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

Articles Posted in Contracts
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Plaintiff sued PetroTel Oman, LLC (“PetroTel”) and affiliated entities in Texas state court, alleging that they breached an oral contract to compensate him for helping them raise funds for an oil and gas project in Oman. The PetroTel entities removed the action to federal court, arguing that removal was proper under the federal officer removal statute because they “acted under” a federal agency by partnering with the United States International Development Finance Corporation  (“DFC”) to raise funds for the project. The district court remanded the action, rejecting both grounds for removal offered by the PetroTel entities.   The Fifth Circuit affirmed the district court’s finding rejecting Defendant’s grounds for removal to federal court. The court held that the federal officer removal statute nor the Grable doctrine provides a basis for federal subject-matter jurisdiction in Plaintiff’s breach of contract action against Defendant.   First, the court reasoned that PetroTel did not assist or help the DFC carry out a task that the DFC—or any federal superior—otherwise would have had to do itself. Accordingly, PetroTel did not act under the DFC, so it was not entitled to remove under Sec. 1442(a)(1).  Next, the court held that because Plaintiff’s state court petition does not satisfy the well-pleaded complaint rule, the district court correctly determined that Grable does not provide a basis for federal jurisdiction. View "Box v. PetroTel" on Justia Law

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Dynamic CRM Recruiting Solutions sued UMA Education in Harris County district court for alleged misappropriation of Dynamic’s software in breach of their licensing agreement (“the Agreement”). UMA removed the action to federal district court, which in turn remanded it to state court based on the parties’ contractual forum selection clause.The Fifth Circuit found that the forum state is Texas, and the Agreement provides that its interpretation shall be governed by Texas law. The court reasoned that contractual choice-of-law clauses are generally valid under Texas law unless they violate one of the limitations set forth in the Restatement (Second) of Conflict of Laws Sec. 187 (1971), and neither party here has argued that this clause is invalid on this ground.Further, since the Agreement provides that disputes arising thereunder must be “brought before the district courts of Harris County”, UMA has contractually waived its right to remove the suit. UMA also argued that the district court abused its discretion in allowing Dynamic to drop its claims for conversion, quantum meruit, lien foreclosure, and violations of the TTLA. The court found that it need not reach the jurisdictional point because the district court properly allowed Dynamic to amend its complaint. Thus, the court affirmed the district court’s ruling. View "Dynamic CRM v. UMA Education" 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

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BITCO General Insurance Corporation (“BITCO”) and Monroe Guaranty Insurance Company (“Monroe”) issued general liability insurance policies to 5D Drilling & Pump Service Inc. (“5D”). A property owner sued 5D for breach of contract and negligence. BITCO sought a declaratory judgment that Monroe also owed a duty to defend 5D.The parties dispute whether any “property damage” alleged could have occurred during Monroe’s policy period. The magistrate found that damage must have occurred during a period when Monroe’s policy was in force.The court reasoned that under Texas law, courts determine whether an insurer’s duty to defend has been triggered by using the “eight corners” rule. The party seeking coverage has the initial burden of establishing that the underlying claims potentially state a cause of action. When pleadings in the underlying lawsuit have been amended, the court analyzes the duty to defend by examining the “latest, and only the latest, amended pleadings.”Typically, the eight-corners rule prevents courts from considering any extrinsic evidence. Texas law recognizes a limited exception to the eight-corners rule when it is impossible to discern whether coverage is potentially implicated and when the extrinsic evidence goes solely to a fundamental issue of coverage.Monroe contends that even if the owner’s pleading alleges damage within its policy period, it still has no duty to defend because all the damage falls within policy exclusions. The court found that Monroe cannot carry its burden because it cannot show that either exception unambiguously applies. Thus, the court affirmed the district court’s order. View "BITCO Gen Ins v. Monroe Guar Ins" on Justia Law

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A water control and improvement district in Harris County, Texas ("the District"), wanted a new headquarters, so it contracted with a construction company to build one. The District required the company to post a performance bond. The company engaged Philadelphia Indemnity Insurance Co. (“Philadelphia”) to provide that bond, which explicitly stated that changes to the construction contract would not void Philadelphia’s obligations. However, the District’s project manager backed out, which led the District to execute a new agreement without Philadelphia’s knowledge or consent. The District sought what was owed under the performance bond and sued for breach of contract.At issue is whether a 2016 Agreement created a new contract between the District and the construction company or merely amended their 2015 Agreement. The court concluded that the 2016 Agreement was an amendment under Texas law. The court reasoned that the Supreme Court of Texas would examine the text of both agreements to identify the parties' objective intent. The court concluded the 2016 Agreement amended—instead of replaced—the 2015 Agreement. Thus, the court reversed and remanded the case, placing no limits on the matters that the district court may address on remand. View "Harris Cty v. Philadelphia Indem" on Justia Law

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Tarango Trucking, L.L.C. (“Tarango”) appeals from a judgment declaring that its insurer, Penn-America Insurance Company (“PennAmerica”), owes neither defense nor indemnity concerning third-party claims against Tarango concerning a fatal accident on its property.At the time of the accident, Tarango was insured under a commercial general liability policy issued by Penn-America (“the Policy”). Penn-America defended Tarango but reserved its right to contest coverage. Texas law governs the insurance issues in this diversity case. The Policy contains both a duty to defend and a duty to indemnify. PennAmerica must show that the plain language of an exclusion avoids coverage of all claims within the confines of the eight-corners rule. Penn-America argues that the Policy’s Auto Exclusion satisfies this burden. Because the Parking Exception is an exception to the Auto Exclusion, it is reasonable to interpret it as employing the same “arising-out-of” nexus as the Auto Exclusion.The Fifth Circuit held that the Parking Exception applies to bodily injury and property damage arising out of parking. Because the petition alleges some claims that arise out of parking and are potentially covered by the Policy, Penn-America must defend Tarango. The court also held that it was premature for the district court to decide the indemnity issue. View "Penn-America Ins v. Tarango Trucking" on Justia Law

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After incurring a million-plus-dollar loss for sending gold coins to a thief who forged check payments and intercepted the shipment of those coins, Gage filed an insurance claim. The underwriters denied the claim citing a coverage exclusion for losses incurred “consequent upon” delivering insured property to any third party against payment by a fraudulent check.The Fifth Circuit certified questions to the Texas Supreme Court: Whether Gage's losses were sustained consequent upon delivering insured property to UPS against a fraudulent check, causing the policy exclusion to apply; if yes. whether UPS's alleged errors are considered an independent cause of the losses under Texas law. The Texas Supreme Court concluded the ordinary meaning of “consequent upon” is but-for causation and answered “yes” to the first question. On the second question, the Texas Supreme Court answered “no” by concluding UPS’s alleged negligence was a concurrent cause of loss, dependent upon Gage’s handing over of the gold coins against fraudulent checks. In light of those answers, the Fifth Circuit affirmed the district court. Gage’s losses were excluded from coverage. Gage’s extra-contractual claims were properly dismissed as they were predicated on coverage under the policy. View "Dillon Gage, Inc. v. Certain Underwriters at Lloyds" on Justia Law

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CP and Cimarex entered into the Master Service Agreement (MSA). Cimarex hired CP to work at Cimarex’s Oklahoma oil well. CP assigned Trent, an employee of one of its subcontractors, to work at the well. A flash fire occurred at the well. Trent was severely burned Trent sued Cimarex and CP. Cimarex and its insurers settled with Trent for $4.5 million. The Texas Oilfield Anti-Indemnity Act (TOAIA) voids indemnity agreements that pertain to wells for oil, gas, or water or to mineral mines unless the indemnity agreement is supported by liability insurance. The MSA's mutual indemnity provision required Cimarex and CP to indemnify each other; CP was obligated to obtain a minimum of $1 million in commercial general liability insurance and $2 million in excess liability insurance, Cimarex was required to obtain $1 million in general liability insurance and $25 million in excess liability insurance. CP obtained more coverage than the minimum required by the MSA, but its policy limited indemnity coverage. Cimarex sought indemnity from CP, which paid Cimarex $3 million, but refused to indemnify Cimarex for the remaining $1.5 million.The Fifth Circuit affirmed summary judgment for CP. TOAIA contemplates that mutual indemnity obligations will be enforceable only up to the limits of insurance each party has agreed to provide in equal amounts to the other party as indemnitee. CP did not breach the MSA because CP was only required to indemnify Cimarex up to $3 million. View "Cimarex Energy Co. v. CP Well Testing L.L.C." on Justia Law

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The Housing Authority of New Orleans (HANO) agreed to pay Parkcrest $11 million to build affordable housing. Liberty was Parkcrest’s surety. HANO terminated Parkcrest before the project was done. Parkcrest sued, alleging breach of contract. Liberty and HANO executed a “Takeover Agreement,” incorporating the original contract; Liberty stepped into Parkcrest’s shoes to finish the project. Liberty hired Parkcrest as its completion contractor. HANO claimed that Liberty had forfeited any right to continue working on the project and requested that it relinquish control of the site. Liberty claimed the termination was wrongful. Rather than following the contract’s dispute resolution procedures, Liberty filed a complaint-in-intervention in the HANO-Parkcrest litigation.The district court concluded that HANO had breached the Takeover Agreement and the underlying HANO Contract by terminating Liberty for convenience after Liberty had substantially completed the project, awarded Liberty and Parkcrest damages, and held HANO liable to Liberty for attorney’s fees, but left those fees unquantified. The Fifth Circut affirmed but concluded it lacked jurisdiction to consider the fee award because a fee award is not a final judgment under 28 U.S.C. 1291 until reduced to a sum certain. The district court then awarded Liberty $526,192.25 in fees. The Fifth Circuit reversed. Liberty’s claim for fees arises from the contract, which authorizes fee-shifting “upon the receipt by [HANO] of a properly presented claim.” Liberty breached the contract’s dispute-resolution procedures, this breach was unexcused, so Liberty is entitled to nothing. View "Liberty Mutual Insurance Co. v. Housing Authority of New Orleans" on Justia Law

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MDK, a Bolivian entity, filed suit against Proplant, a Texas-based corporation under both breach of contract and tort theories. The Fifth Circuit affirmed the district court's grant of summary judgment in favor of Proplant, concluding that MDK did not meet the Federal Rule of Civil Procedure 56(d) standard for deferring summary judgment, and thus the district court did not err by ruling on Proplant's summary judgment motion before the parties had completed discovery. In this case, MDK's opening brief failed to adequately present its arguments that Proplant's summary judgment motion and the district court's summary judgment order were "legally deficient." Therefore, MDK has waived these issues.Finally, the court rejected MDK's contention that the district court erred in granting summary judgment on MDK's two breach of contract claims. In regard to the first claim, the court concluded that MDK has not pointed to any evidence suggesting that it did in fact execute the October Document. In regard to the second claim, the court concluded that MDK failed to meet its burden of demonstrating by competent evidence that there is a dispute of material fact as to whether YPFB awarded Proplant the O&M contract. View "MDK Sociedad de Responsabilidad Limitada v. Proplant Inc." on Justia Law