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

A major data breach compromised sensitive consumer information on thousands of credit cards. In this appeal, we address who must pay for the cleanup. Beginning in 2014, hackers compromised credit card data at multiple businesses owned by Landry’s Inc. (“Landry’s”). Many of those cards belonged to Visa and Mastercard. In response, Visa and Mastercard imposed over twenty million dollars in assessments on JPMorgan Chase and its subsidiary Paymentech (collectively, “Chase”), who were responsible for securely processing card purchases at Landry’s properties. Chase then sued Landry’s for indemnification, and Landry’s impleaded Visa and Mastercard. The district court dismissed Landry’s third-party complaints against Visa and Mastercard and granted summary judgment for Chase, finding that Landry’s had a contractual obligation to indemnify Chase. Landry’s argued that it should not have to indemnify Chase because the assessments are not an enforceable form of liquidated damages.   The Fifth Circuit affirmed. The court explained that since Landry’s indemnification obligation stems from its own acts or omissions under the Merchant Agreement, the debt is its own. Further, the court wrote that Landry’s alleged for its deceptive business practices claims that the assessments were “invalid” under the Payment Brand Rules and “applicable law” and, therefore, the Payment Brands’ “imposition and collection of the [assessments] was an unlawful business practice.” Because these claims turn on the assessments’ enforceability under Chase’s contracts with the Payment Brands, they are functionally the same as the subrogated claims. Since Landry’s cannot challenge the Payment Brands over those contracts as Chase’s subrogee, it cannot do so through a change in labeling. View "Paymentech v. Landry's" on Justia Law

Electric Reliability Council of Texas, Inc. (“ERCOT”) determines market-clearing prices unless otherwise directed by the Public Utility Commission of Texas (“PUCT”). ERCOT is the sole buyer and seller of all energy in Texas. According to the operative complaint, during winter storm Uri ERCOT and the PUCT allegedly “intervened in the market for wholesale electricity by setting prices [that were] orders of magnitude higher than what market forces would ordinarily produce.”   Just Energy, a retail energy provider, purports that after the storm, ERCOT “floored” it with invoices totaling approximately $335 million. Just Energy commenced bankruptcy proceedings in Canada and filed this Chapter 15 case in the United States Bankruptcy Court for the Southern District of Texas, Houston Division. Just Energy challenges its invoice obligations. At the hearing on ERCOT’s motion to dismiss, the bankruptcy court stated that it would strike various language like, “subject to reduction only after a finding by the Court concerning a legally appropriate energy price per megawatt hour as proven by expert testimony, if appropriate, but in no event greater than the price per megawatt hour in effect after market forces took effect.” By striking this and similar language sprinkled throughout the complaint, the court concluded that “this change solves the abstention problem.”    The Fifth Circuit disagreed and vacated the bankruptcy court’s order and remanded with instructions to determine the appropriate trajectory of this case after abstention. The court explained that abstention under Burford6\ is proper because: (1) the doctrine applies in the bankruptcy context; and (2) four of the five Burford factors counsel in favor of abstention. View "Electric Reliability v. Just Energy" on Justia Law

The Horseracing Integrity and Safety Act (HISA) is a federal law that nationalizes governance of the thoroughbred horseracing industry. To formulate detailed rules on an array of topics, HISA empowers a private entity called the Horseracing Integrity and Safety Authority (the “Authority”), which operates under Federal Trade Commission oversight. Soon after its passage, HISA was challenged by various horsemen’s associations, which were later joined by Texas and the state’s racing commission. Plaintiffs argued HISA is facially unconstitutional because it delegates government power to a private entity without sufficient agency supervision. The district court acknowledged that the plaintiffs’ “concerns are legitimate,” that HISA has “unique features,” and that its structure “pushes the boundaries of public-private collaboration.” Nonetheless, the court rejected the private non-delegation challenge.   The Fifth Circuit declared that the HISA is unconstitutional because it violates the private non-delegation doctrine. Accordingly, the court reversed the district court’s decision and remanded. The court explained that while acknowledging the Authority’s “sweeping” power, the district court thought it was balanced by the FTC’s “equally” sweeping oversight. Not so. HISA restricts FTC review of the Authority’s proposed rules. If those rules are “consistent” with HISA’s broad principles, the FTC must approve them. And even if it finds an inconsistency, the FTC can only suggest changes. What’s more, the FTC concedes it cannot review the Authority’s policy choices. The Authority’s power outstrips any private delegation the Supreme Court or the Fifth Circuit has allowed. Thus the court declared HISA facially unconstitutional. View "National Horsemen's Benevolent v. Black" on Justia Law

Plaintiff appealed from the dismissal of his claims challenging tax penalties assessed against him, as well as the revocation of his passport pursuant to those penalties. He also appealed the denial of an award of attorneys’ fees under the Freedom of Information Act (FOIA).   The Fifth Circuit affirmed. The court explained that Plaintiff sought to overturn the penalties, restrain collection of them, or otherwise cast doubt on the validity of the assessment. The government has not waived its sovereign immunity for those challenges, and so the district court was correct to dismiss them for lack of jurisdiction. Further, the court explained that Congress was within its rights to provide the IRS another arrow in its quiver to support its efforts to recoup seriously delinquent tax debts. Under even intermediate scrutiny, the passport-revocation scheme is constitutional. Thus, the district court was correct to dismiss Plaintiff’s challenge.   Finally, the court explained that when considering FOIA attorneys’ fees, the court has generally looked with disfavor on cases with no public benefit. Here, the district court did not abuse its discretion in declining to award fees. Plaintiff’s lawsuit is far afield from the purposes for which FOIA, and its attorneys’ fees provision, were designed. There is no public value in the information and no value for anyone other than Plaintiff. Instead, Plaintiff only sought the information to aid him in his personal fight with the IRS regarding his tax penalties. View "Franklin v. United States" on Justia Law

Plaintiff recieved a debt-collection letter from Defendant, a law firm that specializes in collecting debt on behalf of the Texas government. However, the limitations period for the debt mentioned in the letter had run. Plaintiff filed a claim against the law firm under the Fair Debt Collection Practices Act. Plaintiff also sought, and obtained, class certification. The law firm appealed the district court's certification.On appeal, the Fifth Circuit sua sponte found that Plaintiff lacked standing to bring a claim against a debt-collection law firm under the Fair Debt Collection Practices Act. The court held that Plaintiff failed to establish that the law firm's debt-collection letter inflicted an injury with a “close relationship to a harm traditionally recognized as providing a basis for a lawsuit in American courts." Without this showing, Plaintiff could not establish the first element of standing: that she suffered a concrete harm. View "Perez v. McCreary, Veselka, Bragg" on Justia Law

Petitioners Wages and White Lion Investments, LLC, d/b/a Triton Distribution (“Triton”) and Vapetasia, LLC (“Vapetasia”) sought to market flavored nicotine-containing e-liquids for use in open-system e-cigarette devices. Petitioners needed to submit premarket tobacco product applications as required by 21 U.S.C. Section 387j—which the Food and Drug Administration (“FDA”) deemed applicable to e-cigarette tobacco products. FDA denied the requested marketing authorizations, finding that Petitioners failed to offer reliable and robust evidence (such as randomized controlled trials or longitudinal studies) to overcome the risks of youth addiction and show a benefit to adult smokers. Petitioners sought review of those marketing denial orders (“MDOs”), and prior to the consolidation of the two cases. Petitioners argued that the FDA lacks the authority to impose a comparative efficacy requirement and that FDA acted arbitrarily and capriciously by “requiring” scientific studies.   The Eleventh Circuit denied the petitions for review. The court explained that Congress passed the Family Smoking Prevention and Tobacco Control Act (“TCA”) in an active effort to protect public health. Relevant here, the Deeming Rule subjected e-cigarette manufacturers to the TCA’s prior authorization requirement—manufacturers of “new tobacco product[s]” must submit premarket tobacco product applications (“PMTAs”). The court held that the FDA’s consideration of the lack of cessation as a risk and comparing that risk between new tobacco products and old tobacco products “fall[s] squarely within the ambit of the FDA’s expertise and merit[s] deference.”  As such, the court cannot say that FDA acted arbitrarily and capriciously by disagreeing with Petitioners as to the significance of the evidence they presented. View "Wages and White Lion Investmen v. FDA" on Justia Law

American Express National Bank (“AmEx”) filed suit for breach of contract in Mississippi state court to recover $2,855.74 of unpaid credit card debt incurred on Plaintiff's account. Plaintiff contended an unknown person incurred this debt fraudulently. Plaintiff then filed Fair Credit Reporting Act (“FCRA”) claims against AmEx and other defendants in Mississippi state court. The district court denied AmEx’s motion to compel arbitration.   The Fifth Circuit vacated the decision of the district court and remanded for reconsideration in the first instance in light of Forby v. One Techs., L.P and Morgan v. Sundance, Inc. The court held that these cases were decided on the same day and after the district court’s ruling. Forby clarified the test for waiver by a party of the right to compel arbitration and reiterated that waiver analysis occurs on a claim-by-claim basis. In addition, Morgan addressed this and other sister circuits’ tests for waiver by a party of the right to compel arbitration. The court explained that although it can apply subsequent precedent to cases before it, “[a]s a court for review of errors, we are not to decide facts or make legal conclusions in the first instance." Thus, the court’s task is to review the actions of a trial court for claimed errors. View "Barnett v. American Express National" on Justia Law

On the panel's initial hearing of the case, Judge Higginson concluded that the restrictions on the President's removal authority under the Consumer Financial Protection Act are valid and constitutional. Judge Higginson found that neither the text of the United States Constitution nor the Supreme Court's previous decisions support appellants' arguments that the Consumer Financial Protection Bureau is unconstitutionally structured, and thus he affirmed the district court's judgment.More than two years later, and after conducting a vote among the circuit judges, the Fifth Circuit vacated its previous opinion and elected to hear the case en banc. View "CFPB v. All American Check Cashing, et al" on Justia Law

The Fifth Circuit vacated the district court's award of fees to class counsel in a class action settlement involving consumers who purchased defective toilet tanks against defendants. The court agreed with Porcelana that the district court erred in calculating the lodestar and refusing to decrease it. In this case, the district court abused its discretion by failing to make any factual findings regarding the nature of the class's unsuccessful claims and an unsupported assertion is insufficient to permit the district court to bypass the proper lodestar calculation and only consider the unsuccessful claims under the eighth Johnson factor. Nor is this a case where the record supports such a conclusion in the absence of an explicit finding by the district court. Even assuming the district court had adequately supported its conclusion that unsuccessful claims were intertwined with those that proved successful, the court stated that the district court still failed to properly analyze the award in relation to the results obtained. Accordingly, the court remanded for further proceedings. View "Fessler v. Porcelana Corona de Mexico, S.A. de C.V." on Justia Law

The 2009 Family Smoking Prevention and Tobacco Control Act, implemented through the FDA, 21 U.S.C. 387a(b), 393(d)(2), prohibits manufacturers from selling any “new tobacco product” without authorization. The FDA’s 2016, “Deeming Rule” classified electronic nicotine delivery systems (e-cigarettes) as a “new tobacco product.” To avoid an overnight shutdown of the e-cigarette industry, the FDA delayed enforcement of the Deeming Rule then required e-cigarette makers to submit premarket tobacco applications (PMTAs). Originally, the FDA required that all PMTAs be filed by 2018. The FDA later extended the PMTA deadline to 2022 but then moved the deadline to 2020. Initially, the FDA’s guidance stated that “in general, FDA does not expect that applicants will need to conduct long-term studies to support an application” but later changed course and required long-term studies of e-cigarettes.Triton had e-cigarette products on the market before the Deeming Rule. Triton (and others) submitted PMTAs for flavored e-cigarettes. In August 2021, the FDA announced that it would deny the PMTAs for 55,000 flavored e-cigarettes, stating it “likely” needed evidence from long-term studies." Less than a week later, Triton submitted a letter stating that it intended to conduct long-term studies of its products. About two weeks later, the FDA issued Triton a marketing denial order. The Fifth Circuit granted a temporary administrative stay and, later, a full stay, “to prevent the FDA from shutting down Triton’s business” pending disposition of Triton’s petition. View "Wages and White Lion Investments, L.L.C. v. United States Food and Drug Administration" on Justia Law