In this edition of litigation roundup, the Fifth Circuit has asked the Texas Supreme Court to answer a certified question in a dispute that pits a nonprofit group against the state’s environmental protection agency, the Texas Supreme Court grants review in two tax appraisal cases involving the value of Oncor’s transmission lines and the founder of a Call of Duty esports team take aim at Activision Blizzard’s business practices in a new suit.
Have a development we should include in next week’s Litigation Roundup? Please let us know at tlblitigation@texaslawbook.net.
Central District of California
Activision Hit with $680M Monopoly Claim
The Texas-based CEO of an esports company has filed a lawsuit against Activision Blizzard alleging the gaming company is operating a monopoly over professional leagues and tournaments revolving around the popular first-person shooter game Call of Duty.
The lawsuit was filed Feb. 15 by Hector Rodriguez, who uses the handle “H3CZ” and is the founder and operator of esports team OpTic. Seth Abner, who uses the handle “Scump” and is the second winningest professional Call of Duty player, also is a plaintiff in the lawsuit.
Prior to 2019, the lawsuit alleges, there were many market participants organizing Call of Duty leagues and tournaments. But in late 2019 Activision, the company that created Call of Duty, “took concerted and purposeful actions” to monopolize the market and then use that power to “economically coerce the world’s top players and teams to agree to Activision’s rent-seeking demands and various trade-restraining contractual provisions that constitute per se violations of Section 1 of the Sherman Act.”
“Those who could not acquiesce to Activision’s extortionate terms were excluded from the market or, in a few instances, allowed to participate in the market only if they ‘partnered’ with investors who satisfied Activision’s preferences,” the lawsuit alleges. “Activision’s actions were intended to, and did, eliminate all professional Call of Duty leagues and professional Call of Duty tournaments other than the Activision Call of Duty League (the ‘Activision CoD League’), which Activision owns and controls.”
Activision requires Call of Duty teams pay it a $27.5 million entry fee and give it 50 percent of revenue teams get from ticket sales, sponsorships and other revenue streams.
The lawsuit is seeking more than $680 million in damages.
The plaintiffs are represented by Eric Rosen, Constantine P. Economides and Brianna K. Pierce of Dynamis in Newport Beach, California, and Aaron M. Katz of Aaron Katz Law in Boston.
The docket did not indicate on Monday which judge the case had been assigned to or who is representing Activision.
The case number is 2:24-cv-01287.
Eastern District of New York
Bankruptcy Trustee Alleges Fraudulent Transfer
The trustee overseeing the Chapter 7 bankruptcy of Jones Diversity, a diversity consulting company, has alleged the company fraudulently transferred more than $600,000 to another company prior to filing for bankruptcy.
Jones Diversity is owned by Haynes Boone Dallas partner Sharon Jones, who also owns O-H Community Partners. Jones is president and sole officer of both companies and is also the chief diversity, equity and inclusion officer for Haynes Boone.
Trustee Lori Lapin Jones alleges in the complaint filed Feb. 6 against Sharon Jones and O-H Community Partners that in the two years after a 2019 lawsuit was filed in state court in Cook County, Illinois, against Jones Diversity — seeking about $76,000 for unpaid services rendered — Jones Diversity made dozens of transfers totaling $623,552 to O-H.
In the Cook County lawsuit, final judgment of $93,342 against Jones Diversity was entered Oct. 26, 2022
Jones Diversity filed for Chapter 7 bankruptcy two days later, according to court records.
“Defendant Jones’s actions have damaged the debtor, the debtor’s estate and the debtor’s creditors,” the trustee alleges. “By reason of the foregoing, plaintiff is entitled to the entry of an order and judgment against Defendant Jones in the amount of $623,552.64, plus punitive damages in such amount as may be determined at trial.”
The case has been assigned to U.S. Bankruptcy Judge Jil Mazer-Marino.
The trustee is represented by Holly R. Holecek and Lon J. Seidman of LaMonica Herbst & Maniscalco.
Jones Diversity is represented by Bruce Weiner of Rosenberg Musso & Weiner.
The case number is 1-22-42698.
Texas Supreme Court
Justices Consolidate Oncor Appraisal Disputes for Oral Arguments
Texas Supreme Court justices will hear consolidated arguments to decide whether Oncor Electric Delivery Company can retroactively adjust two settlements that the company alleges were based on incorrect appraisal data, resulting in Oncor being overcharged $7 million in property taxes.
Clarity is needed from the Supreme Court, the parties say, after lower courts in two of Oncor’s lawsuits against appraisal districts and review boards in Mills County and Wilbarger County came to opposite conclusions. Oncor argues such agreements are voidable under the mutual mistake doctrine.
The suits — one against Mills Central Appraisal District and Mills County Appraisal Review Board that was before the Third Court of Appeals; the other against Wilbarger County Appraisal District and Wilbarger County Appraisal Review Board that was in the Seventh Court of Appeals — are among several filed by Oncor over the valuation of transmission lines in 13 Texas counties. Privately-owned electric transmission lines are subject to property taxes.
After Oncor began acquiring property in 2019 from Sharyland Distribution & Transmission Services, the company discovered a clerical error misreporting the number of miles of two types of transmission lines, impacting the calculated value per mile.
Oncor filed motions to correct the errors with the appraisal review boards in both counties. The appraisal districts denied the motions, concluding settlement agreements are “final” under the Texas Tax Code. Oncor then filed lawsuits in the respective counties.
The trial court judge in the Mills County case granted the appraisal district’s plea to jurisdiction and dismissed the case. A panel of the Third Court of Appeals reversed. But the trial court judge in the Wilbarger case denied that appraisal district’s plea to jurisdiction, a decision the Seventh Court of Appeals panel later reversed.
The Supreme Court granted both petitions for review but will hear the cases together for oral arguments on March 21.
The counties argued the Tax Code Section 1.111(e) bars the courts from having subject-matter jurisdiction and that Section 25.25 — which allows for contracts to be invalidated for limited reasons — does not apply in this case.
“After-the-fact protests of misrepresentation are easily lodged, and parties who contractually promise not to rely on extra-contractual statements — more than that, promise that they have in fact not relied upon such statements — should be held to their word,” Wilbarger County argued. “Parties should not sign contracts while crossing their fingers behind their backs.”
In both cases, the parties debate the impact of the high court’s 2018 opinion in Willacy County Appraisal District v. Sebastian Cotton & Grain. In that case, the Supreme Court ruled an appraisal district’s chief appraiser may make an ownership correction to the appraisal roll when it does not increase the amount of property taxes owed in the year of the correction, and that an agreement under section 1.111 (e) may be voided where fraud is proven.
Oncor is represented by Marnie A. McCormick and David H. Gilliland of Duggins Wren Mann & Romero.
Wilbarger County Appraisal Review Board is represented by Jonathan Whitsitt.
Wilbarger County Appraisal District is represented by Erin Gaines, Marjorie Bachman, Kirk Swinney, Ryan L. James and James Robert Evans Jr. of Low Swinney Evans & James.
Mills County Appraisal Review Board is represented by Julia Lacy Armstrong and Roy L. Armstrong of Armstrong and Armstrong in Taos, New Mexico.
Mills Central Appraisal District is represented by Erin Gaines, Marjorie Bachman, Peter W. Low, D. Kirk Swinney, Ryan L. James and James Robert Evans Jr.
The case numbers are 23-0138 and 23-0145.
U.S. Court of Appeals for the Fifth Circuit
SCOTX Input Requested in TCEQ Emissions Permit Suit
A panel of judges from the Fifth Circuit on Friday withdrew a November opinion that had found the Texas Commission on Environmental Quality applied its own administrative policy inconsistently when it approved emissions permits for a natural gas plant in Port Arthur and vacated the TCEQ’s order.
The panel on Friday also denied TCEQ’s requests for panel rehearing and rehearing en banc. But Judges Jacques L. Wiener Jr., James E. Graves Jr. and Dana M. Douglas did decide to send a certified question that will help it resolve the case to the Texas Supreme Court.
The question is:
- Does the phrase “has proven to be operational” in Texas’s definition of “best available control technology” codified at Section 116.10(1) of the Texas Administrative Code require an air pollution control method to be currently operating under a permit issued by the Texas Commission on Environmental Quality, or does it refer to methods that TCEQ deems to be capable of operating in the future?
The nonprofit Port Arthur Community Action Network is challenging the issuing of a permit to Port Arthur LNG to construct an LNG plant, arguing TCEQ contravened its policy of adhering to previously imposed emissions limits without adequately explaining the reasons for the departure. The nonprofit pointed specifically to a permit TCEQ issued to Rio Grande LNG, a facility which has been approved but not yet constructed, that capped two types of emissions at lower levels than what the Port Arthur permit allowed.
The Fifth Circuit had in its November ruling rejected TCEQ’s argument that the nonprofit didn’t have standing to bring suit and said TCEQ had failed to present any “statutory, rule-based, or precedential support or analysis” to explain why it departed from its own policy.
The panel concluded that TCEQ isn’t “forever bound to the emissions limits that it set for Rio Grande LNG for all subsequent permits,” but said TCEQ “must demonstrate that it is treating permit applications consistently.”
The Port Arthur Community Action Network is represented by Colin Cox of the Environmental Integrity Project in Austin and Natasha Bahri, Amy Dinn and Chase Porter of Lone Star Legal Aid.
TCEQ is represented by Erin Snody and Jessica Ahmed of the state attorney general’s office and Toby Baker of the TCEQ.
The case number is 22-60556.
Full Court will Rehear Case of Moonlighting ADA
The full Fifth Circuit agreed on Wednesday to rehear en banc a lawsuit brought by a woman who claims she was wrongly convicted of cocaine possession more than 20 years ago in Midland.
Erma Wilson, who has maintained her innocence for 22 years, filed suit in 2022 after discovering that then-assistant district attorney Ralph Petty had been moonlighting as a law clerk for the judges that were ruling in the cases Petty’s office was prosecting, meaning Petty was “disturbingly … working both sides of the bench,” Judge Don R. Willett wrote in the court’s December opinion that called for en banc rehearing.
While the December panel — that also included Judges Carolyn King and Dana Douglas — sided against Wilson and in favor of Midland County, the group called for a reversal of circuit precedent that would put the Fifth Circuit in line with six other circuit courts that allow non-imprisoned criminal defendants to sue local and state officials for violating their constitutional rights even though their convictions were never overturned.
Wilson’s felony conviction carried an eight-year term of probation and prevented her from pursuing her dream of becoming a registered nurse. Wilson didn’t find out about Petty’s dual role until after she served her whole sentence “making federal habeas a non-option,” Judge Willett wrote.
The Texas Supreme Court in 2021 concluded Petty had engaged in professional misconduct and disbarred him.
Wilson is represented by Jaba Tsitsuashvili and Robert McNamara of Institute for Justice.
Midland County is represented by Richard Rouse and Miles Nelson of Shafer, Davis, O’Leary & Stoker.
The case number is 22-50998.
No Rehearing for McKinney Woman Whose Home Cops Destroyed
On Valentine’s Day the Fifth Circuit denied a request from Vicki Baker for en banc rehearing in her lawsuit that was seeking to recoup some of the $60,000 in damage done to her home by McKinney police during a standoff with a suspect.
Eleven of the court’s judges voted against rehearing, but six would have agreed to rehear the case that was originally decided by Judges Stephen A. Higginson, Don R. Willett and Jerry E. Smith in October.
Judges Edith H. Jones, Jennifer Walker Elrod, James E. Graves Jr., James C. Ho, Stuart Kyle Duncan and Andrew S. Oldham voted in favor of rehearing, and Judges Elrod and Oldham joined in authoring a dissent from the majority.
“In sum, while McKinney police acted shrewdly, their actions also left Baker $60,000 in the hole. There is no doubt the McKinney community was better off because its officers ravaged Baker’s home,” the dissenting judges wrote. “But it is at least peculiar to say that because the officers’ conduct benefited the community, the community can avoid compensating Baker for the inconveniences she incurred on its behalf. The panel apparently thought that was the result the law required. If the panel was right, so be it. But there can be no denying that the text of the Fifth Amendment and the Supreme Court’s precedents at least suggest otherwise.”
The panel that issued the October ruling found Baker wasn’t entitled to any compensation, undoing a $60,000 damages award in a final judgment U.S. District Judge Amos L. Mazzant had entered in June 2022 following a jury trial.
The Fifth Circuit panel held that despite having “sympathy” for Baker, “on whom misfortune fell at no fault of her own,” she was not entitled to compensation in this instance under the Fifth Amendment’s takings clause because it was “objectively necessary” for police to damage or destroy her home in order to prevent “imminent harm.”
Baker is represented by Jeffrey H. Redfern, William R. Aronin, Robert McNamara and Suranjan Sen of Institute for Justice.
McKinney is represented by Edwin Voss Jr. of Brown & Hofmeister.
The case number is 22-40644.
Nickelback’s Win Over ‘Rockstar’ Infringement Claims Affirmed
A member of the Texas band Snowblind that had accused Canadian rock band Nickelback of infringing its copyright for his 2001 song called Rock Star with its 2005 song titled Rockstar had the dismissal of his lawsuit affirmed Monday.
Kirk Johnston had accused the members of Nickelback — Chad Kroeger, Michael Kroger, Ryan Peake and Daniel Adair — of copying the musical composition of his song.
Johnston filed notice of appeal in April, challenging a ruling from U.S. District Judge Robert L. Pitman who adopted a magistrate judge’s recommendation that the lawsuit be dismissed. The magistrate judge concluded that the two songs didn’t sound alike and that Johnston had failed to raise a fact issue regarding “factual copying.”
Judges Edith H. Jones, Catharina Haynes and Dana M. Douglas agreed with that finding, explaining Johnston’s assertions that Nickelback had a reasonable opportunity to access his work because executives from the band’s record label could have attended shows where Snowblind could have played Rock Star requires “leaps of logic” that aren’t supported by the evidence.
A jury would have to infer that the executives Johnston named actually attended Snowblind’s shows or received one of his demo CDs, and that these executives then showed the song to Nickelback,” the panel wrote.
The appellate judges also found Johnston failed to produce any evidence that the songs were substantially similar, rejecting his arguments that the “hooks and lyrics” were similar enough to raise a fact issue. Johnston’s expert had categorized the lyrics of both songs to show a similarity in the themes — making money, knowing famous people and sports references.
“But these broad categories are mere clichés of being a rockstar that are not unique to the rock genre. Singing about being a rockstar is not limited to Johnston,” the court wrote. “Further, organizing the lyrics into these categories overstates their similarities.”
“For example, Johnston contends both songs lyricize about sports. Well, Johnston’s work includes the phrase ‘Might buy the Cowboys and that’s how I’ll spend my Sundays,’ but Nickelback’s work includes the phrases ‘And a bathroom I can play baseball in’ and ‘It’s like the bottom of the ninth and I’m never gonna win.’ These lyrics reference different sports in different contexts, and do not approach the threshold of striking similarity. No reasonable juror would think that Nickelback could have produced its lyric about baseball only by copying Johnston’s lyric about football.”
Johnston is represented by Sesha Kalapatapu of Paz & Associates and Jeffrey Phillips of Spencer Fane.
The members of Nickleback are represented by Emily F. Evitt, Alexandra L. Anfuso and David A. Steinberg of Mitchell, Silberberg & Knupp and Kenneth E. McKay of McKay Law Offices.
The case is 23-50254.
U.S. Court of Appeals for the Federal Circuit
Laredo Trampoline Park Gets Injunction Undone in Fight with Urban Air
The company that operates a single indoor trampoline park in Laredo was handed a win on Friday in its dispute with Urban Air in a patent and trade dress infringement lawsuit when a three-judge panel of the Federal Circuit reversed a preliminary injunction against it.
Kangaroo had appealed in July 2022, after U.S. District Judge Drew B. Tipton entered the injunction that prevented it from operating a specific part of its trampoline park called the “Adventure Hub.” Kangaroo operated its park inside a space that was formerly occupied by an Urban Air franchisee and used the same play equipment.
UATP IP, which is known as Urban Air and operates more than 160 trampoline parks, sued Kangaroo alleging the equipment infringed its patent and that the color scheme of Kangaroo’s park infringed its trade dress.
“After full briefing and argument, we conclude the district court abused its discretion by failing to make the requisite findings to support its grant of the preliminary injunction,” the panel held. “Further, we find that UATP failed to prove in its briefing below that it was likely to succeed on the merits of its patent infringement claim.”
“The district court likewise erred in failing to make any findings on irreparable harm, balance of the equities, or the public interest in its analysis relating to UATP’s patent infringement claim.”
Judges Jimmie V. Reyna, Richard G. Taranto and Raymond T. Chen sat on the panel
Urban Air is represented by Chris Hanslik of BoyarMiller.
Kangaroo is represented by Steven Knight, Amber Ali, AJ Foreman and David Medina of Chamberlain Hrdlicka.
The case number is 22-2047.
Editor’s Note: Krista Torralva contributed to this report.