In this edition of Litigation Roundup, a judge in Houston sides with a group of former BP employees in an ERISA suit, the Fifth Circuit expedites oral arguments in a dispute between the U.S. Chamber of Commerce and the Consumer Financial Protection Bureau over plans to cap credit card late fees and Parkland Health prevails on appeal in an employment discrimination and retaliation lawsuit.
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Southern District of Texas
BP Found to Have Violated ERISA in Pension Plan Suit
A group of BP employees who alleged the company had failed to adequately explain to them that a change in their pension plans would result in a “significant reduction in the rate of future benefit accruals” were vindicated when a federal judge recently agreed the company had violated the Employee Retirement Security Act.
On March 28, U.S. District Judge George C. Hanks issued a 57-page findings of fact and conclusions of law holding that BP’s communications to plan participants “included misleading and incomplete information and were not written in a manner reasonably calculated to be understood by the average plan participant.”
The plaintiffs, who formerly worked for Standard Oil of Ohio before the company was acquired by BP in June 1987, filed suit in April 2016. A 14-day bench trial before Judge Hanks wrapped up on July 20, 2023, according to court documents.
Judge Hanks found that BP “did not forthrightly inform those employees with whom it was communicating that the 1989 promise of a comparable benefit was untrue.”
“It was not until the assessment of their expert in this matter, after a review of discovery materials, that any of the plaintiffs had sufficient information to have actual knowledge that BP’s promise was not true for the class,” he wrote. “… BP concealed all along it had no intent to fulfill its promise by enhancing the class members’ benefits to be as good or better than what the class would have received under the [BP America Retirement Plan].”
Guenther is represented by Leander Laurel James IV, Brady Espeland and Susan Weeks of James Vernon and Weeks and Philip Meade, Rossi F. Maddalena and Peter Steilberg of Merrick, Hofstedt & Lindsey.
BP Retirement Accumulation Plan is represented by Esteban Shardonofsky, Ian Morrison, Megan E. Troy, Emma Mata and Thomas Horan of Seyfarth Shaw and Monica Fitzgerald and Steven R. Rech of Vorys Sater.
The case number is 4:16-cv-00995.
Western District of Texas
Aerospace Trade Secrets Spat Heats Up
A former vice president at aerospace hardware and software company CesiumAstro who was accused of stealing the company’s trade secrets and taking them to a direct competitor has hit back against the claims and is now seeking sanctions against his former employer.
CesiumAstro filed suit against Erik Luther and Anysignal on March 25, alleging it had been betrayed by Luther, its former vice president of product, who misappropriated trade secrets and “plotted to evade his contractual obligations not to compete against CesiumAstro.”
Luther is not employed by Anysignal.
“And during his departure and since then, Luther has tried to hide his wrongdoing by spoliating documents and refusing to come clean about or stop his misconduct,” the suit alleges. “CesiumAstro had no choice but to file this complaint and seek court relief.”
But Luther told U.S. District Judge Robert Pitman in a motion he filed March 29 that CesiumAstro should be sanctioned for the filing of this “frivolous and baseless” lawsuit. Luther has also requested an emergency conference.
Ten days after he resigned from CesiumAstro in August 2023, Luther said he received a cease and desist letter from the former attorney representing the company, Michael Royal of Littler Mendelson, prompting him to perform a “diligent search” for any CesiumAstro emails, files or data in his possession.
He turned over what he discovered, according to court documents, and the parties agreed to a third-party forensic examination to be conducted by TransPerfect. Luther’s attorney reviewed the findings in February but Luther wasn’t able to review the files because he wasn’t allowed to see the ones Littler had identified as “responsive.”
“Luther’s counsel diligently communicated with TransPerfect to correct the issue without any resolution, so Luther’s counsel sent plaintiff’s counsel an email on March 1 asking him to intervene quickly so the process could keep moving,” Luther told the court. “Plaintiff’s counsel never responded and plaintiff filed this lawsuit three weeks later.”
So far, defending against suit has cost Luther more than $17,000 in legal fees, he said.
“It is my belief, based on my experiences at CesiumAstro and countless interactions with [CEO] Mr. [Shey] Sabripour, that CesiumAstro is pursuing me so aggressively, not for any legitimate purpose, but to exact vengeance for my leaving the company, to bully me, and to find any excuse possible to intimidate its competitors,” Luther told the court in a declaration.
A hearing on the motion for sanctions had not been set as of Monday afternoon.
CesiumAstro is represented by David S. Almeling, Kristin Cope and Patrick V. Plassio of O’Melveny & Myers.
Luther is represented by Collin K. Brodrick of Ogletree, Deakins, Nash, Smoak & Stewart.
The case number is 1:24-cv-00314.
Northern District of Texas
RICO Suit Against Megatel Founders Tossed
The brothers who cofounded Megatel Homes will not have to face a civil lawsuit accusing them of violating the Racketeer Influenced and Corrupt Organizations Act after a federal judge dismissed the claims with prejudice.
U.S. District Judge Barbara M.G. Lynn issued an order March 31 tossing the lawsuit a group of property developers, led by CADG Erwin Farms, had brought against Aaron and Zach Ipour and their five investment funds in December 2022.
The property developers’ claims centered on deals with Megatel for six residential developments in the Dallas-Fort Worth area. They accused Megatel and the Ipour brothers of fraudulently entering agreements to buy the finished lots and then waiting to see if business conditions were favorable before closing on the lots.
The brothers were accused by the property developers of “tying up” the properties by filing “fraudulent liens” and notices of lis pendens with the intent to cloud title to the properties and obstruct efforts to sell the properties to homebuilders other than Megatel.
“As an initial matter, the complaint is wholly bereft of specific allegations regarding the fund defendants’ participation or role in the alleged scheme,” Judge Lynn wrote.
“As to the remaining defendants, Aaron and Zach Ipour, the Court concludes that there are multiple fatal problems with plaintiffs’ substantive RICO claim as pleaded, warranting dismissal,” the judge wrote. “First, plaintiffs’ allegations of wrongdoing arise either from Megatel’s contractual agreements to purchase property or litigation activity, which are not covered by RICO.”
Megatel and the Ipour brothers are represented by Lucas C. Wohlford and Randy D. Gordon of Duane Morris.
CADG Erwin Farms is represented by Stephen A. Khoury and Ryan Seay of Kelsoe Khoury Rogers & Clark and Dennis M. Holmgren of Holmgren Johnson: Mitchell Madden.
The case number is 3:22-cv-02896.
Fifth Court of Appeals, Dallas
Ex-Parkland Director Loses Appeal in Discrimination Suit
The former director of patient financial services for Parkland Health and Hospital System will not get to proceed with his lawsuit accusing his former employer of disability discrimination and retaliation after an appellate panel tossed the suit on March 26.
Michael Ballew started working at Parkland in 2001 as the accounts receivable audit supervisor, was promoted to director of patient financial services in 2008 and was fired in 2019, according to the opinion.
Trouble arose in 2016, when 11 complaints were filed by employees against Ballew and his immediate supervisor accusing them of favoritism, poor leadership and retaliation. The complaints prompted the hospital’s director of employee relations to recommend firing Ballew and the supervisor.
But the hospital ended up administering a “final disciplinary action” on Ballew, because “the general consensus” was that his supervisor’s “domineering style” may have impacted him, according to the opinion. In 2019, Ballew went on long-term leave to have surgery, and that’s when a supervisor filling in for him realized Ballew had misrepresented progress on a variety of projects he had been assigned — including on one that resulted in a delay or loss to the hospital in receiving between $6 million and $7.2 million in the first quarter of 2019.
A full investigation later showed Ballew had likely cost Parkland between $40 and $50 million in recoverable revenue, according to the opinion.
Ballew came back to work from leave on May 5, 2019, and was suspended pending investigation May 9, 2019. He lodged his complaint that he was being unfairly retaliation against because of his health condition on May 9, 2019.
He was fired in June 2019 and lodged a complaint with the Equal Employment Opportunity Commission in December of that year.
Dallas County Court at Law No. 1 Judge D’Metria Benson had, in November 2022, declined to dismiss the lawsuit, and Parkland filed notice of appeal the following month.
“Parkland contends it ‘proffered ample legitimate and nondiscriminatory reasons for firing Ballew,’” the justices wrote in tossing the suit. “Specifically, Parkland maintains its evidence showed Ballew engaged in conduct requiring him to be terminated. That conduct included failing to execute Parkland’s objectives, acting callously toward Parkland’s patients, and lacking integrity, honesty, and personal accountability in his job performance.”
“We agree.”
Justices Robbie Partida-Kipness, Amanda L. Reichek and Maricela Moore Breedlove sat on the panel.
Ballew is represented by Brian P. Sanford and Elizabeth “BB” Sanford of The Sanford Firm.
Parkland is represented by Joshua J. Bennett and Stacy Cho Hernandez of Carter Arnett
The case number is 05-22-01358-CV.
U.S. Court of Appeals for the Fifth Circuit
Chamber Gets Transfer of CFPB Case Stayed
On Saturday a three-judge panel issued an order administratively staying a lower court’s ruling that a lawsuit challenging the Consumer Financial Protection Bureau’s rule capping credit card late fees belonged in the U.S. District Court for the District of Columbia
U.S. District Judge Mark T. Pittman had issued an order March 28 transferring the lawsuit the U.S. Chamber of Commerce had filed March 7. Judge Pittman noted in the seven-page order that the rule being challenged was promulgated in D.C., that the CFPB is headquartered in D.C. and that three of the six plaintiffs are in D.C. — the Chamber, the American Bankers Association and the Consumer Bankers Association. And of the 10 attorneys representing the parties in the dispute, he wrote, eight list their offices as being in D.C.
“This means that any proceeding this court conducts (such as the preliminary injunction hearing set for April 2) will require all of defendants’ counsel and two-thirds of plaintiffs’ counsel to travel to Fort Worth — a task that will be charged to their clients or to the government,” Judge Pittman wrote. “This would mean that taxpayers, including residents of Fort Worth, would foot an expensive bill for this litigation. Notably, plaintiffs do not identify any substantial or practical issues with this case being held in Washington D.C.”
The Fifth Circuit’s Saturday order administratively stays the case until 5 p.m. Tuesday and also expedited the appeal to the next oral argument panel. A date and time for oral arguments had not been set as of press time Monday.
The rule being challenged was slated to go into effect May 14. The Chamber appealed to the Fifth Circuit a week ago after Judge Pittman declined its request for an expedited ruling on the injunction.
In a two-page order detailing the court’s heavy case load, Judge Pittman concluded by saying “the court does not have the luxury to give increased attention to certain cases just because a party to the case thinks their case is more important than the rest.”
“There are simply too many cases that demand the court’s full attention,” he wrote.
The Chamber has argued it needs relief from the Fifth Circuit to avoid “serious or irreparable harm.”
“Plaintiffs’ members must also notify current cardholders in writing of any changes they may make to the terms of their cardholder agreements to mitigate the late fee change at least 45 days prior to making those terms effective,” the Chamber wrote. “To time those changes with the final rule’s May 14, 2024 effective date, such notices would need to be received by customers by March 29, 2024. As a result, plaintiffs will suffer irreparable harm absent an immediate injunction.”
This lawsuit was originally assigned to U.S. District Judge Reed O’Connor, but he recused himself from the case March 14 after Accountable.US, which bills itself as a government watchdog group, raised concerns about Judge O’Connor’s personal investments in credit card issuing companies constituting a conflict of interest.
The Chamber is represented by Michael Murray and Tor Tarantola of Paul Hastings, Derek Carson and Philip Vickers of Cantey Hanger, Thomas Pinder and Andrew Doersam of the American Bankers Association and Jennifer B. Dickey and Maria C. Monaghan of the U.S. Chamber’s litigation center.
The CFPB is represented by its own Stephanie Garlock of Washington, D.C.
The case number in the district court is 4:24-cv-00213. The case number in the Fifth Circuit is 24-10248.