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.

In Fontenot v. Watson Pharmaceuticals, a long-running products liability and medical malpractice case about a transdermal pain patch, plaintiffs sought to add nondiverse health care providers to the case after removal.  No. 12-30711 (June 10, 2013).  The district court remanded pursuant to 28 U.S.C. § 1447(e).  The Fifth Circuit dismissed for lack of appellate jurisdiction, concluding that a remand for lack of subject jurisdiction was unreviewable under Thermtron just like a jurisdictional remand under 1447(c), and noting that all other circuits facing the issue reached the same conclusion.  The Court also found that the joinder ruling that led to the jurisdictional issue was unreviewable as a collateral order.

The defendant in Bowles v. Ranger Land Systems did not have a bank account, registered agent, or office in Texas.  No. 12-51255 (June 16, 2013, unpublished).  As a defense contractor, the company had a handful of employees at three Army bases in Texas, but that presence was not substantial enough to create general jurisdiction.  (citing Johnston v. Multidata Systems Int’l Corp., 523 F.3d 602, 612-13 (5th Cir. 2008) (presence of two employees, who reported to out-of-state supervisor, was “certainly a regular contact with Texas” but was “not substantial enough to create a general business presence in Texas”)).  The Fifth Circuit also found no abuse of discretion in denying further jurisdictional discovery based on these allegations.

A dispute about guaranty obligations related to the purchase of a blimp was removed to federal court.  The district court granted a motion to compel arbitration, stayed the case, and administratively closed it.  McCardell v. Regent Private Capital LLC, No. 12-31089 (June 7, 2013, unpublished).  The Fifth Circuit reminded that administrative closure does not create a final judgment, and thus dismissed for lack of appellate jurisdiction over the interlocutory appeal.

Several companies resolved their responsibility for environmental litigation in a series of three agreements.  The second one (the “Merger Agreement”) had a “hold harmless” provision between two parties; the third (the “Master Settlement Agreement”) did not.  Alford v. Kuhlman Electric Corp., No. 11-60728 (May 24, 2013).  The beneficiary of the hold harmless provision in the Merger Agreement argued that the Master Settlement Agreement incorporated that provision via this language: “BorgWarner shall make payments of the Settlement Funds on behalf of [KEC] pursuant to the [Merger Agreement.]”  Noting that “[t]he term ‘pursuant to’ has multiple meanings and its use does not automatically trigger incorporation of the referenced agreement or statute,” the Fifth Circuit found that this “mere reference” did not incorporate the Merger Agreement.  The Court also rejected a similar argument based on a provision in the MSA which said it should not “be construed to impair, change, or modify any separate agreement” among the parties.

The case of Nexstar Broadcasting v. Time Warner Cable presented the appeal of the denial of a preliminary injunction, sought by an operator of TV stations (and creator of content) against a large cable company.  No. 12-10935 (May 30, 2013, unpublished).  The dispute focused on whether the defendant could relay signals, originally created by the plaintiff, out of local broadcast markets.  The key contract provision said: “[Nexstar] hereby gives [Time Warner] its consent, pursuant to Section 325(b) of the Act and the FCC Rules, to the nonexclusive retransmission of the entire broadcast signal of each Station (the “Signal”) over each System pursuant to the terms of this Agreement,” with “System” defined to mean all Time Warner Systems, with no geographic limitation.  Citing Bryan Garner’s dictionary of legal usage, the Fifth Circuit held: “The adverb ‘each’ is distributive—that is, [it] refer[s] to every one of the several or many things (or persons) comprised in a group.”  Accordingly, the grant of authority included all Time Warner systems, and no abuse of discretion in denying injunctive relief was found.

In State of Mississippi v. AU Optronics Corp., the Fifth Circuit reversed a remand order, finding that a suit brought to protect consumers by the Mississippi Attorney General was a “mass action” under CAFA. 701 F.3d 696 (2012).  Based on the analytical framework of Louisiana ex rel Caldwell v. Allstate Insurance, 536 F.3d 418 (5th Cir. 2008), the Court concluded that the numerical requirements of CAFA for a mass action were satisfied, and the “general public policy” exception in the statute was not.  A concurrence endorsed the outcome but suggested that the “claim-by-claim” framework of Caldwell effectively mooted the public policy exception.  The Supreme Court has now granted certiorari in this case to resolve a circuit split about how CAFA should treat “parens patriae” actions.

In Homoki v. Conversion Services, a check processing company sued its sales agent and a competitor.  No. 11-20371 (May 28, 2013).  It won judgment for $700,000 against the competitor for tortious interference with the sales agent’s contract with the company, and $2.15 million against the agent for past and future lost profits.  The company and competitor appealed.  First, the Fifth Circuit — assuming without deciding that the plaintiff had to show the competitor’s awareness of an exclusivity provision in the agent’s contract — found sufficient evidence of such knowledge in testimony and the parties’ course of dealing, and affirmed liability for tortious interference.  Second, the Court found that the plaintiff’s “experience in managing his business for sixteen years” supported his damages testimony, and that “[w]hile [plaintiff]’s presentation of its damages evidence was far from ideal,” also found sufficient evidence of causation on the interference claim.  Finally, the Court found that the plaintiff had given adequate notice of its claim of conspiracy to breach fiduciary duties (the joint pretrial order was not signed by the judge), but the plaintiff waived jury trial on that issue by not requesting a damages question — particularly given the significant dispute about causation in the evidence presented.

Plaintiff sued for violations of Louisiana’s version of RICO; defendants removed and moved to dismiss.  The trial court said in part: “there is no standing, there is no jurisdiction and the court will grant the Motion to Dismiss pursuant to 12(b)(1).”  Cox, Cox, Filo, Camel & Wilson LLC v. Sasol North America, Inc., No. 12-31123 (May 24, 2013, unpublished).  The Fifth Circuit found error in dismissing with prejudice, noting that “to dismiss with prejudice under Rule 12(b)(1) is to disclaim jurisdiction and then exercise it.”  The Court also found it unclear whether the trial court had dismissed on constitutional standing grounds or standing under the racketeering statute, “[b]ut instead of rewriting the district court’s order to affirm on the merits,” it vacated and remanded for further proceedings consistent with its opinion.

Plaintiffs, “waste haulers that operate throughout the City of San Antonio and its surrounding counties,” claimed that a fee imposed by San Antonio for a waste collection permit violated the Commerce Clause.  Cibolo Waste, Inc. v. City of San Antonio, No. 12-50153 (May 15, 2013).  Examining their standing, the Fifth Circuit found that they showed an injury-in-fact because the fee increased their cost of doing business.  The plaintiffs, could not, however, show that they fell within zone of interest protected by the dormant Commerce Clause, since “[t]heir business is purely intrastate,” and “the only parties that have standing to bring a dormant Commerce Clause challenge are those who both engage in interstate commerce and can show that the ordinance at issue has adversely affected their commerce.”

The case of Woman’s Hospital Foundation v. National Public Finance Guarantee Corp. turned on a claimed conflict between clause 2.2(f) of a bond insurance contract, which capped the amount of “indebtedness” the borrower could assume, and clause 2.6, which gave the insurer a right to consent to new “obligations.”  No. 12-30701 (May 14, 2013, unpublished).  The Fifth Circuit affirmed dismissal of the borrower’s claims, agreeing that as the instrument was written, the cap applied the the borrower’s overall financial condition and “indebtedness,” of which “obligations” were the subset that was secured by the insurer.  While unpublished, the opinion reminds of the technical, transaction-specific definitions that sophisticated deal instruments can give to terms such as “obligations.”

In Kenyon International Emergency Services, Inc. v. Malcolm, the Fifth Circuit found no abuse of discretion in an award of attorneys fees under a Texas statute to the defendants in a suit to enforce a noncompetition agreement. No. 12-20306 (May 14, 2013, unpublished).  The Court clarified that “the key determination is [plaintiff’s] knowledge of reasonable limits, not . . . its knowledge of the reasonableness of the agreement” (emphasis in original).  As it saw the record, the plaintiff’s CEO testified that the restrictions “were worldwide, overreaching in scope of activity, and basically indefinite in time.”  The Court also reversed a sanction on the plaintiff’s lawyer related to the unsealed filing of a “sexually-explicit Internet chat,” reminding that “[i]ssuing a show-cause order is a mandatory prerequisite to imposing monetary sanctions sua sponte,” and finding that the lawyer did not have an improper purpose in making the filing and thus did not fall within Rule 11.

In Colonial Freight Systems v. Adams & Reese, the Fifth Circuit affirmed summary judgment for a law firm on a malpractice claim and for unpaid fees.  No. 12-30853 (May 15, 2013, unpublished).  The plaintiff claimed, under Louisiana law, that the firm’s “negligent failure to advise the company of its right to a jury” was malpractice.  The Court rejected that claim because the plaintiff could only speculate about any loss resulting from that alleged failure.  (In the context of criminal law, a different framework applies because the policies at play are different, see United States v. Mendez, 102 F.3d 126 (5th Cir. 1996)).

The plaintiff served its suit on a guaranty obligation by using the Texas longarm statute, which requires that the plaintiff provide the Texas Secretary of State with the defendant’s “home or home office address.”  Tex. Civ. Prac. & Rem. Code §§ 17.044(a), 17.045(a).  The defendants in Moody National Bank v. Bywater Marine alleged that the plaintiff had only served a “mailing address,” but the Fifth Circuit disagreed, holding that service on the address specified in the parties’ contract for service of process satisfied the statute.  No. 12-40946 (May 14, 2013, unpublished) (citing Mahon v. Caldwell, Haddad, Skaggs, Inc., 783 S.W.2d 769, 771 (Tex. App. — Fort Worth 1990, no writ)).

The EPA and its state equivalent sued the owner of the “Big Cajun II,” a coal power plant in Louisiana, seeking penalties, injunctive relief, and remediation of alleged environmental damage.  Louisiana Generating LLC v. Illinois Union Ins. Co., No. 12-30651 (May 15, 2013).  Applying New York law, the Fifth Circuit found that “Claims, remediation costs, and associated legal defense expenses . . . as a result of a pollution condition” potentially encompassed some of the relief sought by the EPA for past environmental problems.  The Court also found that an exclusion for “[p]ayment of criminal fines, criminal penalties, punitive, exemplary or injunctive relief” did not unambiguously exclude coverage for remediation required by an injunction order, reasoning that such a broad reading “would potentially swallow” the coverage for remediation costs.  Having found a duty to defend, the Court did not reach a question about whether New York law allowed indemnification for civil penalties imposed under the Clean Air Act.

In Miller v. Raytheon Co., the Fifth Circuit affirmed liability for age discrimination and affirmed in part on damages.  No. 11-10586 (revised, July 30, 2013).  Among holdings of broader interest in civil litigation, the Court: (1) affirmed the verdict of liability, noting: “Considered in isolation, we agree with Raytheon that each category of evidence presented at trial might be insufficient to support the jury’s verdict.  But based upon the accumulation of circumstantial evidence and the credibility  determinations that were required, we conclude that ‘reasonable men could differ’ about the presence of age discrimination”; (2) reversed an award of mental anguish damages because “plaintiff’s conclusory statements that he suffered emotional harm are insufficient”; and (3) rejected a challenge, based on the Texas Constitution, to the statutory punitive damages cap in the TCHRA.

In Wellogix, Inc. v. Accenture, LLP, LLP the district court entered judgment for the plaintiff — $26.2 million in compensatory damages and $18.2 million in punitives, after a remittitur —  in a trade secrets case about software to make oil exploration more efficient.  No. 11-20816 (May 15, 2013, revised Jan. 15, 2014).  Affirming, the Court: (1) reminded, in the opening paragraph, of the deference due to a jury verdict; (2) detailed the sufficient evidence before the jury of a trade secret, of its inappropriate use by the defendant, of damages, and malice; (3) rejected Daubert arguments about the scope of the plaintiff’s computer science expert’s testimony  and the material considered by its damages expert; and (4) affirmed the punitive damages award because it was less than the compensatory damages and the issue of “reprehensibility” was neutral.  The Court also analyzed aspects of the relationship between trade secret claims and the patent process.  Footnote 4 of the opinion provides a useful guide to the federal courts’ treatment of a “Casteel problem” in Texas jury submissions.

The original lawsuit in Comer v. Murphy Oil alleged tort claims against several oil companies about the effect of global warming on Hurricane Katrina.  The district court dismissed the claims in that original suit on standing and political question grounds; then, after a Fifth Circuit panel initially reversed in part; the appeal was dismissed after recusals made en banc review impossible after a vote to grant review by the full Court.  In this new case, the plaintiffs refiled, the district court dismissed on the grounds of res judicata since its original ruling was not affected by the appeal, and the Fifth Circuit affirmed.  No. 12-60291 (May 14, 2013).  The Court reviewed the policies behind the doctrine of res judicata and declined to create an equitable exception to the doctrine for this case.

After sidestepping an issue about the Rooker-Feldman doctrine in the context of mortgage servicing earlier this year, the Fifth Circuit revisited the topic in Truong v. Bank of America, 717 F.3d 377 (2013).  After a review of the doctrine (“‘Reduced to its essence, the Rooker/Feldman doctrine holds that inferior federal courts do not have the power to modify or reverse state court judgments’ except when authorized by Congress.”), the Court found that it did not prevent a claim arising from alleged misconduct during the course of a foreclosure case. On the merits, however, the claim failed because of an exemption in Louisiana’s unfair trade practices act for “[a]ny federally insured financial institution,” and the Court affirmed dismissal on that basis.

In 2011 in J. McIntyre Machinery v. Nicastro, the Supreme Court revisited the issue of specific personal jurisdiction over a manufacturer based on putting a product into the “stream of commerce.”  131 S. Ct. 2780 (2011).  While the fractured Court did not produce a majority opinion, the plurality and a 2-Justice concurrence expressed concern about a view of that doctrine that would allow jurisdiction in a particular state based on a manufacturer’s general intent to do business across the country.  The Fifth Circuit directly addressed that language in Ainsworth v. Moffett Engineering, No. 12-60155 (May 9, 2013), finding that the plurality was not controlling, and that the 2-Justice concurrence was decided on the limited ground that no formulation of the doctrine would allow jurisdiction based on that manufacturer’s small number of shipments into the forum.  Because the defendant in Ainsworth had over 100 shipments during the relevant time, jurisdiction was appropriate. Language from past Circuit cases that may be inconsistent with McIntyre was noted but kept in place for now.

After the Army disclosed that a property was once a bomb range, the developer sued the law firm that advised on the issuance of bonds for the development. Coves of the Highland Development District v. McGlinchey Stafford PLLC, No. 12-30096 (May 7, 2013, unpublished).The Fifth Circuit affirmed summary judgment for the firm, principally on the ground that the developer bought the property before it retained the firm as bond counsel.  Of general interest, the parties’ dispute about the engagement letter pitted a general description of the firm’s work “regarding the source of payment and security for the Bonds” against a specific statement that the firm would rely on the developer for “complete and timely information on all developments pertaining to the Bonds . . . .”

Another 2013 mortgage case affirmed judgment for a mortgage servicer on contact, promissory estoppel and tort claims about an unsuccessful HAMP modification negotiation.  The holding of note is that the plaintiffs’ DTPA claim failed as a matter of law.  James v. Wells Fargo Bank, No. 12-10861 (May 3, 2013, unpublished). (quoting Montalvo v. Bank of America, 864 F. Supp. 2d 567, 595 (W.D. Tex. 2012) (“Texas federal courts have recently addressed DTPA claims like [plaintiff]’s claim and concluded that a person seeking a loan modification under the HAMP using a loan servicer is not a consumer under the DTPA.”)

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

While of limited precedential value because it uses “plain error” review, Ward v. Rhode touches on the role of websites in personal jurisdiction.  No. 12-41201 (May 3, 2013, unpublished).  Plaintiff alleged that the defendants placed a false “Scam Alert” about Plaintiff’s debt settlement services on a website.  The court observed: “The [Defendants’] website is interactive to the extent that it allows users to post their opinions about the debt-counseling services that they have used.  However, it neither allows users to purchase products online, nor sells subscriptions to view its content.  Therefore, the nature of the exchange of information is not commercial.”  (citing Mink v. AAAA Dev. LLC, 190 F.3d 333, 336 (5th Cir. 1999)).  Accordingly, it was “not clear or obvious” that the website’s interactivity with Texans and the commercial nature of that interaction was sufficient to establish jurisdiction.

The Supreme Court has granted certiorari in the case of In re Atlantic Marine Construction,   701 F.3d 736 (5th Cir. 2012), which declined to grant mandamus relief to enforce a forum selection clause.  The questions for review indicate that the Court plans to resolve a circuit split about the standard for enforcement of a forum selection clause, when the forum of suit would otherwise be proper under the federal venue statutes.  One view uses the test for “improper venue,” while another analyzes the issue under a 1404(a) convenience framework.

The insurance policy said: “Whenever any Assured has information from which the Assured may reasonably conclude that an occurrence covered hereunder involves an event likely to involve this Policy, notice shall be sent to Underwriters as soon as practicable . . . ”  Ins. Co. of N. Am. v. Board of Commissioners of the Port of New Orleans, No. 12-30705 (May 1, 2013, unpublished). Clarifying an earlier opinion (and mandate) about this notice provision, the Fifth Circuit held: “[T]he duty of coverage is triggered for each underwriter who receives notice under the policy. . . We do not, however, hold the converse of this conclusion.  In other words, we do not hold that all underwriters under the policy must receive notice as a condition precedent to a duty of coverage being triggered for any individual underwriter under the policy.”

The Fifth Circuit affirmed the district court’s confirmation of an arbitration award against challenges by both sides.  One party argued that there was no agreement to arbitrate, and the Court resolved that issue under general contract law principles: “Signature[] lines may be strong evidence that the parties did not intend to be bound by a contract until they signed it. But the blank signature blocks here are insufficient, by themselves, to raise a genuine dispute of material fact.”  The other party disputed the handling of postjudgment interest, but the Court concluded that the panel had only awarded post-award interest, leaving the district court free to impose the statutory postjudgment rate upon confirmation. The Court noted that parties may contract to have the arbitrator resolve the appropriate postjudgment rate.  Tricon Energy Ltd. v. Vinmar Int’l, Ltd., No. 12-20100 (May 3, 2013).

The plaintiffs in AFLAC v. Biles sued in state court, alleging that AFLAC paid death benefits to the wrong person, and that the signature on the policy application was forged.  No. 12-60235 (April 30, 2013).  AFLAC moved to compel arbitration in the state court case and simultaneously filed a new federal action to compel arbitration. The state court judge denied AFLAC’s motion without prejudice to refiling after discovery on the issue of the signatures’ validity.  In the meantime, the federal court granted AFLAC’s summary judgment motion and compelled arbitration after hearing expert testimony from both sides on the forgery issue.  The Fifth Circuit affirmed, finding that Colorado River abstention in favor of the state case was not required, and that the order compelling arbitration was allowed by the Anti-Injunction Act because it was “necessary to protect or effectuate [the federal] order compelling arbitration.”  The Court also found no abuse of discretion in the denial of the respondents’ FRCP 56(e) motion, since it sought testimony that would only be relevant if the witness admitted outright to forgery.

In Versata Software v. SAP America, the Federal Circuit affirmed jury verdicts that will likely lead to a judgment in excess of $400 million.  That Circuit’s review of a verdict is “reviewed under regional circuit law,” as to which the Court observed: “The Fifth Circuit applies an ‘especially deferential’ standard of review ‘with respect to the jury verdict.'”  (citing Brown v. Bryan County, 219 F.3d 450, 456 (5th Cir. 2000)).  In affirming the award for a reasonable royalty, the Court quoted the recent case of Huffman v. Union Pacific R.R., which discussed “inference on the basis of common sense, common understanding and fair beliefs, grounded on evidence consisting of direct statement by witnesses or proof of circumstances from which inferences can fairly be drawn.”  675 F.3d 412, 421 (5th Cir. 2012).  (Huffman is nominally about the causation requirements of FELA, but its analysis easily extends to other basic Daubert issues.)

The Fifth Circuit wrote in five areas of particular interest for commercial litigation during the first 1/3 of 2013:

Mandatory arbitration.  While an employer’s Dispute Resolution Program encouraged mediation, it still required arbitration if other options did not succeed.  Klein v. Nabors Drilling, 710 F.3d 234 (5th Cir. 2013).

Daubert.  Opinions about railroad safety were “transparently subjective” when the witness relied solely on “education and experience” and could not tie his opinions to specific safety standards.  Brown v. Illinois Central Railroad, 705 F.3d 531 (5th Cir. 2013).

Personal jurisdiction.  When the plaintiff bought a shaved-ice machine in Louisiana and “unilaterally transported” it to Mississippi, Mississippi had no jurisdiction over the Louisiana-based manufacturer.  Irvin v. Southern Snow Manufacturing, No. 11-60767 (5th Cir. March 13, 2013, unpublished).

Injunctive relief and trade secrets.  The Court largely affirmed a preliminary injunction about pharmaceutical development in Daniels Health Sciences v. Vascular Health Sciences, reviewing the standards for proof of a trade secret and irreparable injury.  710 F.3d 579 (5th Cir. 2013).

Mortgage servicing. A series of unpublished opinions rejected claims against mortgage servicers and lenders (usually arising from failed loan modification negotiations) involving the Statute of Frauds, negligent misrepresentation, estoppel, waiver, the validity of a MERS assignment and unreasonable collection efforts.   

BONUS: Monks can sell caskets.  A Louisiana law that barred a Benedictine monastery from selling caskets was struck down as unconstitutional under “rational basis” review.  St. Joseph Abbey v. Castille, ___ F.3d ___, No. 11-30757 (5th Cir. March 20, 2013).  “The deference we owe expresses mighty principles of federalism and judicial roles.  The principle we protect from the hand of the State today protects an equally vital core principle – the taking of wealth and handing it to others . . . as ‘economic’ protection of the rulemakers’ pockets.”

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

The Court released a revised opinion in National Rifle Association v. Bureau of Alcohol, Tobacco, Firearms & Explosives, a gun control case of broad general interest that has grown in social significance since its original release in October of 2012.  No. 11-10959 (revised April 29, 2013).  A thoughtful opinion rejects a Second Amendment challenge to restrictions on handgun purchases by 18-to-20 year-olds, noting: “considerable historical evidence of age- and safety-based restrictions on the ability to access arms . . . .”  The Court rejected challenges to the standing of the NRA as an organization to sue on behalf of members with personal interests in the dispute.  This case was found to control in a later dispute about a similar law, NRA v. McCraw, No. 12-10091 (revised May 22, 2013).

Continuing a series of opinions about mortgage servicing, the Fifth Circuit addressed an “incoherent and rambling” challenge to an assignment through the Mortgage Electronic Registration System (MERS) in Martins v. BAC Home Loans Servicing, No. 12-20559 (April 26, 2013, unpublished).  Notwithstanding its criticism of the argument presented, the Court firmly adopted the position of “[n]umerous district courts” that the “show-me-the-note” theory — under which only the holder of the original wet-ink signature note can begin a nonjudicial foreclosure — is not valid in Texas because “foreclosure . . . enforces a deed of trust, rather than the underlying note.”  (citing Wells v. BAC Home Loans Servicing, 2011 WL 2163987 (W.D. Tex. Apr. 26, 2011)).  The Court went on to reject a challenge to the adequacy of the price paid at foreclosure (92% of the most recent appraisal) and an estoppel-based challenge to a failed discussion of a HAMP modification.

The plaintiff in RBIII, L.P. v. City of San Antonio sought damages after the City of San Antonio razed a property without providing prior notice.  No. 11-50626 (April 23, 2013).  After a jury trial it recovered $27,500 in damages.  The Fifth Circuit found that a key jury instruction on the City’s defenses “improperly cast the central factual dispute as whether or not the Structure posed an immediate danger to the public, when the issue should have been whether the City acted arbitrarily or abused its discretion in determining that the Structure presented an immediate danger.”  Accordingly, “[b]ecause this error in the instructions misled the jury as to the central factual question in the case,” the Court reversed and remanded for further proceedings.   The Court’s analysis summarizes how federal courts address the issue of harm in erroneous jury instructions that the Texas Supreme Court has engaged in the Casteel line of cases.

The defendant in R&L Investment Property LLC v. Hamm alleged fraudulent inducement into a land sales contract, and the plaintiff responded that a ratification occurred when the defendant signed a modification of a related lien note and deed of trust.  (April 19, 2013).  The Fifth Circuit agreed with the plaintiff, following the principle that “instruments pertaining to the same transaction may be read together . . . as if they were part of a single, unified instrument.”  Because the defendant not only executed the ratification, but received the benefit of the related bargain, its claim for damages was foreclosed.  (citing Fortune Production Co. v. Conoco, Inc., 52 S.W.3d 671, 678 (Tex. 2000)).

Creditors sought to assert state law tort claims that had at one point belonged to a bankruptcy estate.  Wooley v. Haynes & Boone LLP No. 11-51106 (Apr. 18, 2013).  The Fifth Circuit found that the reservation language in the reorganization plan was too vague to satisfy the requirements of the Code as to these claims: “Neither the Plan nor the disclosure statement references specific state law claims for fraud, breach of fiduciary duty, or any other particular cause of action. Instead, the Plan simply refers to all causes of action, known or unknown. As noted, such a blanket reservation is not sufficient to put creditors on notice.”  The opinion reviews the handful of Fifth Circuit opinions that establish the guidelines on this basic topic in bankruptcy litigation, and contrasts with another recent opinion that found a set of avoidance claims had been properly reserved.

Smyth, a partner in a bankrupt entity, complained that the bankruptcy court had no jurisdiction to authorize the sale of claims he sought to assert individually. Smyth did not obtain a stay of the sale order, however, rendering the appeal moot: “When an appeal is moot because an appellant has failed to obtain a stay, this court cannot reach the question of whether the bankruptcy court had jurisdiction to sell the claims.”  Smyth v. Simeon Land Development LLC (April 18, 2013, unpublished).

The owner of technology for identifying promising sites for gold mines sued an engineering firm for misusing its confidential information.  Target Strike, Inc. v. Marston & Marston, Inc., No. 12-50221 (April 17, 2013, unpublished).  The Fifth Circuit found it appropriate to exercise jurisdiction after dismissal of the federal claim, when the claim had been litigated for an extended period and the timing of the remand motion seemed tactical “when the judicial tide appeared to turn . . .”  (That holding contrasts with a recent opinion that found an abuse of discretion in not remanding a case once all federal claims were eliminated at an early stage of the proceedings.  Enochs v. Lampasas County, 641 F.3d 155 (5th Cir. 2011) (citing Parker & Parsley v. Dresser Indus., 972 F.2d 580 (5th Cir. 1992))).  The Court went on to find the plaintiff’s claim time-barred because the sites were known to the plaintiff and the defendant’s activity was public.

Hari Aum LLC v. First Guaranty Bank examined how Louisiana law handles documentation about a mortgage securing future indebtedness.  No. 11-31218 (April 16, 2013).  Article 3298 of the Civil Code recognizes such mortgages so long as basic requirements are satisfied. Articles 1839 and 3338 require the filing of certain instruments in the public record for them to have full legal effect.  The Court concluded that a pledge and a modification to the original mortgage did not need to be recorded “as long as these alterations did not exceed the total indebtedness under the pre-existing [mortgage], which they did not.”

A lawyer’s letter making a settlement offer contained a paragraph accusing the other side of giving a witness money for favorable testimony.  The accused party then sued for defamation.  In Lehman v. Holleman, applying Mississippi law, the Fifth Circuit affirmed that such statements are absolutely privileged from liability because they are “plainly related” to an underlying judicial proceeding.  No. 12-60814 (April 15, 2013, unpublished).

The plaintiff in Hyde & Hyde, Inc. v. Mount Franklin Foods LLC asserted conversion claims about certain packaging equipment, based on an alleged assignment as part of a settlement agreement.  No. 12-50675 (Apr. 15, 2013, unpublished).  Applying Connecticut law, the Court  distinguished between assignments of claims involving property damages as opposed to personal injury: “When a tort is committed against a person, the injury is fixed to that individual; when a tort involving property occurs, the harm is claimed by whoever owns or has the right to the property at issue.”  Id. at 8.  While concluding that Connecticut thus allows assignment of conversion claims,  the Court found that general language in the agreement about “all” of the other party’s “rights and interests in the equipment” was not sufficient to make an assignment as it did not “describe the assignment of claims ‘with such particularity as to render [them] capable of identification.'”  Id. at 9.

Arbitrators awarded a videogame developer a perpetual license in certain intellectual property.  The district court vacated the award on the ground that the award went against the essence of the developer’s contractual relationship with the game publisher.  Timegate Studios, Inc. v. Southpeak Interactive, LLC (April 9, 2013).  The Fifth Circuit acknowledged that the FAA’s deference to arbitrators reaches its boundary if they “utterly contort[] the evident purpose and intent of the parties” with an award that does not “draw its essence” from the parties’ contract.  Here, particularly in light of the arbitrator’s findings about the publisher’s intentional wrongdoing, the Court found the license “was a permissible exercise of the arbitrator’s creative remedial powers” even if it was not wholly consistent with the parties’ contract.  The Court reviewed cases about arbitrators who exceeded their given authority and found them inapplicable to this situation: “Timegate committed an extraordinary breach of the Agreement, and an equally extraordinary realignment of the parties’ original rights [was] necessary to preserve the essence of the Agreement.”

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

Contractors who worked on a bankrupt hospital project disputed their relative lien priorities.  First National Bank v. Crescent Electrical Supply, No. 12-10386 (April 5, 2013).  The threshold question under Texas law was when work was “visible from inspection,” and was not “preliminary or preparatory.”  (citing Tex. Prop. Code §§ 53.123 and 53.124 and Diversified Mortgage Investors v. Lloyd D. Blaylock General Contractor, 576 S.W.2d 794 (Tex. 1978)).  In affirming the district court’s reversal of the bankruptcy court, the Fifth Circuit credited a stipulation by a party that was signed by counsel of record for another company, noting this was a “unique circumstance[],” where “the parties’ interests were significantly aligned and [the] party did not have record counsel of its own . . . .”    The Court also found that the force of the stipulation overcome later testimony by the party’s president, when he admitted that the company had not yet obtained a permit at the time of its earliest work.

Wagner v. BellSouth Telecommunications underscores a recent holding that a reduced credit rating is not enough to establish damage under the Fair Credit Reporting Act. 12-31080 (April 5, 2013, unpublished).  The opinion also reminds that to recover mental anguish damages under the FCRA, a plaintiff must offer “evidence of genuine injury, such as the evidence of the injured party’s conduct and the observations of others,” and to demonstrate “a degree of specificity which may include corroborating testimony or medical or psychological evidence in support of the damage award.” (quoting Cousin v. Trans Union Corp., 246 F.3d 359, 371 (5th Cir. 2001)).  The Court also reviewed basic limitations principles under the FCRA and its Louisiana state analog.

Two unpublished cases offer nuts-and-bolts insight on pleading requirements.  A pro se copyright infringement complaint failed when the plaintiff “[d]id not plausibly allege that the defendants copied any original work of authorship by her.”  Richards v. BP Exploration & Production, No. 12-30508 (April 3, 2013, unpublished).  A qui tam suit under the False Claims Act failed to allege fraud with sufficient particularity.  The Court noted that while Fed. R. Civ. P. 9(b) applies to FCA claims, its application there is “context specific and flexible,” and a plaintiff can plead with enough particularity “without including all the details of any single court-articulated standard–it depends on the elements of the claim in hand.”  Nunnally v. West Calcasieu Cameron Hospital, No. 12-30656 (April 3, 2013, unpublished) (quoting United States ex rel. Grubbs v. Kanneganti, 565 F.3d 180, 189-90 (5th Cir. 2009)).

The employee in Klein v. Nabors Drilling signed an Employee Acknowledgement Form that agreed to resolve disputes through the Nabors Dispute Resolution Program, describing the Program as “a process that may include mediation and/or arbitration.”  No. 11-30824 (Feb. 26, 2013).  The Fifth Circuit reminded that the basic legal framework asks: (1) is there a valid agreement to arbitrate? and (2) does the dispute fall within the scope of the agreement?  Here, the parties did not dispute that they had a valid agreement, or that Klein’s age discrimination claim was a “dispute” within the meaning of the Program — the novel issue was whether the parties agreed that arbitration was mandatory.  The Court carefully reviewed the Program and found that while it “preserve[d] options for nonbinding dispute resolution before final, binding arbitration,” it clearly stated that it “create[d] an exclusive procedural mechanism for the final resolution of all Disputes” and thus required arbitration of Klein’s claim.

Teta v. Chow involved a WARN Act claim asserted by a putative class in bankruptcy court. No. 12-40271 (March 29, 2013, revised April 19, 2013). The Fifth Circuit began its review by comparing the rules for adversary proceedings, which automatically adopt Fed. R. Civ. P. 23, with those for a class proof of claim, which would not automatically implicate that rule.  Applying Rule 23, the Court agreed that factors unique to the bankruptcy process can be considered in certification of a class by a bankruptcy court, but remanded for additional explanation by the district court on the issues of numerosity and superiority.  A dissent would simply reverse the denial of class certification.

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

A steady flow of mortgage servicing cases in 2013 continued with Smith v. JPMorgan Chase (March 22, 2013, unpublished).  In affirming summary judgment for the lender on several issues, the Court made two holdings of note.  First, an incomplete RESPA response, provided less than sixty days before suit was filed, could not support a contract or negligent misrepresentation claim when it caused no damage.  Second, the statement: “Defendants’ agents made harassing phone calls 8-10 times per day.  I quit answering our phone, but the constant ringing caused us to have to unplug our home phone and to only use our cell phones” did not raise a fact issue on a claim of unreasonable collection efforts, when “Defendants’ detailed call records, on the other hand, indicated that calls were not answered, phone numbers were disconnected, and messages were left, but, on days when there were multiple calls, only two calls were made.”

A company leased a railcar, and undertook to return it “cleaned of commodities,” which was defined to mean (among other things) “safe for human entry.” Sampson v. GATX Corporation, No. 12-30406 (March 19, 2013, unpublished). The district court concluded that this provision was only part of the contract devoted to allocation of the cost of cleaning.  The Fifth Circuit disagreed, and found that the plaintiff had raised a fact issue about whether this contractual duty could give rise to tort liability to someone injured in the car, pursuant to section 324A of the Second Restatement of Torts.

In a rare but classical exercise of judicial review of a state law’s “rational basis,” the Fifth Circuit found a Louisiana economic regulation unconstitutional.  The Associated Press and the Times-Picayune provide some initial commentary.  The Louisiana State Board of Embalmers and Funeral Directors barred an abbey of Benedictine monks from selling caskets.  In late 2012, the Fifth Circuit certified a question to the Louisiana Supreme Court about the Board’s authority, which that court declined to answer.  The Fifth Circuit then reviewed the Board’s actions and agreed with the district court that the regulation was not rationally related to the state’s claimed interests in consumer protection or public health, affirming an injunction against its enforcement.  St. Joseph Abbey v. Castille, No. 11-30757 (March 20, 2013).  The Court emphasized both the limited role of “rational basis” review and its importance when it does apply: “The deference we owe expresses mighty principles of federalism and judicial roles.  The principle we protect from the hand of the State today protects an equally vital core principle — the taking of wealth and handing it to others . . . as ‘economic’ protection of the rulemakers’ pockets.”

The Court released a revised opinion in Janvey v. Democratic Senatorial Campaign Committee, No. 11-10704 (originally issued October 23, 2012; revised March 18, 2013).  The expanded opinion withdraws the earlier holding that a federal equity receiver has standing to assert creditors’ fraudulent transfer claims arising from a Ponzi scheme.  The Court now holds that the receiver only has standing to assert the claims of the entities in receivership, but those entities are not considered to be “in pari delicto” with the operator of the scheme: “The appointment of the receiver removed the wrongdoer from the scene.  The corporations were no more [the perpetrator’s] evil zombies.”  Id. at 6 (quoting Eberhard v. Marcu, 530 F.3d 122, 132 (2d Cir. 2008), and citing Scholes v. Lehmann, 56 F.3d 750 (7th Cir. 1995) (Posner, C.J.)).

Materials Evaluation and Technology Corporation (“METCO”) had a CGL policy from Mid-Continent that it renewed annually beginning in 1997.  The 2002 policy covered liability arising from a third-party contractual relationship while the 2003 policy did not.  Two METCO employees were injured at a DuPont facility, DuPont settled their claim and sought indemnity from METCO pursuant to their contract, and Mid-Continent denied coverage based on the 2003 policy.  Materials Evaluation & Tech Corp. v. Mid-Continent Casualty Co., No. 12-40186 (March 18, 2013, unpublished).  METCO appealed a summary judgment for the insurer, arguing that Texas law presumes that an insurance policy renews on the same terms as the original.  The Court reviewed METCO’s authority and found it was limited to those cases’ particular fact situations — generally involving a claim of misrepresentation or an issue of mutual mistake — and affirmed.

The parties in Silver Dream LLC v. 3MC Inc. settled a copyright dispute about jewelry sales “by agreeing, among other things, that the [individual defendants] would provide affidavits disclosing details of the infringing items.”  No. 11-30968 (March 18, 2013, unpublished).  The defendants warranted the affidavits would be “true, complete, and exact” but the agreement allowed termination only if the affidavits were discovered to be false within a year.  The plaintiff took issue with the “qualified nature” of the affidavits as a reason to terminate the settlement, but the district court and Fifth Circuit stressed that the cancellation right was limited to a “false” statement. The plaintiff’s proof of alleged affirmative falsehoods in the affidavits was found to lack specificity.  The Fifth Circuit also found no abuse of discretion in denying a motion for continuance to depose the individual defendants, noting delay in the request and a lack of specificity about what the plaintiff planned to establish.

The ALI’s publication of the Restatement (Third) of Restitution in 2011 stirred interest in the important but arcane principles that define unjust enrichment.  The Fifth Circuit addressed a classic restitution situation in Boudreaux v. Transocean Deepwater, Inc., No. 12-30041 (March 14, 2013).  A seaman sought recovery for maintenance and cure after an injury; Transocean successfully established a defense based on the seaman’s failure to disclose a previous medical condition; and Transocean sought restitution of money paid earlier.  The majority rejected Transocean’s position, finding a lack of support in prior case law, and noting that the scienter element of Transocean’s defense was less demanding that a common-law fraud claim.  (“We are offered no reason to depart from precedent. There is only the change of advocates and judges, by definition irrelevant to the settling force of past jurisprudence — always prized but a treasure in matters maritime.”)  A dissent, briefly citing the Restatement, argued that one other circuit had endorsed such a claim, and that allowing the claim struck the proper policy balance.

Plaintiff purchased a shaved-ice machine in Louisiana, made by Southern Snow, a Louisiana-based business.  She moved the machine to Mississippi, injured her hand while cleaning it, and sued for damages in Mississippi.  Irvin v. Southern Snow Manufacturing, No. 11-60767 (March 13, 2013, unpublished).  The Fifth Circuit agreed with the district court that she did not establish specific jurisdiction under a stream-of-commerce theory.  Even assuming that Southern Snow had minimum contacts by making a substantial percentage of its sales into neighboring Mississippi, her claim did not arise out of those contacts because “Southern Snow sold the machine to a Louisiana customer and had no knowledge that, years later, Irvin unilaterally transported it into Mississippi.”  General personal jurisdiction was not at issue.  The Court’s emphasis on the “arising out of” factor echoes its recent opinion in ITL International v. Constenla, S.A., 669 F.3d 493 (5th Cir. 2012).  The vagaries of snow cone sales produced another published Fifth Circuit opinion, on procedural due process and pleading issues, in Bowlby v. City of Aberdeen, 681 F.3d 215 (5th Cir. 2012).

An assignment of royalty interests for a continental shelf project had this “calculate or pay” clause:  “The overriding royalty interest assigned herein shall be calculated and paid in the same manner and subject to the same terms and conditions as the landowner’s royalty under the Lease.”  The parties disputed whether the clause simply required calculation of royalties in the same way as the government’s royalty, or allowed suspension of the assigned payments during a period when the government’s royalty right was suspended. Total E&P USA, Inc. v. Kerr-McGee Oil & Gas, No. 11-30038 (revised June 20, 2013).  Applying Louisiana law, the majority found the clause ambiguous on that issue, and further reasoned that at the time of contracting, legal principles that eventually became settled and could resolve the ambiguity were not yet settled.  Noting that no cross-appeal was taken, the Court reversed a summary judgment and remanded for consideration of extrinsic evidence.   A succinct concurrence noted an additional reason for finding ambiguity based on the grammar of the clause.  A dissent took issue with the majority’s analysis of other contract provisions and applicable law, and would have affirmed summary judgment about interpretation but reversed as to reformation for mutual mistake.    Both the majority and dissent endorsed consideration of extrinsic evidence, for different reasons and purposes — a general topic which recurs with some regularity in the Court’s contract opinions.

The plaintiff in Smith Maritime v. L/B KAITLYN EYMARD sought recovery for property damage and lost profits from allegedly negligent welding on a crane on a boat.  No. 12-30378 (Jan. 3, 2013, publication ordered March 11, 2013)  The Fifth Circuit found the plaintiff’s tort claims for economic loss barred by East River Steamship Corp. v. Transamerica Delaval, which “held that a manufacturer in a commercial relationship has no duty under either a negligence or strict products-liability theory to prevent a product from injuring itself.”  476 U.S. 858, 871 (1986).  The Court concluded that “modification of a vessel,” as distinguished from its “manufacture or repair,” was “a distinction without a difference” for purposes of East River.  The Court recognized that the errant crane had damaged living quarters that were being added to the vessel, but those quarters were not “other property” outside the East River doctrine given the wording of the parties’ Asset Purchase Agreement.  

Appellant sought review of an attachment order on the M/V OCEAN SHANGHAI.  Appellee moved to dismiss the appeal, as the parties had settled, and the boat in question had left the jurisdiction (near the coast of Latvia as of the date of this post.)    Farenco Shipping Co. v. Farenco Shipping PTE, Ltd., No. 12-31154 (March 4, 2013, unpublished).  Appellant responded by asking for vacatur of the attachment order.  Recognizing that this request raised the novel question of vacatur of an interlocutory order rather than a final judgment, the Fifth Circuit found no “exceptional circumstances” in either the parties’ settlement or the order’s potential collateral estoppel effect that would warrant its vacatur.  With respect to the settlement, the Court observed that as a general matter: “Settlements are frequently made under difficult circumstances, and often represent the least bad of several bad options; this does not make such settlements involuntary.”

The Court released a revised opinion in PPI Technologies v. Liberty Mutual, which continues to affirm the dismissal of a coverage case for inadequate allegations of property damage.  No. 12-40189 (March 1, 2013, unpublished).  The opinion is now unpublished, contains a footnote stating: “Our holding is not intended to alter Texas pleading standards,” and discusses the allegations in Twombly-like language, stating: “The allegations in the underlying lawsuits are either for economic damages, and thus not covered, or are legal conclusions, rather than factual allegations as required.”

The Deepwater Horizon rig operated under a drilling contract between BP and Transocean.  The contract had indemnity provisions between BP and Transocean for pollution claims depending on whether the contamination originated above water.  The contract also required Transocean to maintain BP as an additional insured under Transocean’s liability coverage.  In Ranger Insurance v. Transocean Offshore, the parties agreed that BP was entitled to some coverage as an additional insured, but disputed whether that coverage reached pollution liability, since the spill originated below water in BP’s area of responsibility under the indemnity clauses.  No. 12-30230 (March 1, 2013).  The Fifth Circuit reasoned: (1) Texas law begins by examining the policy, which did not restrict pollution coverage when read in light of earlier cases involving similar clauses; (2) the terms of the drilling contract did not change that conclusion, as its indemnity provisions were sufficiently “discrete” from its additional insured provision.  The opinion reviews what the Court saw as a consistent line of Fifth Circuit and Texas authority about the interplay of indemnity and “additional insured” clauses.

The Fifth Circuit affirmed a preliminary injunction about pharmaceutical development in Daniels Health Sciences v. Vascular Health Sciences.  No. 12-20599 (March 5, 2013). The opinion offers a practical road map for basic issues in trade secret litigation.  As to likelihood of success on the merits, the Court found adequate findings about damage, specific confidential information, a trade secret arising from a “compilation,” and a confidential relationship between the parties.  As to irreparable injury, the Court found sufficient findings about reputational injury that was not speculative.  While it found no abuse of discretion in the district court’s weighing of public and private interest factors, it did see a “close question” about the overall scope of the injunction in light of the conduct at issue and the defendant’s business plans and suggested that the district court “try to narrow the scope of its injunction on remand.”

The secured lender held a $39 million claim in the bankruptcy of a hotel development; a reorganization plan was approved over its objection in a “cram-down” that called for repayment of the debt over ten years at 5.5 percent interest (1.75 percent above prime on the date of confirmation).  Wells Fargo v. Texas Grand Prairie Hotel Realty LLC (No. 11-11109, March 1, 2013).  The parties agreed that this “prime-plus” approach was appropriate under the plurality in Till v. SCS Credit Corp., 541 U.S. 465 (2004), but disputed the proper rate.  The Court rejected a threshold challenge based upon “equitable mootness” because it reasoned that the appeal could be resolved with “fractional relief” rather than rejection of the plan.  On the merits, the Court reaffirmed that it would review the choice of a cramdown rate for clear error rather than de novo, citing In re: T-H New Orleans Limited Partnership, 116 F.3d 790 (5th Cir. 1997)).  After a thorough review of Till and subsequent cases, the court found no clear error in this prime-plus rate in this factual context.

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

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

The Bankruptcy Code requires that a plan receive a favorable vote from “at least one class of claims that is impaired under the plan.”  11 U.S.C. § 1129(a)(10).  In Western Real Estate Equities LLC v. Village at Camp Bowie I, LP, thirty-eight unsecured trade creditors of a real estate venture voted to approve the debtor’s plan, while the secured creditor voted against it.  No. 12-10271 (Feb. 26, 2013).  The secured creditor complained that the consent was not valid because the plan “artificially” impaired the unsecured claims, paying them over a three-month period when the debtor had enough cash to pay them in full upon confirmation.  Recognizing a circuit split, the Fifth Circuit held that section 1129 “does not distinguish between discretionary and economically driven impairment.”  The Court conceded that the Code imposes an overall “good faith” requirement on the proponent of a plan, but held that the secured creditor’s argument here went too far by “shoehorning a motive inquiry and materiality requirement” into the statute without support in its text.

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

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

Con-Drive contracted to provide an offshore diving system to ARV Offshore, did not perform, and was found liable for millions of dollars that it cost ARV to arrange a substitute system for an oil-drilling project.   ARV Offshore Co. v. Con-Dive LLC, No. 12-20098 (Feb. 22, 2013, unpublished).  A key damage issue was whether ARV was reimbursed by its customer for a substantial amount of the costs for the substitute.  The Fifth Circuit affirmed the judgment, noting a potential waiver issue because Con-Dive had not adequately pleaded offset as a defense, and found that the relevant testimony from an ARV representative was “non-specific and did not establish a basis for the district court to recompute the damage amount.”  The opinion is fact-specific but this observation has broader applicability in commercial damages litigation.

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

Hisaw & Associates General Contractors (“HIGAC”) defaulted on contracts, requiring Liberty Mutual to pay on a surety bond.  Liberty Mutual v. Hisaw & Associates, No. 11-11012 (Feb. 20, 2013, unpublished).  After it paid, Liberty Mutual sought recovery from HIGAC’s principals; the question for appeal was whether certain transactions involving them violated a covenant about a minimum asset requirement.  The Fifth Circuit affirmed the district court’s conclusion that several payments to third parties by HAGC were not “received by” the principals under the contract, and that loan repayments by HAGC to its principals were not “as a result of . . . loans [to the principals].”  The Court then reversed in favor of the principals on whether a salary payment was a “distribution.”  The Court noted that Liberty Mutual could use more precise contract language, and faulted a senior Liberty Mutual counsel for changing testimony on a relevant issue during a deposition.

A Louisiana statute requires a well operator to provide landowners “a sworn, detailed, [and] itemized statement” about drilling costs.  Brannon Properties v. Chesapeake Operating, No. 12-30306 (Feb. 21, 2013, unpublished).  The Fifth Circuit reversed a summary judgment for the operator, finding that the district court correctly concluded that its report lacked enough detail under the unambiguous language of the statute, and that the analysis should have ended there.  Id. at 5 (“The statute clearly connects the costs reported to the benefits received in exchange.  . . . [I]t must tell the unleased mineral owner what it is getting for its money.”).  The Court faulted the district court for proceeding to analysis of the statute’s purpose after reaching a conclusion that its terms were unambiguous, and also for finding an incorrect purpose inconsistent with those terms. Id. at 6-7.

The defendant in Innovation First Int’l v. Zuru Inc. removed a trade secret case about a toy robotic fish and then obtained dismissal on forum non conveniens grounds.  No. 12-10511 (Feb. 19, 2013, unpublished).  The Fifth Circuit found no abuse of discretion in the district court’s conclusions that the design and production of the fish took place in China and that the bulk of witnesses and evidence were in China, and affirmed based on the analogous case of Dickson Marine v. Panalpina, Inc., 179 F.3d 331 (5th Cir. 1999).  A revised opinion slightly changed the Court’s analysis of the deference due to the plaintiff’s choice of forum.

Knoles v. Wells Fargo presented a rare encounter between an eviction and the Rooker-Feldman doctrine.  No. 12-40369 (Feb. 19, 2013, unpublished).  The borrower lost a forcible entry & detainer (eviction) matter at trial in JP court and on appeal.  The borrower then sued for damages, Wells removed, and the borrower unsuccessfully tried to get a TRO about possession from the federal district court.  The district court denied relief based on the Rooker-Feldman doctrine about federal review of final state court judgments.  The Fifth Circuit found that it had jurisdiction over the interlocutory appeal pursuant to 28 U.S.C. § 1292(a)(1), even though the appeal was nominally from a TRO, because the relief at issue was “more in the nature of a temporary injunction in fact, though not in name.”  The court deflected an argument about mootness to hold that the order sought a federal injunction against a final state court judgment in violation of the Anti-Injunction Act.

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

The case of Tekelec, Inc. v. Verint Systems, Inc. presented a contract dispute, sufficiently intricate that the Court attached a four-color chart to its opinion to illustrate the facts.  No. 11-40418 (Feb. 13, 2013).  In affirming summary judgment for the plaintiff on largely case-specific grounds, the Court reached two principal holdings: (1) an assignee has a right to enforce a payment obligation even if the contract documents do not create an express enforcement right, and (2) the contract payments were not “royalties or other patent damages” within the specific context of these parties’ dealings, or as the terms “royalty” and “reasonable royalty” are generally understood.  The first holding draws upon the general principle in Texas law that a contract construction leading to an exclusive remedy is disfavored unless that intent is clearly stated; an issue arising in contract litigation generally when potential equitable remedies are evaluated.

The borrowers in Priester v. JP Morgan Chase alleged two violations of the Texas Constitution about their home equity loan — not receiving notice of their rights 12 days before closing, and closing the loan in their home rather than the offices of a lender, attorney, or title company.  708 F.3d 667 (5th Cir. 2013).  A cure letter was not answered and they sued for forfeiture of interest and principal under the state constitution. The Fifth Circuit affirmed the dismissal of the claim under the Texas 4-year “residual” limitations period, finding that was the prevailing view of courts that had examined the issue, and disagreeing with a district court that had found no limitations period.  That court reasoned that a noncompliant home equity loan was void, but the Fifth Circuit concluded that the cure provision in the Constitution instead made it voidable. Tolling doctrines did not apply since it was readily apparent where the closing occurred.  The Court also affirmed the denial of a motion for leave to amend to add new claims and non-diverse parties, reviewing the factors for both aspects of such a motion.

In long-running litigation and arbitration about alleged environmental contamination in Ecuador, Chevron obtained discovery from U.S. courts several times under 28 U.S.C. § 1782 on the basis that a “foreign or international tribunal” was involved.  Republic of Ecuador v. Connor, No. 12-20122 (Feb. 13, 2013).  Chevron then successfully resisted a § 1782 application on the ground that the arbitration was not an “international tribunal.”   The Fifth Circuit applied judicial estoppel and reversed, asking: “Why shouldn’t sauce for Chevron’s goose be sauce for the Ecuador gander as well?  The Court dismissed a jurisdictional issue by characterizing § 1782 as a grant of administrative authority.  It then rejected Chevron’s arguments that judicial estoppel could not apply to legal issues and that reliance by earlier courts on Chevron’s position had not been shown.  The opinion reminds that: “Because judicial estoppel is an equitable doctrine, courts may apply it flexibly to achieve substantial justice.”  (quoting Reed v. City of Arlington, 650 F.3d 571 (5th Cir. 2011) (en banc), and citing New Hampshire v. Maine, 532 U.S. 752 (2001)).  (The “goose-and-gander” saying traces to an early collection of English proverbs.)

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

A manufacturer of ship propulsion systems contracted with a ship operator, who in turn contracted with a shipbuilder.  The manufacturer and the operator had a sales contract (with an arbitration clause), and the operator and the shipbuilder had a separate contract.  VT Halter Marine v. Wartsila North America, No. 12-60051 (Feb. 8, 2013, unpublished).  The component manufacturer and shipbuilder had dealings as part of the overall relationship but did not have a direct contract.  The shipbuilder sued the manufacturer for supplying allegedly defective parts.  Its breach of warranty claim, derivative of the operator’s rights, was conceded to be arbitrable.  The tortious interference claim, however, could only be arbitrated under an estoppel theory since the shipbuilder was not a party to the manufacturer-shipbuilder contract.  The district court’s order was not clear about the basis for ordering arbitration of that claim, and the Fifth Circuit remanded for resolution of whether estoppel applied.  The Court reminded that while orders compelling arbitration are usually reviewed de novo, an order compelling a third party to arbitrate under an estoppel theory is reviewed for abuse of discretion (citing Noble Drilling v. Certex USA, 620 F.3d 469, 472 n.4 (5th Cir. 2010)).

The insurers in Pride Transportation v. Continental Casualty faced a claim arising from a truck accident that left the victim a paraplegic, with evidence that the driver falsified her logs to make deliveries on time, and with plaintiff’s counsel who had won personal injury verdicts in the same county for amounts in excess of policy limits.  No. 11-10892 (Feb. 6, 2013, unpublished).  Under these circumstances, the Fifth Circuit agreed with the district court that the insurers did not incur Stowers liability under Texas law for accepting (rather then rejecting, the classic Stowers fact pattern) a settlement offer at policy limits and then withdrawing from the defense of the insured trucking company.  The Court did not address potential issues arising from the specific release in this settlement (it only named the driver, and excluded the company) except to note that potential indemnity claims between them would fall within the “insured-v.-insured” exclusion.

The insured in Kerr v. State Farm filed a claim about a stolen fishing boat, but declined to give an examination under oath (EUO).  No. 12-30332 (Feb. 5, 2013, unpublished).  State Farm claimed that refusal was a material breach that prevented recovery on the policy.  The insured said that State Farm was not prejudiced.  The Fifth Circuit affirmed summary judgment for State Farm, citing “affidavits from members of [State Farm’s] Special Investigative Unit stating that an EUO is an important tool in the claim investigation process and that by refusing an EUO, Kerr impeded State Farm’s ability to gather information about the claim.”  The Court declined to address an argument by State Farm that prejudice need not be shown when an EUO is refused in a first-party case.

An apartment developer sought recovery on a title insurance policy after unfortunate zoning stopped the project.  Levy Gardens Partners v. Commonwealth Land Title Insurance, No. 12-30010 (Jan. 31, 2013).  The Fifth Circuit affirmed the finding of coverage, concluding, among other matters, that: (1) state court rulings about zoning laws deserved deference by federal courts in later coverage litigation; (2) the state court preliminary injunction litigation about zoning had become a sufficiently “final decree” to trigger coverage; (3) delay in giving notice did not cause prejudice; and (4) the policy did not require the developer to invoke a “conditional use process.”  The Court also found, however, that the policy “unambiguously restricts liability to the difference in the value of the title with and without the zoning encumbrance,” thus limiting the insured’s recovery to roughly $650,000 rather than several million in development expenses.  In rejecting the insured’s arguments about the policy, the Court also found no prejudicial violation of Fed. R. Civ. P. 8(c) about the pleading of defensive matters.

A group of chicken farmers supplied poultry to Pilgrim’s Pride.  After the company terminated its contracts and entered bankruptcy, the farmers sued for damages under a promissory estoppel theory, alleging that its oral promises of a long-term relationship induced them to invest in chicken houses.  Clinton Growers v. Pilgrim’s Pride, No. 12-10063 (Jan. 31, 2013) at 2.  The Court affirmed summary judgment for Pilgrim’s Pride, finding that the plain language of the contract specified a contract duration (“flock-to-flock,” roughly 4-9 weeks), and foreclosed an estoppel claim about that topic.  Id. at 7.  Similarly, contract provisions about the farmers’ compensation and maintenance obligations foreclosed other attempts to recast the subject of the estoppel claim.  Id. at 8.   The Court distinguished a prior Arkansas case about a commitment by Tyson Foods to supply hogs to a hog grower, both on legal grounds and on the strength of the evidence about the alleged misrepresentations by Tyson.  Id. at 8-10.  The Texas Law Book covered the opinion shortly after its release.

In the fourth of a series of unrelated cases about mortgages and foreclosures in 2013, the Fifth Circuit affirmed the dismissal of claims about the foreclosure on a home used as collateral for a business loan.  Water Dynamics v. HSBC Bank, No. 12-10307 (Jan. 30, 2013, unpublished).  The holdings included: (1) the foreclosure price exceeded 50 of the claimed value, and was thus not “grossly inadequate” and appellants could not state a wrongful foreclosure claim, (2) appellants’ prior breach of contract foreclosed their contract claims, and the contract modifications they alleged were barred by the Texas statute of frauds, (3) acts of the lender alleged to be inconsistent with the loan documents did not state a waiver claim, especially given the deed of trust’s anti-waiver provision, and (4) “Appellants’ allegations may demonstrate a failure to communicate between themselves and the lender, but they fall far short of . . . [showing] ‘a course of harassment that was willful, wanton, malicious, and intended to inflict mental anguish and bodily harm'” so as to state a claim for unreasonable collection efforts.

The plaintiff in Akerblom v. Ezra Holdings sued several companies for damages arising from their business dealings.  No. 12-20182 (Jan. 28, 2013, unpublished).  Federal jurisdiction turned on whether one defendant, called “Subsea” in the opinion, was improperly joined.  To determine whether “the defendant has demonstrated that there is no possibility of recovery by the plaintiff against an in-state defendant,” the Court reminded that the focus is on pleadings at the time of removal — any later pleadings or affidavits can only “amplify or clarify facts alleged in the state-court complaint.”  Id. at 7.  Applying Texas’s “fair and adequate notice” standard for proper pleading, the Court found that the fraud claim against Subsea failed to say that misrepresentation Subsea allegedly made, or who from Subsea allegedly made it.  Id. at 10.  There were also substantive issues as to whether several alleged representations were actionable.  The Court’s focus on “what” and “who” under Texas law echoes recent opinions under the federal Twombly standard.

An expert opined that a railroad crossing was unsafe and required active warning devices.  Brown v. Illinois Central Railroad, No. 11-60654 (Jan. 28, 2013).  He contended that the crossing had “‘narrow’ pavement, ‘skewed’ angle, ‘rough’ surface and ‘steep’ incline” but did not tie those conclusions to a guideline or publications, relying instead on “education and experience.”  He also admitted that visibility at the crossing was adequate under the Transportation Department’s standards.  Id. at 7.  Accordingly, the Fifth Circuit affirmed the district court’s exclusion of his testimony under Daubert, calling it “transparently subjective.”  Id. at 8.

In 2011, Antill Pipeline joined a new third-party defendant to a case and obtained a continuance.  In 2012, Antill Pipeline had the case consolidated with another lawsuit it had filed, which had the effect of joining two new defendants, and obtained another continuance. In December 2012, the trial court dismissed several defendants, including the three joined by Antill Pipeline.  One week before the January 28 trial setting, Antill Pipeline moved to stay the trial and then sought mandamus two business days before the scheduled start date.  The Fifth Circuit held: “Antill’s petition, if granted, would further delay a trial that Antill has already caused to be delayed numerous times. Under these circumstances we cannot say that the district court clearly abused or usurped its judicial power . . . .”  In re Antill Pipeline Construction Co., No. 13-30102 (Jan. 25, 2013, unpublished).

The defendant in Factory Mutual Insurance v. Alon USA stipulated to liability after an explosion at a waste treatment plant.  The remaining issue was whether fair market value of the plant was the cost to replace it (roughly $6 million) or the cost of the plant’s component parts (roughly $900,000).  No. 11-11080 (Jan. 23, 2013).  Under deferential clear error and abuse-of-discretion standards of review, the Fifth Circuit affirmed the district court’s conclusions that: (1) the plant system was unique and the cost of its components did not fairly estimate its value (distinguishing Hartford Ins. Co. v. Jiminez, 814 S.W.2d 551 (Tex. App.–Houston [1st Dist.] 1991, no pet.)); (2) the plaintiff’s expert “educated and interviewed . . . employees” about a key depreciation issue, and thus “did more than just repeat information gleaned from external sources” (distinguishing U.S. v. Mejia, 545 F.3d 179 (2d Cir. 2008)); and (3) the multiplier used to reflect installation expenses was “entirely reasonable[,]” “[g]iven the lack of useful records and resources pertaining to this particular . . . plant.”

In Ergon-West Virginia, Inc. v. Dynegy Marketing & Trade, the Fifth Circuit found that Dynegy had no duty under two natural gas supply contracts to attempt to get replacement gas after a declaration of force majeure in response to hurricane damage, affirming the district court as to one contract and reversing as to the other.  No. 11-60492 (Jan. 22, 2013).  The first contract’s force majeure clause required Dynegy to “remed[y] with all reasonable dispatch” the event.  The Court found that “reasonable” was not ambiguous but that extrinsic evidence of industry standards (favorable to Dynegy) was properly admitted to give it full meaning (contrasting its approach with the district court’s, which found the term ambiguous and admitted the testimony to resolve the ambiguity).  The second contract’s provision had language about “due diligence” by Dynegy.  The Court found the term ambiguous as both parties’ readings of it were reasonable, and then held that the district court should have credited the same evidence here as it did for the first contract.

In the third mortgage servicing opinion of 2013, the Fifth Circuit affirmed the dismissal of contract, promissory estoppel, and tort claims under Texas law arising from the attempted negotiation of a loan modification during a foreclosure situation.   Milton v. U.S. Bank, No. 12-40742 (Jan. 18, 2013, unpublished); see also Gordon v. JP Morgan Chase (contract and estoppel claims under Texas law) and Pennell v. Wells Fargo Bank (negligent misrepresentation claim under Mississippi law).  The Court also found that this mortgagor-mortgagee relationship did not create an independently actionable duty of good faith, and that reliance on alleged representations that were inconsistent with the loan documents and foreclosure notice was not reasonable.  Id. at 5, 6.

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

City of New Orleans Employees’ Retirement System v. Hayward affirmed the dismissal, on forum non conveniens grounds, of putative shareholder derivative suits against BP arising from the Deepwater Horizon disaster.  No. 12-20019 (Jan. 16, 2013, unpublished).  Among other factors discussed, the Fifth Circuit noted and gave weight to the points that: (1) plaintiffs were “phantoms” for FNC purposes because of their attenuated interests in the case, (2) technological advances did not make geographical issues irrelevant in an FNC analysis [key witnesses and documents being located in the UK rather than Louisiana], (3) the UK had a substantial interest in applying its own, relatively new Companies Act, and (4) the BP derivative cases comprised one-third of the U.S. court’s MDL docket.

Plaintiffs obtained a preliminary injunction against enforcement of a school voucher program, alleging it violated a desegregation consent decree.  Moore v. Tangipahoa Parish School Board, No. 12-31218 (Jan. 14, 2013, unpublished).  The Fifth Circuit found an abuse of discretion in denying a stay pending appeal.  One reason was Pullman abstention, which arises “when an unsettled area of state law . . . would render a decision on the federal issue unnecessary,” and where the Court said the defendant had a “a strong likelihood of establishing” it in light of pending state litigation about the constitutionality of the law under state law.  Another was jurisdiction under the All Writs Act, where the Court said the plaintiffs’ evidence of harm was “based merely on general financial information and speculation.”  A dissent further discussed Pullman abstention and advocated outright dismissal of the case.  The opinion appears to have been unpublished because of its expedited procedural posture, and a later panel will fully address the merits on a conventional briefing schedule.  Id. at 4 n.1

Continuing a theme begun a few days ago in Gordon v. JP Morgan Chase, the Fifth Circuit affirmed summary judgment for a servicer on a negligent misrepresentation claim under Mississippi law based on statements during loan modification discussions.  Pennell v. Wells Fargo Bank, No. 12-60595 (Jan. 9, 2013, unpublished).  The Court saw the statements as unactionable promises of future conduct.  In reviewing the relevant cases, the Court distinguished two federal district court cases on their facts, while also diminishing their effect under Erie compared to controlling state court authority.

The district court dismissed a case about the misappropriation of trust assets under the “probate exception” to federal diversity jurisdiction.  Curtis v. Brunsting, No. 12-20164 (Jan. 9, 2013) (applying Marshall v. Marshall, 547 U.S. 293 (2006)).  The Fifth Circuit stated that “Marshall requires a two-step inquiry into (1) whether the property in dispute is estate property within the custody of the probate court and (2) whether the plaintiff’s claims would require the federal court to assume in rem jurisdiction over that property.”  Id. at 5.  Finding no evidence that this inter vivos trust was, or even could be, subject to Teas probate administration, the Court reversed and remanded.

The sales agreement for two tugboats provided for $250,000 in liquidated damages if the boat was used in violation of a noncompetition provision.  International Marine LLC v. Delta Towing LLC, No. 12-30280 (Jan. 8, 2013).  The Fifth Circuit applied federal admiralty law, using section 356 of the Second Restatement of Contracts as the guide, and placing the burden on the party seeking to invalidate the provision as a penalty. The Court quickly concluded that the second factor of that section — difficulty in proving damages — was established by evidence about the nature of the boat charter business to which the clause applied.  Id. at 9.  The Court also found that the first factor — reasonableness of the estimated anticipated loss — was satisfied by evidence about the range of expected fees and contract duration.  Id. at 9-10.  (citing Farmers Exp. Co. v. M/V Georgis Prois, 799 F.2d 159 (5th Cir. 1986)).  The clause was thus enforceable.

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

The Fifth Circuit’s 2012 business litigation opinions suggest these five tips for the New Year:

1.  Plead key details.   While not removing the limits on Fed. R. Civ. P. 9(b), the Court has reminded twice of the importance of “what,” “how,” and “when” in pleading under Twombly and Iqbal.  It also reversed a Rule 12 dismissal in a contract case because the plaintiff adequately pleaded an industry custom about the relevant terms.

2.  Plead reasonably.  The Federal Circuit, applying Fifth Circuit law, reversed the denial of Rule 11 sanctions for what it saw as an objectively unreasonable construction of a patent.

3.  Stretch the long arm carefully.  Applying recent Supreme Court authority, the Fifth Circuit found no personal jurisdiction over cases about an “off-the-shelf” software contract, a distributorship arrangement based outside the forum state, and an alleged corporate “alter ego” situation.

4.  Watch the eight corners.   During 2012, the Court reversed once, and then again, to reject exceptions to Texas’s “eight corners” rule about insurance coverage, but also reversed to allow a mistake claim to proceed despite that rule.

5.  Don’t count on mandamus.  After granting mandamus in a high-profile venue dispute in 2008, the Court has since declined to grant the writ as to the wrongful denial of a remand motion and an alleged error about a forum selection clause.

An employer terminated two employees for safety violations.  An arbitrator, appointed under the parties’ collective bargaining agreement, ordered them reinstated after a suspension.  The district court vacated the award, and the Fifth Circuit reversed and reinstated.  Albermarle Corp. v. United Steelworkers, 703 F.3d 821 (2013).  The Court found that “explicating broad CBA terms like ’cause,’ when left undefined by contract, is the arbitrator’s charge.”  Id. at 7.  It distinguished prior cases that left an arbitrator no discretion as to whether certain rule violations required discharge.  Id. at 5-6 (citing E.I. DuPont de Nemours & Co. v. Local 900, 968 F.2d 456 (5th Cir. 1992)).  The Court also rejected a challenge to the award on public policy grounds, reminding that “any such public policy must be explicit, well defined, and dominant.”  Id. at 10.  Cf. Horton Automatics v. Industrial Division of the Communication Workers of America, No. 12-40576 (Jan. 4, 2013, unpublished) (reversing confirmation when labor arbitrator exceeded limited scope).

The appellant in All Plaintiffs v. Transocean Offshore (the MDL relating to Deepwater Horizon) challenged an order requiring him to submit to a psychiatric exam and supply medical records as part of the procedure.  No. 12-30237 (Jan. 3, 2013, unpublished).  Following Mohawk Industries v. Carpenter, 130 S. Ct. 599 (2009), the Fifth Circuit held that the collateral order doctrine did not allow appeal of this interlocutory discovery order.  Any erroneous effect on the merits of the case could be reviewed on appeal of final judgment, and even if that review was “imperfect[]” to remedy the intrusion on his privacy interest, the harm was not so great as to justify interlocutory review of the entire class of similar orders.  A concurrence noted that while mandamus review was theoretically possible, this party had not requested it as an alternative to direct appeal, and had not made a sufficiently specific showing of harm to obtain mandamus relief.

The plaintiff in Gordon v. JP Morgan Chase alleged that a home foreclosure was prevented by the lender′s promises of a permanent loan modification under the Home Affordable Mortgage Program (“HAMP”).  No. 12-20323 (Jan. 3, 2013, unpublished).  The Fifth Circuit agreed with the lender that the Statute of Frauds did not allow such a claim to proceed under Texas contract law.  Because the SOF barred the contract claim, promissory estoppel could only arise if the lender orally promised to sign a writing that would satisfy the SOF, and that the writing was in existence at the time of the promise.  Statements about future loan papers did not satisfy this rule.  While the opinion is unpublished, its analysis has the potential for extensive citation in state and federal cases seeking to stop foreclosures because of statements made in the context of HAMP negotiations.

The district court and Fifth Circuit agreed that fraud claims by dissatisfied consumers of weight loss medicine did not allege “bodily injury” so as to trigger a duty to defend.  CSA Nutraceuticals v. Chubb Custom Insurance, No. 12-10137 (Jan. 2, 2013, unpublished): “Failing to achieve weight reduction means the body basically did not change. It does not mean that the body was injured.”  The short opinion summarizes and rejects the plaintiff′s arguments for coverage.

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

The FDIC repudiated a North Texas office lease as receiver for a failed bank, the landlord sued for unreasonable delay in violation of the statute authorizing the FDIC’s action, and the FDIC defended on the ground that the delay caused no harm in a depressed real estate market and thus could not have been unreasonable.  Building Four Shady Oaks Management LP v. FDIC, No. 12-0080 (Dec. 21, 2012, unpublished).  The district court and Fifth Circuit agreed with the FDIC.  The opinion clearly illustrates basic statutory interpretation and how a factor such as “prejudice” may be incorporated by a statutory term such as “reasonable time.”

Denied enforcement of a $26 million arbitration award in China’s Fujian Province (that court finding the award invalid because an arbitrator was imprisoned during the proceedings), the plaintiff sought recognition in the Eastern District of Louisiana.  First Investment Corp. of the Marshall Islands v. Fujian Mawei Shipbuilding,  No. 12-30377 (Dec. 21, 2012, revised Jan. 17, 2013). The Fifth Circuit affirmed dismissal for lack of personal jurisdiction with three holdings: (1) the recent case of Goodyear Dunlop Tires v. Brown, 131 S. Ct. 2846 (2011), removed doubt as to whether foreign corporations could invoke due process protection about jurisdiction; (2) the New York Convention did not abrogate those rights; and (3) no “alter ego” relationship among the relevant companies was shown that could give rise to jurisdiction.  In a companion case, the Court affirmed a ruling that denied jurisdictional discovery based on “sparse allegations” of alter ego.    Covington Marine v. Xiamen Shipbuilding, No. 12-30383 (Dec. 21, 2012); cf.Blake Box v. Dallas Mexican Consulate, No. 11-10126 (Aug. 21, 2012) (reversing jurisdictional discovery ruling).

The plaintiff in Smith v. Santander Consumer USA received $20,43.59 in damages for violation of the Fair Credit Reporting Act.  No. 12-50007 (Dec. 20, 2012).  The Fifth Circuit agreed that damages were not recoverable solely for a reduced line of credit, but found sufficient other evidence about harm to the plaintiff’s business and personal finances to affirm.  Enthusiasts of appellate arcana will find it interesting to compare the Court’s analysis of a general federal verdict under the Boeing standard with the Texas damages submissions required by Harris County v. Smith, 96 S.W.3d 230 (Tex. 2002) (applying Crown Life Ins. v. Casteel, 22 S.W.3d 378 (Tex. 2000)).

The parties’ agreement said: “State Farm agrees not to remove any Hurricane Ike cases filed by your firm to Federal Court.”  Horn v. State Farm Lloyds, No. 12-40410 (Dec. 21, 2012).  Roughly a year later, the firm filed a 100,000-member class action against State Farm, who removed the case.  State Farm argued that the agreement was intended to resolve large numbers of individual claims and extending it to a class action was not consistent with the specific consideration given.  The Fifth Circuit affirmed the remand order, finding that the terms “any” and “cases” were not ambiguous.  The Court’s emphasis on contract wording, especially in the insurance context, is consistent with other recent cases, see, e.g., Ballard v. Devon Energy, 678 F.3d 360 (5th Cir. 2012).

New Orleans taxicab owners challenged new city ordinances about their business and cars.  The Fifth Circuit vacated a preliminary injunction in their favor, primarily on grounds related to the substantive constitutional issues in play, and affirmed the district court’s denial of an injunction on other matters for lack of irreparable injury.   Dennis Melancon, Inc. v. City of New Orleans, No. 12-30921 (Dec. 18, 2012, revised Jan. 17, 2013).  Reminding that  “when the threatened harm is more than de minimis, it is not so much the magnitude but the irreparability that counts for purposes of a preliminary injunction,” the Court found that plaintiffs could later sue the city for costs of complying with the ordinances if they prevailed.  Footnotes 14 and 15 address other potential theories of irreparable injury based on “impairment of contract” and privacy rights.

The plaintiff in Arthur J. Gallagher & Co. v. Babcock obtained a $1.2 million judgment for violation of a noncompetition agreement in the insurance field.  No. 11-30452 (Dec. 18, 2012).   The Fifth Circuit affirmed the enforceability of the agreement.  As to its substance, the Court held that Gallagher’s prohibition of employees from competing for accounts on which they actually worked at Gallagher was “less restrictive than allowed under state law.”  As to geographic scope, the Court affirmed the district court’s narrowing of the provision from 64 parishes to the 9 in which Gallagher actually provided insurance services.  The Court vacated the damages because the key witness conflated (a) the group of clients who chose to leave Gallagher after the employee left with (b) the group of clients who actually followed Gallagher to his new employer.  See id. at 18 (“Defendants did not breach their agreements by leaving GBSI, but by accepting work from clients who departed along with them.”)

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

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

A police dispatcher was terminated based on texts and pictures found on her cell phone in violation of department policy.  Garcia v. City of Laredo, No. 11-41118 (Dec. 12, 2012).  The Fifth Circuit affirmed summary judgment on her claim that this data was protected by the Stored Communications Act, 18 U.S.C. ch. 121, finding that the phone was not a “facility” and the data saved on it was not in “electronic storage” as the statute defined those terms.  The Court also rejected her contention that the district judge had shown bias against her counsel in the course of the proceedings below.

Earlier this year, the Fifth Circuit affirmed a fee enhancement in the Pilgrim’s Pride bankruptcy pursuant to section 330 of the Code.  In ASARCO LLC v. Barclays Capital, the Court reversed an enhancement under section 328.  No. 11-41010 (Dec. 11, 2012).  “Section 328 applies when the bankruptcy court approves a particular rate . . . at the outset of the engagement, and § 330 applies when the court does not do so.”  Id. at 13.  A “necessary prerequisite” to section 328 enhancement is that the professional’s work was “not capable of anticipation.”  Here, the Court found that the length of the ASARCO bankruptcy and the exodus of its employees after filing led to “commendable” work by Barclays that was still “capable of being anticipated.”  See id. at 19 (analogizing Barclays to a car buyer who finds a new Corvette “needed far more than a car wash”).

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

Paddle Tramps Manufacturing made wooden paddles with the emblems of several fraternities, a group of 32 fraternities sued to enjoin it for trademark infringement and unfair competition, and the company defended with unclean hands and laches.  Abraham v. Alpha Chi Omega, No. 12-10525 (revised Feb. 7, 2013).  The district court entered partial injunctive relief after a jury trial found for the company on the defenses.  The Fifth Circuit affirmed the instructions given, finding that the appellant’s arguments about unclean hands conflated elements of trademark liability with elements of the defense and that the laches instruction fairly handled the concept of “progressive encroachment.”   The Court also found sufficient evidence to support the “undue prejudice” element of laches, although calling it a “close question,” and found that the district court properly balanced the equities — especially injury to the alleged infringer — in crafting the injunction.  The opinion discusses and distinguishes other cases denying relief in related situations.  Professor Rebecca Tushnet further analyzes the case on her intellectual property blog.

The Fifth Circuit affirmed summary judgment for an insurer, reasoning: “We do not consider mere use of the phrase ‘property damage’ and parroted Policy language as sufficient factual allegations.  None of the assertions of ‘property damage’ in the underlying lawsuits are accompanied by facts illustrating specific harm or damage to tangbile property.”  PPI Technology Services v. Liberty Mutual Ins., No. 12-40189 (Nov. 29, 2012).  The closest, an allegation that the insured suffered “property damage throughout the lease where the well was drilled,” was characterized as “simply stating that it owns the property in which the drilling occurred . . . .”  Id. at 10.  The case analyzes the pleadings under the Texas “eight-corner” test rather than Twombly or Iqbal.

In Sosebee v. Steadfast Insurance Co., the Fifth Circuit found that an insurer made an effective reservation of rights, reminding that “Louisiana follows a functional approach to the reservation of rights and we have rejected requirements for technical language . . . .”  No. 11-31134 (Nov. 27, 2012) (citing FDIC v. Duffy, 47 F.3d 146, 151 (5th Cir. 1995)).  The Court then analyzed whether the insurer waived that reservation, in the unusual setting of a direct action suit against the insurer while the insured was in bankruptcy.  Finding no harm or prejudice to the insured from the conduct at issue, the Court held that no waiver occurred, and reversed and rendered summary judgment for the insurer.

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

The Fifth Circuit makes a major contribution to the law of international insolvency proceedings in Ad Hoc Group of Vitro Noteholders v. Vitro SAB de CV, Nos. 12-10542, 12-10869, 12-10750 (Nov. 28, 2012, rev’d Jan. 7, 2013).  The opinion affirms a series of rulings under Chapter 15 of the Bankruptcy Code (which implements the UNCITRAL model law on cross-border insolvency): that (1) recognized the legitimacy of the Mexican reorganization proceeding involving Vitro (the largest glassmaker in Mexico with over $1 billion in debt), (2) recognized the validity of the foreign representatives appointed as a result of that proceeding, analogizing their appointment process to the management of a debtor in possession in the U.S., and (3) denied to enforce the plan on the grounds of comity.  The detailed comity analysis turns on the U.S. bankruptcy system’s disfavor for non-consensual, non-debtor releases.  The framework of the opinion is broadly applicable to a wide range of cross-border insolvency situations and addresses issues of first impression about the scope of relief available under Chapter 15.  A representative article about the case in Businessweek appears here.

In re Atlantic Marine Construction denied a mandamus petition about enforcement of a forum selection clause, finding no “clear abuse of discretion.”  No. 12-50826 (Nov. 19, 2012).  The majority and specially concurring opinions exchanged detailed views on whether Fed. R. Civ. P. 12(b)(3) or 28 U.S.C. § 1404(a) controls a forum selection issue when the parties did not select state law to govern enforcement of the clause and venue would otherwise be proper in the district of suit.  The majority opinion reflects a continuing conservatism in recent mandamus cases after 2008’s en banc Volkswagen opinion.

In State of Mississippi v. AU Optronics Corp., the Fifth Circuit reversed a remand order, finding that a suit brought to protect consumers by the Mississippi Attorney General was a “mass action” under CAFA. 701 F.3d 796 (2012).  The Court reviewed the pleading, the relevant Mississippi statutes, the general contours of parens patriae law, and its prior case of Louisiana ex rel Caldwell v. Allstate Insurance, 536 F.3d 418 (5th Cir. 2008), which found that policyholders rather than the Louisiana AG were the real parties in interest in an analogous suit.  Based on this analysis, the Court concluded that the numerical requirements of CAFA for a mass action were satisfied, and the “general public policy” exception in the statute was not.  A concurrence endorsed the outcome but questioned the framework used to analyze the statutory exception.

Overlapping state and federal cases about the rights to settlement proceeds led the district court to abstain under the Colorado River doctrine in Saucier v. Aviva Life & Annuity Co., No. 11-60503 (Nov. 16, 2012).  The Fifth Circuit reversed, finding no “exceptional circumstances” warranting abstention.  In reviewing each of the relevant factors, the Court distinguished “duplicative litigation” — which does not warrant absention — from “piecemeal” litigation in which a state court case has more relevant parties than a federal one.  Id. at 7-8.  The Court also reminded that “how much progress has been made” is more important in comparing the status of parallel cases than their respective filing dates.  Id. at 8.

The bankruptcy trustee in Compton v. Anderson filed several avoidance actions, and the bankruptcy court dismissed for lack of standing because the reservation of those claims to the trustee in the debtors’ reorganization plan was not sufficiently “specific and unequivocal.”  No. 11-20478 at 4 (Nov. 14, 2012) (citing Dynasty Oil & Gas v. Citizens Bank, 540 F.3d 351, 355 (5th Cir. 2008)).  The Fifth Circuit reviewed several of its recent cases on this issue and reversed, concluding that “[i]n addition to stating the basis of recovery, the Exhibits referenced in the Reorganization Plan identified each defendant by name.”  Id. at 12. The case was remanded for further review, including the scope of a carve-out in the reservation for released claims.  Id. at 12.  This opinion is an important contribution on a basic issue in bankruptcy litigation.

Smith v. Christus St. Michaels presented a wrongful death claim about an elderly man, who suffered from recurrent cancer, who died from a fall in the hospital while being treated for a blood disorder.  No. 12-40057 (Nov. 13, 2012) (unpublished).  The trial court granted summary judgment under the “lost chance” doctrine, finding a lack of evidence that the man would have been likely to survive his cancer.  The Fifth Circuit reversed because it found his death was caused by a fall unrelated to his cancer or other treatment protocol.  Id. at 8. The Court also reversed a ruling that the plaintiffs’ expert testimony on causation was conclusory, finding that it “sufficiently explained how and why” as to the allegedly inadequate monitoring of the patient’s bedside at night.  Id. at 10.  The opinion provides a general nuts-and-bolts summary of Texas tort causation law.

A series of clerical errors led an insurer to overpay a $710,000 settlement by $510,000.  National Casualty v. Kiva Construction, No. 12-20217 (Nov. 12, 2012).  The insurer sued for breach of contract and “money had and received”; the insured counterclaimed for bad faith in the initial handling of the settlement.  The Fifth Circuit affirmed the district court’s summary judgment for the insurer.  The Court’s straightforward, unpublished opinion offers two cautionary notes — first, while the settlement agreement did not specify a time for payment of the full amount, a Lousiana statute did so specify (although the insurer complied), and second, the Twombly standards are not in play when the district court obviously considered evidence outside of the pleadings and said in its order that the counterclaims failed “based on the undisputed facts.”

In Gibson v. Texas Department of Insurance, a state regulator sought to prohibit an attorney from using the domain: “texasworkerscomplaw.com.”  No. 11-11136 (Oct. 30, 2012). Even assuming the domain name was only commercial speech, the Fifth Circuit reasoned that Texas failed to show that the name was inherently deceptive, and also “made no serious attempt to justify” its regulation as an effort to “prevent misuse of the DWC’s names and symbols.”  Id. at 9-10.  The Court thus reversed and remanded for consideration of the “misuse” issue and to allow Gibson to show that the domain was “ordinary, communicative speech, and not merely . . . commercial speech.”  Its analysis reviewed several cases about trademark issues in the domain name context.  Id. at 8 & n.1.

In Ackal v. Centennial Beauregard Cellular, the Fifth Circuit reversed the certification of a class of Louisiana governmental entities who contracted with the class defendants for cell phone service.  No. 12-30084 (Oct. 26, 2012).  The Court reasoned that because Louisiana law requires many of the entities to follow a specific process before retaining outside legal counsel, the class was essentially “opt in” — a class structure expressly foreclosed by Rule 23(b)(3), which allows only class member “opt out.”  Id. at 6 (citing Kern v. Siemens Corp., 393 F.3d 120 (2d Cir. 2004)).

An unpublished opinion reversed the vacating of a FINRA arbitration award in Morgan Keegan v. Garrett, No. 11-20736 (Oct. 23, 2012).  The Court reversed a finding of fraudulent testimony “because the grounds for [the alleged] fraud were discoverable by due diligence before or during the . . . arbitration.”  Id. at 8.  The Court also deferred to the panel’s conclusions about the scope of the arbitration as consistent with the authority given by the FINRA rules.  Id. at 10-12.  Throughout, the opinion summarizes Circuit authority about the appropriate level of deference to the panel in a confirmation seting.

The receiver for the Allen Stanford entities sued to recover $1.6 million in contributions to political committees as fraudulent transfers under Texas law.  Janvey v. Democratic Senatorial Campaign Committee, No. 11-10704 (Oct. 23, 2012).   The Fifth Circuit affirmed summary judgment for the receiver, holding: (1) notwithstanding some conflicting language in prior opinions, the receiver had standing to “maintain . . . actions done in fraud of creditors even though the corporation would not be permitted to do so”; (2) limitations ran from the discovery of the fraud, not the public disclosure of the payments under federal election law; and (3) TUFTA was not preempted by that law, noting its limited preemptive effect and the lack of a conflict as to election regulation.

“The thirty-eight monks of St. Joseph Abbey,” unable to earn income from the abbey’s timberland after Hurricane Katrina, began to sell handmade funeral caskets at a price significantly lower than that offered by funeral homes.  The Louisiana State Board of Embalmers and Funeral Directors contended that these sales violated state regulations, and the monks sought relief under the 14th Amendment, arguing that the regulations had no rational basis as applied to them.  St. Joseph Abbey v. Castille, No. 11-30756 (rev’d Nov. 21, 2012).  After an exceptionally thorough review of due process principles in the context of “rational basis review” of economic regulation (which Judge Haynes declined to join as unnecessary), the Court certified a question to the Louisiana Supreme Court about the scope of the relevant enabling statute.

Several months ago, the Court held that a stay is not automatic during an appeal about arbitrability, weighing in on an important procedural issue addressed by several other Circuits.  Weingarten Realty v. Miller, 661 F.3d 904 (5th Cir. 2011).  In an unpublished opinion, the Court has now addressed the merits and affirmed the denial of the motion to compel arbitration under an “equitable estoppel” theory, offering a basic reminder about that concept — arbitration is not proper when the guaranty as to which the plaintiff sought a declaration was distinct from the loan agreement that contained the arbitration clause.  Weingarten Realty v. Miller (2), No. 11-20676 (Oct. 22, 2012).

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

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

After reviewing the application of judicial estoppel in the bankruptcy context as to a debtor’s claim in Love v. Tyson Foods, 677 F.3d 258 (5th Cir. 2012), the Court applied the doctrine to a creditor’s claim in Wells Fargo v. Oparaji, No. 11-20871 (Oct. 5, 2012).  After carefully reviewing the elements of that doctrine in this circuit, the Court found that Wells did not adopt “plainly inconsistent position[s]” in the debtor’s two bankruptcies, observing that a creditor is not required to include all accrued liability in every revised proof of claim.  The Court also found that the debtor’s failure to follow the plan in his first bankruptcy barred him from now invoking the equitable remedy of judicial estoppel based on those proceedings.

After granting en banc review, and thus vacating the panel opinion in Access Mediquip v. United Healthcare, the en banc court has now reinstated the panel opinion and expressly overruled prior cases that were in tension with the panel’s analysis of ERISA preemption as to misrepresentation claims.  No. 10-20868 (Oct. 5, 2012).

In Highland Capital Management v. Bank of America, the Fifth Circuit reversed a Rule 12 dismissal of a claim for breach of an oral contract.  No. 11-11139 (Oct. 2, 2012).  The Court noted the practical difficulty of applying the legal test for intent to be bound by an oral contract, largely developed on summary judgment records, in the pleading context.  The Court acknowledged that after the phone call in which the plaintiff alleged the contract formed, email called their deal “subject to” further amendment.  The plaintiff, however, alleged sufficient facts about whether all material terms were agreed on in the call, the industry custom for the type of transaction, and the nature of the further discussions to state a plausible contract claim.  The Court affirmed the dismissal of a promissory estoppel claim for failure to adequately plead reliance.

While Opulent Life Church v. City of Holly Springs turned on First Amendment religion clause issues about the legality of a zoning ordinance, it offers some general insights about preliminary injunction practice.  No. 12-60052 (Sept. 27, 2012).  Irreparable injury can potentially be shown from evidence about the likely loss of a lease, or a looming lack of building capacity (although the capacity issue in this case focused on religious practice.)  Id. at 27.  Even if evidence of injury is strong, the party opposing a preliminary injunction should have the opportunity to be heard and present evidence about the potential harm to it of an injunction so that the equities can be balanced.  Id. at 28-29.

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

Judge Edith Jones has resigned as Chief Judge of the Fifth Circuit, to be succeeded by Judge Carl Stewart from Louisiana.  She will continue to serve on the Court.  This change returns the Court to a familiar balance seen with Chief Judges Henry Politz and Carolyn King, when a Democratically-appointed Chief presided over a court with a majority of Republican-appointed judges.

Earlier this year, the Fifth Circuit largely affirmed a series of rulings about governmental immunity in litigation about flood damage from Hurricane Katrina, allowing some cases to proceed and finding the government immune as to others.  On rehearing, the Court found that the “discretionary-function exemption” to the Federal Tort Claims Act created immunity even if the Flood Control Act did not.  In re Katrina Canal Breaches Litigation at 25-26 (Sept. 24, 2012) (“Our construction of the FCA leaves undisturbed the district court’s ruling on that issue.  Our application of the DFE, however, completely insulates the government from liability.”).

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

After a 3-day hearing, a bankruptcy court certified a class for injunctive relief about foreclosure-related fees during the debtors’ bankruptcy proceedings.  Rodriguez v. Countrywide Home Loans, No. 11-40056 (Sept. 14, 2012).  The Fifth Circuit affirmed, finding that Countrywide’s acts were “generally applicable” to the “narrowly certified . . . class of approximately 125 individuals.”  Id. at 6 (distinguishing Wilborn v. Wells Fargo, 609 F.3d 748 (5th Cir. 2010)).  The Court also found that the relevant records were readily searched and that Countrywide had a consistent “practice” even though it had no formal company policy as to the fees.  Id. at 9, 10-11 (distinguishing Wal-Mart v. Dukes, 131 S. Ct. 2541 (2011)).

A consumer group sued under the Clayton Act about the market for funeral caskets, and then settled all compensatory damages with one of the defendants.  Funeral Consumers Alliance v. Service Corp. Int’l, No. 10-20719 (Sept. 13, 2012).  The Fifth Circuit held that, even after that settlement, the group had standing to proceed against the remaining defendants for attorneys fees.  Id. at 4-14.  Noting, however, that “[t]he fact that death is inevitable is not sufficient to establish a real and immediate threat of future harm,” the Court found no standing for injunctive relief.  Id. at 15, 18.  The Court also affirmed the denial of class certification, finding that the scope of the putative nationwide class fit poorly with the evidence of localized market activity for funeral services and casket sales.  Id. at 27 (distinguishing United States v. Grinnell Corp., 384 U.S. 563 (1996)).

From the second third of 2012, here are 5 commercial litigation cases from the U.S. Court of Appeals for the Fifth Circuit worth knowing:

1.  Personal jurisdiction.  “[O]ff-the-shelf, out-of-the-box” software contract did not create a “long-term interactive business relationship” with Texas.  Pervasive Software v. Lexware GMBH & Co., No. 11-50097 (5th Cir. July 20, 2012).

2.  Class certification.  No “commonality” for claims about “whether each individual qualified for the discount based on the evidence in his or her file.”  Ahmad v. Old Republic Nat’l Title Ins., No. 11-10695 (5th Cir. Aug. 13, 2012).

3.  Daubert challenges rejected.  Several issues about mechanical engineering testimony “ultimately . . . affected the weight of the evidence” rather than admissibility.  Roman v. Western Manufacturing, No. 10-31271 (5th Cir. Aug. 17, 2012)

4 and 5.  Satisfying Twombly and Iqbal 

Not enough: pleading that “invokes three potentially cognizable theories of liability,” but “does not identify by date or amount or type of service, any of the alleged bad-faith denials and delays . . . .”  Patrick v. Wal-Mart, 681 F.3d 614 (5th Cir. 2012).

Not enough: “no allegations regarding the types of businesses . . . the size . . . where they are located, or what laws and regulations they have violated.”  Bowlby v. City of Aberdeen, 681 F.3d 215 (5th Cir. 2012).

Compare: “Particularity” standard under FRCP 9(b) “require[s] a plaintiff pleading fraud to specify the statements contended to be fraudulent, identify the speaker, state when and where the statements were made, and explain why the statements were fraudulent. . . . the who, what, when, where, and how of the events at issue.”  E.g., Dorsey v. Portfolio Equities, 540 F.3d 333, 339 (5th Cir. 2008).

The unpublished case of Gibbs v. Lufkin Industries reviews the basics of anti-suit injunctions.  No. 11-50524 (Sept. 7, 2012).  The district court dismissed some of plaintiffs’ claims (including the federal ones), remanded the remaining state claims, and enjoined pursuit of those claims during appeal of the dismissal ruling.  The Fifth Circuit reversed, noting that the second court ordinarily determines the preclusive effect of a prior court’s judgment, and that simultaneous in personam proceedings do not by themselves require an anti-suit injunction.  Id. at 6.  The Court distinguished Brookshire Bros. v. Dayco Products, 2009 WL 8518382 (5th Cir. Jan. 23, 2009) as arising from the erroneous remand of the same proceeding.

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

Texas Keystone v. Prime Natural Resources began as an application for U.S. discovery in support of an English court case pursuant to 28 U.S.C. § 1782.  After review of that statute and its relationship with Fed. R. Civ. P. 26 once discovery is ordered, the Court found an abuse of discretion when the trial court granted the respondents’ Motion to Quash without a response from the party requesting discovery.  Id. at 10-13 (citing Sandsend Financial Consultants v. FLHBB, 878 F.2d 875 (5th Cir. 1989) and Wiwa v. Royal Dutch Petroleum, 392 F.2d 812 (5th Cir. 2004)).  The Court’s analysis of section 1782, intended to guide the district court on remand, also provides general background for future discovery requests in the Circuit under that statute.

Baisden v. I’m Ready Productions involved several challenges to a defense verdict in a copyright infringement case.  No. 11-20290 (Aug. 31, 2012).  Among other holdings, the Fifth Circuit reminded that “[c]onsent for an implied [nonexclusive] license may take the form of permission or lack of objection,” making the Copyright Act’s requirement of a writing inapplicable.  Id. at 9-10 (reviewing Lulirama Ltd. v. Axcess Broad. Servs., 128 F.3d 872 (5th Cir. 1997)).  The Court also reviewed a jury instruction that allegedly conflated the question of license with that of infringement — a potential problem since the burdens are different on the two points — but found that while “the question is not a model of clarity” it did not give rise to reversible error.  Id. at 19-21.

The plaintiff in Lozano v. Bosdet did not serve a British defendant within the 120 days of Fed. R. Civ. P. 4, or a later extension by the district court.  No. 11-60737 (Aug. 31, 2012).  The Fifth Circuit, noting “that statutory interpretation is a ‘holistic endeavor,'” applied a “flexible due-diligence” standard to find that dismissal was not warranted, especially since a refiled suit would likely be time-barred.  Id. at 7, 9.  The Court aligned itself with the Seventh Circuit and rejected different readings of Rule 4(f) in the international context by the Ninth Circuit (unlimited time) and Second Circuit (120-day limit excused only if service is attempted in the foreign country), noting that it did not wish to require “immediate resort to the Hague Convention or other international methods.”  Id. at 5-6.

In National Union v. American Eurocopter, a contribution suit arising from settlement of claims about a helicopter crash, a Hawaii district court found no personal jurisdiction and transferred venue to Texas.  No. 11-10798 (Aug. 27, 2012).  The appellant challenged that ruling, and the Fifth Circuit held that it lacked jurisdiction over that issue.  Id at 4 (quoting 28 U.S.C. § 1294, defining appellate jurisdiction as reaching “appeals . . . [f]rom a district court of the United States to the court of appeals for the circuit embracing the district”).  On the merits, the Court affirmed a dispositive choice-of-law ruling for Texas law, noting a Texas choice-of-law provision in a relevant contract, a rough balance between the place of the accident (Hawaii) and the defendants’ headquarters (Texas), and the relatively weak interest of an out-of-state insurer.  Id. at 5-7 (noting Beech Aircraft v. Jinkins,  739 S.W.2d 19 (Tex. 1987)).

Vanderbilt Mortgage v. Flores, arising from a collection suit about the financing for a mobile home, involved a substantial recovery on counterclaims for wrongful debt collection and filing of a fraudulent lien.  692 F.3d 357 (5th Cir. 2012).  The Fifth Circuit affirmed in part and reversed in part, finding: (1) the release of the debtors unambiguously reached only the lien and not the underlying debt (thereby mooting some counterclaims); (2) property owners in the position of these debtors did not have an ongoing duty, for limitations purposes, to check deed records; (3) Tex. Civ. Prac. & Rem Code chapter 12, about fraudulent liens, does not require actual damages before penalties may be awarded; (4) Chapter 12 does not violate the Excessive Fines Clause; and (5) personal jurisdiction over one defendant was appropriate, particularly given the confusion in its own records about its activities.

In the unpublished case of Blake Box v. Dallas Mexican Consulate General, the Fifth Circuit reversed a dismissal for lack of jurisdiction under the Foreign  Sovereign Immunities Act  because discovery was not allowed on whether a Mexican government representative had actual authority.  No. 11-10126 (Aug. 21, 2012).  Acknowledging that the FSIA seeks to reduce litigation involving sovereigns, the Court found that authority “is a discrete issue conducive to limited discovery [and] the relevant documents reside exclusively with the defendant . . . ”  Id. at 7-8.  The analysis and cited cases are of general interest in other jurisdictional discovery situations.  Disclosure: LTPC colleagues Jason Dennis and Sam Hardy represented the successful appellant.

Appellate jurisdiction over bankruptcy matters can become murky (as discussed in this 2009 CLE paper) because finality is not always obvious.  In an appeal from an individual’s  bankruptcy case, the Court reminded that the test is whether a district court order is a “final determination of the rights of the parties to secure the relief they seek” or a “final disposition ‘of a discrete dispute within the larger bankruptcy case.'”  Sikes v. Crager, No. 11-30982 at 3 (Aug. 16, 2012) (quoting Bartee v. Tara Colony Homeowners Ass’n, 212 F.3d 277 (5th Cir. 2000).   The district court’s finding that the debtor’s Chapter 13 plan was not made in good faith “involve[d] a discrete dispute within her case” and created jurisdiction.

The plaintiff in Choice Inc. of Texas v. Greenstein challenged a Louisiana regulation about the licensing of abortion facilities.  No. 11-30296 (Aug. 17, 2012).  The majority found the suit was not ripe because the plaintiff did not show “that hardship will result if court consideration is withheld at this time.”  Id. at 7.  A forceful dissent faulted the majority for a “procrustean ripeness analysis.”  Id. at 32.   While much of the back-and-forth involves matters unique to abortion litigation, the case presents a thorough review of general  principles about ripeness in the Fifth Circuit at present.

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

Globeranger Corp. v. Software AG involved Texas state law claims about the development of a radio frequency identification system.   No. 11-10939 (Aug. 17, 2012).  The defendants removed and obtained dismissal on the grounds of Copyright Act preemption.  The Fifth Circuit agreed that section 301(a) of the Act creates complete preemption, and on the applicable test: “whether [the claim] falls ‘within the subject matter of copyright'” and whether it “protects rights that are ‘equivalent'” to those of a copyright.  Id. at 6 (citing Carson v. Dynegy, 344 F.3d 446, 456 (5th Cir. 2003)).  After through review of prior cases, the Court held that the conversion claim was likely preempted (thereby maintaining federal jurisdiction), but that the general basis for the claims included business practices excluded from copyright protection, making dismissal at the Rule 12 stage inappropriate.  Id. at 10-12.

Finding that the EPA’s action was “[s]ixteen years tardy” and “without basis in the Clean Air Act or its implementing regulations,” the Court vacated an EPA rule that would have voided roughly 140 permits for various pollution-emitting businesses in Texas.  State of Texas v. EPA, No. 10-60614 (Aug. 13, 2012).

In Ahmad v. Old Republic National Title Insurance, the Court reversed a grant of class certification in a case about title insurance premiums.  No. 11-10695 (Aug. 13, 2012).  The Court relied on Benavides v. Chicago Title, 636 F.3d 699 (5th Cir. 2011), which declined to certify a similar class of title insurance buyers because “[t]he resulting trial would require the factfinder to determine whether each individual qualified for the discount based on the evidence in his or her file.”  Op. at 9.   The Court declined to distinguish Benavides even though a particular discount was mandatory once “the requirements of R-8 [a Texas Insurance Code provision]” were satisfied, because each plaintiff would present unique facts about those requirements.  Id. at 10-11.  Therefore, the class did not meet the commonality requirement of Fed. R. Civ. P. 23(a)(2).

The bankruptcy court in CRG Partners v. Neary awarded a $1 million fee enhancement for  a “rare and exceptional” result in the Pilgrim’s Pride bankruptcy.  No. 11-10774 (Aug. 10, 2012).  The Trustee objected, arguing that Perdue v. Kenny A. ex rel Winn, 130 S. Ct. 1662 (2010) — a case rejecting a comparable enhancement under 42 U.S.C. § 1988 — impliedly overruled older Fifth Circuit authority that allowed them in bankruptcy.  The Court carefully reviewed Perdue under the “rule of orderliness,” a set of principles that guide a panel’s fidelity to older panel opinions, and found Perdue distinguishable factually and for policy reasons.  Op. at 22-25.  The Court reminded that it had recently reached a similar conclusion as to the effect of Stern v. Marshall, 131 S. Ct. 2594 (2011), on magistrate jurisdiction.

An unpublished opinion affirmed a ruling that an SEC suit about backdating was barred by limitations and the discovery rule did not apply.  SEC v. Microtune, No. 11-10594 (Aug. 7, 2012).  An interesting analysis of the opinion and its potential broader significance appears in the August 11, 2012 Texas LawBook.

Echoing its recent action in Sawyer v. du Pont, the Fifth Circuit withdrew its previous opinion in Ewing Construction v. Amerisure Insurance and certified two questions to the Texas Supreme Court about the scope of the “contractual liability” exclusion in a construction contractor’s CGL policy.  No. 11-40512 (Aug. 8, 2012).

Lowry Development LLC v. Groves & Assocs. Insurance involved a real estate developer who sued its insurer about coverage for wind damage, and alternatively, its insurance agent for negligence.  No. 11-60670 (Aug. 3, 2012).  The district court granted summary judgment for the developer against the insurer (thereby mooting the claim against the agent), which the Fifth Circuit reversed.  Id. at 3.   The developer then sought to reinstate its claim against the agent.  The Court found that the agent’s dismissal was “based on an earlier judgment that has been reversed or vacated” and thus came within Fed. R. Civ. P. 60(b)(5).  The agent argued that the insurer should have taken a protective appeal at the time of the original dismissal, but the Court, “[a]cknowledging that [plaintiff’s Rule 60(b) motion looks like the protective appeal it failed to file,” found no abuse of discretion in the district court’s decision to grant the motion.  Id. at 10.

“Does the failure to give notice to an excess carrier until after an adverse jury verdict constitute evidence of prejudice that forfeits coverage?”  Berkley Regional Ins. Co. v. Philadelphia Indemnity Ins. Co., 690 F.3d 342 (5th Cir. 2012).  The Court thoroughly reviewed Texas law about untimely claim notice, observing that it can void coverage if the insurer is prejudiced, but “[d]efining the contours of prejudice from the breach of a notice requirement . . . is not easy.”  It applied that general principle to excess carriers, and found that this carrier had raised fact issues about prejudice from untimely notice (here, after an adverse jury verdict), as it was unable to investigate the matter or participate in mediation: “The cows had long since left the barn when [the carrier] was invited to close the barn door.”

The case of Little v. Shell Exploration presented an issue of first impression — whether a federal employee, even one whose job is to investigate fraud, may bring a qui tam action under the False Claims Act.  690 F.3d 282 (5th Cir. 2012).  After review of the statutory text, the Court sided with a majority of other Circuits that have addressed the issue and concluded that one may.  The Court acknowledged the practical issue of “how to ensure employee fidelity to agency enforcement priorities in the face of personal monetary incentives,” but concluded that the government could address that issue with personnel guidelines and with its power to intervene and dismiss actions.  The Court remanded for consideration of whether the “public disclosure” and “original source” aspects of the Act barred the specific claims raised by these relators — matters that could limit the scope of the first holding.

City of New Orleans v. BellSouth Telecommunications presented a long-simmering dispute, stretching back to an 1879 ordinance, about BellSouth’s use of public rights-of-way in New Orleans.  Nos. 11-30607 and 11-31058 (July 31, 2012).  The district court awarded $1.5 million in unjust enrichment related to BellSouth’s use after 2006.  The Fifth Circuit reversed, finding that the parties’ complicated relationship gave BellSouth a “‘justification in . . . contract’ for any enrichment it may be enjoying . . . ,” which defeated an unjust enrichment claim under Louisiana law.   Id. at 21, 25 (citing SMP Sales Management v. Fleet Credit Corp., 960 F.2d 557, 560 (5th Cir. 1992)).

Chevron sued Aker Maritime and Oceaneering International in connection with bolt failures on an offshore drilling rig.  Chevron USA v. Aker Maritime Inc., No. 11-30369 (July 31, 2012).  Chevron recovered a significant damage award against both defendants, and Aker sought indemnity from Oceaneering.  Id. at 4.  To recover under the indemnity provision, Aker had to establish that it was an agent of Chevron with respect to Oceaneering’s work.  The Court concluded that Aker was an agent with respect to the specific activity of procurement, which it found “extends beyond Aker’s mere ordering and includes the receipt of the bolts.”  Id. at 8.

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

BP and Exxon disputed the condition of an offshore rig operated by Noble off the coast of Libya; Noble sought payment from either of them.  BP Exploration Libya Ltd. v. ExxonMobil Libya Ltd., No. 11-20547 (July 30, 2012).  The resulting three-party dispute ran into practical problems because the arbitration clause had a procedure for selecting three arbitrators that was only workable in a two-party dispute.  The Fifth Circuit found that a “mechanical breakdown” had occurred that justified federal court intervention under the FAA, 9 U.S.C. § 5, but that the district court exceeded its authority by ordering that arbitration proceed with five arbitrators rather than the three specified by the agreement.  The Court remanded with instructions as to the process for the district court to follow in forming a three-arbitrator panel.

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

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

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

In Westlake Petrochemicals v. United Polychem, the plaintiff obtained judgment for $6.3 million under the UCC for breach of a contract to supply ethylene.  No. 10-20634 (July 24, 2012).  The Fifth Circuit affirmed on liability, finding that evidence about the need for credit approval did not disprove contract formation, defeat the Statute of Frauds, or establish a condition precedent.  Id. at 9-13.  The Court reversed and remanded on damages, finding that the plaintiff was analogous to a “jobber” and thus could recover lost profits but not the contract-market price differential.  Id. at 17 (citing Nobs Chemical v. Koppers Co., 616 F.2d 212 (5th Cir. 1980)).  The Court also reversed as to an individual’s guaranty of the damages, finding a conflict between the termination provision of the guaranty and the plaintiff’s argument about when liability accrued, which created an ambiguity that made the guaranty unenforceable under Texas law.  Id. at 20-21.

An Austin-based software developer sued a German software company for breach of contract and related torts.  Pervasive Software v. Lexware GMBH & Co., No. 11-50097 (July 20, 2012).  The Fifth Circuit affirmed the dismissal of the case for lack of personal jurisdiction, revisiting several key jurisdiction points for business relationships.  The Court held that the parties’ contracts alone would not create jurisdiction when the parties had no prior negotiations and did not envision “continuing and wide-reaching contacts” in Texas.  Id. at 15, 19 (citing Burger King v. Rudzewicz, 471 U.S. 462 (1985).  (A lengthy footnote analyzes Texas law about the role of choice-of-law clauses in a jurisdictional analysis.  Id.  at 14-15 n.4.)  The German company’s Internet sales into Texas — 15 programs, costing roughly $66 each, over four years — did not establish “purposeful availment” for specific jurisdiction, or “continuous and systematic contacts” for general jurisdiction.  Id. at 19-24, 28-29.    The alleged acts of conversion occurred in Germany and thus did not create specific jurisdiction either.  Id. at 25-26.