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

Timothy Barton was involved in a scheme to develop underutilized land with loans from Chinese nationals. The Securities and Exchange Commission (SEC) and the Department of Justice initiated parallel civil and criminal proceedings against Barton and his associates, alleging violations of antifraud provisions of the Securities Act and the Exchange Act. The SEC sought a receivership to preserve lenders' assets, leading to various district court orders imposing and administering a receivership and freezing Barton’s assets. Barton appealed these orders and requested reassignment of the case on remand.The United States District Court for the Northern District of Texas initially imposed a receivership, which Barton appealed. The United States Court of Appeals for the Fifth Circuit vacated the receivership order, finding that the district court used the wrong standard and that the receivership's scope was too broad. On remand, the district court applied the correct standard from Netsphere, Inc. v. Baron and reimposed a receivership, including entities that received or benefited from assets traceable to Barton’s alleged fraudulent activities. Barton again appealed, challenging the district court’s jurisdiction, the decision to appoint the receiver, the scope of the receivership, the administration of the receivership, and the preliminary injunction.The United States Court of Appeals for the Fifth Circuit affirmed the district court’s imposition and scope of the receivership and the grant of a preliminary injunction. The court found no abuse of discretion in the district court’s actions and dismissed Barton’s appeal of certain orders administering the receivership for lack of jurisdiction. The court also denied Barton’s request to reassign the case to another district-court judge, finding no basis for reassignment. View "Securities and Exchange Commission v. Barton" on Justia Law

Zyla Life Sciences, LLC (Zyla) sells FDA-approved indomethacin suppositories, while Wells Pharma of Houston, LLC (Wells Pharma) sells compounded indomethacin suppositories that are not FDA-approved but are produced in a registered compounding facility. Zyla filed suit against Wells Pharma under the unfair-competition laws of six states, arguing that Wells Pharma's sales violated state laws that mirror the Federal Food, Drug, and Cosmetic Act (FDCA) by requiring FDA approval for new drugs.The United States District Court for the Southern District of Texas granted Wells Pharma's motion to dismiss, holding that the state laws were preempted by federal law. Zyla appealed the decision.The United States Court of Appeals for the Fifth Circuit reviewed the case and reversed the district court's decision. The Fifth Circuit held that state laws mirroring federal requirements are not preempted by the FDCA. The court relied on the Supreme Court's decision in California v. Zook, which established that state laws incorporating federal law do not create a conflict and are not preempted. The court also distinguished this case from Buckman Co. v. Plaintiffs’ Legal Committee, noting that Buckman involved state-law claims of fraud on a federal agency, which is a uniquely federal concern, unlike the parallel state regulations at issue here.The Fifth Circuit concluded that the state laws in question do not conflict with the FDCA and do not interfere with federal enforcement discretion. Therefore, the district court's order granting Wells Pharma's motion to dismiss was reversed, Wells Pharma's cross-appeal for attorney's fees was dismissed as moot, and the district court's order denying Zyla's motion for leave to amend was vacated. The case was remanded for further proceedings. View "Zyla Life Sciences v. Wells Pharma" on Justia Law

In November 2023, X Corp. filed a lawsuit against Media Matters, Inc., Eric Hananoki, and Angelo Carusone, alleging interference with X Corp.'s contracts, business disparagement, and interference with prospective economic advantage. X Corp. claimed that Media Matters manipulated images to portray X Corp. as a platform dominated by neo-Nazism and anti-Semitism, which alienated advertisers, publishers, and users. During discovery, X Corp. requested Media Matters to produce documents identifying its donors and communications with them. Media Matters resisted, citing First Amendment concerns.The United States District Court for the Northern District of Texas initially ordered Media Matters to log documents responsive to X Corp.'s requests as privileged. However, Media Matters did not comply, arguing that the requests overlapped with other discovery requests. The district court then granted X Corp.'s motion to compel production, ruling that Media Matters had waived any First Amendment privilege by not searching for or logging the documents. Media Matters appealed the order and sought a stay pending appeal.The United States Court of Appeals for the Fifth Circuit reviewed the case. The court found that it had jurisdiction under the collateral order doctrine, as the discovery order involved important First Amendment issues that were separate from the merits of the case and would be effectively unreviewable on appeal. The court determined that Media Matters was likely to succeed on the merits of its appeal because the discovery requests were not proportional to the needs of the case and posed a significant burden on Media Matters and its donors. Consequently, the court granted Media Matters's motion for a stay pending appeal, staying the district court's order compelling production. View "X Corp v. Media Matters" on Justia Law

Texas Truck Parts & Tire, Incorporated, a wholesaler and retailer of truck parts and tires, purchased tires from Chinese manufacturers between 2012 and 2017. These manufacturers shipped the tires to Texas Truck in Houston, Texas. Texas Truck did not file quarterly excise tax returns or pay excise taxes on the tires, believing the Chinese manufacturers were the importers responsible for the tax. Following an IRS audit, Texas Truck was assessed approximately $1.9 million in taxes. Texas Truck paid a portion of the taxes and filed for a refund, which the IRS did not act upon, leading Texas Truck to file a lawsuit seeking a refund. The Government counterclaimed for the remaining taxes owed.The United States District Court for the Southern District of Texas granted summary judgment in favor of Texas Truck, determining that the Chinese manufacturers were the importers and thus liable for the excise tax. The court based its decision on the interpretation that Texas Truck did not "bring" the tires into the United States under the applicable Treasury regulation, and did not consider whether Texas Truck was the beneficial owner of the tires.The United States Court of Appeals for the Fifth Circuit reviewed the case and held that Texas Truck was the beneficial owner of the tires and therefore liable for the excise tax. The court found that the district court erred by not considering whether Texas Truck was the beneficial owner under the Treasury regulation. The Fifth Circuit concluded that the Chinese manufacturers were nominal importers and that Texas Truck, as the beneficial owner, was responsible for the excise tax. Consequently, the court reversed the district court's summary judgment in favor of Texas Truck, rendered judgment for the Government, and remanded the case to the district court to determine the damages. View "Texas Truck Parts & Tire v. United States" on Justia Law

Eileen Cure, a licensed investment advisor, entered into agreements with LPL Financial LLC (LPL) to act as a registered representative under LPL’s broker-dealer umbrella. These agreements included arbitration provisions. Cure, along with her companies, Cure & Associates, P.C. and Premier Wealth & Retirement Management, LLC, filed claims against LPL after LPL terminated its relationship with Cure, alleging she violated LPL’s policies. Cure’s companies, which were not signatories to the arbitration agreements, also alleged business disparagement and other claims against LPL.The United States District Court for the Eastern District of Texas granted LPL’s motion to compel arbitration for Cure but denied it for her companies, stating that the companies were not signatories to the arbitration agreements. The court also denied LPL’s request to stay the litigation pending arbitration. LPL appealed, arguing that under California and Texas law, equitable estoppel principles should compel Cure’s companies to arbitrate their claims.The United States Court of Appeals for the Fifth Circuit reviewed the case and concluded that Cure’s companies, although nonsignatories, were bound by the arbitration provisions due to equitable estoppel. The court found that the companies received direct benefits from Cure’s agreements with LPL, making them subject to the arbitration clauses. The Fifth Circuit reversed the district court’s denial of LPL’s motion to compel arbitration for the companies and vacated the order denying a stay of the litigation. The case was remanded for the district court to compel arbitration of the companies’ claims and to stay the action pending arbitration. View "Cure & Associates, P.C. v. LPL Financial" on Justia Law

Occidental Petroleum Corporation acquired Anadarko Petroleum Corporation in 2019, resulting in a trust holding a significant amount of Occidental stock. Wells Fargo, acting as trustee, agreed via email to sell the stock between January 6 and January 10, 2020. However, Wells Fargo failed to execute the sale until March 2020, by which time the stock's value had significantly decreased, causing a loss of over $30 million. Occidental sued Wells Fargo for breach of contract based on the email chain and the Trust Agreement.The United States District Court for the Southern District of Texas granted summary judgment in favor of Occidental, finding that Wells Fargo breached the Trust Agreement by failing to sell the stock as planned. The court also dismissed Wells Fargo’s counterclaim and affirmative defenses and awarded damages and attorney’s fees to Occidental.The United States Court of Appeals for the Fifth Circuit reviewed the case and held that the 2019 email chain did not constitute a contract due to lack of consideration. However, Wells Fargo was judicially estopped from arguing that the Trust Agreement was not a contract, as it had previously asserted that the relationship was contractual to dismiss Occidental’s fiduciary-duty claim. The court affirmed that Wells Fargo breached the Trust Agreement by failing to prudently manage the Trust’s assets.The Fifth Circuit also upheld the district court’s calculation of damages, rejecting Wells Fargo’s argument that reinvestment should have been considered. The court found that reinvestment was speculative and unsupported by the record. Additionally, the court affirmed the dismissal of Wells Fargo’s counterclaim and affirmative defenses, as Wells Fargo failed to show a genuine dispute of material fact. Finally, the court upheld the award of attorney’s fees, finding no basis for segregating fees based on Wells Fargo’s different capacities. The district court’s judgment was affirmed. View "Occidental Petroleum v. Wells Fargo" on Justia Law

Two whistleblowers, John M. Barr and John McPherson, challenged the Securities and Exchange Commission’s (SEC) calculation of their award amounts under the Dodd-Frank Wall Street Reform and Consumer Protection Act. The case involves Life Partners Holdings, Inc., which was found guilty of extensive securities fraud from 1999 to 2013. In 2012, the SEC filed a civil action against Life Partners, resulting in a $38.7 million judgment. Life Partners subsequently filed for Chapter 11 bankruptcy to avoid the appointment of a receiver. The bankruptcy court appointed a Chapter 11 trustee, and a reorganization plan was confirmed in 2016.The SEC posted a Notice of Covered Action in 2015, inviting whistleblowers to apply for awards. Barr and McPherson submitted applications. The SEC’s Claims Review Staff initially recommended denying Barr an award and granting McPherson 23% of the collected sanctions. After objections, the SEC revised its decision, granting Barr 5% and McPherson 20% of the collected amounts. The SEC argued that the bankruptcy proceedings did not qualify as a “covered judicial or administrative action” or a “related action” under the Dodd-Frank Act.The United States Court of Appeals for the Fifth Circuit reviewed the case. The court held that the SEC’s motion to appoint a Chapter 11 trustee did not constitute “bringing an action” under the Dodd-Frank Act. The court found that the ordinary meaning of “action brought” refers to initiating a lawsuit or legal proceedings, which did not apply to the SEC’s involvement in the bankruptcy case. The court also rejected the argument that the SEC’s actions in the bankruptcy case were a continuation of its enforcement strategy. Consequently, the court denied the petitions for review, upholding the SEC’s award calculations. View "Barr v. SEC" on Justia Law

Tesla, Inc. and its affiliates challenged a Louisiana law that prohibits automobile manufacturers from selling directly to consumers and performing warranty services for cars they do not own. Tesla alleged that the law violated federal antitrust law, due process rights, and equal protection rights. The defendants included the Louisiana Motor Vehicle Commission, its commissioners, the Louisiana Automobile Dealers Association (LADA), and various dealerships.The United States District Court for the Eastern District of Louisiana dismissed Tesla's claims. The court found that the private defendants were immune from antitrust liability, Tesla had not plausibly pleaded a Sherman Act violation against the governmental defendants, there was insufficient probability of actual bias to support the due process claim, and the regulations passed rational-basis review for the equal protection claim.The United States Court of Appeals for the Fifth Circuit reviewed the case. The court reversed the dismissal of Tesla's due process claim, finding that Tesla had plausibly alleged that the Commission's composition and actions created a possible bias against Tesla, violating due process. The court vacated and remanded the dismissal of the antitrust claim, noting that the due process ruling fundamentally altered the grounds for Tesla's alleged antitrust injury. The court affirmed the dismissal of the equal protection claim, holding that the regulations had a rational basis in preventing vertical integration and controlling the automobile retail market.In summary, the Fifth Circuit reversed the due process claim dismissal, vacated and remanded the antitrust claim dismissal, and affirmed the equal protection claim dismissal. The case was remanded for further proceedings consistent with the court's opinion. View "Tesla v. Louisiana Automobile Dealers" on Justia Law

In 2019, Ancor Holdings, L.P. (Ancor) and Landon Capital Partners, L.L.C. (Landon) entered into letters of intent to invest in and acquire a majority interest in ICON EV, L.L.C. (ICON). The deal fell through, and Landon and ICON entered into their own agreement. Ancor sued Landon and ICON for breach of contract and tortious interference, respectively. The trial court dismissed Ancor’s tortious interference claim against ICON as a matter of law and denied Ancor’s declaratory judgment claim. The jury found for Ancor on the breach of contract claim against Landon, awarding $2,112,542 in damages.The United States District Court for the Northern District of Texas initially handled the case. The trial court dismissed Ancor’s tortious interference claim against ICON and denied Ancor’s declaratory judgment claim. The jury found Landon breached the contract and awarded Ancor damages. Ancor appealed the dismissal of its claims, and Landon cross-appealed the jury’s verdict.The United States Court of Appeals for the Fifth Circuit reviewed the case. The court reversed the trial court’s dismissal of Ancor’s declaratory judgment and tortious interference claims, remanding them for a jury trial. The appellate court affirmed the jury’s finding that Landon breached the contract but reversed the trial court’s judgment on the reimbursement amount, instructing it to determine 80% of all third-party costs incurred. The court held that Ancor was entitled to a jury trial on its declaratory judgment claim and that sufficient evidence supported the tortious interference claim against ICON. The court also found that the trial court did not err in submitting the breach of contract claim to the jury, nor did the jury err in its findings. View "Ancor Holdings, L.P. v. Landon Capital Partners, L.L.C." on Justia Law

Mark Nordlicht, founder and chief investment officer of Platinum Partners, defrauded Black Elk Energy Offshore Operations' creditors of nearly $80 million, transferring the funds to his hedge fund’s investors, including Shlomo and Tamar Rechnitz, who received about $10.3 million. Nordlicht was later convicted of securities fraud. Black Elk declared bankruptcy, and the Trustee initiated an adversary proceeding against the Rechnitzes to recover the transferred funds.The bankruptcy court ruled that the Trustee could recover the money from the Rechnitzes under 11 U.S.C. §§ 544, 548(a)(1), and 550(a), rejecting their defense under 11 U.S.C. § 550(b)(1) that they were good faith transferees. The court imputed Nordlicht’s knowledge of the fraudulent scheme to the Rechnitzes, as he acted as their agent. The court also found that the funds transferred to the Rechnitzes were traceable to the fraudulent scheme. The district court affirmed the bankruptcy court’s decision.The United States Court of Appeals for the Fifth Circuit reviewed the case and affirmed the lower courts' rulings. The court held that the knowledge of an agent (Nordlicht) is imputed to the principal (the Rechnitzes) under 11 U.S.C. § 550(b)(1), and thus, the Rechnitzes could not claim to be good faith transferees. The court also found that Nordlicht’s actions were within the scope of his authority as the Rechnitzes’ agent. Additionally, the court upheld the bankruptcy court’s tracing methodology, which assumed that tainted funds were used first, finding it appropriate under the circumstances. The court concluded that the Trustee could recover the $10.3 million from the Rechnitzes. View "Rechnitz v. Schmidt" on Justia Law