and vacated a third, applying the basic federal standard: “whether the defendant willfully defaulted, whether a meritorious defense is presented, and whether setting aside the default judgment would prejudice the plaintiff.”  No. 13-10096 (Jan. 24, 2014, unpublished).  Footnote 3 notes that the standards under Rule 60(b)(1) and Rule 55 may diverge after a 2007 stylistic revision to Rule 55,  but concludes they have not yet and did not on the facts of this case.

The question in Bank of New York Mellon v. GC Merchandise Mart LLC was whether the acceleration of a note triggered a $1.8  million prepayment penalty, when the debtor had ceased making payments on the note.  No. 13-10461 (Jan. 27, 2014).  The Fifth Circuit affirmed judgment in favor of the debtor: “The plain language of the contract does not require the payment of the Prepayment Consideration in the event of mere acceleration. Quite the opposite, in fact: the plain language plainly provides that no Prepayment Consideration is owed unless there is an actual prepayment, whether voluntary or involuntary.”

This week, the Texas Lawbook has posted an excellent profile of Chief Judge Carl Stewart, titled “Meet Chief Judge Carl Stewart: ‘A Brilliant Legal Mind Housed in a Very Nice, Regular Person.'”  The ABA Journal will publish the profile later this week.

Boyett v. Redland Ins. Co. examined whether a forklift is a “motor vehicle” within the meaning of Louisiana’s uninsured motorist statute, and concluded that it is one.  No. 12-31273 (Jan. 27, 2014).  Its Erie analysis illustrates a feature of Louisiana’s civil law system that bedevils outsiders.  On the one hand, a court “must look first to Louisiana’s Constitution, its codes, and statutes, because the ‘primary basis of law for a civilian is legislation, and not (as in the common law) a great body of tradition in the form of prior decisions of the courts.’ Unlike in common law systems, ‘[s]tare decisis is foreign to the Civil Law, including Louisiana.'”  On the other hand, “[W]hile a single decision is not binding on [Louisiana’s] courts, when a series of decisions form a constant stream of uniform and homogenous rulings having the same reasoning, jurisprudence constante applies and operates with considerable persuasive authority.”

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.

In Richardson v. Wells Fargo, a mortgage servicer sought recovery of attorneys fees pursuant to a provision in the deed of trust that referred to “paying reasonable attorneys’ fees to protect its interest in the Property and/or rights under this Security Instrument.”  No. 13-10002 (Jan. 24, 2014).  The issue was whether a Rule 54(d)(2) motion was an appropriate vehicle to make its claim, which turned on “whether the fees are an element of damages or collateral litigation costs.”  The Fifth Circuit concluded this provision defined legal fees as collateral costs, not “an independent ground of recovery” where Rule 54 might become inapplicable.  The Court went on to hold that “motions for attorney’s fees provided by contract are permissible under Rule 54(d)(2)” after reviewing and rejecting authority that suggested otherwise.   (For thorough review of when fees become damages in their own right under Texas law, and other key points about fee awards, please consult  “How to Recover Attorneys Fees in Texas” by my colleagues Trey Cox and Jason Dennis.)

A painstaking panel issued two detailed tax opinions on the same day.  In the first, “substantial underpayment” penalties were found appropriate, in a partnership-level proceeding, where substantial authority did not support the taxpayer’s position as to a well-known inappropriate tax shelter.  NPR Investments LLC v. United States,  No. 10-41219 (Jan. 23, 2014).  In  the second, the Court affirmed a finding that certain claimed tax credits were not “qualified research expenses” within the meaning of the Internal Revenue Code, while also remanding to enforce a stipulation made by government before the Tax Court, In an evidentiary holding of broader interest, the court found no abuse of discretion in the exclusion under Rule 403 of the taxpayers’ alleged lab records, agreeing that they were voluminous and not pertinent to the specific tax law issues at hand. Shami v. Commissioner of Internal Revenue, No. 12-60727 (Jan. 23, 2014).  Both opinions discuss the appropriate standards of review for appeal from the U.S. Tax Court.

BAL Metals stored roughly $500,000 of copper in a warehouse operated by Mundell Terminal Services.  Thieves stole the copper.  BAL Metals’ insurance carrier paid the claim and then sued the warehouse as BAL’s subrogee.  United Nat’l Ins. Co. v. Mundell Terminal Servs., Inc., No. 13-50052 (Jan. 23, 2014). The warehouse asked its carrier for defense and indemnity, coverage litigation ensued, and the district court granted summary judgment for the warehouse’s carrier.  It reasoned that because a bailor is presumed to insure a bailee’s interest as well as its own under Texas law, the policy was “other insurance” to BAL’s coverage.  The Court noted that the warehouse had a first-party property damage policy rather than liability coverage.  The Court also concluded that another coverage argument, about the characterization of the metal under the policy’s definition of “property,” had been waived because it was not presented with enough specificity to the district court.

The City of Alexandria settled a lawsuit with an electricity supplier for a $50 million recovery.  A sordid dispute then broke out among the City and various lawyers who worked on the case and asserted a contingency interest in the recovery.  City of Alexandria v. Brown, No. 12-30823 (Jan. 15, 2014).  The opinion, which affirms the district court’s resolution of the dispute, provides an overview of when “quantum meruit” principles control over the terms of a contingent fee agreement.  As to one lawyer, relevant factors included the end of her involvement relatively early in the matter, and seemingly unreliable time records during that involvement. As to another, the court noted that the contract created a “joint obligation” between him and another lawyer that became impossible of performance after he was disbarred, requiring a quantum meruit analysis.  (A related appeal was disposed of later in the year in deference to this panel opinion.)

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.

The plaintiff in Diggs v. Citigroup, Inc. sought to resist arbitration of an employment dispute, relying upon a study by Cornell professor Alex Colvin that concluded: “there is a large gap in outcomes between the employment arbitration and litigation forums, with employees obtaining significantly less favorable outcomes in arbitration.”  No. 13-10138 (Jan. 8, 2014, unpublished).  The Fifth Circuit affirmed the district court’s decision to exclude the study under Daubert, noting that the study was not connected to this dispute and examined data from 5 years before its initiation.  The Court also questioned — without resolving — the validity of comparing arbitration statistics from 2003-07 with litigation statistics from the late 1990s.

After WaMu failed, the FDIC conveyed its assets and liabilities to Chase.  Several landowners sought to enforce lease terms against Chase by virtue of that conveyance. The Fifth Circuit affirmed summary judgment for them in Excel Willowbrook LLC v. JP Morgan Chase Bank, NA, 758 F.3d 592 (5th Cir. 2014).  First, the Fifth Circuit “reluctantly” followed two other Circuits which found that a “no-beneficiaries” clause in the FDIC’s assignment extinguished the landlords’ rights, noting its own belief that the lease requirements were more in the nature of primary obligations.  But the Court then agreed with the district court that the landlords were in privity of estate with Chase and could enforce the leases for that reason, characterizing the FDIC’s argument to the contrary as “ignor[ing] eight centuries of legal history,” and expressly disagreeing with an Eleventh Circuit case to the contrary.  As for concerns about expansive liability for FDIC assignees, the Court observed: “The FDIC can avoid its present plight in future cases by drafting contractual provisions for the right it seeks to claim.”  The Court re-examined this “obscure but heavily litigated consequence of the largest bank failure in U.S. history” in Central Southwest Texas Development, LLC v. JPMorgan Chase, No. 12-51083 (March 2, 2015), resolved largely on procedural grounds.

9-0, the Supreme Court reversed the Fifth Circuit’s panel opinion in Mississipi ex rel. Hood v. AU Optronics Corp., 571 U.S. ___ (Jan. 14, 2014).  After review of CAFA’s language and structure, that Court concluded that an action brought on behalf of consumers by a state was not a “mass action” that could allow removal, since it has only one plaintiff, and the claims of the relevant consumers cannot be counted without “unwieldy inquiries.”  The Supreme Court characterized the “mass action” provision of CAFA as a “backstop” to prevent the repackaging of a class action.

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.

From recent cases described on this blog, here are three basic tips for business cases in 2014:

 1.            Plead like a mystery writer.  Like a skilled crime novelist, the civil rights plaintiff in Jabaray v. City of Allen survived a Rule 12 motion by detailing motive and opportunity – the mayor’s alleged personal investment in the real estate at issue, and his role and involvement in the relevant city agencies.  No. 12-41054 (Nov. 25, 2013, unpubl.)

2.            Eyewitnesses help make fact issues.  Plaintiff claimed a barge came loose during Hurricane Katrina and damaged a bridge.  Defendant said that Plaintiff’s theory required the impossible – that the barge move upstream against hurricane-force wind.  The Fifth Circuit found a fact issue from eyewitnesses who saw and heard things consistent with Plaintiff’s theory.  “There is a great deal of testimony supporting Lafarge’s position, to be sure, and little to support the Parish’s, but we are mindful of the summary judgment standard.”  St. Bernard Parish v. Lafarge North America, No. 13-30030 (Dec. 19, 2013, unpubl.)  This reasoning could extend to admissible testimony about the commercial context of an agreement, or its course of performance.

3.            Keep experts on Earth.  The Court found that an expert in a toxic tort case made unsupported assumptions about (a) the plaintiff’s work hours, (b) what he did at work, (c) where he worked, and (d) whether the ventilation worked.  ”To be sure, reliable expert testimony often involves estimation and reasonable inferences from a sometimes incomplete record. . . . Here, however, the universe of facts assumed by the expert differs frequently and substantially from the undisputed record evidence.”  Moore v. International Paint LLC, No. 13-30281 (Nov. 15, 2013, unpubl.)

A recurring issue in federal litigation arises from cases that “overstay their welcome” in the federal courthouse; for example, where only state law claims remain after dismissal of federal claims.  A variation of that situation arose in Energy Management Services LLC v. City of Alexandria, where a city sued its electricity provider.  After that litigation was removed to federal court, the city then removed a second suit, brought by its utility consulting firm, on the ground of supplemental jurisdiction — after the first case had been settled.  12-31184 (Jan. 9, 2014).  The remand order was certified for interlocutory appeal and the Fifth Circuit reversed, finding that there was no original jurisdiction over the second case as required by the removal statute.  The Court acknowledged that the district court could have continuing jurisdiction over matters related to the original settlement, which could potentially even extend to such matters involving third parties — but here, the second case had no connection to those settled matters.

Su, a citizen of Taiwan, served on the board of Vantage, an offshore drilling contractor. Vantage is incorporated in the Cayman Islands with its principal place of business in Texas.  Vantage sued Su in Texas state court for breach of fiduciary duty and related claims.   Su removed, remand was denied, and the district court certified the jurisdictional issue for interlocutory appeal.  Vantage Drilling Co. v. Su, No. 13-20379 (Jan. 7, 2014). The Fifth Circuit reversed and ordered remand, relying primarily upon  Chick Kam Choo v. Exxon Corp., 764 F.2d 1148 (5th Cir. 1985).  Section 1332(a)(2) requires complete diversity, and section 1332(c)(1) deems a corporation a citizen of “every State and foreign state” in which it is incorporated — thus, “there are aliens on both sides of the litigation, complete diversity is lacking, and there can be no diversity jurisdiction.”  Su argued that Choo could be read to allow federal jurisdiction to protect against local bias, but the Court rejected that argument as inconsistent with the statute.

Federal Rule of Bankruptcy Procedure 8002(a) says that the notice of appeal from bankruptcy to district court must be filed within 14 days of the judgment or order at issue. Here, Smith filed his notice of appeal to district court thirty days after entry of final judgment. Smith v. Gartley, No. 13-50154 (Dec. 16, 2013).  After reviewing the continuing validity of its older precedent of In re Stangel, 219 F.3d 498 (5th Cir. 2000), which held that this deadline is jurisdictional, the Fifth Circuit looked to In re Latture, 605 F.3d 830 (10th Cir. 2010), which reached the same conclusion. Because “the statute defining jurisdiction over bankruptcy appeals, 28 U.S.C. § 158, expressly requires that the notice of appeal be filed under the time limit provided in Rule 8002,” the time limit is jurisdictional.

In Coleman v. H.C. Price Co., a toxic tort case, the Fifth Circuit certified to the Louisiana Supreme Court the question whether that state’s one-year limitations statute for survival actions is “prescriptive” (limitations does not run until the cause of action accrues, based on the plaintiff’s actual or constructive knowledge), or or “preemptive” (the cause of action is extinguished even if it has not accrued).  No. 13-30150 (Dec. 18, 2013, unpublished). The issue is significant, as the opinion says: “the answer will define the time period governing all survival actions brought in Louisiana . . . .”

Venable had a heart attack on a drilling barge; he and its owner agreed to settle for $350,000.  The Louisiana Workers’ Compensation Corporation initially indicated its agreement, but withdrew consent when it became evident that he would need a heart transplant.  Venable v. Louisiana Workers’ Compensation Corporation, No. 12-30965 (Dec. 30, 2013).  Litigation ensued as to whether the LWCC could rely upon section 933 of LHWCA, which gives a carrier such as LWCC a veto right with substantial procedural safeguards.  The Fifth Circuit reversed summary judgment for Venable.  After a thorough and succinct review of the black-letter law on federal question jurisdiction, the Court found that section 933 gave the LWCC a defensive right that did not implicate Venable’s “well-pleaded complaint.”  It also found that the tentative nature of the LWCC’s alleged consent foreclosed ancillary jurisdiction over the claimed settlement under Kokonnen v. Guardian Life, 511 U.S. 375 (1994).

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.

The lower courts agreed that the sale of a pipeline system from a bankruptcy estate was free and clear of an obligation to pay certain fees to “Newco.”  Newco Energy v. Energytec, Inc., No. 12-41162 (Dec. 31, 2013).  The Fifth Circuit reversed, finding that the obligations arose from a covenant that ran with the land.  First, the Court found that the lower courts’ reservation of the “free and clear” issue was sufficient to avoid section 363 of the Bankruptcy Code, which would otherwise moot the appeal for failure to get a stay.  On the merits, the Court focused on “horizontal privity” between the parties at the time the covenant was created, expressing doubt that Texas in fact imposed such a requirement, but finding it satisfied in the conveyances here.  (discussing Wayne Harwell Props. v. Pan Am. Logistics Center, Inc., 945 S.W.2d 216, 218 (Tex. App.–San Antonio 1997, writ denied)).  The Court also concluded that the payment obligation ran with the land, as it related to transportation from the land and was secured by a lien on the entire pipeline.  (distinguishing El Paso Refinery, LP v. TRMI Holdings, Inc., 302 F.3d 343 (5th Cir. 2002)).

Waltner v. Aurora Loan Services LLC welcomes the New Year with three bread-and-butter issues in business litigation.  No. 12-50929 (Dec. 31, 2013, unpublished).  First, a party’s failure to answer on time does not require the “drastic remedy” of a default judgment, especially when a plaintiff shows no prejudice from the failure to timely answer.  The granting of a default judgment is a discretionary ruling by the district court.  Second, damages for lost use of property are not reliance damages that can be recovered with a promissory estoppel claim.  Rather, they are consequential losses — a form of expectation damages.  Finally, while Fed. R. Civ. P. 26(g)(2) says that a court “must strike” unsigned discovery responses “unless a signature is promptly supplied” after the error is identified, the district court has discretion in determining what is “prompt” and in what weight to give the lack of prejudice to the opposing party.

After a recent example of attorneys fees that were not “inextricably intertwined” under Texas law, the Fifth Circuit followed this month with a practical example of the Texas requirement of “presentment” of a contract claim before fees may be recovered. In Playboy Enterprises, Inc. Sanchez-Campuzano, the Court reminded that the pleading of presentment is procedural, and thus not a requirement in the federal system.  No. 12-40544  (Dec. 23, 2013, unpublished).  It is, however, a substantive requirement.  In this case, sending a “Notice of Default” under a primary obligation was enough to “present” a claim for liability on a guaranty, noting the “flexible, practical understanding” of the requirement by Texas courts. The Court distinguished Jim Howe Homes v. Rodgers, 818 S.W.2d 901 (Tex. App.-Austin 1991, no writ), which found that service of a DTPA complaint was not presentment of a later-filed contract claim, on the ground that the “Notice” here went beyond mere service of a pleading.  For thorough review of this principle, and other key points about fee awards, please consult the book “How to Recover Attorneys Fees in Texas” by my colleagues Trey Cox and Jason Dennis.)

New York Life v. Cannatella involved the interpleader of life insurance benefits.  The Fifth Circuit affirmed the award of $750 in attorneys fees to the insurance company who filed the action, agreeing that the company was “disinterested,” and identifying these factors about a fee award to a party in its position: “1) whether the case is simple or involved; 2) whether the stakeholder performed any unique services for the claimants or the court; 3) whether the stakeholder acted in good faith and with diligence; 4) whether the services rendered benefited the stakeholder; and 5) whether the claimants improperly protracted the proceedings.”  No. 12-30663 (Dec. 23, 2013, unpublished).

Gregg Costa, a recent appointee to the Galveston division of the Southern District of Texas, has been nominated by President Obama to the Fifth Circuit.  A Rehnquist clerk and the lead prosecutor in the Allen Stanford case, Judge Costa enjoys substantial bipartisan support for his intellect and abilities.

A barge moored at a facility operated by Lafarge came loose during Hurricane Katrina and caused extensive damage.  The district court granted summary judgment to Lafarge, finding that the plaintiff’s damage theory was not scientifically credible in light of the observed weather conditions at the time.  St. Bernard Parish v. Lafarge North America, Inc., No. 13-30030 (Dec. 19, 2013, unpublished).  The Fifth Circuit agreed that “[t]here is a great deal of testimony supporting Lafarge’s position, to be sure, and little to support the Parish’s, but we are mindful of the summary judgment standard.”  It reversed, however, noting eyewitness testimony that was not consistent with the defendant’s expert analysis. The Court distinguished and limited Ralston Purina v. Hobson, 554 F.2d 725 (5th Cir. 1977), which involved an unusual theory about the behavior of starving chickens, on the ground that its plaintiff could not prove the facts that his theory required.

The parties’ agreement said: “Upon payment of the Lease Termination Fee, TTE will not longer have any obligations under Section 9.1A.”  The district court found that the structure of the agreement meant that provision did not apply to all of the relevant buildings.  The Fifth Circuit disagreed: “While such a divisions may be analytically satisfying, it is unsupported by any other language in the MOU, such as, for example, a paragraph heading identifying a particular provision as only relating to one warehouse.”  APL Logistics Americas, Ltd. v. TTE Technology, Inc., No. 13-10352 (Dec. 13, 2013, unpublished).

Among other issues in Farkas v. GMAC Mortgage LLC, a borrower disputed whether he had received proper notice of the servicer’s identity, arguing that only the current mortgagee could send effective notice.  No. 12-20668 (Dec. 2, 2013, unpublished).  The Fifth Circuit affirmed a judgment against him on the grounds of quasi-estoppel, noting: “The duration and regularity of these continued payments to mortgage servicers who had not been identified by current mortgagees constitute acquiescence to the validity of notice of transfer from one mortgage servicer to the next.  The equitable relief afforded by quasi-estoppel assures that a party’s position on a given issue is more than a matter of mere convenience but is instead a stance to which it is bound.”

Alphonse lost his home to foreclosure.  He then sued in federal court, alleging unfair trade practices.  Alphonse v. Arch Bay Holdings LLC, No. 13-30154 (Dec. 11, 2013, unpublished).  The district court dismissed based on the Rooker/Feldman doctrine, but by the time the Fifth Circuit took up the case, all parties conceded that ruling was incorrect because of Truong v. Bank of America, 717 F.3d 377, 381-83 (5th Cir. 2013).  The appellees urged affirmance based on res judicata from the foreclosure proceeding, but the Fifth Circuit remanded for further factual development.  The party to the foreclosure proceeding was a “Series 2010B” that owned the mortgage; the parties to the federal case were that entity’s parent and its mortgage servicer; and the Court was not convinced that the pleadings — standing alone — established the right relationships to find preclusion.  The Court also remanded for further consideration of whether Delaware law about 2010B entities applied to third party claims, noting a potential exception the “internal affairs” doctrine in choice-of-law analysis.

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.”

In Croft v. Lowry, the debtor filed for bankruptcy after judgment was entered against him for attorneys fees and sanctions in two lawsuits.  No. 13-50020 (Dec. 10, 2013).  The debtor sought to lift the stay to pursue appeals of those judgments; the adverse parties in the lawsuits opposed, arguing that the debtor’s defensive appellate rights were estate property and could be sold.  The district court ruled for the debtor and the Fifth Circuit reversed.  Noting that only two courts have addressed this issue, and reached different results, the Court concluded that the rights had quantifiable value and were thus “property” under Texas law. The Court noted that the rights had value to the estate, since appellate success would reduce liability, as well as the judgment creditors, who may be willing to pay some amount to avoid litigation expense and reversal risk.  “Whether the defensive appellate rights are sold depends upon whether the parties can agree on the value of those rights, not whether they have any value at all.”  (emphasis in original)

Seventy property owners sued St. Bernard Parish, alleging that it wrongfully demolished their properties in the wake of Hurricane Katrina (which flooded virtually every structure in that hard-hit area).  The Parish’s insurer disputed coverage.  Lexington Ins. Co. v. St. Bernard Parish Gov’t, No. 13-30300 (Dec. 6, 2013, unpublished).  Among other arguments, the insurer argued that there was no coverage because the policy had a $250,000 retention limit per occurrence, and each demolition (none of which involved more than that amount) should be viewed as a separate occurrence.  The district court and Fifth Circuit ruled for the Parish.  The Fifth Circuit noted that the limit applied “separately to each and every occurrence . . . or series of continuous, repeated, or related occurrences,” and that the phrase “related” has a broad meaning in the insurance context, covering logical or causal connections between acts or occurrences.   Here: “[T]he acts alleged in the underlying actions are related because they all resulted from St. Bernard’s ordinance condemning those properties that remained in disrepair following Hurricane Katrina. The fact that the properties in the underlying action were demolished at different times, in varying degrees, and at different locations, does not mean that these acts are not related.”

The plaintiff in Weeks Marine Inc. v. Standard Concrete Products Inc. fell from a crane during a bridge construction project.  No. 12-20610 (Dec. 6, 2013).  He sued Weeks Marine, the general contractor, who in turn sought indemnity from Standard Concrete, the manufacturer of the “concrete fender modules” for the project.  The district court granted summary judgment for the manufacturer and the Fifth Circuit affirmed.  A broader indemnity obligation in the original purchase order was limited by the additional terms and conditions to “actual damages relating to workmanship of Seller’s (Standard Concrete) product.”  Accordingly, the plaintiff’s claims, related to a steel component of the product made by another company, were not covered: “The steel modules are a component that Standard Concrete used to make its product; they are not the product itself. Standard Concrete’s products are the pre-cast concrete fender modules. The common usage of ‘product’ distinguishes this term from components, tools, and equipment used in the manufacturing process.”

Mississippi brought six parens patriae actions alleging inappropriate charges for credit card “ancillary services” in violation of state law.  Defendants removed under CAFA and on the ground of complete preemption, and the district court denied remand. Hood v. JP Morgan Chase & Co. (Dec. 2, 2013).  The Fifth Circuit reversed.  As to CAFA, it found that defendants (who have the burden) did not establish that any plaintiff had a claim of $75,000 – especially when Mississippi offered evidence that the average yearly charge at issue was around $100.  The Court also observed that the defendants likely had similar information in their records.  The Court acknowledged that federal usury laws have the effect of complete preemption, but found that the charges at issue in these cases could not be characterized as “interest” within the meaning of those laws.

In Ortega v. Young Again Products, the plaintiff sued a judgment creditor and its counsel, claiming that they took assets that belonged to him rather than the judgment debtor.  No. 12-20592 (Nov. 27, 2013, unpublished).  The Fifth Circuit recognized that Texas extends qualified immunity to claims by a third-party against an attorney for conduct requiring the “office, professional training, skill, and authority of an attorney.”  The focus is on the type of conduct, not its merit.  Accordingly, removal of the case was proper because the attorney was fraudulently joined, and dismissal for various reasons was affirmed.

In D.R. Horton Inc. v. NLRB, the Fifth Circuit reviewed an NLRB decision that invalidated an arbitration agreement as to collective or class claims related to employment.  No. 12-60031 (Dec. 3, 2013).  The court deftly sidestepped a difficult constitutional issue, presently before the Supreme Court, about President Obama’s “recess appointments” to the NLRB.  On the merits, the Court reversed the NLRB.  The Board relied upon Section 7 of the NLRA, which guarantees the right “to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection.”  The Court found that this statute did not create a right to pursue collective or class claims in court that trumped the language and policy goals of the Federal Arbitration Act.  A recent Texas Lawbook article discusses the significance of this opinion for employers.

In a 9-0 opinion, the Supreme Court reversed a Fifth Circuit panel about the enforcement of a forum selection clause.  Atlantic Marine Construction v. U.S. District Court for the Western District of Texas, 571 U.S. ___ (December 3, 2013).  The panel opinion questioned enforceability when the district of suit was otherwise proper under the federal venue statutes; a strong dissent by Judge Catharina Haynes argued otherwise. The Supreme Court endorsed her position: “When the parties have agreed to a valid forum-selection clause, a district court should ordinarily transfer the case to the forum specified in that clause.  Only under extraordinary circumstances unrelated to the convenience of the parties should a §1404(a) motion be denied. And no such exceptional factors appear to be present in this case.”  Procedurally, while the Supreme Court noted in its introduction that the case arose in a mandamus context, it nowhere discusses how that posture affects the analysis — a significant point that divided the Fifth Circuit’s recent en banc vote in the case of In re Radmax.  

Two new briefing rules took effect in the Fifth Circuit on December 1.  The first eliminates the requirement of a separate statement of the case, and consolidates a matter’s procedural and substantive history into a single statement of facts.  The second standardizes record citations.  “For multiple record cases, parties will cite ‘ROA’ followed by a period, followed by the Fifth Circuit appellate case number of the record they reference, followed by a period, followed by the page of the record. For example, ‘ROA.13 12345.123.’  In single record cases, parties cite the short citation form, ‘ROA,’ followed by a period, followed by the page number. For example, ‘ROA.123.'”  This standardized form should help the Court in electronically matching record citations and the actual record.

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.”

Borrowers alleged that their lender knowingly accepted an inaccurate fair market value of their home, for purposes of a home equity loan, in violation of the Texas Constitution.  Gonzalez v. U.S. Bank, N.A., No. 13-10342 (Nov. 29, 2013, unpublished).  The lender won summary judgment and the Fifth Circuit affirmed.  The borrowers first pointed to a tax appraisal, which the Court rejected because “under Texas law, tax valuations are legally insufficient evidence of fair-market value.”  Second, the borrowers pointed to one of their affidavits, which the Court also rejected as “conclusory and unsubstantial” and insufficient to prove notice to the lender.  The Court briefly reviewed other summary judgment cases involving similar “self-serving” affidavits.

“The Daubert reliability analysis applies to, among other things, ‘the facts underlying the expert’s opinion.'”  Moore v. International Paint LLC, No. 13-30281 (Nov. 15, 2013, unpublished).  In this case, the Fifth Circuit affirmed the exclusion of expert testimony about a plaintiff’s cumulative benzene exposure, citing these problems with his assumed facts: (1) assuming an hourly rate of $6,00, when his rates were in fact $6.99, $7.44, and $8.00; (2) assuming, contrary to the plaintiff’s deposition testimony, that he always worked with paint indoors, that his respirator always failed within an hour, and he never received a replacement; (3) assuming, contrary to other deposition testimony, that the indoor spaces where the plaintiff worked were always unventilated; and (4) assigning an arbitrary number, with no record support, to the amount of time the plaintiff worked as a sandblaster rather than a painter.  “To be sure, reliable expert testimony often involves estimation and reasonable inferences from a sometimes incomplete record. . . . Here, however, the universe of facts assumed by the expert differs frequently and substantially from the undisputed record evidence.”

Due to the nature of its case load, the Fifth Circuit does not often give practical advice on how to plead under Twombly and Iqbal.  It has written a handful of cases in the area, though, and the new opinion of Jabaray v. City of Allen adds to that group.  No. 12-41054 (Nov. 25, 2013, unpublished).  Jabary alleged constitutional claims arising from the revocation of the Certificate of Occupancy for his business (a “restaurant, hookah bar, and tobacco store” that also sold “K2” for a time.)  The Fifth Circuit affirmed the Rule 12 dismissal of most defendants, but reversed as to two.  The holding of general interest relates to the pleading of the mayor’s involvement in the decision, which was found adequate — the court specifically noted that the pleading said the mayor had suggested to Jabary that he move his business, and that the mayor had a potential financial motive because he owned another business in the relevant mall.

After a recent merciful reception for an untimely notice of appeal, the Fifth Circuit reacted differently in M.D. v. Perry, No. 13-90045 (Nov. 19, 2013, unpublished).  The district court certified a large class of children in the Texas foster care system.  The State of Texas filed a petition for leave to appeal under Fed. R. Civ. P. 23(f), a day late.  Sidestepping the technical question whether the deadline was “jurisdictional” or simply “claims-processing,” the Court found it binding, noting that the “narrow window” set by the rule reflected a careful balance of policies.  The Court also rejected a request to suspend the deadline under Fed R. App. P. 2, noting that Fed. R. App. P. 26 expressly prohibits deadline suspension as to a petition for permission to appeal.

The Fifth Circuit continued its conservative approach to the construction of guaranties in McLane Foodservice Inc. v. Table Rock Restaurants, LLC, No. 12-50980 (Nov. 15, 2013).   In 1997, an investor in a restaurant chain guaranteed the chain’s debts to PFS, a division of Pepsioco.  Years later, McLane became the owner of PFS’s operations after a series of sales transactions.  In 2010, a customer of McLane called Table Rock went out of business, owing McLane over $400,000, and sought to collect on the original guaranty. The Fifth Circuit agreed with the district court that the guaranty only reached credit extended by PFS, that McLane was not an “affiliate” of PFS, and that “successors and assigns” language in the guaranty could not expand the scope of the underlying guaranty obligation.

A REIT sued the City of College Station, alleging that its zoning decisions were unconstitutionally irrational and unfair.  The City’s CGL policy covered liability arising from “wrongful act[s]” of city officials, with an exclusion for liability arising from eminent domain or condemnation proceedings.  City of College Station v. Star Insurance, No. 12-20746 (Nov. 14, 2013).  The district court granted summary judgment for the insurer and the Fifth Circuit reversed: “As [the REIT’s] constitutional and tortious interference claims may produce liablity that does not ‘arise out of’ [its] inverse condemnation action, [the insurer] is liable for the City’s defense costs.”

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 classic problem in restitution law involves how to disgorge profits that result in part from wrongful conduct (i.e., taking a client) and in part from lawful action (i.e., doing quality work for that stolen client).  In Gulf & Mississippi River Transp. Co. v. BP Oil Pipeline Co., the Fifth Circuit addressed the profits of a pumping station located on a disputed tract of land. No. 12-30741 (Sept. 18, 2013).   Under the distinctive terminology of Louisiana law, the landowner argued that the profits were the “civil fruit” of the tract, and the pump operator argued that they came solely from the operation of the pumping business.  The Fifth Circuit remanded for clarification of “whether [the district court] was referring to natural fruits, civil fruits, or both” in its analysis of this point.  The discussion of the civil law in this area is difficult to follow because of the unusual vocabulary, but it provides an interesting perspective on a recurring remedies issue.

Plaintiffs sued Blackburn for breach of contract with respect to three promissory notes and for fraud in a stock transaction.  Highground, Inc. v. Blackburn, No. 13-30248 (Sept. 25, 2013, unpublished).  Plaintiffs recovered on the notes but not the fraud claim, and the bankruptcy court awarded $25,000 as a “fair fee” for that result.  Plaintiffs appealed, seeking fees for the fraud claim as well, arguing that their litigation was “inextricably intertwined” with the note claims.  Applying Tony Gullo Motors I, L.P. v. Chapa, 212 S.W.3d 299 (Tex. 2006), the Fifth Circuit agreed with the lower court: “Appellants prevailed on the notes claim because Blackburn signed the notes without authority to do so, not because of the allegations of fraud relating to other aspects of the purchase agreement . . . .”  The case presents a clean example of claims against the same party that are nevertheless not “inextricably intertwined” for purposes of an attorneys fee award.  (For thorough review of this principle, and other key points about fee awards, please consult the book “How to Recover Attorneys Fees in Texas” by my colleagues Trey Cox and Jason Dennis.)

A zealous borrower filed successive lawsuits against U.S. Bank, its attorneys, and MERS arising from a foreclosure.  Maxwell v. U.S. Bank, N.A.,13-20113 (Oct. 30, 2013, unpublished).  While MERS was not a party to the first two cases, it asserted res judicata, based on their dismissal, arguing that it was in privity with the defendants.  The Fifth Circuit cited Taylor v. Sturgell, 553 U.S. 880 (2008), which described how res judicata reaches “a variety of pre-existing substantive legal relationships between the person to be bound and a party to the judgment,” including “preceeding and succeeding owners of property, bailee and bailor, and assignee and assignor” as well as other relationships described as “privity.”  Here, the mortgage documents identified MERS as “nominee for” U.S. Bank, which satisfied Taylor.

A subcontractor’s policy excluded “property damage” to “your work.”  An endorsement added the general contractor as an additional insured “only with respect to liability for . . . ‘property damage’ . . . caused, in whole or in part, by . . . [y]our acts or omissions.”  “The policy defined “you” and “your” with reference to the subcontractor and the endorsement did not purport to modify that definition.  State Farm Auto Ins. v. Harrison County, No. 13-60001 (Sept. 16, 2013, unpublished).  The insurer argued that the additional insured could only “stand[] in shoes no larger than those worn by the primary policyholder.”  The Fifth Circuit did not disagree, but found that this specific endorsement created ambiguity when read along with the original policy, and thus affirmed the district court’s summary judgment in favor of coverage.

In an unpublished opinion that happened to come out the same day as the slightly-revised “robosigning” opinion of Reinagel v. Deutsche Bank, the Fifth Circuit briefly reviewed the requirements for a summary judgment affidavit in a note case.  RBC Real Estate Finance, Inc. v. Partners Land Development, Ltd., No. 12-20692 (Oct. 30, 2013, unpublished).  As to foundation, the affidavit purported to be based on personal knowledge, and said that “[a]s an account manager at RBC[, the witness] is responsible for monitoring and collecting the . . . Notes.” “Therefore, [he] is competent to testify on the amounts due . . . .”  As to sufficiency, the Court quoted Texas intermediate appellate case law: “A lender need not file detailed proof reflecting the calculations reflecting the balance due on a note; an affidavit by a bank employee which sets forth the total balance due on a note is sufficient to sustain an award of summary judgment.”

The district court dismissed the plaintiff’s False Claims Act case on October 31, 2012. Plaintiff filed a notice of appeal and motion to extend time on December 5, 2012 — 35 days later.  King v. University of Texas Health Science Center-Houston, No. 12-20795 (Nov. 4, 2013, unpublished).  Plaintiff argued that her attorneys (1) mistakenly believed there was a 60-day deadline, reasoning that the U.S. was the real party in interest, and (2) had busy trial dockets in November that kept them from noticing the error in time.  The district court granted the extension and the Fifth Circuit affirmed.  The Court applied Pioneer Inv. Servs. Co. v. Brunswick Assocs., Ltd., 507 U.S. 380, 385 (1993) and Halicki v. Louisiana Casino Cruises, Inc., 151 F.3d 465, 470 (5th Cir. 1998), and Court noted that while an attorney’s legal error or scheduling problems could constitute inexcusable neglect, here the defendant was not prejudiced and the rule at issue was ambiguous.  The Court also noted a distinction between review of a district court’s finding of excusable neglect and a finding that neglect was not excusable.

The Fifth Circuit has voted to rehear en banc the case of Department of Texas, VFW v. Texas Lottery Commission.  Texas allows charitable bingo if the sponsoring organization does not use the proceeds for political advocacy and several charities challenge that restriction on First Amendment grounds.  The case presents the challenging question whether this limitation violates the “unconstitutional conditions” doctrine.

CHS Inc. v. Plaquemines Holdings LLC presented the interaction of the Bankruptcy Code and an old section of the Louisiana Civil Code (involving cases from 1849, 1828, and 1913).  No. 13-30028 revised (Nov. 26, 2013).  The Louisiana Code provision provides: “When a litigious right is assigned, the debtor may extinguish his obligation by paying to the assignee the price the assignee paid for the assignment, with interest from the time of the assignment.”  As the Fifth Circuit noted: “The law is aimed at preventing unnecessary litigation by reducing the ability of third parties to buy and sell legal claims for profit.”   CHS, part owner of a tract of land along with a bankrupt company, attempted to redeem that company’s interest after it was sold as part of a dissolution case required by the bankruptcy.  The Court found that the sale, conducted pursuant to bankruptcy court orders, fell within a “judicial sale” exception to the Code provision that prevented CHS from using it here.  

On October 29, the Fifth Circuit released a revised opinion in Reinagel v. Deutsche Bank, N.A., 722 F.3d 700 (5th Cir. 2013), which rejected a borrower’s claims about alleged “robosigning” (and in the process, discussed the “show-me-the-note” argument under Texas law, for the sole purpose of adding a footnote to acknowledge Martins v. BAC Home Loans Servicing LP, 722 F.3d 249, 255 (5th Cir. 2013), which expressly addressed and rejected that argument.

“What does Judge X think about my issue?”  If Judge X has served on the Fifth Circuit for some time, his or her votes in two cases can provide good insight: (1) the denial of en banc rehearing in Huss v. Gayden, 585 F.2d 823 (5th Cir. 2009), a difficult Daubert case, and (2) the en banc opinion of In re Volkswagen,  545 F.3d 304 (5th Cir. 2008), which granted mandamus relief for the denial of a 1404 venue transfer motion from the Eastern District of Texas. A third case has now joined that list — the recent 7-8 vote to deny en banc rehearing for In re Radmax, 730 F.3d 285 (5th Cir. 2013).  The Radmax panel granted mandamus relief to compel an intra-district transfer under section 1404.  Judge Higginson, who dissented from the panel, also dissented from the en banc vote, pinpointing the issue as whether the ruling “propounds appellate mandamus power over district judges which the Supreme Court has said we do not have.”  The votes in Huss, Volkswagen, and Radmax signal much about a judge’s philosophy as to the power and role of a district judge.

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.

Employer sought to enforce two arbitration agreements in an employee handbook, which also gave Employer the right to unilaterally “supersede, modify, or eliminate existing policies.”  Scuderio v. Radio One of Texas II, LLC, No. 13-20114 (Oct. 24, 2013, unpublished).  Applying In re 24R, Inc., 324 S.W.3d 564 (Tex. 2010), the Fifth Circuit noted a distinction between an arbitration clause that is in a separate instrument from a handbook with such a provision, and a clause that is part of the handbook.  Here, “because the arbitration provision is in the handbook that contains the language allowing the employer to unilaterally revise the handbook, the agreement to arbitrate is illusory and unenforceable.”  See also Carey v. 24 Hour Fitness, 669 F.3d 202 (5th Cir. 2012) (finding another arbitration provision illusory in an employment setting).

The plaintiff in Delahoussaye v. Performance Energy Services LLC suffered back injuries while working on a drilling platform when a handrail fell on him.  No. 12-31222 (Oct. 24, 2013).  The district awarded general damages of $200,000, noting that the plaintiff had exaggerated his complaints of pain and was able to return to work.  The award was reviewed for clear error.  The Fifth Circuit reviewed prior awards in comparable cases and concluded that $200,000 was excessive in light of the district court’s other fact findings. Reviewing precedent that established a “maximum recovery” guideline based on 133% of the highest previous recovery for a similar injury, the Court remitted the damages to $86,450 (133 percent of $65,000, the highest comparable recovery found by the Court).  The plaintiff could accept the remitted award or have a new trial on damages.

The machinery of justice needs fuel to function.  An eloquent letter by the Judicial Conference of the United States summarizes today’s serious situation about the funding of the federal courts.  Please speak out.

A builder obtained a 6-figure judgment against an architect, for cost overruns and lost profits, resulting from the architect’s negligence.  Garrison Realty LP v. Fouse Architecture & Interiors, PC, No. 12-40764 (Oct. 21, 2013, unpublished).  The jury awarded distinct sums for negligence and negligent misrepresentation.  The Fifth Circuit found that the causes of action were duplicative in this context and reversed as to the inclusion of the smaller award in the final judgment. The Court also held that the defendant had waived an argument for a partial offset as a result of a prior lawsuit, finding that offset had not been pleaded as a defense, and that the plaintiff was prejudiced because it could have changed its trial proof had the issue been raised earlier.  (On the pleading issue, the Court noted that the defendant had alleged offset, but only claimed it was a bar “in whole” rather than “in whole or in part.”)

The plaintiff in a personal injury case was found to be judicially estopped from asserting the claim because it was not properly disclosed in her personal bankruptcy, even though it arose post-petition.  Flugence v. Axis Surplus Ins. Co., No. 13-30073 (Oct. 4, 2013).  The trustee, however, could pursue the claim and its counsel could recover professional fees. Accordingly, the Court declined to declare that the trustee’s recovery was capped at the amount owing to creditors.  (applying Reed v. City of Arlington, 650 F.3d 571 (5th Cir. 2011) (en banc)).

In one of the many unpublished cases dismissing “split-the-note” cases after Martins v. BAC Home Loans Servicing, LP, 722 F.3d 249 (5th Cir. 2013), the Fifth Circuit addressed a foreclosure sale that had taken place while a TRO purported to stop it.  Hall v. BAC Home Loans Servicing, No. 12-41023 (Oct. 7, 2013, unpublished).  Because the TRO did not state why it was granted without notice, the Court concluded that it “did not meet the requirements of Texas Rule of Civil Procedure 680,” making it “void under Texas law” and “a mere nullity.”  Accordingly, it could not support a wrongful foreclosure claim.

The plaintiff in Bradberry v. Jefferson County, Texas alleged that he was terminated from his job as a county corrections officer, in violation of federal law, because he was called to service in the Army Reserve during Hurricane Ike.  No. 12-41040 (Oct. 17, 2013).  A key issue was whether a county administrative proceeding about his termination had collateral estoppel effect on his later federal lawsuit.  The Fifth Circuit, noting that administrative proceedings can create collateral estoppel if state law would allow it, held that the questions were different and no estoppel arose: “We conclude that a finding that Bradberry was discharged due to a disagreement about military service is not the equivalent of a finding that the County was motivated by his military status to discharge him.” While analogical reasoning from this fact-specific holding may pose challenges, it still provides a clearly-stated example of when issues become “identical” for purposes of issue preclusion.

Washington Mutual (“WaMu”) failed; Chase took over its mortgage operations from the FDIC.  In the meantime, borrower Dixon (after receiving notice from Chase that it was replacing WaMu as mortgagee and servicer) obtained a default judgment in state court against WaMu for $2.8 million and a declaration that all liens were cancelled.  A year later, Chase foreclosed on the property and obtained title at a foreclosure sale.  Chase sued in federal court to quiet the cloud on title created by the recordation of the default judgment.  JP Morgan Chase Bank NA v. Dixon, No. 12-40590 (Oct. 7, 2013, unpublished).  The district court granted summary judgment to Chase.  Dixon argued that this ruling violated the Rooker/Feldman doctrine about federal review of state court judgments.  The Fifth Circuit disagreed, noting that the federal ruling did not technically “nullify” the state court judgment, and that Chase was not a party to the state proceedings and thus Rooker/Feldman was not implicated.

Devon Enterprises was not re-approved as a charter bus operator for the Arlington schools after the 2010 bid process.  Devon Enterprises v. Arlington ISD, No. 13-10028 (Oct. 8, 2013, unpublished).  Devon argued that it was rejected solely because of its bankruptcy filing in violation of federal law; in response, the district cited safety issues and insurance problems.  An email by the superintendent said “[Alliance] was the company that [AISD] did not award a bid to for charter bus services because they are currently in bankruptcy.”  Calling this email “some, albeit weak, evidence” that the filing was the sole reason for the decision, the Fifth Circuit reversed a summary judgment for the school district.

Moore sued PPG Industries and several local parties for injuries at a chemical complex; the defendants removed, arguing fraudulent joinder.  After some jurisdictional discovery, Moore sought to add three more local parties, and the district court denied him leave to do so.  Moore v. Manns, No. 12-31265 (Oct. 8, 2013). The Fifth Circuit affirmed, first reminding; “If after removal the plaintiff seeks to join additional defendants whose joinder would destroy subject matter jurisdiction, the court may deny joinder, or permit joinder and remand the action to the State court”; accordingly, a district court should review such a proposed amendment “more closely than an ordinary amendment.”  Factors include the extent to which the amendment is solely for jurisdictional purposes, whether plaintiff was dilatory, and potential harm to plaintiff of not allowing the amendment.  Here, the Court agreed that the “general responsibilit[y]” for safety under which the new parties were sued did not trigger personal fault under Louisiana law, making the amendment tactical and impermissible.

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.

In a straightforward analysis of “conflict preemption,” the Fifth Circuit agreed that the Federal Power Act (the enabling statute for FERC) “preempts property damage claims under state law where the claim alleges negligence for failing to act in a manner FERC expressly declined to mandate while operating a FERC-licensed project.”  Simmons v. Sabine River Authority, No. 12-30494 (Oct. 9, 2013).  Here, plaintiffs claimed damages from flooding after spillway gates along the Sabine River were opened in late 2009; the Court concluded that the claims “infringe on FERC’s operational control” because “FERC, not state tort law, must set the appropriate duty of care for dam operators.”

In Serna v. Law Office of Joseph Onwuteaka, P.C., the plaintiff alleged that a debt collector had sued him in an impermissible venue under the FDCPA .  No. 12-20529 (Oct. 7, 2013). The defendants obtained summary judgment on limitations; the question was whether the offending act under the FDCPA — to “bring such action” — was filing of the suit or service. The Fifth Circuit found that the term “bring” is ambiguous in this context, which justifies consideration of the statute’s history and purpose.  It then concluded that “the FDCPA’s remedial nature compels the conclusion that a violation includes both filing and notice,” and reversed.  A dissent argued that the term was not ambiguous, since the term “brought” refers only to filing in another provision of the statute.

In Vinewood Capital LLC v. Dar Al-Maal Al-Islami Trust, “[t]he only evidence offered by Vinewood in support of the alleged oral contract between Vinewood and DMI for DMI to invest $100 million in real estate [was] Conrad’s deposition testimony and affidavit.”  No. 12-11103 (Oct. 8, 2013, unpublished).  The Fifth Circuit reminded: “[A] party’s uncorroborated self-serving testimony cannot prevent summary judgment, particularly if the overwhelming documentary evidence supports the opposite scenario.” (citing Vais Arms, Inc. v. Vais, 383 F.3d 287, 294 (5th Cir. 2004)).Therefore, “[a]s the district court concluded, Conrad’s self-serving testimony is belied by the parties’ contemporaneous written communications and written agreements and is therefore insufficient to create an issue of fact.”

The district court awarded attorneys fees for a lawsuit filed in breach of a release, and the Fifth Circuit affirmed.  Dallas Gas Partners v. Prospect Energy Corp., No. 12-20496 (Oct. 7, 2013).  Among other arguments, appellants contended that even if they were bound by the release, they did not breach it because they were not named plaintiffs in the offending action.  Admitting that they funded the lawsuit, and directed the plaintiff entity to bring the suit, they argued that those actions did not violate the agreement not to “institute, maintain or prosecute any action . . . ”  The Court found that “maintain” meant financial support.

Attorneys filed fee applications in a bankruptcy and the debtor responded with tort counterclaims.  Frazin v. Haynes and Boone, No. 11-10403 (Oct. 1, 2013).  The bankruptcy court entered judgment for the attorneys.  The Fifth Circuit found a lack of jurisdiction over the DTPA counterclaim and remanded.  It reasoned that Stern v. Marshall, 131 S. Ct. 2594 (2011), had overruled prior circuit precedent saying that bankruptcy courts could enter final judgments in all “core” proceedings.  Applying Stern to these claims, the Court reasoned (1) the malpractice claim was intertwined with the fee application, (2) the fiduciary duty action was as well, as it sought fee forfeiture, but (3) “it was not necessary to decide the DTPA claim to rule on the Attorneys’ fee applications” (including whether the claim was an impermissible “fracturing” of a professional negligence claim under Texas law)  The court noted that the district court may have jurisdiction to enter final judgment on the claim.  A dissent would not remand “because no harm is done, at least in this case, and the district court will no doubt simply dismiss whatever has been remanded.”

John Doe, a 13-year-old member of the Choctaw Indian tribe, had an internship at a Dollar General store on the Mississippi Choctaw reservation.  He was sexually molested in the store and sued the company for damages in tribal court.  Dolgencorp Inc. v. The Mississippi Band of Choctaw Indians, No. 12-060668 (Oct. 3, 2013).  After losing jurisdictional challenges in the tribal system, the company sued in federal court to enjoin the prosecution of the case.  The Fifth Circuit affirmed dismissal in favor of Choctaw jurisdiction. Reviewing the Supreme Court authority in the area, it concluded: “[T]he ability to regulate the working conditions (particularly as pertains to health and safety) of tribe members employed on reservation land is plainly central to the tribe’s power of self-government.” (discussing Plains Commerce Bank v. Long Family Land & Cattle Co., 554 U.S. 316 (2008) and Montana v. United States, 450 U.S. 544 (1981)).  A strongly-worded dissent criticized “[t]he majority’s alarming and unprecedented holding,” arguing that it “profoundly upsets the careful balance that the Supreme Court has struck” in the area. Over another dissent, the full Court denied en banc review in 2014.

The district court handling the Deepwater Horizon litigation rebuffed BP’s complaints that the agreed-upon claims processing formula was not working correctly.  Lake Eugenie Land & Development v. BP Exploration & Production, No. 13-30315 (Oct. 2, 2013).  A fractured opinion from the Fifth Circuit reversed in substantial part.  It required remand for further development of the record on how the agreement was intended to handle several accounting issues about claimed losses.  The Court then imposed a “tailored stay” on further payments to “allow[] the time necessary for deliberate reconsideration of these significant issues on remand.”  Judge Clement wrote the plurality, which Judge Southwick joined on the foregoing grounds.  Her opinion went on to note that, for standing reasons, a court lacked jurisdiction to administer a settlement “that included [class] members that had not sustained losses at all, or had sustained losses unrelated to the oil spill . . . .” Judge Dennis dissented as to the reasons for remand and disagreed with the standing analysis.

In Meyers v. Textron Inc., the Fifth Circuit affirmed the Rule 12 dismissal of a complaint on res judicata grounds.  No.13-10023 (Oct. 2, 2013, unpublished).  .Noting that res judicata is ordinarily an affirmative defense, the Court reminded: “When all relevant facts are shown by the court’s own records, of which the court takes notice, the defense [of res
judicata] may be upheld on a Rule 12(b)(6) motion without requiring an answer.” On the merits, the Court found no dispute that the plaintiffs in two cases were in privity given the control one had over the other.

While nominally about a limited issue of workers compensation law,  Austin v. Kroger Texas LP analyzes basic issues of an “Erie guess,” Texas premises liability law, and the types of negligence claims available in Texas.  No. 12-10772 (Sept. 27, 2013).  Austin, a Kroger employee, slipped while cleaning an oily liquid with a mop.  Contrary to store policy, a product called “Spill Magic” was not available to him that day.   After a thorough discussion of the interplay between the common law of premises liability and the Texas workers compensation statutes (Kroger being a non-subscriber), the Fifth Circuit reversed a summary judgment for Kroger that was based on Austin’s subjective awareness of the spill.  “Section 406.033(a) of the Texas Labor Code takes the employee’s own negligence off of the table for a non-subscriber like Kroger . . . ”  The Court went on to find fact issues about Kroger’s negligence in not having Spill Magic available, and about Kroger’s knowledge of the spill.  The Court affirmed dismissal of the gross negligence claim, and in the remand, asked the district court to consider the specific type of negligence claim that Austin asserted under Texas law.

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

Plaintiffs sued for defamation, based on critical comments about their role in the Chinese drywall MDL that ended up on the “Above the Law” website.  Herman v. Cataphora, Inc., No.12-30966 (Sept. 17, 2013).  The Fifth Circuit agreed with the district court that Louisiana had no jurisdiction over the defendants because that state was not the “focal point” of the statements, citing Calder v. Jones, 465 U.S. 783 (1984) and Clemens v. McNamee, 615 F.3d 374 (5th Cir. 2010).  It took issue, however, with the district court granting the motion to dismiss and then ordering a transfer.  It noted that a district court has authority to transfer (under 28 U.S.C. § 1406(a)) if it determines that it lacks personal jurisdiction, and therefore vacated the dismissal order and remanded with instructions to order transfer.

The Fifth Circuit affirmed the dismissal of several mortgage-related claims by a borrower against JP Morgan, based on the reasoning of the Court’s opinions in the area in 2013. Hudson v. JP Morgan Chase Bank NA, No. 13-50407 (Sept. 23, 2013, unpublished).  After the district court ruled, the Bank of New York (who had been sued but not served) entered an appearance in the case, and asked the Fifth Circuit to dismiss the claims against it as well.  Finding that BONY was not a party at the time of the district court’s dismissal ruling, the Court dismissed that request for lack of jurisdiction.

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.

The unpublished opinion of Wiley v. Deutsche Bank National Trust Co. affirms the Rule 12 dismissal of borrwers’ wrongful foreclosure claims, summarizing the 2013 cases from the Fifth Circuit about the “split-the-note” argument against the validity of a MERS assignment. No. 12-51039 (Sept. 16, 2013, unpublished).  The opinion reminds that while some borrowers’ claims have survived appellate scrutiny in 2013, a pleading that appears to rehash discredited arguments will not satisfy Twombly and Iqbal.  Other unpublished opinions to the same effect are Kramer v. Fannie Mae, No. 12-51171 (Sept. 19, 2013, unpublished), and Epstein v. U.S. Bank NA, No. 13-50047 (Sept. 25, 2013, unpublished).

The insured estimated loss from a hailstorm at a shopping center at close to $1 million; the insurer estimated $17,000.  TMM Investments v. Ohio Casualty Insurance, No. 12-40635 (Sept. 17, 2013).  The insurer invoked its contractual right for an appraisal, which came in around $50,000.  The insured sued, alleging that the appraisal improperly excluded damages to the HVAC system and that the panel exceeded its authority by considering causation issues.  Applying State Farm Lloyds v. Johnson, 290 S.W.3d 886 (Tex. 2009), the Fifth Circuit agreed on the HVAC issue, but did not see that as a reason to invalidate the entire award, and reasoned that the appraisers were within their authority when they “merely distinguished damage caused by pre-existing conditions from damage caused by the storm . . . .”

Davis, a Louisiana prisoner, was attacked and injured by another inmate, Anderson.  Davis sued under 42 U.S.C. § 1983, alleging that several prison officials and guards were “deliberately indifferent” to a “substantial risk of serious harm” to his safety.  Davis v. LeBlanc, No. 12-30756 (Sept. 12, 2013, unpublished).  Similar cases are filed frequently, summary judgment for the defense is common, and affirmance is near-universal under the demanding legal standards for such claims.  Here, Davis offered a sworn declaration from another inmate who spoke to a guard defendant shortly before the attack, and was told by that guard that Anderson was going to “‘whip that [expletive] Davis in the cell next to him’ and ‘that [expletive] needs a good [expletive] whipping and it is worth the paperwork for him to get it.'”  Summary judgment for that guard was reversed and the case was remanded for further proceedings.   Whatever happens to Davis’s claims, this opinion provides a clear — if graphic — example of how to create a fact issue, and reminds that the Fifth Circuit does in fact review the record in the many prisoner cases presented to it.

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”

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

As part of a complicated battle about arbitrability and arbitrator selection, a district court ruled: “Plaintiff’s claims are dismissed for resolution by arbitration.”  Later, the district court rejected a challenge to the arbitrator selection process.  Adam Technologies Int’l v. Sutherland Global Services, No. 12-10760 (Sept. 5, 2013).  The panel divided over how to apply Kokkonen v. Guardian Life, 511 U.S. 375 (1994), which held that a court lacked ancillary jurisdiction to hear a dispute about the enforcement of a settlement provision in a dismissed action.  The majority reasoned: “The judgment dismissing [plaintiff’s] initial lawsuit operated, in all practical effect, as the functional equivalent of an order compelling arbitration between these parties.  We conclude that ancillary jurisdiction existed to allow the district court later to evaluate whether the dismissal that allowed the dispute to be taken to arbitration was being thwarted.”  The dissent did not read the district court’s ruling as retaining jurisdiction.    

A case about Medicare reimbursement for a “mobile stander” wheelchair became moot on appeal when the state agency found it was not medically necessary.  The Fifth Circuit dismissed the case and also vacated the district court opinion and judgment, noting legal errors in the opinion and discrepancy between the opinion and judgment.  In light of all the circumstances, the Court concluded that vacatur was in “the public interest.”  Koenning v. Janek, 12-41187 (Aug. 20, 2013, unpublished).

The Fifth Circuit addressed several important business litigation topics in May-August of 2013:

1.       Borrowers survive.  Mortgage servicers still won many cases, including a published opinion rejecting claims of “robosigning.”   Three times, however, the Fifth Circuit reversed Rule 12 dismissal of borrowers’ pleadings.

2       Personal jurisdiction.  The Fifth Circuit applied for the first time  a 2011 Supreme Court opinion about the “stream of commerce,” finding jurisdiction over a foreign manufacturer, but noting that the opinion may affect older Circuit cases suggesting that a general intent to sell in the US could create jurisdiction in a specific state.

3.       Extrinsic evidence.  The proper handling of extrinsic evidence is a recurring challenge in contract litigation.  A recent case reminds of the importance of evidence about course of performance, even for an unambiguous contrac

4.       Venue.  The Court granted mandamus to compel an intra-district transfer from East Texas’s Marshall Division to its Tyler Division.

5.       Jury deference.  In Wellogix, Inc. v. Accenture, LLP, the Court affirmed a $44 million jury verdict, reminding: “Had we sat in the jury box, we may have decided otherwise.”  Three other published opinions substantially affirm jury awards.

BONUS: Where is the M/V OCEAN SHANGHAI?  An admiralty appeal was recently found moot, in part because the “ship had sailed” from the Fifth Circuit.  Modern technology lets blog readers follow the SHANGHAI to non-Fifth Circuit locations around the globe.

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 . . . .”

In a high-profile “data breach” case, the district court dismissed several banks’ claims against a credit card processor after hackers entered its system and stole confidential information.  Lone Star National Bank v. Heartland Payment Systems, No. 12-20648 (Sept. 3, 2013).  The banks did not have a contract with the processor.  They sought money damages for the cost of replacing compromised credit cards and reimbursing customers for wrongful charges.  Applying New Jersey law, the Fifth Circuit found that the economic loss rule did not bar a negligence claim on these facts at the Rule 12 stage.  These banks were an “identifiable class,” Heartland’s liability would not be “boundless” but run only to the banks, and the banks would otherwise have no remedy.  The Court also noted that it was not clear whether the risk could have been allocated by contract.  The Court declined to affirm dismissal on several other grounds such as choice-of-law and collateral estoppel, “as they are better addressed by the district court in the first instance.”

Plaintiff asserted personal jurisdiction under Calder v. Jones, 465 U.S. 783 (1984), alleging that a receiver’s purported misconduct would forseeably damage investors in Texas. Bustos v. Lennon, No. 12-50765 (August 16, 2013, unpublished).  The Fifth Circuit affirmed dismissal, finding that the alleged misconduct was not intentionally aimed at Texas, and that jurisdiction did not comport with “fair play and substantial justice” given the status of related litigation in another state.

The plaintiffs in Young v. United States alleged that the Interior Department negligently prepared two studies which led to flooding along Interstate 12 in Louisiana, bringing federal litigation in 2008 when the last major flood was in 1983.  No. 13-30094 (August 21, 2013).  Plaintiff argued that the “continuing tort” doctrine saved the claim from limitations because the improperly-designed highway remained in place. The Fifth Circuit affirmed dismissal, noting two controlling Louisiana Supreme Court cases.  The first, Hogg v. Chevron, involved leaking underground gasoline storage tanks and “rejected the plaintiffs’ contention that the failure to contain or remediate the leakage constituted a continuing wrong, suspending the commencement of the running of prescription . . . [explaining] that ‘the breach of a duty to right an initial wrong simply cannot be a continuing wrong that suspends the running of prescription, as that is the purpose of every lawsuit and the obligation of every tortfeasor.'” 45 So.3d 991 (La. 2010).  Similarly, the second held: “[T]he actual digging of the canal was the operating cause of the injury[, and t]he continued presence of the canal and the consequent diversion of water from the ox-bow [were] simply the continuing ill effects arising from a single tortious act.”  Crump v. Sabine River Authority, 737 So.2d 720 (La. 1999).

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

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

As part of broader disputes about the bankruptcy of Pilgrim’s Pride, chicken growers alleged that its decision to shut down a large facility violated the Packers and Stockyards Act of 1921.  Relying on its earlier [9-7] en banc decision which found that a broader provision of the Act required proof of anticompetitive conduct, the Fifth Circuit found that section 192(e) of the Act imposes the same requirement.  Agerton v. Pilgrim’s Pride Corporation, No. 12-40085 (August 27, 2013) (citing Wheeler v. Pilgrim’s Pride Corporation, 591 F.3d 355 (5th Cir. 2009)).  The Court then reversed a $25 million judgment for the growers, reasoning: “In the instant case, PPC had overextended itself into the commodity chicken market, was producing more chicken than the market appeared to need, and was thereby driving the market price of chicken down at great cost to itself. Recognizing the damage inflicted by its own excess production, PPC wisely decided to stop flooding the market with unprofitable chicken.  . . . Far from being a nefarious goal, higher prices are the natural consequence of a reduction in supply.  If it is lawful for a business to independently control its own output, then it is also lawful for the business to hope for the natural consequences of its actions.”

Texas allows charitable bingo if the sponsoring organization does not use the proceeds for political advocacy; several charities challenged that restriction on First Amendment grounds.  Department of Texas, VFW v. Texas Lottery Commission, No. 11-50932 (August 21, 2013).  In a new opinion issued on panel rehearing, the Fifth Circuit rejected a standing challenge based on the interplay of the relevant law with other gambling laws (which the state argued made the lawsuit irrelevant), and then reversed an injunction against the law.  The Court saw the case as controlled by Rust v. Sullivan, 500 U.S. 173 (1991), noting: “The challenged provisions in this case do nothing to restrict speech outside the scope of the State’s bingo program. Charities are free to participate in the bingo program and engage in political advocacy; they simply must not use bingo proceeds to do so.”  For similar reasons, it distinguished Citizens United v. Federal Election Commission, 130 S.Ct. 876 (2010).  A dissent argued that Rust did not control and the law was invalid under the “unconstitutional conditions” doctrine.

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

A district court vacated a previously-granted class certification in a securities case in 2004.  The putative class refiled in Texas in 2009.  The district court found the action time-barred, concluding that any tolling effect under American Pipe & Construction Co v. Utah, 414 U.S. 538 (1974) ended with the order of vacatur.  Hall v. Variable Annuity Life, No. 12-20440 (August 15, 2013).  The Fifth Circuit affirmed, finding no meaningful distinction in this context between a vacatur order and a decision not to certify in the first instance.

Plaintiff voluntarily dismissed a Texas suit under Rule 41, refiled in New York, and then voluntarily dismissed that action as well.  Because the second dismissal was with prejudice under the Federal Rules, Plaintiff sought relief under Rule 60(b) to allow reinstatement of the original case.  Yesh Music v. Lakewood Church, No. 12-20520 (August 14, 2013). Defendant argued that a voluntary dismissal is not a “final proceeding” for Rule 60 purposes.  The Fifth Circuit affirmed the grant of 60(b) relief.  The Court acknowledged Harvey Specialty & Supply, Inc. v. Anson Flowline Equipment, Inc., 434 F.3d 320 (5th Cir. 2005), which found no preclusive effect for a Rule 41 voluntary dismissal, but concluded that one was still a “final . . . proceeding” within Rule 60 because of its practical effect.  The Court noted that the weight of authority from other Circuits agreed with this conclusion.

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

The sole issue for bench trial in Union Oil v. Buffalo Marine Services was the amount of damages causedby an oil spill.  No. 12-40848 (August 16, 2013, unpublished).  Both sides appealed.  The Fifth Circuit affirmed.  As to the methodology used by the district court, the Court said: “Contrary to Buffalo’s assertion, the ‘reasonable certainty’ with which Unocal was required to prove lost profits did not require it to identify lost opportunities from specific vessels that would have visited the terminal but for its closure following the spill. Considering figures from adjacent months was more than adequate.”  The Court found “no support in the actual numbers” for an argument about a seasonal spike in revenue during the relevant period.  Finally, the Court agreed that a claim determination from the National Pollution Fund Center was inadmissible as proof of damages under Fed. R. Evid. 408.

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

The FTC sued debt negotiation companies, claiming that their ads deceptively promised substantial reductions in consumers’ credit card debt.  The district court concluded that “deception” under section 5 of the FTC Act should be evaluated on the basis of all information disclosed by the companies to consumers up to the point of purchase, and entered judgment for the defendants.  FTC v. Financial Freedom Processing Inc. No. 12-10520 (Aug. 12, 2013, unpublished). The Fifth Circuit thought that the district court’s analysis was “dubious,” noting authority in other circuits that holds “each advertisement must stand on its own merits.”  The FTC, however, elected to challenge the district court’s finding about deceptiveness at the point of purchase.  Here, “while the Companies’ radio ads and websites may be misleading–indeed, it is difficult to conclude that the websites are not deceptive–we are satisfied that substantial evidence supports the district court’s finding . . . .”

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

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

An unsecured creditor contended that the gross negligence of a bankruptcy trustee allowed a key asset to escape the estate.  The court agreed and ordered payment from Liberty Mutual’s bond for the trustee.  The Fifth Circuit affirmed, finding: (1) the relevant limitations period was set by a 4-year federal statute rather than a 2-year state one, (2) the finding of gross negligence was not clearly erroneous, and (3) expert testimony was not necessary to establish gross negligence in this situation: “While the precise course of action the Trustee should have taken may be subject to reasonable debate, it requires no technical or expert knowledge to recognize that she affirmatively should have undertaken some form of action to acquire for the bankruptcy estate the assets to which it was entitled.”   Liberty Mutual v. United States, No. 12-10677 (revised August 20, 2013).

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

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

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

Acceptance Loan had a lien on a Mississippi office building, which was the principal asset of S. White Transportation (“SWT”) when it went into bankruptcy.  Acceptance Loan Co. v. S. White Transportation, No. 12-60648 (August 5, 2013).  Acceptance received notice of SWT’s bankruptcy several times.  After plan confirmation, Acceptance sought a declaration that its lien survived.  The Fifth Circuit held that “passive receipt of notice” did not constitute “participation” in the bankruptcy under In re Ahern Enterprises, 507 F.3d 817, 822 (5th Cir. 2007).  Therefore, the general rule applied that “a secured creditor with a loan secured by a lien on the assets of the debtor who becomes bankrupt before the loan is repaid may ignore the bankruptcy proceeding and look to the lien for satisfaction of the debt.”

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

The Fifth Circuit has affirmed in all respects the high-profile corruption convictions associated with former Dallas City Councilman Don Hill: United States v. Reagan et al. (August 2, 2013).

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).

“Equitable mootness” is a prudential doctrine that balances a litigant’s interest in appellate review against the need for finality of a bankruptcy plan.  It has three elements: (i) whether a stay has been obtained, (ii) whether the plan has been ‘substantially consummated,’ and (iii) whether the relief requested would affect either the rights of parties not before the court or the success of the plan.”  Official Committee of Unsecured Creditors v. Moeller, Nos. 12-50718, 50805 (July 24, 2013).  The Fifth Circuit declined to apply the doctrine in this case, finding that Chase had at best shown only “speculative” harm to other parties.  Dicta in the opinion expresses skepticism that the doctrine can apply to an adversary proceeding.

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

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).

A technical opinion about calculation of a Clean Water Act penalty for a wastewater spill offers two points of broader interest.  United States v. Citgo Petroleum, No. 11-31117 (July 17, 2013).  First (in the context of a remand for other reasons), as to whether the defendant’s acts amounted to gross negligence rather than simple negligence, the Fifth Circuit emphasized the importance of the defendant’s long delay in taking remedial action.  “In our view, though, almost winning a highly risky gamble with the environment does not much affect the egregiousness of having been gambling in the first place.”  Second, in reviewing a challenge to the amount of wastewater at issue under the “clear error” standard, the Court reminded: “The government’s argument on this issue is essentially that the court credited the wrong expert.  ‘Where there are two permissible views of the evidence, the factfinder’s choice between them cannot be clearly erroneous.'”

In United States v. Transocean Deepwater Drilling, the Fifth Circuit reviewed the standards for a stay pending appeal.  No.13-20243 (July 23, 2013, unpublished).  The case involved an administrative subpoena related to the Macondo accident.  The Court first analyzed the interplay between the typical four-factor test (likely success on the merits, irreparable injury, injury to the nonmovant, and the public interest) and a variant from Ruiz v. Estelle, 650 F.2d 555 (5th Cir. Unit A June 1981), which required “a substantial case on the merits when a serious legal issue is involved,” noting that the Ruiz analysis applies only if the other three factors are “heavily tilted in the movant’s favor.”  Here, the Court found a failure to satisfy both tests: (1) it assumed that the movant had a “substantial case,” in large part because the district court expressly said so in denying it relief; but (2) found no irreparable injury from providing the requested documents; and (3) found a public interest in proceeding with their production, as there had already been a lengthy delay.

In Escamilla v. M2 Technology, the individual owner of a business sued to enforce the “M2” trademark owned by his business.  No. 12-41183 (July 16, 2013, unpublished).  The Fifth Circuit affirmed the dismissal of the claim for failure to join a necessary party, as the individual did not join his company as a party plaintiff, thus exposing the defendant to potential repetitive future litigation.  (This decision appears to have been rooted in avoiding the cost of having counsel appear for the company.)  The Court rejected the individual’s argument that a future suit would be barred by claim preclusion, noting the clear separation in Delaware corporate law between a business entity and its shareholders.

An insurance company complained that its counsel allowed entry of a consent judgment in a Louisiana case that wrongly imposed $400,000 in liability on it that another insurer should have covered. The company, based in South Carolina, sued for legal malpractice in Texas, the location of the third-party administrator who had overseen the counsel. Companion Property & Casualty v. Palermo, No. 12-11255 (July 17, 2013).  The Fifth Circuit found that the firm’s relationship with the TPA was not enough to establish general jurisdiction, and also found no basis for personal jurisdiction in Texas over the Louisiana-based firm.  The counsel was in Louisiana, the alleged malpractice occurred in Louisiana, and the insured was in South Carolina: “Although [the firm’s] contacts with [the TPA] are factually related – and perhaps integral – to the substance of [Plaintiff’s] claim, the alleged malpractice does not arise from a breach of some duty owed to [the TPA].”

The plaintiff in Asadi v. G.E. Energy (USA), LLC was terminated after making an internal report of a potential securities law violation.  No. 12-20522 (July 17, 2013).  The Fifth Circuit affirmed the Rule 12 dismissal of his whistleblower claim based on Dodd-Frank: “Based on our examination of the plain language and structure of the whistleblower-protection provision, we conclude that the whistleblower protection provision unambiguously requires individuals to provide information relating to a violation of the securities laws to the SEC to qualify for protection . . . . (emphasis in original)”  The Court acknowledged a more expansive SEC regulation on the point, but found it was not entitled to Chevron deference given the clarity of the statute.

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

The plaintiff in Butler v. Taser International sought to amend a negligence suit to add a new fraud claim, after the deadline for motions to amend pleadings.  No. 12-11026 (July 10, 2013, unpublished).  In affirming the denial of leave to amend, the Fifth Circuit noted: “In his first amended complaint, Officer Butler pled a litany of facts that could have supported claims for fraudulent inducement and failure to warn. He alleged that TI had made false representations, and that TI’s warnings regarding the dangers of a Taser shock were inadequate.”  In other words, a point that weighs against a finding of prejudice — that the matters raised by the new pleading were already in issue — also weighed against a finding of good cause and justified denial of leave, especially after the deadline.

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

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

The 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.

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

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

Among several other holdings in Clayton v. ConocoPhillips Co., the Fifth Circuit agreed that state law claims about benefits due under a severance plan were preempted by ERISA, when “an ongoing administrative program” is necessary because of discretion in the plan about eligibility, and when the plan is not fairly characterized as “a one-time, lump-sum payment triggered by a single event.” No. 12-20102 (July 3, 2013).

“The court subordinated the equities of a particular situation to the overmastering need for certainty in the transactions of commercial life.”  Benjamin Cardozo, The Growth of the Law 111 (1924).  In Medco Energi US, LLC v. Sea Robin Pipeline Co., the plaintiff — a natural gas producer — argued that the defendant pipeline company had misrepresented how long it would take to make repairs after Hurricane Ike.  No. 12-30791 (July 2, 2013).  The Fifth Circuit found this claim preempted by federal law under the “filed rate” doctrine, under which a rate filed with FERC is conclusive “[e]ven if a rate is misrepresented to a customer and the customer relies on that rate . . . .”  (citing AT&T v. Central Office Telephone, 524 U.S. 214 (1988).  Otherwise, “[b]ecause [plaintiff] only paid for interruptible service subject to these provisions, allowing recovery for damages incurred when it could not use [defendant’s] pipeline would conflict with the interruptible rate and the provisions of the [filed] tariff.”

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.

Bain Cotton Co. v. Chesnutt Cotton Co. involved a challenge to an arbitration award based on the arbitrators’ denial of discovery.  No. 12-1138 (June 24, 2013, unpublished).  In affirming the district court’s rejection of the challenge, the Fifth Circuit stated: “This appeal presents a quintessential example of a principal distinction between arbitration and litigation, especially in the scope of review. Had this discovery dispute arisen in and been ruled on by the district court, it is not unlikely that the denial of Bain’s pleas would have led to reversal; however, under the ‘strong federal policy favoring arbitration, judicial review of an arbitration award is extremely narrow.’”

The Fifth Circuit took the atypical step of writing a short opinion about why it granted a petition for review of a remand order under CAFA in Opelousas General Trust Authority v. Multiplan, Inc., No. 13-90027 (June 28, 2013).  CAFA jurisdiction has a “local controversy” exception, an element of which is that the putative class seeks “significant relief” from an in-state defendant.  In that context, the Court said: “We have yet to fully explore the meaning of ‘significant relief” in this context. Defendants argue that we should grant them leave to appeal so that we may determine ‘whether a defendant which is not a going concern and which will not satisfy any judgment against it can be a defendant from whom “significant relief is sought” . . . .’ We GRANT their petition so that we may consider the question.”

In Cutler v. Stephen F. Austin State University, the defendant sought interlocutory review of an order requiring it to appear for a deposition under Fed. R. Civ. P. 30(b)(6).  No. 12-41393.  The Fifth Circuit found the appeal moot because the depositions had already taken place.  The defendant argued that the appeal was not moot because the depositions may be used at an upcoming trial.  The Court responded: “This court does not have jurisdiction to issue advisory opinions regarding decisions of the district court that have not been made at a trial that has not been held.”

James v. State Farm involved the appeal of summary judgment for the insurer in a bad faith case brought under Mississippi law, in which State Farm “tendered the policy limit on its uninsured motor vehicle coverage to [Appellant] nearly thirty months after [she] was injured in a car accident.”  No. 11-60458 (June 21, 2013).  The majority opinion reversed in part, working through the delay and finding that State Farm lacked a justification for delay during certain portions of the thirty-month period.  The dissent took a different approach, stating: “The district court’s more holistic approach of evaluating whether State Farm’s actions throughout the course of its investigation rose to the level of an independent tort is more in line with precedent.”

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

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

In Morlock LLC v. JP Morgan Chase, the plaintiff disputed Chase’s ability to foreclose.  No. 12-20623 (June 4, 2013, unpublished).   Its first claim was a suit to quiet title, as to which the Fifth Circuit found that the plaintiff’s challenge to a MERS assignment did not impugn the original Deed of Trust and thus did not present a title question.  Its second claim was for wrongful foreclosure, which can require the party seeking foreclosure to establish its standing.  Here, the Court found that the MERS assignment was facially valid and the plaintiff’s arguments about the signatory’s authority were not substantiated.

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

The parties arbitrated whether certain offshore oil dealings violated RICO.  Grynberg v. BP, PLC, No. 12-20291 (June 7, 2013, unpublished).  The arbitrator found that the claimant did not establish damage and dismissed that claim, noting that he lacked authority to determine whether any criminal violation of RICO occurred. The Fifth Circuit affirmed the dismissal of a subsequent RICO lawsuit on the grounds of res judicata, finding that the arbitrator’s ruling was on the merits and not jurisdictional.

“Mandamus petitions from the Marshall Division are no strangers to the federal courts of appeals.”  In re Radmax, Ltd., No. 13-40462 (June 18, 2013).  In Radmax, the Fifth Circuit found a clear abuse of discretion in declining to transfer a case from the Marshall Division of the Eastern District of Texas to the Tyler Division.  It found that the district court incorrectly applied the eight relevant 1404(a) factors, giving undue weight to potential delay and not enough weight to witness inconvenience, and quoting Moore’s Federal Practice for the principle that “‘the traditional deference given to plaintiff’s choice of forum . . . is less’ for intra-district transfers.”  Accordingly the Court granted mandamus pursuant to In re Volkswagen, 545 F.3d 304 (5th Cir. 2008) (en banc).  A pointed dissent agreed that the 1404(a) factors favored transfer but saw no clear abuse of discretion, noting that there was no clear Fifth Circuit authority on several of the points at issue in the context of intra-district transfers.  “The majority persuasively fills those doctrinal gaps with citations to Moore’s Federal Practice; that treatise may prove convincing, but it is not binding law.”

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

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

Continuing a steady stream of rulings in favor of lenders and mortgage servicers in foreclosure cases, the Fifth Circuit affirmed summary judgment for the defendant in  Watson v. Citimortgage, No. 12-41009 (June 10, 2013, unpublished).  Rejecting waiver and estoppel arguments about the servicer’s conduct, the Court stressed the “anti-waiver” provision in the loan instruments, the lack of definiteness of the servicer’s alleged promises, and the lack of specificity about alleged violations of the Texas fair debt collection statutes.