Take the Fifth

Designated for publication

• Williams v. GoAuto Insurance Co., 24-30646, appeal from M.D. La.
  • Southwick, J. (Higginbotham, Jones, Southwick) (oral argument), insurance
  • Affirming dismissal of claims that insurance company’s cancelation procedures did not comply with Louisiana statutory requirements and breached the duty of good faith and fair dealing.
  • The Fifth Circuit considered whether GoAuto Insurance and its premium finance company, APAC, complied with Louisiana’s statute governing the cancellation of financed insurance policies for nonpayment. Former insureds Kimberly Williams, Nicholas Jenkins, and Felita Wright argued that GoAuto’s procedures failed to satisfy statutory requirements, leading to invalid cancellations and bad-faith conduct. The district court granted summary judgment for GoAuto, finding that the company’s electronic process—through which APAC notified GoAuto of cancellations after insureds failed to make timely payments—met the state’s legal standards. On appeal, the plaintiffs challenged the district court’s interpretation of the statute’s provisions regarding certification and receipt of cancellation notices.
  • The Fifth Circuit affirmed, holding that Louisiana law did not require a signed certification by a named employee for the cancellation to be valid and that GoAuto’s electronic receipt of APAC’s cancellation notices satisfied the statutory definition of “receipt.” The court reasoned that modern business practices allow automated computer systems to effect transactions that once required human handling, and it declined to impose additional signature or delivery requirements not stated in the statute. Although plaintiffs urged certification of these statutory questions to the Louisiana Supreme Court, the Fifth Circuit refused, finding no compelling reason to do so. Thus, the appellate court upheld the dismissal of all claims with prejudice, confirming that GoAuto’s procedures complied with Louisiana’s strict statutory framework for policy cancellations.

• U.S. v. Alaniz, 24-40236, appeal from S.D. Tex.
  • per curiam (Jones, Graves, Rodriguez) (no oral argument) (published after an opposed motion to publish opinion was filed), criminal, Second Amendment, Commerce Clause
  • Affirming conviction of possession of a firearm by a felon, rejecting Commerce Clause challenge, facial Second Amendment challenge, and as-applied Second Amendment challenge.

Unpublished decisions

• U.S. v. Ball, 25-10399, appeal from N.D. Tex.
  • per curiam (Stewart, Graves, Oldham) (no oral argument), criminal
  • Granting Anders motion to withdraw, and dismissing appeal.

• Nova Scotia Health Employees’ Pension Plan v. McDermott International, Inc., 24-20326, appeal from S.D. Tex.
  • Wiener, J. (Wiener, Willett, Ho), Ho, J., concurring in judgment only (w/o op.) (oral argument), class certification, standing, securities fraud
  • Affirming class certification order, and upholding ruling on standing.
  • This §10(b) securities-fraud class action under the PSLRA stems from McDermott International’s 2018 merger with Chicago Bridge & Iron (CB&I). Lead plaintiff NSHEPP—represented by Pomerantz—held CB&I shares that converted into McDermott stock at closing; it never bought McDermott on the market. Plaintiffs allege defendants (McDermott, its CEO, and CFO) misled investors about CB&I’s financial health, particularly massive cost overruns on four “Focus Projects” (two LNG and two gas-turbine jobs), which allegedly inflated McDermott’s stock around the merger. After the December 2017 announcement and May 10, 2018 closing, McDermott reported successive losses and filed Chapter 11 in January 2020; its share price fell about 92.5% by September 2019.
  • On class certification, the magistrate judge (MR-1) found a “fundamental conflict” between (i) exchangers like NSHEPP, whose CB&I shares converted into McDermott stock, and (ii) purchasers who bought McDermott on the market—because any fraud-driven inflation in CB&I’s pre-merger price could have benefitted exchangers while harming purchasers. He denied certification without prejudice and suggested creating exchanger and purchaser subclasses; he also concluded NSHEPP had standing and that McDermott’s market was efficient after a certain date. The district court initially adopted MR-1 (OR-1). After NSHEPP filed a Rule 23(f) petition, the court withdrew OR-1 and the magistrate issued MR-2, again finding the fundamental conflict and recommending subclasses, deeming NSHEPP adequate to represent the exchanger subclass but not purchasers, and deferring purchaser-specific issues (e.g., late-period market efficiency and certain corrective disclosures). The district court adopted MR-2 with minor edits (OR-2); NSHEPP’s first 23(f) petition was denied as moot, and a new 23(f) petition followed.
  • On appeal, NSHEPP argued the district court lacked authority to withdraw and reissue its certification order after the initial 23(f) filing and challenged the conflict finding, the placement of the damages burden, and reopening the purchaser-subclass lead-plaintiff process. Defendants cross-appealed, disputing NSHEPP’s standing, opposing any class/subclass mixing purchasers and exchangers, and contesting the appealability of issues unrelated to certification. The court held that a pending, ungranted Rule 23(f) petition does not divest the district court of jurisdiction; only a granted petition does. Rule 54(b) and Rule 23(c)(1)(C) permit revisiting interlocutory class-cert decisions, so the withdrawal and reissuance were proper.
  • Substantively, the court affirmed NSHEPP’s standing: NSHEPP pled a plausible economic-injury theory (inflation in McDermott’s price above any incorporated CB&I inflation, followed by declines on corrective disclosures), and the respective amounts of CB&I vs. McDermott inflation remain evidentiary questions for trial, not grounds to defeat standing as speculative. The court also upheld the “fundamental conflict” determination and the remedy of subclassing. Adequacy focuses on the representative, and purchasers have no stake in litigating CB&I-specific inflation theories that matter to exchangers; creating separate subclasses aligns counsel and incentives. Class members who are both exchangers and purchasers may hold claims in both subclasses, each protected by its own representative—this overlap does not multiply conflicts, it ensures each interest is advocated by the appropriate subclass lead. Finally, the court concluded that case-management choices about reopening the lead-plaintiff process fall outside Rule 23(f) review, while the district court’s edits (e.g., striking an “affirmative-defense” clause and deferring purchaser-only issues) were within its discretion in managing certification.

• U.S. v. Bazile, 24-30606, appeal from E.D. La.
  • per curiam (Stewart, Graves, Oldham) (no oral argument), criminal, guilty plea
  • Affirming guilty plea conviction of possession of a firearm and ammunition by a felon.

• U.S. v. Olvera-Galvan, 25-40115, appeal from S.D. Tex.
  • per curiam (Stewart, Graves, Oldham) (no oral argument), criminal
  • Granting Anders motion to withdraw, and dismissing appeal.

• U.S. v. Mangram, 24-40330, appeal from E.D. Tex.
  • per curiam (Jones, Duncan, Douglas) (no oral argument), criminal
  • Granting Anders motion to withdraw, and dismissing appeal.