In National Union v. American Eurocopter, a contribution suit arising from settlement of claims about a helicopter crash, a Hawaii district court found no personal jurisdiction and transferred venue to Texas. No. 11-10798 (Aug. 27, 2012). The appellant challenged that ruling, and the Fifth Circuit held that it lacked jurisdiction over that issue. Id at 4 (quoting 28 U.S.C. § 1294, defining appellate jurisdiction as reaching “appeals . . . [f]rom a district court of the United States to the court of appeals for the circuit embracing the district”). On the merits, the Court affirmed a dispositive choice-of-law ruling for Texas law, noting a Texas choice-of-law provision in a relevant contract, a rough balance between the place of the accident (Hawaii) and the defendants’ headquarters (Texas), and the relatively weak interest of an out-of-state insurer. Id. at 5-7 (noting Beech Aircraft v. Jinkins, 739 S.W.2d 19 (Tex. 1987)).
Vanderbilt Mortgage v. Flores, arising from a collection suit about the financing for a mobile home, involved a substantial recovery on counterclaims for wrongful debt collection and filing of a fraudulent lien. 692 F.3d 357 (5th Cir. 2012). The Fifth Circuit affirmed in part and reversed in part, finding: (1) the release of the debtors unambiguously reached only the lien and not the underlying debt (thereby mooting some counterclaims); (2) property owners in the position of these debtors did not have an ongoing duty, for limitations purposes, to check deed records; (3) Tex. Civ. Prac. & Rem Code chapter 12, about fraudulent liens, does not require actual damages before penalties may be awarded; (4) Chapter 12 does not violate the Excessive Fines Clause; and (5) personal jurisdiction over one defendant was appropriate, particularly given the confusion in its own records about its activities.
In the unpublished case of Blake Box v. Dallas Mexican Consulate General, the Fifth Circuit reversed a dismissal for lack of jurisdiction under the Foreign Sovereign Immunities Act because discovery was not allowed on whether a Mexican government representative had actual authority. No. 11-10126 (Aug. 21, 2012). Acknowledging that the FSIA seeks to reduce litigation involving sovereigns, the Court found that authority “is a discrete issue conducive to limited discovery [and] the relevant documents reside exclusively with the defendant . . . ” Id. at 7-8. The analysis and cited cases are of general interest in other jurisdictional discovery situations. Disclosure: LTPC colleagues Jason Dennis and Sam Hardy represented the successful appellant.
Appellate jurisdiction over bankruptcy matters can become murky (as discussed in this 2009 CLE paper) because finality is not always obvious. In an appeal from an individual’s bankruptcy case, the Court reminded that the test is whether a district court order is a “final determination of the rights of the parties to secure the relief they seek” or a “final disposition ‘of a discrete dispute within the larger bankruptcy case.'” Sikes v. Crager, No. 11-30982 at 3 (Aug. 16, 2012) (quoting Bartee v. Tara Colony Homeowners Ass’n, 212 F.3d 277 (5th Cir. 2000). The district court’s finding that the debtor’s Chapter 13 plan was not made in good faith “involve[d] a discrete dispute within her case” and created jurisdiction.
The plaintiff in Choice Inc. of Texas v. Greenstein challenged a Louisiana regulation about the licensing of abortion facilities. No. 11-30296 (Aug. 17, 2012). The majority found the suit was not ripe because the plaintiff did not show “that hardship will result if court consideration is withheld at this time.” Id. at 7. A forceful dissent faulted the majority for a “procrustean ripeness analysis.” Id. at 32. While much of the back-and-forth involves matters unique to abortion litigation, the case presents a thorough review of general principles about ripeness in the Fifth Circuit at present.
Roman v. Western Manufacturing examined a $1mm-plus verdict about severe injuries from a pump malfunction. No. 10-31271 (Aug. 17, 2012). After review of the standards, id. at 5 (“It is not our charge to decide which side has the more persuasive case.”), the Court found that two qualified mechanical engineers met Daubert even though they lacked extensive experience with “stucco pumps,” declining to “make expert certification decisions a battle of labels.” Id. at 7. The Court also rejected technical challenges to the type of pump reviewed by the experts and the plausibility of their factual assumptions about its operation, id. at 13 (“There was certainly contrary evidence, but that was for jurors to weigh.”), as well as sufficiency challenges about the inferences made by the jury. Id. at 16-17. Additional challenges were found waived under Fed. R. Civ. P. 50. This opinion is the latest in a series of thoughtful cases about Daubert after the 2009 decision in Huss v. Gayden.
Globeranger Corp. v. Software AG involved Texas state law claims about the development of a radio frequency identification system. No. 11-10939 (Aug. 17, 2012). The defendants removed and obtained dismissal on the grounds of Copyright Act preemption. The Fifth Circuit agreed that section 301(a) of the Act creates complete preemption, and on the applicable test: “whether [the claim] falls ‘within the subject matter of copyright'” and whether it “protects rights that are ‘equivalent'” to those of a copyright. Id. at 6 (citing Carson v. Dynegy, 344 F.3d 446, 456 (5th Cir. 2003)). After through review of prior cases, the Court held that the conversion claim was likely preempted (thereby maintaining federal jurisdiction), but that the general basis for the claims included business practices excluded from copyright protection, making dismissal at the Rule 12 stage inappropriate. Id. at 10-12.
Finding that the EPA’s action was “[s]ixteen years tardy” and “without basis in the Clean Air Act or its implementing regulations,” the Court vacated an EPA rule that would have voided roughly 140 permits for various pollution-emitting businesses in Texas. State of Texas v. EPA, No. 10-60614 (Aug. 13, 2012).
In Ahmad v. Old Republic National Title Insurance, the Court reversed a grant of class certification in a case about title insurance premiums. No. 11-10695 (Aug. 13, 2012). The Court relied on Benavides v. Chicago Title, 636 F.3d 699 (5th Cir. 2011), which declined to certify a similar class of title insurance buyers because “[t]he resulting trial would require the factfinder to determine whether each individual qualified for the discount based on the evidence in his or her file.” Op. at 9. The Court declined to distinguish Benavides even though a particular discount was mandatory once “the requirements of R-8 [a Texas Insurance Code provision]” were satisfied, because each plaintiff would present unique facts about those requirements. Id. at 10-11. Therefore, the class did not meet the commonality requirement of Fed. R. Civ. P. 23(a)(2).
The bankruptcy court in CRG Partners v. Neary awarded a $1 million fee enhancement for a “rare and exceptional” result in the Pilgrim’s Pride bankruptcy. No. 11-10774 (Aug. 10, 2012). The Trustee objected, arguing that Perdue v. Kenny A. ex rel Winn, 130 S. Ct. 1662 (2010) — a case rejecting a comparable enhancement under 42 U.S.C. § 1988 — impliedly overruled older Fifth Circuit authority that allowed them in bankruptcy. The Court carefully reviewed Perdue under the “rule of orderliness,” a set of principles that guide a panel’s fidelity to older panel opinions, and found Perdue distinguishable factually and for policy reasons. Op. at 22-25. The Court reminded that it had recently reached a similar conclusion as to the effect of Stern v. Marshall, 131 S. Ct. 2594 (2011), on magistrate jurisdiction.
An unpublished opinion affirmed a ruling that an SEC suit about backdating was barred by limitations and the discovery rule did not apply. SEC v. Microtune, No. 11-10594 (Aug. 7, 2012). An interesting analysis of the opinion and its potential broader significance appears in the August 11, 2012 Texas LawBook.
Echoing its recent action in Sawyer v. du Pont, the Fifth Circuit withdrew its previous opinion in Ewing Construction v. Amerisure Insurance and certified two questions to the Texas Supreme Court about the scope of the “contractual liability” exclusion in a construction contractor’s CGL policy. No. 11-40512 (Aug. 8, 2012).
Lowry Development LLC v. Groves & Assocs. Insurance involved a real estate developer who sued its insurer about coverage for wind damage, and alternatively, its insurance agent for negligence. No. 11-60670 (Aug. 3, 2012). The district court granted summary judgment for the developer against the insurer (thereby mooting the claim against the agent), which the Fifth Circuit reversed. Id. at 3. The developer then sought to reinstate its claim against the agent. The Court found that the agent’s dismissal was “based on an earlier judgment that has been reversed or vacated” and thus came within Fed. R. Civ. P. 60(b)(5). The agent argued that the insurer should have taken a protective appeal at the time of the original dismissal, but the Court, “[a]cknowledging that [plaintiff’s Rule 60(b) motion looks like the protective appeal it failed to file,” found no abuse of discretion in the district court’s decision to grant the motion. Id. at 10.
“Does the failure to give notice to an excess carrier until after an adverse jury verdict constitute evidence of prejudice that forfeits coverage?” Berkley Regional Ins. Co. v. Philadelphia Indemnity Ins. Co., 690 F.3d 342 (5th Cir. 2012). The Court thoroughly reviewed Texas law about untimely claim notice, observing that it can void coverage if the insurer is prejudiced, but “[d]efining the contours of prejudice from the breach of a notice requirement . . . is not easy.” It applied that general principle to excess carriers, and found that this carrier had raised fact issues about prejudice from untimely notice (here, after an adverse jury verdict), as it was unable to investigate the matter or participate in mediation: “The cows had long since left the barn when [the carrier] was invited to close the barn door.”
The case of Little v. Shell Exploration presented an issue of first impression — whether a federal employee, even one whose job is to investigate fraud, may bring a qui tam action under the False Claims Act. 690 F.3d 282 (5th Cir. 2012). After review of the statutory text, the Court sided with a majority of other Circuits that have addressed the issue and concluded that one may. The Court acknowledged the practical issue of “how to ensure employee fidelity to agency enforcement priorities in the face of personal monetary incentives,” but concluded that the government could address that issue with personnel guidelines and with its power to intervene and dismiss actions. The Court remanded for consideration of whether the “public disclosure” and “original source” aspects of the Act barred the specific claims raised by these relators — matters that could limit the scope of the first holding.
City of New Orleans v. BellSouth Telecommunications presented a long-simmering dispute, stretching back to an 1879 ordinance, about BellSouth’s use of public rights-of-way in New Orleans. Nos. 11-30607 and 11-31058 (July 31, 2012). The district court awarded $1.5 million in unjust enrichment related to BellSouth’s use after 2006. The Fifth Circuit reversed, finding that the parties’ complicated relationship gave BellSouth a “‘justification in . . . contract’ for any enrichment it may be enjoying . . . ,” which defeated an unjust enrichment claim under Louisiana law. Id. at 21, 25 (citing SMP Sales Management v. Fleet Credit Corp., 960 F.2d 557, 560 (5th Cir. 1992)).
Chevron sued Aker Maritime and Oceaneering International in connection with bolt failures on an offshore drilling rig. Chevron USA v. Aker Maritime Inc., No. 11-30369 (July 31, 2012). Chevron recovered a significant damage award against both defendants, and Aker sought indemnity from Oceaneering. Id. at 4. To recover under the indemnity provision, Aker had to establish that it was an agent of Chevron with respect to Oceaneering’s work. The Court concluded that Aker was an agent with respect to the specific activity of procurement, which it found “extends beyond Aker’s mere ordering and includes the receipt of the bolts.” Id. at 8.
In Gonzalez v. Fresnius Medical Care, the Court affirmed a JNOV on claims under the False Claims Act. Nos. 10-50413, 10-51171 (July 30, 2012). The Court agreed with the district court’s conclusion that the plaintiff had not shown a wrongful patient referral scheme, noting that the number of referred patients stayed the same over time, whether or not the alleged conspiracy was in place. Id. at 8. The Court also agreed that a line of cases about claims “tainted by fraud” was limited to the fraudulent inducement context. Id. at 9-11. Finally, the Court affirmed a sanctions award under 28 USC § 1927 based on the plaintiff’s changing testimony on whether she was asked to cover up the alleged scheme, noting differences between the deposition, the errata sheet afterwards, and then trial testimony. Id. at 13-16.
BP and Exxon disputed the condition of an offshore rig operated by Noble off the coast of Libya; Noble sought payment from either of them. BP Exploration Libya Ltd. v. ExxonMobil Libya Ltd., No. 11-20547 (July 30, 2012). The resulting three-party dispute ran into practical problems because the arbitration clause had a procedure for selecting three arbitrators that was only workable in a two-party dispute. The Fifth Circuit found that a “mechanical breakdown” had occurred that justified federal court intervention under the FAA, 9 U.S.C. § 5, but that the district court exceeded its authority by ordering that arbitration proceed with five arbitrators rather than the three specified by the agreement. The Court remanded with instructions as to the process for the district court to follow in forming a three-arbitrator panel.
The Court vacated its earlier panel opinion in Sawyer v. du Pont, which rejected claims of fraudulent inducement by employees who the Court concluded were “at-will.” The issue of whether at-will employees can bring such claims (which here, also involves the application of a notice provision in the employees’ CBA with their employer), has now been certified to the Texas Supreme Court. No. 11-40454 (July 27, 2012). The Texas Lawyer Blog has some interesting insight on the procedural history of this ruling.
Lawyers in the North Texas area will enjoy the new blog 600commerce.com, which covers the Texas Fifth District Court of Appeals that sits at 600 Commerce in downtown Dallas.
“What follows is the tale of competing mineral leases on the Louisiana property of Lee and Patsy Stockman during the Haynesville Shale leasing frenzy.” Petrohawk Properties v. Chesapeake Louisiana at 1, No. 11-30576 (as rev’d Aug. 2012). The Fifth Circuit affirmed a finding that one of the dueling leases was procured by fraudulent misrepresentations as to the legal effect of a lease extension, rejecting several challenges to whether such a representation was actionable under Louisiana law, as well as an argument that the fraud had been “confirmed [ratified].” The Court also rejected a counterclaim for tortious interference with contract, noting that Louisiana has a limited view of that tort and requires a “narrow, individualized duty” between plaintiff and tortfeasor. Id. at 20-24 (citing 9 to 5 Fashions v. Spurney, 538 So.2d 228 (1989)).
In Westlake Petrochemicals v. United Polychem, the plaintiff obtained judgment for $6.3 million under the UCC for breach of a contract to supply ethylene. No. 10-20634 (July 24, 2012). The Fifth Circuit affirmed on liability, finding that evidence about the need for credit approval did not disprove contract formation, defeat the Statute of Frauds, or establish a condition precedent. Id. at 9-13. The Court reversed and remanded on damages, finding that the plaintiff was analogous to a “jobber” and thus could recover lost profits but not the contract-market price differential. Id. at 17 (citing Nobs Chemical v. Koppers Co., 616 F.2d 212 (5th Cir. 1980)). The Court also reversed as to an individual’s guaranty of the damages, finding a conflict between the termination provision of the guaranty and the plaintiff’s argument about when liability accrued, which created an ambiguity that made the guaranty unenforceable under Texas law. Id. at 20-21.
An Austin-based software developer sued a German software company for breach of contract and related torts. Pervasive Software v. Lexware GMBH & Co., No. 11-50097 (July 20, 2012). The Fifth Circuit affirmed the dismissal of the case for lack of personal jurisdiction, revisiting several key jurisdiction points for business relationships. The Court held that the parties’ contracts alone would not create jurisdiction when the parties had no prior negotiations and did not envision “continuing and wide-reaching contacts” in Texas. Id. at 15, 19 (citing Burger King v. Rudzewicz, 471 U.S. 462 (1985). (A lengthy footnote analyzes Texas law about the role of choice-of-law clauses in a jurisdictional analysis. Id. at 14-15 n.4.) The German company’s Internet sales into Texas — 15 programs, costing roughly $66 each, over four years — did not establish “purposeful availment” for specific jurisdiction, or “continuous and systematic contacts” for general jurisdiction. Id. at 19-24, 28-29. The alleged acts of conversion occurred in Germany and thus did not create specific jurisdiction either. Id. at 25-26.
In Dameware Development LLC v. American General Life Ins. Co., the plaintiff complained that the defendant insurance company did not deliver a plan with certain tax benefits. No. 11-20218 (July 19, 2012). The plaintiff contended that their contract was entered into based on a mistake about whether such a plan would be delivered (“error,” under the applicable Louisiana law), and the Court disagreed, characterizing the situation as a “mistaken prediction” that would not allow the contract to be voided. Id. at 9. As to the contract itself, the Court found particularly persuasive a disclaimer that said the insurance company would “operate[] solely in the capacity of a product provider . . . .” Id. at 10.
In an insurance coverage case that is also a careful review of basic contract interpretation principles, the Court determined that a decedent was “legally intoxicated” and thus fell within a policy exclusion. Likens v. Hartford Life, No. 11-20653 (July 19, 2012). Recognizing that some authority requires a “legal intoxication” exclusion to involve a criminal act, the Court disagreed with those cases, reviewing comparable terms elsewhere in Texas law, as well as a line of admiralty authority.
In the context of a denial of en banc rehearing, a concurring and dissenting opinion disputed whether an issue of charge error in an employment case had been preserved below. Nassar v. UT Southwestern Medical Center, No. 11-10338 (July 19, 2012). The exchange echoes a similar one in the recent en banc case of Jimenez v. Wood County, 660 F.3d 841 (5th Cir. 2011).
In GuideOne Specialty Mutual Ins. Co. v. Missionary Church, a coverage case arising from a car accident by church workers on a lunch break, the Court reversed on the duty to defend, disagreeing with the district court’s decision to consider evidence about the state tort litigation as inconsistent with Texas’s “eight corners” rule. No. 11-10894 (July 17, 2012), op. at 9-12. Under that rule, the pleadings about the driver’s status and activities could potentially trigger coverage, creating a duty to defend. Id. at 13. The Court declined to apply a “very narrow’ exception that could apply if a coverage issue did not “overlap with the merits of or engage the truth” of the facts of the case. Id. at 14 (citing GuideOne Elite v. Fielder Road Baptist Church, 197 S.W.3d 305 (Tex. 2006)). The Court ended by reversing an injunction against state proceedings about the accident, citing general cases about the scope of declaratory judgment actions and noting that the “relitigation exception” to the Anti-Injunction Act did not apply. Id. at 15-16.
The confirmation of an arbitration award in a construction dispute was affirmed in Petrofac, Inc. v. DynMcDermott Petroleum Operations Co., No. 11-20141 (July 17, 2012). The Court found: (1) that the arbitrator had authority, based on the parties’ agreement to AAA rules, to determine whether a particular damages issue was arbitrable; (2) the award was not procured by fraud, rejecting an argument that the claimant’s damage calculation involved a “bait-and-switch” that pretended to abandon one theory; and (3) the district court properly awarded prejudgment interest, particularly in light of the arbitration panel creating “a thirty-day interest-free window from the date of the award” for payment.
McMurray v. ProCollect, Inc. involved a claim that a debt collector’s demand letter contained language that was inconsistent with, and that also overshadowed, the required notice required by 15 U.S.C. section 1692g(a), the Fair Debt Collection Practices Act. No. 11-20141 (July 17, 2012). As to the claim of inconsistency, the Court found no violation because the letter did not contain a deadline for payment that conflicted with the 30-day contest period in the FDCPA. Op. at 7. As to the claim of overshadowing, the Court found that the letter simply encouraged payment and did not make threats, and did not use fonts or spacing to minimize the effect of the statutorily-required notice. Op. at 8. On both claims, the Court reviewed the letter through the lens of an “unsophisticated consumer standard.” Op. at 5.
The plaintiff’s counsel in Mick Haig Productions v. Does 1-670 served subpoenas on Internet service providers (ISPs) about the alleged wrongful download of pornographic material. No. 11-10977 (July 12, 2012). The district court found that the subpoenas violated orders that it had made to manage discovery, and imposed significant monetary and other sanctions on the lawyer. Op. at 4-5. The Fifth Circuit found that all of the lawyer’s appellate challenges were waived — either because they were not raised below, or were raised only in an untimely motion to stay filed after the notice of appeal, and thus were waived. Id. at 5. The Court declined to apply a “miscarriage of justice” exception to the standard waiver rules, stating that the lawyer’s actions were “an attempt to repeat his strategy of . . . shaming or intimidating [the Does] into settling . . . .” Id. at 6.
In the case of Downhole Navigator LLC v. Nautilus Insurance, an insured retained independent counsel after receiving a reservation of rights letter from its insurer, arguing that the insurer’s chosen counsel had a conflict at that point. 686 F.2d 325 (5th Cir. 2012). Applying Northern County Mutual v. Davalos, 140 S.W.3d 685 (Tex. 2004), the Court found no conflict because “‘the facts to be adjudicated’ in the underlying . . . litigation are not the same ‘facts upon which coverage depends.'” The Court did not see the recent case of Unauthorized Practice of Law Committee v. American Home Assurance Co., 261 S.W.2d 24 (Tex. 2008), which dealt with the responsibilities of insurers’ staff attorneys who defend a claim for an insured, as changing the basic analysis under Texas law.
While resolving an issue of Mississippi state property law, the Court provides a good example of an “Erie guess” involving canons of statutory interpretation in Marlow LLC v. BellSouth Telecommunications, No. 11-60394 (June 27, 2012).
In Smith & Fuller, P.A. v. Cooper Tire & Rubber Co., a law firm had inadvertently distributed documents, designated as confidential under a Rule 26(c) protetive order, during a conference of personal injury lawyers. No. 11-20557 (June 21, 2012). Pursuant to Fed. R. Civ. P. 37(b)(2)(C), the Court ordered the firm to reimburse Cooper for its fees and expenses incurred in rectifying the situation. The Court found that the protective order was an “order to provide or permit discovery” as defined by Rule 37(b)(2), that the award was justified with “specific and well-reasoned grounds . . . that any lesser penalty would not have been an adequate future deterrent,” and that the affidavits of counsel were suficient to establish the amount awarded. The Court noted that the firm had previously been sanctioned for another violation of a protective order involving Coooper. Op. at 3 n.2 & 10.
The Court reviewed several Daubert rulings in the toxic tort case of Johnson v. Arkema, Inc., No. 11-50193 (June 20, 2012). Under an abuse-of-discretion standard, it affirmed the exclusion of experts based on weaknesses in reliance upon (1) analysis of whether the materials at issue belonged to a “class of chemicals” known to cause disease; (2) state and federal exposure guidelines; (3) animal studies; and (4) the “temporal connection” between exposure and illness. Op. at at 8-20. The Court then affirmed the exclusion of an opinion based on a “differential diagnosis,” concluding that it was based on an unreliable presumption about general causation. Id. at 22. The Court concluded by reversing on a causation issue that did not require expert testimony, finding that the temporal connection between exposure and certain chronic injuries was close enough to allow trial — while also finding that the connection was to attenuated as to related chronic injuries. Id. at 26. A dissent took issue with the majority’s reasoning as to one well-credentialed toxicology expert. Id. at 29.
The Court adddressed the contractual liability exclusion in a Texas CGL policy in the case of Ewing Construction v. Amerisure Insurance, No. 11-40512 (June 15, 2012). The Court applied the “plain language of the exclusion,” guided by Gilbert Texas Construction LP v. Underwriters at Lloyd’s London, 327 S.W.3d 118 (Tex. 2010), and concluded that it reached a contractual commitment to complete a construction project. Op. at 8. The Court then examined whether an exception applied for liability that would exist even without the contract, and concluded that there was no such liability under Texas’s “con-tort” cases. Id. at 9 (quoting Southwestern Bell v. DeLanney, 809 S.W.2d 493 (Tex. 1991). The Court concluded by deferring the issue of the duty to indemnify, and acknowledging a point raised by the dissent about overlap between the “contract” and “your work” exclusions in a typical CGL contract. Id. at 10.
The bankruptcy case of Bandi v. Becnel involved a dispute as to whether a debt was nondischargeable because it arose from fraud, or whether it fell within an exception for statements about “financial condition” in 11 U.S.C. § 523(a)(2)). No. 11-30654 (June 12, 2012). The Court found that the phrase “financial condition” should be construed “to connote the overall net worth” of the debtor, and thus did not include “[a] representation that one owns a particular residence or a particular commercial property” because the property could be subject to liens or other liabilities. Op. at 8. The Court reviewed a substantial body of law from its prior opinions, other Circuits, and the Supreme Court about the intricacies of this statute and other related provisions of the Bankruptcy Code.
In Greenwood 950 LLC v. Chesapeake Louisiana LP, the Court found an ambiguity in a Louisiana mineral lease, seeing two reasonable ways to harmonize clauses about obligations to “repair all surface damages” and “pay . . . all damages.” No. 11-30436 (June 12, 2012) at 5-7 (emphasis added). On the threshold Erie issue, the Court reminded: “[W]e look first and foremost ‘to the final decisions of Louisiana’s highest court’ rather than this Court’s prior applications of Louisiana law.” Op. at 4 n.11 (quoting Holt v. State Farm, 627 F.3d 188, 191 (5th Cir. 2010)).
Mid-Continent Casualty v. Davis presented an insurance coverage dispute about a wrongful death claim by a construction worker. No. 11-10142 (June 8, 2012). Coverage turned on whether the worker was an employee or an independent contractor. Applying the five-factor test from Limestone Products Distribution v. McNamara, 71 S.W.3d 308 (Tex. 2002), the Court affirmed a finding that the worker was an independent contractor. Key facts were that the worker provided his own tools and supplies, largely controlled his own schedule and tasks, and was provided a 1099 rather than a W-2. Op. at 13-14.
The Court briefly revisited personal jurisdiction in an unpublished opinion, ITL International v. Cafe Soluble, S.A., No. 11-60360 (rev’d June 7, 2012). The case arose from a dispute between Mars, Inc. and a Latin American distributor, closely related to the dispute at issue in the recent case of ITL International v. Costenla, S.A. The Court followed the same analytical framework, finding that the defendant’s contacts with Mississippi were not sufficiently related to the dispute to create jurisdiction. It concluded by reminding that a dismissal for lack of personal jurisdiction should be without prejudice because it is not on the merits.
Environmental groups challenged several plans approved by the Department of the Interior for oil exploration and development in the Gulf of Mexico after the Deepwater Horizon accident. In a group of consolidated cases, the Fifth Circuit dismissed the challenges on procedural grounds. See, e.g., Gulf Restoration Network v. Salazar, No. 10-60411 (May 30, 2012). Among other holdings, the Court found that the groups had standing as organizations to sue, op. at 8-10, and that case law about the effect of an agency’s allegedly “illegal [and] clandestine” internal policies did not excuse the groups’ failure to exhaust administrative remedies here. Op. at 29.
In Continental Casualty v. North American Capacity Ins. Co., the district court required three primary carriers to split defense costs, while not allowing the excess insurer to recover defense costs from the primaries. No. 10-20262 (May 30, 2012). The Fifth Circuit affirmed on the cost-splitting issue, after careful review of the policies’ coverage triggers, scope, and “other insurance” clauses. Op. at 15-20. The Court reversed as to the excess carrier, finding it had a right of contractual subrogation, and distinguishing Mid-Continent Insurance v. Liberty Mutual, 236 S.W.3d 765 (Tex. 2007).
In Illinois Central Railroad Co. v. Guy, the Court reviewed a jury verdict that two lawyers had improperly induced a railroad into settling asbestos exposure claims. No. 10-61006 (May 29, 2012). The Court rejected jurisdictional challenges that were based on the Rooker-Feldman and Burford doctrines, finding sufficient distance between the facts of the case and the underlying state court proceedings. Op. at 14, 16. The Court also found sufficient evidence of affirmative acts of concealment, and due diligence by the railroad, to toll limitations, Op. at 20, although a dissent argued otherwise. Op. at 27 (“I would reverse because doing nothing is not due diligence.”). The Court rejected a waiver defense, distinguishing the defendants’ cases as arising when a fraud plaintiff accepted a benefit after it knew or should have known of fraudulent inducement. Op. at 25.
In a significant case applying Stolt-Nielsen S.A. v. AnimalFeeds International Corp., 130 S. Ct. 1758 (2010), the Court vacated a class arbitration award as exceeding the arbitrator’s authority. Reed v. Florida Metropolitan University, No. 11-50509 (May 18, 2012). The Court found that the “any dispute” and “any remedy” clauses in the parties’ agreement did not authorise class arbitration, acknowledging a different conclusion by the Second Circuit in Jock v. Sterling Jewelers, Inc., 646 F.3d 113 (2011). Op. at 19-22. Before reaching that result, the Court reviewed the applicable AAA rules and concluded that they allowed the threshold matter of class arbitration to be reviewed by the arbitrator. Id. at 8.
The plaintiff in Patrick v. Wal-Mart alleged: “Defendants have engaged in a continuing pattern of bad faith . . . [and] have among other things, unreasonably delayed and/or denied authorization and/or payment of reasonable, neceessary and worker’s comp related medical treatment, as well as permanent indemnity benefits, as ordered by [the state agency].” No. 11-60217 at 11-12 (May 17, 2012). The Court found that this allegation “invokes three potentially cognizable theories of liability,” but was “devoid of facts to make it plausible” under Twombly — the pleading “fails to identify the specific time or nature of such wrongs . . . [and] does not identify by date or amount or type of service, any of the alleged bad-faith denials and delays . . . .” Id. It found no abuse of discretion in not allowing further amendment, noting “repeated failure[s] to cure deficiencies . . . .” Id. at 12-13 (quoting United States v. Humana Health Plan, 336 F.3d 375, 387 (5th Cir. 2003)).
The plaintiff in Bowlby v. City of Aberdeen alleged a denial of procedural due process and equal protection rights as to the handling of her license to run a snow cone stand in a particular location. No. 11-60279 (May 14, 2012). The Court applied Twombly and Iqbal to find that she had not stated an equal protection claim, reminding that a pleading should have “facial plausibility” from its “pleaded factual content” and not offer only “labels and conclusions or a “formulaic recitation of the elements of a cause of action.” Op. at 17 (noting “no allegations regarding the types of businesses . . . the size . . . where they are located, or what laws and regulations they have violated”). The Court found an actionable due process issue and rejected a challenge to its ripeness, both under a specialized test for constitutional claims and under “general ripeness principles.” Id. at 14-15 (requiring a claim “fit for judicial decision” as to which delay “would cause . . . further hardship”).
From the first third of 2012, here are 5 commercial litigation cases from the U.S. Court of Appeals for the Fifth Circuit worth knowing:
1. Unenforceable arbitration clause. A clause in an employee manual, which could be amended by giving appropriate notice, was illusory and not enforceable. Carey v. 24 Hour Fitness, 669 F.3d 202 (5th Cir. 2012).
2. Personal jurisdiction. The defendant’s 55 transactions in Mississippi were not sufficiently related to the claim to create personal jurisdiction. This was the Circuit’s first jurisdiction case since two major Supreme Court cases in 2011. ITL International, Inc. v. Sonstenla, S.A., 669 F.3d 493 (5th Cir. 2012).
3. Sufficient causation evidence. A thorough opinion finds that expert testimony was not needed in a personal injury case, but even then, the evidence of causation was not sufficient. Huffman v. Union Pacific Railroad, 675 F.3d 412 (5th Cir. 2012).
4. Business Torts Damages 101. The defendants’ acts were not actionable in fraud, did not amount to fraudulent inducement, but did support liability for misappropriation of trade secrets. Bohnsack v. Varco, 668 F.3d 262 (5th Cir. 2012).
5. Statute of Frauds 101. Sufficient evidence to satisfy the Statute of Frauds is different than what may establish contract liability. Preston Exploration Co. v. GSF, LLC, 669 F.3d 518 (5th Cir. 2012).
The Court will rehear en banc the case of Access Mediquip v. United Healthcare, decided by the panel earlier this year, which presents a sophisticated question about when ERISA preempts certain misrepresentation claims.
The unpublished case of Stanwood Boom Works LLC v. BP Exploration & Production Inc., in the context of affirming summary judgment for the defendant in a contract case, gives a thorough summary of “black letter” Texas law about contract formation, as well as the related situation of negotiations that are too tentative to create promissory estoppel. No. 11-20511 (April 25, 2012).
In Grissom v. Liberty Mutual, the trial court awarded $212,000 in damages for negligent misrepresentation, based on the difference between the coverage a homeowner actually had at the time of Hurricane Katrina, and the coverage he could have had under a “preferred risk policy.” No. 11-60260 (April 23, 2012). The Fifth Circuit reversed on preemption issues unique to flood insurance as well as the viability of the claim itself, stating: “Because Liberty Mutual was not offering insurance advice, was not a fiduciary of Grissom, and did not offer any statement to Grissom to imply the lack of alternative insurance options, Mississippi law would not recognize negligent misrepresentation as a cause of action against Liberty Mutual . . . .” Op. at 9-10.
