Justia U.S. 5th Circuit Court of Appeals Opinion Summaries

Articles Posted in Professional Malpractice & Ethics

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After the BP Stock Fund lost significant value, the affected investors filed suit alleging that the plan fiduciaries breached their duties of prudence and loyalty by allowing the Plans to acquire and hold overvalued BP stock; breached their duty to provide adequate investment information to plan participants; and breached their duty to monitor those responsible for managing the BP Stock Fund. The district court held that the stockholders had failed to overcome the Moench v. Robertson presumption and dismissed their claims. The stockholders appealed, and while their appeal was pending in this court, the Supreme Court issued Fifth Third Bancorp v. Dudenhoeffer, holding that there was no such “presumption of prudence” under the Employee Retirement Income Security Act (ERISA), 29 U.S.C. 1001 et seq. On remand, the district court held that the stockholders had plausibly alleged that defendants had inside information; and the stockholders had plausibly alleged two alternative actions that defendants could have taken that met the Fifth Third standard: freezing, limiting, or restricting company stock purchases; and disclosing unfavorable information to the public. The district court granted the motion to amend with respect to pleading these alternative actions. It then certified defendants’ motion for interlocutory appeal. The court concluded, however, that the district court here erred when it altered the language of Fifth Third to reach its holding. Under the Supreme Court’s formulation, the plaintiff bears the significant burden of proposing an alternative course of action so clearly beneficial that a prudent fiduciary could not conclude that it would be more likely to harm the fund than to help it. In this case, the stockholders have failed to do so. Because the stockholders' amended complaint is insufficient and the district court erred in granting their motion to amend, the court reversed and remanded. View "Whitley v. BP, P.L.C." on Justia Law

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Plaintiffs filed a putative class action against Allen Standford's lawyers, Thomas Sjoblom, and the law firms where he worked, arguing that they aided and abetted Stanford’s fraud and conspired to thwart the SEC’s investigation of Stanford’s Ponzi scheme. The district court subsequently denied defendants' motion to dismiss the complaint as barred by the attorney immunity under Texas law. The court held that, under Texas law, attorney immunity is a true immunity of suit, such that denial of a motion to dismiss based on attorney immunity is appealable under the collateral order doctrine. The court reversed the district court’s order denying defendants’ motions to dismiss based on attorney immunity now that the Texas Supreme Court has clarified that there is no “fraud exception” to attorney immunity. Accordingly, the court rendered judgment that the case is dismissed with prejudice. View "Troice v. Proskauer Rose, L.L.P." on Justia Law

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W. Steve Smith, trustee of a complex Chapter 7 estate, appealed the bankruptcy court's removal of him as trustee. Smith also appealed his removal from all of his other pending cases. Smith had traveled with his wife and children to New Orleans for an oral argument related to his work as trustee, billing the the firm for work that included estate funds for trip expenses. The district court affirmed. The court concluded that the bankruptcy court applied a proper legal standard, and its determination that Smith’s conduct violated that standard was not clearly erroneous. Therefore, the bankruptcy court did not abuse its discretion in finding cause sufficient to remove Smith as trustee. The court rejected Smith's notice argument as well as his as-applied constitutional argument to section 324(b) of the Bankruptcy Code. Finally, the court's ruling moots the issue of whether the bankruptcy and district courts wrongly refused to stay his removal pending appeal. Accordingly, the court affirmed the judgment. View "Smith v. Robbins" on Justia Law

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This case arose from Credit Management's debt-collection phone calls to plaintiff. On appeal, plaintiff's attorney challenged the district court's referral of his conduct to the disciplinary committee. Credit Management filed a motion to dismiss by requesting sanctions against the attorney under Rule 11, claiming that the attorney knew that the allegations in the complaint were false and frivolous. The district court denied the request for Rule 11 sanctions, holding that sanctions were unavailable because the attorney filed the motion to dismiss first, and thus obviously within twenty-one days of knowing that Credit Management was seeking Rule 11 sanctions. The district court, however, referred the allegation to the Admissions Committee for further review. The court concluded that neither plaintiff nor his attorney has standing to appeal that referral, which was not accompanied by any finding of misconduct. Accordingly, the court dismissed the appeal. View "Zente v. Credit Mgmt." on Justia Law

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Ronald Hines was a Texas-licensed veterinarian who practiced since the mid-1960s. He worked mainly in traditional veterinary practices until he retired in 2002. After his retirement, he founded a website and began to post articles about pet health and care. These general writings soon turned to more targeted guidance and, as he acknowledged in his complaint, he began “to provide veterinary advice to specific pet owners about their pets.” This advice was given via email and telephone calls, and Hines “never physically examine[d] the animals that are the subject of his advice,” though he did review veterinary records provided by the animal owners. Texas required veterinarians to conduct a physical examination of an animal or its premises before they can practice veterinary medicine with respect to that animal. In 2012, the Texas Board of Veterinary Medical Examiners informed Hines that by providing veterinary advice without a physical examination, he had violated Texas law. Hines eventually agreed to: abide by the relevant state laws, including the physical examination requirement, one year of probation; a stayed suspension of his license; a $500 fine; and to retake the jurisprudence portion of the veterinary licensing exam. Hines thereafter filed suit in federal court, seeking declaratory and injunctive relief. He argued that the physical examination requirement violates his First Amendment right to free speech as well as his rights under the Due Process and Equal Protection Clauses of the Fourteenth Amendment. The Board moved to dismiss under Federal Rule of Civil Procedure 12(b)(6). The district court granted the Board’s motion in part and denied it in part. With respect to the equal protection claim, the court concluded that because the law did not discriminate on the basis of any suspect classification, the count was evaluated pursuant to rational basis review, and held that the physical examination requirement passed that deferential standard. The court dismissed Hines’s substantive due process claim for similar reasons. The district court denied the motion to dismiss the First Amendment claims. It recognized that states have broad power to regulate professionals, but determined that because the physical examination requirement “regulate[s] professional speech itself,” it is subject to the First Amendment. Relying on federal Supreme Court precedent, the district court held that Hines had stated a plausible claim that the Board had infringed his First Amendment rights. The Board moved to certify for interlocutory review the district court’s order. The issue this case presented for the Fifth Circuit's review thus centered on whether Hines' First or Fourteenth Amendment rights were violated. The Court concluded it offends neither, reversing the district court’s denial of the defendants’ motion to dismiss the plaintiff’s First Amendment counts and affirming the district court’s granting of the defendants’ motion to dismiss the plaintiff’s Fourteenth Amendment counts. View "Hines v. Alldredge" on Justia Law

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Plaintiffs filed suit alleging violations of the Employee Retirement Income Security Act (ERISA), 29 U.S.C. 1001 et seq. Plaintiffs claimed that the bonds that they invested in were an unsuitable investment for the Plans' funds and that defendant made multiple oral misrepresentations to plaintiffs in violation of his fiduciary duties. The district court ruled that there was a disputed issue of material fact as to whether defendant was an ERISA fiduciary, but nonetheless granted summary judgment because defendant provided plaintiffs with written disclosures. The court concluded that defendant did not qualify as a fiduciary under ERISA subsection 1002(21)(A)(i) because he did not exercise discretionary authority or control over the investment at issue; subsection 1002(21)(A)(ii) because he did not receive a fee from the Plans in connection with the investment; and section 1002(21)(A)(iii) because it was inapplicable in this instance. Accordingly, the court affirmed the judgment of the district court. View "Tiblier, et al. v. Dlabal, et al." on Justia Law

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Spring Street, seeking to recover against Bayou and its owner Douglas Lam on defaulted promissory notes, claimed that certain transfers that defendants made were fraudulent: (1) Bayou's transfer of "hard assets" to LT Seafood when LT Seafood took over Bayou's retail operations at the 415 East Hamilton location; (2) Douglas Lam's transfer of his 49% interest in LT Seafood to DKL & DTL; and (3) DKL & DTL's subsequent transfer of this 49% interest to Vinh Ngo. The court concluded that Spring Street could pierce DKL & DTL's corporate veil on the basis of fraud and impose individual liability on the LLC members. Accordingly, the court affirmed the district court's summary judgment in favor of Spring Street with regard to these claims. However, the court concluded that Ten Lam and Ngo have raised a genuine dispute of fact as to both which "hard assets" Bayou transferred to LT Seafood and the value of those assets on the date of the transfer. Accordingly, the court vacated the judgment in regards to Spring Street's fraudulent transfer claim against Lam and Ngo for the amount of $150,000 and remanded for further proceedings. View "Spring Street Partners v. Lam, et al." on Justia Law

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Lamesa filed suit against Liberty Mutual alleging that Liberty Mutual was liable under a federally-required surety bond for the alleged misconduct of its principal, a trustee in a Chapter 7 bankruptcy proceeding. On appeal, Liberty Mutual appealed the district court's decision to affirm the bankruptcy court's judgment that the trustee had committed gross negligence and Liberty Mutual, as the trustee's surety, was liable for damages under the terms of the bond. The court held that the controlling limitations period in this case was provided by 11 U.S.C. 322(d). Because Liberty Mutual did not contest that Lamesa's claim was timely under that provision, the court affirmed the bankruptcy court's conclusion that Lamesa's suit was not time-barred. On the merits, the court concluded that the bankruptcy court's finding that the trustee was grossly negligent in performing her duties was not clearly erroneous; expert testimony was not necessary to establish that the trustee failed to meet her standard of care; and Liberty Mutual failed to demonstrate that the district court's damage award was clearly erroneous. Accordingly, the court affirmed the judgment of the district court. View "Liberty Mutual Ins. Co. v. USA by Lamesa National Bank" on Justia Law

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Plaintiff brought a class action suit under the Employee Retirement Income Security Act (ERISA), 29 U.S.C. 1001 et seq., alleging various breaches of fiduciary duty to plan participants. The district court dismissed the complaint for failure to state a claim. The court concluded that the district court correctly dismissed Counts I and IV of the amended complaint which alleged that Idearc Defendants breached their fiduciary duties by allowing plan participants to buy and hold Idearc stock when it was no longer prudent to do so where the amended complaint failed to allege sufficient facts to overcome the "presumption of prudence" the court adopted in Kirschbaum v. Reliant Energy Inc. The court also concluded that the district court correctly dismissed plaintiff's claim for inaccurate disclosures and nondisclosures (Count II) where plaintiff alleged no specific circumstance or specific injury mandating the Idearc Defendants disclose non-public information to plan participants and no general duty to disclose non-public information existed under ERISA or under the court's precedents. The court affirmed the district court's dismissal of plaintiff's remaining claims. View "Kopp v. Klein, et al." on Justia Law

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Defendant, an attorney and the brother-in-law of Trent Lott, appealed from the denial of his 28 U.S.C. 2255 motion challenging one of his two convictions for bribing a judge. Defendant's conviction stemmed from his bribe of a circuit court judge in a lawsuit involving a fee-sharing dispute with co-counsel (the "Wilson Case"). Defendant offered to recommend the judge to Lott, who at the time was a U.S. Senator, for a district court judgeship in exchange for the judge's help in winning the Wilson Case. The court concluded that Skilling v. United States, which addressed the constitutionality of the honest-services statute, 18 U.S.C. 1346, had no effect on the district court's subject matter jurisdiction over defendant's guilty plea. Defendant had shown neither his actual innocence of post-Skilling honest-services fraud nor that there was cause and prejudice for failing to raise a constitutional-vagueness challenge to section 1346. Therefore, defendant procedurally defaulted on his claim and the district court correctly denied his section 2255 motion. Finally, the court rejected defendant's First Amendment overbreadth challenge to section 1346. Accordingly, the court affirmed the judgment. View "United States v. Scruggs" on Justia Law