Leftover turkey?  Have no fear — continue the celebration New Orleans style with Emeril Lagasse’s recipe for Turkey Bone Gumbo.  Happy Thanksgiving from 600Camp!

The parties in Morton v. Yonkers disputed whether a gas royalty interest was void under the laws of the Navajo Nation.  No. 13-10926 (Nov. 19, 2014).  One party submitted a letter from an attorney for the Navajo Nation Department of Justice, opining that the “purported overriding royalty interest is invalid under the applicable provisions of the Navajo Nation Code and is completely void.”  The Fifth Circuit affirmed the lower courts’ conclusion that this letter was inadmissible hearsay, and did not qualify for an exemption under Fed. R. Evid. 803(8) or (15) [public records and statements about property interests]; or the general exception in Rule 807 [the former 803(24) and 804(b)(5), combined in 2011]: “Trustworthiness is the linchpin of these hearsay exceptions.  We are persuaded by the district court’s thorough explanation that the letter is untrustworthy, in large part because it was drafted by Morton’s counsel and was prepared after Morton’s counsel provided the Navajo Nation official with only one side of the story.”

In Matassarin v. Grosvenor, the Fifth Circuit reversed a dismissal on personal jurisdiction grounds, reminding: “For an intentional tort claim, purposeful availment can be established through ‘a single phone call and the mailing of allegedly fraudulent information’ to the forum state if ‘the actual content of communications with a forum gives rise to’ the claim, as when the communications’ content was allegedly fraudulent.”  (quoting Lewis v. Fresne, 252 F.3d 352, 355-56 (5th Cir. 2001)).  Here, the plaintiff described communications, received in Texas by email and fax, that he alleged to contain misrepresentations about several features of a condominium unit.

After an unusual pretrial mandamus ruling by the Fifth Circuit in a high-profile False Claims Act case, and after the jury returned a plaintiff’s verdict for $175 million — which could be trebled upon final judgment — the defendants returned to the Fifth Circuit last week. They filed a renewed mandamus petition  — drawing on the Court’s statements in the prior ruling — supported by amici filings from Texas A&M and another company.  In re: Trinity Industries, Inc., No. 14-41297.  The Court has requested a response, presently due on December 1.  Further briefing, and the ultimate disposition of this mandamus petition, will be of interest both procedurally and substantively.  (Disclaimer: I am not counsel of record in this proceeding, but do represent Trinity.)

In an intellectual property dispute with several pending motions, the district court held a telephone conference and said the following about the pending application for preliminary injunction:

“I can see that there at least would be a fact issue as to whether or not the contract’s violated, but that’s a different proposition from concluding that a preliminary injunction should be granted.  There are a lot of factors to take into account to decide whether or not, ultimately there would — a breach of contract would be found to exist, such as, whether or not there’s a possibility for some relief besides injunctive relief, such as the recovery of damages.  I haven’t found anything in the papers to indicate to me that the defendant couldn’t respond to a judgment in damages, if required to do so.  I don’t — I don’t think a preliminary injunction is necessary or appropriate in this case, so I’m going to deny that request.”

Observing that the district court’s statmeent in damages “seems to relate to [Defendant’s] ability to respond to a judgment in damages, which does not relate to whether damages would be an adequate remedy,” the Fifth Circuit vacated and remanded for a lack of findings of fact and conclusions of law under Fed. R. Civ. P. 52(a).  Software Development Technologies v. Trizetto Corp., No. 13-10829 (Nov. 5, 2014, unpublished).

Mabary withdrew money from an ATM machine. While she received an on-screen notice about a $2.00 fee, the machine did not have a posted external notice about the fee — a violation of the Electronic Funds Transfer Act at the time.  After amendments to the EFTA that eliminated the Bank’s liability (if applicable), the district court dismissed Mabary’s claim and denied certification of a related class.  Mabary v. Home Town Bank, N.A., No. 13-20211 (Nov. 5, 2014).  The Fifth Circuit reversed, holding: (1) Mabary had Article III standing as a result of EFTA’s definition of injury, even though she did receive a form of notice; (2) a Rule 68 offer of proof to her – precertification – did not moot her claim; and (3) EFTA’s amendments did not fall within the exception to the general presumption against statutory retroactivity.  A dissent took issue with the standing holding as “respectfuly, silly stuff,” reasoning: “Mabary cannot show that she suffered a cognizable injury in fact, so she can sue only if the existence of her statutory cause of action sufficed to satisfy Article III.”

World Wrestling Entertainment sought ex parte seizure and temporary restraining orders, against unnamed defendants selling fake WWE merchandise at live events, under the Trademark Counterfeiting Act.  The district judge denied relief, noting concerns about WWE’s ability to prove a likelihood of success against an unknown defendant.  The Fifth Circuit (who reviewed the case because the district court certified the matter for interlocutory appeal) took a different view, noting: “WWE does not license third parties to sell merchandise at live events . . . The resulting confined universe of authorized sellers of WWE merchandise necessarily ‘identifies’ any non-WWE seller as a counterfeiter.”  The opinion also observed that “the very nature of the ‘fly-by-night’ bootlegging industry” involves “counterfeiters who, upon detection and notice of suit, disappear without a trace and hide or destroy evidence, only to reappear later at the next WWE event down the road.”  World Wrestling Entertainment, Inc. v. Unidentified Parties, No. 14-30489 (Nov. 4, 2014).

Menendez complained about his employer’s accounting practices to the SEC.  The employer received a letter from the SEC asking for retention of certain documents.  The employer then emailed Menendez’s colleagues, “instructing them to start retaining certain documents because ‘the SEC has opened an inquiry into the allegations of Mr. Menendez.'”  Relations with his co-workers deteriorated and he ultimately resigned.  In a detailed opinion, the Fifth Circuit affirmed a $30,000 damages award to Menendez on his claim for retaliation: “The undesirable consequences, from a whistleblower’s perspective, of the whistleblower’s supervisor telling the whistleblower’s colleagues that he reported them to authorities for what are allegedly fraudulent practices, thus resulting in an official investigation, are obvious.”  Halliburton, Inc. v. Administrative Review Board, U.S. Dep’t of Labor, No. 13-60323 (Nov. 12, 2014).  The case has received considerable attention in employment and compliance circles; the Wall Street Journal‘s coverage is a short example.

Consistent with a 2014 line of cases that reversed summary judgments on credibility issues, the Fifth Circuit reversed a summary judgment for the insurer in a bad faith case in Santacruz v. Allstate Texas Lloyds, No. 13-10786 (Nov. 13, 2014, unpublished).  The insured alleged inadequate investigation into her claim of covered wind damage to her home, and the Court found fact issues on two matters.

First, as to liability for bad faith, the Court noted: “The extent of Allstate’s inquiry into the claim consisted of its adjuster taking photographs of the damaged home. Significantly, Allstate did not attempt to talk to the contractor, who submitted an affidavit in this case describing what he observed concerning the roof and attributing the cause to wind damage. Nor is there any evidence showing that Allstate obtained weather reports or inquired with neighbors to see if they suffered similar damage, which would tend to show the damage was caused by wind rather than normal wear and tear.”

Second, as to damages, the Court said: “Santacruz claimed three types of damages: (1) the replacement of the roof, supported by an invoice from Pedraza providing that Santacruz paid him $3,900 to repair the roof; (2) a list of damaged personal and household items compiled by Santacruz and his family with an estimate of the value of all the belongings; and (3) repair work needed for the damaged interior of the home, supported by an estimate from a contractor listing the repairs to be done. Further, Pedraza submitted an affidavit testifying to the necessity of repairing the roof, and Santacruz submitted photographs showing the extensive damage to the home’s interior to support his claim that repairs were necessary.”

The Supreme Court recently reversed the Fifth Circuit on a Twombly issue — here is the pleading that “simply, concisely, and directly” stated a civil rights claim.

Among other theories, the borrowers in Shaver v. Barrett Daffin LLP alleged that a servicer “was unjustly enriched by failing to apply credit default swap payments and other payments to their loan balance.”  No. 14-20107 (Nov. 5, 2014, unpublished).  This argument — apparently addressed for the first time by the Fifth Circuit in this opinion — was rejected by the Court, which noted similar results in other jurisdictions.

In the 9-0 per curiam opinion of Johnson v. City of Shelby, the Supreme Court reversed the Fifth Circuit’s dismissal of a civil rights claim for failure to cite the applicable statute: “Our decisions in [Twombly and Iqbal] are not in point, for they concern the factual allegations a complaint must contain to survive a motion to dismiss.  A plaintiff, they instruct, must plead facts sufficient to show that her claim has substantive plausibility.  Petitioners’ complaint was not deficient in that regard.  Petitioners stated simply, concisely, and directly events that, they alleged, entitled them to damages from the city.  Having informed the city of the factual basis for their complaint, they were required to do no more to stave off threshold dismissal for want of an adequate statement of their claim.”  No. 13-1318, 574 U.S. ___ (Nov. 10, 2014).  Law360 has covered the case.  Here is the actual pleading at issue.

Vaillancourt sued a mortgage servicer, the substitute trustee for a foreclosure, and her husband.  The defendants removed, claiming fraudulent joinder of the in-state defendants, and the district court rejected that argument and remanded.  In so doing, it declined to exercise supplemental jurisdiction over the accompanying state-law claims.   Vaillancourt v. PNC Bank, N.A., No. 14-40303 (Nov. 5, 2014).  A good exam question for a Federal Courts class resulted.

Because the district court based its remand order on its decision to decline supplemental jurisdiction, the Fifth Circuit (under its prior precedents) had appellate jurisdiction over that ruling, which necessarily included review of the predicate ruling about original jurisdiction. The Court noted that this result “is in some tension with 28 U.S.C. § 1447(d)’s command that ‘[a]n order remanding a case to the State court from which it was removed is not reviewable on appeal or otherwise,’ which the Supreme Court has construed to insulate from appellate review remands made on the basis of subject matter jurisdiction.”

The Court went on to reverse the ruling about fraudulent joinder, finding no cognizable claim pleaded against the trustee or the husband.  Accordingly, because “‘the district court had diversity jurisdiction over the state law claims at the time of remand,’ and ‘the exercise of that jurisdiction is mandatory,'” it reversed the remand order.

This summer, in the panel opinion of  Barron & Newburger, P.C. v. Texas Skyline, Ltd., No. 13-50075 (July 15, 2014), the Fifth Circuit affirmed the partial denial of a fee application based on its earlier opinion of  In re: Pro-Snax Distributors, Inc., 157 F.3d 414 (5th Cir. 1998). That earlier opinion rejected a “reasonableness” test in the application of Bankruptcy Code § 330 — which would have asked “whether the services were objectively beneficial toward the completion of the case at the time they were performed” — in favor of a “hindsight” approach, asking whether the professionals’ work “resulted in an identifiable, tangible, and material benefit to the bankruptcy estate.”  All three panel members joined a special concurrence asking the full Court to reconsider Pro-Snax en banc, and that invitation was recently accepted by a majority of active judges.  Law360 provides some good additional commentary about the en banc vote.

“[Attorney] Grodner filed a motion requesting that certain inmates housed in the same correctional facility as [Grodner’s client] be allowed to provide testimony by video. The state did not oppose this form of testimony. Judge Jackson denied the order, however, requiring the incarcerated inmates to appear in court. As a result, Grodner filed five new motions requesting that the district court subpoena certain inmates to testify in court. Grodner styled those motions ‘unopposed,’ although she admittedly never contacted opposing counsel to confirm this. Even after opposing counsel filed a memorandum clarifying their opposition to the subpoenas, Grodner proceeded to file three more ‘unopposed’ motions requesting subpoenas.”  In re Grodner, No. 14-98001 (Nov. 3, 2014, unpublished).  The Fifth Circuit affirmed the district court’s sanction of a 60-day suspension from practice before the Middle District of Louisiana.

The Fifth Circuit has launched an attractive new website, with the customary features and some great pictures of the John Minor Wisdom courthouse and surrounding landmarks.

A mortgage servicer sued two individuals, alleging a conspiracy to defraud; the defendants argued that the servicer lacked standing because the notes in question were not properly conveyed.  The case settled during trial, and as part of the settlement “the parties stipulated to several facts, including the fact that the Trusts were the owners and holders of the Loans at issue.”  An agreed judgment followed.  BAC Home Loans Servicing, L.P. v. Groves, No. 13-20764 (Nov. 3, 2014, unpublished).

The defendants then moved to vacate under FRCP 60(b), arguing that the plaintiff lacked standing.  The district court denied the motion and the Fifth Circuit affirmed.  It first noted that “the court will generally enforce valid appeal waivers, [but] a party cannot waive Article III standing by agreement . . .”  Further noting that “parties may stipulate to facts but not legal conclusions,” the Court held: “That is exactly what happened here.  [Defendants] conceded facts that establish [plainitiff’s] status; thus, the district court appropriately reached the resulting legal conclusion that [plaintiff] has standing.”

EnCana Oil & Gas hired Seiber as a general contractor, who in turn hired Holt and TAUG as subcontractors.  Seiber failed to make timely payments.  EnCana interpleaded the funds at issue, and Seiber then filed for bankruptcy — before entry of a final order in the interpleader case. Holt Texas, Ltd. v. Zayler, No. 13-41153 (Nov. 3, 2014).

Holt and TAUG alleged that they had materialmen’s liens under Texas law that removed the funds from Seiber’s bankruptcy estate; Seiber’s bankruptcy trustee argued that the filing of the interpleader action “automatically satisfied its liability to Seiber, thus transferring legal possession of the funds to Seiber and the bankruptcy estate.”

The Fifth Circuit disagreed with the trustee and reversed the bankruptcy court, reasoning: “If this were so, the interpleader would be the final judge of its own legal obligations relative to the dispute, by depositing a sum solely determined by it, washing its hands of any relationship to the dispute and walking away whistling Yankee Doodle.”

Uretek USA developed a process for pavement repair, which it sublicensed to Uretek Mexico under an agreement signed in 2003.  In 2010, the principals of the two companies met to try and resolve disputes about that agreement and other business dealings. During the meeting, the parties initialed an amended sublicense agreement, and Uretek USA accepted four checks from Uretek Mexico with these amounts and memo lines:

1. $10 “As per First Amendment to Sublicense Agreement”
2. $76,950.90 for “Full Payment on Technical Assistance”
3. $225,471.05 for “Full Payment on Royalties”
4. $10 for “Full Release [Uretek USA] to [Uretek Mexico]

Uretek USA later sued to dispute the enforceability of the amendment.  The jury found that Uretek USA ratified it by conduct, principally by cashing these checks.  While Uretek USA made several arguments against that finding on appeal, the number of checks and specificity of the notations on them was sufficient to sustain the verdict.  Uretek (USA), Inc. v. Ureteknologia de Mexico S.A. de C.V., No. 13-20430 (Oct. 29, 2014, unpublished).

In a reversal on rehearing from the original panel opinion, based on answers to certified questions in another matter in the meantime, the Court held in Crownover v. Mid-Continent Casualty Co.: “In sum, [Gilbert Texas Construction, L.P. v. Underwriters at Lloyd’s London, 327 S.W.3d 118, 124, 127 (Tex. 2010) and Ewing Constr. Co. v. Amerisure Ins. Co., 420 S.W.3d 30, 37 (Tex. 2014)], maintain that for a contractual-liability exclusion to apply, the insurer must prove that a contractually-assumed duty effected an expansion of liability beyond that supplied by general law. The arbitrator in this case determined that Arrow violated an express duty to repair work that did not conform to the requirements of its construction contract with the Crownovers. Mid-Continent has failed to proffer evidence creating a dispute of fact as to whether the arbitrator’s award was based on liability greater than that dictated by general law. Therefore, the contractual-liability exclusion from coverage does not apply.”  No. 11-10166 (Oct. 29, 2014, on petition for rehearing).

The concept of “proportionality” in discovery began its modern ascendance in  Bell Atlantic Corp v. Twombly, with observations such as these: “Probably, then, it is only by taking care to require allegations that reach the level suggesting conspiracy that we can hope to avoid the potentially enormous expense of discovery in cases with no ‘reasonably founded hope that the [discovery] process will reveal relevant evidence’ to support a § 1 claim.”  127 S.Ct. 1955, 1968 (2007).

Over time, the “proportionality” concept has moved from the discovery rules to pervade the entire system of federal procedure.  Consider Advisory Committee Note to revised Federal Rule of Civil Procedure 1 (approved by the Judicial Conference in September 2014 and now before the Supreme Court): “Effective advocacy is consistent with — and indeed depends upon — cooperative and proportional use of procedure.”

While arising under state law rather than the Federal Rules, the recent Texas Supreme Court of In re National Lloyds Ins. Co. illustrates the concept of proportionality in a highly practical context. The plaintiff in an insurance bad faith case sought evidence about similar claim denials, arguing “that the trial court’s discovery order was (1) limited in time, because it compelled only production of evidence relating to the two storms at issue, and (2) limited by location, because it involved only properties in Cedar Hill.”  ___ S.W.3d ___, No. 13-0761 (Tex. Oct. 31, 2014) (per curiam).

That Court disagreed: “Scouring claim files in hopes of finding similarly situated claimants whose claims were evaluated differently from [plaintiff’s] is at best an ‘impermissible fishing expedition.’ . . . [Plaintiff] is correct that discovery must be reasonably limited in time and geographic scope.   But such limits in and of themselves do not render the underlying information discoverable.”   It concluded that there were still too many likely differences between this set of claims and the plaintiff’s case to justify the discovery request.

Four times in the last two months, 600Camp has won recognition from Texas Bar Today for a “Top 10 Post of the Week” among Texas law blogs, “based on subject matter, writing style, headline, and imagery.” The posts were  The Regulation, My Friend, is Blowing in the Wind (Sept. 16), My Five Tips for Good Legal Writing (Oct. 9), Arbitration Here, There, or Nowhere (Oct. 20), and How to Notice Mississippi (Oct. 28).  Thanks for your support!

“Those who prefer to hunt deer without the use of dogs (still-deer hunters) complain that
dog-deer hunting is disruptive and unsportsmanlike. Adjacent landowners complain that dog-deer hunting leads to shooting near houses and from roads, fights between dog-deer hunters and landowners, roads being blocked by dog-deer hunters, dogs running across private property, and trespass.  Dog-deer hunters defend the practice based on its history as a traditional method of hunting in Louisiana dating back to the colonial period.”  The plaintiffs in Louisiana Sportsmen Alliance, LLC v. Vilsack sought to enjoin the U.S. Forest Service from banning dog-deer hunting in the Kisatchie National Forest.  The Forest Service won on the merits in the district court, and for the first time on appeal, argued that the plaintiff organization lacked standing. Expressing vexation: “The district court was ill-served by the Forest Service in this regard, because the Forest Service never argued that the Alliance lacked organizational standing until this appeal,” the Court nevertheless considered the issue because “Article III standing is a jurisdictional requirement that cannot be waived,” and then dismissed the appeal because the plaintiff association had not shown its standing to bring suit.  No.13-31260 (Oct. 28, 2014, unpublished).

River Oaks, an apartment management business originally based entirely in Louisiana, expanded into Mississippi in 2011.  It had a workers comp policy with Bridgefield Insurance, which provided “Other States” coverage for Mississippi if River Oaks notified Bridgefield of activity there.  After an employee’s injury in Mississippi, Bridgefield denied coverage for failure to comply with this notice requirement.  Bridgefield Casualty Ins. Co. v. River Oaks Management, Inc., No. 13-31077 (Oct. 27, 2014, unpublished).

Bridgefiled won the coverage dispute in district court, and the Fifth Circuit agreed that: (1) the provision was not ambiguous; (2) the provision was a condition precedent to coverage, so Bridgefield did not have to show prejudice from the lack of notice; and (3) for similar reasons, the provision did not implicate the Louisiana “anti-technical” statutes.

But, the Court found a material fact issue and reversed — agreeing with the district court that there was a factual dispute about whether an audit by Bridgefield put it on notice of the Mississippi activity (and accepted payments after that time), the Court disagreed with the district court’s conclusion that the dispute was not material: “An insurer may waive a provision that falls short of granting it the right to cancel the entire policy, such as the exclusion-of-coverage provision at issue here.”

Earlier this year, the Texas Supreme Court answered certified questions from the Fifth Circuit about the treatment of home equity loans under the Texas Constitution; that opinion summarizes: “To avoid foreclosure, homeowners and lenders often try to restructure underwater home mortgage loans that are in default by capitalizing past-due amounts as principal, lowering the interest rate, and reducing monthly payments, thereby easing the burden on the homeowners. But home equity loans are subject to the requirements of Article XVI, Section 50 of the Texas Constitution. The United States Court of Appeals for the Fifth Circuit has asked whether those requirements apply to such loan restructuring. We answer that as long as the original note is not satisfied and replaced, and there is no additional extension of credit, as we define it, the restructuring is valid and need not meet the constitutional requirements for a new loan.”  Sims v. Carrington Mortgage Services, LLC, No. 13-0638 (Tex. 2014).  Following that Court’s recent denial of rehearing, the Fifth Circuit has now formally accepted the answer and ruled accordingly.

Because the Fifth Circuit rarely acts en banc in business-related cases, votes by the full court on civil matters deserve careful review as examples of the judges’ broader philosophical leanings.  As detailed in another post, I place particular emphasis on (1) the vote to deny en banc review in the Daubert case of Huss v. Gayden (balancing judicial authority with the jury’s); (2) the vote to grant mandamus relief in the venue dispute of In re Volkswagen (balancing appellate authority with that of the trial court); and (3) the 7-8 vote to deny en banc review in the venue case of In re Radmax (same).  

The issue in the recent en banc case of McBride v. Estis Well Service, LLC, No. 12-30714 (revised Oct. 24, 2014), while facially addressing an important but technical issue of admiralty law, offers insight about the judges’ views of another topic — the authority of the judiciary as opposed to Congress’s. The introduction to Judge Higginson’s dissent succinctly captures that point: “The question presented by this case is whether seamen may recover punitive damages for their employer’s willful and wanton breach of the general maritime law duty to provide a seaworthy vessel. Because the Supreme Court has said that they can, and Congress has not said they can’t, I would answer in the affirmative, and REVERSE.”

Nine judges (spread across three opinions) saw the answer differently.  The conclusion to the majority opinion begins: “In the words of the Supreme Court, ‘Congress has struck the balance for us.'” (citing Mobil Oil Corp. v. Higginbotham, 436 U.S. 618, 623 (1978)).  Two concurrences make similar observations. Notably, all of the active judges appointed by a Democratic president at the time of en banc submission are in dissent.

The State Bar of Texas Litigation Section recently published my article, based on content from this blog, about how the Fifth Circuit has applied Twombly and Iqbal in recent opinions.

A cousin to U.S. Bank, N.A. v. Verizon Communications, Inc., the case of Murphy v. Verizon Communications, Inc. presented an ERISA-based challenge to the spinoff of Idearc by Verizon.  No. 13-11117 (Oct. 15, 2014, unpublished).  The appellate issue was the plaintiffs’ right under ERISA’s “catch-all provision” to request, as “other instruments under which the [ERISA] plan is established or operated,” various documents about the plan’s investment guidelines.  The Fifth Circuit held: “We agree with the majority of the circuits which have construed [the] catch-all provision narrowly so as to apply only to formal legal documents that govern a plan.”

Dawna Casey’s family sued Toyota, alleging that the airbag in a 2010 Highlander did not remain inflated for six seconds and caused her death in an accident.  The district court granted judgment as a matter of law and the Fifth Circuit affirmed.  Casey v. Toyota Motor Engineering & Manufacturing, No. 13-11119 (Oct. 20, 2014).

As to the claim of manufacturing defect, the Court observed: “Casey . . . established only that the air bag did not remain inflated for six seconds,” and relied on alleged violations of Toyota’s performance standards to prove a defect (rather than a technical explanation of the bag’s performance).  The Court rejected those allegations under Texas law and precedent from other jurisdictions: “Each piece of evidence submitted by Casey on this point is result-oriented, not manufacturing-oriented, and provides no detail on how the airbag is constructed.”

As to the claim of design defect, Casey relied primarily on a patent application for an allegedly superior design, which the Court rejected as not having been tested under comparable conditions, and as lacking a real-world track record as to feasibility, risk-benefit, and other such matters.  Law360 has written a summary of the opinion.

Sharpe v. Ameriplan re-engages the recurring problem of an arbitration agreement governed by multiple documents.  No. 13-10922 (Oct. 16, 2014).  Specifically:

— A Policy Manual contained an arbitration clause;

— A Broker Agreement, which incorporated the Policy Manual.  This Agreement said that the Agreement could not be changed except by written agreement, but acknowledged that the Manual could be changed at will; and

–3 of 4 plaintiffs had Sales Director Agreements that contained a lengthy dispute resolution provision, which began with a commitment to nonbinding mediation and concluded with detailed language that “claims, controversies, or disputes” be “submitted . . . to the jurisdiction” of courts in Dallas (a fourth had a much shorter provision that was simply a Dallas forum selection provision for “any action” on the agreement).

The Court held that that shorter provision did not trump the arbitration clause, but that the longer one did: “The language in Guarisco’s agreement demonstates that AmeriPlan knew how to draft a narrow forum selection clause, and its decision in later Sales Director Agreements to add far more extensive language establishing a full dispute resolution process must be given effect as creating something beyond that.”  The Court distinguished its recent opinion of Klein v. Nabors Drilling USA, L.P., 710 F.3d 234 (5th Cir. 2013), in which it read language about nonbinding mediation as not conflicting with “an exclusive procedural mechanism for the final resolution of all Disputes falling within its terms.”  (See also Lizalde v. Vista Quality Markets,  No. 13-50015 (March 25, 2014) (enforcing an arbitration agreement in the face of a benefit plan with a broad termination right, noting that both agreements’ termination provisions were limited to “this Agreement” and “this Plan” respectively and thus “clearly demarcate their respective applications”)).

The plaintiff in Law v. Ocwen Loan Servicing, L.L.C., a mortgage servicing case, asked the Fifth Circuit for leave to amend if it affirmed the dismissal of the complaint under Rule 12.  No. 14-20019 (Oct. 16, 2014, unpublished).  The Court affirmed on the merits and as to the denial of leave to amend, noting these basic and important principles on the point:

*  “A party who neglects to ask the district court for leave to amend cannot expect to receive such dispensation from the court of appeals.”

*  A district court’s sua sponte discussion of amendment is not a request, and neither is this language in a response: “[T]he only relief possibly available to [the defendant] at this stage of the case is that [the plaintiff] replead.”

*  While new factual allegations in response to a summary judgment motion can be construed as a request for leave to amend, that does not hold for a response to a Rule 12 motion.

The meaning of the word “value,” a seemingly simple word, lies at the heart of most economic theory.  In the Fifth Circuit, in the context of a defense under section 548(c) of the Bankruptcy Code to a fraudulent transfer claim, “value” is measured “from the perspective of the transferee: How much did the transferee ‘give’?” Williams v. FDIC, No. 12-20687 (Oct. 16, 2014) (discussing Jimmy Swaggart Ministries v. Hayes, 310 F.3d 796 (5th Cir. 2002)). (Although, as footnote 3 of Williams observes, the answer may be different under state law.)

In Williams, a debtor company paid $367,681.35 to a bank, on an obligation owed entirely by the individual who owed the debtor.  The bankruptcy trustee proved these payments were a fraudulent transfer, but the bank won below by showing two items of value: (1) forbearance as to eviction, which had substantial value to the debtor’s business, and (2) roughly $250,000 in “reasonable rental rate” for the period when the debtor occupied the premises in question.  The Fifth Circuit disregarded the first as irrelevant from the debtor’s perspective under Swaggart.   As to the second, the Court required “netting” of the loan payments received by the bank, against the rent the bank could have received, and rendered judgment for the trustee for the difference.  This holding turns on a detailed analysis of the term “value” in 548(c), as distinguished from “reasonably equivalent value” in a defense elsewhere in the Code.

The Fifth Circuit and the district court agreed that the plaintiffs/appellants in Mboho USA, Inc. v. Okon had served “abusively excessive, repetitious, and burdensome discovery requests.”  No. 13-20449 (Oct. 10, 2014, unpublished).  But, the Fifth Circuit found that the district court had acted too hastily in dismissing the case entirely, noting:

(1) the plaintiff, a foreign entity, was not foreclosed from suing in Texas simply because it is not registered to do business there;

(2) one of the appellants had legitimate documents from the Nigerian government authorizing him to bring suit in the US or Canada;

(3) an earlier dismissal in state court for lack of subject matter jurisdiction was not preclusive as to another court with jurisdiction; and

(4) as to one of the claims, plaintiffs were entitled to an opportunity to respond before it was dismissed sua sponte.

The Chemical Safety and Hazard Investigation Board served administrative subpoenas on Transocean in connection with the Deepwater Horizon disaster.  United States v. Transocean Deepwater Drilling, Inc., No. 13-20243 (Sept. 18, 2014).  Transocean contended that the Board lacked jurisdiction because the ill-fated rig was not a “stationary source” within the meaning of the Board’s enabling statute; the majority disagreed, concluding that at the time of the accident, the rig “was physically connected (though not anchored) at that site and maintained a fixed position.”

Transocean also contended that this sentence deprived the Board of jurisidiction: “The Board shall not be authorized to investigate marine oil spills, which the National Transportation Safety Board is authorized to investigate.”  After a foray into the grammatical thicket of “which” v. “that,” the majority concluded that the Board was not categorically barred from investigating oil spills in light of the “overall regulatory scheme.”

A dissent disagreed with both conclusions, reminded that “[f]or the sake of maintaining limited government under the rule of law, courts must be vigilant to sanction improper administrative overreach,” and noted that at least 17 other investigations were conducted into the accident.

Holden, an employee of Buck Kreihs Company (“BKS”), was injured while removing a gangway that connected BKS’s dock to a barge owned by U.S. United Ocean Services (“United”).  Holden and United settled their litigation, and United’s liability insurer won summary judgment in United’s suit for insurance coverage.  The Fifth Circuit affirmed in Holden v. U.S. United Ocean Services, L.L.C., No. 12-30251 (Sept. 15, 2014, unpublished).  The policy — actually issed to BKS, but with United as an additional insured — had a “watercraft” exclusion.  The exclusion would otherwise apply to the barge, except for an exemption for a contract under which “the ‘Named Insured’ assumes the tort liability of another party for ‘bodily injury’ or ‘property damage’ to a third party or organization.”  The majority found that United was not a named insured, and that the exemption was best read to reach claims by an injured claimant against BKS — not claims by an additional insured for its own liability to the claimant.  A dissent argued that this reading did not give effect to the precise terms used in the policy.

On Friday October 10, the Fifth Circuit denied mandamus relief on the eve of trial in a high-stakes False Claims case, In re Trinity Industries, Inc. — but took the unusual step of making an additional statement: “The court is compelled to note, however, that this is a close case. The writ is timely and the litigation stakes–the potential for a $1 billion adverse judgment–are unusually high. This court is concerned that the trial court,  despite numerous timely filings and motions by the defendant, has never issued a reasoned ruling rejecting the defendant’s motions for judgment as a matter of law.”  The Court went on to cite several specific opinions that caused its concern.

Pioneer suffered an oil well blowout and paid millions to restore order.  It sued for reimbursement under its umbrella policy and the Fifth Circuit affirmed judgment for the insurer, based largely on the broad language of the relevant exclusions.  Pioneer Exploration LLC v. Steadfast Ins. Co., No. 13-30802 (Sept. 22, 2014).  Pioneer argued that the “owned, rented or occupied” exclusion did not apply to a mineral lease.  The Court disagreed, noting that the mineral lease gave Pioneer some control over surface land, and that the broad language of the exclusion reached activity associated with oil production (citing Aspen Ins. UK, Ltd. v. Dune Energy, Inc., No. 10-30335 (5th Cir. Nov. 8, 2010, unpublished)).  Further, noting that Louisiana law allowed debate as to whether an “owned property” exclusion reached remediation costs incurred to minimize liability to third parties, the Court found that this exclusion “specifically excludes containment costs” (reviewing Norfolk Southern Corp. v. California Union Ins., 859 So. 2d 167 (La. App. 2003)).”  Finally, as to another exclusion, the Court found that the insured could not meaningfully allocate expense “between controlling costs and plugging costs.”

While preparing a CLE for our associates, I drafted and posted my five tips for good legal writing, along with comments and examples.  The tips are:

1. Avoid needless words.
2. Use shorter words.
3. Use shorter sentences.
4. Avoid passive voice.
5. There is no good writing. Only good re-writing.

I hope you have a chance to read the post, along with some of the linked examples, and that they are of use to you in your work.

This summer, the Fifth Circuit declined to apply the Texas “one satisfaction rule” in a fraudulent transfer case, where the plaintiff had also settled a contract dispute with the seller of the business involved in the transfer.  GE Capital Commercial, Inc. v. Worthington National Bank, No. 13-10171 (June 10, 2014).  The court returned to the one-satisfaction rule in Structural Metals, Inc. v. S&C Electric Co., in which the jury awarded roughly $300,000 for a breach of warranty (measured as the difference in value between the goods as received, and the goods as warranted).  The plaintiff also received an insurance payment for fire damage involving the goods.  Again, the Court declined to apply the rule, finding that the plaintiff had suffered two distinct injuries.  No. 13-50332 (Oct. 6, 2014, unpublished).  Interestingly, in both cases, the Court focused on the one-satisfaction rule rather than the closely-related doctrine of the collateral source rule.

The Fifth Circuit returned to the tension between excess and primary carriers in RSUI Indemnity Co. v. American States Ins. Co., a bad faith case under Louisiana law.  After a review of the cases on the issue, the Court held “that under the circumstances of this case, where an excess carrier alleges that a primary insurer in bad faith breached its duty to defend a common insured properly and caused exposure of the insured to an increase in the settlement value of the case above the primary policy limit, which the excess insurer must then satisfy on the insured’s behalf, the excess insurer has a subrogated cause of action against the primary insurer for any payment above what it otherwise would have been required to pay.”  No. 14-30033 (Sept. 25, 2014).

Plaintiffs alleged that Amedisys, a provider of home health services, concealed billing improprieties, causing a drop in its stock value when they were revealed.  Public Employees’ Retirement System of Mississippi v. Amedisys, Inc., No. 13-30580 (Oct. 2, 2014).  The Fifth Circuit reversed the district court’s dismissal on the pleadings, finding adequate allegations of loss causation.  It based its holding on the alleged cumulative effect of the five pleaded disclosures of the allegedly concealed information: “This holding can best be understood by simply observing that the whole is greater than the sum of its parts.”  In its discussion of the Supreme Court’s treatment of this pleading issue in Dura Phamaceuticals, Inc. v. Broudo, 544 U.S. 336 (2005), the Court pointed out that Dura relied on Conley v. Gibson for its summary of pleading requirements — perhaps inviting a reassessment of that holding in light of later developments under Twombly and Iqbal.

On October 2, the Supreme Court granted certiorari in ASARCO v. Baker Botts, L.L.P., a Fifth Circuit case about enhancement of professional fees for a “rare and extraordinary” result in bankruptcy fraudulent transfer litigation.

Fed. R. Civ. P. 62(f) says: “If a judgment is a lien on the judgment debtor’s property under the law of the state where the court is located, the judgment debtor is entitled to the same stay of execution the state court would give.”  In MM Steel, L.P. v. JSW Steel (USA), Inc., Appellant faced an adverse judgment for over $150 million, and sought a stay of execution based on this rule.  No. 14-20267 (Nov. 14, 2014 [revised]).

Reviewing the somewhat scattered authority about Rule 62(f) and its application in Texas, the per curiam majority concluded that the creation of a Texas judgment lien with an abstract of judgment “requires more than mere ministerial acts.”  Accordingly, a Texas judgment is not a lien within the scope of Rule 62(f), and Appellant’s motion to stay was denied (applying Rodriguez-Vazquez v. Lopez-Martinez, 345 F.3d 13 (1st Cir. 2003)).

In dissent, Judge Jones (a) saw the case as controlled by a different line of authority (citing Castillo v. Montelepre, Inc., 999 F.2d 931 (5th Cir. 1993)), under which “Rule 62(f) is applicable where a judgment creditor is otherwise afforded sufficient security under state law” such as Texas’s $25 million bond cap, and (b) observed: “The majority overstates the difficult of filing an abstract of judgment. . . . It is a single page with a few simple fields, like names and addresses of the parties.”

1. General jurisdiction is not general.  “It is . . . incredibly difficult to establish general jurisdiction in a forum other than the place of incorporation or principal place of business.”  Monkton Ins. Servs. v. Ritter, __ F.3d ___ (5th Cir. Sept. 26, 2014) (applying Daimler AG v. Bauman, 134 S. Ct. 746 (2014)).
2.  “Gateway” arbitration has a gate.   A party must only “arbitrate gateway questions of arbitrability if the argument that the dispute falls within the scope of the agreement is not wholly groundless.”  In Douglas v. Regions Bank, an agreement about a bank account did not control a later, unrelated embezzlement case.  757 F.3d 460 (5th Cir. 2014).
3. “Based on” = Arbitration.  The contract said: “Terms and conditions are based on the general conditions stated in the [attached].”  While “based on” may have “multiple interpretations . . . in the abstract,” no such reading worked here, given the length and scope of the attachment compared to the contract.   Rushaid v. National Oilwell Varco, Inc., 757 F.3d 416 (5th Cir. 2014).
4. No actual damages = No civil penalties.  Forte v. Wal-Mart Stores, ___ F.3d ___ (5th Cir. Aug. 25, 2014) (rehearing pending).
5. Analytical GAAP.   An expert reviewed financial documents from A and tax returns from B.  His opinions about the finances of C and D were stricken: “It is by no means clear how a [CPA] can obtain personal knowledge of the effects of the actions of one entity on other parties without reviewing the latter’s financial documents . . . .”  Meadaa v. K.A.P. Enterprises LLC, 756 F.3d 875 (5th Cir. 2014).

BONUS: Lipan Apaches may use eagle feathers in religious rituals — for now at least.  McAllen Grace Brethren Church v. Salazar, ___ F.3d ___ (5th Cir. Aug. 20, 2014).

Plaintiff bought a Nissan Murano, paying $39,289 in total.  She sued for breach of warranty and related state law claims, and the defendants removed.  The issue addressed on appeal was whether the claim fell within the $50,000 amount-in-controversy requirement of the Magnuson-Moss Warranty Act.    Scarlott v. Nissan North America, Inc., No. 13-20528 (Sept. 30, 2014).  The Fifth Circuit found it did not — the plaintiff’s invocation of a “Level One” Discovery Control Plan under the Texas Rules of Civil Procedure did not specify a claim amount, and the defendants did not offer sufficient evidence of dimunution of value, repair costs, or lost profits to bring the claim about the threshold.  Notably, under the Magnuson-Moss statute, in calculating the amount in controversy a court may not consider attorneys fees, personal injury damages, or damages associated solely with pendent state-law claims.

Ritter, a resident of Texas, owned an insurance company in the Cayman Islands. Litigation broke out, in Texas, between Ritter and the Cayman-based entity that managed the insurance company.  Ritter sought to join a Cayman-based bank to the Texas case, arguing that it failed to detect the manager’s wrongdoing.  The district court dismissed for lack of personal jurisdiction and the Fifth Circuit affirmed.  Monkton Ins. Servs. v. Ritter, No. 13-50941 (Sept. 26, 2014).  The case is notable as one of the first applications by the Circuit of two 2014 Supreme Court cases about personal jurisdiction.

First, as to general jurisdiction, applying Daimler AG v. Bauman, 134 S. Ct. 746 (2014), the Court observed: “It is . . . incredibly difficult to establish general jurisdiction in a forum other than the place of incorporation or principal place of business.”  The Court also reminded that a “sliding scale” analysis about the jurisdictional effect of a defendant’s website “is not well adapted to the general jurisdiction inquiry, because even repeated contacts with forum residents by a foreign defendant may not constitute the requisite substantial, continuous and systematic contacts required for a finding of general jurisdiction—in other words, while it may be doing business with Texas, it is not doing business in Texas.” (quoting Revell v. Lidov, 317 F.3d 467, 471 (5th Cir. 2002) (citing Zippo Mfg. Co. v. Zippo Dot Com, Inc., 952 F. Supp. 1119 (W.D. Pa. 1997)).

Second, as to specific jurisdiction, the Court noted that Walden v. Fiore, 134 S. Ct. 1115 (2014), emphasized that a plaintiff’s unilateral actions with respect to the forum cannot create personal jurisdiction.  Here, the bank transactions at issue were initiated by Ritter, running afoul of this principle.  The Court also found no abuse of discretion in denying jurisdictional discovery.

Plaintiff brought a class action in Louisiana state court on behalf of apartment owners and managers.  Defendant removed under CAFA.  Plaintiff then sought to add a local defendant and invoke the “local controversy” exception to CAFA jurisdiction. Cedar Lodge Plantation, LLC v. CSHV Fairway View I, LLC, No. 14-30735 (Sept. 29, 2014). Citing State of Louisiana v. American National Property & Casualty Co., 746 F.3d 633 (5th Cir. 2014), the Fifth Circuit rejected this argument, noting that CAFA defines a class action as the “civil action filed”   28 U.S.C. § 1332(d)(1)(B) (emphasis added).

Boxcars Properties, the operator of an apartment complex, sued its neighboring landowners West Hills Park and Home Depot in Texas state court, complaining about development activity that led to a “lack of lateral support” and made the complex uninhabitable. Williams v. Home Depot, Inc. (Sept. 22, 2014, unpublished).  Boxcars settled with Home Depot and obtained a $2.4 million verdict against West Hills, which then filed for bankruptcy.

West Hills sought indemnity from Home Depot, and the district court and Fifth Circuit rejected its request.  The indemnity provision contained an exclusion for “the tortious acts of . . . other parties” — such as West Hills.  Noting that “[t]he express negligence doctrine alone may be sufficient to deny [debtor’s] claim,” the Court decided on the basis of issue preclusion, agreeing with the district court that “the negligence finding was essential to the judgment because only that finding allowed for the damages for improvements to land included in the state court verdict.”

ExxonMobil sued US Metals, alleging over $6 million in damages from defects in a set of 350 “weld neck flanges.”  US Metals sought CGL coverage from Liberty.  U.S. Metals, Inc. v. Liberty Mutual Group, Inc., No. 1320433 (Sept. 19, 2014, unpublished). Liberty denied US Metals’s request, based on the “your product” and “impaired” property exclusions in the policy, which turned on the terms “physical injury” and “replacement” in those exclusions.   The Fifth Circuit noted a lack of Texas authority as to whether those terms are ambiguous in this context, and no clear answer in other opinions that have addressed them. Accordingly, the Court certified two questions to the Texas Supreme Court: (1) whether those terms, as used in these exclusions, are ambiguous; and (2) if so, whether the insured’s interpretation is reasonable.  The Court observed that the interpretation of these terms “will have far-reaching implications” and “affect a large number of litigants.”  That Court accepted the certification request today.

In somewhat quirky language, the Texas Rules of Civil Procedure set this deadline to answer a lawsuit: “[O]n or before 10:00 a.m. on the Monday next after the expiration of twenty days after the date of service.”  Despite the specific time stated, attorneys often calendar only the answer day, reasoning that a default judgment is unlikely in the space of a few hours.  That practice failed in G&C Land v. Farmland Management Services, in which the plaintiff obtained a default judgment for over $3,000,000 at 10:15 on the critical Monday.  No. 14-10046 (5th Cir. Sept. 23, 2014).

Plaintiff alleged fraud claims about the costs of an agricultural lease on a West Texas farm; the judgment granted recovery on those claims and trebled the damages under the DTPA.  Two hours later, the defendant removed and then sought to set aside the default judgment.  The district court ultimately granted that motion, along with a summary judgment for the defendant on the merits, and the Fifth Circuit affirmed.

Whilte the Fifth Circuit’s opinion is short and unpublished, the district court opinion (page 31 of the attached) goes into substantial detail about the default judgment.  It found a lack of willfulness by the defendant, a lack of prejudice to the plaintiff, and meritorious defenses.  As to willfulness, the district court noted that “fault is attributed only to Farmland’s counsel,” and held: “There is no dispute that Farmland failed to file an answer or remove before the deadline to answer in state court, which failure is attributed to the negligence of Farmland’s counsel.  Yet, such negligence does not amount to willfulness . . . “   It also noted that while Farmland had timely answered after removal in accordance with the Federal rules, “this alone does not excuse Farmland’s failure to timely answer in state court.”

The federal courts’ decisions to set aside the default judgment are clearly correct – the (affirmed) summary judgment shows that the claim lacked merit, and plaintiff was not prejudiced by having to address the merits instead of resting on a 15-minute “gotcha.”  And as to the deadline, the opinions do not address Rule 5 of the Texas Rule of Civil Procedure, which provides:  “If any document is sent to the proper clerk by first-class United States mail in an envelope or wrapper properly addressed and stamped and is deposited in the mail on or before the last day for filing same, the same, if received by the clerk not more than ten days tardily, shall be filed by the clerk and be deemed filed in time (emphasis added).”  A serious argument says that the state court’s speedy grant of a default judgment did not allow Rule 5 a chance to function as intended.

Nevertheless, the district court faulted defense counsel for not answering before 10:00, and used the word “negligence” to describe what happened.  Had the facts been different – a stronger claim, a change of position in reliance on the judgment – the decision could have been closer and counsel’s situation would have become more awkward.  In light of the facts of this case, defense counsel should be mindful of the 10:00 AM deadline in the rules, and factor it into their calendaring system.

A similar article about this case appeared in a recent Texas LawBook.