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

Articles Posted in Arbitration & Mediation
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In this case, the defendant, Bobby Quinton Gentile, pleaded guilty to conspiracy to possess with intent to distribute at least 500 grams of methamphetamine. He later appealed his sentence, arguing that the district court judge improperly coerced him into withdrawing his objections to the drug amount calculation in the Presentence Investigation Report by threatening to deny him his acceptance of responsibility points. The United States Court of Appeals for the Fifth Circuit found no plain error and affirmed the district court's decision. The court held that Gentile's argument that he was judicially coerced to withdraw his objections to the drug amount calculation fails under plain error review because, even assuming arguendo that the district court erred clearly by coercing him, Gentile did not show the error affected his substantial rights. His sentence was affirmed. View "USA v. Gentile" on Justia Law

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In a dispute between Conti 11 Container Schiffarts-GMBH & Co. KG M.S. and MSC Mediterranean Shipping Company S.A., the United States Court of Appeals for the Fifth Circuit found that the District Court for the Eastern District of Louisiana lacked personal jurisdiction over the case and reversed the district court's decision. The dispute arose from an incident where three chemical tanks exploded onboard a cargo vessel chartered by Conti to MSC, causing extensive damage and three deaths. After Conti won a $200 million award from a London arbitration panel, Conti sought to confirm the award in the Eastern District of Louisiana. MSC argued that the court lacked personal jurisdiction. The Fifth Circuit agreed with the district court’s assessment that when confirming an award under the New York Convention, a court should consider contacts related to the underlying dispute, not just those related to the arbitration itself. However, the Fifth Circuit disagreed with the district court's ruling that MSC waived its personal jurisdiction defense through its insurer’s issuance of a letter of understanding. The court also disagreed with the district court's finding that the loading of the tanks in New Orleans conferred specific personal jurisdiction over MSC, as this contact resulted from the actions of other parties not attributable to MSC. Therefore, the Fifth Circuit reversed the lower court's decision and remanded the case with instructions to dismiss it for lack of personal jurisdiction. View "Conti 11. Container Schiffarts-GMBH & Co. KG M.S. v. MSC Mediterranean Shipping Co. S.A." on Justia Law

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Direct Biologics, LLC (“DB”) brought claims for breach of covenant to not compete and misappropriation of trade secrets against Adam McQueen, DB’s former employee, and Vivex Biologics, Inc. (“Vivex”), McQueen’s new employer. After granting DB a temporary restraining order based on its trade secret claims, the district court denied DB’s application for a preliminary injunction. Finding that DB’s claims were subject to arbitration, the district court also dismissed DB’s claims against McQueen and Vivex and entered final judgment.   The Fifth Circuit vacated the district court’s orders denying DB’s motion for a preliminary injunction and dismissing DB’s claims and remanded. The court held that the district court did not abuse its discretion by declining to presume irreparable injury based on McQueen’s breach of his non-compete covenants. The court held that remand is thus proper to allow the district court to make particularized findings regarding irreparable harm; specifically, the likelihood of misuse of DB’s information and the difficulty of quantifying damages should such misuse occur. View "Direct Biologics v. McQueen" on Justia Law

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Appellant, his law firm, and Amberson Natural Resources (“ANR”) (collectively “Amberson”) moved for rehearing by the Fifth Circuit. Though successful in convincing a majority of the panel that it has authority to consider the argument that a claim was not arbitrable, Amberson then lost on the merits of that argument. Amberson alleged that the Fifth Circuit erred in three ways: (1) it should not have considered the arbitrator’s fact findings in deciding the validity of the state court’s compelling of arbitration; (2) the state court record does not support that all the claims were intertwined; and (3) the appellees’ state court pleadings do not support the court’s finding of alter ego.   The Fifth Circuit denied the petition for rehearing. The court explained that Amberson cites no Texas caselaw that the evidence to support the validity of interlocutory orders reviewed on appeal after a final judgment must come only from the part of the record that existed when the orders were entered. Moreover, Amberson’s briefing, though, did not meaningfully dispute the accuracy of the arbitrator’s fact-findings. The arbitrator’s opinion contained the best summary of the facts. Absent any argument that the findings were erroneous, acceptance of the summary was proper and undue deference was not given to the arbitrator as to fact-findings. View "In the Matter of: Jon Amberson" on Justia Law

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Plaintiff was a local delivery driver for Cintas Corporation. That means he picked up items from a Houston warehouse (items shipped from out of state) and delivered them to local customers. Lopez does not want to arbitrate his claims against Cintas. He says that he is exempt from doing so because he belongs to a “class of workers engaged in foreign or interstate commerce” under Section 1 of the Federal Arbitration Act.   The Fifth Circuit partially affirmed the district court’s ruling finding that Plaintiff is not a “transportation worker” under Section 1 of the FAA. However, because Plaintiff's unconscionability challenge to his employment agreement must be decided in arbitration, the court vacated and remanded for that claim to be dismissed without prejudice to be considered in arbitration in the first instance.   The court explained that unlike either seamen or railroad employees, the local delivery drivers here have a more customer-facing role, which further underscores that this class does not fall within Section 1’s ambit. As a result, the transportation-worker exemption does not apply to this class of local delivery drivers. Further, because unconscionability under Texas law is a challenge to the validity, not the existence, of a contract, that challenge must be resolved by an arbitrator. Thus, the court held that the district court erred in resolving the merits of Plaintiff’s unconscionability claim. View "Lopez v. Cintas" on Justia Law

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Plaintiff-Appellee Preble-Rish Haiti, S.A. filed this case pursuant to Rule B of the Supplemental Rules for Admiralty or Maritime Claims in the Federal Rules of Civil Procedure. It sought to attach assets to secure a partial final arbitration award against the Republic of Haiti and the Bureau de Monétisation de Programmes d’Aide au Developpement (BMPAD). Garnishee BB Energy USA, L.L.C.(BB Energy) admitted to holding credits belonging to BMPAD located in the Southern District of Texas.   Although BB Energy raised BMPAD’s sovereign immunity from prejudgment attachment again, the district court stated it had already decided that issue and cited its August 10, 2021 order. BB Energy appealed the January 4, 2022 order pursuant to the collateral order doctrine   The Fifth Circuit reversed the district court’s ruling and vacated the writ of attachment. The court explained that to satisfy Section 1610(d), an explicit waiver of immunity from prejudgment attachment must be express, clear, and unambiguous. Anything short of that is insufficient. Here, because there is no such explicit waiver in the contract or elsewhere, the district court erred in concluding BMPAD waived its sovereign immunity from prejudgment attachment. View "Preble-Rish Haiti, S.A. v. BB Energy USA" on Justia Law

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Rusco Operating, L.L.C. and Planning Thru Completion, L.L.C. are two companies that offer an online application (“app”) that connects oil field workers looking for work with oil-and-gas operators looking for workers. The companies seek to intervene here because some app-using workers have opted-in as plaintiffs alleging claims for unpaid overtime, under the Fair Labor Standards Act, against an operator that used the app to hire them. The app companies’ asserted interests in the litigation related to arbitration agreements between them and the workers, their belief that a win by the workers would destroy their business model, and a demand for indemnity allegedly made by Defendant operator for liability it might incur as to Plaintiffs’ claims. The district court found these interests insufficient to justify intervention and denied leave   The Fifth Circuit reversed, concluding that the arbitration agreements at issue give rise to sufficient interest in this action to support the app companies’ intervention. The court explained that Appellants  have shown adequate interest in the subject of this lawsuit by virtue of their contracts with the parties, and “disposing of the action may as a practical matter impair or impede the [Intervenors’] ability to protect [their] interest.” Fed. R. Civ. Pro. 24(a)(2). By contrast, no other party in this action will adequately represent the Intervenors’ interest. They should therefore be allowed to intervene of right. View "Field v. Rusco Operating" on Justia Law

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Appellant is a pipeline-inspection company that hires inspectors and sends them to work for its clients. When Plaintiff was hired, Appellant had him sign an Employment Agreement that contained an arbitration clause. That arbitration provision explained that Plaintiff and Appellant agree to arbitrate all claims that have arisen or will arise out of Plaintiff’s employment. Appellant staffed Plaintiff on a project with Defendant, a diversified energy company that stores and transports natural gas and crude oil.   Alleging that the Fair Labor Standards Act entitled him to overtime pay, Plaintiff filed a collective action against Defendant; he brought no claims against Appellant. Appellant moved to intervene. The magistrate judge granted that motion, explaining that Appellant met the criteria for both permissive intervention and intervention as of right. Appellant claimed that it was an “aggrieved party” under Section 4 of the Federal Arbitration Act (“FAA”) and thus could compel arbitration. The magistrate judge rejected all the motions. The district court affirmed.   The Fifth Circuit dismissed for lack of jurisdiction Appellant’s appeal. The court held that Appellant is not an aggrieved party under Section 4 of the FAA and cannot compel arbitration. The court explained it is only where the arbitration may not proceed under the provisions of the contract without a court order that the other party is really aggrieved. Here, Plaintiff only promised to arbitrate claims brought against Appellant. Claiming that Plaintiff did not arbitrate its claims with Defendant is therefore not an allegation that he violated his agreement with Appellant. View "Hinkle v. Phillips 66 Company" on Justia Law

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Defendant, a foreign oil company, contracted with Ecuador to develop an oil-rich region of the rainforest. Defendant paid its Ecuadorian employees a sizable portion of its annual profits. The government canceled the exploration contract and expropriated Occidental’s property, leading to massive losses. Profits and profit-sharing abruptly ceased. Occidental sought arbitration and, a decade later, received a nearly billion-dollar settlement from Ecuador. Plaintiffs, a group of Occidental’s former Ecuadorian employees, then sued Occidental, claiming the arbitration settlement represented profits they were entitled to share. The district court correctly dismissed the employees’ claims. On appeal, the Fifth Circuit affirmed the district court’s dismissal of Plaintiffs' claims holding that Defendant owes its former employees no shared profits for the relevant year. The court reasoned that under the plain terms of Ecuadorian law, a company’s profit-sharing obligation depends on the profits lawfully declared in its annual tax returns. Plaintiffs maintained that tax returns are “not the exclusive mechanism for determining profit-sharing liability.” However, the court held Ecuador's law is clear that the calculation [of profits shall be conducted on the basis of the declarations or determinations prepared for the payment of Income Tax, and Occidental’s tax returns for the interrupted year of 2006 showed not profits but losses. View "Cisneros Guerrero, et al v. Occidental Petro, et a" on Justia Law

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This case arises from a dispute regarding a joint financial venture between Noble Capital Fund Management, L.L.C. (“Noble”) and US Capital Global Investment Management, L.L.C. (“US Capital”). Noble created two separate funds, collectively the “Feeder Funds."Noble and the Feeder Funds initiated a JAMS arbitration against US Capital, alleging various claims including the breach of contractual and fiduciary duties. US Capital was unable to pay the arbitration fees, and the JAMS panel terminated the arbitration.On November 24, 2020, Noble and the Feeder Funds sued US Capital in Texas state court for various claims including fraud and fraudulent inducement. US Capital appeals the denial of its motion to compel arbitration and stay judicial proceedings and the denial of its motion to transfer.The court explained the Federal Arbitration Act requires that, where a suit is referable to arbitration, judicial proceedings be stayed until arbitration "has been had." Here, there is no arbitration to return this case to and parties may not avoid resolution of live claims by compelling a new arbitration proceeding after the first proceeding failed. Further, the court found no pendent jurisdiction over the denial of the motion to transfer. The court affirmed the district court’s ruling and dismissed the appeal of the district court’s denial of the motion to transfer. View "Noble Capital Fund v. US Capital Global" on Justia Law