Take the Fifth

Designated for publication

• Genesis Marine, L.L.C. v. Darrow, 25-30205, appeal from E.D. La.
  • Stewart, J. (Smith, Stewart, Haynes) (oral argument), maritime law, timeliness
  • Affirming summary judgment dismissal of limitation-of-liability suit as untimely, when it was filed three years after former employee’s state-court negligence suit was filed in state court.
  • Seaman claimant Brandon Darrow, employed by Genesis Marine, LLC, suffered a severe back injury while working aboard Genesis’s towing vessel, the M/V Anaconda and associated barges, and subsequently filed a state-court negligence and unseaworthiness lawsuit seeking substantial damages. After years of discovery and expert reports confirming Darrow’s permanent disability and high damages estimates, Genesis filed a federal limitation of liability action under the Limitation of Liability Act, seeking to cap its exposure at the $12.5 million value of the vessel.
  • The core legal issue was whether Genesis’s limitation proceeding was timely under 46 U.S.C. § 30529(a), which requires vessel owners to file a limitation action within six months after receiving written notice “of a claim.” The district court held, and the Fifth Circuit affirmed, that Genesis had received sufficient written notice well over six months before filing its limitation action—through Darrow’s state-court filings, medical information, and expert reports indicating a reasonable possibility that Darrow’s damages would exceed the vessel’s value. Thus, the limitation action was untimely as a matter of law.
  • On appeal, Genesis raised several arguments, including that the statutory deadline is a non-jurisdictional claim-processing rule and that there were genuine disputes of material fact regarding when notice triggered the deadline. The Fifth Circuit rejected these arguments, explaining that even as a non-jurisdictional rule the six-month deadline must be enforced and that the record demonstrated no genuine dispute that Genesis knew before June 13, 2024, of the reasonable possibility that Darrow’s claim could exceed the vessel’s value.

• Doe v. U.S. Department of Health and Human Services, 24-40778, appeal from E.D. Tex.
  • Oldham, J. (Haynes, Ho, Oldham) (oral argument), Haynes, J., dissenting in part; administrative law
  • Reversing district court judgment upholding HHS’s refusal of plaintiff’s request to reconsider its denial of his request to remove an adverse action report from his record, and remanding for further consideration.
  • Judge Oldham, writing for the majority, held that the Department of Health and Human Services violated the longstanding Chenery principle by changing its rationale for denying Dr. John Doe’s request for administrative reconsideration; although HHS initially said Doe was ineligible for reconsideration, the record actually showed he was eligible under the agency’s own guidance, and on appeal the agency attempted to justify its denial on different grounds (that it reviewed the new evidence and denied relief on the merits), which the Chenery rule forbids courts from accepting as a post-hoc rationalization. Applying Supreme Court precedent, Judge Oldham explained that an agency’s action must be upheld, if at all, solely on the grounds the agency invoked at the time of decision, and because HHS’s stated basis was incorrect under its own procedures, the Fifth Circuit reversed the district court’s dismissal of Doe’s Administrative Procedure Act claim and remanded for further proceedings consistent with that principle.
  • Judge Haynes dissented in part, agreeing with remanding the case but for different reasons than the majority: she would affirm the dismissal of Doe’s first two causes of action (constitutional challenges) because those weren’t properly before the court and then limit the panel’s review on the remaining two APA-based claims by sending them back to the district court. Judge Haynes emphasized deference to pro se litigants, noting that Doe originally litigated in district court without counsel and that, with counsel now, he should be allowed the first opportunity to fully develop and present his arguments to the trial court before this court decides those issues on appeal; accordingly, she would have the district court address those arguments in the first instance rather than resolving them on appeal.

• Sirius Solutions, L.L.P. v. Commissioner of Internal Revenue, 24-60240, appeal from U.S. Tax Court
  • Oldham, J. (Graves, Engelhardt, Oldham) (oral argument), Graves, J., dissenting; tax law
  • Vacating tax court’s upholding the IRS’s upward adjustment of Sirius Solutions’s net earnings from self-employment, and remanding for further proceedings.
  • Judge Oldham framed the case as a pure statutory interpretation dispute over the meaning of the term “limited partner” in 26 U.S.C. § 1402(a)(13), a provision of the Internal Revenue Code that excludes certain partnership income from Social Security and Medicare self-employment taxes. The Tax Court had upheld the IRS’s adjustments to Sirius Solutions’ federal tax returns for 2014–2016 on the theory that none of Sirius’s individual partners qualified as “limited partners” because, in the Tax Court’s view (following Soroban Capital Partners LP v. Commissioner), a limited partner for this tax exception must be a passive investor. Judge Oldham rejected that premise and clarified that the sole issue on appeal was the statutory meaning of “limited partner” as used in § 1402(a)(13).
  • To resolve the appeal, the majority began with the statute’s text and structure, emphasizing that “limited partner” in § 1402(a)(13) should be given its ordinary meaning at the time of the statute’s enactment in 1977. By consulting contemporaneous dictionaries and statutory sources, Judge Oldham explained that “limited partner” historically referred to a partner in a limited partnership who has limited liability, without reference to investment passivity. This textual analysis, he argued, pointed to limited liability as the defining feature of a limited partner — not passive investment.
  • The majority also placed significant weight on longstanding and consistent interpretations from the Internal Revenue Service (IRS) and the Social Security Administration (SSA) contemporaneous with and following the 1977 Social Security Amendments. From 1978 through the tax years at issue, IRS partnership tax instructions defined a “limited partner” in terms of limited liability, and SSA regulations similarly identified limited liability as the touchstone of the term. Judge Oldham held these agency interpretations, developed “contemporaneously with the statute,” to be especially useful in confirming the ordinary meaning of the statutory phrase.
  • Turning to counterarguments, the opinion systematically rejected the IRS and Tax Court’s “passive investor” interpretation. The majority explained that such a reading would render other parts of the statute (like the reference to “guaranteed payments for services rendered”) nonsensical, would require courts to engage in amorphous “functional analysis” to determine tax status, and would upend decades of predictable tax administration. Because the Tax Court’s decision rested on the erroneous passive-investor rule, the Fifth Circuit vacated that judgment and remanded for further proceedings consistent with its interpretation that a § 1402(a)(13) “limited partner” is someone with limited liability in a limited partnership.
  • Judge Graves dissented and would instead affirm the Tax Court’s judgment upholding the IRS’s adjustments to Sirius’s self-employment tax. Based on his reading of the text, structure, legislative history, and longstanding Tax Court precedent (particularly Soroban Capital Partners, LP), Judge Graves concluded that Congress intended the exemption to apply only to partners whose distributive share of income is investment-like and not derived from active participation in the partnership’s business operations. In his view, this interpretation aligns with the statutory phrase “as such” and the historical context of the provision’s enactment in 1977.
  • Judge Graves emphasized the functional analysis applied by the Tax Court and earlier case law, which looks to the nature of the partners’ roles and the character of the income at issue. He noted that under this analytical framework, a partner who devotes significant effort to the partnership’s business or displays characteristics akin to a general partner should not be treated as a limited partner “as such” for self-employment tax purposes, even if technically enjoying limited liability under state law. He pointed to examples where courts have held that active participation or receipt of compensation resembling service payments indicates that the income is not investment income and thus not exempt. He viewed this approach as more faithful to congressional intent and longstanding IRS and Tax Court practice that limited partners excluded under § 1402(a)(13) were traditionally those whose distributive shares reflect investment returns rather than self-employment earnings.
  • In challenging the majority’s interpretation, Judge Graves also critiqued its reliance on dictionary definitions that focus on limited liability, arguing that such definitions do not necessarily capture the nuance of “as such” in the tax statute and that the context of the provision—and especially the legislative purpose of preventing self-employment tax avoidance by passive investors—must inform interpretation. He contended that the majority’s literal focus reduces the role of functional characteristics Congress sought to distinguish and undermines the statutory scheme that distinguishes active partners from those whose involvement is investment-oriented.

Unpublished decisions

• Willis v. Western Power Sports, Inc., 25-10664, appeal from N.D. Tex.
  • per curiam (Southwick, Duncan, Engelhardt) (no oral argument), Rule 60(b)
  • Dismissing as frivolous appeal from denial of Rule 60 motion on reopening case that had already been affirmed on appeal.

• Singh v. City of Greenville, 24-60644, appeal from N.D. Miss.
  • per curiam (Jones, Duncan, Douglas) (no oral argument), discrimination, qualified immunity
  • Affirming dismissal of claims, based on lack of comparator evidence and qualified immunity.