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Federal Court Update
Western District of Texas Court Summaries
By Soledad Valenciano, Melanie Fry, and Jeffrie Lewis
If you are aware of a Western District of Texas order that you believe would be of interest to the local bar and should be summarized in this column, please contact Soledad Valenciano (svalenciano@svtxlaw.com, 210–787–4654) or Melanie Fry (mfry@dykema.com, 210–554–5500) with the style and cause number of the case, and the entry date and docket number of the order.
Motion for Attorney’s Fees
Mason v. Helping Our Seniors, LLC, SA21-CV-00368-ESC (Chestney, J., Feb. 14, 2024)
Following a bench trial on Title VII retaliatory discharge fees, the plaintiffs, as prevailing parties, filed a motion for attorney’s fees. The defendant objected to the plaintiffs’ motion on the basis that the amount of attorney’s fees expended in the representation of the plaintiffs before the Texas Workforce Commission was not recoverable because that work was not necessary to the results obtained at the bench trial. The court overruled the objection, concluding the plaintiffs could recover fees for the time their attorney expended representing them before the Texas Workforce Commission because the attorney work in those proceedings was both useful and necessary to the successful prosecution of the plaintiffs’ claims. The court, applying the lodestar method, held that the amount of attorney’s fees was reasonable, declined to reduce the fees as requested by the defendant, and awarded the full amount requested by the plaintiffs.
Motion to Transfer Venue
Potter v. S. Univ., SA-23-CV-01332-JKP (Chestney, J., Feb. 14, 2024)
The plaintiff filed a lawsuit against her former employer in the Superior Court of the State of Arizona, Maricopa County, alleging Title VII claims of race discrimination relating to her employment with the defendant while working remotely and living in San Antonio, Texas. The defendant removed to the United States District Court for the District of Arizona and moved to dismiss for improper venue. The court found that venue was improper and, finding that the plaintiff was employed and living in San Antonio, transferred venue to the San Antonio Division of the Western District of Texas. The plaintiff thereafter filed the instant motion to transfer venue, moving to transfer venue to the Southern District of Georgia, and arguing venue was proper because the defendant had a corporate office there. The court, construing the plaintiff’s motion as a motion to transfer venue pursuant to 28 U.S.C. § 1404 for convenience of the parties, denied the motion, concluding that the plaintiff had not met her burden of showing good cause for the transfer by demonstrating by the preponderance of the evidence that the requested venue is clearly more convenient for the parties and witnesses and serves the interests of justice. In so concluding, the court noted that the plaintiff presented no evidence to support the motion other than her argument that the defendant’s alleged corporate offices were in Georgia; the plaintiff currently resided in Arizona, not Georgia, and the plaintiff and the relevant witnesses would, therefore, likely be required to travel to provide testimony; and the case had already been pending in three different venues and the plaintiff did not argue for transfer to Georgia, rather than San Antonio, when the original motion to transfer venue was briefed before the Arizona District Court.
Bankruptcy Court Appeal; Standing
Smith v. Terry (In re Smith), No. 5:23-CV194-XR (Rodriguez, X., January 30, 2024)
Pursuant to a lien advance agreement, Dr. Smith’s radiology company was advanced cash by MedLegal in exchange for a lien on the radiology company’s accounts receivable. A few years later, litigation ensued, first in arbitration, then in state district court. The radiology company filed for Chapter 11 bankruptcy and removed the state court litigation to bankruptcy court as an adversary proceeding. The radiology company was removed as a debtorin-possession under Chapter 11 for cause; the Chapter 11 case was converted to Chapter 7; and a Chapter 7 trustee was appointed. The trustee and MedLegal eventually reached an agreement to settle all claims asserted in the adversary proceeding, which included mutual releases, the dismissal of all pending and abated arbitration proceedings, payment to MedLegal, and the retention of a general unsecured claim by MedLegal. Dr. Smith objected to the settlement. The bankruptcy court concluded: (1) that it was a proper exercise of the trustee’s business judgment to settle and compromise, given the considerable time, effort, and expense of going to trial, as well as the possibility that trial could result in a large, secured claim against the radiology company’s bankruptcy estate; and (2) that such settlement was in the estate’s best interest. Dr. Smith appealed that decision to the district court, raising twenty issues on appeal. The district court dismissed Dr. Smith’s appeal for lack of standing. Bankruptcy courts are not Article III courts and, therefore, are not bound by traditional standing requirements; and despite the evolution of, and later omission of 11 U.S.C. § 67(c)(1976) from the Bankruptcy Code, the “person aggrieved” test in that provision has survived in many circuits, including the Fifth Circuit. The “person aggrieved” inquiry is whether appellant was “directly and adversely affected pecuniarily by the order of the bankruptcy court.” Dr. Smith’s unsubstantiated claims that he was a trustee or trust settlor of the radiology company, or that he retained ownership of the accounts receivable, was not supported by the evidence. The district court considered the facts: (1) that the bankruptcy court had concluded that the accounts receivable belonged to the estate; and (2) that Dr. Smith was judicially estopped from arguing otherwise, having sworn under oath in the radiology company’s schedules that he did not own the accounts receivable and was not a creditor of the estate. Moreover, if a cause of action belongs to the estate, then the trustee has exclusive standing to assert the claim. Accordingly, the district court dismissed the appeal for lack of standing.
Habeas Corpus; Street Time Credit
Menchaca v. Lumpkin, SA-23-CV-01337FB (Biery, F., February 26, 2024)
Menchaca, whose parole was revoked, challenged his loss of street time credit. While re-incarcerated, he filed an application for state habeas corpus relief, which was denied. Then Menchaca filed a petition for federal habeas corpus relief, which is governed by the heightened standard of review of the Antiterrorism and Effective Death Penalty Act of 1996, and that petition was also denied. Menchaca claimed his due process rights were violated. The Fifth Circuit has “clearly held” that there is no federal constitutional right to receive credit towards a sentence for “street time,” i.e., the time one was on parole. Any protected liberty interest would rest on the state law in effect at the time of parole revocation—here, Section 508 of the Texas Government Code. This version of the code excludes persons convicted of aggravated assault with a deadly weapon, the same crime for which Menchaca was convicted. The court reviewed the state petition for habeas corpus and found nothing unreasonable in the state court’s rejection, and giving deference to such rejection, denied the federal habeas review. Finally, the court denied, sua sponte, the request for a certificate of appealability, concluding that jurists of reason would not debate the conclusion that Menchaca was not entitled to federal habeas relief.
Pleading in forma pauperis with Specificity; Employment Discrimination
Garza v. Panda Rest. Grp. Inc., SA-23-CV01481-FB (Biery, J., Feb. 15, 2024)
After granting the plaintiff’s motion to proceed in forma pauperis, the court ordered the plaintiff to clarify the circumstances giving rise to his claim by filing a more definite statement of facts. Under 28 U.S.C. § 1915(e), the court may screen civil complaints filed by a party proceeding in forma pauperis on three criteria: (1) whether the complaint is frivolous or malicious; (2) whether the plaintiff failed to state a claim for which relief can be granted; and (3) whether the plaintiff seeks monetary relief from a defendant who is immune therefrom. The plaintiff’s proposed complaint alleged employment discrimination and harassment based on race, color, sex, religion, and national origin, spanning from August 2020 to January 2021, but lacked facts to substantiate the allegations. The plaintiff’s complaint stated that he is Hispanic, dark-complected, American, and atheist; and that he experienced slurs, physical assault, and a reduction in hours before ultimately being terminated. The court ordered the plaintiff to elaborate on the slurs and assaults, including: (1) the aggressor(s); (2) the frequency; (3) why he believed the motive to be discriminatory; (4) the contents of his work complaints about the harassment; and (5) the retaliation he believed he was experiencing. In his response, the plaintiff explained that the assistant manager and other employees called him slurs like “wetback” and “a godless sinner” during most shifts. He alleged that this treatment began after his manager learned that he was Hispanic, and not Japanese as she initially assumed, and that all White and Hispanic employees endure such treatment from management. After plaintiff provided this and like information, the court ordered service of the complaint on the employer.
Standing; Subject Matter Jurisdiction; Immigration Law
Devins v. Jaddou, SA-23-CV-00152-OLG (Chestney, J., Nov. 30, 2023).
The plaintiff, acting pro se, objected to Magistrate Judge Chestney’s Report and Recommendation recommending that the defendant’s motion to dismiss be granted and that the plaintiff’s motion to amend the complaint be denied. The plaintiff had filed this lawsuit against Ur M Jaddou, in his Official Capacity as Director of the United States Citizenship and Immigration Services, for twice denying the application of Rita Raut, a citizen of Nepal, for an F-1 student visa. Importantly, Ms. Raut was not named in the lawsuit. Nonetheless, the plaintiff alleged that—in denying Ms. Raut’s applications—the defendant denied plaintiff his constitutionally protected right to express his religion freely, which he was trying to do by sponsoring Ms. Raut’s college education in the United States, an action that he said reflected his deep Christian faith. The defendant moved to dismiss on, among other grounds, lack of standing to bring a claim against him on Ms. Raut’s behalf. Magistrate Judge Chestney recommended, and the district court agreed, that the action be dismissed due to the plaintiff’s lack of standing. The plaintiff’s motion to amend his complaint was likewise denied, as his standing deficiency was uncurable, and nothing in his amended complaint would alter the court’s analysis on the issue of standing and subject matter jurisdiction.
