Take the Fifth

Designated for publication

• Guangdong Midea Consumer Electric Manufacturing Co. v. Corelle Brands (Texas) Inc., 25-20119, appeal from S.D. Tex.
  • Duncan, J. (Haynes, Duncan, Ramirez) (oral argument), contract, bankruptcy, indemnification
  • Affirming denial of plaintiff creditor’s objection to debtor’s reorganization plan.
  • Midea, the manufacturer of Instapot cooking appliances, and Corelle operated under a 2016 master supply agreement (MSA) whereby Corelle placed individual purchase orders (POs) specifying price, quantity, packaging, and delivery terms. The MSA and POs both contained indemnification provisions requiring Midea to defend Corelle against product-liability claims. When Corelle entered Chapter 11 bankruptcy in 2023 and sold its appliances business, it assigned the MSA to the purchaser but sought to retain indemnification rights under completed POs. Midea objected, arguing the indemnification rights should transfer with the MSA as part of a single indivisible contract. Issues on appeal were (1) Whether the district court applied the correct standard of review to the bankruptcy court’s divisibility finding; (2) whether the MSA and POs were divisible contracts under Texas law; and (3) whether Corelle’s retention of indemnification rights under completed POs violated 11 U.S.C. § 365(f), which requires executory contracts to be assigned in their entirety.
  • The court applied clear-error review because the bankruptcy court relied on course-of-performance evidence to resolve contract ambiguities—a determination that “entails primarily … factual work”. The bankruptcy court’s express divisibility finding provided sufficient detail to show “a clear understanding of the analytical process.” 
  • Under Texas law, contract divisibility “depends primarily on the intention of the parties, the subject matter of the agreement, and the conduct of the parties.” The MSA “did not obligate Corelle to purchase any certain number of appliances from Midea nor did it specify a set price”—instead, terms were “negotiated and assented to every time Corelle issued a PO.” Course-of-performance evidence confirmed divisibility: “the parties assented separately to each PO”; “Corelle regularly added its own terms and conditions”; and “price and quantity, manufacturing and packaging specifications, and delivery terms … were regularly altered across the various POs.” 
  • Because the POs were severable from the MSA, they were “nonexecutory, separable agreement[s]” not subject to § 365(f)’s requirement that executory contracts be assigned in their entirety. The assignment of the MSA therefore “did not assume and assign completed [POs],” and Corelle could lawfully retain indemnification rights for products it had purchased and for which it remained potentially liable. 

• United States v. Mendoza, 24-20550, appeal from S.D. Tex.
  • Elrod, C.J. (Elrod, Smith, Wilson) (oral argument), criminal, sentencing, supervised release
  • Vacating special conditions of supervised release on conviction of transporting child pornography, and remanding for resentencing.
  • Arturo Mendoza pleaded guilty to transporting child pornography after creating fourteen morphed images in 2019 using Adobe Photoshop, superimposing faces of minor girls (ages six and twelve) onto sexually explicit images of adults. He received an above-Guidelines sentence of 120 months’ imprisonment followed by ten years of supervised release. At sentencing, the district court imposed “standalone” location monitoring, explicitly stating it was not imposing home detention, and left the duration to be determined at a future restitution hearing. However, the written judgment incorrectly included home detention, left the monitoring duration blank, and imposed financial-disclosure and credit-approval conditions tied to anticipated restitution—which was never ordered. Issues on appeal were (1) Whether the district court erred by including home detention in the written judgment contrary to its oral pronouncement; (2) whether failing to specify the duration of location monitoring violated due process; and (3) whether the financial-disclosure and credit-approval conditions were properly imposed under 18 U.S.C. § 3583(d).
  • The court treated the home-detention discrepancy as a clerical error correctable under Federal Rule of Criminal Procedure 36, since the district court explicitly stated at sentencing it was imposing only “standalone” location monitoring. 
  • Under plain error review, the court held that failing to specify the monitoring duration violated due process: “a condition of supervised release ‘may not be so vague that it fails to give ordinary people fair notice of the conduct it punishes, or so standardless that it invites arbitrary enforcement.'” The indefinite condition “fails to give him notice of how long this punishment will last and also potentially invites arbitrary enforcement by the government.” 
  • The financial-disclosure and credit-approval conditions failed all three requirements of § 3583(d): they were not reasonably related to the offense given no restitution was ordered; they imposed “greater deprivation of liberty than is reasonably necessary”; and they were inconsistent with Sentencing Commission policy statements, which authorize such conditions only when restitution or fines are actually imposed. The court rejected the government’s argument that restitution is automatically mandatory in child pornography cases, emphasizing that “restitution is mandatory only to the extent that the district court determines that there is evidence of cognizable loss to the victim(s).”

Unpublished decisions

• United States v. Lindsey, 25-40289, appeal from E.D. Tex.
  • per curiam (Jones, Duncan, Douglas) (no oral argument); criminal, search and seizure
  • Affirming conviction for possession of methamphetamine with intent to distribute.
  • Main Legal Issue: Whether law enforcement officers had reasonable suspicion to prolong a traffic stop in which the defendant was a passenger, leading to the discovery of evidence supporting his conviction for possession of methamphetamine with intent to distribute.
  • The Fifth Circuit held that, under the totality of the circumstances and viewing the evidence in the light most favorable to the Government, the district court did not err in concluding that officers had reasonable suspicion to prolong the stop. The court rejected Lindsey’s argument that there was no evidence officers attempted to issue a warning or citation, finding this contention “belied by the record.” The court also noted that reasonable suspicion “need not rule out the possibility of innocent conduct,” citing United States v. Arvizu.

• Rahdar v. City of Friendswood, 25-40302, appeal from S.D. Tex.
  • per curiam (Davis, Wilson, Douglas) (no oral argument), § 1983
  • Affirming dismissal of § 1983 claims.
  • Main Legal Issues: (1) Whether the district court properly dismissed a Fourth Amendment false arrest claim under Rule 12(b)(6) arising from an August 2020 incident at plaintiffs’ pub; and (2) Whether the district court properly granted summary judgment on a First Amendment retaliatory arrest claim arising from a February 2021 parking lot incident.
  • On the false arrest claim, the court found that plaintiffs’ complaint alleged they were arrested for refusing a bar check but failed to allege that officers lacked probable cause for the arrest.
  • On the retaliatory arrest claim, video footage showed Rahdar intentionally blocked a police officer’s vehicle for four minutes, providing probable cause for arrest under Texas Penal Code § 42.03 (obstructing a highway or passageway). The court held that plaintiffs forfeited their arguments under the Nieves exception by raising them for the first time on appeal.

• Hrncir v. Internal Revenue Service, et al., 25-40644, appeal from E.D. Tex.
  • per curiam (Higginbotham, Engelhardt, Ramirez) (no oral argument), Freedom of Information Act
  • Affirming dismissal of FOIA claim.
  • Main Legal Issues: Whether the district court properly dismissed the pro se plaintiff’s complaint—alleging violations of the Freedom of Information Act (FOIA) and Privacy Act against federal, state, and local government entities—for lack of subject matter jurisdiction.
  • The Fifth Circuit found that the appellant abandoned his challenge to the district court’s standing determination by failing to address it in his brief. The court also found his remaining arguments—including claims that the district court improperly deferred to agency determinations and denied him due process—were forfeited due to inadequate briefing. The court noted that the appellant’s brief failed to “provide meaningful analyses for each issue and present more than conclusory allusions” and lacked required record citations.

• United States v. Castillo, 25-10986, appeal from N.D. Tex.
  • per curiam (Jones, Duncan, Douglas) (no oral argument), criminal
  • Granting Anders motion to withdraw, and dismissing appeal.

• United States v. Garcia Brizuela, 25-10408, appeal from N.D. Tex.
  • per curiam (Jones, Duncan, Douglas) (no oral argument), criminal
  • Granting Anders motion to withdraw, and dismissing appeal.