Take the Fifth

Designated for publication

• Baylor All Saints Medical Center v. Kennedy, 24-10934, appeal from N.D. Tex.
  • Jones, J. (Jones, Stewart, Ramirez) (oral argument), Medicaid
  • Vacating summary judgment for plaintiff hospitals in challenge to Department of Health and Human Services regulation “that penalizes hospitals in states that have pursued alternatives to Medicaid expansion,” and remanding for further proceedings.
  • A group of Texas hospitals challenged a 2023 regulation issued by the Department of Health and Human Services that excluded certain patients in state “demonstration projects” from the Medicaid fraction used in calculating Disproportionate Share Hospital (DSH) Medicare payments. The hospitals sought to preemptively enjoin application of the rule and filed suit in federal district court after the Provider Reimbursement Review Board (PRRB) declined jurisdiction. The district court granted summary judgment for the hospitals and vacated the regulation. On appeal, the Fifth Circuit held the district court lacked subject-matter jurisdiction because the hospitals’ claims arise under the Medicare statute and therefore must be channeled through Medicare’s administrative review process, culminating in a “final decision” by the Secretary that can be judicially reviewed. Because the hospitals never presented their claims to the agency nor obtained a final determination on their reimbursements, the present action was prematurely filed outside the prescribed statutory review scheme.
  • The court rejected the hospitals’ alternative arguments that their claims did not arise under the Medicare statute or that the administrative channeling requirement should be excused. The hospitals’ asserted harm from potential future reductions in DSH payments and eligibility for the 340B drug discount program did not circumvent the statutory requirement to first seek administrative review; any delay or future financial impact does not amount to a complete preclusion of judicial review.

• Occidental Fire & Casualty Co. of North Carolina v. Cox, 24-20388, appeal from S.D. Tex.
  • Douglas, J. (Wiener, Douglas, Ramirez) (oral argument), Ramirez, J., dissenting in part; insurance
  • Reversing grant of Rule 50 motion in favor of insurer in an insurance coverage dispute under homeowner’s policy involving spinal injury suffered by visitor to home after ingesting LSD.
  • The appeal arises from an insurance coverage dispute over whether Occidental Fire & Casualty Company (“Occidental”) had a duty to indemnify under a homeowner’s policy for severe spinal injuries suffered by Christoffer Cox after he ingested drugs at a friend’s home. Occidental filed a declaratory judgment action in federal court seeking a ruling that the policy’s controlled substance exclusion barred coverage because the injury “arose out of the use … of a Controlled Substance.” The parties had entered into a settlement in the underlying personal injury case and stipulated that the only issue for the jury in the coverage suit was whether the injury arose out of the use of a controlled substance; if not, judgment would be entered against Occidental. A jury found it did not; but the district court granted Occidental’s renewed motion for judgment as a matter of law (JMOL) under Rule 50(b), set aside the verdict, and entered final judgment for Occidental. The Coxes appealed.
  • The Fifth Circuit majority first addressed Occidental’s argument that the Coxes forfeited their contractual interpretation argument by failing to raise it in the district court. The court rejected Occidental’s position, explaining that the Coxes had raised related arguments in the trial court that put the settlement agreement and stipulations at issue. Thus, the argument was properly preserved for appeal.
  • Turning to the substance, the majority held that the settlement agreement and stipulations did not preclude Occidental from filing a post-verdict Rule 50(b) motion. Occidental’s right to appeal under the settlement agreement would be hollow if it could not pursue such a motion because appellate review of sufficiency of the evidence requires first making a proper Rule 50(b) motion. The court further explained that the agreement’s language that “the court or the jury” would determine the sole fact question was consistent with the mechanics of Rule 50 practice, under which the jury initially decides factual questions and the district court later can reconsider sufficiency.
  • On the merits of the JMOL, the majority applied Texas law to interpret the controlled substance exclusion. The Coxes contended the district court erred by ignoring the “use” element of that exclusion and by misapplying Texas causation standards. The Fifth Circuit rejected the Coxes’ proposed application of the automobile policy “use” test from Mid-Century Insurance Co. v. Lindsey, finding it inapplicable because that test arises from a vehicle coverage context, not a drug-use exclusion in a homeowner’s policy. Instead, the court found the district court applied appropriate Texas precedents and Fifth Circuit law regarding “arising out of,” which focuses on causal connection and allows but-for causation without requiring proximate cause.
  • Nevertheless, the majority reversed the district court’s JMOL ruling. On de novo review of the legal sufficiency of the evidence, the Fifth Circuit concluded that reasonable jurors could have found that Christoffer’s injuries did not arise out of drug use. The evidence could support an inference that the severe spinal injury resulted primarily from how Christoffer was moved after he fell, not from the use of controlled substances. With all inferences drawn in favor of the non-movants (the Coxes), the evidence was not so one-sided that no reasonable jury could have reached the verdict it did. Thus, the district court erred in setting aside the jury’s verdict, and judgment was reversed.
  • Judge Ramirez dissented in part, contending that the district court correctly granted judgment as a matter of law because the undisputed evidence established that the use of LSD by both Cox and Zinkweg was at least a “but for” cause of Cox’s ultimate quadriplegia, bringing the injury squarely within the homeowner policy’s Controlled Substance Exclusion. Emphasizing Texas law’s expansive interpretation of “arising out of”—requiring only an incidental causal connection and satisfied by but-for causation—Judge Ramirez maintains that the evidentiary record leaves no room for a reasonable jury to conclude that the injury did not originate from, grow out of, or flow from the boys’ LSD use. Judge Ramirez highlights Zinkweg’s admissions that his impaired judgment and fear of legal consequences from illegal drug use caused him to delay seeking help, as well as Azhar’s testimony that both the delay and the decision to move Cox stemmed from their belief that Cox’s immobility was merely drug-induced. Because the delay in treatment and the improper movement were the two exacerbating factors identified by the medical expert, and both were causally linked to LSD use, the dissent concludes that the exclusion necessarily applies.
  • Judge Ramirez further rejects the Coxes’ argument that the movement of Cox—as opposed to the delay in medical care—was an independent cause unrelated to drug use. She reasons that both actions were taken at the same time, for the same stated reason, and on the same assumption about LSD’s effects, leaving no evidentiary basis for the jury to sever one from the causal chain while accepting the other. Given the broad sweep of but-for causation recognized by Texas courts, and the lack of any non-speculative evidence showing that LSD use was not at least incidentally related to either exacerbating factor, Judge Ramirez concludes that the jury’s verdict denying application of the Controlled Substance Exclusion was legally unsupportable.

• MIECO, L.L.C. v. Targa Gas Marketing L.L.C., 23-20567, appeal from S.D. Tex.
  • Southwick, J. (Elrod, Higginbotham, Southwick) (oral argument), breach of contract
  • Affirming judgment on jury verdict in favor of plaintiff on non-performance of natural gas supply contract, reversing partial summary judgment excusing defendant’s under the contract’s force majeure clause, and remanding for further proceedings.
  • This case arises from a contract dispute between MIECO and Targa over natural gas deliveries during Winter Storm Uri in February 2021. Under two transaction confirmations governed by a base NAESB form contract, Targa was obligated to deliver specified volumes of gas to MIECO. During the storm, Targa delivered substantially less than required. Targa sued for a declaratory judgment that the force majeure clause excused its non-performance, and MIECO counterclaimed for breach of contract. The district court granted Targa partial summary judgment on force majeure and then tried the remaining issues, including how partial deliveries should be priced and allocated. The jury ultimately returned a verdict for MIECO on the allocation issue. Both parties appealed: MIECO challenged the force majeure finding, and Targa challenged the jury’s verdict about how to allocate deliveries between the fixed-price (“first-of-month”) and variable-price (“spot market”) contracts.
  • The Fifth Circuit reversed the district court’s partial summary judgment on force majeure. The panel explained that while Uri was indisputably a force majeure event, Targa failed to show there was no genuine dispute about loss of “gas supply,” causation, and whether it made reasonable efforts to avoid the storm’s impacts, all required under the contract. The court held that Targa’s usual sources of supply included not only its affiliates but also purchases from third parties, and it had not carried its burden to show those were unavailable. On causation, merely showing Uri occurred was insufficient; Targa had to show the storm, not economic decisions, caused the non-performance. Reasonable efforts to mitigate the shortfall (including looking for replacement gas) were fact questions for further proceedings.
  • The court affirmed the jury’s verdict requiring Targa to allocate delivered gas first to the lower-priced fixed contract before assigning volumes to the higher-priced spot market contract. The jury’s finding was supported by evidence of industry usage and practice that such allocations prioritize fixed-volume contracts. Targa’s argument that Texas Business & Commerce Code § 2.615’s “fair and reasonable” allocation standard entitled it to pro-rata allocations did not prevail because the parties’ contract was silent and MIECO’s evidence sufficed under applicable gap-filler and usage-of-trade principles.
  • The court remanded the case for further factual development on the unresolved force majeure issues — including determining the extent of any loss of supply and whether Targa made reasonable efforts to perform its contractual duties during the storm.

• U.S. v. Peterson, 24-30043, appeal from E.D. La.
  • Elrod, J. (Elrod, Higginbotham, Southwick) (no oral argument), criminal, Second Amendment, search and seizure
  • Affirming denial of defendant’s motion to suppress, and affirming conviction of possessing an unregistered suppressor in violation of various provisions of the National Firearms Act.
  • Defendant George Peterson argued that the NFA’s registration requirement for suppressors violated his Second Amendment rights as applied to him, and that evidence obtained from the ATF’s search of his home should be suppressed as the result of a Fourth Amendment violation. The underlying facts showed that ATF agents executed a search warrant at Peterson’s home and business, discovering an unregistered suppressor in his safe, and Peterson pleaded guilty while reserving the right to appeal these constitutional issues.
  • On the Second Amendment claim, the Fifth Circuit assumed (without deciding) that suppressors qualify as “arms” under the Amendment. It then applied the Bruen framework and found the NFA’s licensing and registration scheme to be a presumptively lawful “shall-issue” regulatory regime because it imposes objective, defined requirements (e.g., fingerprints, background checks) that ensure only law-abiding individuals may receive approval. Because Peterson offered no evidence that the NFA’s requirements imposed an unconstitutional burden on him — he did not allege he applied for a license, paid the tax, or was deterred by processing delays — his as-applied challenge failed and the denial of his motion to dismiss was affirmed.
  • As to the Fourth Amendment claim, the court upheld the denial of Peterson’s suppression motion under the good-faith exception to the exclusionary rule, finding that the ATF officers acted in objectively reasonable reliance on a magistrate judge’s warrant. Thus, even if there were defects in the warrant, suppression of the evidence was unwarranted because the agents’ actions met the criteria for good-faith application of the warrant.

• Evans v. Garza, 23-50541, appeal from W.D. Tex.
  • Richman, J. (Richman, Oldham, Ramirez) (no oral argument), Oldham, J., dissenting; Younger abstention, First Amendment
  • Affirming the denial of preliminary injunction against the district attorney from investigating or prosecuting the plaintiff for posting a photograph of a transgendered legislator washing their hands in the women’s restroom of the Texas state capitol.
  • The Fifth Circuit affirms the district court’s denial of a preliminary injunction sought by Michelle Evans, who tweeted a photograph of a transgender politician washing their hands in the women’s restroom at the Texas Capitol. After Evans surrendered her phone during an investigation initiated by Travis County District Attorney José Garza under Texas Penal Code § 21.15(b), she sought to enjoin any investigation or prosecution on the ground that the statute was unconstitutional on its face and as applied to her publication of the image. The panel first holds that Evans has standing because she faces a credible threat of prosecution traceable to the district attorney and redressable by injunctive relief. It further concludes that Younger abstention does not apply because no state criminal proceeding—such as charges or a grand-jury process—had begun.
  • Turning to the preliminary-injunction factors, the court emphasizes that Evans bears the burden on all four prongs and that the district court did not actually apply Younger abstention, but merely referenced its underlying comity values when assessing equities. The panel determines that the balance of harms and public-interest factors weigh against an injunction: Texas has a strong interest in enforcing its criminal laws, and enjoining a statute inflicts irreparable harm on the state. Although the threat of prosecution may chill Evans’s future speech and constitute irreparable harm, that alone cannot justify an injunction. The district attorney had also paused charging decisions during the litigation, weakening Evans’s claim of imminent enforcement.
  • The court concludes Evans did not demonstrate a substantial likelihood of success on the merits. Unlike the subsection previously struck down by the Texas Court of Criminal Appeals, § 21.15(b)(2) applies only to images taken of a person “in a bathroom or changing room” and includes a heightened mens rea—intent to invade privacy—that Texas courts have construed narrowly to reach only “highly offensive” invasions. The panel reasons that many applications of the law are plainly constitutional, including prohibitions on distributing non-consensual images of individuals in restrooms, and declines to accept Evans’s assertion of First Amendment protection for photographing or disseminating restroom images simply because the subject is fully clothed. Because Evans failed to carry her burden on the likelihood-of-success factor, the court holds that the district court did not abuse its discretion in denying preliminary injunctive relief.
  • Judge Oldham dissented. Judge Oldham opens his dissent by condemning the majority for affirming the denial of Michelle Evans’s request for a preliminary injunction even after conceding that Younger abstention does not apply. He frames the case starkly: Evans merely retweeted “a picture of a fully clothed man washing his hands,” yet the Travis County District Attorney responded by threatening prosecution under Texas’s improper-photography statute. Judge Oldham contends that the district court’s reliance on Younger was “an erroneous application” of abstention doctrine, and he rebukes the majority for “conced[ing] that Younger and the AIA do not apply to Evans’s suit, but then turn[ing] around and apply[ing] Younger… under Winter.” This, he says, transforms Younger from a narrow exception into an all-purpose bar against federal injunctive relief.
  • On the merits, Judge Oldham insists that neither the Anti-Injunction Act nor Younger restricts federal courts from granting injunctions in § 1983 suits when no state proceeding is pending. He stresses that the Supreme Court has repeatedly refused to extend Younger beyond ongoing prosecutions, noting that “[t]he principles of equity, comity, and federalism ‘have little force in the absence of a pending state proceeding.’” He maintains that Evans faces a classic First Amendment chilling injury—her speech is suppressed precisely because the DA keeps her “in limbo” about prosecution. Judge Oldham views the district court’s reasoning as creating a “squeeze play” in which plaintiffs cannot obtain relief before prosecution (because of Younger) or after prosecution (because the values underlying Younger are repackaged inside the preliminary-injunction factors), a maneuver he calls an impermissible “rewrite[] [of] the AIA into an exceptionless prohibition on the federal courts.”
  • Finally, Judge Oldham contends that Evans is likely to succeed both on her as-applied and potential facial challenges to Texas Penal Code § 21.15(b). The statute, he says, suppresses core political expression on “the opposite of private” subject matter—a public debate about public policy involving a public figure in a public building. Because the photo depicts nothing intimate or private, he concludes that the State cannot satisfy strict scrutiny, observing pointedly: “Is there a person on earth who thinks their conduct at a public sink enjoys privacy protections?” He closes with a warning about the fragility of free expression—“Free speech is a fragile thing”—and criticizes the majority for leaving Evans “at the mercy of the Travis County District Attorney,” rather than remanding for proper consideration of the preliminary-injunction factors.
    

Unpublished decisions

• U.S. v. Harkins, 25-10481, appeal from N.D. Tex.
  • per curiam (Higginbotham, Engelhardt, Ramirez) (no oral argument), criminal
  • Granting Anders motion to withdraw, and dismissing appeal.

• U.S. v. Thompson, 25-10591, appeal from N.D. Tex.
  • per curiam (Smith, Higginson, Wilson) (no oral argument), criminal
  • Granting Anders motion to withdraw, and dismissing appeal.

• U.S. v. Deleon-Juarez, 25-10640, appeal from N.D. Tex.
  • per curiam (Jones, Duncan, Douglas) (no oral argument), criminal, sentencing
  • Affirming sentence on conviction of illegal reentry.

• Patra v. Schlumberger Technology Corp., 25-20106, appeal from S.D. Tex.
  • per curiam (Davis, Jones, Ho) (no oral argument), employment, attorney malpractice, jurisdiction
  • Modifying judgment of dismissal from with prejudice to without prejudice, and vacating vexatious-litigation injunction for lack of jurisdiction.

• U.S. v. Dean, 25-30357, appeal from E.D. La.
  • per curiam (King, Haynes, Ho) (no oral argument), criminal, sentencing, guilty plea
  • Affirming sentence and guilty-plea conviction of possession with intent to distribute fentanyl, possession of a firearm in furtherance of a drug trafficking crime, and possession of a firearm by a convicted felon.

• Gauthier v. Goodyear Tire & Rubber Co., 25-40021, appeal from E.D. Tex.
  • per curiam (Higginbotham, Ho, Douglas) (oral argument), employment
  • Affirming summary judgment in favor of former employer on bases of whether plaintiff’s firing was retaliatory.

• U.S. v. Guzman-Rios, 25-40225, appeal from S.D. Tex.
  • per curiam (King, Haynes, Ho) (no oral argument), criminal, sentencing
  • Affirming 120-month sentence and conviction for conspiracy to possess with intent to distribute five kilograms or more of a mixture or substance containing a detectable amount of cocaine.

• Gomez-Gomez v. Bondi, 25-60270, petition for review of BIA order
  • per curiam (Barksdale, Oldham, Douglas) (no oral argument), immigration
  • Denying Honduran citizen’s petition for review of BIA order dismissing her appeal from an Immigration Judge’s (IJ) denying her application for: asylum; withholding of removal; and protection under the Convention Against Torture.

• Luxxotica of America, Inc. v. Brave Optical, Inc., 25-40309, appeal from E.D. Tex.
  • per curiam (Davis, Wilson, Douglas) (no oral argument), Lanham Act, attorneys’ fees
  • Affirming fee award to plaintiff on Lanham Act claim.

• U.S. v. Ibarra-Vasquez, 25-50256, appeal from W.D. Tex.
  • per curiam (Elrod, Smith, Stewart) (no oral argument), criminal, sentencing
  • Affirming 60-month sentence on conviction of illegal reentry.

• U.S. v. Rojas-Hernandez, 25-50268, appeal from W.D. Tex.
  • per curiam (Smith, Higginson, Wilson) (no oral argument), criminal
  • Granting Anders motion to withdraw, and dismissing appeal.

• Gamero-Larin v. Bondi, 25-60160, petition for review of BIA order
  • per curiam (Barksdale, Oldham, Douglas) (no oral argument), immigration
  • Denying Salvadoran citizen’s petition for review of BIA order upholding the Immigration Judge’s (IJ) denying his claim for deferral of removal under the Convention Against Torture.

• Salmeron-De Martinez v. Bondi, 25-60189, petition for review of BIA order
  • per curiam (Smith, Higginson, Wilson) (no oral argument), immigration
  • Denying Salvadoran citizens’ petition for review of BIA order upholding the denial of asylum, withholding of removal, and protection under the Convention Against Torture.