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  No. 12-30332 (Feb. 5, 2013, unpublished).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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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