The London Underground reminds its riders to “Mind the Gap” so they do not trip when entering or exiting a train. The Fifth Circuit’s new typography places a notable gap between paragraphs and footnotes. While this sort of line-spacing does not have a technical label like “kerning,” it is nevertheless an important part of the overall look and feel of a piece of legal writing. What are your thoughts on inter-paragraph line spacing?
The long-running litigation about 3D printed firearms (to the right, the single-shot “Liberator” returned to the Fifth Circuit in Defense Distributed v. Grewal, in which a manufacturer sought relief in Texas from the New Jersey AG. The Court found personal jurisdiction in Texas, noting: “Grewal’s conduct beyond sending the cease-and desist letter confirms his intent to crush Defense Distributed’s operations and not simply limit the dissemination of digital files in New Jersey. Grewal’s enforcement actions are selective. He has not targeted the many similarly-situated persons who publish Defense Distributed’s files on the internet. Instead, he has focused solely on Defense Distributed.” No. 19-50723 (Aug. 19, 2020) (distinguishing Stroman Realty, Inc. v. Wercincki, 513 F.3d 476 (5th Cir. 2008).
After reviewing comparable ethical rules nationwide, the Fifth Circuit held that under the Louisiana attorney-conduct rules: “[A] contingency fee arrangement resulting in an attorney owning part of the client’s business is a business transaction under Rule 1.8(a). Because the terms of the 2013 CFA give the Firms an ownership interest in LTSG, Rule 1.8(a) applies, and the Firms were required to advise Fox to seek the advice of independent counsel. Fox did not have to take this advice, but the Firms were obligated to give it. Thus, the 2013 CFA is void.” Wiener, Weiss, & Madison v. Fox, No. 19-30688 (Aug. 21, 2020).
In the early 1900s, railroad shareholders sued Minnesota’s Attorney General, the spectacularly-mustachioed Edward Young (right), to enjoin the enforcement of price limitations; the Supreme Court found that their request for injunctive relief did not violate the Eleventh Amendment. Ex parte Young, 209 U.S. 123 (1908). It is easier to state the rule of Young than apply it, however, especially in often-complex jurisdictional situations.
Green Valley Special Utility District v. City of Schertz presented an arcane regulatory dispute about “two orders of the Texas Public Utility Commission decertifying territory from the certificate of convenience and necessity issued to [Green Valley] for sewer (wastewater) service.” (cleaned up). Resolution of that dispute required en banc review, and produced a lead opinion with a two-page summary of the Court’s holdings, along with four concurrences on Young and the statutory-interpretation issue in the case. No. 18-51092 (Aug. 7, 2020).
Sanchez v. Smart Fabricators, No. 19-20506 (Aug. 14, 2020), held that Sanchez was a Jones Act seaman. All three judges specially concurred in the result, observing:
Two causes of action under Texas law, frequently asserted but rarely tried, were rejected by the Fifth Circuit in BBX Operating v. Bank of America, No. 19-11050 (Aug. 11, 2020, unpublished):
A notable feature of the Fifth Circuit’s new typography is the amount of kerning (spacing between of letters) in certain elements of an opinion’s first page. (And for those who are 
weary of the “cases in footnotes,” “1-space, 2-space,” or “anything but Times New Roman” topics, kerning offers an entirely new topic of discussion.) What are your thoughts on appellate kerning?
“Applying Skidmore, we ask whether EPA’s interpretation of Title V in the Hunter Order is persuasive. Specifically, we inquire into the persuasiveness of EPA’s current view that the Title V permitting process does not require substantive reevaluation of the underlying Title I preconstruction permits applicable to a pollution source. As we read it, the Hunter Order defends the agency’s interpretation based principally on Title V’s text, Title V’s structure and purpose, and the structure of the Act as a whole. Having examined these reasons and found them persuasive, we conclude that EPA’s current approach to Title V merits Skidmore deference.” Environmental Integrity Project v. EPA, No. 18-60384 (Aug. 13, 2020) (emphasis added).
My newest Coale Mind podcast episode looks forward to this fall, when the Supreme Court will consider two decisions by the en banc (full) U.S. Court of Appeals for the Fifth Circuit, the federal appellate court for Texas.
In the first, California v. Texas, a Fifth Circuit panel found that the individual mandate of the Affordable Care Act was unconstitutional after the repeal of the relevant tax, and the en banc court denied review in a close vote. In the second, Collins v. Mnuchin, the en banc Fifth Circuit found that Fannie Mae’s regulator was structured unconstitutionally.
These cases, important in their own right, also reflect a fascinating encounter between two “conservative” federal courts. Will the Fifth Circuit, widely seen as a particularly conservative court after President Trump’s many appointments, be seen by the Roberts Court as having gone too far? Or will the two courts by “in synch” with each other on these important constitutional issues?
In Six Dimensions, Inc. v. Perficient, Inc., the Fifth Circuit concluded that under California noncompete law, the parties’ “2014 Agreement” was unenforceable. A key question was whether their “2015 Agreement” was also subject to that conclusion, or whether it was separate and the arguments against it had been waived in the trial court. The Court found no waiver, concluding that the below language was insufficient notice that the plaintiff was seeking summary judgment about that contract.
“Defendant argues that Brading was permitted to engage in this wrongful conduct because the contract that she signed, contained a provision that is not allowed under California law. Defendant argues that even though the Amended Complaint does not accuse Brading of breaching the non-competition portion of the 2014 Agreement [Dkt 10-2], that its presence in the 2014 Agreement invalidates that agreement. Texas has no such provision. It is respectfully submitted, as asserted in the Complaint, that the law of Texas applies and as such, the 2014 Agreement is clearly breached by Brading’s undisputed conduct in violating both portions of the 2014 Agreement. Further, there is no noncompetition portion for the Termination Certification signed by Brading in June of 2015 and as such, under the law of either State, Brading is responsible for violating the 2015 Agreement.”
No. 19-20505 (Aug. 7, 2020) (emphasis added).
The Fifth Circuit found it was an abuse of discretion to not reform a noncompetition agreement at the preliminary-injunction stage, rejecting the argument that reformation “is a remedy to be granted at a final hearing, whether on the merits or by summary judgment, not as interim relief.” The Court held: “This argument runs against the clear majority practice of Texas courts, which have on many occasions reformed contracts for the purposes of granting interim relief. The Texas case that has most thoroughly considered the question has rejected the argument Calhoun makes here, finding that reformation ‘is not only a final remedy’ and may be made ‘as an incident to the granting of injunctive relief.'” Calhoun v. Jack Doheney Cos., No. 20-20068 (Aug. 7, 2020).
“The Texas Supreme Court has held that a Texas court of civil appeals does not have jurisdiction to initiate an award of appellate attorneys’ fees because ‘the award of any attorney fee is a fact issue which must [first] be passed upon the trial court.’” In Texas state courts, requesting appellate fees at the original trial is a placeholder requirement to ensure the state trial courts maintain jurisdiction over the issue. Those are procedural rules that do not apply in federal court. Our local rules provide for appellate litigants to petition this court for. Local Rule 47.8 does not require a party seeking appellate attorneys’ fees to first request appellate attorneys’ fees in the district court as a placeholder.” Atom Instrument Corp. v. Petroleum Analyzer Co., No. 19-20151 (Aug. 7, 2020) (citations omitted).
The ABA House of Delegates has recently adopted a comprehensive set of best practices for litigation funding–an important topic in modern law practice.
OSHA regulations have an exemption for “diving performed solely as a necessary part of a scientific, research, or educational activity by employees whose sole purpose for diving is to perform scientific research tasks. Scientific diving does not include performing any tasks usually associated with commercial diving such as: Placing or removing heavy objects underwater; inspection of pipelines and similar objects; construction; demolition; cutting or welding; or the use of explosives.”
OSHA concluded that the divers who clean the tanks at the Houston Aquarium were not “scientific divers” under this regulation; the Fifth Circuit saw otherwise: “The divers are engaged in a ‘studious … examination’ and ‘detailed study’ when they observe the animals for abnormalities, and when they work to keep the animals in the Aquarium alive, healthy, and breeding. That an organization collaborates among employees and engages in verbal communication does not mean that the examination and study of the animals in the tanks is not ‘studious’ or ‘detailed.’ Nothing about the feeding and cleaning dives renders the information that the trained scientists performing the dives gather during these dives outside of the definition of ‘research.’” Houston Aquarium, Inc. v. OSHRC, No. 19-60245 (July 15, 2020).
Many forum-selection disputes, particularly about arbitration clauses, turn on whether the parties’ contract incorporates another document. A variation on this common fact pattern appeared in Sierra Frac Sand v. CDE Global, No. 19-40489 (May 26, 2020),”Sierra concedes that some document was incorporated into the contract. Indeed, by making the agreement ‘subject to’ the ‘Standard Terms and Conditions of Sale” that were available on request, the contract explicitly refers to another document. The question for us is whether the document titled ‘CDE General Conditions – June 2016’ is the incorporated document.”
The answer was “yes,” given evidence that:
No. 19-40489 (May 26, 2020).
Ecclesiastes 3:1-8 instructs: “For everything there is a season, and a time for every [a]purpose under heaven: a time to be born, and a time to die; a time to plant, and a time to pluck up that which is planted,” and so forth. McRaney v. North American Board of the Southern Baptist Convention instructs: “At this early stage of the litigation, it is not clear that any of these [necessary] determinations will require the court to address purely ecclesiastical
questions. McRaney is not challenging the termination of his employment, and he is not asking the court to
weigh in on issues of faith or doctrine[.] His complaint asks the court to apply neutral principles of tort law
to a case that, on the face of the complaint, involves a civil rather than religious dispute.” (citations omitted).
Acknowledging the Supreme Court’s recent reminder that “[t]he First Amendment protects the right of religious institutions ‘to decide for themselves, free from state interference, matters of church government as well as those of faith and doctrine,” the Court held: “At this time, it is not certain that resolution of McRaney’s claims will require the court to interfere with matters of church government, matters of faith, or matters of doctrine. The district court’s dismissal was premature.” No. 19-60293 (July 16, 2020).
The parties’ arbitration agreement adopted certain AAA rules; among them, Rule 52(e) says: “Parties to an arbitration under these rules may not call the arbitrator . . . as a witness in litigation or any other proceeding relating to the arbitration” and that an arbitrator is “not competent to testify as [a] witness[] in such proceeding.”
The appellant in Vantage Deepwater Co. v. Petrobras, facing an award of close to $700 million, sought the deposition of the dissenter on a 3-judge panel, noting his unusual statement that “the entire arbitration, ‘the prehearing, hearing, and posthearing processes,’ denied Petrobras ‘fundamental fairness and due process protections.'”
The Fifth Circuit held otherwise: “We have not discovered any court of appeals decision holding that a district court abused its discretion in denying discovery from an arbitrator about the substance of the award. We see nothing in this record to cause us to be the first.” No. 19-20435 (July 16, 2020).
“Jackson [National Life]’s objection to personal jurisdiction concerned only class members who were non-residents of Texas. Those members, however, were not yet before the court when Jackson filed its Rule 12 motions. What brings putative class members before the court is certification: ‘Certification of a class is the critical act which reifies the unnamed class members and, critically, renders them subject to the court’s power.’ When Jackson filed its pre-certification Rule 12 motions, however, the only live claims belonged to the named plaintiffs, all Texas residents as to whom Jackson conceded personal jurisdiction.” Accordingly, Jackson did not waive the issue of personal jurisdiction by raising it in the proceedings about certification. Cruson v. Jackson National Life, No. 18-40605 (March 25, 2020).
For insurance-coverage lawyers, State Farm Lloyds v. Richards represents another case in which the Fifth Circuit concludes that “the eight-corners rule applies here; the ‘very narrow exception’ does not,” and then finds that the relevant pleading “contains
allegations within its four corners that potentially constitute a claim within the four corners of the policy.” No. 18-10721 (July 19, 2020).
For fans of legal typography, State Farm Lloyds represents a daring new look – stylish, yet readable!
Please check out my new podcast, Coale Mind, where once a week I talk about constitutional and other legal issues of the day. This forum lets me get into more detail than other media appearances, while also approaching issue from a less technical perspective than blogging and other professional writing. I hope you enjoy it and choose to subscribe! Available on Spotify, Apple, and other such services.
Wilson, a trustee of Houston’s community-college system, alleged that his censure by the board was done in retaliation for his exercise of First Amendment rights. A panel found that he had stated a claim that was sufficient to survive a Rule 12 challenge:
The above [Circuit] precedent establishes that a reprimand against an elected official for speech addressing a matter of public concern is an actionable First Amendment claim under § 1983. Here, the Board’s censure of Wilson specifically noted it was punishing him for “criticizing other Board members for taking positions that differ from his own” concerning the Qatar campus, including robocalls, local press interviews, and a website. The censure also punished Wilson for filing suit alleging the Board was violating its bylaws. As we have previously held, “[R]eporting municipal corruption undoubtedly constitutes speech on a matter of public concern.” Therefore, we hold that Wilson has stated a claim against HCC under § 1983 in alleging that its Board violated his First Amendment right to free speech when it publicly censured him.
Wilson v. Houston Community College System, 955 F.3d 490 (5th Cir. 2020) (footnote omitted). A vote to take the case en banc produced an 8-8 tie, with these votes (Senior Judge Eugene Davis, who wrote the panel opinion, was not part of the en banc vote):
An alleged tortfeasor, earlier named as a party in a case, settled with the plaintiff. The plaintiff sought to submit a conspiracy count related to that party, and the Fifth Circuit agreed: “The alleged co-conspirator need not actually face liability. … [A]settlement in general does not prevent submitting to the jury questions about that party’s conduct (only pursuing an actual judgment against the settling party). Therefore, we conclude that Phadia’s settlement had no bearing on the Plaintiffs’ ability to prove a civil conspiracy case against the Defendants based on an underlying tort committed by Phadia.” United Biologics v. Allergy & Asthma Network, No. 19-50257 (June 24, 2020) (unpublished).
The parties in Acadian Diagnostic Laboratories v. Quality Toxicology, LLC disputed what the phrase “customary billing practices” meant in their contract. QT argued that it meant “the billing practices that [Acadian] habitually or usually used with its customers in general,” while Acadian “asserts that it agreed to use the billing practices that it habitually or usually used with QT.” The Fifth Circuit resolved this dispute by reference to the parties’ performance, finding that “the record is entirely one-sided,” and that Acadian’s interpretation was consistent with the parties’ performance both before and after the formatoin of their contract. No. 19-30320 (July 13, 2020).
Soren Kierkegaard wondered, “What is the Absurd?” Contemporary artist Michael Cheval creates thought-provoking works of absurdist art (to the right, “Echo of Misconception” (2015)). And the Fifth Circuit plumbed the meaning of the absurd in Geovera Specialty Ins. Co. v. Joachin, No. 19-30604 (July 6, 2020), in a coverage dispute about a homeowners’ insurance policy, bserving: “Absurdity requires a result ‘that no reasonable person could approve.’ An insurance policy is thus absurd if it ‘exclude[s] all coverage’ from the outset. So is one that broadly excludes coverage without reasonable limitations. But the GeoVera policy is not absurd on its face. The policy makes perfect sense for a homeowner who purchases it while already living in the home.” No. 19-30605 (July 6, 2020) (citations omitted).
In Williams v. MMO Behavioral Health Systems, the Fifth Circuit affirmed a $244,000 judgment for defamation, entered after a jury trial. Good record keeping often benefits defendants in employment-related litigation, but in this case it helped the plaintiff on a key issue:
Before MMO had published the statement to the [Louisiana Workforce Commission], Williams had informed MMO that she did not falsify her timecard. This should have led MMO to examine Williams’s timecard. If MMO had done so, it would have discovered that even though Williams regularly clocked in every day, the timecard facially showed that someone else clocked in Williams on July 5th. This fact indicates that MMO should have known that Williams was not the one falsifying her timecard. The times for which Williams was clocked in on July 5th were also not her normal working hours, further suggesting that Williams was not the one to clock in on July 5th. Moreover, Williams did not fill out a missed-clock-punch form, which would have been necessary to allow someone else to clock her in or out, suggesting that Williams was not even involved with this July 5th clocking in and out.
No. 19-30757 (July 9, 2020) (unpublished).
The trap: “The Funds sought to render an interlocutory decision appealable by dismissing at least one defendant without prejudice. And under [Williams v. Seidenbach, 958 F.3d 341, 369 (5th Cir. 2020) (en banc)], that means—absent some further act like a Rule 54(b) certification—there is no final, appealable decision.”
The hint: “Because the dismissal without prejudice in this case occurred after the order the Funds seek to appeal, we do not decide how Williams . . . would apply where the dismissal occurred before the adverse, interlocutory order. See Schoenfeld v. Babbitt 168 F.3d 1257, 1265–66 (11th Cir. 1999) (concluding that there was a final decision in such a case).”
Firefighters’ Retirement System v. Citco Group Ltd., No. 19-30165 (July 7, 2020).
After the plaintiff voluntarily dismissed the federal securities claims that justified removal, the district court retained jurisdiction over the case based on supplemental jurisdiction and granted a motion to compel arbitration. The Fifth Circuit rejected the supplemental-jurisdiction argument and vacated the motion to compel: “All of SJAP’s claims against Cigna arise from or concern the In-Network Agreement and the resulting business relationship. SJAP’s federal claim against the Insight Defendants, by contrast, was based on SJAP’s purchase of securities from Insight as part of the Lab Operating Agreement, a completely separate contract that had nothing to do with Cigna that was consummated several years before the events giving rise to SJAP’s claims against Cigna. Other than SJAP’s vague assertion that Insight and the Cigna Affiliates previously ‘had a lengthy and sordid relationship’ that resulted in an undisclosed settlement agreement, the operative complaint when the case was removed demonstrated no connection between Cigna and the Insight controversy, let alone the specific federal security claim that conferred original jurisdiction on the district court.” SJ Associated Pathologists v. Cigna Healthcare of Texas, No. 20-20188 (July 6, 2020) (emphasis added).
Digidrill sued for unjust enrichment, “alleging [that] Petrolink hacked into its software at various oil drilling sites in order to ‘scrape’ valuable drilling data in real time.” The Fifth Circuit held: “Digirill’s claim is not preempted by copyright because—like the claim in GlobeRanger—it requires establishing that Petrolink engaged in wrongful conduct beyond mere reproduction: namely, the taking of an undue advantage. Under Texas law an unjust enrichment claim requires showing that one party ‘has obtained a benefit from another by fraud, duress, or the taking of an undue advantage.’ Digidrill … contends Petrolink obtained a benefit by taking undue advantage when it surreptitiously installed [certain software]. This is the claim Digidrill put to the jury. Like the alleged misappropriation-of-trade-secrets claim in GlobeRanger, which required establishing improper means or breach of a confidential relationship, Digidrill’s alleged unjust enrichment claim requires establishing wrongful conduct—i.e., inducing the MWD
companies to violate the express terms of their DataLogger licenses—that goes
beyond mere copying.” Digital Drilling Data Sysems LLC v. Petrolink Servcs., Inc., No. 19-20116 (July 2, 2020) (footnote omitted, emphasis added). The Court noted that a different type of unjust-enrichment claim could potentially lead to a different result.
When not engaged in good-natured banter about typeface or proper spacing after periods, the appellate community often argues about the right place to put citations to authority. The traditional approach places them “inline,” along with the text of the legal argument. A contrarian viewpoint, primarily advanced by Bryan Garner, argues that citations should be placed in footnotes.
Has modern technology provided a third path? Professor Rory Ryan of Baylor Law School advocates “fadecites,” reasoning:
A brief using this approach would look like this on a first read:
(A longer example is available on Professor Ryan’s Google Drive.) The reader can quickly skim over citations while reviewing the legal argument. Additionally, assuming that the court’s technology allows it, case citations can be arranged to become more visible if the reader wants to know more information. Modern .pdf technology allows a citation to become darker and more visible if the reader places the cursor on it. A hyperlink to the cited authority could also be made available.
This idea offers an ingenious solution to a recurring challenge in writing good, accessible briefs. I’d be interested in your thoughts and Professor Ryan would be as well.
A manufacturer of vaping liquid, invoking the structural limitations imposed on administrative agencies by the delegation doctrine, challenged the FDA’s power to regulate it. The Fifth Circuit observed: “The [Supreme] Court might well decide—perhaps soon—to reexamine or revive the nondelegation doctrine. But ‘[w]e are not supposed to . . . read tea leaves to predict where it might end up.'” (citation omitted). That observation was case-dispositive: “The [Supreme] Court has found only two delegations to be unconstitutional. Ever. And none in more than eighty years.” Under that precedent, Congress’s delegation of authority to the FDA in this area showed a “sufficiently intelligible principle,” constrained by Congress’s definition of “tobacco product,” and by Congress having “ma[de] many of the key regulatory decisions itself.” Big Time Vapes, Inc. v. Food & Drug Admin., No. 19-60921 (June 25, 2020).
Congratulations to Judge Cory Wilson of Mississippi, who was confirmed by the Senate yesterday as the newest member of the U.S. Court of Appeals for the Fifth Circuit.
A Texas business alleged that the CARES Act impermissibly discriminated against it as a bankruptcy debtor. The Fifth Circuit, citing its rule of orderliness, noted that it “has concluded that all injunctive relief directed at the [Small Business Administration] is absolutely prohibited.” Accordingly, “the bankruptcy court exceeded its authority when it issued an injunction against the SBA administrator … .” Hidalgo County Emergency Service Foundation v. Carranza, No. 20-40368 (June 22, 2020).
Hoover Panel Systems contracted with HAT Contract to design a component for office desks. The Fifth Circuit found their contract ambiguous, noting the tension between its introductory and first-numbered paragraphs. While both address confidentiality, the introduction is general and paragraph 1 describes a particular process:
“Both parties agree that all information disclosed to the other party, such as inventions, improvements, know-how, patent applications, specifications, drawings, sample products or prototypes,[]engineering data, processes, flow diagrams, software source code, business plans, product plans, customer lists, investor lists, and any other proprietary information shall be considered confidential and shall be retained in confidence by the other party.
1. Both parties agree to keep in confidence and not use for its or others benefit all information disclosed by the other party, which the disclosing party indicates is confidential or proprietary or marked with words of similar import (hereinafter INFORMATION). Such INFORMATION shall include information disclosed orally, which is reduced to writing within five (5) days of such oral disclosure and is marked as being confidential or proprietary or marked with words of similar import.”
The Court noted “[s]everal plausible interpretations” of these paragraphs:
Hoover Panel Systems, Inc. v. HAT Contract, Inc., No. 19-10650 (June 17, 2020).
In re Spiros Partners is the second recent mandamus opinion by the Fifth Circuit about notice in large collective actions under the Fair Labor Standards Act. The plaintiff–an exotic dancer with the stage name “Syn”–had an “Entertainer’s License Agreement” with an arbitration clause, the trial court entered an order about other parties and their agreements, and the Fifth Circuit held:
No. 20-50318 (June 19, 2020, unpublished).
“Mistah Kurtz — he dead.” Joseph Conrad, Heart of Darkness.
Spell v. Edwards presented a challenge to a COVID-19 restriction that became moot with the passage of time: “A Louisiana church and its pastor ask us enjoin stay-at-home orders restricting in-person church services to ten congregants. But there is nothing for us to enjoin. The challenged orders expired more than a month ago. That means this appeal and the related request for an injunction … are moot.” Notably, the restriction expired by its own terms, showing that it was not abandoned as a litigation tactic, and thus making inapplicable the “capable of repetition, yet evading review” exception to mootness. No. 20-30358 (June 18, 2020).
A recent article in the Baylor Law Review by Kylie Calabrese, a student of the able Rory Ryan at the Baylor Law School, provides a thorough and well-documented analysis of In re: JP Morgan Chase & Co., 915 F.3d 494 (5th Cir. 2019) and its implications for mandamus practice in the Fifth Circuit.
In In re Schlumberger Tech, Inc., the Fifth Circuit again held that mandamus relief can be necessary to remedy the erroneous production of privileged material. It found that no offensive-use waiver occurred when: “STC’s answer claimed only that it relied in good faith ‘on applicable law, administrative regulations, orders, interpretations and/or administrative practice or policy enforcement.’ STC did not claim that counsel advised it that its decisions complied with the FLSA. Indeed, its answer did not allude to advice of counsel at all. While privileged communications may have some bearing on STC’s beliefs about its compliance, STC has not ‘rel[ied] on attorney-client communications’ to establish its good-faith defense.” No. 20-30236 (June 4, 2020).
Last week, I noted the holding in Gulf Engineering Co. v. Dow Chemical Co. about the construction of the parties’ contract (Dow had the right, but not the obligation, to assign work to Gulf Engineering during the relevant period of time). Not surprisingly, this holding caused trouble for the plaintiff’s damages model:
“… The only evidence of how the details of daily or weekly assignments can be known is that Dow used oral and written communication that included the issuing of work orders and job schedules. What Gulf needed to offer were details about any assigned work. That would include evidence of such variables as the nature of the work, the number of employees needed, and the number of days needed to complete the work. In other words, what was needed in some form was evidence relevant to allow a calculation of what Dow would have paid and what Gulf’s expenses would have been, i.e., what Gulf’s profit would have been. Instead, the only evidence was an average from an historic time period, where all those variables were blended.
As we explained earlier, the evidence of any assigned work after the notice of termination barely suffices to show liability. For us then to allow the evidence offered of daily-average profits over one or five years to substitute for actual profits for actual assigned work is a bridge too far. …”
No. 19-30395 (June 9, 2020) (emphasis added).
The contract-interpretation question in Gulf Engineering Co. v. Dow Chemical Co. was whether, after giving notice of termination, Dow Chemical was obligated to provide work to Gulf Engineering for another 90 days, or whether Dow had the “right but no contracted-for obligation to continue assigning work to Gulf.”
The Fifth Circuit found that the contract unambiguously meant that Dow had the right but not the obligation to give work to Gulf, and that the trial court thus erred in denying Dow’s summary-judgment motion on that point. The Court further found that the district court “compounded the error” by instructing the jury that it had found the relevant contract term to be ambiguous. Nevertheless, the error was harmless because the trial court also gave an instruction about the contract that substantially agreed with Dow’s reading of it. No. 19-30395 (June 9, 2020).
Despite the complexity of a dispute about telecommunication regulations, the parties’ performance mattered: “Sprint and Verizon’s conduct, while certainly not dispositive, is nevertheless informative. Sprint and Verizon are among America’s largest IXCs and are sophisticated market participants. Yet, they waited more than eighteen years to object to the LECs’ access charges for intraMTA wireless-to-wireline calls, paying hundreds of millions of dollars in the process. Moreover, over that same timeframe, Sprint’s and Verizon’s LEC affiliates imposed access charges on IXCs, including on each other, for intraMTA wireless-to-wireline calls. We decline to award Sprint and Verizon, who sat on their hands for the better part of two decades, a nine-figure windfall based on an interpretation of § 251(g) that is divorced from both the 1996 Act’s text and industry practice.” No. 18-10768 (May 27, 2020). (LPCH was one of the counsel for the prevailing side of this case.)
Phoneternet complained that an inaccurate report available on Lexis-Nexis caused the loss of a business opportunity (oddly enough, with the car company Lexus). The Fifth Circuit affirmed, holding (among other matters) as to their negligent-misrepresentation and promissory-estoppel claims:
“If Phoneternet believed the errors had already been corrected, there would have been no reason for Phoneternet to repeatedly call LexisNexis. In that case, Phoneternet would be asking LexisNexis to correct already accurate information. Moreover, to the extent Phoneternet did rely on LexisNexis’s alleged statement that all fifteen errors in the report had been “modified . . . as requested,” such reliance cannot be considered reasonable and justified. Given the alleged importance of this report—the only remaining obstacle between Phoneternet and a lucrative multimillion-dollar contract with Toyota—Phoneternet should have at least confirmed that the errors had been corrected before blindly relying on LexisNexis’s representation.”
Phoneternet LLC v. Lexis-Nexis, No. 19-11194 (June 3, 2020) (unpublished) (emphasis added).
Hewlett-Packard proved $176 million in antitrust damages at trial (later trebled); the defendant argued that HP had not proved it was a direct purchaser of the optical drives at issue. The Fifth Circuit affirmed. On the two key points, it held:
Q. And so in a procurement event you have an ODD supplier and a purchaser, an entity that purchases. Did HP, Inc. . . . was that the purchaser in all of these procurement events that you have described?
A. It was some form of HP. I don’t know that it was HP, Inc., but it was a legal entity of HP, somewhere in the region that these were purchased, that purchased the drives.
Q. So the purchaser might not have been HP, Inc. at a particular procurement event? It might have been some subsidiary of HP, Inc.?
A. It could well have been, yes. . . . I’m not exactly sure on how that was spread out, but it could very well have been.
Hewlett-Packard Co. v. Quanta Storage, No. 19-20799 (June 5, 2020). A longer version of this post appears in the Texas Lawbook.
Here is the PowerPoint for my June 2 presentation to the DBA’s Appellate Law Section about Fifth Court commercial-litigation opinions over the last twelve months.
The Fifth Court rejected Burford abstention in Stratta v. Roe, observing: “Burford ‘does not require abstention whenever there exists [complex state administrative processes], or even in all cases where there is a potential for conflict with state regulatory law or policy.’ Nor would a federal judgment here interfere with the coherence of state policy. [Groundwater Conservation Districts] are designed to be decentralized and fragmentary in order to offer local control over groundwater resources. There are roughly 100 GCDs in Texas, but nearly two-thirds of them oversee territory coextensive with a single county.” No. 18-50994-CV (May 29, 2020) (citation omitted).
Recent orders about conducting trials during the pandemic highlight the different procedural structures of the state and federal courts.
In the state system, the Texas Supreme Court recently released its seventeenth emergency order about when and how jury trials may resume. (An order, incidentally, that I got from the txcourts.gov website, which shows progress in returning that site to normal after the recent hacker attack.)
In the federal system, the recent order in In re Tanner reminds of the considerable district court discretion about such matters: “[T]he district court has given great consideration to the COVID-19 issues addressed by Tanner. . . . [W]hatever each of us as judges might have done in the same circumstance is not the question. Instead, as cited below, the standards are much higher for evaluating the district court’s decision” for purposes of a writ of mandamus or prohibition. No. 20-10510 (May 29, 2020).
On June 2 at 2 PM, as a guest of the DBA’s Appellate Law Section, I’ll review several Dallas Court of Appeals opinions in commercial cases since June of last year, when I made a similar presentation. This one will be online, so please register in advance on the DBA’s website! The PowerPoint will be posted after the presentation.
The original party to an oilfield-services agreement assigned its rights to Motis Energy. Motis sued on the agreement, lost, and sought to avoid the agreement’s attorneys-fee provision. The Fifth Circuit ruled against it: “Motis is a nonparty to the Agreement. But Motis embraced the Agreement by seeking to enforce its terms. Motis’s argument–that it did not embrace the entirety of the Agreement because it was assigned the right to Motis-DI’s claims, not the entire contract–lacks merit. When a plaintiff sues to enforce a contract to which it was not a party, the Supreme Court of Texas has held, as have we, that the plaintiff subjects itself to the entirety of the contract terms.” Motis Energy LLC v. SWN Prod. Co. LLC, No. 19-20495 (April 28, 2020) (unpublished) (emphasis added).
Katherine P. v Humana Health Plan, an ERISA dispute about hospitalization to treat an eating disorder, turned on a specific criterion: whether “[t]reatment at a less intense level of care has been unsuccessful in controlling” the disorder. The Fifth Circuit found a fact issue, noting:
“[T]here is evidence in the administrative record that suggests Katherine P. satisfied that requirement. For example, in her last appeal Humana, Katherine P. provided a declaration describing her history of failed treatment. In it, she listed past failed treatment regimens, including outpatient treatment. Her mother likewise provided a declaration making essentially the same point. Furthermore, Katherine P.’s physicians said she was ‘unable to follow a weight gain meal plan and to abstain from symptoms of purging and restricting while she was at a lower level of care.’”
(citations omitted). The court also noted evidence cutting the other way:
Her same declaration, for example, shows that she participated in an eight-week intensive outpatient program in late 2010 that failed due to external trauma—not because the treatment was ineffective. And Humana noted that the 2010 treatment was her most recent course of treatment prior to her admittance to Oliver-Pyatt about a year and a half later. A factfinder could therefore conclude that Katherine P. failed to show that she met [the criterion].
Katherine P. v Humana Health Plan, No. 19-50276 (May 14, 2020).
The COVID-19 crisis has required the courts to deftly juggle conflicting, and important, interests when asked to review emergency regulation. A good summary of such a balancing exercise appears in First Pentecostal Church of Holly Springs v. City of Holly Springs: “Our sole appellate jurisdiction in this case rests upon denial of an injunction implied from the choice by the district court not to rule in an expedited fashion. After briefing, it remains plain that the court is being requested to enjoin a shifting regulatory regime not yet settled as to its regulation and regulatory effect, such as the apparent acceptance by the Church of the Governor’s regulations. That settlement is best made by the district court in the first instance. Lest we in error step upon treasured values of religious freedom and personal liberties we stay our hand and return this case to the district court for decision footed upon a record reflecting current conditions.” No. 20-60399 (May 22, 2020) (emphasis added).
I spoke today, virtually, to the Texas Bar CLE’s 33rd “Advanced Evidence and Discovery Course,” which would have been in San Antonio. My topic was proving up damages in a commercial case, and I focused on ten specific issues identified in recent Texas and Fifth Circuit cases. I also showed off some smooth hand gestures, as you can see above. Here is a copy of my PowerPoint. The Bar staff did a terrific job with the A/V logistics and I look forward to doing another program with them soon.
In long-running litigation about liability for hotel occupancy taxes, the Fifth Circuit’s prior mandate said that “plaintiff-appellee cross-appellant pay to defendants-appellants cross appellees the costs on appeal to be taxed by the Clerk of this Court.” The Court held that this language did not preclude the trial court clerk from assessing appropriate costs on remand pursuant to Fed. R. Civ. P. 39(e).
The Court also held: “The fact that the decretal language in the first appeal used the word ‘vacated’ instead of ‘reversed’ does not change this result. . . . While an argument can be made that ‘reversed’ might have been the better choice for the decretal language in the first appeal, what matters for purposes of Rule 39(a) is the substance of the disposition, not merely the form.” San Antonio v. Hotels.com, No. 19-50701 (May 11, 2020) (citations omitted, emphasis in original).
PRACTICE TIP: Fed. R. App. P. 39(e)(3) includes “premiums paid for a bond or other security to preserve rights pending appeal” as a taxable cost–in this litigation, a cost exceeding $2 million.
Despite the May 11 en banc opinion about the “finality trap,” the plaintiff in CBX Resources v. ACE Am. Ins. Co. remained stuck in the trap after dismissing certain of its claims – against the sole defendant – without prejudice: “To be sure, many cases applying the Ryan rule have multiple defendants, one or more of which was dismissed without prejudice while at least one defendant prevailed on the merits. But Ryan itself was an employment dispute with a single plaintiff suing a single defendant, his employer.” No. 18-50740 (May 12, 2020).
The “finality trap” can arise when a plaintiff sues two defendants and then (a) voluntarily dismisses one defendant without prejudice, and then (b) litigates to conclusion against the other and loses. The plaintiff’s ability to appeal the outcome of proceeding (b) is affected by the lack of a final judgment in proceeding (a), because under Fed. R. Civ. P. 54(b), there is not a final decision as to any one defendant until there is a final decision for all defendants
Williams v. Seidenbach found that entry of a partial final judgment under Rule 54(b) solved the plaintiffs’ problem in that case. (Judge Ho, joined by Chief Judge Owen and Judges Jones, Stewart, Dennis, Elrod, Haynes, Graves, Higginson, and Engelhardt).
A concurrence suggested that future litigants consider “bindingly disclaiming their right to reassert any dismissed-without-prejudice claims” as way to solve the problem. (Judge Willett, joined by Judge Southwick) (Note that all opinions appear in the same PDF document, linked above).
A dissent, focused on the text of Rules 41 and 54, observed that once a “Rule 41(a) dismissal ‘adjudicated’ the plaintiffs’ claims . . . there were no claims pending after that adjudication” which mean that “Rule 54(b) was (and still is) completely irrelevant.” (Judge Oldham, joined by Judges Smith, Duncan and – unexpectedly – Costa).
To be continued . . .
O’Shaughnessy v. Young Living Essential Oils presents the classic contract-law problem of an agreement contained in more than one document; here, it led to the Fifth Circuit rejecting the defendant’s effort to compel arbitration. O’Shaughnessey’s “Member Agreement” with Young Living had three salient features:
The Policies and Procedures, in turn, had an arbitration clause with a carve-out for certain kinds of injunctive relief. The Court held: “The arbitration clause’s exemption of certain litigatory rights from its purview does not cure its inherent conflict with the Jurisdiction and Choice of Law provision. The two provisions irreconcilably conflict and for this reason, we agree that there was no ‘meeting of the minds’ with respect to arbitration in this case.” No. 19-51169 (April 28, 2020). (The above picture, BTW, is Mary Astor playing Brigid O’Shaughnessey in 1941’s The Maltese Falcon.)
With the kids home from school because of the coronavirus, I’ve watched a lot of YouTube videos over their shoulders. In particular, this one tells the fascinating story about how post-production editing saved Star Wars, which was bloated and impossible to follow in its first rough versions. Among other changes, the start of the film was drastically simplified – from a series of back-and-forths between space and Tatooine, to a focus on the opening space battle and no shots of Tatooine until the droids landed there. This bit of editing is directly relevant to the tendency of legal writers to “define” (introduce) all characters and terms at the beginning of their work, without regard to the flow of the narrative that follows.
In affirming a preliminary injunction in a noncompete case, Realogy Holdings Corp. v. Jongeblood suggested that the district court could “when determining the term of any injunction, to reweigh the equities . . . in light of the time that has passed during the pendency of th[e] appeal.” Interestingly, this suggestion came after the Fifth Circuit had granted a stay during the preliminary-injunction appeal, which it also expedited. Specifically, the relevant covenants last for a year, the injunction was granted on November 15, 2019; the appellate stay was granted on January 24, 2020, and the opinion issued on April 27. No. 19-20864.
A gentle spring breeze can be refreshing, but not when it involves “reversibly … breezy” analysis of class certification. For a putative 90,000-member class action about certain ERISA plans, the Fifth Circuit found the district court’s review lacking as to two parts of Fed. R. Civ. P. 23:
Chavez v. Plan Benefit Services, No. 19-50904 (April 29, 2020). Cf. Seeligson v. Devon Energy, No. 20-90011 (May 15, 2020) (unpublished) (“In short, the district court complied with this Court’s instructions on remand and reconsidered its findings on both commonality and predominance. Particularly given the fact that we have already addressed this class certification once, we are not inclined to postpone consideration of the merits any further. DEPCO’s petition for permission to file a Rule 23(f) appeal is denied.”).
After recently addressing a party’s rights to oral argument in a dispute about enforcement of an arbitration award, the Fifth Circuit then returned to Sun Coast Resources v. Conrad to review the prevailing party’s motion for sanctions under Fed. R. App. 38 for a frivolous appeal.The Court observed:
“[T]he case for Rule 38 sanctions is strongest in matters involving malice, not incompetence. And our decision on Sun Coast’s appeal was careful not to assume the former. As to the merits of its appeal—including the company’s
failure to disclose that it cited Opalinski II rather than Opalinski I to the arbitrator—we observed that ‘[t]he best that may be said for Sun Coast is that it badly misreads the record.’ As to its demand for oral argument, we stated that ‘Sun Coast’s motion misunderstands the federal appellate process in more ways than one.’
Perhaps Sun Coast earnestly (if mistakenly) believed it had a valid legal claim to press. Or perhaps it was bad faith—maximizing legal expense to drive a less-resourced adversary to drop the case or settle for less. Or perhaps its decisions were driven by counsel. But we must resolve the pending motion based on facts and evidence—not speculation. We sympathize with Conrad . . . [b]ut we conclude that this is a time for grace, not punishment.”
No. 19-20058 (May 7, 2020) (citations omitted).
While the timing is coincidental, the case is an instructive companion to the Texas Supreme Court’s recent opinion in Brewer v. Lennox Hearth Products LLC, which reversed a sanctions award. That Court noted that “while the absence of authoritative guidance is not a license to act with impunity, bad faith is required to impose sanctions under the court’s inherent authority,” and this held that “the sanctions order in this case cannot stand because evidence of bad faith is lacking.” No. 18-0426 (Tex. April 24, 2020) (footnotes omitted).
Manuel owed $250 to an orthopedics practice, first billed in December 2010 and January 2011. Merchants Professional, a collection agency, sent him “six collection
letters in 2011 and, after six years with seemingly no collection effort, it sent
four more in 2017.” Manuel sued for violation of the FDCPA arguing that it was improper to seek collection of a debt after the limitations period had run.
The Fifth Circuit reviewed and sidestepped earlier precedent which suggested that attempts to collect time-barred debt were per se violations of the Act. It nevertheless affirmed judgment for Manuel based on the specific contents of these letters, holding that “these letters seeking collection of time-barred debt, filled with ambiguous offers and threats with no indication that the debt is old, much less that the limitations period has run, misrepresent the legal enforceability of the underlying debt . . . .” Manuel v. Merchants & Professional Bureau, No. 19-50814 (April 29, 2020) (emphasis added).
On pages 62-63 of the May 2020 issue of “D CEO” magazine, you can read a profile of me as the only Tarot-reading lawyer in Dallas–a skill first acquired on trips to New Orleans for appellate business!
Related to the Fifth Circuit’s recent general reminder in Sun Coast Resources v. Conrad about when oral argument will occur, Chief Judge Owens’s April 20 Covid-19 order makes clear that individual panels may decide when to use “Zoom” or other such conferencing technology. H/T to Louisiana’s Ray Ward for drawing my attention to this order.
Realogy Holdings Corp. v. Jongeblood offers several practical tips about litigating a noncompetition agreement:
No. 19-20864 (April 27, 2020).
The Fifth Circuit allowed a “John Doe” summons to proceed, requiring a law firm to disclose certain client entities. After reviewing authority nationwide about such warrants, the Court concluded: “[D]isclosure of the Does’ identities would inform the IRS that the Does participated in at least one of the numerous transactions described in the John Doe summons issued to the Firm, but ‘[i]t is less than clear . . . as to what motive, or other confidential communication of [legal] advice, can be inferred from that information alone.’ Consequently, the Firm’s clients’ identities are not ‘connected inextricably with a privileged communication,’ and, therefore, the ‘narrow exception’ to the general rule that client identities are not protected by the attorney-client privilege is inapplicable.” Taylor Lohmeyer Law Firm PLLC v. United States, No. 19-50506 (April 24, 2020).
As reported by The Verge on April 24, Microsoft Word now auto-corrects the use of two spaces after a period at the end of a sentence. The battle, such as it was, should now be considered over. This influential article in Slate explains why the one-spacers – while correct during the era of typewriters, which made every letter and space the same size – have been wrong since the early 1990s and the widespread availability of proportional spacing in modern word processing software.
In Jacked Up LLC v. Sara Lee Corp., the plaintiff’s expert “seems to have assumed
that the projections in the Sara Lee Pro Forma were correct and then extrapolated lost-profits figures.” But the record also contained a detailed explanation by the defendant’s marketing director about why “the assumptions in the pro formas are merely
elaborate guesswork by the business and sales teams” until there are actual product sales. Accordingly, the Fifth Circuit affirmed the exclusion of the expert under a basic Daubert principle: “Expert evidence that is not ‘reliable at each and every step’ is not admissible.” No. 19-10391 (April 3, 2020) (unpublished). (citation omitted). (LPHS represented the successful appellee in this case.)
The relator in United States ex rel Porter v. Magnolia Health Plan “allege[d] that her former employer, which contracts with the Mississippi Division of Medicaid, is violating the False Claims Act by using licensed professional nurses for tasks that require the expertise of registered nurses.” The Fifth Circuit affirmed dismissal: “Plaintiff-Appellant’s first amended complaint makes no specific allegations regarding the materiality of Magnolia’s alleged fraud. The contracts between Magnolia and MississippiCAN do not require Magnolia to staff care or case manager positions with registered nurses, and they contain only broad, boilerplate language requiring Magnolia to follow all laws.” No. 18-60746 (April 15, 2020) (unpublished).
Sun Coast Resources Inc. v. Conrad, No. 19-20058 (April 16, 2020), involved a challenge to an arbitration award. The challenging party did not agree with the Fifth Circuit’s decision to proceed without oral argument, and filed a motion seeking an oral argument. It was denied and the Court’s explanation is instructive:
The fast-paced litigation about access to abortion during the COVID-19 pandemic produced a strong statement about government power (including the power of the administrative state) during a health crisis: “The bottom line is this: when faced with a society-threatening epidemic, a state may implement emergency measures that curtail constitutional rights so long as the measures have at least some ‘real or substantial relation’ to the public health crisis and are not ‘beyond all question, a plain, palpable invasion of rights secured by the fundamental law.'” In re Abbott, No. 20-50264 (April 7, 2020) (orig. proceeding) (quoting Jacobson v. Commonwealth of Massachusetts, 197 U.S. 11 (1905)). The opinion has gathered national coverage from diverse media outlets such as CNN and Reason.
Third of three posts this week about Illinois Tool Works v. Rust-Oleum; in addition to reversing two damages awards, the Fifth Circuit reversed a finding of Lanham Act liability for a lack of evidence about materiality. Citing prior Circuit precedent, the Court held: “If misleading claims about something as vital to pizza as its ingredients were not necessarily material, a misleading claim about how long a windshield water-repellant treatment lasts was not, either. Moreover, though Illinois Tool Works asserts that consumers want to know how long these products last, it does not substantiate this assertion with evidence. So this argument fails.” No.19-20210 (April 9, 2020).
The Fifth Circuit’s recent opinion in Illinois Tool Works v. Rust-Oleum, also rejected the plaintiff’s award of damages for corrective advertising, holding:
“Illinois Tool Works has never even asserted that it plans to run corrective advertising. It did not say what the advertising might consist of, offer a ballpark figure of what it might cost, or provide even a rough methodology for the jury to estimate the cost. Damages need not be proven with exacting precision, but they cannot be based on pure speculation. . . . Illinois Tool Works . . . argues that it was not required to show that it ‘needs’ the award, and that its 40 years of goodwill and tens of millions of dollars spent on advertising, coupled with RustOleum’s expenditures, support the unremitted amount. . . . [I]t does not explain how its decades of goodwill and past advertising expenditures show a loss or justify compensation in any amount. These bald facts lack inherent explanatory value. So these arguments fail.”
No. 19-20210 (April 9, 2020).
Illinois Tool Works proved at trial that Rust-Oleum engaged in false advertising about the parties’ competing water-repellent products. The Fifth Circuit reversed the judgment as to disgorgement (among other matters), reasoning:
“Illinois Tool Works failed to present sufficient evidence of attribution. It cites nothing that links Rust-Oleum’s false advertising to its profits, that permits a reasonable inference that the false advertising generated profits, or that shows that even a single consumer purchased RainBrella because of the false advertising.
Illinois Tool Works argues, however, that three things show that RustOleum benefitted from its false advertising: witnesses testified about how important the advertising claims were to Rust-Oleum, tens of thousands of people saw the commercial, and RainBrella was placed on nearby shelves in the same stores as Rain-X. None of this shows attribution.” Illinois Tool Works v. Rust-Oleum, No. 19-20210 (April 9, 2020).
I
n Golden Spread Electric Co-op v. Emerson Process Management, the Fifth Circuit affirmed the dismissal of business-tort claims under Texas’s economic loss rule.
Golden Spread, a public utility, contracted with Emerson to provide “a new, customized control system” for a steam turbine generator. During testing of the new system, the software installed by Emerson issued a mistaken command that caused the turbine to overheat and become damaged.
The Fifth Circuit reviewed Golden Spread’s claims in light of two policy considerations identified by Texas cases in the area. First, “[p]urely economic harms proliferate widely and are not self-limiting in the way that physical damage is ….” Second, “the risk of economic harms are better suited to allocation by contract” because the parties “usually have a full opportunity” to negotiate such risks before finalizing a contract.
The Court’s reasoning may prove relevant to future lawsuits involving business issues arising from the current COVID-19 crisis.
Feeling salty about the handling of a AAA arbitration, Texas Brine (not a Louisiana citizen) sued the AAA (not a Louisiana citizen) and two Louisiana-based arbitrators in New Orleans state court. The AAA was served with process and immediately removed the case, before the two Louisiana citizens were served.
The Fifth Circuit held that such a “snap removal” was permitted by the plain text of the removal statute, noting that the “forum defendant rule” only applied once an in-state defendant was served. (In relevant part, 28 U.S.C. § 1441(b)(2) says that a civil action “. . . may not be removed if any of the parties in interest properly joined and served as defendants is a citizen of the State in which such action is brought.” (emphasis added)).
The Court declined to find that this situation produced an “absurd result,” noting the Second Circuit’s observation that: “Congress may well have adopted the ‘properly joined and served’ requirement in an attempt to both limit gamesmanship and provide a bright-line rule keyed on service, which is clearly more easily administered than a fact-specific inquiry into a plaintiff’s intent or opportunity to actually serve a home-state defendant.” Texas Brine Co. LLC v. AAA, No. 18-31184 (April 7, 2020).
The arbitration clause in Bowles’s employment contract had a provision delegating to the arbitrator, “any legal dispute . . . arising out of, relating to, or concerning the validity, enforceability or breach of this Agreement, shall be resolved by final and binding arbitration.” Bowles argued that disparity of bargaining power during her contract negotiations amounted to procedural unconscionability. “Bowles’s challenge to the Arbitration Agreement as procedurally unconscionable was a challenge to the Agreement’s enforceability, not to its existence. For that reason, under the delegation clause in the Agreement that sends all enforcement challenges to an arbitrator, the district court correctly referred this challenge to the arbitrator.” Bowles v. OneMain Fin. Group, No. 18-60749 (April 2, 2020).
“For a generation, the State of Texas and a federally recognized Indian tribe, the Ysleta del Sur Pueblo, have litigated the Pueblo’s attempts to conduct various gaming activities on its reservation near El Paso. This latest case poses familiar questions that yield familiar answers: (1) which federal law governs the legality of the Pueblo’s gaming operations—the Restoration Act (which bars gaming that violates Texas law) or the more permissive Indian Gaming Regulatory Act (which “establish[es] . . . Federal standards for gaming on Indian lands”); and (2) whether the district court correctly enjoined the Pueblo’s gaming operations.” Unfortunately for the tribe, the Fifth Circuit found that a previous opinion conclusively settled these issues in favor of the State of Texas. The opinion also discusses the proper scope of injunctive relief for such a situation. Texas v. Ysleta del Sur Pueblo, No. 19-50400 (April 2, 2020).
A union protested that an arbitrator, in the guise of correcting a “technical” error with his original award, in fact revised its substance in a way contrary to the applicable arbitration rules. The Fifth Circuit disagreed: “To the contrary, he cited [AAA] Rule 40, classified his error as a “technical” one capable of correction, and held that his correction did not violate Rule 40, notwithstanding the Union’s argument that he was “redetermin[ing] the merits” of CWA’s claim against the Company. Even if the arbitrator made a mistake in reaching his conclusion, “[t]he potential for . . . mistakes is the price of agreeing to arbitration. . . . The arbitrator’s construction holds, however good, bad, or ugly.” Communication Workers of America v. Southwestern Bell, No. 19-50686 (March 27, 2020) (citations omitted).
In Bradley v. Ackal, the Fifth Circuit reversed the sealing of an on-the-record proceeding involving the settlement of a minor’s claim connected to a police shooting. The Court reminded: “’In exercising its discretion to seal judicial records, the court must balance the public’s common law right of access against the interests favoring nondisclosure.’ But, ‘[t]he presumption however gauged in favor of public access to judicial records[]’ [is] one of the interests to be weighed on the [public’s] “side of the scales.”‘ No. 18-31052 (March 23, 2020) (citations omitted).
An unsuccessful motion to compel arbitration did not fare better on appeal when:
Hiser v. NZone Guidance LLC, No. 19-50353 (March 24, 2020) (unpublished).
The appellant in North Cypress Medical Center Operating Co. v. Cigna Healthcare argued that the district court failed to follow the law of the case as established by an earlier Fifth Circuit panel, citing a paragraph in the panel’s opinion that described the two-step process for resolving a particular ERISA issue. The Fifth Circuit disagreed: “This general statement of the law, expressed in terms of the facts of the case, is no mandate at all. Nor is it a statement of the whole law regarding review of ERISA benefit decisions. The court’s summary omits mention of [two key cases], in which this court established that a party may skip the legal correctness inquiry and proceed to consider
whether the plan administrator abused its discretion, as outlined in [the prior panel opinion]. The [prior] panel did not deny the authority of [those cases] (nor could it).
Accordingly, the district court properly relied on [those cases] in skipping the legal correctness analysis. In so doing, the court did not violate the law of the case and committed no error.” No. 18-20576 (March 18, 2020).
DISH Network declared an impasse after lengthy negotiations with the Communication Workers of America. The NLRB rejected that declaration; the Fifth Circuit reversed the NLRB’s factual determination: “The Board’s decision rested on its determination that the Union’s November 2014 counterproposal was a ‘white flag’ of surrender. But the ‘white flag’ characterization in turn rested on an unsound factual foundation from the ALJ” about how unionized employees reacted to a particular compensation system as compared to nonunionized ones. DISH Network Corp. v. NLRB (revised March 24, 2020).
A Houston-based engineering firm negotiated a contract with a New Jersey town. The town then sought to avoid paying, arguing that no contract had been formed because it had not obtained proper approvals as required by New Jersey’s statutes about public contracts. The firm countered that the parties’ agreement had a Texas choice-of-law provision, which should also control as to contract formation. Noting that while this dispute seemed to form a “chicken-or-the-egg problem,” the Fifth Circuit ruled for the town as “the choice-of-law provision has force only if the parties validly formed a contract.” It remanded for consideration of potential quantum meruit liability. EHRA Engineering v. Downe Township, No. 19-20176 (March 19, 2020).
Surprising no one, the constitutional challenge to the CFPB’s structure presented by CFPB v. All American Check Cashing will be reviewed en banc by the full Fifth Circuit.
This is a cross-post from 600Commerce, which follows the Dallas Court of Appeals.
One Dallas Court of Appeals case addresses the breach-of-contract defense of impracticability, Hewitt v Biscaro, 353 S.W.3d 304 (Tex. App.—Dallas 2011, no pet.). Relevant to the current crisis, it involves a government order that allegedly made performance more difficult. The Court examined whether:
The Court relied on an earlier Texas Supreme Court case and the relevant Restatement (Second) of Contracts provision. Application of this opinion will be important in upcoming commercial disputes created by the novel coronavirus.
This is a cross-post from 600Hemphill, which follows the Texas Supreme Court:
Henry McCall lived in a cabin on Homer Hillis’s property, occasionally helping Hillis with maintenance at the McCall’s bed-and-breakfast. While working on Hillis’s sink, a brown recluse spider bit McCall. The Texas Supreme Court found that the ferae naturae doctrine barred McCall’s lawsuit against Hillis: “[H]e owed no duty to the invitee because he was unaware of the presence of brown recluse spiders on his property and he neither attracted the offending spider to his property nor reduced it to his possession. Further, [McCall] had actual knowledge of the presence of spiders on the property.” Hillis v. McCall, No. 18-1065 (Tex. March 13, 2020). In addition to its impact on brown-recluse litigation, the reasoning of this opinion about liability for small, dangerous creatures well be relevant in any future litigation about coronavirus exposure.
Rogers, a collection agency, wrote Salinas, stating the amount due ($4629.96)
and the interest and fees due ($0.00). The letter also said: “In the event there is interest or other charges accruing on your account, the amount due may be greater than the 
amount shown above after the date of this notice.”
The Fifth Circuit held that, while its precedent had not squarely addressed “conditional” language such as “in the event,” Rogers’s letter was not deceptive. “Salinas reads it to imply the possibility that interest or other charges may accrue when in fact they cannot,” noted the Court, but “[a]n illustration shows the problem with Salinas’ reading of the letter”:
Suppose a traveler boards a flight from El Paso, TX, to Tucson, AZ—a route traversing only desert—and is shown a safety video describing steps to take “in the event of a water landing.” Even the least sophisticated traveler would not take the video to imply the plane would be flying over water. No passenger would leap out of his seat in panic, concluding he had boarded the wrong flight. Even a traveler “tied to the very last rung on the intelligence or sophistication ladder” would interpret the video as merely acknowledging the reality that some flights, if not this one, fly over water.
Salinas v. R.A. Rogers Inc., No. 19-50618 (March 12, 2020).
Casalicchio received a pre-foreclosure notice that “contained a deadline thirty days from the day the notice was printed, even though the deed of trust called for a deadline thirty days from the day the letter was mailed.” (emphasis in original). Unfortunately for Casalicchio, while the Fifth Circuit acknowledged older Texas cases that refer to an “absolute” right to “strict compliance” with a deed of trust, the Court concluded: “Since the 1980s, the Texas Supreme Court has repeatedly moderated its rule that the ‘terms of a deed of trust must be strictly followed,’ clarifying recently that harmless mistakes do not void otherwise-valid foreclosure sales.” The defect in his notice was thus “but a ‘minor defect,’ insufficiently prejudicial to justify setting aside an otherwise valid foreclosure sale.” Casalacchio v. BOKF, N.A., No. 19-20246 (March 6, 2020) (applying, inter alia, Hemyari v. Stephens, 355 S.W.3d 623 (Tex. 2011)).
What is a “sole, superseding cause”? BP Exploration v. Claimaint ID 100191715 did not resolve the question, but found an argument sufficiently credible to require a remand for further review in the Deepwater Horizon claims process: “BP argues that Claimant passed the V-Shaped Revenue Pattern due solely to a price spike and drop in the price of fertilizer that was unrelated to the oil spill. According to BP, the spike caused Claimant’s revenues to soar and crash back down to normal rates thereafter. And, only because Claimant used months during the price spike as its benchmark period was it able to satisfy the ‘V-Shape Revenue Pattern’ test in Exhibit 4B. In other words, Claimant’s loss was not due to the spill; rather, the price spike in fertilizer was the sole, superseding cause for its loss.” No. 19-30264 (March 3, 2020).
The ground rules for the administrative state are few, important, and vexingly difficult to apply. The en banc court confronted the structure of Fannie Mae’s regulator, the Federal Housing Finance Agency, in Collins v. Mnuchin, 938 F.3d 553 (5th Cir. 2019), and found it wanting constitutionally. In CFPB v. All American Check Cashing, a panel majority confronted the structure of another Great Recession entity, the Consumer Finance Protection Board, and concluded that “neither the text of the Constitution nor the Supreme Court’s previous decisions support the Appellants’ arguments that the CFPB is unconstitutionally structured.” No. 18-60302 (March 3, 2020).
A concurrence elaborated: “The President can remove the CFPB Director only for ‘inefficiency, neglect of duty, or malfeasance in office,’ a broad standard repeatedly approved by the Supreme Court. That alone is enough to decide this case. If there is any threat of undue concentration of power, the Office of President is its beneficiary.” A dissent faulted the majority’s reasoning and the judicial process employed: “Collins winds up in the dustbin because two judges say it should. At one time, those judges thought it beyond the pale ‘to rely on strength in numbers rather than sound legal principles in order to reach their desired result in [a] specific case.’ Now, they suddenly discover that stare decisis is for suckers.” (footnotes omitted).
An exceptionally clear example of “virtual representation” for res judicata purposes appears in Butler v. Endeavor Air, Inc., No. 19-20304 (March 4, 2020).
Butler unsuccessfully sued Delta Airlines in state court about difficulties his daughter experienced on a flight. Final judgment was entered for Delta after a partial summary judgment and a jury trial.
Butler also sued Endeavor Airlines–a Delta subsidiary that operated the flight in question. Delta had stipulated, in both cases (it had at one point been named in the second case) that it would accept any liability assigned to Endeavor.
The district court found the Endeavor suit was barred by res judicata and the Fifth Circuit. Delta was Endeavor’s “virtual representative” in the first action given their parent-subsidiary relationship, the same set of facts involved in both cases, and Delta’s stipulation.
Rules of procedure require precision in pleading a cause of action. The eight-corners rule of insurance coverage, in contrast, often rewards imprecision. A powerful example appears in Allied World Specialty Ins. Co. v. McCathern, PLLC, a duty-to-defend claim arising from a legal malpractice claim, where the Fifth Circuit held: “The allegations that McCathern did not monitor the file, conduct legal research, or communicate with the client are factual assertions—as opposed to causes of action—even if they are vague. Allied World’s challenge to the factual allegations thus seems to be that they are not specific enough or may not prove true. But at the duty-to-defend stage it is not for us to say whether West Star will be able to prove that McCathern was negligent in failing to monitor the personal injury suit or in failing to research legal issues.” No. 17-10615 (Feb. 26, 2020, unpublished).
J&J Sports v. Enola Investments, a dispute about an unauthorized broadcast of the most recent “Fight of the Century” (Mayweather v. Pacquiao in 2015) led to a muddled record as to how the bar in question rebroadcast the fight:
“There is conflicting evidence about how the Lounge broadcast the Fight. Small claimed that an employee streamed the Fight over the internet, but J & J’s investigator testified that internet streaming typically results in lower quality video than the high definition broadcast he saw at the Lounge. J & J’s corporate representative also testified that the Fight was not available to commercial establishments via internet streaming. But J & J’s investigator muddled the waters by stating that he did not see cable or satellite equipment at the Lounge. And now, on appeal, defendants claim that the Lounge received the Fight via cable because Enola maintained a business account with Comcast. The only undisputed evidence is that the Fight was originally transmitted via satellite.”
This record required affirmance under the applicable standard: “The district court thus had several plausible options to choose from—satellite, internet, or cable. And when ‘there are two permissible views of the evidence, the fact-finder’s choice between them cannot be clearly erroneous.'” (citations omitted). No. 19-20458 (Feb. 28, 2020, unpublished).
The 2016 Presidential election, one of only five since 1824 when the Electoral College winner lost the popular vote, led to nationwide debate about the College, which in turn led to LULAC v. Abbott – a constitutional challenge to the “Winner Take All” law in Texas that assigns all the state’s electoral votes to the candidate who wins that state’s popular vote. The Fifth Circuit rejected a “one-person, one-vote” challenge to WTA based on a 1969 three-judge opinion that the Supreme Court summarily affirmed, and has not overruled or limited since. It also rejected a challenge based on right-of-association grounds, observing: “[A]ny disadvantage they allege is solely a consequence of their lack of electoral success. But ‘the function of the election process is to winnow out and finally reject all but the chosen candidates.'” No. 19-50214 (Feb. 26, 2020) (citations omitted). (Above, the unfortunate Samuel Tilden, the only Presidential candidate in history to lose despite receiving an outright majority – not just a plurality – of the popular vote).
Faced with “extraordinarily confused” case law within the Circuit about the federal-officer removal statute (28 USC sec. 1442(a)(1)), the en banc Court’s opinion in Latiolais v. Huntington Ingalls is intended to “strip away the confusion, align with sister circuits, and rely on the plain language of the statute, as broadened in 2011.” The new test requires a defendant to show: “(1) it has asserted a colorable federal defense, (2) it is a ‘person’ within the meaning of the statute, (3) that has acted pursuant to a federal officer’s directions, and (4) the charged conduct is connected or associated with an act pursuant to a federal officer’s directions.” It abandons a previously-recognized “causal nexus” requirement. Accordingly, the defendant shipbuilder “was entitled to remove this negligence case filed by a former Navy machinist because of his exposure to asbestos while the Navy’s ship was being repaired at the Avondale shipyard under a federal contract.” No. 18-30652 (Feb. 24, 2020). (Above, the formidable bow of the U.S.S. Somerset, the last ship launched from the long-serving shipyard.)
The Fifth Circuit reversed a defense summary judgment in a products case in Certain Underwiters at Lloyd’s v. Axon Pressure Prods., Inc., noting:
Procedurally, a lack of explanation as to key Daubert rulings and related elements of the plaintiff’s claim, characterizing them as “pithy to the point of being incomplete.”conflicting testimony on (a) the handling of the relevant piece of equipment, (b) the reasons for material continuing to flow through that equipment at the time of the accident.No. 18-20453 (Feb. 21, 2020).
The Committee for a Qualified Judiciary has published its list of Dallas-area judicial candidates found qualified.
To the right, Elvis sings “Return to Sender.” Similarly, in Rajet Aeroservicios v. Cervantes, the Fifth Circuit reminded: “‘The failure to include a return[-]jurisdiction
clause in an [FNC] dismissal constitutes a per se abuse of discretion.” . . . This is because, as our court has repeatedly made clear, ‘courts must take measures, as part of their dismissals in [FNC] cases, to ensure that defendants will not attempt to evade the jurisdiction of the foreign courts.’ Notably, ‘[s]uch measures often include agreements
between the parties to litigate in another forum, to submit to service of process
in that jurisdiction, to waive the assertion of any limitations defenses, to agree
to discovery, and to agree to the enforceability of the foreign judgment.’ A return-jurisdiction clause assists in preventing defendants from circumventing these measures and ensures plaintiffs have the opportunity to proceed with the action in one of the forums.” No. 19-20354 (Feb. 3, 2020) (unpublished) (citations omitted, emphasis added).
Resolution of the tortious-interference claim in Whitney Bank v. SMI Companies Global, Inc. turned on whether the defendant’s profit motive could establish “actual malice” as required by Louisiana law. To the panel majority:
There is no evidence that Whitney was driven by anything other than profit in its collection efforts. Moreover, the express terms of the contract allowed Whitney to recover from SMI’s customers because both loans were secured by SMI’s accounts receivable. While it may have been more prudent and logical for Whitney to involve SMI in its collection efforts, those efforts, however brusque, served to protect the bank’s legitimate interests—collecting on the defaulted loans.
(citations omitted, emphasis added). The dissent, however:
Often this requirement [of “actual malice”] is insurmountable in the business context because of the “appropriate” motivation of profits. But I disagree with the notion that someone in a corporation who is seeking to collect money from another can never have actual malice or ill will towards that other. Corporations are run by humans, after all. . . . The magistrate judge’s decision rested in part on its determination that Whitney’s employees lacked credibility, and we do not second-guess credibility determinations.
No. 18-31189 (Feb. 3, 2020) (emphais added). (Louisiana’s actual-malice requirement for this tort is uniquely demanding, so this discussion may be less relevant in other jurisdictions.)
In Vizaline, LLC v. Tracy, the Fifth Circuit formally implemented NIFLA v. Becerra, 138 S.Ct. 2361 (2018), in the context of Mississippi’s licensing of surveyors: “The Supreme Court has recently disavowed the notion that occupational licensing regulations are exempt from First Amendment scrutiny. In overturning the “professional speech” doctrine deployed by some circuits, including ours, the Court rejected any theory of the First Amendment that ‘gives the States unfettered power to reduce a group’s First Amendment rights by simply imposing a licensing requirement.’ The district court’s ruling in this case—that Mississippi’s licensing requirements for surveyors do not trigger any First Amendment scrutiny—was inconsistent with NIFLA. We therefore reverse and remand for further proceedings.” No. 19-60053 (Feb. 14, 2020) (citations omitted, emphasis added).
Gonzales cited two Texas Supreme Court cases, decided after a summary judgment against her, holding that an insurer’s payment of an appraisal award does not preclude a Texas Prompt Payment of Claims Act (“TPPCA”) claim. The Fifth Circuit found that she failed to preserve this argument in the district court. The Court noted that “a change in law . . . does not permit a party to raise an entirely new argument that could have been articulated below”–a rule that applies when a party “could have made the same ‘general argument’ to the district court, but had not done so.” As for the state of the law at the time of the summary-judgment briefing, the Court observed:
We recognize that several courts, including our own, had previously concluded a TPPCA claim was extinguished as a matter of law after the payment of an appraisal award. But the Supreme Court of Texas granted review in [the two relevant cases] on January 18, 2019, seven days after Allstate moved for summary judgment and thirteen days before Gonzales filed her response to the motion. This fact undermines her assertion here that she “could not have made a good faith argument in the trial court that payment of the appraisal award did not preclude her from recovering under the TPPCA as a matter of law.”
Gonzales v. Allstate Vehicle & Property Ins. Co., No. 19-40250 (Feb. 11, 2020) (emphasis added, footnote omitted).
“[T]he only non-moot challenges to the injunction concern its forward-looking terms, which do not stay any ongoing state-court proceedings. See 28 U.S.C. § 2283
(absent specific exceptions, prohibiting federal courts from ‘grant[ing] an injunction to stay proceedings in a State court’); see also Dombrowski v. Pfister, 380 U.S. 479, 485 n.2 (1965) (§ 2283 bars only ‘stays of suits already instituted’ but does not ‘preclude injunctions against the institution of state court proceedings’ (citation omitted)).” Hill v. Hunt, No. 18-11633 (revised March 13, 2020).
In re Darden joins the line of cases in which the Fifth Circuit denied a mandamus petition while offering guidance on the issue presented. Darden sought relief from the trial court’s proposed jury charge on a key issue in a wrongful-death case, and the Court held:
Darden has other adequate means to attain the relief he desires. We are satisfied that on these facts, a writ of mandamus would be inappropriate. Nevertheless, we suggest that the following additional question in the verdict form, one for each officer, upon which the jury’s other findings would not be conditioned, would clearly comply with this court’s prior opinion and possibly avoid another appeal regarding these instructions after a verdict.
QUESTION NO. [#]
Do you find from a preponderance of the evidence that [officer’s name] knew or should have known of the existence and extent of Jermaine Darden’s preexisting conditions?
No. 20-10065 (Feb. 7, 2020).
A not-unusual series of events involving a settlement agreement led to a practice tip in Defense Distributed v. U.S. Dep’t of State, No.18-05911 (Jan. 21, 2020):
The Fifth Circuit found that the stipulation divested the district court of jurisdiction, dooming the request to reopen. The Court suggested: “If the parties had wanted to, they could have asked the district court to retain jurisdiction–for example, to oversee enforcement of a settlement agreement.” (citations omitted).
The Texas Supreme Court’s recent opinion in JP Morgan Chase v. Orca Assets, 546 S.W.3d 648 (Tex. 2018) has significantly influenced commercial litigation, particularly with its focus on “red flags” about a questionable transaction. In Universal Truckload, Inc. v. Dalton Logistics, Inc., Ni. 17-20725 (Jan. 3, 2020), a promissory estoppel case, the Fifth Circuit observed: “[T[his case differs from JPMorgan in at least three crucial ways. First, the letter of intent at issue in JPMorgan was a binding contract signed by both parties. The [Indication of Interest (“IOI”] that Universal Truckload sent Dalton is expressly nonbinding. Second, the letter of intent in JPMorgan included a clause disclaiming any oral agreements. Universal Truckload’s IOI does not. And third, the letter of intent in JPMorgan directly contradicted the oral promise, and Universal Truckload’s IOI does not. The Supreme Court of Texas explained in JPMorgan, ‘there is no direct contradiction if a reasonable person can read the writing and still plausibly claim to believe the [oral] representation.’ The conditions laid out in the IOI explain what would need to happen if Universal Truckload was to enter a contract to purchase Dalton. But the jury did not find in favor of Dalton on a contract theory. Dalton succeeded on a promissory estoppel theory, which requires the absence of a contract.”
A fatal injury at the L’Auberge Casino in Lake Charles, Louisiana, led to litigation in Texas against the casino’s owner. The plaintiffs asserted general personal jurisdiction based on the casino’s substantial marketing efforts directed toward Texas. The Fifth Circuit acknowledged “a handful of . . . district court cases finding general jurisdiction against non-resident casinos for their localized marketing efforts,” but found that recent Supreme Court opinions about general jurisdiction meant that “local advertising, as a standalone factor, does not meet ‘the demanding nature of the standard for general personal jurisdiction over a corporation.'” Frank v. P N K (Lake Charles) LLC, No. 18-31060 (Jan. 21, 2020) (applying, inter alia, Daimler AG v. Bauman, 571 U.S. 117 (2014)).
I spoke at the State Bar’s “Litigation Update” last Friday to give a Supreme Court and Fifth Circuit update; here is my PowerPoint from that presentation. It covers SCOTUS and CTA5 cases of general interest to business litigators since the last Litigation Update seminar in January 2019.
The General Land Office of Texas disputed the Interior Department’s decision to continue protection of the golden-cheeked warbler as an endangered species. The Fifth Circuit found the Department’s process flawed: “The Service recited this
standard, but a careful examination of its analysis shows that the Service applied an inappropriately heightened one.Specifically, to proceed to the twelve-month review stage, the Service required the delisting petition to contain information that the Service had not considered in its five-year review that was sufficient to refute that review’s conclusions. . . .The Service thus based its decision to deny the delisting petition on an incorrect legal standard. Consequently, we conclude that the Service’s decision was arbitrary and capricious. We therefore vacate that decision and remand for the Service to evaluate the delisting petition under the correct legal standard.” General Land Office of Texas v. U.S. Dep’t of the Interior, No. 19-50178 (Jan. 15, 2020) (emphasis in original).
“[S]tatutory damages do not only approximate a copyright owner’s consequential damages. Statutory damages also serve an independent deterrent purpose; therefore, mitigation rules do not wholly preclude recovery of statutory damages.” Energy Intelligence Group, Inc. v. Kayne Anderson Capital Advisors, LP, No. 18-20350 (Jan .15, 2020). This case also provides a case study in the multiplication of copyright damages resulting from the unauthorized recirculation of a copyrighted publication.
The arbitration clause in Kemper Corporate Servcs., Inc. v. Computer Sciences Corp., No. 18-11276 (Jan. 10, 2020), said that “decisions shall be in writing and shall state the findings of fact and conclusions of law upon which the decision is based, provided that such decision may not (i) award consequential, punitive, special, incidental or exemplary damages or any amounts in excess of the limitations delineated in” other provisions of the parties’ contracts (emphasis added). The unsuccessful party questioned whether the arbitrator had authority to “categorize damages as consequential or direct,” but the Fifth Circuit disagreed, concluding: “For the arbitrator to resolve the dispute between CSC and Kemper, which could include awarding damages, he had to categorize the potential damages into the permitted and the prohibited categories.” The Court then affirmed under the highly-deferential standard of review as stated in BNSF R.R. Co. v. Alstom Transp., 777 F.3d 785 (5th Cir. 2015).
Among other challenges to a $65 million arbitration award, Catic USA disputed the claimants’ damages calculation. The Fifth Circuit rejected the challenge, in part because the shortcomings were of Catic’s own making: “Catic USA does not contest that AVIC’s anticipated rate of return was 15% or that the panel employed an appropriate discount rate; instead, it attacks the panel’s assumption that AVIC’s investment did (or would) generate profits. It is true that, although the amount of lost profits may be estimated, claimants generally ‘must show that there would [have been] some future profits’ but for the breach. But in this case, Catic USA has refused to provide the relevant information, and it was thus within the arbitration panel’s authority to infer that AVIC’s investment was indeed profitable.” Soaring Wind Energy LLC v. Catic USA Inc., No. 18-11192 (Jan. 7, 2020) (citation omitted, emphasis added). .
Catic USA challenged a $63 million arbitration award about a Chinese wind-energy venture, complaining inter alia, that the panel was assembled unfairly: “[O]ne side (the plaintiffs) appointed five arbitrators, the other side (Catic USA and Thompson) only two.'” The Fifth Circuit disagreed, noting that the parties’ contract identified “seven total, signatory ‘Members,'” each of whom had the right to name an arbitrator in the event of a dispute. “This case involves two sides, but, more importantly, it features seven members; suppose Eris had tossed the Apple of Discord into a Soaring Wind conference room, prompting a free-for-all among the parties–the arbiter selection process would have remained the same.” Soaring Wind Energy LLC v. Catic USA Inc., No. 18-11192 (Jan. 7, 2020). The Court reminded that as a general matter: “It is not the court’s role to rewrite the contract between sophisticated market participants, allocating the risk of an agreement after the fact, to suit the court’s sense of equity or fairness.”
In this election year, the Texas State Bar’s Judicial Poll has special significance. If you’re a Texas lawyer, haven’t voted yet and can’t locate the email from the Bar about it, just click here for your ballot by February 4.
“Repeatedly emphasizing that the classification turns on whether the deadline is in a statute, the Supreme Court has held that the time limits in Civil Rule 23(f), Appellate Rule 4(a)(5)(C), Criminal Rules 33 and 45, and Bankruptcy Rules 4004 and 9006 are not jurisdictional. The Court has not addressed the rule we confront, Civil Rule 50(b). But its reasoning in these cases—that “[i]t is axiomatic that the Federal Rules of Civil Procedure do not create or withdraw federal jurisdiction,”—compels the conclusion that Rule 50(b) is also a claim-processing requirement. We therefore hold that Rule 50 does not impose a jurisdictional deadline.” Escribiano v. Travis County, No. 19-50236 (Jan. 10, 2020).
“The district court’s order to stay and administratively close [Appellant]’s case is not a final order for purposes of [Federal Arbitration Act] § 16(a)(3); the collateral order doctrine does not apply to orders concerning arbitration governed by the FAA; and § 1292(a)(3) is inapplicable to referrals to arbitration in admiralty cases that do not determine a party’s substantive rights or liabilities.” Psara Energy, Ltd. v. Advantage Arrow Shipping, LLC, No. 19-40071 (Jan. 9, 2020).
Southern Credentialing showed that Hammond infringed its “credentialing packets” used for hospitals in making privilege decisions. The trial court found non-willful infringement and awarded statutory damages; Hammond appealed, arguing that such damages were not available when the alleged infringement occurred before Southern Credentialing registered its copyrights. The Fifth Circuit held: “[S]ection 412 bars statutory damage awards when a defendant violates one of the six exclusive rights of a copyright holder preregistration and violates a different right in the same work after registration. Any other conclusion would be inconsistent with the Copyright Act, which does not distinguish between ‘different’ infringements.” Southern Credentialing Support Services, LLC v. Hammond Surgical Hospital LLC, No. 18-31160 (Jan. 9, 2020).
Judicial-estoppel issues often surface when a debtor a seeks to assert a claim and dispute arises about the adequacy of the debtor’s disclosures about that claim. Wal-Mart Stores, Inc. v. Parker involved a debtors personal-injury claim, and the Fifth Circuit concluded: “After declining to apply judicial estoppel and thus allowing Parker to proceed with his personal injury suit against Wal-Mart, the bankruptcy court ordered Parker to turn over any recovery to the Chapter 13 trustee to be administered for the benefit of creditors. In cases similar to Wal-Mart’s—when a potential defendant argues that a debtor is estopped from bringing a lawsuit for failure to disclose it to the bankruptcy court—we have held that, while a debtor may be estopped from pursuing the claim on his own behalf, his bankruptcy trustee is not similarly estopped and may pursue the claim for the benefit of the creditors.” No. 18-30378 (Jan. 8, 2020). “Though the bankruptcy court’s decision is certainly odd and not the route we would have chosen, we cannot say that it contained clearly erroneous factual findings or the application of incorrect legal standards that amount to an abuse of discretion.”
A putative class action failed for lack of commonality: “Every member of the putative class received the same allegedly threatening letter from Medicredit. But the FDCPA penalizes empty threats, not all threats. So the letter alone is insufficient to certify a class. As in Dukes, there is no ‘glue’ here ‘holding the alleged reasons for all those [letters] together’—namely, evidence of a uniform intention by Seton regarding suit. So it is likewise ‘impossible to say that examination of all the class members’ claims for relief will produce a common answer to the crucial question’ why was I threatened.” Flecha v. Medicredit, Inc., No. 18-50551 (Jan. 8, 2020) (citations omitted, emphasis in original).
The Fifth Circuit noted two limits on Fed. R. Evid. 407, which excludes evidence of “subsequent remedial measures” –
1. In an overtime-pay case, with respect to an employer’s internal audit about employee classifications, the Court observed that “by themselves, post-accident investigations would not make the event ‘less likely to occur,’ only the actual implemented changes make it so.”
2. And as to exhibits in which the employer actually reclassified various employees, the Court said: “[F]ederal law mandates that Shipcom pay its nonexempt employees overtime wages. Because Shipcom is legally obligated to take these measures to comply with the FLSA, excluding evidence of Plaintiffs’ reclassification to nonexempt status would not further a social policy of encouraging employers to correctly classify their employees in the future.”
Novick v. Shipcom Wireless, Inc., No. 19-20056 (Jan. 7, 2020) (citations omitted, emphasis added).
An issue in Novick v. Shipcom Wireless, Inc., was whether the district court erred in not letting the defendant employer open and close arguments, when it had the burden of proof on the remaining disputed issues in an overtime-pay case. The Fifth Circuit held: “Shipcom has not cited, and we have not found, any case where this court has held a trial court’s decision as to which party presents argument first to be an abuse of discretion. Many legal presentations, like the FLSA claim in this case, have a beginning, a middle, and an end. It was within the discretion of the trial court to decide that in this case the jury should hear the beginning of the story first, even though the legal effect of the beginning was not in dispute.” No. 19-20056 (Jan. 7, 2020).
Paine Snider v. L-3 Communications involved a company’s legal malpractice claim against a firm that represented it in corporate matters, when a firm partner helped a company employee with a discrimination case against the company. The Fifth Circuit affirmed the dismissal of most of the malpractice claim on limitations grounds, observing:
L-3 knew in 2007 that . . . [i]t had access to emails between Edwards and Paine Snider reflecting that Edwards participated in drafting a detailed written internal complaint document cataloging the facts and incidents supporting Paine Snider’s claims. L-3 contacted Edwards and Elizabeth Quick, both partners at Womble, and expressly asserted that Edwards had a conflict of interest. L-3 failed to follow up with the Womble firm after it was apprised in writing by Bill Raper of that firm that he would investigate IT material, and subsequently, that he had investigated and was ready to talk to the general counsel of L-3’s parent company about Edwards’s involvement with Paine Snider’s claims against L-3.
. . .
We also know that when, late in 2011, L-3 subpoenaed documents from the Womble firm, the “new” information was somewhat more salacious and provided additional evidentiary support. But the nature of and essential facts supporting L-3’s claims against Edwards and Womble remained unchanged since 2007.
No. 16-60731 (Dec. 31, 2019).
Continuing a line of thought from earlier 2019 authority about standing to challenge administrative-agency action, the Fifth Circuit found an organization’s alleged standing was too attenuated when it “contend[ed] that its injuries are traceable to Treasury’s actions because Treasury has plenary authority over the [Low-Income Housing Tax Credit] program, including the power both to issue regulations and to recapture LIHTCs from investors who violate the [Fair Housing Act].” Inclusive Communities Project, Inc. v. Dep’t of the Treasury also shows that the style trend toward use of contractions hasn’t lessened as 2019’s continued. No. 19-10377 (Dec. 30, 2019).
Several amendments to the Federal Rules of Appellate Procedure became effective on December 1, 2019. This House Report describes and explains them.
The issue in BNSF Railway v. Panhandle Northern Railroad was whether a “handling-carrier” relationship between two railroads was terminable at will. BNSF contended that it was not; Panhandle Northern, a short line operating between BNSF’s cross-country track and a large complex of chemical plants in the Texas Panhandle, argued that it was. The Fifth Circuit made a detailed “Erie guess” about the construction of the parties’ contract under the controlling Illinois law, and rendered judgment in favor of Panhandle Northern:
“[I]in making an Erie guess, we must determine, in our best judgment, how we believe the Illinois Supreme Court would resolve whether the handling-carrier relationship between PNR and BNSF is terminable at will. And, as reflected in the [key Illinois Supreme Court] decision, careful analysis of the text of the contract is paramount in making such a determination. Moreover, in the cases BNSF relies upon, the courts discussed the economics of the parties’ agreements only after first examining closely the text of the contracts at issue and determining that there were termination provisions sufficient to take the contracts of indefinite duration out of the general rule of at-will termination. Although the courts could have ended their decisions upon making those determinations, they then went on to discuss the economics of the parties’ agreements to further bolster their decisions that the contracts were not terminable at will.”
No. 18-11416 (Jan. 3, 2020). (LPCH represented the successful appellant in this case.)
In a dispute about the allocation of a fee award in a successful class action case, the trial court expressly declined to follow the customary factors about reasonableness, instead focusing on the equities of earlier agreements among counsel. Applying a prior Circuit case on the issue, the Fifth Circuit reversed: “Although sympathetic to the difficult task the lawyers gave to the district court, we must vacate the award allocating attorney’s fees and remand for proceedings consistent with this opinion and with due consideration of the Johnson factors. While nothing forecloses an agreement among all, its absence leaves no choice but to ‘do it by the book.’ The result will be ‘equitable’ but not necessarily the extant result.” Torres v. SGE Management, LLC, No. 18-20801 (Dec.18, 2019).
When planning your next trip to New Orleans, be sure to check the 2020 Mardi Gras parade schedule! Mardi Gras falls on February 25 this year.
Ms. Whitlock received a large amount of money from the DeBerrys in September 2013, and returned $241,000 of it to them in October. In early 2014, Mr. DeBerry filed for bankruptcy. The trustee of his bankruptcy estate sought recovery of the 2013 transfer from Ms. Whitlock. The Fifth Circuit agreed with her that the $241,000 was not recoverable because it had already been returned to the estate before filing of the bankruptcy petition:
In matters of statutory interpretation, text is always the alpha. Here, it’s also the omega. Section 550(a) permits the trustee to “recover” the property. To “recover” means “[t]o get back or regain in full or in equivalence.” Obtaining a duplicate of something is not getting it back; it’s getting a windfall. Property that has already been returned cannot be “recovered” in any meaningful sense. And that principle defeats the Trustee’s claims against Ms. Whitlock. Once the fraudulently transferred property has been returned, the bankruptcy trustee cannot “recover” it again using § 550(a)
Whitlock v. Lowe, No. 18-50335 (Dec. 23, 2019) (citations omitted) (emphasis added).
A Chevron dispute about the Department of the Interior’s collection of natural gas royalties led to the question whether “the agency must credit all of W&T’s prior overdeliveries in calculating the cumulative delivery shortfall.” Observing that the defense of “equitable recoupment is ‘never barred by the statute of limitations so long as the main action itself is timely,'” the Fifth Circuit rejected the Department’s three arguments against its application – looking to three common reference points for resolving such disputes:
W&T Offshore v. Bernhardt, No. 18-30876 (Dec. 23, 2019).
Schrödinger’s Cat, wily feline that it is, made a cameo in yesterday’s Affordable Care Act opinion. Rebutting a point made by the dissent, the panel majority observed:
The dissenting opinion’s theory of the “law that does nothing” results in some bizarre metaphysical conclusions. The ACA was signed into law in 2010. No one questions that when it was signed, § 5000A was an exercise of legislative power. Yet today, the dissenting opinion asserts, § 5000A is not an exercise of legislative power. So did Congress exercise legislative power in 2010, as seen from 2015? As seen from 2018? Does § 5000A ontologically re-emerge should a future Congress restore the shared responsibility payment? Perhaps, like Schrödinger’s cat, § 5000A exists in both states simultaneously. The dissenting opinion does not say. Our approach requires no such quantum musings.
Slip op. at 43 n.38 (emphasis added).
The Fifth Circuit has ruled in the closely-watched constitutional challenge to the Affordable Care Act, Texas v. United States, No. 19-10011 (Dec. 18, 2019). The panel majority opinion, written by Judge Elrod and joined by Judge Englehardt, held:
First, there is a live case or controversy because the intervenor-defendant states have standing to appeal and, even if they did not, there remains a live case or controversy between the plaintiffs and the federal defendants. Second, the plaintiffs have Article III standing to bring this challenge to the ACA; the individual mandate injures both the individual plaintiffs, by requiring them to buy insurance that they do not want, and the state plaintiffs, by increasing their costs of complying with the reporting requirements that accompany the individual mandate. Third, the individual mandate is unconstitutional because it can no longer be read as a tax, and there is no other constitutional provision that justifies this exercise of congressional power. Fourth, on the severability question, we remand to the district court to provide additional analysis of the provisions of the ACA as they currently exist.
(emphasis added). Judge King dissented, stating: “I would vacate the district court’s order because none of the plaintiffs have standing to challenge the coverage requirement. And although I would not reach the merits or remedial issues, if I did, I would conclude that the coverage requirement is constitutional, albeit unenforceable, and entirely severable from the remainder of the Affordable Care Act.”
Appellants complained about the treatment of their claims by the system established to resolve the “Chinese-Manufactured Drywall Products Liability Multi-District Litigation.” They contended that “a disagreement with the District Court’s interpretation and application of the settlement agreement invalidates the waivers” of appeal rights in that agreement. The Fifth Circuit disagreed, concluding that this argument “negates the entire purpose of the appeal waiver and would render these agreed upon terms meaningless,” and reminding that to make such a waiver, “a party need only understand the right to appeal that is given up, not all the facts relating to all potential challenges that could be raised on appeal.” Asch v. Gebrueder Knauf, No. 18-31223 (Dec. 12, 2019, unpublished).
A $61,000 jury verdict for allegedly unfair debt collection practices turned on whether the debt at issue was a consumer debt; specifically, whether “the jury could reasonably infer that the Synchrony Bank dept at issue was the QVC credit card, which was used exclusively for personal purchases, and, therefore, a consumer debt.” Jones v. Portfolio Recovery Associates LLC, No 18-50703 (Dec. 12, 2019, unpubl.) The Fifth Circuit reversed the trial court’s grant of JMOL on this issue, rejecting four arguments by the defendant that involved “two jury functions: drawing inferences and making credibility determinations.” The Court concluded: “Though it may have been simpler for Jones to explicitly connect these dots for the jury, her failure to do so is not enough to overturn the jury’s verdict. We permit—and in fact implore—juries to process contradictory information and make inferences to reach a verdict. And that is what this jury did. It was not the clearest path to victory for Jones, but it was a reasonable path, which is all we require.”
Plaintiff, suing in his capacity as “God of the Earth Realm” and “Trust Protector of the American Indian Tribe of משֶׁ ה Moses,” complained of, inter alia, conspiracy between the United States and Louisiana to monopolize “intergalactic foreign trade” and sought a “declaration of rights guaranteed . . . by the 1795 Spanish Treaty with the Catholic Majesty of Spain.” Perhaps a Martian or Venusian court will have jurisdiction over his claim, but the Western District of Louisiana does not, as the Fifth Circuit affirmed its finding that it lacked jurisdiction “because the claim[s] asserted [are] so attenuated and unsubstantial as to be absolutely devoid of merit.” Atakapa Indian de Creole Nation v. Louisiana, No. 19-30032 (Dec. 10, 2019).
Three provocative cases are set for en banc consideration by the full Fifth Circuit (with some minor variations due to recusals and senior-judge participation) on January 22-23, 2020:
The Fifth Circuit found that the Ex Parte Young exception to Eleventh-Amendment immunity (Mr. Young appears to the right) did not apply to the Texas Attorney General’s potential enforcement of a statute that was in conflict with a City of Austin ordinance: “[N]one of the cases the City cites to demonstrate the Attorney General’s ‘habit’ of intervening in suits involving municipal ordinances to ‘enforce the supremacy of state law’ have any overlapping facts with this case or are even remotely related to the Ordinance. And the 
mere fact that the Attorney General has the authority to enforce § 250.007 cannot be said to ‘constrain’ the City from enforcing the Ordinance. The City simply provides no evidence that the Attorney General may “similarly bring a proceeding” to enforce § 250.007: that he has chosen to intervene to defend different statutes under different circumstances does not show that he is likely to do the same here. . . . Thus, we find that Attorney General Paxton lacks the requisite ‘connection to the enforcement’ of § 250.007.” City of Austin v. Paxton, No. 18-50646 (Dec. 4, 2019).
“Here, however, we have an appeal from grant of a motion to dismiss without prejudice to refile. It is not a final judgment because ‘the district court did not adjudicate or dispose of any substantive issues on the merits.'” The King-Morocco v. Banner of N.O., L.L.C., No. 19-30323 (Nov. 27, 2019) (unpubl.) (citations omitted).
The GSA’s page about the John Minor Wisdom Courthouse offers a free poster for download of the building’s striking “Great Hall.”
The Fifth Circuit affirmed a Tax Court decision about a $52 million “bad debt” deduction, observing: “Baker Hughes’ authorities all involved a bona fide debt. … No authority shown to us holds that a bad-debt deduction applies to a guarantor’s payment on a guarantee that does not create a debtor-creditor relationship with the party whose original obligation is extinguished.” Baker Hughes Inc. v. United States, No. 18-20585 (Nov. 21, 2019).
Diece-Lisa Indus., Inc. v. Disney Enterprises, Inc., a dispute about trademark rights related to “Lots-O’-Huggin’ Bear” (right), analyzed whether the disposition of several consolidated cases on personal-jurisdiction grounds could be reviewed. After reviewing the specific claims and the applicable standards, the Fifth Circuit “conclude[d] that we have jurisdiction to review the interlocutory orders . . . because they can be ‘regarded as merged into the final judgment terminating'” one of the case numbers. It then affirmed, finding that the plaintiffs’ “franchise theory” (a kind of single-business-enterprise argument) lacked merit, and that a nonexclusive license agreement also was not, by itself, a basis for jurisdiction. No. 17-41268 (Nov. 19, 2019).
In the 1200s, Henry III was protected from suit by sovereign immunity, as chronicled by the prolific Bracton;
In Williams v. TH Healthcare Ltd., No. 19-20134 (Nov. 14, 2019, unpubl.), the Fifth Circuit made two broadly-applicable points about the deadline running from receipt of an EEOC right-to-sue letter:
A mismatch between counsel’s activity and the results obtained led to a substantial revision of the “lodestar” in Portillo v. Permanent Workers LLC, No. 18-31238 (Nov. 11, 2018) (unpublished): “[A] drastic reduction from the requested fees is called for by deleting some of the hours consumed and otherwise departing from the lodestar. Spending tens of thousands of dollars to recover $1305 makes little sense. Although the degree of success may not be the only factor considered, it weighs heavily here, particularly since no overarching principle was vindicated, no problem solved.” (citations omitted). (Above, a picture of a Lockheed C-60 “Lodestar”, a civilian airliner and military transport during World War II.)
“Since the issue of whether the district court applied the correct state’s law to resolve the matters before it is of primary importance in determining whether the district court ultimately reached the correct result in granting Gray’s request for summary judgment, we reject Gray’s categorization of its appeal as ‘conditional.’ Either the district court applied the correct law, or it did not. Whether the district court applied the correct law cannot and does not revolve on whether it reached a result that benefits Gray. Thus, we will address the propriety of the district court’s decision to apply Texas law regardless of whether we agree with the court’s conclusion under Texas law.” Aggreko LLC v. Chartis Specialty Ins. Co., No. 18-40325 (Nov. 11, 2019).
“[T]he plain language of the [Louisiana Lease of Movables Act] forbids a lessor from both repossessing leased equipment and collecting accelerated future rental payments. Because the Lease’s liquidated damages clause authorizes just this combination of remedies, the district court properly held it unenforceable. We, like the district court, ‘agree[] with Prince that lessors cannot be allowed to circumvent Louisiana law by simply including a lease provision allowing liquidated damages in the amount of future rent payments.’” Bank of the West v. Prince, No. 18-30970 (Nov. 12, 2019).
The en banc Fifth Circuit will consider the panel opinion in Williams v. Taylor-Seidenbach, Inc., No. 18-31159 (Aug. 15, 2019), which continued to find a lack of appellate jurisdiction over a dispute because of the so-called “finality trap.” In a previous appeal, the Court found a lack of appellate jurisdiction over an order after three defendants had been dismissed without prejudice. The plaintiff returned to district court and obtained a new order directing dismissal with prejudice (with some caveats), but to no avail: “[T]he rule 54(b) judgment did not retroactively transform the prior without-prejudice dismissals into with-prejudice dismissals. . . . [T]he finality trap, which was found to bar appellate jurisdiction in Williams I, remains shut.” Judge Haynes’s concurrence in the panel opinion asked for en banc review of the Fifth Circuit’s cases on this topic.
Jones, the heir of a former member of the Dixie Cups, a Louisiana-based musical group, sued the Artist Rights Enforcement Corporation in Louisiana for mishandling royalties. The Fifth Circuit affirmed the dismissal of Jones’s case for lack of personal jurisdiction, observing:
Jones v. Artists Rights Enf. Corp., No. 19-30374 (Oct. 22, 2019) (unpublished).
The full Fifth Circuit has voted to rehear Brackeen v. Bernhardt, an important case about the Indian Child Welfare Act with broader ramifications for administrative law generally. Judge Ho is recused; Senior Judge Wiener will join the en banc court for this case because he served on the panel.
The Fifth Circuit reversed an OSHA determination that a company had failed to justify an untimely response, noting that under Fed. R. Civ. P. 60(b)(1) (which OSHA has adopted for this particular situation): “The excusable neglect inquiry is not limited to whether a party’s mistake caused the delay, such cause being expressed in the term ‘neglect,’ but equally concerns whether the party’s mistake or omission was ‘excusable.’ Focusing narrowly on whether a party is at fault for the delay and denying relief if it bears any blame clearly conflicts with Pioneer‘s more lenient and comprehensive standard.” Coleman Hammons Constr. Co. v. OSHA, No. 18-60559 (Nov. 6, 2019).
“Appellants argue that, by finding disgorgement a ‘penalty’ under [28] § 2462, Kokesh necessarily also decided that disgorgement is not an equitable remedy courts may impose in SEC enforcement proceedings. We disagree. Kokesh itself expressly declined to address that question, and so our precedent upholding district court authority to order disgorgement controls.” SEC v. Team Resources Inc., No. 18-10931 (Nov. 5, 2019).
UCC section 9.404(a)(2) say that “the rights of an assignee are subject to . . . any other defense or claim of the account debtor against the assignor that accrues before the account debtor receives a notification of the assignment authenticated by the assignor or the assignee.” Applying this provision, the Fifth Circuit held: “Filing a financing statement does not provide actual notice. Without an inquiry duty, [debtor]’s failure to find the financing statement is not ‘actual notice.’ Because the facts presented do not support the conclusion of actual notice, the district court should have granted judgment in favor of [debtor].” Finserv Casualty Co. v. Symetra Life Ins. Co., No. 18-20245 (Oct. 29, 2019). The Court acknowledged that a sufficient factual record could establish actual notice, but found that this one did not do so: “Although [debtor] knew that the payments might be assigned, and even if it knew that such payments were routinely assigned in the structured-settlement industry, it could not have had more than a suspicion that the payments had in fact been assigned.”
An excellent recent article in Law360 summarizes the state of the sometimes-Byzantine structure of Texas’s intermediate appellate courts. The article is behind Law360’s paywall but my remarks are below:
The Fifth Circuit affirmed a preliminary injunction that enforced a (reformed) noncompetition agreement under Louisiana law, observing, inter alia:
Brock Services LLC v. Rogillio, 936 F.3d 290 (5th Cir. 2019).
In a case about whether a debtor’s discharge order could be enforced in a district other than the one that entered the order – a difficult question generating much analysis over the years – the Fifth Circuit “adopt[s] the language of the Second Circuit that returning to the issuing bankruptcy court to enforce an injunction is required at least in order to up hold ‘respect for judicial process.’ The bankruptcy court erred in holding that it could address contempt for violations of injunctions arising from discharges by bankruptcy courts in other districts. Therefore, as to . . . those debtors whose discharges were entered by courts in other districts, the bankruptcy court in these proceedings has no authority to enforce the resulting injunction.” Crocker v. Navient Solutions LLC, No. 18-20254 (Oct. 21, 2019) (citation omitted). This holding was fatal to an effort to bring a class action about the alleged mishandling of a type of student-loan debt.
David Russell paid money to Ellen Yarrell, and by doing so argued that he discharged a debt to his ex-wife Janna Russell. The Fifth Circuit agreed with the district court that this payment was ineffective because Yarrell was not Janna’s agent at the time,
As to express agency, the relevant court order required that any negotiable instrument “shall be made payable to ‘Janna Russell’ only and shall not have any other endorsement.” As to apparent agency, while Yarrell was still an attorney of record for Janna at the time, that general relationship did not control over David’s specific awareness that Yarrell was not authorized to serve as Janna’s agent on this specific issue. Russell v. Russell, No. 18-20643 (Oct. 21, 2019).
Practice tip: The Court noted the black-letter principles that “whether . . . authority exists ‘depends on some communication by the principal either to the agent (actual or express authority) or to the third party (apparent or implied authority).’ It does not depend on whether the principal benefits from the transaction.“ (citation omitted, emphasis added). The Court noted, though, that neither party had raised the issue of ratification. Principles of restitution could also potentially come into play depending on the relationship between the alleged principal and agent.
“This case is a perfect example of when we should certify cases, and why certification is valuable. We are presented with a question of pure statutory interpretation on a recurring issue of interest to citizens and businesses across Texas. What’s more, it is a question that divided judges on this court. As reflected in our competing concurring opinions, different judges on this court have disagreed about whether the district court correctly interpreted the Texas Sales Representative Act (“TSRA”). But we all agreed that reasonable minds could differ. So rather than provide a partial answer—binding only litigants who file in federal court, not those in state court— we instead certified the question to the Supreme Court of Texas, which can speak with authority for all litigants, in state and federal court alike. We now have that answer, and accordingly affirm in part and reverse and remand in part.” JCB Inc. v. Horsburgh & Scott Co., No. 17-51023 (Oct. 17, 2019).
The Fifth Circuit will not ordinarily grant a writ of mandamus about the erroneous denial of a motion to dismiss for lack of subject matter jurisdiction. But in In re Gee, a sweeping challenge to Louisiana’s abortion laws, the Court observed:
“Here, the combination of five federalism concerns makes this a special circumstance and distinguishes it from an ordinary case: (1) A sovereign State is requesting the writ; (2) Plaintiffs seek sweeping review of an entire body of state law; (3) Plaintiffs seek structural injunctions that would give the district court de facto control of state law; (4) the type of discovery waiting on the other side of Louisiana’s motion to dismiss is categorically different than what awaits an ordinary civil litigant; and (5) the ordinary civil litigant cannot demand attorneys’ fees from the State’s taxpayers.”
The Court declined to grant the writ at this stage and after its detailed analysis of the relevant issues, observing
“. . . two reasons. First, it’s not clear from the district court’s order how it would resolve the State’s jurisdictional challenge. And second, much of the State’s argument in its mandamus petition goes beyond jurisdiction. In particular, the State argues that Plaintiffs’ “cumulative-effects challenge” is not cognizable. But that challenge might change after the district court conducts its claim-by-claim analysis of Plaintiffs’ standing. So in our view, resolution of whether that challenge is cognizable should await the district court’s jurisdictional analysis.”
No. 19-30353 (Oct. 18, 2019).
The Cenacs sued Orkin after Formosan termites damaged their house. Based largely on the contract documents, the Fifth Circuit affirmed summary judgment for Orkin, with the exception of the Cenacs’ negligence claim:
None of the contracts between the Cenacs and Orkin—the 1991 Agreement, the CPP, or the SSA—required Orkin to recommend, instruct, or direct its customers on how to remedy conditions conducive to termite infestation. . . . Under these circumstances, the Cenacs’ claim that Orkin recommended installation of a vapor barrier and approved its allegedly negligent installation does not involve the breach of a specific contractual duty. Rather, Orkin undertook the task of recommending and directing installation of a vapor barrier, which . . . it had no obligation to do under its contracts with the Cenacs.
Cenac v. Orkin LLC, No. 18-31121 (Oct. 18, 2019).
The EPA approved Louisiana’s plan for controlling haze; both environmental and industry groups protested. The Fifth Circuit affirmed the EPA’s approval under the “arbitrary and capricious” standard of review.
As to industry: “We afford ‘significant deference’ to agency decisions involving analysis of scientific data within the agency’s technical expertise. The EPA’s selection of a model to measure air pollution levels is precisely that type of decision. The EPA therefore did not act arbitrarily and capriciously in relying on the CALPUFF model to approve Louisiana’s [statutorily-required] determinations.”
As to environmental groups: “Louisiana’s explanation of its . . . determination . . . omitted two of the five mandatory factors and failed to compare—or even set out—the numbers for the costs and benefits of the control options Louisiana considered. Louisiana also failed to explain how its decision accounted for the EPA-submitted analyses that pointed out substantial flaws in other analyses in the administrative record. But applying the deferential standards of the Administrative Procedures Act to the facts of this case, we hold that the EPA’s approval of Louisiana’s [plan] was not arbitrary and capricious.” Sierra Club v. EPA, No. 18-60116 (Oct. 3, 2019).
Walker and Ameriprise Financial, pursuant to their agreement, arbitrated their dispute under FINRA rules. Walker argued that the panel “exceeded its powers,” and thus fell within a statutory ground for vacatur of the arbitration award. The Fifth Circuit disagreed: “’An arbitrator exceeds his powers [under § 10(a)(4)] if he acts contrary to express contractual provisions.’ Walker does not argue that the panel violated any express provisions of the arbitration agreement, but only that it incorrectly applied [FINRA] Rule 13504.” Walker v. Ameriprise Fin. Servcs., Inc., No. 18-11641 (Oct. 9, 2019) (unpublished).
After an unsuccessful detour to the High Court of the Republic of the Marshall Islands, a plaintiff tried to appeal an award from the Western District of Texas of $26,726 in costs under Fed. R. Civ. P. 41(d) (“Costs of a Previously Dismissed Action”), along with a related order that administratively closed the Texas matter until the costs were paid. The Fifth Circuit found it had no jurisdiction because: (1) administrative closure is not a final judgment; (2) the collateral-order doctrine did not apply, “[s]ince there is no indication that the ordered costs could not be paid and later recovered upon a successful appeal of a final judgment,” and (3) mandamus was not available, especially when: “[A]ppellants here do not allege that they are unable to pay. Unwillingness to pay based on disagreement with the district court’s decision is insufficient. Appellants can obtain relief through direct appeal after a final judgment.” Sammons v. Economou, No. 18-50932 (Oct. 10, 2019).
A substantial body of law, focused on the requirements of the Federal Rules of Civil Procedure, defines the appropriate level of specificity for a plaintiff’s complaint. Pleading specificity can interact with other bodies of law as well, such as insurance coverage, where additional detail can affect an “eight-corners” analysis of whether the allegations fall within coverage. Another illustrative, if infrequent, situation appeared in the FCA case of United States ex rel. Hendrickson v. Bank of America, N.A., where a plaintiff’s lack of detail fed into the defendants’ defense of public disclosure: “Not disputing that the six documents constituted public disclosures, Hendrickson claims they do not disclose substantially the same allegations as his complaint because they do not reference DNEs or name specific banks. The banks respond that the documents’ disclosures are as specific as the complaint, which fails to allege particular instances of their receiving DNEs or differentiate allegations made against each defendant.” No. 18-11472 (Oct. 7, 2019).
A party sought to appeal a ruling in a forfeiture action about the M/V Galactica Star (distinct from the Battlestar Galactica, right); the Fifth Circuit dismissed for lack of jurisdiction: “Although a “Final Judgment” was signed and entered in district court, it did not reference Rule 54(b), did not include any language taken from the rule,and did not express the sentiments contained within the rule. The only document referenced in the judgment was the Government’s motion to strike, which did not mention Rule 54(b), the language of the rule, partial finality, or immediate appealability.” United States v. The MV Galactica Star, No. 18-20781 (Oct. 1, 2019). Cf. Lehmann v. Har-Con Corp., 39 S.W.3d 191 (Tex. 2001) (“[W]hen there has not been a conventional trial on the merits, an order or judgment is not final for purposes of appeal unless it actually disposes of every pending claim and party or unless it clearly and unequivocally states that it finally disposes of all claims and all parties.” (emphasis added)).
While focused on the intricate McDonnell-Douglas burden-shifting framework (a structure described in more than one Fifth Circuit opinion as “kudzu-like“), Garcia v. Professional Contract Servcs. Inc provides general insight about creation of a genuine issue of material fact.
As to the plaintiff’s prima facie case, all parties agreed that “proximity in time” – the passage of only 76 days between the plaintiff’s protected whistleblowing activity and termination – was sufficient to meet this burden.
As to pretext, while temporal proximity alone is not enough, the Fifth Circuit found a genuine issue of fact when the plaintiff pointed to: “(1) temporal proximity between his protected activity and his firing; (2) his dispute of the facts leading up to his termination; (3) a similarly situated employee who was not terminated for similar conduct; (4) harassment from his supervisor after the company knew of his protected whistleblowing conduct; (5) the ultimate stated reason for the company’s termination of [plaintiff] had been known to the compan
y for years; and (6) the company stood to lose millions of dollars if its conduct was discovered.” The Court also disagreed with the district court about whether the “similarly situated” employee identified by the plaintiff qualified as such, noting that while they worked in different divisions: “Rodas and Garcia had identical jobs, reported to the same people, had a similar history of infractions, and both made mistakes overseeing Job 560.” No. 18-50144 (Sept. 11, 2019).
Are unpublished opinions introducing murkiness into a legal issue? Rein them in with Garcia v. Professional Contract Servcs., Inc., No. 18-50144, (Sept. 11, 2019), which:
the binding Fifth Circuit precedent on this point because they did not need to: both decisions resolved the cases before them on other grounds.” (citations omitted); and
600Camp and 600Commerce are recognized in the first-ever list of “Texas Trailblazers,” as just published by Texas Lawyer!
If you are litigating a Texas contract-law case and feel the need to scratch an equitable itch – don’t: “The Supreme Court of Texas has observed that the interpretive role of judges ‘is to be neither generous nor parsimonious’ but unswervingly faithful to what the words actually say. Looser atextual readings may scratch an equitable itch, or at times seem more pragmatic. But the Texas High Court adheres to this centuries-old principle—’law, without equity, though hard and disagreeable, is much more desirable for the public good, than equity without law: which would make every judge a legislator, and introduce the most infinite confusion.’ Texas precedent is no-nonsense about giving words their most forthright, contextual meaning. Plain language forbids judicial ad-libbing. Here, the text is clear. And, at least in Texas, clear text = controlling text.” Weaver v. Metropolitan Life Ins. Co., No. 18-10517 (Sept. 20, 2019).
On October 1, the term of Hon. Priscilla Owen begins as Chief Judge of the Fifth Circuit. The Court’s official press release provides background information. Every best wish to Chief Judge Owen in this important position.
In Simmons v. Pacific Bells LLC, the Fifth Circuit reversed a summary judgment against a Taco Bell employee who claimed he was retaliated against for going to jury duty. In particular –
He raised specific facts indicating that his termination for tardiness may have been pretextual. First, Simmons was tardy less often than other coworkers, yet those coworkers were not terminated and did not suffer adverse employment action. Second, he was never once warned about his tardiness prior to his termination. Third, Simmons demonstrated that some of his tardiness resulted from Pacific Bells’s business practices. Fourth, he was terminated immediately following his jury service. Fifth, the individual who told Simmons to lie recommended his termination and was present for it. Sixth, the individual who terminated Simmons stated in an email that she had “several different routes I can go with his termination. . . . I want to focus on [his] excessive tardiness.” In sum, the timing of Simmons’s termination, combined with the arguably pretextual rationale for his firing, could lead a reasonable jury to conclude that he was fired as a result of his refusal to lie to avoid jury service.
The Court declined to address a related issue about the scope of the “interested witness” doctrine in summary-judgment practice. No. 19-60001 (Sept. 27, 2019) (unpublished).
The Fifth Circuit (minus the two Mississippi judges, who are) voted to take en banc the difficult voting rights case of Thomas v. Bryant, No. 19-60133 (as revised, Sept. 3, 2019), which also presents important issues about justiciability and appellate procedure. At the panel level, all three judges wrote opinions.
The district court held a jury trial on whether Gilbert Galan had notice of Valero Energy’s (his employer) arbitration program. Valero called the arbitation program “Dialogue”; the jury charge asked whether “Valero prove[d] by a preponderance of the evidence that it gave unequivocal notice to Gilbert Galan, Jr. of definite changes in employment terms regarding Valero’s Dialogue program[,]” Additionally, an instruction said that the “sole issue in this trial is whether Defendant[] Valero . . . notified plaintiff of the arbitration program and its mandatory nature.” Galan objected that the question did not have the word “arbitration”; “[h]is point is that the jury could have concluded Galan knew about the Dialogue Program as a whole, but not the part of it requiring arbitration.” The Fifth Circuit found no abuse of discretion in denying that request, especially given the instruction accompanying the question. Galan v. Valero Services, Inc., No. 19-400753 (Sept. 23, 2019) (unpublished).
The 600Camp blog celebrates its birthday this week, and invites you to join the festivity with some shrimp remoulade; here’s the recipe from Galatoire’s so you can spice up your week!
Another discovery dispute in litigation about governance of the airport in Jackson, Mississippi (a previous proceeding involved a mandamus proceeding related to the deposition of the governor’s chief of staff) arose from subpoenas to several legislators, who asserted legislative privilege in response. The Fifth Circuit found that the plaintiffs lacked standing (“The plaintiffs cite no precedent supporting their theory that Jackson voters have a right to elect officials with the exclusive authority to select municipal airport commissioners”), and that this issue was properly raised even during an interlocutory appeal of a collateral order: “[E]ven nonparty witnesses refusing to comply with a discovery order may challenge standing . . . because ‘the subpoena power of a court cannot be more extensive than its jurisdiction.'” Stallworth v. Bryant, No. 18-60587 (Aug. 21, 2019).
Cleveland v. Bell was a wrongful death claim, asserted under 42 U.S.C. § 1983, which turned on the allegation that a prison nurse was indifferent to the decedent’s calls for help. The trial court denied qualified immunity to the nurse and the Fifth Circuit reversed: “[W]e find no evidence that . . . Nurse Bell subjectively ‘dr[e]w the inference’ that Cleveland was experiencing a life-threatening medical emergency. The record contains statements from Nurse Bell indicating that she thought there was nothing wrong with Cleveland and believed he was faking illness.But nothing suggests that these statements reflected anything other than her sincere opinion at the time. Even if we construe her statements in the light most favorable to Plaintiffs, they are insufficient to establish that Nurse Bell knew how serious the situation was.” No. 18-30968 (Sept. 13, 2019) (emphasis added).
A surprisingly subtle problem can arise under secction 2.316 of the UCC when a party urges a role for implied warranties, even though the parties’ agreement contains express ones. A comment to that section advises: “The situation in which the buyer gives precise and complete specifications as to the seller is not explicitly covered in this section, but this is a frequent circumstance by which the implied warranties may be excluded.” In Baker Hughes v. UE Compression, the Fifth Circuit found such a situation when:
. .. this Agreement included 18 single-space pages of Baker Hughes’s Specification and a 21-page responsive set of specifications comprising UE’s Quote. Baker Hughes ordered exactly what it required in the boosters. Other contractual provisions cited above confirm Baker Hughes’s ultimate responsibility for the design, its duty to supply technical information, its ability to modify specs during the fabrication, and its right to approve any drawings or specifications prepared by UE
Mo. 17-20709 (Sept. 12, 2019) (Our firm’s state-court brief on the topic in an unrelated case shows some of the potential complexities about this UCC issue.)
The Flying Dutchman is a mythical ship that forever travels the seas, unable to find a port. Conn Appliances, Inc. v. Williams presents a similar tale about a dispute involving a retail installment contract. Williams sued Conn in Tennessee, realized that he had an arbitration agreement in his contract, and then dismissed his suit in favor of arbitration in Tennessee (the clause required arbitration “near his residence”). Williams won; he filed suit in Tennessee to enforce the award while Conn filed sued in its home state of Texas to vacate it (the clause allowed confirmation in “any court with jurisdiction”). The Fifth Circuit agreed that Williams was not subject to personal jurisdiction in Texas, and affirmed the dismissal of that action. Conn protested that it was not subject to jurisdiction in Tennessee, and the Court observed: “[E]ven if the Western District of Tennessee is not the proper forum, the lack of jurisdiction over Conn in another forum does not mean that the Southern District of Texas has personal jurisdiction over Williams.” No. 19-20139 (Sept. 4, 2019).
An accounting firm successfully defended against a malpractice claim by relying on Mississippi’s “minutes rule,” under which “Mississippi courts will not give legal effect to a contract with a public board unless the board’s approval of the contract is reflected in its minutes.” After losing a summary judgment, the plaintiff (a county hospital) “attempted to submit additional evidence into the record to prove the existence of a professional relationship with Horne—namely, minutes from the board’s regular session meetings on January 19, 2011 and March 16, 2011, as well as minutes from the board’s executive session meetings. . . . The Medical Center admitted, however, that this evidence was in fact not new at all—the Center had access to its own minutes throughout the proceedings. It nevertheless sought to excuse its tardiness on the ground that the minutes became relevant only when the district court granted summary judgment to Horne.” (emphasis added). The district court rejected that explanation, and so did the Fifth Circuit. Lefoldt v. Horne LLP, No. 18-60581 (Sept. 6, 2019).
The full Fifth Circuit engaged the boundaries of the administrative state in Collins v. Mnuchin. A 9-7 majority of the en banc Court found that the FHFA (the regulator of Fannie Mae and Freddie Mac) was structured unconstitutionally; a different 9-7 majority found that the appropriate remedy was a go-forward restructure of the agency rather than the unwinding of a significant, previously-ordered financial transaction. (If the below is hard to read in your browser, just click on it to see it full-sized).
Four Republican appointees joined the majority on remedy, two of whom–Judges Owen and Duncan–had joined the majority on constitutionality.
Among the various concurrences and dissents, Judges Ho and Oldham concurred to emphasize the significance of the case to other administrative agencies, while Judges Costa and Higginson dissented on the basis of the plaintiffs’ standing.
The diverse approaches of the Republican-appointed judges underscore the frequent observation on this blog that the term “conservative” is a broad umbrella for different perspectives on distinct aspects of the apparatus of government.
The question in French v. Linn Energy LLC was subordination; the analysis reviewed the Bankruptcy Code’s policy goals: “Section 510(b) serves to effectuate one of the general principles of corporate and bankruptcy law: that creditors are entitled to be paid ahead of shareholders in the distribution of corporate assets.” The Court reviewed this issue: “whether In this case we decide that payments owed to a shareholder by a bankrupt debtor, which are not quite dividends but which certainly look a lot like dividends, should be treated like the equity interests of a shareholder and subordinated to claims by creditors of the debtor,’ and concluded that they should be. No. 18-40369 (Sept. 3, 2019).
A securities-fraud class action lived to fight another day in Broyles v. Commonwealth Advisors: “The district court erred in deciding that plaintiffs lacked standing under Delaware law to bring a direct action against their investment advisers rather than initiating a derivative action in behalf of the hedge funds that the advisers had assembled and managed for fraudulent inducement purposes. The investor plaintiffs adequately supported their motion for partial summary judgment demonstrating their Article III standing with appropriate evidence of their injury-in-fact that arose :immediately upon their purchase of the falsely overvalued securities; were induced and caused by the defendant advisers’ fraudulent advice and solicitations; and likely will be redressed by a favorable decision on the merits.” No. 17-30092 (Aug. 28, 2019).
Conservative thinkers frequently express skepticism about the administrative state, and in particular, the Chevron doctrine about judicial deference to it. A powerful counterpoint to that line of thinking, and an equally orthodox part of conservative philosophy, appears in the Fifth Circuit’s recent opinion in Center for Biological Diversity v. EPA, which found a lack of standing to challenge an EPA discharge permit and reminded: “’For the federal courts to decide questions of law arising outside of cases and controversies would be inimical to the Constitution’s democratic character.’ It would improperly transform courts into ‘roving commissions assigned to pass judgment on the validity of the Nation’s laws’ and agency actions. In our Government, there are entities that address environmental issues outside of the case-or-controversy constraint. This Court is not one of them. As Judge Sentelle put it many years ago: ‘The federal judiciary is not a backseat Congress nor some sort of super-agency.’“ No. 18-60102 (Aug. 30, 2019) (citations omitted).
“Incentive alignment” is a well-known business concept; in law, various types of fee arrangements are often employed to align the financial motivations of lawyer and client. The law is also wary of incentives for injustice, especially when the finances of the justice system become muddled with court procedure. A recent Fifth Circuit opinion joined the list of the clearest examples of such misalignments:
Double Eagle Energy Services filed for Chapter 11 bankruptcy protection and then sued two defendants for breach of contract in federal district court. Double Eagle then assigned that claim to one of its creditors; the defendants argued that this assignment destroyed federal subject matter jurisdiction. The Fifth Circuit disagreed, relying upon the “time-of-filing” rule to find that the “related to bankruptcy” jurisdiction existing when the case was filed continued to exist after the assignment. The separate question–whether the district court should nevertheless its exercise discretion to dismiss the case–was remanded, as the Court’s “ordinary practice for discretionary decisions is remanding to ‘allow the district court to exercise its discretion in the first instance.'” Double Eagle Energy Services v. Markwest Utica EMG, No. 19-30207 (Aug. 26, 2019).
A vocational school (RRCC) sought to recover damages from the federal government’s civil forfeiture of $4 million from it, arguing that the seizure without notice put it out of business. the Fifth Circuit found the school’s claims barred by sovereign immunity: “Congress has provided various remedies for claimants like RRCC who assert that the United States has wrongfully seized their property in forfeiture proceedings. Under certain circumstances, claimants who “substantially prevail[ ]” in a forfeiture action may recover attorneys’ fees, costs, and interest. In some cases, they may sue the United States for property damages under the FTCA. .What claimants may not do, however, is sue the United States for constitutional torts arising out of the property seizure. Congress has not waived the United States’ sovereign immunity for damages claims of that nature. Because RRCC’s counterclaims sought precisely those kinds of damages, we hold its counterclaims are barred by sovereign immunity.” United States v. $4,480,466.16, No. 18-10801 (Aug. 22, 2019), withdrawn and revised (Nov. 5, 2019).
The Fifth Circuit confirmed a district judge’s broad discretion over discovery in JP Morgan Chase Bank v. Datatreasury, a dispute about the scope of postjudgment discovery in a licensing dispute won by Chase. The Court held that the district court did not abuse its discretion in:
No. 18-40043 (Aug. 23, 2019).
Nearly a century ago, the unfortunate Helen Palsgraf was injured in a Long Island Railroad station; the difficult tort-law issues arising from her injury continue to challenge the courts today. Martinez v. Walgreens Co. presented the question “whether, under Texas law, a pharmacy owes a duty of care to third parties injured on the road by a customer who was negligently given someone else’s prescription.” The Fifth Circuit answered “no,” considering, inter alia: (1) “[I]t was not sufficiently foreseeable that a pharmacy customer would take the medication in a bottle intended for someone else, notwithstanding that the label listed someone else’s name and a different medication,” and (2) “[T]he Texas legislature has shown itself to be both willing and able to undertake the public policy balancing inherent in extensive regulation of pharmacies’ treatment of prescription drugs.” No. 18-40636 (Aug. 6, 2019).
“Resolving an issue that has brewed for several years in this circuit, we conclude that the TCPA does not apply in diversity cases.” Klocke v. Watson, No. 17-11320 (revised Aug. 29, 2019) (emphasis added). “Because the TCPA imposes evidentiary weighing requirements not found in the Federal Rules, and operates largely without pre-decisional discovery, it conflicts with those rules.”
Assuming the confirmation of Hon. Sul Ozerden of Mississippi, all active-judge positions on the Fifth Circuit will soon be filled. Of the 17 judges, 12 will have been appointed by Republican Presidents (6 by President Trump), and 5 by Democrats. 8 of the 17 judges will have previously served, for some amount of time, as a state or federal trial judge.
En banc votes by the Court, examined with an eye on the political party of the appointing Presidents, can show patterns. For example, in this week’s Cole v. Carson case, the Democrat-appointed judges voted the same way while the Republican-appointed judges divided. (If these slides are hard to read on your browser, clicking on them should bring them to full size and clear resolution):
All former trial judges voted the same way:
Similarly, in the 2017 case of Jauch v. Choctaw County about pretrial detention, all the Court’s Democrat-appointed judges voted against en banc review, while the Republican-appointed ones divided:
And again, all of the Court’s former trial judges voted the same way:
There are many ways to define, characterize, and otherwise describe judges and their philosophies. This quick review suggests that an exclusive focus on political-party association is too narrow.
The Fifth Circuit’s published opinions this week include Municipal Employees’ Retirement System v. Pier One Imports, a large securities case involving the beleaguered stock of the “Pier One” retail chain; the second, Cole v. Carson, is a long-running, hard-fought lawsuit about a police shooting. (The fracturing of the en banc court in Cole will be the subject of an upcoming post.) Despite the gravity of these issues, the Court crafted two wonderful turns of phrase, deserving of a moment’s recognition because they are both fun and effective.
Texas liquor law prohibits a public corporation from holding a “P permit,” which “authorize[s] the sale of liquor, wine, and ale for off-premises consumption.” Wal-Mart successfully challenged this law as a violation of the dormant Commerce Clause.The Fifth Circuit reversed and remanded, making these observations, of general interest beyond this specific dispute, on the issue of legislative intent:
Wal-Mart Stores, Inc. v. Texas Alcoholic Beverage Commission, No. 18-50299 (Aug. 15, 2019).
A long-litigated dispute about arbitrability reached its latest stage in Archer & White Sales, Inc. v. Henry Schein, Inc., on remand from the Supreme Court, in which the Fifth Circuit held: “The most natural reading of the arbitration clause at issue here states that any dispute, except actions seeking injunctive relief, shall be resolved in arbitration in accordance with the AAA rules. The plain language incorporates the AAA rules—and therefore delegates arbitrability—for all disputes except those under the carve-out. Given that carve-out, we cannot say that the Dealer Agreement evinces a ‘clear and unmistakable’ intent to delegate arbitrability.”
As for the Supreme Court’s opinion, the panel said: “We are mindful of the Court’s reminder that ‘[w]hen the parties’ contract delegates the arbitrability question to an arbitrator, the courts must respect the parties’ decision as embodied in the contract.’ But we must also heed its warning that ‘courts “should not assume that the parties agreed to arbitrate arbitrability unless there is clear and unmistakable evidence that they did so.’”‘ The parties could have unambiguously delegated this question, but they did not, and we are not empowered to re-write their agreement.” No. 16-41674 (Aug. 16, 2019).
DeJoria v. Maghreb Petroleum Exploration, S.A. presents, at first blush, an epic dispute in which “[t]he facts of this case are littered across the pages of the Federal Reporter.” A failed oil-development project in Morocco led to a $130 million judgment from the Moroccan courts. But after years of legal wrangling about the enforceability of that judgment in Texas, “despite the seeming complexity of this case—royal intrigue, a foreign proceeding, almost a billion dirhams at stake—it ends up being resolved on one of the most basic principles of appellate law: deference to the factfinder.” After confirming the correct legal framework, the Fifth Circuit found no clear error in the district court’s fact-findings. No. 18-50348 (Aug. 16, 2019).
The viability of a tort claim against T-Mobile, arising from delays in obtaining medical treatment, turned on whether this recent statement by the Texas Supreme Court was “obiter dictum” or “judicial dictum”:
Proximate cause requires both cause in fact and foreseeability. For a condition of property to be a cause in fact, the condition must serve as a substantial factor in causing the injury and without which the injury would not have occurred. When a condition or use of property merely furnishes a circumstance that makes the injury possible, the condition or use is not a substantial factor in causing the injury. To be a substantial factor, the condition or use of the property must actually have caused the injury. Thus, the use of property that simply hinders or delays treatment does not actually cause the injury and does not constitute a proximate cause of an injury.
The Fifth Circuit concluded that the statement was judicial dictum entitled to deference in an Erie analysis, and rendered summary judgment for T-Mobile. Alex v. T-Mobile USA, Inc., No. 18-10555 (June 6, 2019, unpublished) (applying City of Dallas v. Sanchez, 494 S.W.3d 722 (Tex. 2016)). (My Pepperdine Law Review article with the University of Idaho’s Wendy Couture remains a strong summary of the underlying theory.)
The complexity of the modern administrative state produces ornate procedural problems – specifically, in Wynnewood Refining Co. v. OSHRC, the challenge of two parties appealing an administrative-agency ruling to two different federal circuit courts. The solution, however, is simple, in the form of a strict “first-to-file” rule established by Congress for this problem: “Th[is] first-to-file rule governs even for petitions filed on the same day; indeed, we have applied it even when petitions were filed within a minute of each other.” The Fifth Circuit rebuffed an attempt by the agency to assert its discretion over which petition was filed first, concluding that Congress had drafted this statute to foreclose precisely such discretion. No. 19-60357 (Aug. 2, 2019).
In Brackeen v. Bernhardt, an opinion of enormous significance to Indian law, the Fifth Circuit found the Indian Child Welfare Act to be constitutional, reversing a district-court opinion that held otherwise. The Court also affirmed various Bureau of Indian Affairs regulations under the Chevron doctrine, noting, inter alia: “The mere fact that an agency interpretation contradicts a prior agency position is not fatal. Sudden and unexplained change, or change that does not take account of legitimate reliance on prior interpretation, may be arbitrary, capricious [or] an abuse of discretion. But if these pitfalls are avoided, change is not invalidating, since the whole point of Chevron is to leave the discretion provided by the ambiguities of a statute with the implementing agency.” No. 18-11479 (Aug. 9, 2019) (citation omitted). (My colleague Paulette Miniter and I assisted Professor Seth Davis of UC-Berkeley with an amicus brief in this case, in support of the result ultimately reached by the Court.)
After a five-week trial, three days of deliberation, and an Allen charge, the district court excused Juror No. 7. “[T]he district court found that Juror No. 7 had failed to follow instructions, exhibited a lack of candor during questioning, and had engaged in threatening behavior towards other jurors. Though defendants argue that this juror was removed for reasons that involve the deliberative process, there were sufficient independent reasons for his removal, namely, his lack of candor and his threatening behavior.” The Fifth Circuit followed Circuit precedent that “previously declined to apply the rule used by some circuits that prohibits dismissing a juror unless there is ‘no possibility’ that the failure to deliberate arises from their view of the evidence,” and instead reasons that “when the dismissal is due to a failure to be candid or a refusal to follow instructions, those are grounds that ‘do not implicate the deliberative process.’” United States v. Hodge, No. 17-20720 (Aug. 9, 2019) (applying United States v. Ebron, 683 F.3d 105 (2012)).
Warren claimed that an internal investigation report for her employer, Fannie Mae, was defamatory. The Fifth Circuit affirmed summary judgment for the defense, holding, inter alia, that the report was shielded from liability by a qualified privilege. As to Warren’s argument that the report was made with actual malice, her evidence of “things that the investigator left out of the report” did not meet the demanding standard of showing “that the report was false or recklessly disregarded the truth.” And as to her argument about excessive distribution of the report, she “offer[ed] no evidence, other than her own speculation, that any person without a valid interest received the report or was made aware of its findings.” Warren v. Fannie Mae, No. 18-11211 (Aug. 2, 2019).
In a remarkable letter last month, some months after an en banc argument, the federal agency at issue in the high-profile case of Collins v. Mnuchin has decided that it is in fact constitutional. The plaintiffs responded that this position shift proved their point.
Longoria, a truck driver in Laredo, prevailed in a 3-day jury trial about his injuries arising from an accident, and won judgment for $2.8 million in total, based on the jury’s awards as to nine types of damages. The Fifth Circuit noted these points, among others, in reviewing the defendant’s appeal of that judgment:
Longoria v. Hunter Express, No. 17-41042 (Aug. 1, 2019).
Appellants argued that it a securities-registration exemption plainly applied to a transaction; the Fifth Circuit observed: “While the Gleasons now argue that section 4(a)(1)’s applicability is so obvious that the district court committed a clear error of law or manifest injustice, their able lawyers went in a different direction when opposing summary judgment,” and affirmed. Gleason v. Markel Am. Ins. Co, No. 18-40850 (July 30, 2019, unpublished).
Two oft-addressed topics in 2019–the wreckage of Allen Stanford’s Ponzi scheme, and the appropriate deference to district court discretion in c
omplex litigation– intersected in Zacarias v. Stanford Int’l Bank, No. 17-11703-CV (July 22, 2019).
The panel majority affirmed the “bar orders” entered by the district court in connection with a complicated settlement, observing: “The receiver initiated suit, negotiated, and settled with the Willis Defendants and BMB while empowered to offer global peace, that is, to deal with potential investor holdouts like the Plaintiffs-Objectors. These holdouts have been content for the receiver to pursue litigation for their benefit, then to participate as receivership claimants, collecting pro rata. Now, however, they ask to jump the queue, come what may to their fellow claimants who remain within the receivership distribution process.”
The dissent countered: “I share the majority’s appreciation for this settlement’s practical value. But in my view, the district court lacked jurisdiction to grant the bar orders. The Receiver only had standing to assert the Stanford entities’ claims. It could not release other parties’ claims, or have the court do so, in exchange for a payment to the Stanford estate. For better or worse, the objecting plaintiffs’ claims were beyond the district court’s power.”
“Ordinarily, courts must refrain from interfering with arbitration proceedings. But as our sister circuits have held, and as we now hold today, class arbitration is a ‘gateway’ issue that must be decided by courts, not arbitrators—absent clear and unmistakable language in the arbitration clause to the contrary.” 20/20 Communications, Inc. v. Crawford, No. 1810260 (July 22, 2019).
