Stephen Higginson’s nomination to the Fifth Circuit has been confirmed by the Senate.

In a case of considerable practical importance as to litigation about arbitration clauses and appellate procedure generally, the Fifth Circuit addressed a party’s motion for a stay of district court proceedings during an appeal about the arbitrability of the matter in Weingarten Realty v. Miller.  The Court acknowledged a significant circuit split as to whether a notice of appeal automatically stayed district court decisions during an arbitrability appeal, with one school of thought (two circuits) holding that a case’s merit is a distinct matter from whether it is arbitrable, and another school (five circuits) holding that a notice of appeal automatically stays district court proceedings for efficiency reasons.  Op. at 3-4.   Recognizing that this issue turns on the application of Griggs v. Provident Consumer Discount, 459 U.S. 56 (1982), and its holding that a district court may adjudicate matters not involved in the appeal, the Court concluded that under prior Circuit precedent a notice of appeal did not create an automatic stay.  Op. at 7.  The Court went on to review the motion under the general four-factor test for a discretionary stay during appeal, and again declined to order a stay, primarily because it believed the movant had a low chance of success on the merits under the contract documents and the doctrine of equitable estoppel.  Op. at 7-8.

The case of Texas Pipeline v. FERC involved a challenge to natural gas regulations as beyond FERC’s statutory authority.   The Court found that the regulations were beyond that authority, and accordingly, did not reach any issues where agency deference under Chevron could be appropriate.   See Op. at 5 (“[A]gencies cannot manufacture statutory ambiguity with semantics to enlarge their congressionally mandated border.”)  The Fifth Circuit has taken a conservative view of agency opinions about statutory authority in other thoughtful opinions, see, e.g., Mississippi Poultry v. Madigan, 31 F.3d 293 (5th Cir. 1994) (en banc) (construing the term “same” in statute governing regulation of poultry processing).

The case of Garriott v. NCsoft presented a challenge to a $28 million judgment for breach of an employee’s stock option contract.  After resolving a liability issue under South Korean law about the employee’s termination, the Court considered whether the judgment impermissibly considered post-breach stock appreciation.  The Court faulted the defendant for not raising its challenge to the damages calculation in a Daubert motion, evidence objection, or charge objection, and rejected the argument under “plain error” review.  Op. at 7-9 (“Displeased with the jury’s decision, NCSoft now asks for a mulligan.”)  The Court also found sufficient direct evidence, consistent with the expert models, as to when the employee would have sold his shares.  Op. at 9 (reminding that damages “may be too speculative if based on ‘assumptions without basis in the real world,'” but that the plaintiff “need not prove damages with mathematical certainty”).

The case of Weaver v. Texas Capital Bank first presented a jurisdictional question under the Rooker-Feldman doctrine.  Texas Capital Bank had obtained a state court default judgment against a guarantor, and contended that the guarantor’s later adversary proceeding attacking the basis for that liability was an impermissible federal attack on a final state court judgment.  The Court disagreed, finding that Rooker-Feldman was not implicated.  Op. at 5-7.  The Court went on to reverse, however, finding that the guarantor’s arguments to the bankruptcy court were defenses to the earlier state court action and thus barred by claim preclusion.  Op. at 8-11.  The opinion thoroughly reviews Texas claim preclusion law and its “transactional” approach to the application of the compulsory counterclaim rule.

Countrywide Home Loans sought to recover certain post-petition attorneys fees in a Chapter 13 bankruptcy case in Countrywide v. Velazquez.  The Court reviewed the provisions of the relevant Deed of Trust, and concluded that the word “and” in the phrase “do and pay for whatever is reasonable or appropriate to protect Lender’s interest in the Property and rights under this Security Instrument” did not require that a recoverable fee involve both the protection of the lender’s interest and the lien.  (Op. at 6-9 (citing Lanier v. Spring Cypress Investments, 1995 WL 489427 (Tex. App.–Houston [1st Dist.] Aug. 17, 1995, no writ)).  The Court “respectfully disagree[d]” with the unpublished affirmance of a different result by another panel earlier this year in Wells Fargo v. Collins.

The Court released a revised opinion in Barber v. Shinseki, in which the appellant sought review of a magistrate’s electronic order dismissing his case.  The Court first observed that the appellant did not appear to have consented to final disposition of his case by a magistrate as opposed to the district judge.  Op. at 3-4.  The Court went on to note that “[t]he electronic order entered by the magistrate judge . . . does not appear on any document–electronic or otherwise–other than as merely a separate entry on the docket sheet,” and thus did not comply with the requirement of Fed. R. Civ. P. 58 that “every judgment shall be set forth on a separate document.”  Op. at 4.  The Court noted that certain exceptions to Rule 58 were not applicable.  Op. at 4 n.2.  (The opinion was revised to “remove language indicating that all judgments must be set forth on paper documents” and to note that an appropriate document “may be electronic.”  Op. at 1.

The United States removed a case after entry of a default judgment against two doctors associated with the federal government (and after their motion for new trial was overruled by operation of law under Texas rules).  Oviedo v. Hallbauer (revised October 14, 2011)  After reviewing several potentially applicable removal statutes, the Court held: “The weight of authority thus holds that, by the time the government filed its notice of removal in this case, there was no pending case to remove, inasmuch as nothing remained for the state courts to do but execute the judgment.”  (Op. at 7)  Given this conclusion about the timeliness of the removal, the Court also rejected an argument based on the Federal Tort Claims Act that the state court may have lacked jurisdiction over this case.  (Op. at 8-10)

In the case of Jimenez v. Wood County, the en banc Court reviewed the requirements for preserving charge error.  The case presented a civil rights challenge to a county’s strip-search policy as to misdemeanor arrestees.  At trial, the County made the objection, “Just one objection, Your Honor, the — the Court finding that this was a minor offense as a matter of law.  For record purposes, we would object.”  Op. at 2-3.  The Court found that this objection preserved an argument as to whether the plaintiff was arrested for a “minor offense,” but did not preserve an argument as to whether “reasonable suspicion” was required for the search at issue.  The Court thoroughly reviewed the requirements of Fed. R. Civ. P. 51, both as to the substance and timing of a charge objection.  Op. at 4-6 & n.2.  It rejected the County’s argument that statements made at a pre-trial conference were sufficient to preserve error here, and that “any objection would have been futile” because of the state of Circuit precedent at the time.  Judge Smith’s dissent suggests potential exceptions to the majority’s approach to Rule 51.  Op. at 16 n.4.

In Wal-Mart Stores, Inc. v. Qore, Inc. (originally released in July, revised October 6), Wal-Mart sued several defendants about structural problems with a new store in Starkville, Mississippi.  Wal-Mart won some claims at trial, the share of which for defendant Qore (a geotechnical services firm) was $48,600.  Pursuant to an indenmity provision that reached “any claim, demand, loss, damage or injury (including Attorney’s fees) caused by any negligent act or omission,” the trial court awarded $810,000 in fees against Qore – the substantial majority of Wal-Mart’s fees for the whole case.  The Fifth Circuit agreed that this provision justified a fee award, but found the award excessive because Wal-Mart’s fees could have been segregated, and remanded for further proceedings.  Op. at 6.  The Court noted that Cobb v. Miller, 818 F.2d 1227 (5th Cir. 1987), an attorneys fee dispute in a civil rights case, raised policy issues about “private attorney[s] general” that did not apply to this Mississippi state law matter.  Op. at 13.

The case of LHC Nashua Partnership Ltd. v. PDNED Sagamore Nashua LLC presented several liability and damages issues in a contract case arising from a real estate development project.  While nominally applying New Hampshire law, the Court addressed Texas law because it did not materially differ on the key points.  Op. at 8.  The Court’s holdings included these: a promissory estoppel claim was not actionable given the scope of the parties’ written contract, op. at 9-10; the plaintiff offered sufficient evidence of justifiable reliance on alleged misrepresentations, op. at 11-13; and a merger clause in the parties’ agreement did not foreclose the misrepresentation claim, op. at 13-14.  The Court’s analysis of the merger clause focused on the recent Texas Supreme Court case of Italian Cowboy Partners v. Prudential, which substantially clarified Texas law in that area.  The Court affirmed an award of reliance damages but reversed an award of $25 million in lost profits, stating that the contract induced by fraud “contemplated a future closing transaction”; therefore, “[Plaintiff] cannot recover lost profits flowing from an agreement to purchase property that never closed due to the failure of that agrement’s express conditions.”  Op. at 21-23.

In an antitrust suit about fees for a golf voucher program, the defendant successfully moved to dismiss on the ground that the plaintiff had not alleged an effect on interstate commerce.  Substantively, the Court acknowledged that while it has “limited the reach of the Commerce Clause with respect to non-economic activity,” (Op. at 7, citing U.S. v. Lopez, 514 U.S. 549 (1995)), “the conduct alleged here . . . bringing out-of-state tourists to play golf–falls squarely within the Supreme Court’s commerce clause jurisprudence.  Procedurally, the Court reviewed the plaintiff’s allegations about the effect of the fees on “out-of-state residents” in light of Twombly and Iqbal and concluded that, while “sparse,” those allegations sufficed to allege an effect on interstate commerce.  The Court reversed the lower court’s dismissal of the case for lack of jurisdiction.  Gulf Coast Hotel-Motel Association v. Mississippi Gulf Coast Golf Course Association

The case of Klier v. Elf Atochem presented this challenge: “When modern, large-scale class actions are resolved via settlement, money often remains in the settlement fund even after initial distributions to class members have been made because some class members either cannot be located or decline to file a claim.”  Op. at 6.  The Court reviewed the district court’s decision to make a cy pres distribution of unclaimed funds from a tort settlement to various charities.  The Court began its analysis by reminding that the Rules Enabling Act and Fed. R. Civ. P. 23 “define the first –and often the last–arena of analysis,” Op. at 8, limiting cy pres distributions “only to rescue the objectives of the settlement when the agreement fails to do so.”  Op. at 10.  Noting that the parties’ settlement did not provide for a cy pres distribution, and that it had a clause allowing the district court to change the distribution protocol “for the benefit of the Settlement Class Members,” Op. at 11-12, the Court concluded that the unused funds were to be used for the benefit of another settlement subclass rather than as the district court had ordered.  The Court went on to review several features of the parties’ agreement, reminding that the cases in this area “have necessarily taken case-specific approaches . . . .”  Op. at 14.  Chief Judge Jones wrote a concurrence that focused on situations when it would be appropriate to return unused funds to the settling defendant.

In Friends of St. Frances Xavier Cabrini Church v. FEMA, a nonprofit association challenged several acts of FEMA in dealing with a historic church property.  The Court analyzed the association’s standing, beginning by noting that as a jurisdictional matter, the issue can be examined for the first time on appeal.   Op. at 8.  To establish standing, “[t]he plaintiff must show that he has sustained or is immediately in danger of sustaining some direct injury as the result of the challenged official conduct and the injury or threat of injury must be both real and immediate . . . ”  Op. at 9.  The Court found that the association lacked a sufficient “geographical nexus” as to FEMA’s activities in the Ninth Ward and did not suffer “concrete injury” from alleged deficiencies in FEMA’s review processes.  Op. at 12.  The case was remanded with instructions to dismiss for lack of standing.

In Young v. Merrill Lynch, the Court addressed a technical dispute under New York law about the appropriate deference to decisions of Merrill Lynch’s Compensation Committee.  Judge DeMoss dissented from the per curiam opinion.  Full text of both opinions here. 

In Williams v. Homeland Insurance, a discretionary appeal accepted under the Class Action Fairness Act, the Court affirmed the denial of a motion to remand, concluding that the “local controversy” exception to CAFA jurisdiction had been satisfied.  The opinion reminds that “[t]he parties moving for remand bear the burden of proof that they fall within an exception to CAFA jurisdiction.”  Op. at 3.  In this challenge to discounts made by a PPO program, the Court concluded that adding a claims administrator as a new party did not change the fact that “significant relief” was still sought from the in-state entity that operated the PPO network, thus satisfying that element of the local controversy exception.  Op. at 6.   The Court went on to state that “a class arbitration is not a class action,” and that as a result, a prior arbitration did not implicate the requirement of the exception that no other class action have been filed against a defendant in the previous three years.  Op. at 7.