U.S. Fifth Circuit - The FindLaw 5th Circuit Court of Appeals Opinion Summaries Blog

May 2010 Archives

Contract, Education and Employment Matters Also Decided

Gagnon v. United Technisource Inc., No. 09-20098, was an action under the Fair Labor Standards Act (FLSA) based on defendants' failure to increase plaintiff's "per diem" hourly rate.  The court of appeals affirmed judgment for plaintiff in part, holding that 1) when, as here, the amount of per diem varies with the amount of hours worked, the per diem payments are part of the regular rate in their entirety; 2) there was no clear error in the district court's finding that the violation was willful; and 3) in paying the per diem, defendant did not pay plaintiff any additional sums that could be characterized as advanced or inappropriate amounts subject to an offset against the overtime owed to him.  However, the court vacated in part, holding that the district court needed to provide additional explanation for its awards and with specific instructions to include time spent on this appeal in determining the amount of attorney's fees.

Shandong Yinguang Chem. Indus. Joint Stock Co. v. Potter, No. 09-20268, an action against the individual owner of a corporation seeking to pierce the corporate veil based on common law fraud and fraudulent inducement.  The court of appeals affirmed the dismissal of the complaint, holding that 1) plaintiff did not plead that defendant presented any detailed, corroborating information, facts or figures to support the company's financial statement that might entice a reasonable person to attach importance to the statement; and 2) piercing the corporate veil was not a separate cause of action, but a method to impose personal liability on shareholders and corporate officers who would otherwise be shielded from liability for corporate debts.

In re: Ran, No. 09-20288, involved an Israeli bankruptcy receiver's appeal of the district court's denial of his petition for recognition under Chapter 15 of the Bankruptcy Code of an ongoing, involuntary bankruptcy proceeding pending in Israel.  The court of appeals affirmed, holding that 1) it was evident that, when the receiver filed the petition for recognition, the debtor's habitual residence was in Houston, Texas; 2) while sufficient to rebut the presumption that debtor's center of main interest was in the U.S., the receiver's evidence was nevertheless insufficient to prove by a preponderance of the evidence that Israel was the location of debtor's center of main interests; and 3) at the time the receiver filed his petition for recognition, debtor possessed neither a secondary residence nor place of employment in Israel.

R.H. v. Plano Indep. Unified Sch. Dist., No. 09-40369, involved plaintiff's appeal from the district court's denial of tuition reimbursement for private preschooling under the Individuals with Disabilities Education Act (IDEA).  The court of appeals affirmed, on the grounds that 1) the school district discussed the potential harmful effects of plaintiff's placement in a special educational environment; 2) defendant considered whether plaintiff's Individualized Education Plan (IEP) could be satisfactorily implemented in a regular classroom; and 3) the lack of extended school year services was part and parcel of plaintiff's IEP, and he was thus required to give notice to defendant of his intent to reject the terms of his existing IEP.

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Rosenblatt v. United Way of Greater Houston, No. 09-20131, concerned an ERISA action asserting that the net effect and intent of defendant's benefit plan conversion was to shift the burden of funding the plan's deficit to older employees, like plaintiff, who had earned substantial benefits through longer service.  The Fifth Circuit affirmed the dismissal of the complaint, on the grounds that 1) in plaintiff's complaint, he disclosed neither a claim of error nor how any errors affected his retirement benefits; 2) nowhere in his complaint did plaintiff contend that defendant failed to provide him with any statements or notice of amendments to or potential reductions in his benefit accruals under the plan; and 3) plaintiff did not indicate that his previously accrued benefits had diminished in any way, only that he had not received properly calculated benefit accruals since the conversion of the plan.

Admiral Ins. Co. v. Ford, No. 09-50671, involved an action seeking a declaration that plaintiff owed defendant no duty to defend a suit arising out of a blown-out oil well.  The court of appeals reversed summary judgment for defendant, on the grounds that 1) the parties intended the legal definition of professional services to exclude coverage for professional services in any of defendant's operations; and 2) the underlying suit alleges the existence of and failure to fulfill a contract, the very subject of which was defendant's expertise in drilling operations.

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Meza v. Livingston, No. 09-50367, involved a civil rights action for violations of plaintiff's right to due process after defendants attached sex offender conditions to plaintiff's mandatory supervision.  The court of appeals affirmed judgment for plaintiff in part, holding that 1) the Texas procedure for providing parolees with their Coleman notice did not meet the constitutional requirements for procedural due process; and 2) on the spectrum of due process rights afforded by the Supreme Court in analogous cases, requiring a parolee who has not been convicted of a sex offense to register as a sex offender or participate in sex offender therapy required more process than was provided to the inmate in Wolff, but less process than was provided in Vitek.  However, the court of appeals vacated in part, on the ground that the due process clause did not entitle plaintiff to counsel in Coleman notice proceedings.

As the court wrote:  "Texas parolee Raul Meza, who has never been convicted of a sex offense, sued the defendants, all employees of the Texas Board of Pardons and Paroles ("the Board") and the Texas Department of Criminal Justice-Parole Division ("the Department"), for violations of his right to due process after the defendants attached sex offender conditions to his mandatory supervision. This court has made clear that sex offender conditions may only be imposed on individuals not convicted of a sex offense after the individual has received due process.

Meza was convicted of aggravated robbery in 1977 and was released on parole in 1981.  He was out on parole when he committed the murder in 1982. At the time Meza was convicted, Texas penal law provided that a prisoner must be released on mandatory supervision when the length of his calendar time in prison plus good conduct time earned equaled the total length of his sentence. See 1977 Tex. Gen. Laws 925 (currently embodied in TEX. GOV'T CODE § 508.001, et seq.). The Board had no discretion in whether Meza was released on mandatory supervision.  We agree with the district court that the current procedures do not pass constitutional muster. However, we do not agree that Meza is owed all of the
process afforded by the district court."

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Affirmance of Plaintiff's Verdict in Employee Poaching Case

Meaux Surface Protection, Inc. v. Fogleman, No. 09-20234, involved an action for breach of fiduciary duty claiming that defendant surreptitiously and unlawfully poached employees and clients while working for plaintiff.  The court of appeals affirmed judgment for plaintiff in part, on the grounds that 1) it was perfectly apparent throughout discovery and pretrial litigation that plaintiff would seek lost profits, and thus the district court's amendment of its pretrial order to permit plaintiff to do so was not erroneous; 2) defense counsel had the relevant documents prior to plaintiff's lost profits witness's deposition and could have questioned him about his familiarity, or lack thereof, with plaintiff's operations and profitability; 3) the jury was well within its province to find that defendants' recruitment of plaintiff's employees directly caused plaintiff to suffer a loss in business; and 4) because the company and industry were not nascent and untested, copious evidence of lost profits was unnecessary.  However, the court remanded in part because the district court needed to consider the appropriateness of prejudgment interest and to award post-judgment interest.

As the court wrote:  "In this diversity jurisdiction case, we review a jury verdict and judgment in favor of Plaintiff Meaux Surface Protection, Inc. ("Meaux") on a claim for breach of fiduciary duty. Defendants Mike Fogleman, Charlie Kotrla, and CleanBlast, LLC (collectively "defendants") contend that the district court abused its discretion in allowing an eleventh-hour amendment of the pretrial order, and erred in failing to grant defendants' motions for judgment as a matter of law. Meaux cross-appeals the denial of prejudgment and post-judgment interest. After careful review, we find no reason why we should upset the jury verdict and judgment. However, we order that that the case be remanded to its port of call for the district court to consider the appropriateness of prejudgment interest and to award post-judgment interest."

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Case Involving Garnishment of Community Property

US v. Loftis, No. 09-10482, concerned defendant's appeal from the district court's order of garnishment, which set aside a community property partition agreement entered into between defendant and her husband.  The court of appeals affirmed the order, on the grounds that 1) the partition agreement was clearly voidable as a fraudulent transfer under 28 U.S.C. section 3304(b)(1)(B)(ii); and 2) the district court was correct to treat the couple's assets as jointly managed property.

As the court wrote:  "Lisa Loftis ("Lisa") appeals the district court's Final Order of Garnishment, which set aside a community property partition agreement entered into between Lisa and her husband, Todd Loftis ("Todd"). She contends that the district court erroneously found the partition agreement to be a fraudulent transfer, and she challenges the scope of the garnishment ordered. We reject her arguments and affirm."

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Action Alleging Violation of Bankruptcy Court Order

In re: Tex. Comm. En'gy., No. 08-40890, involved an action claiming that defendant drew down a letter of credit in violation of a bankruptcy court order and confirmed reorganization plan that allegedly prevented defendant from taking that action to satisfy pre-confirmation debts.  The court of appeals reversed the judgment for plaintiffs, holding that 1) a debt owed to defendant was neither an "Invoice" nor an "obligation represented by those Invoices" under the district court's injunction, the order did not govern defendant's action regarding the debt; 2) the district court's order still had effect as applied to the actual pre-petition invoices, and thus the court of appeals' interpretation of the order did not render it superfluous; and 3) the plan did not state that the $1.3 million letter of credit at issue must remain the sole and exclusive security for defendant's claim.

As the court wrote:  "Leo Leonard May and Texas Commercial Energy ("TCE") sued the Electric Reliability Council of Texas ("ERCOT") for drawing down a letter of credit in violation of a bankruptcy court order and confirmed reorganization plan that allegedly prevented ERCOT from taking that action to satisfy pre-confirmation debts. The final judgment awarded contract damages and attorneys fees to the Appellees. ERCOT now appeals, asserting that it had the right to draw down TCE's Trustee and ERCOT settled pending appeal the letter of credit to pay TCE's post-confirmation debts. We agree, and accordingly REVERSE and RENDER the judgment in favor of May."

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Hurricane Katrina Insurance Action, and RICO Matter

Bradley v. Allstate Ins. Co., No. 09-30035, involved an action against an insurer seeking proceeds for property damage due to Hurricane Katrina.  The court of appeals affirmed summary judgment for defendant in part, on the grounds that 1) the district court did not err in concluding that defendant was entitled to judgment as a matter of law on the claim for loss of contents and 2) because plaintiffs did not establish any plausible breach of contract for unpaid additional living expenses (ALE), there was no basis for asserting a bad faith claim against defendant with respect to unpaid ALE.  However, the court vacated in part, on the grounds that 1) under the policy's total loss provision, plaintiffs were entitled to recover up to the policy limit for covered losses, and the district court erred by ignoring the total loss provision; and 2) the district court erred by calculating the actual cash value of the property based on the pre-storm market value of the house.

Joffroin v. Tufaro, No. 09-30984, concerned a RICO action alleging that defendants, developers of a subdivision in which plaintiffs owned homes, neglected the common areas and diverted assessments for their own benefit.  The court of appeals affirmed the dismissal of the action, holding that plaintiffs' alleged injuries derived from injuries to their homeowner's association and plaintiffs thus lacked standing to bring a direct suit.

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Drug Conspiracy Sentence Affirmed

In US v. Garcia, No. 08-50458, the Fifth Circuit affirmed defendant's drug conspiracy sentence, holding that defendant's plea agreement left the district court to use the guidelines, with the exception that the term of imprisonment could not fall below 240 months, and the district court executed the plea agreement as originally written.

As the court wrote:  "Through an agreement with the government, Marco A. Garcia pleaded guilty to conspiracy to distribute 500 or more grams of cocaine and 50 or more grams of crack, in violation of 21 U.S.C. §§ 841(a)(1) & 846. The district court accepted the plea agreement - which provided for a minimum prison term of 240 months - and, after calculating Garcia's guidelines range, sentenced him to 262 months. After retroactive implementation of the crack sentencing amendments, Garcia moved to reduce his sentence under 18 U.S.C. § 3582(c)(2). The district court granted the motion and changed Garcia's sentence to 240 months, the minimum stipulated to in the plea agreement. Garcia appeals, urging that the district court erred in holding that the plea agreement prevented further reduction. After confirming the district court had jurisdiction to modify Garcia's sentence, we affirm."

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EOG Resources, Inc. v. Chesapeake Energy Corp., No. 09-30363, concerned an action claiming that defendant drilled three oil wells without obtaining plaintiff's permission, in alleged violation of an operating agreement between the parties.  The court of appeals reversed judgment for defendant, holding that 1) plaintiff's suit did not challenge an "operative fact" of the Louisiana Commissioner of Conservation's orders and thus was not a collateral attack on them; and 2) the district court's finding that there was no breach of contract was predicated on its finding that plaintiff was engaged in a collateral attack.

Jenevein v. Willing, No. 09-50064, involved an action by a censured state judge against the Texas State Commission on Judicial Conduct, seeking to have the censure expunged from his record.  The Fifth Circuit affirmed the denial of plaintiff's motion for attorney's fees, on the ground that plaintiff was not a prevailing party because the commission's censure remained in effect.

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