A textbook example of a deposition admission appears in Peters v. Jazz Casino Co.:

Peters also asserts that the hose was obstructing the walkway, which constituted an unreasonable defect. However, his testimony at the deposition does not support the assertion that the hose obstructed the walkway. In fact, when asked if he had any recollection of the red hose obstructing someone walking on the sidewalk, he responded: “I don’t recall that.” Thus, there is insufficient evidence to create a fact issue as to whether the hose obstructed the walkway.

No. 17-20625 (Jan. 22, 2018, unpublished).

A threshold issue in Hacienda Records LP v. Hacienda Records & Recording Studio, Inc. was whether a ruling about appellants’ standing, in another related action, was entitled to collateral estoppel effect. At the time of the district court’s decision, the other court’s ruling was not final for appeallate purposes. Finding that all elements but one were clearly established, and that the policies behind preclusion doctrines would be well-served by applying collateral estoppel here, the Fifth Circuit noted that with one notable exception, “our court has consistently followed the strict approach to finality, linking the availability of appeal for the prior decision with finality for collateral-estoppel purposes.” The Court then declined to address that issue, accepting and agreeing wiht the district court’s conclusion that “although . . . ‘the doctrine of collateral estoppel does not apply here,’ ‘the court nonetheless agree[s] with the reasoning and conclusions reached” by the other court. No. 16-41180 (Jan. 4, 2018).

Calderone alleged that he was terminated, in retaliation for reporting a car dealership’s alleged refusal to finance cars for racial minorities, in violation of the Consumer Financial Protection Act.  Unfortunately for Calderone, no matter how reasonable his belief may have been, car dealers are exempt from the CFPA by its plain terms, as other agencies have regulatory authority in that sector of the economy. “Under the CFPA, a plainitff may have a reasonable, but mistaken, belief of fact or law that a statute has been violated. But the CFPA does not permit a plaintiff’s reasonable beliefs to expand the CFPB’s jurisdiction.” Calderon v. Sonic Houston JLR, L.P., No. 17-20029 (Jan. 9, 2018).

“[A]lthough a loan provides money to the borrower that can be used for temporary economic gain, it is offset by a future obligation to repay. As there is no overall
improvement in the borrower’s economic situation, there is no gain to be taxed. This contrasts with the taxable treatment of embezzled or misappropriated
funds. A leading tax treatise calls this the ‘theft-loan dichotomy’ that James [v. United States, 366 U.S. 213 (1961)]s] ‘no consensual recognition of an obligation to repay’ requirement seeks to enforce.” (other citations omitted). Accordingly: “‘A mutual understanding that Sun would ‘return some money to Mr. Cheung at some point’ is thus not enough to constitute the bona fide loan that would allow Sun to avoid reporting as income the millions he used to gamble, to bolster the financial condition of his
company, and to produce investment returns that he retained and commingled
with his other funds.” Sun v. Commissioner, No. 16-60270 (Jan. 18, 2018).

The White House has announced President Trump’s intent to nominate Judge Edward Prado as Ambassador to Argentina, after thirty-five years of dedicated service in the federal judiciary. This appointment means that President Trump will name six judges to the Fifth Circuit – Judges Willett and Ho have taken office, two nominations are currently pending, and Judge Prado’s departure will mean two open seats.

Ramos contended that the trial court should not have excluded some of his testimony under the “sham-affidavit rule,” observing that his declaration was given before his deposition. The Fifth Circuit disagreed: “It is the competency, rather than timing, of evidence with which the sham-affidavit rule is concerned.” And it agreed with the district court that the testimony was in fact inconsistent, noting as an example that “Ramos the declarant stated Hacienda ‘never paid him any monies or royalties,’ but Ramos the deponent admitted he couldn’t remember whether he had been paid. Memories, of course, may fade over time; but, that is a far cry from Ramos,at his deposition, being unable to recall many of the events he had stated as fact in his declaration, just four days prior.” Hacienda Records LP v. Hacienda Records & Recording Studio, Inc., No. 16-41190 (Jan. 4, 2018).

Plaintiffs, represented by the same counsel, sought to consolidate two actions in state court; the defendant removed under CAFA’s “mass action” provision. A Fifth Circuit panel majority affirmed the denial of Plaintiff’s motion to remand, rejecting arguments about timeliness, retroactivity, and CAFA’s text. The majority reasoned that “it is the mass action, not claims against particular defendants, that is removable,” and that the plaintiff’s motion satisfied the CAFA requirement of “100 or more persons . . . proposed to be tried jointly on the ground that the plaintiffs’ claims involve common questions of law or fact.” A dissent would remand based on CAFA’s “not-retroactivity” language, as one of the state cases was filed before CAFA took effect. Lester v. Exxon Mobil Corp., No. 14-31383 (Jan. 9, 2018).

U.S. Energy Devel. Corp. v. CL III Funding Holding Co. applied the attorneys’ fees provision of the form Joint Operating Agreement in Texas, which says: “Costs and Attorneys’ Fees: In the event any party is required to bring legal proceedings to enforce any financial obligation of a party hereunder, the prevailing party in such action shall be entitled to recover all court costs, costs of collection, and a reasonable attorney’s fee, which the lien provided for herein shall also secure.” The Fifth Circuit concluded that none of the four legal actions involved in the fee request involved a “financial obligation” within the meaning of the provision. No. 17-50217 (Jan. 10, 2018, unpublished).

While both sides made cogent policy arguments, plain meaning triumphed in Morgan v. Huntington Ingalls, and the Fifth Circuit held that the thirty-day removal deadline begins to run from receipt of a deposition transcript that may create a basis for removal, rather than the oral testimony itself.  “[P]aper” is defined as “[a] written or printed document or instrument.” “[R]eceipt” is defined as the “[a]ct of receiving; also, the fact of receiving or being received; that which is received.” “Copy” is defined as “[t]he transcript or double of an original writing.” “‘Ascertain’ means ‘to make certain, exact, or precise’ or ‘to find out or learn with certainty.’” No. 17-30523 (Jan. 11, 2018).

As a further reminder that “standing,” in all of the forms that idea takes, is a complicated set of doctrines, the Fifth Circuit held in Nevarez Law Firm v. Dona Ana Title Co.: “The district court relief on Rule 12(b)(1) when it dismissed Nevarez’s [RICO and state tort] claims with prejudice after concluding that there was no standing. That was error. ‘A dismissal with prejudice is a final judgment on the merits.’ We agree with an earlier opinion of this court that ‘to dismiss with prejudice under Rule 12(b)(1) is to disclaim jurisdiction and then exercise it.'” No. 17-50053 (Jan. 3, 2018, unpublished) (citations omitted).

A unanimous en banc opinion simplified the Fifth Circuit’s test for “whether a contract for performance of specialty services to facilitate the drilling or production of oil or gas on navigable waters is maritime.” The Court now asks: “First, is the contract one to provide services to facilitate the drilling or production of oil and gas on navigable waters? . . . Second, if the answer to the above question is ‘yes,’ does the contract provide or do the parties expect that a vessel will play a substantial role in the completion of the contract?” Larry Doiron, Inc. v. Jackson , No. 16-30217 (revised Jan. 11, 2018).

The question in Peake v. Ayobami was whether a bankruptcy debtor, who asserts a 100% exemption as to a particular estate asset, is asserting that exemption as to the asset itself or its value. The practical consequence is whether “claiming a 100% interest in an asset as exempt allows the debtor to ‘walk away’ with the asset itself and potentially benefit from any post-petition appreciation of it.” The Fifth Circuit gave a limited answer, noting that the statute allows the debtor to claim “a 100% interest in an asset,” and also noting Supreme Court precedent that expressed skepticism about whether a debtor could use this ability to get clear title to a valuable asset, but not providing an ultimate answer to the question. Ni. 16-20589 (Jan. 3, 2018).

Plaintiffs alleged antitrust violations by distributors of dental equipment; seeking damages and injunctive relief. The defendants sought to compel arbitration, based on this arbitration clause in a relevant contract:

Disputes. This Agreement shall be governed by the laws of the State of North Carolina. Any dispute arising under or related to this Agreement (except for actions seeking injunctive relief and disputes related to trademarks, trade secrets, or other intellectual property of Pelton & Crane), shall be resolved by binding arbitration in accordance with the arbitration rules of the American Arbitration Association [(AAA)]. The place of arbitration shall be in Charlotte, North Carolina.

The issue was whether arbitrability was for the courts to decide or the arbitrator. The Fifth Circuit applied “the two-step inquiry adoped in Douglas v. Regions Bank[, 757 F.3d 460 (5th Cir. 2014),] under which the first question is whether the parties “clearly and unmistakably” intended to delegate the question of arbitrability to an arbitrator. Finding that “the interaction between the AAA Rules and the [injunctive relief] carve-out is at best ambiguous,” the Court chose not to resolve that issue, concluding that the second Douglas question was dispositive. That question asks whether the “assertion of arbitrability is wholly groundless,” which the Court found to be the case:

The arbitration clause creates a carve-out for ‘actions seeking injunctive relief.’ It does not limit the exclusion to ‘actions seeking only injunctive relief,’ nor ‘actions for injunction in aid of an arbitrator’s award.’ Nor does it limit itself to only claims for injunctive relief. . . . The mere fact that the arbitration clause allows Archer to avoid arbitration by adding a claim for injunctive relief does not change the clause’s plain meaning.

Archer & White Sales v. Henry Schein, Inc., No. 16-41674  (Dec. 21, 2017) (emphasis added).

A Chapter 7 debtor was denied a discharge for fraud claims arising from statements about a business’s financial condition, based on secion 523(a)(2)(A) of the Bankruptcy Code. The Fifth Circuit affirmed, rejecting his argument that the statements were not sufficiently detailed: “As we noted in In re: Bandi[, 863 F.3d 671, 674 (5th Cir. 2012))], a statement respecting financial condition ‘need not carry the formality of a balance sheet, income statement, statement of changes in financial position, or income and debt statement.’ The information regarding ‘overall net worth or overall income flow’ contained within such a statement – not the formality of the statement – is what is important.”  Haler v. Boyington Capital Group, LLC, No. 17-40229 (Dec. 29, 2017, unpublished).

Cox v. Provident Life involved a dispute about the cause of the plaintiff’s knee problems: “Under the policies, Cox is entitled to receive disability benefits for life if, and only if, his disability resulted from injury rather sickness.” The record showed that:

Shelton, the treating physician, gave deposition testimony that, ‘to a reasonable degree of medical probability,’ ‘the trauma to [Cox’s] left knee when he fell in the hole on December 26, 2010, caused or contributed to the cause of his disability.’ In the same deposition, Shelton reaffirmed that ‘[e]ven though [Cox] may have had some pre-existing arthritis or chondromalacia,’ the injury ‘contributed to and caused part of [Cox’s] disability.’ The district court never grappled with these unequivocal
statements, instead embracing contrary evidence presented by Provident suggesting Cox’s injury did not accelerate his arthritis. That was error. This is a classic ‘battle of the experts,’ the winner of which must be decided by a jury.

No. 16-60831 (revised Jan. 2, 2018).

Sidestepping the question whether International Shoe overruled the century-old case of Penn. Fire Ins. Co. v. Gold Issue Mining, 243 U.S. 93 (1917), the Fifth Circuit held that registering to do business in Louisiana did not automatically consent to personal jurisdiction there:

Nowhere in Pennsylvania Fire did the Court hold that registering to do business in a state or appointing an agent for service of process acts as consent to any suit of any kind in that state. Instead, it merely concluded that defendants had consented to service of process in Missouri, resting largely on the fact that the state court had construed the Missouri statute to require such consent to suit for the service at issue. This case lacks what Pennsylvania Fire had: a clear statement from the state court construing the statute to require consent. Gulf Coast does not identify any statute or agreement that requires foreign entities to expressly consent to any suit in Louisiana.

Gulf Coast Bank & Trust Co v. Designed Conveyor Systems LLC, No. 17-30062 (Dec. 22, 2017, unpublished) (citations omitted).

Solomon brought a False Claims Act case allleging improper billing on the F-35 Joint Strike Fighter Project. The Fifth Circuit affirmed the dismissal of his claim under the “public disclosure bar,” examining three disclosures under this test: “We are not concerned . . . with the overall probability of someone inferring fraudulent activity from the public disclosures. The focus is on whether they could have made the inference.” Solomon v. Lockheed Martin Corp., No. 17-10046 (Dec. 19, 2017).

A longshoreman died after stepping through a hole on an oil platform. The district court granted summary judgment, finding no fact issue about the “open and obvious” nature of the hole – a necessary element for recovery under the LHWCA. The Fifth Circuit reversed, finding conflicting testimony on the issue, and commenting on pictures of the scene (right): “True, the pictures taken directly over the hole, as one might expect, depict a visible opening. But the pictures taken from an angle–similar to the point of view of a person approaching the hole–depict the way in which the platform’s grating, in [a witness’s] words, can ‘play tricks on your eyes’ and make the opening difficult to see.”  The Court reminded that even though the case would be tried to the bench: “Judicial efficiency is a noble goal, to be sure. But when an evidentiary record contains a material factual dispute (as this one does), we simply cannot bypass the role of the fact-finder, whoever that may be.” Manson Gulf LLC v. Modern American Recycling Service, Inc., No. 17-30007 (Dec. 18, 2017).

In Howard v. Maxum Indemnity Co., “Howard’s appeal raises as a central, threshold question whether he waived application of Oklahoma law” in an insurance dispute. Unfortunately, “[a]lthough Howard did raise the choice of law issue in his Rule 59(e) motion, ‘this court will typically not consider an issue or a new arugment raised for the first time in a motion for reconsideration in the district court.’ . . . ‘Parties generally are bound by the theory of law they argue in the district court, absent some manifest injustice.'” No. 16-11746 (Dec. 13, 2017).

In this not-unusual situation, the Fifth Circuit found that a removal based on diversity was timely: In response to special exceptions, [the Strongs] filed an amended petition stating the maximum amount of damages in controversy by specifying that the Strongs sought “monetary relief of $100,000 or less.” Cf. Tex.  R. Civ. P. 169 (requiring the “$100,000 or less” language to allow for expedited actions). The Strongs also sought injunctive relief ordering both a loan modification to prevent further TDCA violation and “the arrearage . . . to be deleted and/or capitalized . . . so that the loan is brought current.” Green Tree did not remove to federal district court until after it received a response to its request for disclosure in which the Strongs explicitly indicated that they were seeking damages in excess of $75,000.” The Court rejected the Strong’s argument that the petition implictly placed the entire property value at issue. Strong v. Green Tree Servicing LLC, No. 16-11346 (Dec. 11, 2017) (unpublished).

The Senate has now also confirmed Jim Ho to the Fifth Circuit.

The Senate has confirmed Justice Don Willett‘s nomination to the Fifth Circuit.

“Upset that a coworker had been fired, Thomas[, a network adminstrator,] embarked on a weekend campaign of electronic sabotage.” He was successfully prosecuted under the Computer Fraud and Abuse Act, which criminalizes conduct that “knowingly causes the transmission of a program, information, code, or command, and as a result of such conduct, intentionally causes damage without authorization, to a protected computer.” Thomas, citing his network administration responsibilities, argued that “because he was authorized to damage the computer when engaging in [certain] routine tasks, any damage he caused while an employee was not ‘without authorization.’” The Fifth Circuit rejected this argument, noting – in addition to obvious practical issues – that the case law Thomas relied on about “authorization” involved liability under other CFAA provisions about computer access, rather than this provision about causing damage. This case is of general interest to civil litigation, both because CFAA violations can create civil liability, and because unfortunate admissions can have significant consequences:

Just a couple weeks after the damage spree, and before the FBI had contacted Thomas, he told the friend whose firing had set this in motion that “he thought he might have broken the law.” Which law, the friend inquired? Thomas’s response: “the Computer Fraud and Abuse Act.”

United States v. Thomas, No. 16-41264 (Dec. 11, 2017).

Griffith sued his former employer under state law, referring in the pleading to a charge he filed with the EEOC and its issuance of a right-to-sue notice. Alcon removed based on federal question jurisdiction; the district court accepted the removal and granted summary judgment to the employer. The Fifth Circuit reversed: “Although Griffith indeed referenced his dealings with the EEOC in his complaint, he did not mention Title VII or any similar federal statute. As such, the district court lacked subject-matter jurisdiciton and was not entitled to render judgment in Alcon’s favor.” Griffith v. Alcon Research, No. 17-20290 (Dec. 6, 2017, unpublished).

DRI’s 2018 Appellate Advocacy Seminar will be held at the Planet Hollywood Resort in Las Vegas from March 14-15, 2018.  This year’s seminar will include valuable insights into effective advocacy (including tips from Bryan Garner), and joint sessions with trial court practitioners.  The seminar promises great networking opportunities with judges, appellate practitioners and trial advocates from across the country. This year’s seminar will be held in conjunction with the Trial Tactics Seminar, and anyone attending the appellate seminar can attend the final day of the Trial Tactics Seminar for no cost. The seminar also coincides with the beginning of the NCAA men’s basketball tournament, a great time to enjoy the excitement of Las Vegas. You can register for the Appellate Seminar here.  Save $100 and get the best hotel rates when you register and book by February 13, 2018.

Johnson v. Real Estate Mortgage Network, Inc. reminds of a technical but important point about the review of remand orders under CAFA in the Fifth Circuit: “Facing our CAFA deadline, we continue to apply [prior preceden’s] suggestion that our jurisdiction to review a CAFA remand order stops at the edge of the CAFA portion of the order,” and does not extend to “every issue decided in the remand order, including federal question jurisdiction.” No. 17-30768 (Nov. 30, 2017).

A premature notice of appeal is certainly better than nothing, but may not be enough, as the Fifth Circuit noted in Johnson v. Real Estate Mortgage Network, Inc.: “Before we address Johnson’s contentions on appeal, we note that Johnson’s notice of appeal from the summary judgment dismissing the claims against some, but not all, of the defendants, was premature. Nevertheless, because the district court could have certified that the summary judgment was appealable, and it subsequently entered a final judgment, the notice of appeal gives us appellate jurisdiction over the summary judgment.  However, because Johnson did not file a notice of appeal from the final judgment, which dismissed his remaining claims against REMNI/Homebridge, we do not have jurisdiction to consider the dismissal of his claims against REMNI/Homebridge.” No. 17-20347 (Dec. 1, 2017, unpublished).

In City of San Antonio v. Hotels.com, the Fifth Circuit reversed an $84 million judgment for several cities, against online hotel reservation services, relating to the collection of local occupancy taxes. The holding turned entirely on the force of an intermediate Texas appellate opinon under the Erie doctrine. In its reasoning, the Fifth Circuit rejected a number of arguments against following that opinion, including: (1) the scope of the record before the courts; (2) the analytical framework used by the Texas court; and (3) the precise language of the relevant ordinance. The Court was satisfied with the general principles relied upon by the Texas opinion, as well as its resolution of “absurd result” arguments made in both cases. No. 16-50479 (Nov. 29, 2017). The Dallas Morning News has a good summary of the issues and history of this long-running litigation.

It’s that time of year again. The polls are open until the end of November to vote for next year’s listings of Texas SuperLawyers; online voting can be done at the SuperLawyers website, here.

Melton v. Phillips, No. 15-10604 (Nov. 13, 2017), a difficult qualified immunity case that required en banc review to resolve, features a concurrence with the unusual verb “cross-pollinated” to describe a confluence of two lines of authority. That perspective on the development of common law recalls the concept of “vegetation” in early scientific thought, used to describe vigorous and lively growth not just in plant life, but throughout nature. Indeed, no less than Isaac Newton wrote a paper about “Chymystry” titled “On Nature’s Obvious Laws and Processes in Vegetation”:

In an insurance coverage dispute, the district court granted both sides’ motions for summary judgment as to the meaning of various policy terms. The net result was final judgment for the insurance company. The insured appealed; the insurer cross-appealed, and on that procedural point, the Fifth Circuit held that the cross-appeal was unnecessary, noting:

• “National Union is conflating the district court’s opinion (i.e., the order) with its judgment. Appellate courts review judgments, not opinions. . . . To the extent that the district court rejected the arguments in National Union’s cross-appeal, ‘an appellee may urge any ground available in support of a judgment even if that ground was . . . rejected by the trial court.'” (citations omitted);
• The recent case of ART Midwest v. Atlantic Limited Partnership XII,742 F.3d 206 (5th Cir. 2014), in which a party was not allowed to raise certain issues after not taking a cross-appeal, was distinguishable because judgment had actually been entered against that party on those issues. “Here,there is no adverse judgment against National Union, such that it might need to protect its rights—just some adverse reasoning”; and
• “This is not just formalism. ‘A cross-appeal filed for the sole purpose of advancing additional arguments in support of a judgment is “worse than unnecessary”, because it disrupts the briefing schedule, increases the number (and usually the length) of briefs, and tends to confuse the issues.’ . . . In this case, National Union’s improper cross-appeal resulted in an over-length opposition brief and an additional reply (giving National Union over four thousand words of additional briefing).” (citations omitted)

Cooper Indus. v. Nat’l Union Fire Ins. Co., No. 16-20539 (revised Dec. 11, 2017).

The Fifth Circuit affirmed a JNOV motion on damages, under Texas law, when the plaintiff proved gross profits rather than net profits. “Its expert witness testified that he used ThermoTek’s gross profit margin—gross sales, less the cost of those goods sold, divided by gross sales—to calculate lost profits. He then stated that he reached his lost-profit totals for the VascuTherm units and wraps by (1) multiplying the average sales ThermoTek made to Wilford each month by the unit sales price and relevant time period, and (2) deducting the cost of the goods sold. But that is the very definition of gross profits. See Black’s Law Dictionary, supra (defining gross profits as “[t]otal sales revenue less the cost of the goods sold, no adjustment being made for additional expenses and taxes”). Motion Medical Technologies v. Thermotek, No. 16-11381 (Nov. 14, 2017).

“We have twice held that Texas’s unfair competition-by-misappropriation tort does not afford protection qualitatively different from federal copyright law. We do so again here.” Motion Medical Technologies v. Thermotek, No. 16-11381 (Nov. 14, 2017) (citing Ultraflo Corp. v. Pelican Tank Parts, Inc., 945 F.3d 652, 657-59 (5th Cir. 2017) and Alcatel USA, Inc. v. DGI Techs., Inc., 166 F.3d 772, 787-89 (5th Cir. 1999)).

The Fifth Circuit recently “walked back” its May opinion in EEOC v. BDO USA, which identified three problems with a privilege log. A revised opinion removed that discussion, in favor of a shorter, more general observation about there being “no presumption that a company’s communications with counsel are privileged.” The new opinion observed: “Given the ‘broad’ and ‘considerable discretion’ district courts have in discovery matters, we will not analyze the privilege logs in the first instance.” EEOC v. BDO USA, No. 16-20314 (revised Nov. 16, 2017).

Yes, according to Alexander v. Verizon Wireless Services LLC:

Although many style guides, such as the Chicago Manual of Style, and news sources, such as the Associated Press, no longer instruct writers to capitalize “Internet,” we decline to follow this trend. For many, such as the New York Times, the reason for the change to “internet” is simple: others were doing it, so they thought they should, too.  “Internet,” however, was originally capitalized to distinguish the global network from other internets—short for “inter networks”—which are collections of smaller networks that communicate using the same protocols.  In our view, this still makes the word a proper noun, regardless of how often people refer to other internets. Furthermore, to the extent “decapitalizing [I]nternet is part of a universal linguistic tendency to reduce the amount of effort required to produce and process commonly-used words,” we reject the tasks of striking an additional key or reading over a capital “I” as persuasive reasons to alter a word.

No. 16-31227 n.12 (Nov. 13, 2017) (citations omitted).

Two basic reminders about evidence appear in Eaton-Stephens v. Grapevine Colleyville ISD, an employment dispute involving a school counselor:

1. “Eaton-Stephens also argues she should have received a spoliation inference because her computer’s contents were erased, and that, because the School District’s policy and rules required retention of the contents for several years, the only conclusion was that the action was taken in bad faith. Our cases indicate a violation of a rule or regulation pertaining to document retention is not per se bad faith and Eaton-Stephens cites no authority in support of such a per se bad faith rule.”
2. “We agree that the district court unduly discredited some of Eaton-Stephens’s deposition testimony as conclusory. ‘A party’s own testimony is often “self-serving,” but we do not exclude it as incompetent for that reason alone.’ Even if self-serving, a party’s own affidavit containing factual assertions based on firsthand knowledge is competent summary judgment evidence sufficient to create a fact issue.”

No. 16-11611 (Nov. 13, 2017, unpublished).

It’s that time of year again. The polls are open until the end of November to vote for next year’s listings of Texas SuperLawyers; online voting can be done at the SuperLawyers website, here.

PlainsCapital asserted federal jurisdiction over a collection action on two large notes, contending that it would have to establish holder in due course status under federal law to recover (the notes came to PlainsCapital via assignment from the FDIC after a bank failure). The Fifth Circuit disagreed, reversing the district court’s summary judgment for the bank. As to the well-pleaded complaint rule, the Court observed: “PlainsCapital conflates the terms ‘holder’ and ‘holder in due course.’ A ‘holder is ‘the person in possession of a negotiable instrument that is payable either to bearer or to an identified person that is the person in possession. By contrast, a party’s status as a holder ‘in due course’ merely ‘determines the applicable defenses which a defendant . . . ‘ may assert.” PlainsCapital Bank v. Rogers, No. 16-41654 (Oct. 25, 2017).

The statutory interpretation question in United States v. American Commercial Lines was the meaning of the phrase “in connection with.” The Fifth Circuit began with the plain meaning of the word “connection,” which it called “a capacious term, encompassing things that are logically or causally related or simply ‘bound up’ with one another.” Going on to review precedent and the purpose of the statute at hand, the Coourt concluded that “[i]t is, however, not so capacious as to be rendered meaningless. Conduct does not automatically occur ‘in connection with’ a contractual relationship by the mere fact that such a relationship exists.  No. 16-31550 (Nov. 7, 2017) (citation omitted).

A rare Robert Heinlein citation appeared this week in United States v. Gibson: “The trouble with conspiracies is that they rot internally.” The Moon is a Harsh Mistress 76 (1966).

Griffin v. Hess Corp. involved a summary judgment for the defense on the statute of limitations, based on deposition admissions about the plaintiffs’ knowledge of relevant facts. Their testimony differed in response to the summary judgment motion, and the Fifth Circuit agreed that the different testimony did not raise a sufficient issue of fact: “Appellants’ explanation—that the deposition testimony was only meant to speak of what they knew in the present tense and not to their knowledge prior to the actual filing of the complaint—does not remedy or sufficiently explain the contradiction in light of the repeated questions about the particular date certain events took place concerning their royalty claims accruing from the Property. The deposition questions, as Appellees counsel repeatedly indicated and Appellants affirmed, related to the Property and royalties accruing from the production of oil on the Property.” No. 17-30165 (Nov. 3, 2017, unpublished).

Wildman sued about a Medtronic device implanted in his back to relieve pain, contending that the device did not last as long as the company warranted. Medtronic argued that this claim was preempted by federal law. The question, then, is whether that warranty claim imposes requirements “different from” those of the FDA – put differently, whether it would “undermine FDA regulation or reinforce it.” The Fifth Circuit found that it was not preempted, reasoning that Medtronic made a warranty of “the longevity of the entire [d]evice,” which “goes beyond what the FDA evaluated in its approval process,” as that procees focused specifically on the testing of batteries. The Court thus reversed a summary judgment for Medtronic and remanded, noting that on remand the district could consider “another argument challenging the plausibility of Wildman’s claim: that he did not allege reliance on the warranty.” Wildman v. Medtronic, Inc., No. 17-50010 (Oct. 31, 2017).

After the commercial, at about 2:30 in this news segment, I offer a couple of thoughts about recent developments in the Russia investigation.

The concept of a “genuine issue of material fact” is largely unquantifiable, but occasionally a case does set a quantitative landmark. In Shirey v. Wal-Mart Stores Texas, LLC, the Fifth Circuit addressed a personal injury claim asserting that a Wal-Mart store had constructive notice of a grape on the floor, holding:

Photographic and video evidence demonstrate that the grape was, as the district court noted, almost invisible on the off-white floor. The evidence also fails to establish that any Wal-Mart employee was in proximity to the grape for a sufficient period of time. The few seconds during which the employee passed by the grape did not provide an objectively reasonable opportunity for him to see it, notwithstanding his employer’s policy that he perform visual “sweeps” for hazards. Under these circumstances, the seventeen minutes during which the inconspicuous grape was on the floor did not afford Wal-Mart a reasonable time to discover and remove the hazard.

No. 17-20298 (Oct. 30, 2017, unpublished) (emphasis added).

Among other Twombly problems, the Fifth Circuit criticized a bankruptcy trustee’s claims about excessive bonuses, noting: “The Trustee does not explain how ATP’s compensation was excessive in comparison to other similarly sized public companies in the oil and gas industry at the time. Indeed,the Trustee offers no metric or explanation for finding the bonuses ‘exorbitant.'” And in this procedural setting, “these pleading deficiencies are ‘particularly striking’ because the Trustee has ample access to ATP’s books and records.” Tow v. Bulmahn, No. 17-30077 (Oct. 27, 2017, unpublished).

While it does not do so every day, or for that matter even every year, Fifth Circuit opinions draw powerful boundary lines around government activity. One recent example is St. Joseph Abbey v. Castille, 712 F.3d 215 (5th Cir. 2013), about the limits that substantive due process places on economic regulation. Another such line-drawing case appeared this month in Jauch v. Choctaw County, which found that qualified immunity did not protect a sheriff from the following violation of due process:

On April 26, 2012, Starkville Police Department officers pulled Jauch over, issued her several traffic tickets, and informed her of an outstanding misdemeanor warrant in Choctaw County. Choctaw County deputies took custody of Jauch and transported her to the Choctaw County Jail where, the next morning, she was served with the misdemeanor warrant and the capias. Jauch cleared the misdemeanor warrant within a few days. She nonetheless
remained detained on the capias, and her requests to be brought before a judge and allowed to post bail were denied. Jail officials informed Jauch that Sheriff Halford had confirmed she could not be taken before a judge until August when the next term of the Circuit Court commenced. When a friend of Jauch’s reached the sheriff on the telephone, he told her the same thing. Jauch’s protestations of innocence were ineffectual.

Ninety-six days after being taken into custody, Jauch’s case moved forward. She received an appointed attorney, waived formal arraignment, had bail set, and had a trial date set. Six days later, on August 6, 2012, she posted bail. Before the end of the month, the prosecutor reviewed the evidence against Jauch and promptly moved to dismiss the charge. On January 29, 2013, the Circuit Court of Choctaw County entered the dismissal. It is undisputed that Jauch was innocent all along, as she had claimed from behind bars.

No. 16-60690 (Oct. 24, 2017).

Among other holdings in a breach-of-warranty dispute about an aircraft engine, the Fifth Circuit reversed a finding that the manufacturer breached an express warranty by not repairing the engine in a timely manner. Because, under Texas law, “courts will not rewrite agremeents to insert provisions parties could have included,” “time is not of the essence of a contract unless the contract explicitly makes it so . . . .”  Becker v. Continental Motors, Inc., No. 16-10166 (Oct. 3, 2017).

The Fifth Circuit describes its newly-created Pro Bono Program as follows. Great opportunity for quality appellate experience!

“The Program assists the Court by facilitating the appointment of pro bono counsel to represent pro se litigants. Pro Bono Panel members will, at the Court’s invitation, be appointed in civil appeals that, for example, present issues of first impression, complex facts or legal questions, or potentially meritorious claims warranting further briefing and/or oral argument.

Pro bono appointments are made by the Court, and are limited to proceedings before this Court. Although oral argument is not guaranteed, cases selected for the Program are likely to meet the Court’s criteria for granting oral argument.

Attorneys wishing to join the Pro Bono Panel should submit to the CMJS Office a cover letter (including statement of types of cases, if any, that counsel prefers or does not prefer), resumé, writing sample (appellate brief or brief of substantive motion), and statement of good standing in the Fifth Circuit Bar. Applications for panel membership should be emailed to the CMJS Office at probono@ca5.uscourts.gov. Questions about the program may be directed to Kate Clark, Administrative Attorney, at that email address or by telephone at 504-310-7799.”

The question of timely notice to a carrier can give rise to close questions about insurance coverage. Nautilus Ins. Co. v. Miranda-Mondragon, however, presented a straightforward issue: “The first notice Nautilus received of the lawsuit came from Miranda-Mondragon’s counsel 41 days after the state court entered default judgment . . . . The delayed notice prejudiced Nautilus as a matter of law and relieved Nautilus of liability under the policy.” No. 17-20261 (Oct. 20, 2017, unpublished).

Atlas Trading sued AT&T based on the “filed rate doctrine,” which prohibits a common carrier from charging rates other than those on file with the FCC. The Fifth Circuit affirmed the dismissal of that claim on the pleadings; after a thorough discussion of  the requirements of Twombly and Iqbal, the Court observed:

Atlas has neither pled nor shown, though, how these charges are inconsistent with the tariffed rates. That the terms are not found  in the tariffs is insufficient. For example, it could allege what it should have been charged under the tariffed rate or compared that to what it was actually charged. It simply asserts that charges such as the composite access-rate charge are not found in the tariffs and from that asks the court to let its claims go forward.

 

Even accepting as true Atlas’s allegation that the labels for the charges are not found in the tariffs, we cannot make a reasonable inference that the defendants have violated the filed-rate doctrine. At most, we can only infer that certain labels for charges are not found in the tariffs filed with the FCC. Such an inference is not the equivalent of a plausible allegation that the defendants have charged Atlas different rates from those on file with the FCC.

Atlas Trading v. AT&T, No. 16-11661 (Oct. 18, 2017) (emphasis added).

In a reminder of the surprising complexity that can surround litigation about a party’s standing to bring a claim, in Intrepid Ship Mgmnt v. Malin Int’l Ship Repair, the Fifth Circuit noted a source of potential confusion about the applicable procedure: “Although a dismissal for lack of standing is appropriately judged under Federal Rule of Civil Procedure 12(b)(1), which allows a court to make limited findings of fact, the parties have argued this case under the standards applicable to ordinary summary judgment motions. Compare Lane v. Halliburton, 529 F.3d 548, 557 (5th Cir. 2008) (explaining that the district court can resolve disputed facts as necessary to decide a challenge to subject atter jurisdiction), withInt’l Marine LLC v. Integrity Fisheries, Inc., 860 F.3d 754, 759 (5th Cir. 2017) (applying de novo review to summary judgment cases, explaining that “[s]ummary judgment is appropriate when ‘there is no genuine dispute as to any material fact.’”)”. No. 16-41074 (Oct. 11, 2017) (unpublished).

In a 2-1 decision, the Fifth Circuit found that Ezekiel Elliott failed to exhaust remedies within the NFL’s dispute-resolution process before filing suit, meaning that the federal courts lacked subject matter jurisdiction over his complaints. A dissent found a sufficient question about the adequacy of the process to justify the exercise of jurisdiction under the relevant authorities. NFLPA v. NFL, No. 17-40936 (Oct. 12, 2017). While of enormous interest to Cowboys fans, so far as arbitration goes, the opinion is centered on issues unique to collective bargaining agreements.

Plaintiff, invoking classical concepts about the measure of damages, argued that a “reliance” or “restitution” measure was superior to “expectancy” as applied to the breach of a stock-purchase contract. The Fifth Circuit disagreed: “Here, the jury found that there was an express contract, the stock agreement, so under Texas law, Jinsun may not recover anything beyond its expectancy damages unless Jinsun shows that the stock agreement is an exception to the general rule. Jinsun has failed to do so. Here, Jinsun expected to receive $56,000 from Alidad in exchange for the block of Luxeyard stock. Whether the stock price went up or down following the stock transfer, Jinsun was entitled to receive $56,000 from Alidad—no more and no less. Its expectancy damages under the plain terms of the express contract are therefore $56,000—no more and no less.” Jinsun LLC v. Mireskandari, No. 16-20275 (Oct. 5, 2017).

As a counterpoint to the recent case of Boerschig v. Trans-Pecos Pipeline, which rejected a mootness challenge in an injunction case about a condemnation (reasoning that the court could still “order that Trans-Pecos return Boerschig’s land to its precondemnation state.”), there is Dick v. Colorado Housing Enterprises, LLC, which found a request for an injunction became moot after the allegedly wrongful foreclosure occurred (rejecting “Plaintiff-Appellant[‘s] assert[ion] that because the Defendants-Appellees were the successful bidders at the foreclosure sale, this court can order them to cancel or rescind the foreclosure sale.”) The distinction between the two rests on case law unique to foreclosures, which the Dick panel used the Fifth Circuit’s “rule of orderliness” to organize and apply. No. 17-10357 (Oct. 4, 2017).

Ramirez, on work trips to West Texas, contracted a fungal infection that led to the loss of an eye. His employee insurance plan would pay benefits “if an employee is injured as a result of an Accident, and that Injury is independent of Sickness and all other causes.” Based on the definitions of “Accident and “Sickness” in the policy, the Fifth Circuit affirmed summary judgment for the insurer. Ramirez tried to come within a “carve-back” provision at the end of the “Accident” definition, which extended coverage to “bacterial infection that is the natural and foreseeable result of an accidental external bodily Injury or accidental food poisoning, but the Court concluded that “neither the policy’s language nor its structure indicates that this provision applies beyond those two specific occurrences.” Ramirez v. United of Omaha Life Ins. Co., No. 16-11660 (Oct. 6, 2017).

In Boerschig v. Trans-Pecos Pipeline LLC, an effort to enjoin state-court eminent domain proceedings in federal court: “Boerschig contend[ed] that by ceding condemnation power to a private company, Texas eminent domain law offends due process. His argument principally relies on the private nondelegation doctrine, a nook of Fourteenth Amendment law long recognized but seldom invoked.” That obscure but important doctrine provides that “when private parties have the unrestrained ability to decide whether another citizen’s property rights can be restricted, any resulting deprivation happens without ‘process of law.'” Unfortunately for Boehrschig: “The Texas scheme allowing gas pipelines to condemn property does not appear to suffer from either of the twin ills that doomed these zoning and wagesetting laws. It imposes a standard to guide the pipeline companies—that the taking is necessary for “public use”—and provides judicial review of that determination that prevents the company from having the final say.” The Court also rejected a mootness challenge based on the construction of the relevant pipeline, observing that it could still “order that Trans-Pecos return Boerschig’s land to its precondemnation state.” No. 16-50931-CV (Oct. 3, 2017).

Welding-safety regulations enacted under the Outer Continental Shelf Lands Act contain this definition: “You means a lessee, the owner or holder of operating rights, a designated operator or agent of the lessee(s), a pipeline right-of-way holder, or a State lesssee granted a right-of-use and easement.” In United States v. Moss, the Fifth Circuit affirmed the dismissal of criminal charges against a contractor based on this set of regulations, agreeing that “you” – as defined above, and applied consistently with relevant canons of interpretation – could not be read to include a contractor. Weighing heavily against the government’s position was a long history of “virtually non-existent past enforcement of OCSLA regulations against contractors.” No. 16-30561 (Sept. 27, 2017).

The contentious, high-profile False Claims Act case of U.S. ex rel Harman v. Trinity Industries ended with complete victory for the defense, based substantially on the U.S. Supreme Court’s recent opinion about the element of “materiality” in Universal Health Services v. U.S. ex rel. Escobar, 136 S.Ct.1989 (2016). While the Harman opinion touches on many other aspects of the trial evidence and the requirements of the FCA, its central teaching its is application of Escobar, as applied to the government’s interaction with and payment for the highway guardrails at issue: “[I]f the Government pays a particular claim in full despite its actual knowledge that certain requirements were violated, that is very strong evidence that those requirements are not material. Or, if the Government regularly pays a particular type of claim in full despite actual knowledge that certain requirements were violated, and has signaled no change in position, that is strong evidence that the requirements are not material.” No. 15-41172 (Sept. 29, 2017).

Thanks to Mary Douglass and the Bar Association of the Fifth Federal Circuit for the chance to give a commercial litigation update at the 2017 Appellate Advocacy Seminar in New Orleans; here is the PowerPoint that I used for the presentation yesterday.

Former Texas Solicitor General Jim Ho and Texas Supreme Court Justice Don Willett have been nominated to the U.S. Court of Appeals for the Fifth Circuit. The Texas Lawbook features a thorough discussion of the nominations, as does the Dallas Morning News. From Louisiana, President Trump has also nominated Stuart Duncan and U.S. District Judge Kurt Engelhardt; The Advocate has a good summary of their backgrounds.

In Mainali v. Covington Specialty Ins. Co., the Fifth Circuit addressed “whether a payment made to comply with an appraisal award, which in most if not all cases is going to be paid after the 60-day window [set by the Texas Prompt Payment statute], is subject to [a statutory] penalty.” In an Erie analysis, the Court followed intermediate Texas authority that held such a payment was not subject to those statutory penalties, observing: “Covington was not trying to avoid payment of the claim; it was invoking a contractually agreed to mechanism for assessing the amount it owed.” No. 17-10350 (revised Sept. 27, 2017).

TDX Energy v. Chesapeake Operating begins with an entertaining – and accurate – summary of the challenge presented by oil and gas overproduction. Brought forward into today’s market and the parties’ dispute, at issue was a Louisiana statute, under which an operator can forfeit the right to deduct drilling costs on an “unleased oil and gas interest” – defined as one “upon which the operator or producer has no valid oil, gas, or mineral lease. (Here, the relevant interests were leased to TDX but not the operator, Chesapeake.) The Fifth Circuit elected to follow a Lousiana intermediate court opinion that it found to be consistent with the applicable canons of interpretation, and concluded that “The most natural reading of [the two relevant sections together] is that operators forfeit their right to contribution when they fail to send timely reports to lessees with oil and gas interests in lands upon which the operator has no lease . . . .” 857 F.3d 253 (5th Cir. 2017).

After removing a dispute about a home equity loan foreclosure, Deutsche Bank argued that a state court order that had vacated an earlier order allowing the foreclosure was invalid. The homeowner argued that review was precluded by the Rooker-Feldman doctrine; the Fifth Circuit disagreed. The doctrine did not apply because (1) the “vacating order” was not final under Texas law, and (2) was void under Texas law because the state court had no authority to enter it under the specific state rules of procedure applicable to foreclosures. Unfortunately for the homeowner, the original order authorizing the foreclosure was not final either, allowing review of the merits and affirmance of summary judgment for the Bank. Burciaga v. Deutsche Bank Nat’l Trust Co., No. 16-40826 (Sept. 18, 2017).

The four-part venue test adopted by the Eastern District of Texas after the Heartland opinion was short-lived, as the Federal Circuit granted mandamus relief in In re Cray, noting: “[O]ur analysis of the case law and statute reveal three general requirements relevant to the inquiry: (1) there must be a physical place in the district; (2) it must be a regular and established place of business; and (3) it must be the place of the defendant.”

Today this blog celebrates its 6th birthday! Thank you for reading. And if you want to help celebrate, consider mixing up some Crabmeat Yvonne, a staple of New Orleans’s great Galatoire’s.

The Fifth Circuit affirmed an award of $232,809.92 in costs on an unsuccessful FCA claim, noting: “The district court acknowledged that [Defendant]’s invoices were not detailed but explained that, given nearly three million pages of copies [Defendant] produced for its defense in this case,it would have been impossible for [Defendant] to explain each page’s usefulness.” It also allowed recovery for “costs relating to (1) TIFF image conversion, (2) scanning, (3) formatting electronic documents, and (4) PDF conversion – per [28 U.S.C.] § 1920(4), which allows recovery for ‘exemplification’ and ‘making copies’ of case materials.” In a similar vein, the Court credited the district court’s explanation that the statute “allow[s] a prevailing party to recover the costs of complying with an opposing party’s request to reformat electronic documents or scan hard copies of documents.” United States ex rel King v. Solvay Pharmaceuticals, Inc., No. 160259 (Sept. 12, 2017).

The parties in IQ Products Co. v. WD-40 Co.disputed whether an arbitration agreement was limited to “propane/butane-propelled produicts” or also “carbon dioxide-propelled products.” The party who prevailed in the arbitration relied mainly on the parties’ subsequent conduct to justify the broader reading, and the Fifth Circuit agreed (applying California law): “Considering . . . ‘the words used . . . as well as extrinsic evidence of such objective matters and the surrounding circumstances under which the parties negotiated [and] entered into the contract; the object, nature and subject matter of the contract; and the subsequent conduct of the parties . . . WD-40’s assertion is . . . not wholly groundless.” No. 16-20595 (Sept. 13, 2017).

The high-profile dispute between Dallas Cowboys star Ezekiel Elliott and the NFL Players’ Association, on the one hand, and the NFL on the other, has reached the Fifth Circuit after the district court’s grant of a preliminary injunction against Elliott’s suspension by the league. The NFL has moved for an interim stay; the successful plaintiffs have responded; and a motions panel of the Court will consider that issue in the week ahead.

In AMA Discount, Inc. v. Seneca Specialty Ins. Co., the Fifth Circuit rejected an interlocutory appeal on a question of bad faith claims handling under Louisiana insurane law, noting that a potentially conflicting district court decision had recently settled on appeal, and the parties actually disputed the application of law to fact rather than the controlling legal standard. The Court acknowledged that this ruling differed from that of a prior motions panel, but observered that at this stage, the case “has the benefit of full briefing and a completed record.” The Court concluded: “Perhaps an interlocutory certification would ‘materially advance the termination’ of this litigation. If that were the decisive question, of course, there would be few roadblocks to interlocutory appeals of legal issues.” No. 16-31158 (Sept. 11, 2017, unpublished).

• The panel majority in Veasey v. Abbott concluded that a stay was warranted during the appeal of an injunction against certain “voter ID” laws, focusing on the likelihood-of-success element of the standard four-part test: “As the State explains, each of the 27 voters identified – whose testimony the plaintiffs used to support their discriminatory-effect claim – can vote without impediment under SB 5. The State has made a strong showing that htis reasonable-impediment procedure remedies plaintiffs’ alleged harm and thus forecloses plaintiffs’ injunctive relief.”
• A dissent disagreed as to the elements of the four-part test, and the overrarching concept of “preserving the status quo”: “Neither side would be irreparably harmed by continuing to operate under the same election procedures they have been operating under for more than a year. If a stay is granted at all, then it should be comprehensive. In other words, the correct approach would be to stay both the district court’s order and the new legislation.” No. 17-40884 (Sept. 5, 2017).

2017 has not been kind to the administrative state, and neither was Burgess v. FDIC, No. 17-60579 (Sept. 7, 2017). An FDIC administrative law judge concluded that Burgess had misused bank property, the FDIC Board adopted those recommendations, and Burgess sought review in the Fifth Circuit. He sought an interim stay based upon his argument that the ALJ was an “inferior Officer” within the meaning of the Constitution’s Appointments Clause, and the Fifth Circuit agreed, citing the Supreme Court’s analysis of a similar position involving the U.S. Tax Court in Freytag v. Commissioner of Internal Revenue, 501 U.S. 868 (1991). In so doing, the Court parted ways with the D.C. Circuit’s analysis in Landry v. FDIC, 204 F.3d 1125 (2000), by concluding that final decision-making authority was not a prerequisite to Officer status. Accordingly, the Court granted the interim stay, finding that Burgess “has established a likelihood of success on the merits of his Appointments Clause challenge.”

After last week’s opinion in In re: DuPuy Orthopaedics, the plaintiffs have sought en banc review of a panel majority’s statements about the trial court’s ruling on the key issue of waiver. The petition raises interesting and basic questions about the scope of opinions. (For more on that general topic, check out David Coale & Wendy Couture, Loud Rules, 34 Pepperdine L. Rev. 715 (2007)).

Addressing a novel but important question, the Fifth Circuit found in that a state law attachment remedy was available to faciliate an international arbitration about a shipment of pig iron, and that federal courts had removal jurisdiction over the proceedings under the Convention on the Recognition and Enforcement of Foreign Arbital Awards. Stemcor USA v. CIA Siderurgica do Para Cosipar, No. 16-30984 (Sept. 1, 2017).

I am speaking at the Texas State Bar’s “Civil Appellate Practice 101” course on September 6 in Austin about key differences in procedural issues between Texas courts and federal courts in the Fifth Circuit. Here is a copy of the PowerPoint that I am using.

The high-stakes mandamus petition in In re DuPuy Orthopaedics, Inc., No. 17-10812 (Aug. 31, 2017), sought relief from an upcoming set of “bellweather” trials in a massive MDL proceeding about allegedly defective hip implants.  After an hour-long oral argument – and despite Hurricane Harvey’s enormous impact on Houston, where all three panelists are based – the panel denied the petition a week after argument in an unusual “split decision.”

As to the underlying substantive issue – whether the trials could proceed despite strong arguments about personal jurisdiction – two of the three panelists (Judges Smith and Jones) found that a clear error had been committed. But as to mandamus relief, two of the three panelists (Judges Smith and Costa) concluded that the defendants had an adequate remedy by direct appeal.

The opinion has four implications for mandamus practice in the Fifth Circuit, generally.

First, Judge Costa now has a “track record” about mandamus petitions, and his observations in this case – consistent with his prior experience as a trial judge – suggest he has a restrictive view about its availability.

Second, if there was any doubt that mandamus is essentially limited to forum-selection disputes in the Fifth Circuit, the analysis of “adequate remedy” by the panel majority on that point should eliminate it. The unusual length and expense of the upcoming trial, coupled with its potential impact on settlement discussions for the entire MDL, was seen as the type of litigation expense and “hardship [that] may result from delay” that will not justify a mandamus petition.

Third, by detailing a panel majority’s view that the trial court had erred, the opinion continues a practice of offering something of an “advisory opinion” about the merits, despite declining to issue the writ. Indeed, footnote 4 of the opinion gives several examples of other opinions that have done so; two other recent examples include the opinions in In re: Crystal Power Co., 641 F.3d 82 (5th Cir. 2011) (“We confess puzzlement over why respondents insist on litigating this case in federal court even though . . . any judgment issued by the district court will su ely be reversed . . . . “) and In re: Trinity Industries, No. 14-41067 (Oct. 10, 2014) (“The court is compelled to note, however, that this is a close case.”)

Fourth, the opinion highlights the difference between federal and Texas state mandamus practice, despite the nominally similar tests used by the two court systems. A leading Texas Supreme Court case about the adequacy of appellate remedy observes: “Although this Court has tried to give more concrete direction for determining the availability of mandamus review, rigid rules are necessarily inconsistent with the flexibility that is the remedy’s principal virtue.” In re: Prudential Ins. Co., 148 S.W.3d 124 (Tex. 2004). The DuPuy panel majority has a different view of the point.

Five Tips for Hurricane Harvey Litigation (a version of this article is in this week’s Texas Lawbook)

In the course of reviewing the Fifth Circuit’s commercial cases for this blog, I have read many opinons about disputes arising from Hurricane Katrina cases. In light of the havoc recently created by Hurricane Harvey, I wanted to share five observations  to prepare for the litigation that will inevitably result.

1. Record the facts.

Any lawsuit creates tension between the past and the future. The parties want to move on, and put the expense and stress of litigation behind them. But the legal case forces them to revisit the past.

That tension is particularly acute after a disaster such as Harvey, which forced people and businesses to endure incredible stress, while making them then revisit that trauma to protect their legal rights in court. The – entirely understandable – desire to move on, must be squared with the need to take the time to preserve evidence.

Consider St. Bernard Parish v. Lafarge North America, a case about the destruction of a bridge during Hurricane Katrina. While the parties offered extensive expert testimony about what caused the damage, the summary judgment proceedings turned in no small part on the facts of what happened during the storm, including facts established by photographs.

A party facing litigation should consider – as awkward as it can be while recovering from a life-disrupting event – what facts seem obvious now but may fade from memory as time goes on. To the extent possible, some thought should be given to:

• maintaining electronic records, even if the hardware appears damaged at first blush;
• writing down a “log” of relevant conversations and events about important events;
• storing any relevant physical objects, for potential future analysis by experts; and
• simply writing down basic information about names, addresses, phone numbers, and the like.

In a case arising from a natural disaster, courts will likely be forgiving as to claims of spoliation. But lost information is lost, and its absence can later effect the resolution of a legal case.

2. Help the people.

The fact evidence in the Lafarge case also included eyewitness testimony, which proved critical to defeating the defendant’s summary judgment motion. Just as a photograph can deteriorate, a person’s memory can fade. And the likelihood of that occurring can only increase when the person is placed under the severe stress of a natural disaster.

Any “team” confronted with a legal challenge by Harvey ­– a business, a professional organization, or even a family – should be mindful of the psychological effects of that stress, and encourage counseling for depression, substance abuse, and other such problems when their first signs appear. Of course, that is a good practice in any event. But its potential side benefit to a legal case is real and worth remembering.

3. Remember three definitions.

The factual and legal issues that will ultimately go to trial in cases about Harvey simply cannot be predicted with any specificity. But in the short run, three basic legal concepts are likely to pervade business dealings related to the storm:

• The Texas pattern jury instruction about “duress” defines it as “the mental, physical, or economic coercion of another, causing that party to act contrary to his free will and interest.”
• While “force majeure” is ordinarily defined by a specific contract, it generally refers to an “extraordinary event or circumstance beyond the control of the parties,” and often does not excuse a party’s non-performance entirely, but only suspends it for the duration of the event.
• “Impossibility of performance” is defined by the Restatement (Second) of Contracts as occurring “[w]here, after a contract is made, a party’s performance is made impracticable without his fault by the occurrence of an event the non-occurrence of which was a basic assumption on which the contract was made, his duty to render that performance is discharged, unless the language or the circumstances indicate the contrary.”

Awareness of these concepts can potentially avoid problems down the road, as well as identify topics and issues that require special attention today.

4. “Two-deep leadership.”

The Boy Scouts of America strictly follows a policy of “two-deep leadership,” under which two adults should be present at all times when interacting with youth. One benefit of that policy is to avoid “he-said, she-said” disputes between two eyewitnesses with no third–party corroboration. In the stress of dealing with the aftermath of Harvey, involving a business colleague or a friend in important discussions may help the future resolution of a legal matter, if a dispute arises about what was said in those discussions.

5. Crowdsource, wisely.

For good or ill, social media has come a long way since Hurricane Katrina. Used judiciously, it can be a good source of information about late-breaking news or the reputation of a particular business. And it can provide a valuable outlet for self-expression after the trauma of Harvey.

But social media posts can survive much longer than the thoughts that prompted them, and rash comments about people or events can come back to haunt the person who makes an ill-advised post. Social media is a valuable conduit for information, and at the same time, it is a reliable creator and collector of potential evidence.

Conclusion

Faced with the reality of recovery from one of the worst storms in the nation’s history, planning for future litigation may seem to be a distant worry. But the foundation for that litigation is being put in place today, intentionally or unintentionally. These five basic ideas may provide ways to place that foundation in a more orderly manner, resulting in a stronger end product.

While arising in the specific context of a defective design claim under state law, Stewart v. Capital Safety USA addressed a broader question about when expert testimony is required to prove a point, as opposed to observations by knowledgeable lay witnesses. The Court held: “To find injury causation here, a jury would at least have to conclude that a different lifeline cable or a different warning would have, under the circumstances of this accident, prevented Stewart’s death. Thus, a jury would be confronted with questions that require a degree of familiarity with such subjects as physics, engineering, and oil rig practices and procedures. This case therefore raises questions that are of ‘sufficient complexity to be beyond the expertise of the average judge and juror’ and that ‘common sense’ does not ‘make[] obvious.'” No. 16-30993-CV (May 30, 2017; published Aug. 21, 2017).

An insurance dispute went to final judgment in 2012, was appealed to the Fifth Circuit and ultimately remanded “for further consideration in the light of hte answer given by the Texas Supreme Court in [In re: Deepwater Horizon, 470 S.W.3d 452 (Tex. 2015)]. On remand, after considering the effect of Deepwater Horizon, the district court reinstated its 2012 judgment. In the second appeal, the parties disputed whether “the post-judgment interest rate, which is significantly lower than the applicable pre-judgment interest rate, should apply from the date of the 2012 judgment because that judgment was not materially changed on remand.” The Fifth Circuit agreed that it should run from the 2012 judgment, noting that the district court did not reopen the record, and the judgment did not materially change. ExxonMobil v. Electrical Reliability Servcs., No. 15-20751 (Aug. 22, 2017).

Sterling Homes, the general contractor on a residential construction project, successfully sued Espinoza, a painting subcontractor, for a fire loss over $1 million. Espinoza’s insurer denied coverage because Sterling Homes was an “additional insured” on Espinoza’s policy, which the insurer said brought the Sterling-Espinoza dispute within the policy’s “cross suits” (or “insured v. insured”) exclusion.. The Fifth Circuit concluded that the plain terms of the exclusion would cover parties that were named as “additional insureds,” in addition to the actualy purchasers of a policy. But as to the specific claims at issue, the Court further held that the exclusion was only intended to apply to Sterling Homes’s liability arising rom Espinoza’s operations, as “nothing in the plain language of the subcontracting agreement obligating Espinoza to name Sterling Homes as an additional insured suggests the parties intended for Espinoza to lose insurance overage in the event Sterling Homes needed to sue him.” Certain Underwriters at Lloyd’s v. Sterling Custom Homes

Body by Cook, Inc. v. State Farm gives a useful reminder about the basic rules for a federal pleading: “[A] complaint may simultaneously satisfy Rule 8’s technical requirements but fail to state a claim under Rule 12(b)(6). Mere compliance with Rule 8 does not itself immunize the complaint against a motion to dismiss. Rule 8(a)(2) specifies the conditions of the formal adequacy of a pleading,” but “it does not specify the conditions of its substantive adequacy, that is, its legal merit.” No. 16-31034-CV (Aug. 24, 2017) (citations omitted).

The process server’s affidavit in Norris v. Causey said that (1) the defendant’s wife “yelled through the door that she would not accept service, and (2) he then posted the summons and complaint on the defendant’s door. The affidavit did not say, however, that these events occurred on the same day, which led to a remand for additional fact-finding by the district court: “It turns out that whether the yelling and posting happened the same day matters a great deal. Leaving a summons and complaint at a residence door, unaccompanied by a refusal to accept service, is not effective service under Rule 4. . . .   This means that if Garry’s wife was not present, let alone refusing service, on the day the process server posted the documents on the door, Garry’s service was likely defective. On the other hand, a defendant’s refusal to accept service is not rewarded when the process server announces the nature of the documents and leaves them in close proximity to the defiant defendant.” No. 16-30339 (Aug. 22, 2017).

Yahoo cancelled its contract with SCA related to a billion-dollar “perfect bracket contest” for 2014’s March Madness. The parties disputed the appropriate termination payment, defined in the contract as “50% of the fee” – Yahoo contending the “fee” was 50% of the $1.1 million deposit that it already paid SCA; SCA contending that the “fee” was the rull $11 million contract fee, credited for the deposit. The Fifth Circuit reversed and rendered judgment for SCA, noting that the contract “clear[ly] incorporated by reference two invoices that specified the $11 million figure,” and identifying several other contract provisions consistent with SCA’s reading. The issue of what documents comprise a contract, and the related legal issue of when a court may consider “parol” evidence, continues to be a frequent – if not the most frequent – point of disagreement between the Fifth Circuit and trial courts. SCA Promotions v. Yahoo!, No. 15-11254 (Aug. 21, 2017).

After a pipeline breach, a federal regulator penalized ExxonMobil for violating safety rules. The Fifth Circuit reversed, finding, inter alia, that the agency’s interpretation of the “textually unambiguous” regulation required no deference under Auer v. Robbins, 519 U.S. 452 (1997). Specifically, the regulation said that pipeline operators “must consider” “all risk factors that reflect the risk conditions on the pipeline segment.” Concluding (presumably, after due consideration), that “consider” meant “to think about carefully,” the Court concluded that the regulation “unambiguously serves to informs a pipeline operator’s careful and deliberate decision-making process rather than to compel a particular outcome . . . ” This conclusion undermined the substantive basis of the agency’s liability determination, and led to reversal in substantial part. ExxonMobil Pipeline Co. v. U.S. Dep’t of Transp., No. 16-60448 (Aug. 14, 2017).

The issue in Longhorn Gasket & Supply Co. v. U.S. Fire Ins. Co. was whether asbestos was within the scope of a pollution exclusion that applied to  “irritants, contaminants or pollutants.” Acknowledging a dearth of Texas case law on the subject, and lack of a clear trend in opinions nationally, the Fifth Circuit concluded that asbestos was an “irritant” under the commonly-accepted meaning of that term, and the underlying claims thus fell within the scope of the exclusion. The Court then held that because “[w]e have concluded that the pollution exclusion applies . . . the burden shifts to [the insured] to attempt to apply an exception to the exclusion”; in this case whether “such discharge, dispersal, release or escape is sudden and accidental.” No. 15-41625 (Aug. 18, 2017).

I was interviewed today by Fox 4 Dallas about social media and hate speech, in light of recent events in Charlottesville.

In a return trip to the Fifth Circuit, the defamation case of Block v. Tanenhaus again sidestepped the question of whether state anti-SLAPP laws apply in federal courrt, allowing that elephant to remain in the Erie room for awhile longer. Here, assuming that the Lousiana state law applied, the panel reversed and remanded the dismissal of a professor’s claim that the New York Times misquoted him. Jess Krochtengel summarizes the underlying Erie question and its implications in a recent Law360 article. No. 16-30966 (Aug. 15, 2017).

Five LPCH attorneys are on 2018’s list of Best Lawyers in America!

The trial court in Oprex Surgery v. Sonic Automotive Employee Welfare Benefit Plan dismissed Oprex’s complaint for failure to comply with a discovery order; the Fifth Circuit reversed, finding, inter alia:

• A record of “delay or contumacious conduct” was not established when “Sonic raised no complaint, in a motion to compel or otherwise, regarding the adequacy of Oprex’s responses unitl one hour before the conference” at which dismissal occurred;
• The time and expense of participating in conferences is not “prejudice to ‘the opposing party’s preparation for trial”; and
• “. . . given the important due process concerns implicated by a dismissal with prejudice, the court should at leat consider the efficacy of lesser sanctions first”

No. 16-20734 (Aug. 10, 2017, unpublished).

The common law of contracts was forever shaped by the good ships Peerless (one of which appears to the right), which both sailed into Liverpool in late 1863 bearing loads of cotton from Bombay. A modern counterpoint appears in GIC Services v. Freightplus USA , in which the parties were both talking about a tugboat called REBEL (left), but disagreed over what Nigerian city it was supposed to arrive in after a trans-Atlantic journey from Houston. The core problem with the “meeting of the minds,” however, was not among the parties, but among their counsel and the trial court, as the calculation of damages for the prevailing party rested almost entirely on one invoice. The Fifth Circuit panel split 2-1 over whether an effective stipulation had been reached about the authenticity of the invoice, providing a cautionary note to all trial lawyers about the effect and scope of agreements reached “on the fly” in open court. No. 15-30975 (August 8, 2017).

In a topic also addressed on 600Commerce today, the interplay of criminal proceedings and civil litigation can be challenging. The conclusions of In re Grand Jury Subpoena summarized when a stay of civil cases can be required: “It is not necessary that the movant for civil discovery specifically intend to circumvent the rules of criminal discovery: a movant with the ‘purest of motives’ would, in the event the civil case wa allowed to proceed, gain access to materials otherwise unobtainable and, in so doing, potentially harm the related criminal investigation. . . . If not enjoined, further proceedings in state court, including civil discovery, could undermine the federal criminal investigation into [Company]. Furthermore, [Company] will not be unduly burdened if the civil proceedings do not proceed for the duration of the criminal investigation: ownership of the electronic devices can be determined after the investigation is complete, and the devices returned to [Company] if its ownership is established.” No. 16-10181 (Juy 19, 2017).

Among other holdings in a hard-fought wrongful foreclosure action, the Fifth Circuit made two observations about the FDCPA in Mahmoud v. DeMoss Owners Association. First, while language on the first page of a letter suggested that action was required in less than 30 days, the next page of that letter clearly gave the required 30-day action period in three places, and thus did not violate the FDCPA.  Second, even though “a small portion of the debt may have been time-barred,” in the context of a non-judicial foreclosure controlled by state law, that matter alone would not create an FDCPA violation. A dissent had a different view of the point, and “would hold instead that, consistent with the text and spirit of the Act, demanding full repayment of a partiaally time-barred debt under the threat of forecloosure – implying that the entirety of the debt is legally enforceable – violates the FDCPA.” No. 15-20618 (July 28, 2017).

The Fifth Circuit reversed a summary judgment for the insured in a dispute about “advertising injury” coverage, finding that the underlying pleading “alleged misrepresentations . . . directed at a particular potential customer in reference to a particular project that a competitor was undertaking. It thus impugned a particular competitor and its services by necessary implication” (thus distinguishing KLN Steel Prods. Co. v. CNA Ins. Cos., 278 S.W.3d 429 (Tex. App.–San Antonio 2008, pet. denied)). This brought the claim within the policy, which covered “injury . . . arising out of the oral or written publication, in any manner, or material that disparages a person’s or organization’s goods, products or services.” Uretek (USA), Inc. v. Continental Casualty Co., No. 15-20104 (July 28, 2017).

In a thorough review of several basic issues that arise in litigation about residential foreclosures, the Fifth Circuit addressed whether the citizenship of a mortgage securitization trust is determined by the citizenship of the trustee, or the citizenship of all the trust’s interest holders. While the traditional rule is that the citizenship of the trustee controls, Navarro Savings Ass’n v. Lee, 446 U.S. 458 (1980), the borrower argued that a more recent case about the citizenship of a REIT should control, Americold Relay Trust v. Conagra Foods, 136 S. Ct. 1012 (2016). Because the defendant bank was sued in its capacity as trusteee, and because the terms of the Pooling and Service Agreement assigned “real and substantial” control to the bank, the Court elected to follow Navarro. Bynane v. The Bank of New York Mellon, No. 16-20598 (August 4, 2017) (Navarro was sucessfully argued in the Supreme Court by my former law partner James Ellis, an excellent lawyer and as shown above, a star quarterback at Texas Tech in the early 1960s).

In Hills v. Entergy Operations, Inc., a case about overtime pay for security guards, the Fifth Circuit reversed a summary judgment based upon a conclusion about two guards’ lack of damage. While the Court’s holding was based upon technical issues of employment law, its underlying reasoning is of broader applicability: “We reverse the district court’s summary judgment that the fluctuating workweek method applies here as a matter of law. The underlying factual issue upon which the applicabilty of that method is predicated, what the employees clearly understood, should be decided at trial in due course.” No. 16-30924 (Aug. 4, 2017). Also, in a ruling of general interest about administrative law, the Court declined to follow an interpretive letter by the Department of Labor.

The City of Cibolo, Texas, sought to establish sewer service that would conflict with the Greeny Valley Special Utility District’s right to provide such service under a federal program. The dispute turned on the meaning of the phrase “the service” in the relevant statute – the resulting analysis (a) resolved that use of “the” is not dispositive, since its meaning depends on the following noun, and (b) Congress’s many different uses of “service” and “services” in the pertinent set of statutes was not controlling. The Fifth Circuit concluded that the plain terms of the statute required it to “decline the city’s invitation to read adjectives” into the phrase “the service,” and it reversed the district court’s ruling that had limited the phrase to services financed by a federal loan. Green Valley Special Utility District v. City of Cibolo, No.16-51282 (Aug. 2, 2017).

Dominguez had “a series of mishaps during discovery” in his Jones Act case. The district court ultimately dismissed his claims, but the Fifth Circuit reversed in favor of a less severe sanction. The key discovery problem was Dominguez’s failure to attend an independent medical exam, but that exam was called for because of an opinion from a medical expert offered by Dominguezz. “[E]xcluding [the expert] from the proceedings would have eliminatedd the immediate cause of delay and any prejudice to [Defendant] without dismissing Dominguez’s underlying personal injury claims in their entirety.” Dominguez v. Crosby Tugs, LLC, No. 16-31239 (Aug. 1, 2017).

Laney Chiropractic v. Nationwide Mutual Ins. Co. presented a dispute about whether “advertising injury,” covered by insurance, was raised by a complaint about a competitor’s statements about a chiropractic massage technique. The Fifth Circuit affirmed summary judgment for the insurer, finding, inter alia: “[W]hen an insured is accused of using another’s product, they are generally not using another’s ‘advertising idea.’ . . . And that is precisely what the Underlying Complaint alleges. It alleges that Laney unlawfully used a patented product . . . and then advertised the product on its website.” Arguments based on alleged trade dress and slogan infringement failed for similar reasons. No. 16-1183 (July 28, 2017)

Celebrate Christmas in July and read about five business cases from the Fifth Circuit in 2017 that you should know.

McCarty fell outside a restaurant kitchen; her subsequent lawsuit against the restaurant for premises liability failed for lack of evidence. The Fifth Circuit distinguished the Texas appellate authority she cited by observing: “The evidence in each of these cases provided context for how long the hazardous condition had existed, in the form of either a discrete and readily documented antecedent event (e.g., a rainfall) or an attribute of the hazard (e.g., a puddle’s size, from which the jury could reasonably infer how long the puddle had been growing). In this case, by contrast, no evidence would permit the jury to trace the alleged slip risk to a particular antecedent event. Nor could a jury infer from any attributes of the alleged hazard that it had been growing over any length of time.” McCarty v. Hillstone Restaurant Group, No. 16-11519 (July 18, 2017).

The bankruptcy court ruled that a claim against the debtor, arising out of a scheme involving foreclosure proceedings, was nondischargeable. The Fifth Circuit affirmed, holding, inter alia, that the debt could be found nondischargeable because of the debtor’s participation in a civil conspiracy involving the scheme: “[Bankruptcy Code ] ection 523(a)(4) excepts from discharge debts ‘for . . . larceny.’ The text adds no further criteria or qualifications. Like § 523(a)(2), a plain reading of the provision is that a debtor cannot discharge a debt that arises from larceny so long as the debtor is liable to the creditor for the larceny. It is the character of the debt rather than the character of the debtor that determines whether the debt is nondischargeable under § 523(a)(4).” Cowin v. Countrywide Home Loans, No. 15-20600 (July 18, 2017).

Duggan, an non-named member of a class certified under Fed. R. Civ. P. 23(b)(1), made an untimely objection to the fairness of the class settlement. While he was not a named party, he sought to appeal under the doctrine recognized by Devlin v. Scardelletti, 536 U.S. 1 (2002), which allowed non-named class members “who have objected in a timely manner to approval of the settlement at the fairness hearing have the power to bring an appeal without first intervening.”  Unfortunately for Duggan, the Fifth Circuit found no reason to excuse his late objection, in particular rejecting the argument that his opponent was required to move to strike the objection in district court as a prerequisite to arguing waiver on appeal. Farber v. Crestwood Midstream Partners LP , No. 16-20742 (July 17, 2017).

Duncan, a Wal-Mart employee, slipped on a mat near an ice freezer in the store. She sued for her injuries and the Fifth Circuit affirmed summary judgment for the defense, noting several ways in which her proof of a dangerous condition was lacking: “In Duncan’s deposition—the only evidence she and Johnson submitted in support of their claim—she repeatedly explained that she did not know how water developed under the mat on which she slipped. Duncan couldn’t say whether water had ‘somehow leaked or spilled underneath the mat’ or whether ‘something on top of the mat . . . leaked through it.’ No one at Wal-Mart told her that they knew there was water in that area before she fell, and she didn’t know whether water had ever accumulated in that area before. Duncan also said that in the four years she worked at Wal-Mart, she had never heard of the Reddy Ice machine leaking, even though she knew other appliances, like the ‘Coke machine,’ leaked. ” Duncan v. Wal-Mart Louisiana LLC, No. 16-31223 (July 14, 2017).

I recently participated in a mock reargument of Marbury v. Madison (right), albeit changed from the original to (1) actually have discussion about judicial review (2) actually have participation by my character, Attorney General Levi Lincoln, who in “real life” was ordered to stay silent by a highly irritated President Jefferson. In case you should ever need such a thing, here are my notes about the case against judicial review, which rely heavily upon an outstanding 1969 Duke Law Journal article by Professor William Van Alstyne.

Litigation continues on the Texas tollroads, most recently producing a defamation lawsuit in BancPass v. Highway Toll Administration LLC, arising from letters sent by a company’s competitors to Google and Apple. The defendant unsuccessfully argued that the letters were immune from liability by the Texas privilege associated with court proceedings.

Before the Fifth Circuit, matters began well for the defendant – the Court concluded (1) that an immediate interlocutory appeal was allowed because the Texas privilege protects from suit, not just liability, and (2) while “[c]ertainly, the district court expressed its displeasure” at this issue arising late in the proceedings, it did not formally certify the appeal as frivolous (and thus avoided a line of cases that would otherwise have undermined defendant’s appeal right). But on the merits:

“Texas caselaw is clear that our analysis must focus on the connection between the communications and the specific legal action HTA now claims that it was contemplating, rather than legal action more broadly. The letters to Google and Apple in particular put forward bare accusations of unlawful conduct that was unrelated to HTA’s later tortious interference claim and that neither directly implicated HTA’s own legal rights nor constituted legal claims that HTA had any ability to pursue.”

No. 16-51073 (July 13, 2017).

The Fifth Circuit recently granted rehearing en banc in two civil cases – Ariana M. v. Humana Health Services, 853 F.3d 753 (5th Cir. 2017), which reviewed the decisions of an ERISA plan administrator, and In re: Doiron, 849 F.3d 602 (5th Cir. 2017), which addressed whether a contract was “maritime” in nature. The common thread? Both opinions made express appeals to the full court for review:

• In Ariana, all three panel members who joined in the same opinion also joined in a special concurrence:  “As any sports fan dismayed that instant replay did not overturn a blown call learns, it is difficult to overcome a deferential standard of review. The deferential standard of review our court applies to ERISA decisions often determines the outcome of disputes that are far more important than a sporting event: decisions made by retirement and health plans during some of life’s most difficult times, as this case involving a teenager with a serious eating disorder demonstrates. So it is striking that we are the only circuit that would apply that deference to factual determinations made by an ERISA administrator when the plan does not vest them with that discretion.” (emphasis added)
• And the conclusion of the unanimous Dorian panel opinion said: “It is time to abandon the Davis & Sons test for determining whether or not a contract is a maritime contract. The test relies more on tort principles than contract principles to decide a contract case. It is too flexible to allow parties or their attorneys to predict whether a court will decide if a contract is maritime or non-maritime or for judges to decide the cases consistently. The Supreme Court’s decision in Kirby reinforces this conclusion. Just as important, the above test will allow all parties to the contract to more accurately allocate risks and determine their insurance needs more reliably.” (emphasis added)

While not within the usual subject matter of this blog, the general importance to Texas business litigation of the Eastern District’s June 30 decision in Raytheon Co. v. Cray, Inc. warrants attention. Raytheon sued Cray in the Marshall Division of the Eastern District for alleged infringement of at least two patents about supercomputer systems. After the Supreme Court’s recent opinion in TC Heartland LLC v. Kraft Foods Grp. Brands LLC, 137 S. Ct. 1514 (2017), Cray moved to transfer, arguing that it (1) did not reside in the district and (2) had not committed acts of infringement or had a regular and established place of business there. The Eastern District adopted a four-factor test and denied the motion, examining —

1. physical presence “including but not limited to property, inventory, infrastructure, or people”;
2. defendant’s representations “internatlly or externally, that is has a presence in the district”;
3. benefits received from the defendant’s presence in the district, “including but not limited to sales revenue”; and
4. “the extent to which a defendant interacts in a targeted way with existing or potential customers, consumers, users or entities within a district, including but not limited to through localized customer support, ongoing contractual relationships, or targeted marketing efforts.”

No. 2:15-CV-01554-JRG (June 29, 2017).

By summary judgment, Advanced Recovery Systems lost a case brought under section 8 of the Fair Debt Collection Practices Act, alleging that it failed to disclose on credit reports that the plaintiff disputed two allegedly unpaid debts. Procedurally, while the summary judgment did not follow the traditional Rule 56 schedule, the Fifth Circuit found no harm because ARS had admitted to the district court that there were no remaining issues of fact. Substantively, the Court rejected a challenge to Article III standing, finding that the plaintiff’s injury was sufficiently “tangible” — “[T]he violation of a procedural right granted by statute can be sufficient in some circumstances to constitute injury in fact .. . . Among those circumstances are cases where a statutory violation creates the ‘risk of real harm’ . . . Unlike an incorrect zip code, the ‘bare procedural violation’ in [Spokeo, Inc. v. Robins, 136 S. Ct. 1540, 1549 (2016)], an inaccurate credit rating creates a substantial risk of harm.” Sayles v. Advanced Recovery Systems, Inc., No. 16-60640 (July 6, 2017).

A recurring issue in contract litigation is whether a provision creates a “condition precedent” to the performance of other obligations. In Red Hook Communications I, LP v. On-Site Manager, Inc., the Fifth Circuit identified this provision as one that “plainly creates a condition precedent that both [parties] must comply with before either can bring suit (and thus, denying subject matter jurisdiction if it is not complied with): “[T]he Indemnifying Party and the Indemnified Party will, for a period of sixty (60) days following delivery of such objection, use good faith efforts to resolve the Dispute.” No. 16-11351 (July 3, 2017, unpublished).

In St. Joseph Abbey v. Castille, 712 F.3d 215 (5th Cir. 2013), the Fifth Circuit struck down a state-law restriction on the sale of funeral caskets by a monastery, finding that the state had no rational basis for that restriction. Cautious about encouraging similar challenges to economic regulation, the Court warned: “Nor is the ghost of Lochner lurking about. . . . We insist only that Louisiana’s regulation not be irrational—the outer-most limits of due process and equal protection . . . . ”

The recent case of Reyes v. North Texas Tollway Authority confiirms that if the ghost of Lochner chooses to lurk on Dallas-area tollways, it will have to pay its toll charges timely. It found that the NTTA’s system for charging late fees has a rational basis in both its legitimate need to recover collection costs and desire to encourage the use of TollTags, and concluded: “The Zip Cash system with its challenged fees is the type of novel policymaking for which the limited scrutiny of rational basis review is most justified. . . . The political process may continue to fine tune toll collection, but that is not the Due Process Clause’s role to play.”

In so doing, the Court clarified a sometimes-confusing principle about the legal standard: “[G]overnment action that applies broadly gets rational basis [review]; government action that is individualized to one of a few plaintiffs gets [‘]shocks the conscience[‘] review.” No. 16-10767 (June 27, 2017).

Servisair bought a workers’ compensation policy from Liberty Mutual, “There is no dispute that Servisair significantly over-allocated payroll to clerical employees, which is a considerably less expensive classification.” Thus, after the payroll period ended and an audit concluded, Liberty Mutual billed Servisair for $3.6 million in additional premium. Servisair alleged a mistake in the “underlying factual basis” relied upon “in negotiating and agreeing to the policy,” but the Fifth Circuit sided with Liberty Mutual, noting that the policy expressly stated: “If the final premium is more than the premium [Servisair] paid to [Liberty Mutual], [Servisair] must pay [Liberty Mutual the balance.” In other words, “[t]his is an open-ended obligation with no limit on the amount of additional premium Servisair might ultimately owe.” In sum: “Servisair made a deal that, in retrospect, it did not like. That does not allow it to rewrite or avoid its obligations.” Liberty Mutual Ins. Co. v. Servisair, LLC, No. 16-20472 (June 27, 2017, unpublished).

Welsh unsuccessfully sued her employer for allegedly retaliating against her for filing an EEOC charge in 2012. Welsh then sued her employer again in 2015, alleging discrimination based on incidents occurring between April and December of 2014. The district court granted summmary judgment for the defense on res judicata grounds, and the Fifth Circuit reversed. Reviewing Texas law about claim preclusion, pleading amendments, and compulsory counterclaims, the Court concluded: “[W]e reject [Defendant’s] argument that Welsh was required to amend her petition in Welsh I to include claims that were not mature at the time of filing Welsh I. We specifically reject the idea that every time something happens after a lawsuir is filed the plaintiff must immediately amend or risk losing that claim forever.” Welsh v. Fort Bend ISD, No. 16-20538 (June 22, 2017).

In the course of affirming a substantial judgment for misappropriation of trade secrets, the Fifth Circuit made an interesting observation in a footnote about liability for civil conspiracy under Texas law: “For instance, [Defendant] argues he is entitled to judgment on the conspiracy to misappropriate claim because such a claim is barred by Texas’ intra-corporate conspiracy doctrine, i.e., that a corporation and its employees cannot conspire with each other in carrying out a company’s business. He has presented no case applying it to the instant situation, where the conspiracy predated even the creation of the company at issue. Here, [Defendant] stole [Plaintiff’s] trade secrets months before the creation of SXP, and the creation and operation of SXP was the means by which the conspiracy was carried out.” Quantlab Technologies v. Kuharsky, No. 16-20242 (June 22, 2017, unpublished).

While otherwise affirming a judgment in the plaintiff’s favor, in Merrit Hawkins & Associates v. Gresham the Fifth Circuit vacated an award of exemplary damages under Texas law in a non-compete case. It distinguished the plaintiff’s authorities by saying: “Unlike in those cases, the only argument and evidence that [plainitff] MHA presented to the jury on the issue of exemplary damages was that [defendant] Consilium intentionally breached the non-compete contract. MHA claimed that ‘the circumstances of this case [were] quite egregious, that everything was intentional, [Consilium] knew [MHA] had these agreements . . . and they breached them anyway.’ However, this is the exact type of argument that the Texas Supreme Court explains is insufficient to show malice when an element of the underlying cause of action is willful harm. Even drawing all inferences in favor of MHA, the additional evidence MHA points to is insufficient to show that Consilium acted with specific intent to cause substantial harm to MHA. The proximity of the two businesses, without more, does not lead to the conclusion that Consilium acted with malice towards MHA. And the fact that Consilium’s founder was a partner at MHA was not raised for the purpose of showing that MHA engaged in a strategic plan of hiring away MHA employees to harm it, but rather to show that Consilium was aware that MHA’s employees had non-compete agreements. Moreover, MHA has never claimed that Consilium induced [the employee] to steal or use its proprietary information . . . .” No. 16-10439 (June 21, 2017).

The Fifth Circuit website has recently posted an “Important Note Regarding FRAP 28(j) Filings,” which reminds: “Counsel sometimes file a FRAP 28(j) letter after oral argument, ostensibly to provide information requested by the court, but make supplemental argument in the filing. . . . [U]nless authorized or requested by the panel, it is improper to make supplemental argument in the letter.”

Longtime Texas practitioners will remember when lawyer ads had to contain a cumbersome notice that the attorney was “NOT BOARD CERTIFIED – TEXAS BOARD OF LEGAL SPECIALIZATION” if he or she did not have a TBLS certification.  The dental field bit into a similar regulation in American Academy of Implant Dentistry v. Parke, which prohibited claims of specialization in areas not recognized by the American Dental Association. The Fifth Circuit panel majority, after chewing on the First Amendment framework for the regulation of commercial speech, found a poor bridge between the asserted government interest and the scope of the regulation, making it unconstitutional. A dissent would have affirmed the regulation as addressing “inherently misleading” speech, which is rooted in a different First Amendment framework. No. 16-50157 (June 19, 2017).

In ASARCO LLC v. Montana Resources, Inc., a case involving the interplay of a business’s bankruptcy with a later lawsuit for breach of contract by that business, the Fifth Circuit observed:

• “[A] declaratory claim on its own typically will not preclude future claims involving the same circumstances (as noted, issue preclusion may still apply to any declaration the court issues). But in a case involving both declaratory claims and ones seeking coercive relief, the former will not serve as an antidote that undoes the preclusive force that traditional claims would ordinarily have.” (applying the “seminal case” on the point, Kaspar Wire Works, Inc. v. Leco Engineering & Machine, Inc., 575 F.2d 530 (5th Cir. 1978))
• As to the damages claim, “ASARCO’s claim for failure to reinstate did not accrue until MRI rejected the tender in 2011. . . .  ASARCO may or may not have attempted to cure, and MRI may or may not have denied ASARCO’s reinstatement. Because the present breach of contract claim was contingent on future events, ASARCO could not have brought it during the adversary proceeding.”
• For the same reasons, the plaintiff was not judicially estopped by allegedly inadequate disclosures during the earlier bankruptcy: “MRI cites no case requiring a party to disclose a potential claim for breach of contract when the contract had not yet been breached. This makes sense, because MRI’s position would require a debtor to scour its contracts looking for hypothetical claims that another party could maybe breach in the future.”

No. 16-40682 (June 2, 2017).

While this story does not involve federal practice, the recent death of former Dallas Court of Appeals Justice David Lewis, who resigned from that Court last year to combat alcoholism and depression, sounds a warning note for all in the legal profession about the importance of mental health.

For those who enjoy topics even more arcane than the basic Rooker-Feldman doctrine, there is Kreit v. Quinn, No. 16-20744 (June 13, 2017, unpublished). A state court appointed a receiver for a hospital, which then entered bankruptcy. The bankruptcy court approved a sale, a doctor strenuously objected to the sale after the fact, and the court sanctioned the doctor for his filings. On appeal, the receiver contended that the doctor’s filings were barred by the Rooker-Feldman doctrine as a collateral, federal attack on a state court order. The doctor asked the Fifth Circuit to recognize an exception to that doctrine for orders that are void ab initio. But while noting a circuit split on the point, the Court declined to weigh in, finding that the state court had the needed authority.

Lee sued for his injuries from a fall on the M/V BALTY (right). In resolving the defendant’s summary judgment motion, “[t]he district court dismissed Captain Jamison’s report solely because it was not sworn without considering Lee’s argument that Captain Jamison would testify to those opinions at trial and without determining whether such opinions, as testified to at trial, would be admissible.” The Ffith Circuit remanded for reconsideration in light of a 2010 amendment to Fed. R. Civ. P. 56 that says (as summarized by Moore’s Federal Practice): “Although the substance or content of the evidence submitted to support or dispute a fact on summary judgment must be admissible . . . , the material may be presented in a form that would not, in itself, be admissible at trial.” Lee v. Offshore Logistical No. 16-31049 (revised July 5, 2017).

Total Gas, the American subsidiary of the large French energy concern, sued for a declaratory judgment that FERC could not impose certain penalties under the Natural Gas Act. But while FERC had begun an administrative proceeding against Total, that case had to proceed through several more steps before any penalty would be assessed. Accordingly, the dispute was not ripe for adjudication. The “step by step” analysis of ripeness in this case appears to be of general applicability to other cases involving conditions precedent. Total Gas v. FERC, No. 16-20642 (June 8, 2017).

The common situtation of a loan modification raised two general issues – (1) given the princple that “all parts of a contract should be read so that none will be rendered meaningless,” the outcome is not clear if a modification has a signature line, when companied by “contratual language [that] indicated that once the [borrowers] performed, their loan would be modified automatically and [the servicer] would be bound by the Agreement” – and (2) given that the Statute of Frauds in Texas for loan agreements generally involves oral agreements or agreements that clearly require signature by both parties, it is not clear if “the written offer itself, along with the attached Modification Agreement” would satisfy that status. Owens v. Specialized Loan Servicing LLC, No. 16-20557 (June 5, 2017).

I spoke a few days ago about recent Fifth Circuit opinions at the University of Texas Conference on State & Federal Appeals; here is a copy of the PowerPoint that I used.

Vine v. PLS Financial Services presents the infrequently-encountered waiver of arbitration rights by litigation conduct. PLS made a short-term loan to Vine; to obtain such a loan, a PLS customer must present a blank or post-dated check sufficient to cover the loan amount and a finance charge. PLS and Vine had a broad, general arbitration agreement. The Fifth Circuit found that PLS waived that right when it submitted inaccurate “worthless check affidavits” under Texas law after Vine defaulted. It held that the issue of waiver by litigation conduct, as distinct from waiver by failure to comply with a contractual condition precedent, was appropriate for the court rather than an arbitrator. And, the general clause here did not have specific language about that particular waiver issue. A dissent questioned whether submitting the affidavits amounted to “substantial invocation” of the judicial process, as required for waiver of an arbitration right. No. 16-50847 (May 19, 2017, unpublished).

Guilbeau bought real property and sued Hess Corporation for alleged contamination resulting from oil and gas drilling done several years before. Acknowledging that the Louisiana Supreme Court had not ruled on the precise issue presented – whether the “subsequent purchaser” rule applied to mineral interests – the Fifth Circuit concluded that Louisiana law would bar Guilbeau’s claim. A consensus of Louisiana intermediate courts, applying the most analogous authority from that state’s Supreme Court, reasoned “that while mineral rights in the lessee are real rights, a lessor’s rights, including the right to sue for damages, are personal and do not automatically transfer with the property” absent an assignment. Guilbeau v. Hess Corp., No. 16-30971 (April 18, 2017).

The Fifth Circuit reversed a JNOV on liability for breach of contract in Kerr v. Mapei Corp., holding: “The jury was presented with two alternative, but plausible, accounts of the formation and authorization of a contract. The jury reasonably selected one of those alternatives.” As to consequential-type damages for lost profits for other sales, however, the Court affirmed the judgment for the defendants, finding that the plaintiff’s damages model “was not supported by any empirical analysis or any evidence outside of the [contract] relationship . . . (e.g., real-world sales, customer surveys, or current market demand).” In particular, it noted the lack of evidence that the substantial business opportunity related to the contract would recur, the fact that the contract was terminable at will, and the lack of weight for a party’s own “unsubstantiated, self-serving speculations” about future business. No. 16-10430 (June 30, 2017 (revised), unpublished).

The Herculean effort of settling the many lost-profits claims related to the Deepwater Horizon accident led to a claims process described by the Fifth Circuit as follows – “Somewhat simplified, and more than somewhat condensed, the claims process works as follows: The Claims Administrator compares a claimant’s financial performance prior to and after the spill. If the former is greater than the latter, BP is liable for the difference.
Causation is, in all other respects, presumed.”

Efforts to implement this process led to guidelines “requiring the Claims Administrator to move, smooth, or otherwise reallocate revenue for claimants engaged in construction, education, agriculture, and professional services. Claimants in these four industries tend to be paid in lump sums, which are capable of generating damages awards that do not comport with tort principles.”

Mindful that in an earlier dispute about these issues, the Court had reminded that “[i]n interpreting a settlement, surely some weight has to be given to what damages recoverable in civil litigation actually are,” the Court reversed the use of these particular guidelines: “[W]e decline to re-write the Settlement Agreement under the guise of contractualinterpretation. When we said . . . that the Claims Administrator should ‘process claims in accordance with economic reality,’ we assumed that doing so would comport with the text of the Settlement Agreement. . . . [, which] grants claimants the right to choose their own Compensation Period.” Lake Eugenie Land & Devel. v. BP, No. 15-30377 (May 23, 2017).

A business named “Renegade Swish” sued Wright in Texas state court for breach of an employment agreement. Wright counterclaimed for violations of the FLSA. For reasons not explained in the opinion, Swish then nonsuited its contract claims, moved to realign the parties so it would be the new defendant, and removed the case to federal court based on federal jurisdiction. The Fifth Circuit held that Swish lacked an objectively reasonable basis for removal, citing both precedent (primarily, Holmes Group, Inc. v. Vornado Air Circulation Systems, Inc., 535 U.S. 826 (2002)), and the text of 28 U.S.C. § 1441(a), which refers to removal by “defendants.” The Court did not credit Swish’s reliance on the pending motion to realign, declining to “invite federal courts to dream of counterfactuals when actual litigation has defined the parties’ controversy,” and rejected the cases cited by Swish as not presenting a meaningful conflict: “As compared to [a controlling case]m where the disagreement among the courts was ‘hotly contested,’ any disagreement here is tepid and lopsided.” Renegade Swish v. Wright, No. 16-11152 (May 22, 2017).

While arising from the Federal Circuit’s patent jurisdiction rather than the Fifth Circuit, the Supreme Court’s unanimous May 22 decision in TC Heartland LLC v. Kraft Foods Group Brands LLC is of great interest to all local corporations involved in patent litigation: “As applied to domestic corporations, ‘reside[nce]’ in [28 U.S.C.] § 1400(b) refers only to the State of incorporation.”

Green Tree Servicing, LLC v. Clayton involved an unusual argument about the “first-to-file rule, in the context of two actions pending before the same district judge. The Fifth Circuit observed: “[T]he concerns undergirding the firstto-file rule are not triggered when the cases are before the same judge. The first-to-file rule is aimed at avoiding both conflicting rulings on similar issues and duplicative rulings. But when the same judge is deciding both cases, there is no danger of conflicting rulings.” No. 16-60726 (May 18, 2017, unpublished).

Document logs are a necessary, if unloved, feature of privilege disputes. A privilege log is inherently difficult to create, since it must describe the relevant documents but not reveal the privileged information in them. And because a log often lists many documents on the same subject, it can quickly become dull and repetitive. But proper preparation of a log is key to litigating about privilege, as the Fifth Circuit recently held in EEOC v. BDO Seidman LLP when it rejected the sufficiency of the defendant’s log in an employment case. No. 16-20314 (May 4, 2017). The opinion provides four practical tips for attorneys involved in privilege disputes.

The case began when Hang Bower, a former HR manager at BDO Seidman, alleged that she had been subjected to gender discrimination. In response to an EEOC subpoena, BDO prepared a privilege log listing 278 documents. The EEOC filed an enforcement action in federal court, offering a declaration from Bower in support. In it, she said that many of the communications “were made for the primary purpose of conveying business directives or factual information.” She also said that “BDO required her . . . to include in HR-related emails a false designation that the communication was prepared ‘at the request of legal counsel.’”

The magistrate judge found that BDO’s log was adequate, declined to do an in camera review of the documents, and denied relief to the EEOC. The district judge affirmed and the Fifth Circuit reversed, identifying four particular areas of concern:

1. Substance. “[N]umerous log entries fail to identify a sender, recipient, date, or provide a substantive description of the subject matter . . . [s]ome entries have only vague descriptions such as ‘discrimination claim,’ ‘internal investigation,’ or ‘work environment claim’”
2. Email chains. “Emails involving counsel are also problematic, as the log’s descriptions do not indicate whether a particular entry consists of one email or a string of emails – a distinction that may be dispositive as to whether the privilege applies.”
3. Business/Legal distinction. “[N]ot only does the log include conclusory descriptions of ‘legal advice,’ it does so in the context of communications with in-house counsel – an area court have acknowledged presents unique challenges . . . further compounded where HR personnel, such as Bower, are involved.” The Court noted the issues raised in Bower’s declaration.
4. Disclosure. “[T]he log leaves open questions about (1) whether emails courtesy copied to a third party remained privileged . . . (2) whether matters communicated to attorneys were done so with the intention of remaining privileged . . . and (3) whether non-attorney individuals to whom communications were sent were within the sphere of confidence . . . .”

Because the log lacked sufficient detail to establish BDO’s prima facie case of attorney-client privilege as to all the entries, the Fifth Circuit found that the magistrate judge’s legal analysis was flawed and remanded. The Court observed: “Although we leave to the district court’s discretion how to proceed on remand, we note that in camera review will likely be necessary given the facts and circumstances of this case.”

In addition to reminding about four key components of a good privilege log, this opinion reinforces the importance of evidence in resolving a privilege dispute. Bower’s declaration raised questions about the information in the log, which could not be resolved by the log entries themselves. Counsel preparing a privilege log thus needs to not only consider the completeness of the log entries, but how those entries will be supported by evidence and in camera review if there are further proceedings.

For a recent CLE presentation, I prepared the attached one-page chart to summarize the Fifth Circuit’s recent holdings about discovery.

The district court in Salas v. GE Oil & Gas ordered arbitration in 2014 and dismissed the case. The arbitration did not proceed. Each side blamed the other; the district court had a status conference in 2016; and afterwards, withdrew its earlier order and reopened the case. The Fifth Circuit found that the district court lacked jurisdiction to do so, as its 2016 order “did not fall within the narrow scope of th[e] ancillary jurisdiction” provided by section 4 of the FAA: “The court neither determined whether the parties’ agreement to arbitrate was valid nor enforced that agreement. Instead, the court found that the parties had ‘failed’ to arbitrate and withdrew its prior order compelling arbitration. This was not permitted under the FAA.” No. 16-20379 (May 12, 2017).

In Slade v. Progressive Insurance, a putative class survived a challenge to its damages model based on Comcast Corp. v. Behrend, 133 S. Ct. 1426 (2013). The Fifth Circuit concluded that the class avoided Scylla “by essentially rerunning Defendant’s calculation of actual cash value [for a damaged car] but with a lawful base value, Plaintiffs’ damages theory only pays damages resulting from the allegedly unlawful base value.” But the class then encountered Charybdis when a new issue arose from that calculation: “[B]y accepting Defendant’s condition score calculation as is, [named] Plaintiffs may have impermissibly waived unnamed class members’ ability to assert a future claim contesting Defendants’s computation” of a figure called “the condition factor.” This potential waiver raised a question as to whether the class representatives could adequately represent the class memebrs who might wish to challenge that factor, and the Court remanded for further consideration of that aspect of class certification. The Court also reminded that “a fraud class action cannot be certified when individual reliance will be an issue”; a particularly relevant reminder after the recent approval of class certification in Torres v. SGE Management, 838 F.3d 629 (5th Cir. 2016) (en banc). No. 15-30010 (May 9, 2017).

The receiver for the Allen Stanford businesses alleged that Stanford Coins and Bullion made fraudulent transfers to Dilllon Gage, a wholesaler of coins and precious metals. The receiver lost at trial and the Fifth Circuit affirmed in Janvey v. Dillon Gage, Inc., No. 15-1121 (May 5, 2017). The Court noted conflicting evidence about SCB’s subjective belief as to its ability to pay all creditors, supported by objective evidence about its saleable inventory at the relevant time. The Court also found no reversible error in a jury charge that did not expressly define “intent,” or in the instructions given on other aspects of a fraudulent transfer claim under Texas law.

I am speaking on the topic “Ethics 2017: Recent Federal Court Decisions to Know” on Friday, May 5, to the Plano Bar Association (noon at Palio’s Pizza, yum) – here is the PowerPoint that I will be using.

In the case of In re Hermesmeyer, No. 16-11189 (May 2, 2017, unpublished), the Fifth Circuit found no abuse of discretion in the $500 sanction imposed by the district court as a result of the below Q-and-A between the court and counsel:

THE COURT: Okay. Let’s see. There were some—there were two objections filed, and I believe both of them were related to the possibility of a sentence above the top of the advisory guideline range. Did I read those correctly, Mr. Hermesmeyer?

MR. HERMESMEYER: Your Honor, I think they have more to do with legality of whether such a sentence would be permissible or appropriate.

THE COURT: I’m sorry, I was wondering if I’m correct in thinking that both of the objections have to do with the possibility of a sentence above the top of the advisory guideline range. What is the answer to that?

MR. HERMESMEYER: Your Honor, just what I said.

THE COURT: I’m not sure I understand how that answered my question. I’ve asked the question again. Would you please answer the question either yes or no.

MR. HERMESMEYER: Your Honor, I would stand on what I previously said. Thank you.

THE COURT: Mr. Hermesmeyer, you get very close to being held in contempt of court. Would you answer my question?

MR. HERMESMEYER: I have no further response, your Honor.

THE COURT: Okay. Mr. Hermesmeyer, I’ve ordered you to answer my question, and you’ve refused to answer it. I conside that you’re in civil contempt of court, and also you’re in violation of one of the local rules that requires attorneys to appropriately conduct themselves and to respond and answer orders of the Court. I’m going to give you another opportunity to answer my question. And if you would like, if you decline to answer my question, I’ll give you an opportunity at this time to respond to my suggestion that you will be held in civil contempt of court and held in violation of the local rule concerning the conduct of attorneys, if you refuse to answer my question. You may proceed.

[Pause in proceedings.]

THE COURT: Okay. Apparently you’re not going to respond. I’m ordering that you are in violation of the local rule. Let me get the exact number of it.

HERMESMEYER: Your Honor, at this point I would move to withdraw from the representation of [the defendant] given the indications that the Court has made. [He] needs an attorney that’s not under the threat of civil contempt or whatever sort of contempt
that the Court is indicating at this point.

THE COURT: I deny that motion. Rule of Criminal Procedure LCR 57.8(b) says: A presiding judge, after giving an opportunity to show cause to the contrary, may take any appropriate disciplinary action against a member of the bar for conduct unbecoming a member of the bar and failure to comply with any order of the Court. I consider that you have violated that rule in both respects. I’ll give you an opportunity—I’ve given you an opportunity to show cause why you shouldn’t be disciplined for that and you’ve declined to respond, so I’m ordering that you pay a $500 fine, and that it be paid by 2:00 today, and be paid to the office of the clerk of court here in Fort Worth.

In Austin v. Kroger Texas LP, the Fifth Circuit reversed a summary judgment for the defendant in a slip-and-fall case. On the merits, among other holdings of general interest, the Court noted:

• “[A] janitor with fifteen years’ experience is competent to testify about the effectiveness of cleaning products and methods.”;
• When coupled with evidence from “Kroger’s handbook” and the manager’s testimony about “the safety practice at the store,” the plaintiff raised a fact issue;
• “[T]he fact that [Plaintiff] had successfuly cleaned a much smaller spill . . . with a dry mop does not conclusively demonstrate that Spill Magic was not necessary for [him] to safely clean a much larger and more serious spill.”

Procedurally, the Court instructed that the trial court should proceed under “the more flexible Rule 54(b)” on remand rather than “the heightened standard of Rule 59(e),” asking that it “construe the procedural rules with a preference toward resolving the case on the merits and avoiding any dismissal based on a technicality.” No. 16-10502 (April 14, 2017).

An insured disputed whether he had claimed ownership of a particular piece of property in a conversation with an insurance agent, Specifically, while testifying in his deposition that he did not remember the specific questions asked, the conversation did not last very long – implying that the agent simply assumed his ownership of the propertuy. “[H]owever,  n both his answer to State Farm’s complaint and his response to State Farm’s request for admission, [the insured] admitted to telling the agent who took his insurance application that he was the owner of the property and to stating as much in his application. The district court concluded that these facts were judicially admitted, and therefore rejected Appellants’ argument as an impermissible ‘attempt to create a dispute around a material fact already admitted.’” State Farm v. Flowers, No. 16-60310 (April 26, 2017).

In a break from the usual topics about federal procedure, today’s post about the case of Foster v. Woods provides some practical advice for private investigators. Foster, a licensed private investigator, tailed a car into a school parking lot and observed it for a short period before realizing that the driver was his target’s teenaged son. Unfortunately for Foster, the son observed him and told a friend, whose father was the local sheriff. After Foster left the school grounds the sheriff arrested him and unsuccessfully attempted to prosecute him for having brought a firearm onto school grounds (although Foster held a concealed-carry permit, and neither he nor the firearm left the car while in the school parking lot. Foster sued for wrongful arrest; the Fifth Circuit affirmed summary judgment for the sheriff: “Relevant here, Woods knew that Foster was not a student, that he followed a student’s vehicle into a student parking lot posted with a ‘no trespassing” sign, and that Foster remained in the lot for some time as students were arriving for school. . . . Given the facts known to Woods, he had knowledge that would warrant a reasonable officer to believe that Foster violated the trespass statute.” Advice – use caution when entering private property.

In DeLeon v. Abbott, the Fifth Circuit affirmed an award of $585,470.30 in attorneys’ fees and $20,202.90 in costs arising from the Texas counterpart to Obergefell v. Hodges, 135 S. Ct. 2584 (2015). The panel majority observed that “the essential goal in shifting fees (to either party) is to do rough justice,” and that as a result, “[w]e can hardly think of a sphere of judicial decisionmaking in which appellate micromanagement has less to recommend it.” A dissent, observing that “deference is a blank check,” approved of the bulk of the award but took issue with it as to time spent on (a) an unsuccessful third-party motion to intervene; (b) interacting with the media; and (c) coordinating with supportin amici. No. 15-51241 (April 18, 2017, unpublished).

The case of Decatur Hospital Authority v. Aetna Health Inc. involved a remand order, granted on the basis of timelieness (a ruling not ordinarily appealable because of 28 USC § 1447(c)), but where the notice of removal referred to the federal officer removal statute (made reviewable by the less-well-known § 1447(d)). The Fifth Circuit concluded that its review involved “[n]ot particular reasons for an order, but the order itself,” and went to affirm the remand and a related fee award, finding that the defendant did not learn new facts from an interrogatory answer that were not also contained in the original petition. No. 16-10313 (April 18, 2017).

Oubre, struck by an errant forklift, sued Schlumberger for his injuries. To avoid a limitations problem, he cited a choice-of-law provision in the Master Service Agreement between his employer and Schlumberger. The provision ultimately did not help him, and the Fifth Circuit observed that it “does not pose a renvoi issue.” Oubre v. Schlumberger, Ltd., No. 16-41446 (April 5, 2017, unpublished). That term, accurate although infrequently-used, is defined by Black’s as “[t]he doctrine under which a court, in resorting to foreign law, also adopts the foreign law’s conflict-of-laws principles, which may in turn refer the court back to the law of the forum.”

At oral argument, the appellant in a technical dispute about the appointment of arbitrators “argued for the first time that ‘if maritime jurisdiction applies, then . . . there is appellate jurisdiction over the appeal.'” The Fifth Circuit observed: “We do not usually allow parties to raise a new argument for the first time at oral argument. . . . Of course, an argument that this court lacks jurisdiction cannot be waived, but here the argument is that the court has jurisdiction, a matter the appellant is required to prove.” Bordelon Marine, LLC v. Bibby Subsea ROV, LLC, No. 16-30847 (April 14, 2017, unpublished).

Streamline Production Systems v. Streamline Manufacturing involved trademark litigation between businesses with similar names. The Fifth Circuit affirmed theury’s findings about the distinctiveness of the plaintiff’s mark and the likelihood of confusion, observing that the various factors did not all point the same way but “there is not a complete absence of evidence” to support what the jury found. The court reversed on remedy, however, finding that the “reasonable royalty” damages went beyond the scope of the infringement, and that the award of unjust enrichment was not supported by evidence of lost profits or willful action by the defendant. No. 16-20046 (revised April 14, 2017).

Sun-Tzu famously counseled, “[a]ll armies prefer high ground to low and sunny places to dark.” The defendant airline in Conservation Force v. Delta Air Lines artfully changed the ground for conflict in a case about its policies toward shipments involving big game hunts. The plaintiff complained that the airlines’ policy of not accepting the shipment of lion, leopard, elephant, rhino and buffalo hunting trophies violated the airlines’ legal duty to treat all shippers equally. The Fifth Circuit agreed with the district court’s conclusion “that, despite a duty to treat all shippers equally, a common carrier does not have to treat all cargo equally.” No. 16-11062 (March 20, 2017, unpublished).

In Smitherman v. Bayview Loan Servicing LLC, the Fifth Circuit order a limited remand to the district court, so that court could supplement the record about the defendant’s citizenship and then make findings. The district court, however, went on to vacate the judgment it had entered previously and remand the case to state court. The Fifth Circuit observed: “Because the district court lacked the authority to do so, we construe it[]s order to be an indicative ruling made pursuant to Federal Rule of Civil Procedure 62.1(a)(2). Accordingly, we REMAND this case to the district court and DISMISS the appeal as moot and relinquish jurisdiction pursuant to Federal Rule of Appellate Procedure 12.1(b).” No. 16-20328 (March 29, 2017, unpublished).

“[W]here a plaintiff seeks to rely on epidemiological evidence, Texas law requires that the stifues show a statistically significant doubling of the risk of developing their alleged inuiries. . . . The studies relied on by the Plaintiffs and their experts do not . . . One of these studies did not quantify the risk of developing Plaintiffs’ chromuim-related-acute-irritation injuries at all and the other study did not find a doubling of the risk.” McManaway v. KBR, Inc., No. 15-20641 (March 27, 2017) (applying Merck & Co. v. Garza, 347 S.W.3d 256 (Tex. 2011)).

In Ocwen Loan Servicing LLC v. Berry, a dispute about a home equity loan, the Fifth Circuit confirmed that “we now must follow the Texas Supreme Court’s holding in [Wood v. HSBC Bank USA, N.A., 505 S.W.3d 542 (Tex. 2016)] that no statute of limitations applies to a borrower’s allegations of violations of section 50(a)(6) of the Texas Constitution in a quiet title action, rather than our prior holding in [Priester v. JP Morgan Chase Bank, N.A., 708 F.3d 667 (5th Cir. 2013)].” In so doing, the Court reminded that “the issues-not-briefed-are-waived rule is a prudential construct that requires the exercise of discretion,” and addressed the applicability of Wood notwithstanding the appellant not discussing the case in its opening brief, noting that the underlying issues had been briefed, and that the Court had received supplemental briefing on the pure question of law presented about the application of Wood. No. 16-10604 (March 29, 2017).

Moore sued the Governor of Mississippi, alleging that the presence of the Confederate battle flag in the Mississippi state flag (right) violated Moore’s rights under the Equal Protection Clause. The Fifth Circuit affirmed dismissal on standing grounds, distinguishing cases involving the First Amendment’s Establishment Clause because of the distinct injuries addressed by the two Constitutional provisions. The Court concluded: “The assumption that if [Plainitff] had no standing to sue, no one would have standing, is not a reason to find standing.” (citations omitted). Moore v. Bryant, No. 16-60616 (March 31, 2017).

Plaintiffs alleged that a terrible crime would have been averted with a faster response to a 9-1-1 call. The Fifth Circuit, applying City of Dallas v. Sanchez, 494 S.W.3d 722 (Tex. 2016), found a lack of proximate cause (and thus, immunity applied) because “plaintiffs have not plausibly alleged that any of the intervening parties would have acted differently,” including the call center operator and emergency personnel on the scene. The allegations on the general subject of response time were too speculative to satisfy Twombly (footnote 4). And “‘even if the brief delay in relaying Cook’s location ‘contributed to circumstances that delayed potentially life-saving assistance, the [delay] was too attenuated from the cause of [Cook’s] death . . . to be a proximate cause.” Cook v. City of Dallas, No. 16-10105 (March 29, 2017).

Several crawfishermen sued about the effects of canal dredging on the Atchafalaya Basin fisheries. As to one defendant company, the Fifth Circuit affirmed summary judgment in its favor, reviewing each of the documents cited by plaintiffs and finding that none raised a genuine issue of material fact as to actual dredging activity by that company, on the pipelines at issue in this case. As to another, the Court reversed on procedural grounds, finding that the district court should have considered a deposition transcript and responses to requests for admissions offered by the plaintiffs when (1) their proffer had a foundation in the terms of the case management order, (2) the evidence was probative, and (3) it was information obtained from that defendant.  In re Louisiana Crawfish Producers, No. 16-30353 (March 28, 2017). (The opinion notes that crawfish are known by several other names, including “yabbies,” a tidbit that was not known to this author.)

Defendant hosted a website with a public forum called “HairTalk.” Plaintiffs sued for copyright infringement when celebrity photos, to which they owned the rights, were posted by third-party users on HairTalk without their consent. The Fifth Circuit affirmed summary judgment for Defendant, adopting the “volitional conduct” requirement for direct infringement cases, and observing: “[I]t does not make sense to adopt a rule that could lead to the liability of countless parties whose role in the infringement is nothing more than setting up and operating a system that is necessary for the functioning of the Internet.” BWP Media USA v. T&S Software, No. 16-10510 (March 27, 2017).

An architecture firm held a large judgment against a bankruptcy debtor, and contended that the failure of the debtor’s insurer to object to that claim barred further dispute about the insurer’s liability. The Fifth Circuit disagreed, concluding that “in this no asset bankruptcy case, nothing in the court proceedings required claims allowance, no notice was provided to parties in interest to object to claims, and no bankruptcy purpose would have been served by the bankruptcy court’s adjudicating [the firm’s claim.” Kipp Flores Architects v. Mid-Continent Casualty Co., No. 16-20255 (March 24, 2017).

Reviewing the requirements for the application of judicial estoppel, the Fifth Circuit reversed the resolution of a case about insurance coverage of attorneys fees in Aldous v. Darwin Nat’l Assurance Co., No. 16-10537 (March 16, 2017). The Court found that the district court misapplied judicial estoppel when it “unjustifiably read the [key] supplemental declaration in isolation,” and made several “small antecedent errors” leading up to that ruling, including its reading of the relevant earlier decision.

Air Evac contended that the Airline Deregulation Act preempted Texas workers compensation laws about reimbursement for air-ambulance services. This claim led to a dispute about the scope of Eleventh Amendment liability and the landmark Constitutional case of Ex parte Young, 209 U.S. 123 (1908). In a methodical analysis of Young’s history and purpose, the Fifth Circuit concluded that Air Evac could sue: “[T]he balance-billing prohibition works in concert with state defendants’ implementation of the reimbursement system, serving as a backstop against alternative methods of fee collection. State defendants’ pervasive authority to oversee and enforce Texas’ workers’-compensation system satisfies the Ex parte Young exception.” Air Evac EMS, Inc. v. State of Texas, No. 16-51023 (March 20, 2017).

Adams LLC, formed in July 2010, bought a number of assets from Adams Produce Company, Inc., and sought to prosecute a Deepwater Horizon claim for damages suffered by Adams Inc. Unfortunately, “[a]lthough substantially alll of Adams Inc.’s assets and liabilities were transferred as part of the transaction, it is undisputed that Adams Inc. retained certain assets and liabilities. Adams Inc. and Adams LLC are two distinct entities, and the asset transfer that occurred here was not just a change in form.” BP Exploration v. Claimant ID 100169608, No. 16-30482 (March 8, 2017, unpublished).

The Fifth Circuit affirmed a summary judgment for the defendants in the FCA case of Abbott v. BP Exploration & Production; after describing the alleged fact issues about “whether engineers approved the various stages of construction of the Atlantis [offshore oil platform],” it noted: “Rarely does the pursuit of an individual’s FCA claims lead to an investigation requested by Congress. But that is the case with these Plaintiffs, whose insistence on the alleged issues with the Atlantis led to Congressional hearings, an investigation by a federal agency, and the [De[artment of the Interior] Report,” which “found no grounds to suspend the operation of the Atlantis or revoke BP’s designation as an operator.” No. 16-20028 (March 14, 2017).

The Clarion-Ledger reports that Judge E. Grady Jolly of Mississippi will retire on his 80th birthday in October 2017, creating another vacancy on the Fifth Circuit for President Trump to fill. The same paper has a good description of the process for filling the vacancy. Judge Jolly has served the Fifth Circuit with distinction for 35 years; his skill and grace will be greatly missed.

In an interesting parallel to the ongoing litigation about travel bans (which most recently produced a District of Hawaii opinion granting a TRO), the Fifth Circuit denied en banc review in Defense Distributed v. U.S. Dep’t of State, which affirmed a preliminary injunction about the use of 3-D printing technology to make certain firearms. A dissent observes: “Certainly there is a strong public interest in national security. But there is a paramount public interest in the exercise of constitutional rights, particularly those guaranteed by the First Amendment . . . ” No. 15-50759 (March 15, 2017).

Tower Credit garnished the debtor’s wages. In defense of a later preference action, Tower argued that its garnishment was effective when served (taking it outside the preference period), not when the debtor in fact received money. The Fifth Circuit disagreed: “The combination of Supreme Court precedent and the overwhelming weight of persuasive authority applying § 547(e)(3) make clear that a debtor’s wages cannot be transferred until they are earned. Thus, we hold that a creditor’s collection of garnished wages earned during the preference period is an avoidable transfer made during the preference period even if the garnishment was served prior to that period.” Tower Credit v. Schott, No. 16-30274 (March 13, 2017).

In affirming sanctions for vexatious litigation in connection with bankruptcy proceedings, the Fifth Circuit noted, in particular: “Appellants’ . . . repeated attempts to litigate issues that have been conclusively resolved against them or that they had no standing to assert and by their unsupported and multiple attempts to remove . . . the trustee.” Carroll v. Abide, No. 16-30996 (March 13, 2017).

Attorney Martinez sued another law firm (“HLG”) for various torts related to the firm contacting his clients about alleged overbilling. The firm asserted absolute immiunity as a defense and the Fifth Circuit agreed, in a fact-specific holding, that the evidence “demonstrate[s] that the allegedly tortious statements at issue in this case were made in relation to a proposed arbitration and are therefore absolutely privileged under Texas law.” The firm already represented two Martinez clients in connection with the potential arbitration; the new clients did not originate contact with the firm; and all of them ultimately retained the firm. Martinez v. Hellmich Law Group, PC, No. 16-50305 (March 8, 2017, unpublished). This case joins a line of similar holdings in recent years in favor of attorney immunity.

The owner of the Golden Nugget casino in Lake Charles withheld $18.7 million from payments to its general contractor, who then filed a statutory lien (a “privilege” in Louisiana parlance) on the property. The relevant statute requires the contractor to file “within sixty days after the filing of the notice of termination or substantial completion of the work.” If “substantial completion” refers to an event, the contractor’s filing was not timely; if, however, it refers to a filing that certifies substantial completion, the contractor’s filing was timely, as the owner did not record such a certification. The Fifth Circuit concluded that, while the statute was ambiguous, the related provisions and the apparent industry practice supported the contractor’s position: “The [statute] places the burden on an owner to cut of potential claims when a contract has been recorded, whether it is a general contractor or a subcontractor.” Golden Nugget Lake Charles LLC v. W.G. Yates & Sons Constr. Co., No. 16-30496 (March 6, 2017).

In Richard v. Anadarko Petroleum Corp., the Fifth Circuit required reformation of a contract on the grounds of mutual mistake, to the detriment of non-party Liberty Mutual, acknowledging that “[c]ourts must guard against parties’ ‘attempts to make an end-run around the parol-evidence rule,’ which forecloses the use of parol evidence to interpret unambiguous terms, ‘by framing [their] argument[s] as a request for reformation.” Here, reformation was appropriate even considering the effect on Liberty Mutual, given (1) its lack of reliance on the contract, (2) the general consistency of the terms in the reformed contract with industry practice, and (3) course of performance. No. 16-30216 (March 2, 2017).

Federal Insurance agreed to pay defense costs in ongoing commercial litigation against its insureds, subject to its position that under the policy, payment of defense costs deplete the policy limits. The relevant clause said: “[T]he Limit of Liability under the Fiduciary Coverage Section is $1 million, subject to a $1 million aggregate limit, and a $10,000.00 Retention, with Defnse Costs eroding or depleting those limits.” The Fifth Circuit agreed with Federal, rejecting arguments based on the limit potentially implicating conflict-of-interest concerns for counsel, and policy issues raised by applicable state statutes in the health care area. In sum: “Under Mississippi law, insurance policies are to be enforced according to their provisions.” Federal Ins. Co. v. Singing River Health System, Ni. 15-60774 (March 1, 2017).

Litigation about the intellectual property rights to the name “Communicat-R” (here, applied to a specialized type of whiteboard) led to a jury trial. The Fifth Circuit affirmed, finding no abuse of discretion in this instruction: “Trademarks can be abandoned through non-use. A trademark is abandoned if it is proven by a preponderance of the evidence, that (1) the use of trademark was discontinued; and (2) an intent not to resume such use.” The Court rejected a request for additional language about “excusable nonuse,” finding that it would either be redundant or not entirely accurate in the context of this case. The Court also rejected sufficiency challenges to liability and damages, illustrating the operation of the federal standard for the grant of a new trial. Vetter v. McAtee, No. 15-20575 (March 1, 2017).

Gatheright bought sweet potatoes from Clark, paying with two post-dated checks. When they were returned for insufficient funds, Clark instituted criminal proceedings against Gatheright, which were ultimately dismissed after Gatheright spent several weeks in jail. Gatheright then sued Clark for malicious prosecution and abuse of process. The Fifth Circuit affirmed summary judgment for Clark, observing that “$16,000 in bad checks . . . [is] a sum greater than what the Mississippi Supreme Court has previously found would prompt a reasonable person to institute criminal proceedings.” Based on that observation, the Court rejected arguments about whether a post-dated check was a proper basis for a “false pretenses” prosecution in Mississippi, and about the effect of Gatheright’s filing for personal bankruptcy. Gatheright v. Clark, No. 16-60364 (Feb. 23, 2017, unpublished).

It is well-settled nationally that “an appellate court may not alter a judgment to benefit a nonappealing party” because “it takes a cross-appeal to justify a remedy in favor of an appellee.” Greenlaw v. United States, 554 U.S. 237, 244–45 (2008). The Fifth Circuit treats that principle as jurisdictional. See, e.g., Amazing Spaces, Inc. v. Metro Mini Storage, 608 F.3d 225, 250 (5th Cir. 2010) (“[T]his circuit follows the general rule that, in the absence of a cross-appeal, an appellate court has no jurisdiction to modify a judgment so as to enlarge the rights of the appellee or diminish the rights of the appellant.”) Some other Circuits, however, take a different view. See, e.g., Am. Roll-On Roll-Off Carrier LLC v. P&O Parts Baltimore, Inc., 479 F.3d 288, 295 (4th Cir. 2007) (“This circuit views the cross-appeal requirement as one of practice, rather than as a strict jurisdictional requirement.”) (Thanks to my LPCH colleague Russ Herman for pointing this out.)

Recipients of Section 8 housing assistance sued mortgage originators, complaining that the originators either denied or discouraged the recipients’ credit applications by not considering their Section 8 income, in violation of the Equal Credit Opportunity Act. The Fifth Circuit affirmed the dismissal of claims by recipients who had only inquired about, rather than actually starting, the application process, as well as claims based on Wells Fargo’s policies about the purchase of mortgages in the secondary market. It reversed as to one group of applicants, however, finding under Iqbal and the substantive law that they “plausibly alleged that AmeriPro refused to consider their Section 8 income in assessing their creditworthiness as mortgage applicants, and that they received mortgages on less favorable terms and in lesser amounts than they would have had their Section 8 income been considered.” Alexander v. AmeriPro, No. 15-20710 (Feb. 16, 2017).

I commented today on Dallas’s Fox 4 News about how the potential deployment of the National Guard about illegal immigration could implicate the Posse Comitatus Act.

Just before filing for bankruptcy, Mr. Wiggins signed a “Partition Agreement” in which he and his wife divided their ownership of their home into two separate property interests. The Fifth Circuit affirmed the bankruptcy court’s conclusion that this was a fraudulent transfer: “When it became clear that Mr. Wiggains would file bankruptcy to satisfy his outstanding debts, the couple entertained various options and made their best estimate on ultimate financial benefits by having only Mr. Wiggains file after the Partition Agreement was recorded. Allowing Mrs. Wiggains to sidestep the statutory limits for homestead exemptions and obtain approximately $500,000 in proceeds that otherwise are for creditors would lay waste to the provisions of the Bankruptcy Code involved here.” Wiggains v. Reed, No. 15-11249 (Feb. 14, 2017).

Texas Lawyer reports that six candidates are under consideration for the two vacancies on the Fifth Circuit – “Texas Supreme Court Justice Don Willett; U.S. District Court Judge Reed O’Connor of Fort Worth; former Texas solicitor general James Ho; Andy Oldham, a deputy general counsel to Gov. Greg Abbott; Michael Massengale, a justice on Houston’s First Court of Appeals; and Brett Busby, a justice on Houston’s Fourteenth Court of Appeals” – the full story appears here.

Press coverage of Judge Neil Gorsuch’s nomination to the Supreme Court has noted his intelligent and accessible writing style, including use of a sentence diagram (left) in a criminal case that turned on what elements of the crime required proof of intent. In the same spirit, in dissent from the denial of en banc rehearing in a highly technical case about protection of the dusky gopher frog (right), Judge Edith Jones used a pair of Venn diagrams to illustrate her view of how the Endangered Species Act should operate (below left), contrasted with the panel opinion’s (below right). Markle Interests v. U.S. Fish & Wildlife Service, No. 14-31008 (Feb. 14, 2017).

CitiMortgage sought to foreclose on Maldonado’s home; in the subsequent litigatoin, it offered summary judgment evidence that he owed a balance of $533,960.80. In response, Maldonado “disputed the amounts that CitiMortgage claimed in attorneys’ fees, inspection fees, escrow, taxes, and late charges,” but did “not provide any evidence of what the correct amounts should be.”  Maldonado v. CitiMortgage, No. 16-20541 (Jan. 23, 2017, unpublished).

The issue in United States ex rel. Vavra v. Kellogg Brown & Root, Inc. was whether KBR was liable for kickbacks taken by two employees. The Fifth Circuit held that the answer is fact-specific: “[T]he proper test for imputing knowledge under [the AKA] is that corporations are liable ‘only for the knowing violations of those employees whose authority, responsibility, or managerial role within the corporation is such that their knowledge is imputable to the corporation.'”  As for the effect of the alleged kickback, even though “[i]t is true that the district court did not make any findings as to particular service problems [the employee] intended to influence in an improper manner through his gratuities . . . it is enough to connect the gratuity with the specific kind of treatment sought in a way that establishes impropriety,” which was done here “[b]ecause of the nature of the treatment [the employee] sought.” No. 15-41623 (Feb. 3, 2017).

Foster sued about a foreclosure; the state court granted a TRO (so no foreclosure occurred); and the mortgage servicer defendants removed and obtained summary judgment. Foster challenged the denial of her motion to remand, arguing that she did not improperly join the substitute trustee appointed to conduct the foreclosure sale. The Fifth Circuit affirmed: “[B]reach of a trustee’s duty does not constitute an independent tort; rather, it yields a cause of action for wrongful foreclosure. A claim of wrongful foreclosure cannot succeed, however, when no foreclosure has occurred.” Foster v. Deutsche Bank, No. 16-11045 (Feb. 8, 2017).

A group of real estate companies paid Prime LLC for consulting services. While the contract allowed termination with 60 days notice, the group and Prime agreed to end the contract without using the notice provision. A creditor complained that this termination made a fraudulent transfer, and the Fifth Circuit agreed that the claim was at least facially plausible: “While the value of the notice period lost by failure to adhere to the notice provision remains an issue for further development in the district court, at this stage we think the notice requirement secured measurable economic benefit to Prime. Assuming the facts alleged surrounding this transaction to be true, as we must under Rule 12(b)(6), Plaintiff has alleged an asset, cognizable as such under TUFTA, that was constructively transferred.” Hometown 2006-1 1925 Valley View LLC v. Prime Income Asset Management LLC, No. 15-10881 (Feb. 2, 2017)

On Dallas’s Fox 4 News, following the lead of the Matrix movies, I characterize the nominee as “Scalia Reloaded”:

Defendants removed, the plaintiff moved to remand, and the the district court granted the motion. It found a waiver of the right to remove, noting this contract provision: “The Parties hereto hereby irrevocably and unconditionally consent to the sole and exclusive jurisdiction of the courts of Harris County in the State of Texas for any action, suit or proceeding arising out of or relating to this Agreement or the Proposed Transaction . . . .” The defendants claimed ambiguity (which would make the waiver no longer be “clear and unambiguous,” and thus not satisfy the demanding standard in this area) from (1) the definition of “Proposed Transaction,” (2) the definitions of the relevant parties, and the use of “Proposed Transaction” in the above part of the relevant clause, but not in another, similar provision later in it. The Fifth Circuit rejected these arguments and affirmed, but also affirmed the denial of any award of attorneys’ fees. Grand View PV Solar Two, LLC v. Helix Elec., Inc., No. 16-20384 (Feb. 1, 2017). The opinion is a good summary of the law on this topic, which has not been addressed in detail recently.

The receiver of the Allen Stanford businesses sued several investors for receiving fraudulent conveyances. In earlier appeals, the Fifth Circuit resolved other thresehold issues in these cases; in Janvey v. Alguire, the Court reviewed the denials of the defendants’ motions to compel arbitration. It affirmed, rejecting their arguments based on arbitration clauses in various Stanford-related documents: “Because the Receiver may sue on behalf of any of the Stanford entities that has a claim against the defendants, becausehe has chosen to sue on behalf of the Bank, which has not consented to arbitrate claims against any of the defendants [except for one, who waived the issue], and because none of the equitable doctrines urged by the defendants applies, the Receiver cannot be compelled to arbitate his claims against these defendants.” No. 14-10945 et al. (Jan. 31, 2017).

Heniff Transportation, a trucking company, sued Trimac Transportation, alleging that Trimac did not properly clean a tanker-trailer, resulting in contamination and a damages claim against Heniff by its customer. Trimac argued that Heniff’s state law claims were preempted by the Carmack Amendment, a federal law that addresses actions about lost or damaged goods, arising from interstate transportation of the goods by a common carrier. The Fifth Circuit agreed, finding that washing a tanker-trailer was “plainly” such a service, directly analogous to specific examples given by the statute. This statute, not widely known outside trucking litigation, can bear significantly on UCC claims involving transported goods. Heniff Transportation v. Trimac Transportation, No. 16-40553 (Jan. 30, 2017).

The “Gulf Council” manages fisheries in the federal waters of the Gulf of Mexico.With respect to red snapper, its statutory grant of authority requires it to establish “seprate quotas for recreational fishing . . . and commercial fishing.” A group of private anglers complained that the authority to set those two quotas precluded the ability to set a quota for fishing from charter vessels. The Fifth Circuit disagreed, finding that neither the canon that “expressing one item of a commonly associated group or series excludes another left unmentioned,” nor that “a specific statute prevails over an inconsistent general statute” compelled a ruling in favor of the anglers: “Amendment 40 does not create a separate quota for charter fishing; it subdivides the recreational sector into private and charter components.” Coastal Conservation Association v. U.S. Dep’t of Commerce, No. 16-30137 (revised Jan. 26, 2017).

A church in Hattiesburg, Mississippi proved that its insurer did not properly handle its claim resulting from tornado damage (right), resulting in a damages award of over $1,000,000. The Fifth Circuit affirmed against challenges by both sides; as to the church’s request for punitive damages, it held: “Taking the facts in the light most favorable to Mount Carmel, GuideOne’s alleged conduct did not rise to the necessary level of an independent tort that would warrant punitive damages. Mount Carmel merely alleges that GuideOne had ‘knowledge of the financial harm that would result’ from its cancellation of the policy. But this type of knowledge is likely present for many cancellations and alone is not sufficient to rise to the level of an independent tort. Accordingly, it does not warrant punitive damages.” GuideOne Elite Ins. Co. v. Mount Carmel Ministries, No. 15-60915 (Jan. 23, 2017, unpublished).

The relator in a reverse False Claims Act case alleged that DuPont concealed its obligation to pay penalties under the Toxic Substances Control Act. After a careful review of the statute, its history, and policy considerations, the Fifth Circuit reversed the denial of summary judgment to DuPont: “Simoneaux’s position yields an extraordinarily broad construction of the FCA. If his reading . . . were correct, reverse-FCA liability could attach from the violation of any federal statute or regulation that imposes penalties. . . . For example, 45 C.F.R. § 3.42(e) prohibits roller-skating at the National Institutes of Health, and a person violating that regulation “shall be fined under title 18, United States Code, imprisoned for not more than 30 days, or both.” 40 U.S.C. § 1315(c)(A). Under Simoneaux’s reasoning, roller-skating at the NIH results in a penalty ‘of not less than $5,000’ and three times the fine assessed under Title 18. And any private person who saw the roller-skater could bring a qui tam action against him. The statutory definition of ‘obligation’ cannot bear the weight of that interpretation.” United States ex rel. Simoneaux v. duPont, No. 16-30141 (revised Dec. 14, 2016).

Defendants moved for summary judgment, on the ground of qualified immunity, in a case arising from a fatal police shooting. The district court “disregarded the testimony of [Officer] Copeland and two eyewitnesses, finding that because there was ‘no video evidence of the actual shooting[,]’ the ‘testimony of Copeland, the eyewitness, and the 9-1-1 caller . . . should not be accepted until subjected to cross examination.'” The Fifth Circuit reversed; in addition to a ground based on qualfied immunity law, the Court held that under general Rule 56 principles: ”There is no evidence to suggest that the pair was biased, and the district court specifically found that the heirs ‘[did] not offer any evidence to contradict the eyewitnesses’ statements.’ Because their testimony was ‘uncontradicted and unimpeached,’ the district court was required to give it credence. Failure to do so amounted to an inappropriate ‘credibility determination[].'” Orr v. Copeland, No. 16-50023 (Dec. 22, 2016).

In Netsch v. Sherman, the appellants’ counsel missed the 14-day deadline for an appeal from bankruptcy court. The district court denied relief and the Fifth Circuit affirmed; while noting that all relevant factors were either neutral or favored appellants, it concluded:”[T]he bankruptcy court concluded that the reason for the delay weighed strongly against finding excusable neglect. In its analysis of this factor, the bankruptcy court emphasized that the parties had been subject to the Federal Rules of Bankruptcy Procedure throughout the adversary proceeding, these rules were unambiguous, and Appellants’ counsel confused the Federal Rules of Bankruptcy Procedure with the Federal Rules of Civil Procedure. The bankruptcy court also indicated that confusing bankruptcy procedure with civil procedure does not constitute excusable neglect. Consequently, the court held that the reason for the delay should be given greater weight than other factors.” No. 16-10432 (Dec. 22, 2016, unpublished).

Defendants won an intellectual property dispute with Plaintiff, and then sought recovery of $1 million in attorneys fees. This request led to the surprisingly complicated question of exactly what claims were in the case when the Defendants won. The Fifth Circuit concluded: “The [Texas Theft Liability Act] claim in the [First Amended Complaint]–the operative complaint at
the time of the attorneys’ fee award—was never held to be preempted [by federal copyright law]. [Our earlier opinion on the merits] addressed only the TTLA claim as it was pleaded in the Original Petition and did not consider the TTLA claim in the FAC. This is significant because the TTLA claim in the FAC was distinct from that in the Original Petition and specifically omitted allegations that were equivalent to copyright, with the intention of avoiding preemption. And the district court also never held that the FAC’s TTLA claim was preempted. Rather, the TTLA claim in the FAC was litigated and dismissed on the merits during summary judgment, and therefore it was proper to award attorneys’ fees under the TTLA because that law supplied the rule of decision.” Spear Marketing v. Bancorpsouth Bank, No. 16-10155 (revised Jan. 12, 2017). This opinion echoes the complexity in other recent cases that addressed the substance of preemption issues involving federal copyright law.

Foremost Insurance declined to pay a claim made by Charles Pendleton about the destruction in a fire of his 1956 Mercedes 190SL (an example of which appears to the right), arguing that he set the fire. A jury agreed and the Fifth Circuit affirmed. One of Pendleton’s grounds was that the district judge exceeded the scope of Fed. R. Evid. 404(b) by allowing evidence about other “similar accidents surrounded by similar circumstances regarding insurance” involving Pendleton. The Court found no harm as “ample evidence” supported the jury’s verdict in favor of Foremost, including the police investigation of the accident scene, further review of the accident by a forensic fire investigator and a mechanic/accident reconstructionist, and evidence about ownership of the other vehicle. Foremost Ins. Co. v. Pendleton, No. 16-60240 (Jan. 13, 2017, unpublished).

NNN Realty disputed its obligations under a guaranty, noting that the definition of “borrower” in the instrument listed sixteen entities (all of which contained “NNN” in some fashion), concluding with the conjunction “and.” Thus, argued NNN, all of those entities had to be in default to trigger its obligations. The Court rejected this argument, noting the overall structure of the guaranty and related security instrument, as well as the usage of similar terms. It gave little weight to textual arguments about the definition that arose from a misplaced parenthetical. While many of the grammatical arguments – especially as to the the erroneous parenthetical – are unique to the facts of this case, the broader analysis about the interplay between a collectively-defined term and individual obligations applies in many business settings. WBCMT 2007 C33 Office 9720, LLC v. NNN Realty Advisors, Inc., No. 15-20086 (Dec. 22, 2016).

Lowe brough a class action, alleging that company management breached its fiduciary duties to the employee pension plan, and that KPMG aided those breaches by ignoring the underfunding of the plan. KPMG contended that these claims necessarily implicated its engagement agreement with the company, which contained an arbitration clause, and thus required arbitration under the “direct-benefit estoppel” doctrine. Here, “Lowe did not know about the Engagement Letters, and has disclaimed any reliance on the Letters, and her claims rely on common law tort theories, not on the Letters.” The Court concluded that “[i]f that choice makes it harder for [Lowe] to prove her case, so be it,” but her claims as currently stated did not depend on KPMG’s engagment agreement and thus did not have to be arbitrated.” Lowe v. KPMG, No. 16-60263 (Jan. 5, 2017, unpublished).

The first ever Bench-Bar conference for the Northern District of Texas will be held on January 27 at the Four Seasons in Las Colinas. Here is the schedule and registration information; it looks to be a great program and the beginning of a strong tradition.

Several unpublished opinions from the Fifth Circuit in recent weeks, most recently Smitherman v. Bayview Loan Servicing LLC, No. 16-20328 (Jan. 11, 2017, unpublished), have ordered limited remands to the district court “to permit supplementation of the record and to make findings regarding . . . citizenship.” Once completed, “the district court’s amended opinion shall return” to the panel “for appropriate action.” It appears that the Court is reviewing case files not only to confirm appellate jurisdiction, but also the necessary facts to support federal subject matter jurisdiction as well.

Jarrod Burle, a commercial fisherman, made a claim for lost income with the Deepwater Horizon settlement. He then obtained loans, in the form of “pre-settlement funding contracts,” from Woodbridge Baric Pre-Settlement Funding, LLC. After receiving payment from the settlement system, he paid $20,000 back to Woodbridge. A special master then sought to recover that payment from Woodbridge after Burle was found to have made a fraudulent claim. The Fifth Circuit reversed a judgment against Woodbridge, rejecting an analogy between Woodbridge and an attorney with a contingent fee contract, and applying the more general rule that “[b]ecause Woodbridge Baric’s claim for the repayment of the loan was not purely contingent upon the success of Burrle’s claims for compensation, the failure of this contingency did not extinguish [its] claim and does not prevent [it] from asserting its valid interest in defense of its right to retain the funds as a bona fide payee.” In re Deepwater Horizon, No. 15-30599 (revised Jan. 9, 2017).

Johnson-Williams sued MERS about a foreclosure. She lost a Rule 12(b)(6) motion filed by MERS, then her own motion for leave to amend, and finally a motion for reconsideration. She appealed, and the Fifth Circuit observed the limited scope of her appeal, as the notice referred only to the district court’s order as to the amendment.  Johnson-Williams v. MERS, No. 16-10276 (Jan. 4, 2017, unpublished).

“In 2004, an Iraqi insurgent group kidnapped and murdered twelve Nepali men as they traveled through Iraq to a United States military base to work for . . . a Jordanian corporation that had a subcontract with . . . Kellogg Brown Root.” Adhikari v. Kellogg Brown & Root, Inc., No. 15-20225 (Jan. 3, 2017). The Fifth Circuit affirmed the dismissal of tort claims against KBR brought by the representatives of the deceased, including a claim based on the Alien Tort Statute.

The ATS is a cryptic part of the Judiciary Act of 1798, stating: “The district courts shall have original jurisdiction of any civil action by an alien for a tort only, committed in violation of the law of nations or a treaty of the United States.” In 2013, the Supreme Court clarified and limited the extraterritorial scope of the statute in Kiobel v. Royal Dutch Petroleum Co., 133 S. Ct. 1658. Applying Kiobel, the panel majority found no ATS claim stated, despite the strong policy against the human trafficking that was alleged to be involved in this case. A dissent read Kiobel to establish a “touch and concern” test as to contact with the United States, and would have found a cognizable ATS claim pleaded on these facts.

The unsuccessful plaintiff in Dawson v. RockTenn Services, Inc. sued because of injuries he suffered while delivering sulfuric acid to a paper mill. In yet another opinion that endorses careful recordkeeping, the Fifth Circuit affirmed judgment for the defendants: “Under Rock-Tenn’s operating procedures, Martin Transport’s drivers were required to, and apparently did, check that the pressure-release line was ‘free from defects and
void of other materials’ prior to each delivery. Martin Transport’s drivers delivered acid to the mill at least daily, often twice daily, without ever apparently notifying Rock-Tenn of any defect in the pressure-release line. In the absence of any countervailing evidence to suggest that a reasonable person in Rock-Tenn’s position would have undertaken further inspection or maintenance of the pressure-release line, there is no basis for imputing RockTenn with constructive knowledge of an alleged defect in that line.” No. 16-30112 (Dec. 27, 2016, unpublished).

In LLOG Exploration Co. v. Signet Maritime Corp., after affirming a declaratory judgment about delay damages under a maritime towage contract, the Fifth Circuit found that it lacked jurisdiction over the related award of attorneys’ fees: “[I]n its award of fees and costs to LLOG, the district court did not set a set a specific amount. This court held in S. Travel Club, Inc. v. Carnival Air Lines, Inc., 986 F.2d 125, 131 (5th Cir. 1993), ‘that an order awarding attorney’s fees or costs is not reviewable on appeal until the award is reduced to a sum certain.'” No. 15-31123 (Dec. 23, 2016, unpublished).

In a dispute about a home loan, the district court wrote an opinion found for the defendant mortgage servicer in all respects, including its counterclaim for judicial foreclosure. The final judgment, unfortunately, did not address that claim or otherwise contain “catch-all” language. Because “[t]he district court’s ‘final judgment’ neither adjudicates ‘all claims . . . of all parties,’ nor expressly styles itself as a partial final judgment pursuant to Rule 54(b). . . . this Court has no appellate jurisdiction and cannot review the merits of the case.” Wease v. Ocwen Loan Servicing LLC, No. 16-10521 (Dec. 29, 2016, unpublished).

Attached, some excellent proofreading advice for your briefs, motions, and letters in 2017! Best wishes for the New Year from 600Camp. (A tip of the hat to @AnalyticalGrammar)

Sessa Capital, a hedge fund, supported the election of certain directors to the board of Ashford Prime, a hotel business. Ashford’s management rejected their applications, contending that they were incomplete. Litigation ensued, in which Sessa sought an injunction against the June 10, 2016 board election. The district court denied relief; Sessa appealed, and a motions panel of the Fifth Circuit denied an interim stay.

Since that election proceeded, mootness became an obvious appellate issue. The Fifth Circuit noted that “Sessa did not ask the district court to stay the [June 10] election,” and also “never sought the invalidation of the shareholder election in the district court” — requests that, had they been made, could potentially have kept the dispute alive. To the contrary, the Court observed that “Sessa repeatedly made a tactical decision to seek only prospective relief. When the district court contemplated pressing the reset button by staying the shareholder election and allowing Sessa to resubmit the questionnaires, Sessa vehemently opposed this solution.” Accordingly, the Court dismissed the appeal as moot. Ashford Hospitality Prime, Inc. v. Sessa Capital, No. 16-10671 (Dec. 16, 2016, unpublished).