Soren Kierkegaard wondered, “What is the Absurd?” Contemporary artist Michael Cheval creates thought-provoking works of absurdist art (to the right, “Echo of Misconception” (2015)). And the Fifth Circuit plumbed the meaning of the absurd in Geovera Specialty Ins. Co. v. Joachin, No. 19-30604 (July 6, 2020), in a coverage dispute about a homeowners’ insurance policy, bserving: “Absurdity requires a result ‘that no reasonable person could approve.’ An insurance policy is thus absurd if it ‘exclude[s] all coverage’ from the outset. So is one that broadly excludes coverage without reasonable limitations. But the GeoVera policy is not absurd on its face. The policy makes perfect sense for a  homeowner who purchases it while already living in the home.”  No. 19-30605 (July 6, 2020) (citations omitted).

In Williams v. MMO Behavioral Health Systems, the Fifth Circuit affirmed a $244,000 judgment for defamation, entered after a jury trial. Good record keeping often benefits defendants in employment-related litigation, but in this case it helped the plaintiff on a key issue:

Before MMO had published the statement to the [Louisiana Workforce Commission], Williams had informed MMO that she did not falsify her timecard. This should have led MMO to examine Williams’s timecard. If MMO had done so, it would have discovered that even though Williams regularly clocked in every day, the timecard facially showed that someone else clocked in Williams on July 5th. This fact indicates that MMO should have known that Williams was not the one falsifying her timecard. The times for which Williams was clocked in on July 5th were also not her normal working hours, further suggesting that Williams was not the one to clock in on July 5th. Moreover, Williams did not fill out a missed-clock-punch form, which would have been necessary to allow someone else to clock her in or out, suggesting that Williams was not even involved with this July 5th clocking in and out.

No. 19-30757 (July 9, 2020) (unpublished).

The trap: “The Funds sought to render an interlocutory decision appealable by dismissing at least one defendant without prejudice. And under [Williams v. Seidenbach, 958 F.3d 341, 369 (5th Cir. 2020) (en banc)], that means—absent some further act like a Rule 54(b) certification—there is no final, appealable decision.”

The hint: “Because the dismissal without prejudice in this case occurred after the order the Funds seek to appeal, we do not decide how Williams . . . would apply where the dismissal occurred before the adverse, interlocutory order. See Schoenfeld v. Babbitt 168 F.3d 1257, 1265–66 (11th Cir. 1999) (concluding that there was a final decision in such a case).”

Firefighters’ Retirement System v. Citco Group Ltd., No. 19-30165 (July 7, 2020).

After the plaintiff voluntarily dismissed the federal securities claims that justified removal, the district court retained jurisdiction over the case based on supplemental jurisdiction and granted a motion to compel arbitration. The Fifth Circuit rejected the supplemental-jurisdiction argument and vacated the motion to compel: “All of SJAP’s claims against Cigna arise from or concern the In-Network Agreement and the resulting business relationship. SJAP’s federal claim against the Insight Defendants, by contrast, was based on SJAP’s purchase of securities from Insight as part of the Lab Operating Agreement, a completely separate contract that had nothing to do with Cigna that was consummated several years before the events giving rise to SJAP’s claims against Cigna. Other than SJAP’s vague assertion that Insight and the Cigna Affiliates previously ‘had a lengthy and sordid relationship’ that resulted in an undisclosed settlement agreement, the operative complaint when the case was removed demonstrated no connection between Cigna and the Insight controversy, let alone the specific federal security claim that conferred original jurisdiction on the district court.” SJ Associated Pathologists v. Cigna Healthcare of Texas, No. 20-20188 (July 6, 2020) (emphasis added).

Digidrill sued for unjust enrichment, “alleging [that] Petrolink hacked into its software at various oil drilling sites in order to ‘scrape’ valuable drilling data in real time.” The Fifth Circuit held: “Digirill’s claim is not preempted by copyright because—like the claim in GlobeRanger—it requires establishing that Petrolink engaged in wrongful conduct beyond mere reproduction: namely, the taking of an undue advantage. Under Texas law an unjust enrichment claim requires showing that one party ‘has obtained a benefit from another by fraud, duress, or the taking of an undue advantage.’ Digidrill … contends Petrolink obtained a benefit by taking undue advantage when it surreptitiously installed [certain software]. This is the claim Digidrill put to the jury. Like the alleged misappropriation-of-trade-secrets claim in GlobeRanger, which required establishing improper means or breach of a confidential relationship, Digidrill’s alleged unjust enrichment claim requires establishing wrongful conduct—i.e., inducing the MWD
companies to violate the express terms of their DataLogger licenses—that goes
beyond mere copying.” Digital Drilling Data Sysems LLC v. Petrolink Servcs., Inc., No. 19-20116 (July 2, 2020) (footnote omitted, emphasis added). The Court noted that a different type of unjust-enrichment claim could potentially lead to a different result.

When not engaged in good-natured banter about typeface or proper spacing after periods, the appellate community often argues about the right place to put citations to authority. The traditional approach places them “inline,” along with the text of the legal argument. A contrarian viewpoint, primarily advanced by Bryan Garner, argues that citations should be placed in footnotes.

Has modern technology provided a third path? Professor Rory Ryan of Baylor Law School advocates “fadecites,” reasoning:

A brief using this approach would look like this on a first read:

(A longer example is available on Professor Ryan’s Google Drive.) The reader can quickly skim over citations while reviewing the legal argument. Additionally, assuming that the court’s technology allows it, case citations can be arranged to become more visible if the reader wants to know more information. Modern .pdf technology allows a citation to become darker and more visible if the reader places the cursor on it. A hyperlink to the cited authority could also be made available.

This idea offers an ingenious solution to a recurring challenge in writing good, accessible briefs. I’d be interested in your thoughts and Professor Ryan would be as well.

A manufacturer of vaping liquid, invoking the structural limitations imposed on administrative agencies by the delegation doctrine, challenged the FDA’s power to regulate it. The Fifth Circuit observed: “The [Supreme] Court might well decide—perhaps soon—to reexamine or revive the nondelegation doctrine. But ‘[w]e are not supposed to . . . read tea leaves to predict where it might end up.'” (citation omitted). That observation was case-dispositive: “The [Supreme] Court has found only two delegations to be unconstitutional. Ever. And none in more than eighty years.” Under that precedent, Congress’s delegation of authority to the FDA in this area showed a “sufficiently intelligible principle,” constrained by Congress’s definition of “tobacco product,” and by Congress having “ma[de] many of the key regulatory decisions itself.” Big Time Vapes, Inc. v. Food & Drug Admin., No. 19-60921 (June 25, 2020).

Congratulations to Judge Cory Wilson of Mississippi, who was confirmed by the Senate yesterday as the newest member of the U.S. Court of Appeals for the Fifth Circuit.

A Texas business alleged that the CARES Act impermissibly discriminated against it as a bankruptcy debtor. The Fifth Circuit, citing its rule of orderliness, noted that it “has concluded that all injunctive relief directed at the [Small Business Administration] is absolutely prohibited.” Accordingly, “the bankruptcy court exceeded its authority when it issued an injunction against the SBA administrator … .” Hidalgo County Emergency Service Foundation v. Carranza, No. 20-40368 (June 22, 2020).

Hoover Panel Systems contracted with HAT Contract to design a component for office desks. The Fifth Circuit found their contract ambiguous, noting the tension between its introductory and first-numbered paragraphs. While both address confidentiality, the introduction is general and paragraph 1 describes a particular process:

“Both parties agree that all information disclosed to the other party, such as inventions, improvements, know-how, patent applications, specifications, drawings, sample products or prototypes,[]engineering data, processes, flow diagrams, software source code, business plans, product plans, customer lists, investor lists, and any other proprietary information shall be considered confidential and shall be retained in confidence by the other party.

 

1. Both parties agree to keep in confidence and not use for its or others benefit all information disclosed by the other party, which the disclosing party indicates is confidential or proprietary or marked with words of similar import (hereinafter INFORMATION). Such INFORMATION shall include information disclosed orally, which is reduced to writing within five (5) days of such oral disclosure and is marked as being confidential or proprietary or marked with words of similar import.”

The Court noted “[s]everal plausible interpretations” of these paragraphs:

• Different materials. “Hoover reads the opening paragraph to apply to the prototype, the primary property the confidentiality agreement was entered into to protect. Hoover argues that the first numbered paragraph applied to other information and communications that were not obviously confidential under the opening paragraph.”
• General v. specific. “HAT reads the opening paragraph to speak generally about the content of the agreement, and the first numbered paragraph to provide the specific instructions needed to put the confidentiality agreement into effect.”
• Different procedures. “[Another possible] interpretation is that under the agreement, proprietary information is automatically confidential while all other information must be marked. The opening paragraph states that “proprietary material shall be considered confidential,” and in the first numbered paragraph, “all information . . . which the disclosing party indicates is confidential or proprietary or marked with words of similar import” is considered confidential.”
• Substance v. housekeeping. “Another plausible reading is that the opening paragraph provides the scope for all information that is confidential while the first numbered paragraph functions as a housekeeping paragraph, providing instruction on how to mark information as confidential, but not requiring labeling as a condition precedent.”

Hoover Panel Systems, Inc. v. HAT Contract, Inc., No. 19-10650 (June 17, 2020).

In re Spiros Partners is the second recent mandamus opinion by the Fifth Circuit about  notice in large collective actions under the Fair Labor Standards Act. The plaintiff–an exotic dancer with the stage name “Syn”–had an “Entertainer’s License Agreement” with an arbitration clause, the trial court entered an order about other parties and their agreements, and the Fifth Circuit held:

1.  “[The district court] determined there was a genuine dispute as to the arbitration agreements’ validity and ordered Spiros to produce the names of the putative members along with their respective ELAs containing the arbitration agreements. The district court did not err by taking this step in deciding which putative members are subject to valid arbitration agreements, and thus which putative members will not receive notice.”
2. “The only way a putative member with a valid arbitration agreement might receive notice is if ‘nothing in the agreement’ prohibits their participation in the collective action. We conclude the district court went too far by requiring submission of evidence regarding whether Spiros has arbitrated claims with other would-be collective members.” (citation omitted).

No. 20-50318 (June 19, 2020, unpublished).

“Mistah Kurtz — he dead.” Joseph Conrad, Heart of Darkness.

Spell v. Edwards presented a challenge to a COVID-19 restriction that became moot with the passage of time: “A Louisiana church and its pastor ask us enjoin stay-at-home orders restricting in-person church services to ten congregants. But there is nothing for us to enjoin. The challenged orders expired more than a month ago. That means this appeal and the related request for an injunction … are moot.”  Notably, the restriction expired by its own terms, showing that it was not abandoned as a litigation tactic, and thus making inapplicable the “capable of repetition, yet evading review” exception to mootness. No. 20-30358 (June 18, 2020).

A recent article in the Baylor Law Review by Kylie Calabrese, a student of the able Rory Ryan at the Baylor Law School, provides a thorough and well-documented analysis of In re: JP Morgan Chase & Co., 915 F.3d 494 (5th Cir. 2019) and its implications for mandamus practice in the Fifth Circuit.

In In re Schlumberger Tech, Inc., the Fifth Circuit again held that mandamus relief can be necessary to remedy the erroneous production of privileged material. It found that no offensive-use waiver occurred when: “STC’s answer claimed only that it relied in good faith ‘on applicable law, administrative regulations, orders, interpretations and/or administrative practice or policy enforcement.’ STC did not claim that counsel advised it that its decisions complied with the FLSA. Indeed, its answer did not allude to advice of counsel at all. While privileged communications may have some bearing on STC’s beliefs about its compliance, STC has not ‘rel[ied] on attorney-client communications’ to establish its good-faith defense.” No. 20-30236 (June 4, 2020).

Last week, I noted the holding in Gulf Engineering Co. v. Dow Chemical Co. about the construction of the parties’ contract (Dow had the right, but not the obligation, to assign work to Gulf Engineering during the relevant period of time). Not surprisingly, this holding caused trouble for the plaintiff’s damages model:

“… The only evidence of how the details of daily or weekly assignments can be known is that Dow used oral and written communication that included the issuing of work orders and job schedules. What Gulf needed to offer were details about any assigned work. That would include evidence of such variables as the nature of the work, the number of employees needed, and the number of days needed to complete the work. In other words, what was needed in some form was evidence relevant to allow a calculation of what Dow would have paid and what Gulf’s expenses would have been, i.e., what Gulf’s profit would have been. Instead, the only evidence was an average from an historic time period, where all those variables were blended.

As we explained earlier, the evidence of any assigned work after the notice of termination barely suffices to show liability. For us then to allow the evidence offered of daily-average profits over one or five years to substitute for actual profits for actual assigned work is a bridge too far. …”

No. 19-30395 (June 9, 2020) (emphasis added).

The contract-interpretation question in Gulf Engineering Co. v. Dow Chemical Co. was whether, after giving notice of termination, Dow Chemical was obligated to provide work to Gulf Engineering for another 90 days, or whether Dow had the “right but no contracted-for obligation to continue assigning work to Gulf.”

The Fifth Circuit found that the contract unambiguously meant that Dow had the right but not the obligation to give work to Gulf, and that the trial court thus erred in denying Dow’s summary-judgment motion on that point. The Court further found that the district court “compounded the error” by instructing the jury that it had found the relevant contract term to be ambiguous. Nevertheless, the error was harmless because the trial court also gave an instruction about the contract that substantially agreed with Dow’s reading of it. No. 19-30395 (June 9, 2020).

Despite the complexity of a dispute about telecommunication regulations, the parties’ performance mattered: “Sprint and Verizon’s conduct, while certainly not dispositive, is nevertheless informative. Sprint and Verizon are among America’s largest IXCs and are sophisticated market participants. Yet, they waited more than eighteen years to object to the LECs’ access charges for intraMTA wireless-to-wireline calls, paying hundreds of millions of dollars in the process. Moreover, over that same timeframe, Sprint’s and Verizon’s LEC affiliates imposed access charges on IXCs, including on each other, for intraMTA wireless-to-wireline calls. We decline to award Sprint and Verizon, who sat on their hands for the better part of two decades, a nine-figure windfall based on an interpretation of § 251(g) that is divorced from both the 1996 Act’s text and industry practice.”  No. 18-10768 (May 27, 2020). (LPCH was one of the counsel for the prevailing side of this case.)

Phoneternet complained that an inaccurate report available on Lexis-Nexis caused the loss of a business opportunity (oddly enough, with the car company Lexus). The Fifth Circuit affirmed, holding (among other matters) as to their negligent-misrepresentation and promissory-estoppel claims:

“If Phoneternet believed the errors had already been corrected, there would have been no reason for Phoneternet to repeatedly call LexisNexis. In that case, Phoneternet would be asking LexisNexis to correct already accurate information. Moreover, to the extent Phoneternet did rely on LexisNexis’s alleged statement that all fifteen errors in the report had been “modified . . . as requested,” such reliance cannot be considered reasonable and justified. Given the alleged importance of this report—the only remaining obstacle between Phoneternet and a lucrative multimillion-dollar contract with Toyota—Phoneternet should have at least confirmed that the errors had been corrected before blindly relying on LexisNexis’s representation.”

Phoneternet LLC v. Lexis-Nexis, No. 19-11194 (June 3, 2020) (unpublished) (emphasis added).

Hewlett-Packard proved $176 million in antitrust damages at trial (later trebled); the defendant argued that HP had not proved it was a direct purchaser of the optical drives at issue. The Fifth Circuit affirmed. On the two key points, it held:

1. Expert testimony.  Under the proper standard of review, this testimony by HP’s damages expert sufficed: “[W]e did quite a lot of work to understand the data that we received; and it was my understanding, based on that work, that the data was purchases by the plaintiff HP, Inc. formerly known as Hewlett-Packard Company. . . . In the data files that I received, the transactions identified the supplier; and in any cases in which the supplier was identified as an HP entity, I excluded those . . . . ” 
2. Fact testimony. Any uncertainty in the following testimony by an HP executive was not enough to unseat the above-quoted expert conclusion:

Q. And so in a procurement event you have an ODD supplier and a purchaser, an entity that purchases. Did HP, Inc. . . . was that the purchaser in all of these procurement events that you have described?

A. It was some form of HP. I don’t know that it was HP, Inc., but it was a legal entity of HP, somewhere in the region that these were purchased, that purchased the drives.

Q. So the purchaser might not have been HP, Inc. at a particular procurement event? It might have been some subsidiary of HP, Inc.?

A. It could well have been, yes. . . . I’m not exactly sure on how that was spread out, but it could very well have been.

Hewlett-Packard Co. v. Quanta Storage, No. 19-20799 (June 5, 2020). A longer version of this post appears in the Texas Lawbook.

Here is the PowerPoint for my June 2 presentation to the DBA’s Appellate Law Section about Fifth Court commercial-litigation opinions over the last twelve months.

The Fifth Court rejected Burford abstention in Stratta v. Roe, observing: “Burford ‘does not require abstention whenever there exists [complex state administrative processes], or even in all cases where there is a potential for conflict with state regulatory law or policy.’ Nor would a federal judgment here interfere with the coherence of state policy. [Groundwater Conservation Districts] are designed to be decentralized and fragmentary in order to offer local control over groundwater resources. There are roughly 100 GCDs in Texas, but nearly two-thirds of them oversee territory coextensive with a single county.” No. 18-50994-CV (May 29, 2020) (citation omitted).

Recent orders about conducting trials during the pandemic highlight the different procedural structures of the state and federal courts.

In the state system, the Texas Supreme Court recently released its seventeenth emergency order about when and how jury trials may resume. (An order, incidentally, that I got from the txcourts.gov website, which shows progress in returning that site to normal after the recent hacker attack.)

In the federal system, the recent order in In re Tanner reminds of the considerable district court discretion about such matters: “[T]he district court has given great consideration to the COVID-19 issues addressed by Tanner. . . . [W]hatever each of us as judges might have done in the same circumstance is not the question. Instead, as cited below, the standards are much higher for evaluating the district court’s decision” for purposes of a writ of mandamus or prohibition. No. 20-10510 (May 29, 2020).

On June 2 at 2 PM, as a guest of the DBA’s Appellate Law Section, I’ll review several Dallas Court of Appeals opinions in commercial cases since June of last year, when I made a similar presentation. This one will be online, so please register in advance on the DBA’s website! The PowerPoint will be posted after the presentation.

The original party to an oilfield-services agreement assigned its rights to Motis Energy. Motis sued on the agreement, lost, and sought to avoid the agreement’s attorneys-fee provision. The Fifth Circuit ruled against it: “Motis is a nonparty to the Agreement. But Motis embraced the Agreement by seeking to enforce its terms. Motis’s argument–that it did not embrace the entirety of the Agreement because it was assigned the right to Motis-DI’s claims, not the entire contract–lacks merit. When a plaintiff sues to enforce a contract to which it was not a party, the Supreme Court of Texas has held, as have we, that the plaintiff subjects itself to the entirety of the contract terms.” Motis Energy LLC v. SWN Prod. Co. LLC, No. 19-20495 (April 28, 2020) (unpublished) (emphasis added).

Katherine P. v Humana Health Plan, an ERISA dispute about hospitalization to treat an eating disorder, turned on a specific criterion: whether “[t]reatment at a less intense level of care has been unsuccessful in controlling” the disorder. The Fifth Circuit found a fact issue, noting:

“[T]here is evidence in the administrative record that suggests Katherine P. satisfied that requirement. For example, in her last appeal Humana, Katherine P. provided a declaration describing her history of failed treatment. In it, she listed past failed treatment regimens, including outpatient treatment. Her mother likewise provided a declaration making essentially the same point. Furthermore, Katherine P.’s physicians said she was ‘unable to follow a weight gain meal plan and to abstain from symptoms of purging and restricting while she was at a lower level of care.’”

(citations omitted). The court also noted evidence cutting the other way:

Her same declaration, for example, shows that she participated in an eight-week intensive outpatient program in late 2010 that failed due to external trauma—not because the treatment was ineffective. And Humana noted that the 2010 treatment was her most recent course of treatment prior to her admittance to Oliver-Pyatt about a year and a half later. A factfinder could therefore conclude that Katherine P. failed to show that she met [the criterion].

Katherine P. v Humana Health Plan, No. 19-50276 (May 14, 2020).

The COVID-19 crisis has required the courts to deftly juggle conflicting, and important, interests when asked to review emergency regulation. A good summary of such a balancing exercise appears in First Pentecostal Church of Holly Springs v. City of Holly Springs: “Our sole appellate jurisdiction in this case rests upon denial of an injunction implied from the choice by the district court not to rule in an expedited fashion. After briefing, it remains plain that the court is being requested to enjoin a shifting regulatory regime not yet settled as to its regulation and regulatory effect, such as the apparent acceptance by the Church of the Governor’s regulations. That settlement is best made by the district court in the first instance. Lest we in error step upon treasured values of religious freedom and personal liberties we stay our hand and return this case to the district court for decision footed upon a record reflecting current conditions.” No. 20-60399 (May 22, 2020) (emphasis added).

I spoke today, virtually, to the Texas Bar CLE’s 33rd “Advanced Evidence and Discovery Course,” which would have been in San Antonio. My topic was proving up damages in a commercial case, and I focused on ten specific issues identified in recent Texas and Fifth Circuit cases. I also showed off some smooth hand gestures, as you can see above. Here is a copy of my PowerPoint. The Bar staff did a terrific job with the A/V logistics and I look forward to doing another program with them soon.

In long-running litigation about liability for hotel occupancy taxes, the Fifth Circuit’s prior mandate said that “plaintiff-appellee cross-appellant pay to defendants-appellants cross appellees the  costs on appeal to be taxed by the Clerk of this Court.” The Court held that this language did not preclude the trial court clerk from assessing appropriate costs on remand pursuant to Fed. R. Civ. P. 39(e).

The Court also held: “The fact that the decretal language in the first appeal used the word ‘vacated’ instead of ‘reversed’ does not change this result. . . . While an argument can be made that ‘reversed’ might have been the better choice for the decretal language in the first appeal, what matters for purposes of Rule 39(a) is the substance of the disposition, not merely the form.” San Antonio v. Hotels.com, No. 19-50701 (May 11, 2020) (citations omitted, emphasis in original).

PRACTICE TIP: Fed. R. App. P. 39(e)(3) includes “premiums paid for a bond or other security to preserve rights pending appeal” as a taxable cost–in this litigation, a cost exceeding $2 million.

Despite the May 11 en banc opinion about the “finality trap,” the plaintiff in CBX Resources v. ACE Am. Ins. Co. remained stuck in the trap after dismissing certain of its claims – against the sole defendant – without prejudice: “To be sure, many cases applying the Ryan rule have multiple defendants, one or more of which was dismissed without prejudice while at least one defendant prevailed on the merits. But Ryan itself was an employment dispute with a single plaintiff suing a single defendant, his employer.” No. 18-50740 (May 12, 2020).

The “finality trap” can arise when a plaintiff sues two defendants and then (a) voluntarily dismisses one defendant without prejudice, and then (b) litigates to conclusion against the other and loses. The plaintiff’s ability to appeal the outcome of proceeding (b) is affected by the lack of a final judgment in proceeding (a), because under Fed. R. Civ. P. 54(b), there is not a final decision as to any one defendant until there is a final decision for all defendants

Williams v. Seidenbach found that entry of a partial final judgment under Rule 54(b) solved the plaintiffs’ problem in that case. (Judge Ho, joined by Chief Judge Owen and Judges Jones, Stewart, Dennis, Elrod, Haynes, Graves, Higginson, and Engelhardt).

A concurrence suggested that future litigants consider “bindingly disclaiming their right to reassert any dismissed-without-prejudice claims” as way to solve the problem. (Judge Willett, joined by Judge Southwick) (Note that all opinions appear in the same PDF document, linked above).

A dissent, focused on the text of Rules 41 and 54, observed that once a “Rule 41(a) dismissal ‘adjudicated’ the plaintiffs’ claims . . . there were no claims pending after that adjudication” which mean that “Rule 54(b) was (and still is) completely irrelevant.” (Judge Oldham, joined by Judges Smith, Duncan and – unexpectedly – Costa).

To be continued . . .

O’Shaughnessy v. Young Living Essential Oils presents the classic contract-law problem of an agreement contained in more than one document; here, it led to the Fifth Circuit rejecting the defendant’s effort to compel arbitration. O’Shaughnessey’s “Member Agreement” with Young Living had three salient features:

1. A “Jurisdiction and Choice of Law” clause – “The Agreement will be interpreted and construed in accordance with the laws of the State of Utah applicable to contracts to be performed therein. Any legal action concerning the Agreement will be brought in the state and federal courts located in Salt Lake City, Utah.”
2. A merger clause – “The Agreement constitutes the entire agreement between you and Young Living and supersedes all prior agreements; and no other promises,
   representations, guarantees, or agreements of any kind will be valid unless in writing and signed by both parties.”
3. And it incorporated by reference a “Policies and Procedures” document.

The Policies and Procedures, in turn, had an arbitration clause with a carve-out for certain kinds of injunctive relief.  The Court held: “The arbitration clause’s exemption of certain litigatory rights from its purview does not cure its inherent conflict with the Jurisdiction and Choice of Law provision. The two provisions irreconcilably conflict and for this reason, we agree that there was no ‘meeting of the minds’ with respect to arbitration in this case.” No. 19-51169 (April 28, 2020). (The above picture, BTW, is Mary Astor playing Brigid O’Shaughnessey in 1941’s The Maltese Falcon.)

With the kids home from school because of the coronavirus, I’ve watched a lot of YouTube videos over their shoulders.  In particular, this one tells the fascinating story about how post-production editing saved Star Wars, which was bloated and impossible to follow in its first rough versions. Among other changes, the start of the film was drastically simplified – from a series of back-and-forths between space and Tatooine, to a focus on the opening space battle and no shots of Tatooine until the droids landed there. This bit of editing is directly relevant to the tendency of legal writers to “define” (introduce) all characters and terms at the beginning of their work, without regard to the flow of the narrative that follows.

In affirming a preliminary injunction in a noncompete case, Realogy Holdings Corp. v. Jongeblood suggested that the district court could “when determining the term of any injunction, to reweigh the equities . . . in light of the time that has passed during the pendency of th[e] appeal.” Interestingly, this suggestion came after the Fifth Circuit had granted a stay during the preliminary-injunction appeal, which it also expedited. Specifically, the relevant covenants last for a year, the injunction was granted on November 15, 2019; the appellate stay was granted on January 24, 2020, and the opinion issued on April 27. No. 19-20864.

A gentle spring breeze can be refreshing, but not when it involves “reversibly … breezy” analysis of class certification. For a putative 90,000-member class action about certain ERISA plans, the Fifth Circuit found the district court’s review lacking as to two parts of Fed. R. Civ. P. 23:

• Commonality. “Nor does the court explain why clarifying [Defendant’s] status as a fiduciary will in one stroke resolve an issue that is central to the claims of each one of the class members. Most noticeably, the order neglects to consider asserted differences among class members that could prevent the suit from generating “common answers apt to drive the resolution of the litigation.” (footnotes omitted);
• Class Type.  The court notes that, just as in Ortiz [v. Fibreboard Corp.], the
  plaintiffs’ case relates to one of the historical models—namely, an action against a fiduciary seeking an accounting to restore the subject of the trust (in this case, benefits plans). But, parting ways with Ortiz, the court’s analysis begins and ends there. It fails to examine the facts of this specific class to ensure that it qualifies.” (citation omitted).

Chavez v. Plan Benefit Services, No. 19-50904 (April 29, 2020). Cf. Seeligson v. Devon Energy, No. 20-90011 (May 15, 2020) (unpublished) (“In short, the district court complied with this Court’s instructions on remand and reconsidered its findings on both commonality and predominance. Particularly given the fact that we have already addressed this class certification once, we are not inclined to postpone consideration of the merits any further. DEPCO’s petition for permission to file a Rule 23(f) appeal is denied.”).

After recently addressing a party’s rights to oral argument in a dispute about enforcement of an arbitration award, the Fifth Circuit then returned to Sun Coast Resources v. Conrad to review the prevailing party’s motion for sanctions under Fed. R. App. 38 for a frivolous appeal.The Court observed:

    “[T]he case for Rule 38 sanctions is strongest in matters involving malice, not incompetence. And our decision on Sun Coast’s appeal was careful not to assume the former. As to the merits of its appeal—including the company’s
failure to disclose that it cited Opalinski II rather than Opalinski I to the arbitrator—we observed that ‘[t]he best that may be said for Sun Coast is that it badly misreads the record.’ As to its demand for oral argument, we stated that ‘Sun Coast’s motion misunderstands the federal appellate process in more ways than one.’
Perhaps Sun Coast earnestly (if mistakenly) believed it had a valid legal claim to press. Or perhaps it was bad faith—maximizing legal expense to drive a less-resourced adversary to drop the case or settle for less. Or perhaps its decisions were driven by counsel. But we must resolve the pending motion based on facts and evidence—not speculation. We sympathize with Conrad . . . [b]ut we conclude that this is a time for grace, not punishment.”

No. 19-20058 (May 7, 2020) (citations omitted).

While the timing is coincidental, the case is an instructive companion to the Texas Supreme Court’s recent opinion in Brewer v. Lennox Hearth Products LLC, which reversed a sanctions award. That Court noted that “while the absence of authoritative guidance is not a license to act with impunity, bad faith is required to impose sanctions under the court’s inherent authority,” and this held that “the sanctions order in this case cannot stand because evidence of bad faith is lacking.” No. 18-0426 (Tex. April 24, 2020) (footnotes omitted).

Manuel owed $250 to an orthopedics practice, first billed in December 2010 and January 2011. Merchants Professional, a collection agency, sent him “six collection
letters in 2011 and, after six years with seemingly no collection effort, it sent
four more in 2017.” Manuel sued for violation of the FDCPA arguing that it was improper to seek collection of a debt after the limitations period had run.

The Fifth Circuit reviewed and sidestepped earlier precedent which suggested that attempts to collect time-barred debt were per se violations of the Act. It nevertheless affirmed judgment for Manuel based on the specific contents of these letters, holding that “these letters seeking collection of time-barred debt, filled with ambiguous offers and threats with no indication that the debt is old, much less that the limitations period has run, misrepresent the legal enforceability of the underlying debt . . . .” Manuel v. Merchants & Professional Bureau, No. 19-50814 (April 29, 2020) (emphasis added).

On pages 62-63 of the May 2020 issue of “D CEO” magazine, you can read a profile of me as the only Tarot-reading lawyer in Dallas–a skill first acquired on trips to New Orleans for appellate business!

Related to the Fifth Circuit’s recent general reminder in Sun Coast Resources v. Conrad about when oral argument will occur, Chief Judge Owens’s April 20 Covid-19 order makes clear that individual panels may decide when to use “Zoom” or other such conferencing technology. H/T to Louisiana’s Ray Ward for drawing my attention to this order.

Realogy Holdings Corp. v. Jongeblood offers several practical tips about litigating a noncompetition agreement:

• Oral findings of fact at the hearing can satisfy the requirements of Fed. R. Civ. P. 52, when the “oral findings together with [the] written order nonetheless give us ‘a clear understanding of the factual basis for the decision'”;
• Testimony about confidential information given to the employee established the Texas-law requirements about adequate consideration for a noncompete, even when the employer did not make an express promise to do so at the time of contracting; abd
• After an unsuccessful appellate challenge to a preliminary injunction that enforces a noncompete, it can be appropriate to ask the trial court to “when determining the term of any injunction, to reweigh the equities . . . in light of the time that has passed during the pendency of th[e] appeal.”

No. 19-20864 (April 27, 2020).

The Fifth Circuit allowed a “John Doe” summons to proceed, requiring a law firm to disclose certain client entities. After reviewing authority nationwide about such warrants, the Court concluded: “[D]isclosure of the Does’ identities would inform the IRS that the Does participated in at least one of the numerous transactions described in the John Doe summons issued to the Firm, but ‘[i]t is less than clear . . . as to what motive, or other confidential communication of [legal] advice, can be inferred from that information alone.’ Consequently, the Firm’s clients’ identities are not ‘connected inextricably with a privileged communication,’ and, therefore, the ‘narrow exception’ to the general rule that client identities are not protected by the attorney-client privilege is inapplicable.” Taylor Lohmeyer Law Firm PLLC v. United States, No. 19-50506 (April 24, 2020).

As reported by The Verge on April 24, Microsoft Word now auto-corrects the use of two spaces after a period at the end of a sentence. The battle, such as it was, should now be considered over. This influential article in Slate explains why the one-spacers – while correct during the era of typewriters, which made every letter and space the same size – have been wrong since the early 1990s and the widespread availability of proportional spacing in modern word processing software.

In Jacked Up LLC v. Sara Lee Corp., the plaintiff’s expert “seems to have assumed
that the projections in the Sara Lee Pro Forma were correct and then extrapolated lost-profits figures.” But the record also contained a detailed explanation by the defendant’s marketing director about why “the assumptions in the pro formas are merely
elaborate guesswork by the business and sales teams” until there are actual product sales. Accordingly, the Fifth Circuit affirmed the exclusion of the expert under a basic Daubert principle: “Expert evidence that is not ‘reliable at each and every step’ is not admissible.” No. 19-10391 (April 3, 2020) (unpublished). (citation omitted). (LPHS represented the successful appellee in this case.)

The relator in United States ex rel Porter v. Magnolia Health Plan “allege[d] that her former employer, which contracts with the Mississippi Division of Medicaid, is violating the False Claims Act by using licensed professional nurses for tasks that require the expertise of registered nurses.” The Fifth Circuit affirmed dismissal: “Plaintiff-Appellant’s first amended complaint makes no specific allegations regarding the materiality of Magnolia’s alleged fraud. The contracts between Magnolia and MississippiCAN do not require Magnolia to staff care or case manager positions with registered nurses, and they contain only broad, boilerplate language requiring Magnolia to follow all laws.” No. 18-60746 (April 15, 2020) (unpublished).

Sun Coast Resources Inc. v. Conrad, No. 19-20058 (April 16, 2020), involved a challenge to an arbitration award. The challenging party did not agree with the Fifth Circuit’s decision to proceed without oral argument, and filed a motion seeking an oral argument. It was denied and the Court’s explanation is instructive:

• “Sun Coast’s motion misunderstands the federal appellate process in
  more ways than one. To begin, the motion claims that ‘oral argument is the
  norm rather than the exception.’ Not true. ‘More than 80 percent of federal
  appeals are decided solely on the basis of written briefs. Less than a quarter
  of all appeals are decided following oral argument.'”;
• “Sun Coast suggests that deciding this case without oral argument would be ‘akin to . . . cafeteria justice.’ The Federal Rules of Appellate Procedure state otherwise. They authorize “a panel of three judges who have examined the briefs and record” to ‘unanimously agree[] that oral argument is unnecessary for any of the following reasons”—such as the fact that “the dispositive issue or issues have been authoritatively decided,” or that “the facts and legal arguments are adequately presented in the briefs and record, and the decisional process would not be significantly aided by oral argument.””; and
• “[A]nother tactic powerful economic interests sometimes use against
  the less resourced is to increase litigation costs in an attempt to bully the
  opposing party into submission by war of attrition—for example, by filing a
  meritless appeal of an arbitration award won by the economically weaker
  party, and then maximizing the expense of litigating that appeal. Dispensing with oral argument where the panel unanimously agrees it is unnecessary, and where the case for affirmance is so clear, is not cafeteria justice—it is simply justice.” (citations omitted and emphasis added in all the above quotes).

The fast-paced litigation about access to abortion during the COVID-19 pandemic produced a strong statement about government power (including the power of the administrative state) during a health crisis: “The bottom line is this: when faced with a society-threatening epidemic, a state may implement emergency measures that curtail constitutional rights so long as the measures have at least some ‘real or substantial relation’ to the public health crisis and are not ‘beyond all question, a plain, palpable invasion of rights secured by the fundamental law.'” In re Abbott, No. 20-50264 (April 7, 2020) (orig. proceeding) (quoting Jacobson v. Commonwealth of Massachusetts, 197 U.S. 11 (1905)). The opinion has gathered national coverage from diverse media outlets such as CNN and Reason.

Third of three posts this week about Illinois Tool Works v. Rust-Oleum; in addition to reversing two damages awards, the Fifth Circuit reversed a finding of Lanham Act liability for a lack of evidence about materiality. Citing prior Circuit precedent, the Court held: “If misleading claims about something as vital to pizza as its ingredients were not necessarily material, a misleading claim about how long a windshield water-repellant treatment lasts was not, either. Moreover, though Illinois Tool Works asserts that consumers want to know how long these products last, it does not substantiate this assertion with evidence. So this argument fails.” No.19-20210 (April 9, 2020).

The Fifth Circuit’s recent opinion in Illinois Tool Works v. Rust-Oleum, also rejected the plaintiff’s award of damages for corrective advertising, holding:

“Illinois Tool Works has never even asserted that it plans to run corrective advertising. It did not say what the advertising might consist of, offer a ballpark figure of what it might cost, or provide even a rough methodology for the jury to estimate the cost. Damages need not be proven with exacting precision, but they cannot be based on pure speculation. . . . Illinois Tool Works . . . argues that it was not required to show that it ‘needs’ the award, and that its 40 years of goodwill and tens of millions of dollars spent on advertising, coupled with RustOleum’s expenditures, support the unremitted amount. . . . [I]t  does not explain how its decades of goodwill and past advertising expenditures show a loss or justify compensation in any amount. These bald facts lack inherent explanatory value. So these arguments fail.”

No. 19-20210 (April 9, 2020).

Illinois Tool Works proved at trial that Rust-Oleum engaged in false advertising about the parties’ competing water-repellent products. The Fifth Circuit reversed the judgment as to disgorgement (among other matters), reasoning:

“Illinois Tool Works failed to present sufficient evidence of attribution. It cites nothing that links Rust-Oleum’s false advertising to its profits, that permits a reasonable inference that the false advertising generated profits, or that shows that even a single consumer purchased RainBrella because of the false advertising. 

Illinois Tool Works argues, however, that three things show that RustOleum benefitted from its false advertising: witnesses testified about how important the advertising claims were to Rust-Oleum, tens of thousands of people saw the commercial, and RainBrella was placed on nearby shelves in the same stores as Rain-X. None of this shows attribution.” Illinois Tool Works v. Rust-Oleum, No. 19-20210 (April 9, 2020).

In Golden Spread Electric Co-op v. Emerson Process Management, the Fifth Circuit affirmed the dismissal of business-tort claims under Texas’s economic loss rule.

Golden Spread, a public utility, contracted with Emerson to provide “a new, customized control system” for a steam turbine generator. During testing of the new system, the software installed by Emerson issued a mistaken command that caused the turbine to overheat and become damaged.

The Fifth Circuit reviewed Golden Spread’s claims in light of two policy considerations identified by Texas cases in the area.  First, “[p]urely economic harms proliferate widely and are not self-limiting in the way that physical damage is ….” Second, “the risk of economic harms are better suited to allocation by contract” because the parties “usually have a full opportunity” to negotiate such risks before finalizing a contract.

The Court’s reasoning may prove relevant to future lawsuits involving business issues arising from the current COVID-19 crisis.

Feeling salty about the handling of a AAA arbitration, Texas Brine (not a Louisiana citizen) sued the AAA (not a Louisiana citizen) and two Louisiana-based arbitrators in New Orleans state court. The AAA was served with process and immediately removed the case, before the two Louisiana citizens were served.

The Fifth Circuit held that such a “snap removal” was permitted by the plain text of the removal statute, noting that the “forum defendant rule” only applied once an in-state defendant was served. (In relevant part, 28 U.S.C. § 1441(b)(2) says that a civil action “. . . may not be removed if any of the parties in interest properly joined and served as defendants is a citizen of the State in which such action is brought.” (emphasis added)).

The Court declined to find that this situation produced an “absurd result,” noting the Second Circuit’s observation that: “Congress may well have adopted the ‘properly joined and served’ requirement in an attempt to both limit gamesmanship and provide a bright-line rule keyed on service, which is clearly more easily administered than a fact-specific inquiry into a plaintiff’s intent or opportunity to actually serve a home-state defendant.”  Texas Brine Co. LLC v. AAA, No. 18-31184 (April 7, 2020).