by Kelsi White
Q Clothier New Orleans, L.L.C. v. Twin City Fire Ins. Co., No. 21-30278 (Mar. 22, 2022).
In Q Clothier, the Fifth Circuit weighed in on insurance coverage for COVID-related losses from government shutdown orders under Louisiana law. Q Clothier, an upscale men’s clothing store, made a claim on its property insurance after government shutdown orders required it to close its doors in the early days of the pandemic. Q Clothier asserted it had suffered “direct physical loss of or damage to property” and that the policy’s civil-authority-order coverage should apply because access was prohibited to its business by civil authorities. The insurer denied coverage. The district court entered judgment on the pleadings, concluding there was no coverage as a matter of law. The Fifth Circuit affirmed.
The Fifth Circuit interpreted “direct physical loss of or damage to property” under Louisiana law to cover only “tangible alterations of, injuries to, and deprivations of property.” The government-ordered closure of Q Clothier’s stores did not tangibly alter or injure Q Clothier’s property or deprive Q Clothier of that property. The stores themselves and the property inside them were “unchanged” by government orders. This reasoning is consistent with the Fifth Circuit’s interpretation of similar policy language under Texas law in Terry Black’s Barbecue, L.L.C. v. State Automobile Mutual Insurance Co., 22 F.4th 450, 458 (5th Cir. 2022).
As for the civil-authority-order coverage, the Fifth Circuit held that this coverage applied when there was a covered cause of loss to property near the Q Clothier stores that caused a civil authority to limit access to the Q Clothier stores. The Fifth Circuit stressed the importance of a causal connection: the loss of nearby property had to cause the government orders restricting access. Q Clothier could not plausibly allege this kind of causal connection because the pandemic caused the shutdown orders, not some loss of nearby property.
Q Clothier reflects the Fifth Circuit’s and other courts’ almost uniform approach to insurance claims for business losses due to pandemic shut-down orders. Courts have consistently rebuffed efforts by nonessential businesses to shift lost business income to their property insurers.
Troy Mitchell v. Advanced HCS, L.L.C. d/b/a Wedgewood Nursing Home, No. 21-10477 (Mar. 10, 2022).
In Mitchell, the Fifth Circuit rejected a nursing home defendant’s attempt to create federal jurisdiction over a state-law negligence claim for a resident’s COVID death. The Fifth Circuit’s decision follows similar holdings in the Third and Ninth Circuits.
The nursing home defendant argued that the Public Readiness and Emergency Preparedness Act (PREP Act) completely preempted state-law negligence claims, which creates a jurisdictional exception to the well-pleaded complaint rule. The PREP Act grants immunity for injuries caused by, arising out of, relating to, or resulting from the administration or use of a “covered countermeasure,” but it requires the Secretary of the Department of Health and Human Services to issue a declaration that puts it into effect. The PREP Act also provides for a compensation fund for those injured by covered countermeasures. That compensation fund is the sole remedy for an injured person unless they can demonstrate willful misconduct, which is an exclusively federal claim that proceeds in the District Court for the District of Columbia. The Fifth Circuit held that the compensation fund is not a federal cause of action, and that Mitchell was not asserting a willful-misconduct claim that could be preempted by the PREP Act.
The nursing home next claimed that federal jurisdiction existed under Grable & Sons Metal Prods., Inc. v. Darue Eng’g & Mfg., 545 U.S. 308, 312 (2005), because the state-law claims “implicate significant federal issues.” According to the nursing home, the COVID pandemic implicated significant federal issues as shown by the PREP Act, its compensation fund, and agency guidance issued to health services providers. The Fifth Circuit rejected this argument, noting that the Grable category of cases is “special and small.” It covers state-law claims premised on a component of federal law, like a duty established by federal law. The state-law negligence claims against the nursing home did not fall in that category.
Finally, the nursing home claimed it could assert jurisdiction under the federal officer removal statute. The Fifth Circuit rejected this argument because the nursing home was not “acting under” a federal government officer or agency. Nursing homes were not “critical infrastructure” that were enlisted under the government’s close supervision to combat COVID. The Fifth Circuit then specifically disavowed the existence of federal jurisdiction solely because there is a comprehensive and detailed set of federal regulations that govern a private entity (the “regulation plus” framework articulated by a 1991 Eastern District of New York decision).
In summary, Mitchell means that defendants should not expect to find refuge in federal court based on arguments that COVID and the federal response efforts to COVID create a federal issue.
Earnest v. Sanofi U.S. Servs., Inc., No. 20-30184 (Feb. 10, 2022).
In Earnest, the Fifth Circuit reversed and remanded a jury verdict in favor of a drug-manufacturer defendant because the district court erroneously admitted improper expert testimony.
The drug-manufacturer defendant, Sanofi, offered two witnesses at trial: Dr. Kopreski, who had been its corporate representative deponent and purported to offer Rule 701 lay opinion testimony, and Dr. Glaspy, a Rule 702 expert witness. The plaintiff argued that Dr. Kopreski actually offered inadmissible Rule 702 expert testimony at trial, and because Dr. Glaspy wholly relied on it, Dr. Glaspy’s testimony was also inadmissible. The Fifth Circuit agreed with the plaintiff. According to the Fifth Circuit, Sanofi used Dr. Kopreski and Dr. Glaspy in tandem to create a “calculated and troubling end-run around Rule 702 and Daubert.”
Dr. Kopreski’s testimony about clinical trials that occurred during his tenure and about which he had personal knowledge were generally admissible under Rule 701 as lay witness opinion testimony—“[u]p to a point.” But the testimony passed that point. His testimony went beyond his personal knowledge and was “littered with his interpretation and analysis of” the clinical study, which he prepared during litigation. It was a “re-analysis” of that clinical study using scientific, technical, or other specialized knowledge, and therefore his testimony had to meet the requirements of Rule 702.
The Fifth Circuit then decided that the admission of Dr. Kopreski’s testimony was harmful. Sanofi avoided the expert-disclosure and expert-discovery rules by cloaking Dr. Kopreski as a lay witness and then bootstrapped more expert testimony from Dr. Glaspy based on Dr. Kopreski’s undisclosed expert opinions. Sanofi also emphasized the importance of Dr. Kopreski’s testimony in its closing argument.
The admission of Dr. Glaspy’s testimony was also harmful error. This was because he admitted that his opinions were entirely dependent on Dr. Kopreski’s “re-analysis,” which was inadmissible expert testimony.
Earnest is a helpful refresher on the pitfalls a litigant may encounter with a hybrid fact/expert witness and an expert witness that rely on other witnesses’ testimony.
Abbt v. City of Houston, No. 21-20085 (Mar. 11, 2022).
In Abbt, the Fifth Circuit reversed a summary-judgment order on a plaintiff’s hostile-work environment claim but affirmed it as to a Title VII retaliation claim.
The Fifth Circuit held that a hostile-work environment can exist even when the victim discovers harassing conduct after the fact—even years after the fact—so long as all the other requirements of a Title VII claim are met.
The Fifth Circuit also reaffirmed that an employer is on notice of harassment under Williamson v. City of Houston, 148 F.3d 462 (5th Cir. 1998), when a supervisor with remedial authority and a reporting obligation knows of the harassment—even when the supervisor then participates in the harassment, rather than taking appropriate measures or doing nothing.
On the retaliation claim, the Fifth Circuit affirmed by holding that the plaintiff could not meet her burden to demonstrate pretext in the face of the City’s articulated explanation for the alleged retaliatory acts (denial of paid leave and interference with a City-provided therapist).
In full disclosure, I have a soft spot for the Abbt decision after briefing and arguing the appeal for Ms. Abbt. Putting aside that personal bias, the Abbt decision is important for hostile-work environment claims on the above two points.
Trafigura Trading LLC v. United States of America, No. 21-20127 (Mar. 24, 2022).
Although this appeal involves the constitutionality of an export-tax statute—something few would consider required reading—any Hamilton fans should consider reading the introduction to the majority opinion by Judge Ho.