Take the Fifth

• American Sustainable Business Council v. Hegar, No. 26-50111, appeal from W.D. Tex.
  • per curiam (Graves, Ho, Douglas) (no oral argument), Ho, J., concurring; First Amendment
  • Published order granting stay pending appeal of injunction against enforcement of Texas S.B. 13, which prohibits Texas public entities from investing in private funds that refuse to invest in energy companies.
  • The American Sustainable Business Council sued Texas Comptroller Glenn Hegar and Attorney General Ken Paxton, challenging S.B. 13, a Texas law that prohibits certain public entities from investing in private funds that refuse to invest in energy companies. The district court entered a preliminary injunction against enforcement of the law, and the state defendants moved the Fifth Circuit to stay that injunction pending appeal.
  • The per curiam order granting the stay contained no substantive analysis. Judge Ho, however, issued a two-page concurrence in the order that elaborated. He framed S.B. 13 as part of a broader family of Texas laws—including the 2017 anti-BDS statute barring state business with firms that boycott Israel and a 2021 law banning state involvement with firms that “target the firearms industry”—all of which, under Judge Ho’s framing, condition public funds on nondiscrimination rather than regulate speech. He emphasized that the only circuit to have reached the merits of a First Amendment challenge to such a law rejected it in Arkansas Times LP v. Waldrip, 37 F.4th 1386 (8th Cir. 2022) (en banc), cert. denied, 143 S. Ct. 774 (2023), and that the Supreme Court has long upheld conditioning public funds on nondiscrimination under Title VI, Title IX, and Rumsfeld v. FAIR.
  • Judge Ho wrote that “S.B. 13 is about spending, not speech,” and that “[s]tate officials have the right to champion nondiscrimination by refusing to engage with those who discriminate. They’re allowed to boycott those who boycott others.” Judge Ho stressed that investment decisions “are not inherently expressive” and that restricting conduct “has never been deemed an abridgment of freedom of speech … merely because the conduct was in part initiated, evidenced, or carried out by means of language.”
  • Judge Ho concluded: “So I am gratified that the court today grants the stay of the preliminary injunction pending appeal. I am pleased to concur.”

Unpublished decisions

• United States v. Thomas, 25-11162, appeal from N.D. Tex.
  • per curiam (Jones, Duncan, Douglas) (no oral argument), criminal
  • Affirming constitutionality of conviction for possession of a firearm by a felon.

• United States v. Garraway, 25-50344, appeal from W.D. Tex.
  • per curiam (Barksdale, Graves, Duncan) (no oral argument), criminal, sufficiency of evidence
  • Affirming conviction of conspiracy to transport illegal aliens and transportation of an illegal alien for financial gain under 8 U.S.C. § 1324. On appeal, defendant Garraway challenged the sufficiency of the evidence, specifically arguing the Government failed to prove he knew or recklessly disregarded the alienage of the individuals he transported. Because Garraway did not move for a judgment of acquittal below, review was for plain error only—a “doubly difficult” standard that the court described as “tantamount to the eye of a virtually impassable needle.”
  • The Government introduced WhatsApp messages between Garraway and a contact in Mexico (“Muñeca”) directing him to pick up people near Eagle Pass, confiscate their phones, hide them in the vehicle, and drop them off for payment. A Border Patrol Agent also testified that Garraway appeared visibly nervous, “shocked,” and had a “deer in the headlights look” at a checkpoint.
  • The court held that Garraway fell “far short” of the applicable standard, finding the evidence of his knowledge was not “so completely, obviously, and unbelievably inadequate that allowing the verdict to stand would be a shocking and manifest miscarriage of justice.”

• Gemstone Foods, L.L.C. v. JPMorgan Chase Bank, N.A., 26-60049, appeal from S.D. Miss.
  • per curiam (Richman, Duncan, Douglas) (no oral argument), negligence
  • Affirming 12(b)(6) dismissal of claims of tort and UCC violations arising from wire-transfer transactions.
  • Gemstone Foods, a Mississippi food processor, directed two wire transfers totaling roughly $187,000 from its account at Regions Bank to pay vendors. Unknown “intermeddlers” diverted both wires into sham accounts those parties had opened at Chase. Gemstone—which had no banking relationship with Chase—sued Chase for negligence, gross negligence, and violation of Florida’s Article 4A of the Uniform Commercial Code. The central question was whether Chase owed a duty of care to Gemstone, a noncustomer, under Mississippi law.
  • The court held that Midwest Feeders, Inc. v. Bank of Franklin, 886 F.3d 507 (5th Cir. 2018), controls and forecloses the claims. The court rejected three alternative duty theories: (1) that Chase’s alleged violations of industry standards and internal procedures independently create a duty—they do not where no underlying duty exists; (2) that the Bank Secrecy Act and Customer Identification Program regulations create a privately enforceable duty to noncustomers—courts have “consistently held” they do not; and (3) that Elkin Valley Baptist Church v. PNC Bank, N.A., 748 F. Supp. 3d 293 (W.D. Pa. 2024), should persuade the court to recognize such a duty—that decision applied Pennsylvania law and does not bind the Fifth Circuit on its Erie prediction of Mississippi law. The court also declined Gemstone’s request to certify the duty question to the Mississippi Supreme Court, noting it is “chary about certifying questions of law absent a compelling reason”. The UCC Article 4A claim was deemed forfeited for failure to defend it below and on appeal.