In this edition of Litigation Roundup, Texas wins an appeal to vacate the license of a company wanting to store spent nuclear fuel in the Permian Basin, a team of Haynes Boone attorneys in Dallas defended a $6.6 million award for Pizza Hut in a fight with a former franchisee, and a former general counsel and staff attorney for Louisiana State University Health Sciences Center in New Orleans get a second chance to bring a pay discrimination suit.
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Dallas County District Court
Ex-CEO, CFO of Manufacturing Co. Sued for its $12M ‘Downfall’
Max Farley and Taylor Gregg, who formerly served as chief executive officer and chief financial officer, respectively, for Titus Group Inc. have been accused of committing “textbook examples of securities fraud, common law fraud, theft and breaches of fiduciary duties” in a new lawsuit alleging they caused the company to fail.
Founded in 2016, Titus was a company that specialized in “offering fluid-handling and flow-control component parts for the energy, fire protection and industrial business sectors,” according to the lawsuit.
In 2019 Titus was named the second-fastest growing company in North Texas, but the plaintiffs who were investors in the company — Stonehenge Capital Fund Texas II, Salisbury Partners and Reid Hyde — allege that the accolade wasn’t based on actual growth but was the result of “accounting manipulation” executed by Farley and Gregg.
The investor plaintiffs allege that beginning in 2019 Farley and Gregg routinely made misrepresentations about the company’s revenue, expenses, profits and losses.
“Farley and Gregg made these misrepresentations through the deliberate misuse of ASC 606 accounting and outright manipulation of company accounting, which falsely conflated the potential sales pipeline of Titus with actual, realized revenue,” the suit alleges. “By including both actual revenue with ‘potential’ sales, Farley and Gregg made Titus appear to experience exponential growth and revenue that simply did not exist.”
The misrepresentations induced the plaintiffs to invest in the company, the suit alleges, and the “house of cards” collapsed in mid-2020 “when the pandemic revealed that most of Titus’ represented revenue simply did not exist.”
The case has been assigned to Dallas County District Judge Gena Slaughter.
The lawsuit was filed Aug. 14 and Farley and Gregg had not retained counsel as of Monday, according to the docket.
The case number is DC-23-11557.
Eastern District of Texas
Toyota North America Hit with Putative Class Claims Over Fuel Line Recall
Plano-based Toyota North America has been sued by a putative class of plaintiffs over a defect in the fuel line of its 2022 and 2023 model Toyota Tundra pickup trucks that prompted a recall of about 170,000 vehicles earlier this month.
The lawsuit was filed Aug. 24 by lead plaintiff Benjamin Murphy and has been assigned to U.S. District Judge Michael J. Truncale. The issue with the fuel line was that it rubbed against the brake line, causing leaks and posing a fire hazard.
The lawsuit alleges that the recall — which includes fixing the fuel line and replacement of any faulty parts at no cost — will cost Murphy “hours of his time” for what amounts to a temporary fix.
“Defendant’s recall is concerning because it does not offer any reasonably foreseeable guarantee that the fuel line defect will go away permanently,” Murphy alleges. “Rather, the recall mentions installing a fastener to keep the fuel line from rubbing against the brake line. However, it does not detail any other fixes to prevent other possibly faulty fuel lines, or rearranging fuel lines elsewhere as to prevent a similar rubbing situation.”
Murphy is represented by Bryan O. Blevins Jr. of Provost & Umphrey Law Firm.
Toyota had not retained counsel as of Monday, according to the docket.
The case number is 9:23-cv-00145.
U.S. Court of Appeals for the Fifth Circuit
Ex-Pizza Hut Franchisee’s Waiver of Jury Trial Affirmed
Jignesh Pandya, who was one of the largest Pizza Hut franchisees with 43 restaurants in Pennsylvania, failed to convince the Fifth Circuit that an agreement he made with the restaurant to waive his right to a jury trial was procured by fraud.
The appellate court issued an Aug. 22 ruling finding no error in U.S. District Judge Robert Schroeder III’s decision that the contract dispute case proceed to a bench trial, pursuant to a post-termination agreement’s bilateral jury waiver provision. The bench trial ended with an award of $6.6 million plus interest for Pizza Hut.
“Courts have long honored parties’ agreements to waive the jury right if the waiver is knowing and voluntary. We follow our sister circuits in holding that general allegations of fraud do not render contractual jury waivers unknowing and involuntary unless those claims are directed at the waiver provision specifically,” the panel held. “Because Pandya failed to show that the jury waiver was unknowing and involuntary, we hold him to his bargain and affirm.”
Pizza Hut accused Pandya of failing to pay franchise fees and violating brand standards in his operation of stores in Pennsylvania and Connecticut, according to the opinion, and Pizza Hut terminated his franchise agreements in October 2018.
In order to keep the restaurants running while attempts were made to find a buyer, the parties entered into two post-termination agreements that allowed Pandya to keep operating the stores and included a provision that both parties “explicitly waive their respective rights to a jury trial in any litigation between or among them and hereby stipulate that any such trial shall occur without a jury.”
The panel found Pandya “failed to allege that the jury waiver specifically was procured by fraud.”
Judges Don R. Willett, Patrick E. Higginbotham and Leslie H. Southwick sat on the panel.
Pandya is represented by Jennifer Doan, Mariah Hornok and Cole Riddell of Halton & Doan.
The case number is 22-40555.
Ex-GC, Staff Attorney Get LSU Pay Discrimination Suit Partially Revived
Katherine Muslow, who served as the general counsel of Louisiana State University Health Sciences Center in New Orleans for 16 years, and Meredith Cunningham, a staff attorney who reported to Muslow, will get another shot to bring their gender discrimination claim against the university following a 2-1 ruling issued by the court Aug. 24.
The panel revived only claims the plaintiffs brought under Title VII and the Equal Pay Act alleging that LSU retaliated against them by revoking their employment contracts after they requested a salary review.
The women had argued the salaries they received were below their paygrade and lower than what male colleagues were making. The defendants had argued there was a non-retaliatory reason the employment contracts were rescinded: They weren’t signed by a deadline that was listed as an effective appointment date in the contract.
The panel majority noted that Thomas Skinner, the vice president of legal affairs and general counsel at LSU’s office of general counsel had “continued to request that plaintiffs execute the allegedly expired contracts” after the deadline, “which calls into question” the reason for rescinding the contracts.
“Moreover, Skinner explained at his deposition that the employment contracts were rescinded because he was ‘taken aback’ by plaintiffs’ salary-review request,” the court wrote. “Given his admission that their request raising gender-pay equity concerns regarding the OGC salaries was the reason the contracts were rescinded, we hold that Muslow and Cunningham have presented evidence sufficient to overcome summary judgment on this allegation of retaliation.”
Judge Jerry E. Smith concurred in part and dissented in part, writing that he would have upheld the summary judgment win “across the board.”
“Taken at face value, the majority’s reasoning unintentionally allows any plaintiff to make absurd demands of her employer, gesture toward Title VII or the Equal Pay Act at the end of the request, and then survive summary judgment if the employer (reasonably) rejects the demands,” he wrote. “…The requested salary increases were unreasonable and logistically nonviable. There is not a whiff of any retaliatory motive in the record.”
Judges Carolyn Dineen King, Jennifer Walker Elrod and Smith sat on the panel.
LSU is represented by Maria Alessandra and Kim Boyle of Phelps Dunbar.
The case number is 22-30585.
Texas Notches Win Against Nuclear Regulatory Commission
The Fifth Circuit has sided with Texas, agreeing in an Aug. 25 ruling that the Atomic Energy Act does not give the Nuclear Regulatory Commission authority to issue licenses for private parties to store spent nuclear fuel in Andrews County, which is part of the Permian Basin.
The ruling vacated the licenses the NRC had issued to Interim Storage Partners, which had planned to operate a temporary storage facility. An oil and gas company, Fasken Land and Minerals, as well as an interest group called Permian Basin Land and Royalty Owners, had joined Texas in challenging the licensing of ISP. Texas filed a petition for review in September 2021.
“The Atomic Energy Act does not confer on the Commission the broad authority it claims to issue licenses for private parties to store spent nuclear fuel away-from-the-reactor,” the court held. “And the Nuclear Waste Policy Act establishes a comprehensive statutory scheme for dealing with nuclear waste generated from commercial nuclear power generation, thereby foreclosing the Commission’s claim of authority.”
The NRC had argued that because it has authority to issue licenses for possession of nuclear waste, it also had authority to license nuclear fuel storage facilities.
“But this ignores the fact that the Act authorizes the Commission to issue such licenses only for certain enumerated purposes — none of which encompass storage or disposal of material as radioactive as spent nuclear fuel,” the court held.
Judges James C. Ho, Edith H. Jones and Cory T. Wilson sat on the panel.
Texas is represented by its own Michael Abrams, Ryan Baach and Lanora Christine Pettit.
NRC is represented by its own Andrew Paul Averbach.
The case number is 21-60743.