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Western District of Texas Court Summaries
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.
FRCP 4(k)(2); Personal Jurisdiction; Conspiracy
Rusesabagina v. GainJet Aviation, S.A., SA20-CV-01422-XR (Rodriguez, X., July 28, 2023).
After surviving an assassination attempt, Paul Rusesabagina fled Rwanda. In 2020, while residing in San Antonio, he received a call from an alleged bishop, inviting him to travel to churches in Burundi to talk about the Rwandan genocide. Rusesabagina traveled to Dubai where he boarded a jet chartered by Athens-based GainJet Aviation. From there, he was allegedly kidnapped, tortured for three days, and imprisoned in Rwanda. During his imprisonment, Rusesabagina and his family filed two federal court lawsuits: one in Washington, D.C. (“DDC”) against Rwandan officials related to the kidnapping, and one in San Antonio (“SA”) against the bishop and GainJet on conspiracy-related claims. In the DDC action, the DDC court concluded certain Rwandan officials were subject to jurisdiction under FRCP 4(k)(2), stating the rule “is essentially a federal long-arm statute.” Rule 4(k) (2) allows the exercise of personal jurisdiction for claims arising under federal law over a defendant who is not subject to the jurisdiction of any single state if the exercise of jurisdiction is consistent with the United States Constitution. The DDC court found the illegal monitoring of, and fraudulent statements to, Rusesabagina in the United States were sufficient minimum contacts. The SA action proceeded with jurisdictional discovery, uncovering facts suggesting GainJet was a willing participant in the kidnapping conspiracy. However, the SA court stated that the Fifth Circuit does not recognize a “conspiracy theory” basis for personal jurisdiction. The DDC case was dismissed in exchange for Rusesabagina’s safe return to San Antonio. Rusesabagina then moved to transfer his SA case against GainJet to the DDC court because that court was familiar with the issues and had asserted personal jurisdiction over some of alleged co-conspirators who may serve as witnesses. The SA court denied the motion to transfer, holding that the DDC court might not come to the same conclusion about personal jurisdiction under Rule 4(k) as to GainJet as it did as to the Rwandan officials because the officials’ acts involved illegal surveillance in the United States, while GainJet’s actions appeared to have occurred in Dubai. The SA court pointed to the Fifth Circuit’s ruling in Douglass v. Nippon Yusen Kabushiki Kaisha, 46 F.4th 226 (5th Cir. 2022), that Rule 4(k)(2) does not expand the constitutional basis for the exercise of personal jurisdiction. Finally, the SA court explained that as to the claims against GainJet, Rusesabagina failed to identify any witnesses, evidence, or claims related to Washington, D.C.
Motion to Dismiss
Micciche v. New Horizon Mortg. Inc., SA23-CV-00495-XR (Rodriguez, X., July 5, 2023).
Borrower’s heirs sued banks and trustees for claims arising from the attempted foreclosure of a mortgage lien on property owner by the borrower prior to her death but where the plaintiffs resided. The plaintiffs asserted they were entitled to notice of default and acceleration under the terms of the deed of trust and the Texas Property Code, due to their status as heirs of the borrower, and asserted claims for trespass to chattel and for conversion. The current mortgagee filed a motion to dismiss, which the court granted. Because the plaintiffs are not yet responsible for paying the indebtedness at issue, they are not entitled to notice under the deed of trust or the Texas Property Code. Because the plaintiffs identified no physical entry onto their property by the bank, there was no trespass; and the conversion claim failed because real property cannot be converted under Texas law and no personal property was identified as allegedly converted.
Judgment on the Pleadings; Economic Loss Rule
Guthrie v. Ocwen Loan Servicing, LLC, SA21-CV-01291-JKP (Pulliam, J., July 20, 2023)
The plaintiff entered into a contract to purchase property owned by a loan servicing company. When the sale fell through, he sued the company and its agents, seeking a declaration of rights and remedies under the contract and alleging breach of contract and tort claims. The agent defendants moved for judgment on the pleadings as to the tort claims, arguing that the plaintiff did not allege any independent legal duty or injury beyond those arising from the contract and, thus, that the claims were barred by the economic loss rule, which precludes recovery in tort for economic losses resulting from the failure to perform under a contract. A motion for judgment on the pleadings is evaluated under the same standard as a motion to dismiss for failure to state a claim. The court rejected the plaintiff’s argument that his claim for fraudulent inducement survived because even though the economic loss rule does not preclude such a claim, the plaintiff had not actually pled a claim for fraudulent inducement. Because the plaintiff’s complaint alleged only the contract as the source of duties owed by the agents and the rights and remedies between the parties, dismissal was proper based on the economic loss rule; and because the plaintiff had already been given leave to amend once, the court denied the plaintiff’s motion for leave to amend a second time.
Removal and Remand; Amount In Controversy; Pre-Suit Demand Letter
Sliepcevic v. Am Fam. Connect Prop. & Cas. Ins. Co., SA-23-CV-00553-XR (Rodriguez, X., July 5, 2023).
The plaintiffs filed suit for breach of contract and violations of the DTPA, alleging “monetary relief of $250,000 or less, excluding interest, statutory or punitive damages and penalties, and attorney fees, and costs.” The defendant removed, alleging diversity jurisdiction. The plaintiffs moved to remand, alleging the amount-in-controversy requirement had not been satisfied. In Texas, a statement in the petition limiting damages to an amount below the amount-in-controversy of $75,000 or less is not binding. To prevent removal, a plaintiff must file a binding stipulation or affidavit limiting recovery to $75,000 or less. Here, because it was not obvious that the plaintiffs’ claims would reach the amount-in-controversy, the defendant was required to set forth summary-judgment type evidence to establish the jurisdictional amount-in-controversy by a preponderance of the evidence. The allegation of treble damages under the DTPA and a pre-suit demand letter asserting plaintiffs had incurred damages in the amount of $188,000 plus attorney’s fees was sufficient. The court clarified that Rule 408 of the Federal Rules of Evidence does not bar use of the pre-suit demand letter; rather, the Fifth Circuit has considered such letters as evidence of the amount-in-controversy. Because plaintiffs failed to demonstrate to a legal certainty that the amount-in-controversy was under the requisite amount, plaintiffs were not entitled to remand.
Appeal Bond and Motion to Stay
Mission Pharmacal Company v. Molecular Biologicals, Inc., SA-20-CV-01454-JKP (Pulliam, J. July 17, 2023)
After a bench trial, the court awarded the plaintiff $60,508 for unpaid services fees, as well as attorneys’ fees, costs, and interest. The court awarded the defendant nothing on its counterclaims and awarded the plaintiff nothing on its claim for reimbursement for returned goods. The plaintiff appealed the court’s denial of reimbursement. Although the $60,508 was not appealed, the defendant moved pursuant to FRCP 62(b) for a reduced supersedeas bond on the ground that it was insolvent. Rule 62(b) does not expressly require that the bond cover the entire judgment, but courts have interpreted it that way. The burden is on a party seeking a lower bond to demonstrate reasons for the departure and that a reduced bond would still serve the dual purposes of preserving the status quo and protecting the non-appealing party’s rights pending appeal. The court recognized that a supersedeas bond might not be appropriate for a judgment that is not being appealed; however, as the rule is not limited to appellants and the plaintiff did not object, the court proceeded to consider the proper amount of the bond. The court rejected the request for a lower bond, concluding the defendant’s insolvency made it likely that the defendant would be unable to pay the full amount of the judgment in the future, meaning that a lower amount would not protect the plaintiff’s rights.
Forum Selection Clause; Motion to Transfer Venue
Cruz v. Carnival Corp., SA-23-CV-00834XR (Rodriguez, X., August 1, 2023)
The plaintiff sued Carnival, alleging claims for breach of contract, DTPA violations, and common law torts relating to Carnival’s allegedly misleading COVID-19 policies and procedures. Carnival moved to transfer venue, relying on the following forum selection clause contained in the contract plaintiff acknowledged electronically during the online check-in process:
[I]t is agreed by and between the Guest and Carnival that all disputes and matters whatsoever arising under, in connection with or incident to this Contract or the Guest’s cruise, including travel to and from the vessel, shall be litigated, if at all, before the United States District Court for the Southern District of Miami, or as to those lawsuits to which the Federal Courts of the United States lack subject matter jurisdiction, before a court located in Miami-Dade County, Florida, U.S.A. to the exclusion of the Courts of any other county, state or country.
The first page of the contract drew special attention to the forum-selection clause in bold letters stating “THE ATTENTION OF THE GUEST IS ESPECIALLY DIRECTED TO SECTIONS 1, 4, AND 12 THROUGH 15, WHICH CONTAIN IMPORTANT LIMITATIONS ON THE RIGHTS OF GUESTS TO ASSERT CLAIMS AGAINST CARNIVAL CRUISE LINE . . . INCLUDING FORUM SELECTION.” The court recognized that forum-selection clauses in passenger ticket contracts are presumptively valid and enforceable, and that a party challenging the clause has a “heavy burden” of establishing that enforcement of the clause would be “unreasonable under the circumstances.” Finding plaintiff (1) had presented no evidence that consent to the clause was obtained by fraud or overreaching, or that the provisions were otherwise invalid or unreasonable; (2) had not identified any “extraordinary circumstances” that would warrant denying Carnival’s motion; and (3) asserts a claim against Carnival for breach of the very same contract containing the forum-selection clause, the court concluded the forum-selection clause was valid and enforceable and transferred the case to the Miami Division of the Southern District of Florida pursuant to 28 U.S.C. § 1404.
