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

Maude Williams passed away in May 2000, leaving behind both a substantial fortune and incomplete estate-planning documents. Originally believing this omission precluded transfer of the relevant estate property to a limited partnership, her Estate paid over $147 million in federal taxes. The Estate later discovered Texas state authorities supporting that Williams sufficiently capitalized the limited partnership before her death, entitling the Estate to a substantial refund. In this refund suit, the Estate claimed a further substantial deduction for interest on the initial payment, which it retroactively characterized as a loan from the limited partnership to the Estate for payment of estate taxes. The district court upheld both the Estate's contentions. The court affirmed, holding that the district court correctly concluded that Williams' intent on forming the partnership was sufficient under Texas law to transfer ownership of the Community Property bonds to the partnership. The district court also correctly concluded that the post hoc restructuring of the transfer as a loan from the partnership back to the Estate for tax purposes was a necessarily incurred administrative expense; the Estate retained substantial illiquid land and mineral assets that justified the loan, and the loan did not constitute an "indirect use" of the Community Property bonds. View "Keller, et al v. United States" on Justia Law

This case arose when American Airlines filed a lawsuit alleging state-law causes of action for breach of contract and tortious interference with prospective business relations. On appeal, Sabre challenged the district court's award of attorney's fees to American pursuant to 28 U.S.C. 1447(c). The court affirmed the district court's ruling, finding that the district court did not abuse its discretion in awarding attorney's fees to American based on its assessment that Sabre did not have objectively reasonable grounds to believe removal of the case from state court to federal district court was legally proper. View "American Airlines, Inc. v. Sabre, Inc., et al." on Justia Law

Defendant United Polychem, Inc. (UPC) and Lynne Van Der Wall (collectively, Appellants) and Plaintiff Westlake Petrochemicals, LLC (Westlake) appealed different results of a jury trial. At the core of the trial was an agreement between UPC as buyer and Westlake as seller of ethylene, a petroleum product. The jury found that (1) the parties had formed a binding contract, (2) UPC breached that contract, and, as a result, (3) UPC was liable to Westlake for $6.3 million in actual damages and $633,200 in attorneys fees. The district court also held Van Der Wall jointly and severally liable under the terms of a guaranty agreement. The Fifth Circuit Court of Appeals affirmed in part and reversed and remanded in part, holding (1) a binding contract was established, (2) the district court applied the incorrect measure of damages, and (3) Van Der Wall, as UPC's president, was not jointly and severally liable with UPC for the jury verdict under the terms of the guaranty. The Court vacated the damages award and remanded for the district court to calculate the damages under Tex. Bus. & Com. Code Ann. 2.708(b). View "Westlake Petrochemicals, LLC v. United Polychem, Inc." on Justia Law

Plaintiff sued defendants, the City and the Zoning Board, for violations of the Fifth Amendment Takings Clause and for denying her procedural due process and equal protection under the Fourteenth Amendment. The Board had decided to revoke the permits it had given her to operate her Sno Cone hut at a certain intersection. The court held that the district court was justified in dismissing plaintiff's equal protection claim where plaintiff failed to state a viable equal protection claim. The court held, however, that the district court erred in dismissing plaintiff's procedural due process claim where plaintiff's property right in the business permits the Board granted to her merited the protection of procedural due process before the Board revoked it. View "Bowlby v. City of Aberdeen, Mississippi, et al." on Justia Law

These consolidated cases sought judicial review of notices of final partnership administrative adjustment (FPAA) issued to Bemont and BPB. Following the review of the district court, the government appealed the ruling on the partnerships' motion for partial summary judgment disallowing the 40% valuation misstatement penalty, and the ruling post trial holding that the FPAA issued to Bemont for the 2001 tax year was time-barred. The partnerships appealed the district court's judgment upholding the imposition of the 20% substantial understatement and negligence penalties. The court reversed the judgment of the district court that the FPAA as to the 2001 tax year was untimely; affirmed the judgment of the district court in all other respects including disallowing the 40% valuation misstatement penalty and upholding the 20% negligence penalty for both 2001 and 2002. View "Bemont Investments, L.L.C., et al. v. United States" on Justia Law

This case arose when Mirant, an energy company, sought to expand its European operations by acquiring nine power islands from General Electric. When the power island deal fell through, Mirant made payments pursuant to a guaranty and soon thereafter sought bankruptcy protection. Mirant, as debtor-in-possession, sued Commerzbank and other lenders in bankruptcy court to avoid the guaranty and to recover the funds Mirant paid pursuant to the guaranty. After Mirant's bankruptcy plan was confirmed MCAR, plaintiff, substituted into the case for Mirant. Commerzbank and other lenders, defendants, filed a motion to dismiss based on Rules 12(b)(1) and 12(b)(6). The district court subsequently denied defendants' motion to dismiss based on plaintiff's alleged lack of standing. Thereafter, the district court granted summary judgment for defendants. Both sides appealed. While the court agreed that the district court correctly determined that there was standing to bring the avoidance claim, the court vacated the judgment of dismissal because the district court erroneously applied Georgia state law rather than New York state law to the avoidance claim. View "MC Asset Recovery LLC v. Commerzbank A.G., et al." on Justia Law

Karen Cook was appointed receiver over the assets of a number of related corporations and individuals, who the SEC alleged violated multiple federal securities laws. Cook discovered that before the SEC filed its civil complaint, the corporate entities involved had made charitable contributions to the American Cancer Society (ACS). Cook moved to recover the donations on behalf of the receivership, arguing that they qualified as fraudulent transfers under Texas' Uniform Fraudulent Transfer Act (TUFTA), Tex. Bus. & Co. Code 24.005(a). The court held that the receiver's attempt to liken the scheme in question to a "Ponzi-like fraud," and therefore reduce her burden to proving "presumed intent to defraud," failed for lack of evidence. Accordingly, the court reversed the judgment of the district court. View "The American Cancer Society v. Cook" on Justia Law

Plaintiff sued his employer and one of its owners, defendant, for violating the minimum wage standards under the Fair Labor Standards Act (FLSA), 29 U.S.C. 206(a). Plaintiff argued that as a member of this Texas limited liability corporation, defendant was an "employer" under the FLSA and was therefore personally liable for the employer's violations. The district court granted summary judgment to defendant. Applying the economic reality test to defendant, the court reaffirmed the district court's conclusion that no reasonable jury could have found him to be an employer where defendant was simply not sufficiently involved in the operation of the club. Accordingly, the court affirmed the judgment.

In a bankruptcy adversary proceeding, Capco brought claims of fraud and various business torts against Ryder, Tana, TRT, and Tristone. The claims arose out of a transaction in which Capco purchased from Tana certain oil and gas reserves located in the Gulf of Mexico (the Properties). The bankruptcy court granted summary judgment in favor of Ryder, Tana, TRT, and Tristone and dismissed the claims. The court held that Capco failed to present evidence to demonstrate a genuine issue of material fact about whether Ryder was contracted to provide an independent reevaluation of the Properties and advice at the meeting regarding Capco's decision to close on the Properties. The court also held that because the purchase and sale agreement contained a clear intent to disclaim reliance, the lower courts correctly held that Capco was unable to claim fraudulent inducement based on the prior representations of Tana, TRT, and Tristone. Accordingly, the judgment was affirmed.

IFS and 17 affiliated organizations (collectively, Interamericas) were debtors in a series of Chapter 7 cases. This appeal arose from eight collective adversary proceedings, which a trustee of IFS brought against appellants for avoidance of fraudulent transfers under Chapter 5 of the Bankruptcy Code and Chapter 24 of the Texas Business and Commerce Code. Appellants appealed the district court's affirmance of the bankruptcy court judgment of over $3 million in favor of the trustee. The court held that control could be sufficient to show ownership of what was ultimately a fact-based inquiry that would vary according to the peculiar circumstances of each case. The court also held that the lower courts' findings of ownership were not clearly erroneous and, moreover, comported with precedent and the court's holding today where IFS exercised control over the accounts at issue such that it had de facto ownership over the accounts, as well as the funds contained. The court further held that the record supported the lower courts' findings of fraudulent transfer. Specifically, IFS faced pending lawsuits and mounting debts just as it liquidated nearly all Interamericas' assets and evidence that IFS operated as a fraudulent enterprise at the time of transfer supported this finding of fraudulent intent. Accordingly, the judgment was affirmed.