Western District of Texas Court Summaries

from San Antonio Lawyer, November/December 2022

The Effects of Covid-19 on Access to a Speedy Trial

FEDERAL COURT UPDATE

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.

Insurance Coverage; Erie Guess

Go Green Botanicals, Inc. v. Tri-State Ins. Co. of Minn., SA-22-CV-00373-ESC (Chestney, E., Aug. 9, 2022).

The court granted an insurance company’s motion to dismiss without providing the plaintiff an opportunity to amend, finding such amendment futile under Fifth Circuit precedent. The plaintiff insured sought coverage for business income loss due to COVID-19 and related governmental orders. Recently, the Fifth Circuit conducted an Erie guess on similar “business income” and “civil authority” insurance provisions, finding both required a direct physical loss of, or damage to, property, where “physical” meant “tangible,” and “loss” meant “a state of being lost or destroyed, ruin or destruction.” The loss of use of property or the temporary restriction on the use of property are insufficient. District courts within the Fifth Circuit and subsequent panels of the Fifth Circuit are bound by the Fifth Circuit’s Erie predictions absent subsequent state-court decisions establishing that the Fifth Circuit was incorrect. The court additionally pointed to several policy exclusions related to loss of business income, viruses, and acts or decisions, finding those exclusions also acted to bar coverage for loss of business income. The court dismissed the plaintiff’s bad faith claims, finding no bad faith exists when an insurance company promptly denies a claim that is not covered.

Experts; Insurance: TPPCA Atkinson v. Meridian Sec. Ins. Co., SA-21- CV-00723-XR (Rodriguez, X., Aug. 24, 2022).

The court granted an insurance company’s motion to strike the plaintiff’s expert and motion for summary judgment, dismissing the plaintiff’s claims with prejudice. The plaintiff insured’s claims stemmed from alleged roof damage said to have been caused by a hailstorm. Although there was an initial finding of no damage, the insured persisted, and eventually the insurance company conducted a reinspection and paid insured $14,058.12. The insured hired an attorney and filed a demand, so the insurance company invoked the appraisal process, resulting in an additional $10,182.87 payment to the insured, plus interest owed under the Texas Prompt Payment of Claims Act (TPPCA). The insured sued and hired an expert whom the insurance company moved to strike. The court struck the expert’s testimony related to causation and repair because he did not disclose in his report that he would be opining on such matters and because the plaintiff did not show that such omission was substantially justified or harmless. The court struck the expert’s testimony related to claims handling because the testimony did not meet Rule 702 and Daubert standards, in that the expert did not describe the methodologies he applied or how he applied them to the facts of the case. Because the insurance company paid the appraisal award, as a matter of law it did not breach the policy. The plaintiff did not provide evidence of entitlement-to-benefits or the independent injury rule to support her extracontractual claims under the Texas Insurance Code, the DTPA, or fraud. The plaintiff could not recover attorneys’ fees under the TPPCA because the insurance company paid the full amount of policy benefits and the maximum amount of interest allowed under the TPPCA, making any possible judgment “zero dollars.”

Personal Jurisdiction; Minimum Contacts; Transfer

Turner v. Harvard MedTech of Nev., LLC, No. 1:22-CV-83-DAE (Ezra, D., Aug. 8, 2022).

A citizen of Texas filed suit involving allegations of breach of an oral employment agreement and declaratory judgment. The defendants, Harvard MedTech of Nevada, LLC (“HMT”), a Nevada limited liability company with its principal place of business in Nevada, and Kuldarshan S. Padda (“Padda”), an individual citizen of Nevada, moved to dismiss for lack of personal jurisdiction or improper venue or, in the alternative, for transfer to the District of Nevada. The plaintiff responded that the court had specific and general jurisdiction over the defendants given that the defendants’ contacts with the state of Texas produced the contract at issue and were continuous and systematic.

The court concluded the plaintiff failed to demonstrate personal or general jurisdiction. The court held the plaintiff failed to demonstrate that the defendants took any deliberate action in Texas concerning the purported oral agreement forming the basis of the lawsuit, and even if the plaintiff had satisfied this initial burden, the court was not convinced that exercising personal jurisdiction in this matter was satisfactory under traditional notions of fair play and substantial justice. As to Padda, the court held that contracting with a Texas resident, or accepting the transfer of money to a Texas bank (e.g., the wage and other payments made by Padda or HMT to the plaintiff) was not enough to establish that a defendant has sufficient contacts with Texas. Further, there were no allegations of any deliberate contact by Padda directed at Texas (as opposed to the plaintiff himself), and the plaintiff’s allegations of misconduct by Padda occurred while Padda was in Nevada, not Texas. As to HMT, the court held the plaintiff could not rely on any alleged contract negotiations or phone calls to subject HMT to jurisdiction, and the plaintiff had not otherwise pled any other contacts sufficient to establish that HMT is subject to general or specific jurisdiction in Texas. The court—noting it may transfer a case for lack of personal jurisdiction, and that it was undisputed that both defendants were domiciled in, or subject to jurisdiction in, the District of Nevada—found the interests of justice favored transfer rather than dismissal and transferred the matter to the District of Nevada for further proceedings.

Digital Millenium Copyright Act; Independent Injury Rule

Kipp Flores Architects, LLC v. AMH Creekside Dev., LLC, No. SA-21-CV-01158- XR, (Rodriguez, J., Sept. 16, 2022).

Plaintiff Kipp Flores Architects, LLC (“KFA”) asserted violations of the Digital Millennium Copyright Act (“DMCA”), direct and contributory copyright infringement, conversion, and specific performance against defendants who had licensed KFA’s copyrighted architectural works. The defendants filed a motion to dismiss. Relating to the DMCA claim, the plaintiff alleged files containing copies of its works were sent to the defendants with the plaintiff’s copyright management information (“CMI”) on them, and the defendants thereafter created floorplans and 3-D renderings based on those files but did not include the CMI. The court noted to establish liability under the section of the DMCA at issue, the CMI must have been “removed” from the copyright owner’s work. Thus, to establish a claim, the plaintiff must allege CMI was once present on the work and later taken away. In this case, CMI was not taken away, but rather the plaintiff alleged the defendants generated nonidentical renditions based on its works. The nonidentical renditions produced by the defendants never included CMI in the first place and, therefore, CMI was not “removed” from that work. Even where the underlying works were similar, without allegations that defendants reproduced the identical copyrighted works or cropped or deleted CMI, plaintiff failed to state a claim under the DMCA.

The defendants also moved to dismiss KFA’s conversion claim, which arose from the defendants’ alleged refusal to return the copyrighted architectural works prepared by KFA, asserting the claim was barred by the independent injury rule as it sounded only in contract. KFA claimed the defendants were obligated by the terms of the license agreement between the parties to return to KFA all copies of the plans, drawings, and other data prepared by KFA under the agreement. The court held that KFA’s conversion claim, therefore, sought to vindicate its contractual right under the license agreement. Without the contract, there was no right to the physical possession of the tangible embodiments of the copyrighted work. Therefore, the court concluded the conversion claim was barred by the independent injury rule as there was no tort independent of the contract.