By Alex Rossi

The 5th U.S. Circuit Court of Appeals “adopt[ed] a bright-line rule [on January 11, 2018]: Section 1446(b)(3)’s removal clock begins ticking upon receipt of the deposition transcript” as opposed to running from the date of the deposition testimony. The decision in Morgan v. Huntington Ingalls, Inc., et al, No. 17-30523, __ F.3d __ (5th Cir. 1/11/18) was one of first impression for the court.

Plaintiff, Curtis Morgan filed the original lawsuit alleging he contracted mesothelioma as a result of asbestos exposure at various industrial facilities in Louisiana. Morgan specifically alleged that he was exposed to asbestos through his employment at Avondale Shipyard in New Orleans as a sheet metal tacker in the 1960s. Seventy-eight (78) defendants were originally named in the lawsuit.

Morgan was deposed over eight days from March 9 to April 13, 2017. On the second day of testimony, Morgan testified that he worked on unspecified vessels at Avondale Shipyard. On March 20, Morgan agreed with medical records presented by counsel for Avondale Shipyard that one of the vessels on which he worked was the USS Huntsville, a vessel Avondale refurbished on behalf of officers of the U.S. government.

Based on the testimony regarding Morgan’s work on the USS Huntsville for the U.S. Government, Avondale removed the case to the U.S. District Court for the Eastern District of Louisiana on April 28, 2017 under the federal officer removal statute and claimed that removal was timely filed 30 days after receipt of Morgan’s deposition transcript. Morgan opposed the removal as untimely, claiming that the removal clock began from Morgan’s testimony regarding the USS Huntsville, which took place 38 days prior to removal. Morgan further argued that the district court lacked subject matter jurisdiction under 28 U.S.C. § 1442.

In finding the removal untimely, the district court determined that the removal clock for “other paper” under § 1446 began running on the date of the oral deposition testimony, and not the later date of receipt of the deposition transcript. The district court did not address whether the substantive requirements of § 1442 had been met for federal officer jurisdiction.

Citing the plain meaning and purpose of § 1446(b), as well as policy considerations, the 5th Circuit found that oral testimony at a deposition does not constitute an “other paper.” Instead, the court found the removal clock begins upon receipt of the deposition transcript as the “other paper” providing the basis for the removal. In adopting this bright light rule, the 5th Circuit balanced the competing goals of removal: encouraging prompt and proper removal and preventing, hasty, improper removals. The court declined to follow the “notice” standard adopted by the 10th Circuit, finding it counterintuitive to start the clock for removal before the objective evidence is received by the defendant.

The 5th Circuit remanded the case to the district court to address whether the substantive requirements of federal officer removal have been met.

 

 

By Tod J. Everage

The US Fifth Circuit recently published an opinion in Feld Motor Sports, Inc. v. Traxxas, LP, recognizing that it had jurisdiction to review a district court’s denial of a motion for summary judgment on a legal issue. This ruling was the first of its kind in the 5th Circuit, who now joins the 1st, 4th and 8th Circuits to acknowledge this exception to the general rule.

The case involved a fight over allegedly unpaid royalties in a licensing agreement between a monster truck show promoter and an RC car maker. During the case, both parties filed motions for summary judgment advancing their own interpretations of the subject licensing agreement. The district court denied both motions, concluding that the contract was ambiguous and the case proceeded to trial. After a seven-day trial, the jury found Traxxis owed FMS the unpaid royalties. Traxxas then filed a combined renewed motion for summary judgment as a matter of law under Rule 50(b), motion for new trial under Rule 59, or alternative motion to modify the judgment. The district court denied the motions and Traxxas appealed. FMS argued that the 5th Circuit did not have jurisdiction to hear Traxxas’s appeal, among other things.

The 5th Circuit analyzed its recent jurisprudence on the issue of jurisdiction and Rule 50 motions. In 2014, the Court recognized the long-standing general rule that “an interlocutory order denying summary judgment is not to be reviewed when final judgment adverse to the movant is rendered on the basis of a full trial on the merits.” See Blessey Marine Services, Inc. v. Jeffboat, LLC, 771 F.3d 894, 897 (5th Cir. 2014) (quoting Black v. J.I. Case Co., 22 F.3d 568, 570 (5th Cir. 1994)). Before now, the 5th Circuit had recognized only one exception to that rule. In Becker v. Tidewater, Inc., the Court held that it could review “the district court’s legal conclusions in denying summary judgment,” but only when “the case was a bench trial.” 586 F.3d 358, 365 n.4 (5th Cir. 2009). The Court reasoned in Becker that “because Rule 50 motions are not required to be made following a bench trial, it is appropriate to review the court’s denial of summary judgment in this context.” In Blessey, the 5th Circuit noted (in dicta) that it may have jurisdiction to hear an appeal of the district court’s legal conclusions following a jury trial, but only if the party restated its objection in a Rule 50 motion.

For clarification, Rule 50 governs motions for a judgment as a matter of law in a jury trial. Rule 50(a) allows a party (usually the defendant) to move for a judgment as a matter of law in a jury trial against the other party if the other party has been fully heard on an issue, arguing that a reasonable jury would not have a legally sufficient evidentiary basis to find for the party on that issue. If the Court denies the Rule 50(a) motion, a defendant has 28 days after entry of judgment to renew its motion under Rule 50(b).

Here, the 5th Circuit held that “following a jury trial on the merits, this court has jurisdiction to hear an appeal of the district court’s legal conclusions in denying summary judgment, but only if it is sufficiently preserved in a Rule 50 motion.” In doing so, the Court joined the 1st, 4th, and 8th Circuits.

While technically plowing new ground, the 5th Circuit very directly reminded practitioners to make sure to renew their Rule 50(b) motion for judgment as matter of law after an adverse jury verdict or risk waiving their right to appeal the Court’s adverse legal finding. This issue is much more prevalent in contractual interpretation disputes, but can arise in casualty litigation should a defendant be unsuccessful asserting a legal defense on a dispositive motion or Rule 50(a) motion at the close of Plaintiff’s case.

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By Daniel B. Stanton

Nearly everyone who has practiced civil litigation long enough has experienced a case so meritless that allegations of frivolity and the need for sanctions are thrown around. Despite these feelings, the typical result is a simple dismissal of the case and the defendant footing the bill. Rarely are sanctions ever actually awarded against the frivolous plaintiff or his counsel for filing the suit, despite the intent of Rule 11 and their appropriateness of the sanction. Even rarer are instances where a defendant is sanctioned for defending itself at trial.

Recently, the U.S. 5th Circuit Court reviewed such a case from the WDLA. Our earlier blog article covering the trial court opinion in Dr. George T. Moench, et al. v. M/V Salvation, et al. may be found here. What makes this case unusual is the sanction of attorneys’ fees against the defendant based on the court’s belief that the defendant (or its counsel) essentially wasted everyone’s time by trying liability. According to the court, Marquette “clearly knew the extent of its liability based on the circumstances of the case and the actions of its captain … [and] was fully aware of the fact that [plaintiff] had no liability whatsoever for this allision.” Because attorneys’ fees are not a recoverable item of damages in admiralty cases, the plaintiff made no request for them. Instead, by invoking its inherent authority, the district court sua sponte awarded the full amount of Plaintiff’s expended attorneys’ fees ($295,000) as a punitive sanction against Marquette. For these reasons, among others, Marquette appealed the trial court’s ruling.

On appeal, the 5th Circuit considered the prudence of the attorney’s fees award. Despite the unavailability of attorneys’ fees as a recoverable damage, a court may award attorneys’ fees as a sanction against a party that has acted in “bad faith, vexatiously, wantonly, or for oppressive reasons.” This includes raising frivolous arguments or even meritorious ones simply for the sake of harassment. Such behavior constitutes a sanctionable abuse of the judicial process. While every litigant has a right to vigorously defend or prosecute its claim, the 5th Circuit noted that advocacy designed for no other purpose than to burden an “opponent with unnecessary expenditures of time and effort” is an abuse of the judicial process. In this case, the district court found that Marquette’s defense warranted sanctions for two reasons: (1) Marquette refused to concede liability and (2) Marquette relied on expert valuations that were glaringly inaccurate.

By uncontested testimony from Marquette’s captain, Marquette’s vessel struck the plaintiff’s moored vessel after the captain left the helm unattended during a period of dangerously high waters in the Atchafalaya River. By the time the captain returned the wheel, the Marquette vessel and its tow were out of control, and the captain chose to strike the plaintiff’s vessel to avoid significant damage to his tow. In the face of law and facts to the contrary, Marquette continued to not only deny liability but also argue that the plaintiff’s stationary vessel somehow caused the allision. The district court found that such a meritless defense was made in bad faith and deserving of sanctions. The 5th Circuit found no fault in the district court’s determination that Marquette’s continued contestation of liability was abusive.

Compounding the liability issue, the 5th Circuit also found – like the district court – that Marquette’s use of experts challenging Dr. Moench’s damages claim was also abusive. In support of its damages defense, Marquette used two experts who produced woefully unreliable reports with amazing errors in their damage evaluations. Marquette’s first expert opined on value “without including any comparables, without considering the equipment on the vessel, without an accurate description of the vessel, and without reliable underlying information,” and its second expert “not only failed to correct the glaringly incorrect information set forth in the first expert’s report, but incorporated it into his own.” Given these findings, the 5th Circuit found no abuse of discretion by the district court.

While both the district court and 5th Circuit considered other issues in this case, the discussion of a court’s inherent authority to award attorneys’ fees as a sanction bears great attention. “Zealous” or “vigorous” advocacy is often thrown around, usually unsuccessfully, in defense of a lawyer’s conduct when it is the subject of a sanctions motion. The 5th Circuit’s ruling stands as a continued warning to all litigants that “vigorous advocacy” does not include advancing far-fetched legal theories or legitimate legal theories with obviously unreliable evidence. And while sanctions for abuse of the judicial process are still the exception rather than the rule, attorneys and their clients alike should take note when developing their claims, evidence, and defenses to ensure that are not asserting frivolous arguments, or even meritorious ones that could be perceived as harassing an opponent or wasting the Court’s time.