Take the Fifth

Designated for publication

• Banner v. Wright, 25-30381, appeal from E.D. La.
  • per curiam (Smith, Higginson; decided by quorum as Judge Wiener was originally on panel but did not participate in decision) (oral argument); Rule 59; attorney misconduct; juror statements; First Amendment
  • Vacating judgment for defendant on First Amendment claims by member of public whose comments at Parish Council meeting were cut off.
  • Joy Banner attended a St. John the Baptist Parish Council meeting and attempted to comment on an agenda item concerning the retention of special ethics counsel—a topic directly related to an ethics complaint she had filed against Parish President Jaclyn Hotard. After just five seconds, Council Chairman Michael Wright cut her off by reading aloud a Louisiana statute, La. Rev. Stat. § 42:1141.4(L)(1), which criminalizes publicizing Board of Ethics proceedings. That statute, however, had been ruled unconstitutional nearly a decade earlier, and the paper from which Wright read was marked “unconstitutional” at the top. Banner sued under 42 U.S.C. § 1983 for First Amendment retaliation and discrimination, along with state-law claims. A jury found for defendants on all counts, but at trial, defense counsel engaged in at least 38 catalogued instances of misconduct—ignoring court directives, testifying from counsel’s chair, referencing excluded evidence, and mocking the plaintiff.
  • At issue on appeal was (1) whether Banner’s failure to move for a mistrial during trial forfeited her right to seek a new trial under Federal Rule of Civil Procedure 59; (2) whether the district court properly relied on a juror’s post-verdict media statement to deny the Rule 59 motion under Federal Rule of Evidence 606(b); and (3) whether the cumulative misconduct of defense counsel was so prejudicial as to require a new trial.
  • The court held that failure to move for a mistrial does not categorically bar a Rule 59 motion for a new trial. Banner timely objected throughout trial and accepted curative instructions; requiring her to have also moved for a mistrial “would inherently defeat the intended purpose of those instructions and thereby undermine fundamental aspects of trial procedure.” The court noted that Rule 59 even permits sua sponte new-trial orders, so “it naturally follows that the rules aren’t intended to condemn a party who is merely slow on the draw.”
  • The district court committed reversible error by relying on a juror’s post-verdict media statement to conclude that defense counsel’s misconduct did not influence the jury. Federal Rule of Evidence 606(b)(1) broadly forbids evidence of a juror’s statements concerning deliberations or mental processes, and none of its enumerated exceptions applied. The court stated bluntly: “a motion for new trial may not be based on inadmissible evidence.”
  • On the merits, the court found that defense counsel’s misconduct “permeate[d] the entire proceeding” and required a new trial. The court catalogued dozens of violations—testifying from counsel’s chair, referencing excluded evidence, citing an unconstitutional statute as “the law,” and mocking the plaintiff with a timer—and concluded: “you can throw a skunk into the jury box and instruct the jurors not to smell it, but it doesn’t do any good.” The panel added that defense counsel was “seemingly undeterred by multiple sua sponte interjections from the district court and over a dozen sustained objections,” and that the district court itself had denounced defendants for “making a mockery” of the case.

• GH America Energy, L.L.C. v. Fohn, 25-50879, appeal from W.D. Tex.
  • Smith, J. (Smith, Haynes, Engelhardt) (oral argument), preemption, utilities
  • Affirming dismissal of suit challenging Texas agency’s denial of application to connect solar project into electrical grid under Texas law, holding law was not preempted by federal law.
  • GH America Energy (“GHAE”), a Texas LLC and subsidiary of a Chinese company (Xinjiang Guanghui Industry Investment Group), sought to connect its Blue Star Solar Project to the Texas electric grid managed by ERCOT. ERCOT denied GHAE’s interconnection application under the Texas Lone Star Infrastructure Protection Act of 2021 (“LSIPA”), which prohibits contracts giving entities majority-owned or controlled by citizens of China (and certain other countries) access to critical infrastructure in Texas. GHAE had previously been subject to CFIUS review and a mitigation agreement with the Department of Defense related to its parent’s acquisition of U.S. assets. GHAE sued, arguing LSIPA was preempted by the federal CFIUS regime under the Defense Production Act. The district court dismissed on the merits.
  • At issue on appeal was whether the federal CFIUS regime, established under § 721 of the Defense Production Act and expanded by FIRRMA, impliedly preempts LSIPA under either (1) conflict (obstacles-and-purposes) preemption or (2) field preemption.
  • On conflict preemption, the court held that GHAE failed to identify any textual conflict between CFIUS and LSIPA. LSIPA targets a different category of transactions—energy grid interconnection agreements—whereas CFIUS covers corporate-control transactions such as mergers, acquisitions, and certain investments. The court found LSIPA to be “in purposive harmony with CFIUS,” noting that “[r]esponsibly managing interconnections with Texas’s energy grid … is harmonious with [CFIUS] but works in a separate lane.” The court emphasized that “preemption must be found in the statutory text, not a party’s or court’s subjective beliefs about what Congress intended,” and rejected GHAE’s reliance on Crosby v. National Foreign Trade Council and Arizona v. United States, finding neither case involved analogous facts.
  • On field preemption, the court concluded that CFIUS does not constitute the kind of “pervasive” and “dominant” regulatory scheme necessary to occupy the field and oust state power. The court stressed that “utility regulation is one of the most important of the functions traditionally associated with the police power of the States” and that a heightened presumption against preemption applied. The court observed: “as a matter of statutory interpretation, we do not infer positive content from silence; neither do we infer an opposite intent. We just infer no intent.” The court also noted CFIUS’s own non-preemption savings clause and cited the Eleventh Circuit’s rejection of a nearly identical preemption challenge to Florida’s analogous statute.
  • The court concluded with a broader observation: “If states can impose their own environmental standards or health and safety standards without triggering field preemption in any area of economic regulation, it follows that they can protect their energy grids from data theft and computer viruses.” It added that “discretionary policy-balancing is emphatically not the province and role of the judiciary to decide. Where Congress has been silent, … Texas has a free lane to enact and enforce LSIPA.”

• McCain v. Mary Mahoney’s, Inc., 25-60663, appeal from S.D. Miss.
• This was an appeal handled by Tad Bartlett of Fishman Haygood, author of this blog, on behalf of the appellant plaintiff.
• King, J. (King, Smith, Ramirez) (oral argument); standing, class action, fraud
• Reversing dismissal of consumer class action on ground of standing of the named class representative, vacating denial of motion to amend class complaint, and remanding for further proceedings.
• Mary Mahoney’s Old French House, a high-end Mississippi Gulf Coast restaurant specializing in fresh local seafood, participated in a years-long conspiracy with its supplier, Quality Poultry & Seafood, to substitute inexpensive imported frozen fish from Africa, India, and South America for premium local catch. All defendants pled guilty in federal criminal proceedings; Mahoney’s admitted to fraudulently selling approximately 58,750 pounds (over 29 tons) of mislabeled fish between December 2013 and November 2019. Plaintiff Todd McCain dined at Mahoney’s three times during the relevant period and ordered what he believed to be premium local snapper. He filed a class action under RICO and Mississippi law, but the district court dismissed for lack of Article III standing, finding McCain had not plausibly alleged he was personally served mislabeled fish.
• At issue on appeal was (1) whether McCain plausibly alleged a concrete Article III injury under a fraudulent-inducement theory and/or an overcharge-by-fraud theory; and (2) whether his injury was sufficiently particularized—i.e., whether the complaint plausibly alleged that he personally was served mislabeled fish.
• On concreteness, the court distinguished this case from Earl v. Boeing Co. and Rivera v. Wyeth-Ayerst Laboratories, where plaintiffs suffered no physical injury and received a functionally adequate product. Here, as in Wilson v. Centene Management Co., “the seller … promised a high-quality product, charged the buyer for that high-quality product, and delivered an inferior version of that product.” The court framed the case memorably from the opening line: “A customer walked into a high-end restaurant that specializes in fresh local seafood and ordered an entrée of premium snapper caught in local waters. Unbeknownst to the customer, the restaurant had been engaging in a multi-year scheme to substitute a substantial quantity of premium local fish with inexpensive, imported frozen fish.”
• On particularization, the court held that McCain’s allegations of systematic, years-long mislabeling of over 29 tons of fish at a single restaurant plausibly supported an inference that his entrées were affected by the scheme, without requiring him to allege a precise percentage of mislabeled products. The court noted that specific allegations of imported fish orders in September and October 2018, shortly after McCain’s August 21, 2018 visit, combined with Cvitanovich’s admission of mislabeling approximately 17,190 pounds of fish in 2018–2019, “plausibly supports an inference that McCain was served frozen fish on August 21, 2018.” The court emphasized that at the pleading stage, “general allegations embrace those specific facts that are necessary to support the claim.”

Unpublished decisions

• Ellis v. Ben E. Keith Company, 25-11395, appeal from N.D. Tex.
  • per curiam (Graves, Higginson, Ramirez) (no oral argument), civil
  • Dismissed in part for lack of jurisdiction and in part for frivolous appeal, appeal of dismissal of federal claims and remand of state-law claims, and denial of Rule 59(e) motion.
  • Eric Ellis, proceeding pro se, appealed the district court’s dismissal of his federal claims and remand of his state-law claims against Ben E. Keith Company, as well as the denial of his post-judgment motions under Rule 59(e). Ellis moved for leave to proceed in forma pauperis (IFP), challenging the district court’s certification that his appeal was not taken in good faith. Central issues included whether the magistrate judge erred or exceeded authority in striking Ellis’s second amended complaints, whether the district court erred in declining to rule on a default-judgment motion, and whether sanctions and other procedural rulings were proper.
  • The Fifth Circuit dismissed in part for lack of jurisdiction, finding that Ellis’s failure to timely appeal the magistrate judge’s orders striking his second amended complaints to the district court deprived the appellate court of jurisdiction over those claims. The court denied Ellis’s IFP motion and dismissed in part as frivolous, concluding that Ellis failed to present any nonfrivolous issue for appeal on his remaining arguments.

• Bozorgi v. Cassava Sciences, Inc., 25-50855, appeal from W.D. Tex.
  • Engelhardt, J. (Willett, Engelhardt, Douglas) (oral argument), securities fraud, class certification, mootness
  • Rejecting argument that settlement agreement mooted appeal; vacating class certification order and remanding.
  • Investors alleged that Cassava Sciences and several executives committed securities fraud under §10(b) and §20(a) of the Securities Exchange Act and Rule 10b-5 by misrepresenting the success of the company’s experimental Alzheimer’s drug, simufilam. The district court certified a class of all purchasers of Cassava securities during the proposed class period. Defendants appealed the class certification order under Rule 23(f), arguing that “meme-stock dynamics”—where retail traders on social media drive stock prices in ways untethered from company fundamentals—should have defeated the predominance requirement of Rule 23(b)(3). A threshold jurisdictional question was whether a binding settlement agreement between the parties mooted the appeal.
  • The court rejected the plaintiffs’ mootness argument, noting that a class settlement requiring court approval under Rule 23(e) does not moot an action until the court grants that approval, and the parties’ own settlement agreement carved out this appeal.
  • The court vacated the class certification order and remanded, holding that the district court abused its discretion by misapplying the legal standard for assessing market efficiency under the Basic presumption. The district court erred by dismissing defendants’ meme-stock-dynamics evidence out of hand and by ticking through the Cammer/Krogman factors without engaging with record evidence of market inefficiency—including price volatility in the absence of news and short-selling constraints. The Fifth Circuit emphasized that courts must conduct a “rigorous” and holistic assessment, weighing evidence of both market efficiency and inefficiency; the Cammer/Krogman factors are “merely a tool to that end, not the whole project”.

• Cain v. State Farm Fire and Casualty Company, 25-60442, appeal from S.D. Miss.
  • per curiam (Jones, Southwick, Duncan) (no oral argument), insurance, expert witness
  • Affirming summary judgment dismissal of plaintiffs’ claims against homeowners’ insurer.
  • Dustin and Amanda Cain sued State Farm for underpaying a homeowners’ insurance claim after a tree fell on their home. The principal issues were (1) whether the district court properly struck the Cains’ expert reports, which were jointly authored by their designated expert, Sean Fee, and a non-designated co-author, Jim Irmiter, without delineating which opinions belonged to which person; (2) whether summary judgment was proper once the expert reports were excluded, leaving no admissible evidence of causation or damages; and (3) whether the Cains’ “extra-contractual” claims—including bad faith, punitive damages, and delayed payment—could survive independently.
  • The court held the district court did not abuse its discretion in striking the expert reports because they failed to delineate which opinions and analysis were attributable to Fee, the sole designated expert, as required by Federal Rule of Civil Procedure 26(a)(2)(B)(i). The court rejected the Cains’ argument that problems with the reports went only to weight, not admissibility. Summary judgment was proper because, without admissible expert testimony, the Cains could not prove causation or damages. The extra-contractual claims likewise failed because, under Mississippi law, a bad-faith insurance claim requires an underlying breach of contract.

• United States v. Lee, 26-10370, appeal from N.D. Tex.
  • per curiam (Richman, Haynes, Graves) (no oral argument), criminal
  • Granting Anders motion to withdraw, and dismissing appeal.