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Probate & Property

Mar/Apr 2023

Federal Appellate Case Summaries

Manuel Farach


  • The arbitration process itself also produced some cases during our most recent time frame.
  • COVID claims cases are still appearing, and governments are still winning these cases.
  • A creditor's failure to comply with its Truth in Lending Act obligations following a borrower's notice of rescission does not relieve a borrower.
Federal Appellate Case Summaries
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This article provides a brief summary of the most significant opinions issued by federal appellate courts during the period July through December 2022, which addressed, among other topics, contracts, governmental takings, COVID shutdown orders, arbitration, bankruptcy, and consumer law.


We start, as we often do, with arbitration. Questions regarding whether parties agreed to arbitrate are common, and we find several cases on this issue. The Third Circuit held that whether parties agreed to arbitrate is the principal inquiry in an arbitration dispute, and, accordingly, a court must determine whether two competing contracts require arbitration even when the arbitration itself is subject to a “gateway” clause permitting the arbitrators to determine their own jurisdiction. Field Intel. Inc. v. Xylem Dewatering Sols. Inc., 49 F.4th 351 (3d Cir. 2022). And although emails may constitute an “exchange of letters” under the Convention of the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention) sufficient to constitute an agreement to arbitrate, the emails must demonstrate an unequivocal agreement to arbitrate. Jiangsu Beier Decoration Materials Co., Ltd. v. Angle World LLC, 52 F.4th 554 (2d Cir. 2022). A curious case out of the Ninth Circuit held that no agreement to arbitrate was formed by use of a debit card, which card was involuntarily created as a method to return money to released inmates whose cash was confiscated at the time of arrest and incarceration. Reichert v. Rapid Invs., Inc., 56 F.4th 1220 (9th Cir. 2022).

The arbitration process itself also produced some cases during our most recent time frame. The Second Circuit, applying New York law, held that attachment in aid of arbitration can be used during the arbitration process, if permitted by the controlling law of the arbitration, and that New York law permits a judge to consider nonstatutory factors (e.g., extraordinary hardship) on a motion to vacate or modify an attachment. Iraq Telecom Ltd. v. IBL Bank S.A.L., 43 F.4th 263 (2d Cir. 2022). The Third Circuit issued two cases of interest, holding that failure to produce evidence during the discovery phase of arbitration proceedings can constitute sufficient fraud to vacate the arbitration award, France v. Bernstein, 43 F.4th 367 (3d Cir. 2022), and that a trial court does not abuse its discretion by dismissing a case with prejudice under Federal Rule of Civil Procedure 41 where a plaintiff’s refusal to follow orders to arbitrate the dispute makes adjudication of the case impossible. R & C Oilfield Servs. LLC v. Am. Wind Transp. Grp. LLC, 45 F.4th 655 (3d Cir. 2022).

Arbitration awards themselves also garnered some attention. The First Circuit held that arbitration damage awards issued in seriatim are final awards at the point of the last award, i.e., each interim damages award is not considered a final award that must be confirmed within the time limitation of the Federal Arbitration Act. Univ. of Notre Dame (USA) in England v. TJAC Waterloo, LLC, 49 F.4th 132 (1st Cir. 2022). The Ninth Circuit agreed with the Second, Third, Fifth, Sixth, Tenth, and D.C. Circuits that the grounds for vacatur under the Federal Arbitration Act are available for awards governed by the New York Convention, and that accordingly, an arbitration panel may award in accordance with a settlement agreement (which directed arbitration of disputes) so long as the award draws its essence from the parties’ agreement and does not ignore the agreement’s controlling terms. Hayday Farms, Inc. v. FeeDx Holdings, Inc., 55 F.4th 1232 (9th Cir. 2022).


In a case that should send shivers down the spine of all transactional lawyers, the Eleventh Circuit held that a financing statement that lists the debtor as “1944 Beach Blvd., LLC” instead of its legal name of “1944 Beach Boulevard, LLC” is “seriously misleading” under Florida Statutes and is not enforceable against a bankruptcy trustee exercising strong-arm powers. 1944 Beach Boulevard , LLC v. Live Oak Banking Co. (In re NRP Lease Holdings, LLC), 50 F.4th 979 (11th Cir. 2022). This case serves as a warning that all financing statements should be carefully scrutinized to ensure the correct legal name of the debtor is used. The Eleventh Circuit also clarified its view of objections to discharges and held that a debtor is acting in a “fiduciary capacity” under 11 U.S.C. § 523(a)(4) only when there is a “trustee” who holds an identifiable trust res for the benefit of an identifiable beneficiary or beneficiaries, there are sufficient trust-like duties imposed on the trustee with respect to the trust res and the beneficiaries sufficient to create a “technical” trust, and the debtor acted in a fiduciary capacity before the act of fraud or defalcation creating the debt. In re Forrest, 47 F.4th 1229 (11th Cir. 2022).

Some controversy was created by the Fifth Circuit’s holding that a debtor’s decision whether to assume or reject a lease is reviewed under the business judgment rule from the debtor’s perspective and is not analyzed as to the beneficial or detrimental impact on third parties, including sublessees of the debtor. In re J. C. Penney Direct Mktg. Servs., 50 F.4th 532 (5th Cir. 2022). The Fifth Circuit jumped into the equitable mootness discussion by disclosing it views equitable mootness on a claim-by-claim basis, instead of a full appellate basis, and examines “(i) whether a stay has been obtained, (ii) whether the plan has been ‘substantially consummated,’ and (iii) whether the relief requested would affect either the rights of parties not before the court or the success of the plan.” In re Highland Cap. Mgmt., L.P., 48 F.4th 419 (5th Cir. 2022).

The interplay between bankruptcy proceedings and nonbankruptcy proceedings is always interesting, and the Sixth Circuit produced two cases on judicial estoppel. First, it ruled that judicial estoppel bars an undisclosed suit when a separate bankruptcy proceeding is involved if “(1) the debtor assumed a position contrary to one she asserted under oath while in bankruptcy; (2) the bankruptcy court adopted the contrary position either as a preliminary matter or as part of a final disposition; and (3) the debtor’s omission did not result from mistake or inadvertence.” Stanley v. FCA US, LLC, 51 F.4th 215 (6th Cir. 2022). To place a finer point on the discussion, its Bankruptcy Appellate Panel held that a bankruptcy court may apply judicial estoppel to determine the feasibility of permitting amendment to an answer, which amendment would defeat a motion for summary judgment. In re Wood, 647 B.R. 165 (B.A.P. 6th Cir. 2022).

On other matters of interest, the Seventh Circuit held that Bankruptcy Code section 1327(a) (11 U.S.C. § 1327(a)) is no bar to modification of a confirmed Chapter 13 plan, In re Terrell, 39 F.4th 888 (7th Cir. 2022); the Third Circuit held that a bankruptcy court retains jurisdiction to enforce its own orders even after plan confirmation, In re Essar Steel Minn., LLC, 47 F.4th 193 (3d Cir. 2022); and the Eleventh Circuit held that amounts paid post-petition that qualify as an administrative expense claim under Bankruptcy Code section 503(b)(9) (paid within 20 days of the bankruptcy petition) also count toward a “new value” defense under section 547(c)(4). Auriga Polymers Inc. v. PMCM2, LLC, 40 F.4th 1273 (11th Cir. 2022). Finally, the Ninth Circuit discussed the “solvent-debtor exception” and held that creditors possess an equitable right to receive post-petition interest at the contractual or default rate set by the forum state before the debtor collects surplus value from the bankruptcy estate. In re PG&E Corp., 46 F.4th 1047 (9th Cir. 2022).


A fair number of cases during this time-period addressed when a contract is formed. First up is Stackpole International Engineered Products, Ltd v. Angstrom Automotive Group, LLC, 52 F.4th 274 (6th Cir. 2022), a case all transactional lawyers should read. It details when a letter of intent over a “proper subject matter,” together with “consideration,” “mutuality of agreement,” and “mutuality of obligation,” constitutes a binding contract. Also on the “must-read list” is Franlink Inc. v. BACE Services, Inc., 50 F.4th 432 (5th Cir. 2022), in which the Fifth Circuit explained when non-signatories to a franchise agreement are not bound to the contract’s choice-of-forum provision under the “closely related” equitable doctrine, i.e., the doctrine that holds that non-signatories who are “closely related” to the contract can be bound even if they did not sign the contract. The Seventh Circuit examined Illinois law and held that a party proceeding under Illinois law may have a cause of action for breach of an “executory agreement to form a partnership.” KAP Holdings, LLC v. Mar-Cone Appliance Parts Co., 55 F.4th 517 (7th Cir. 2022). Thus, practitioners should be sure to clearly express in preliminary discussions and documents that there is no binding agreement unless and until a definitive written agreement is signed.

Cases interpreting contractual provisions were also plentiful. The Third Circuit parsed a contract’s terms and held that a challenge to the legality of assignment of a loan contract containing an arbitration provision does not challenge the very formation of the arbitration agreement, i.e., challenging the assignment is not tantamount to challenging entering into an agreement to arbitrate. Zirpoli v. Midland Funding, LLC, 48 F.4th 136 (3d Cir. 2022). Likewise, rules implemented subsequent to an online agreement supplement and thus control over the online agreement, including waiving arbitration in favor of a forum selection clause in the courts of a particular state. Suski v. Coinbase, Inc., 55 F.4th 1227 (9th Cir. 2022). In addition, so long as the two are consistent, a settlement agreement providing for a fixed base operations lease is not superseded or invalidated by a subsequent integrated contract relating to the same subject matter. Bos. Exec. Helicopters, LLC v. Maguire, 45 F.4th 506 (1st Cir. 2022).

Some decisions appeared to be common sense but still provide guidance. The Third Circuit held that all previous contractual agreements are merged into a final judgment and a court cannot rewrite a judgment to include items not in the judgment. Sovereign Bank v. Remi Capital, Inc., 49 F.4th 360 (3d Cir. 2022). A clear contractual provision, without conditions, must be enforced when it allows a party to terminate a contract if closing has not occurred by a date certain. Finsight I LP v. Seaver, 50 F.4th 226 (1st Cir. 2022). A “floating forum selection clause,” i.e., one that is applicable at a mutable location, is enforceable. AFC Franchising, LLC v. Purugganan, 43 F.4th 1285 (11th Cir. 2022). Misrepresentations made during the performance of a party’s contract do not fall into the exception to Wisconsin’s Economic Loss Doctrine for fraud in the inducement. Taizhou Yuanda Inv. Grp. Co., Ltd. v. Z Outdoor Living, LLC, 44 F.4th 629 (7th Cir. 2022). Finally, a contract that is closed and deems assets and liabilities transferred to the purchaser upon closing controls for bankruptcy purposes even if third parties who hold rights to the assets or permission did not consent to the transfer. In re PetroQuest Energy, Inc., 54 F.4th 299 (5th Cir. 2022).


COVID claims cases are still appearing, and governments are still winning these cases. The Fifth Circuit followed this trend of rejecting claims and held that a mandatory shutdown of tanning salons is not compensable for violation of Equal Protection, as other similarly situated businesses were also shut down. There is no fundamental right to work so the actions taken are subject to rational basis review (not strict scrutiny review), and there was no taking because neither Cedar Point Nursery v. Hassid, 141 S. Ct. 2063 (2021), nor Lucas v. South Carolina Coastal Council, 505 U.S. 1003 (1992), applied. Golden Glow Tanning Salon, Inc. v. City of Columbus, 52 F.4th 974 (5th Cir. 2022).


On the corporate side, Delaware law continues to be followed in multiple fora. A good example is Whitten v. Clarke, 41 F.4th 1340 (11th Cir. 2022), in which the Eleventh Circuit held that a party that files a derivative suit under Delaware corporate law must either make a demand on the board of directors to rectify the alleged wrongs or show why demand is excused, and if so, must adequately plead why demand is excused. This case is a good reminder to check the choice of law provisions in all your contracts.

Finance and Lending

Two cases of interest in the finance and lending arena give guidance to commonly used contractual provisions. Carnegie Technologies, L.L.C. v. Triller, Inc., 39 F.4th 288 (5th Cir. 2022), held that novation after assignment of a promissory note requires the extinguishment of the prior party’s liability, and Hovde v. ISLA Development, LLC, 51 F.4th 771 (7th Cir. 2022), held that an unconditional and continuing guaranty typically waives defenses to liability under the guaranty but, unless specifically mentioned, does not waive the defense of unenforceability under the statute of limitations.

Land Use and Takings

As is to be expected at this stage of the real estate transaction cycle, land use cases were plentiful. Of particular interest was the treatment of short-term rentals by some courts. The Third Circuit held in Nekrilov v. City of Jersey City, 45 F.4th 662 (3d Cir. 2022), that an ordinance limiting long-term vacation rentals of property owners is not a per se (total) taking, is not a regulatory partial taking under the Penn Central test, is not a violation of the Contracts Clause, and does not violate substantive due process. Similarly, Hignell-Stark v. The City of New Orleans, 46 F.4th 317 (5th Cir. 2022), held that a city’s regulation of short-term rentals does not violate the Takings Clause, a residency requirement does not violate the Dormant Commerce Clause, and advertising restrictions are not a violation of the First Amendment. Said another way, the courts seem to be saying that the ability to rent one’s property is not a fundamental right subject to constitutional protection.

Local government’s winning streak in this area continued outside of the short-term rental cases. Village Green at Sayville, LLC v. Town of Islip, 43 F.4th 287 (2d Cir. 2022), held that the State Exhaustion Requirement for federal review of land use decisions was overruled in Knick v. Township of Scott, 139 S. Ct. 2162 (2019), but the Second Circuit’s Final Decision Doctrine remains good law and thus remains a requirement for federal court standing in the Second Circuit. The Sixth Circuit held in Golf Village North, LLC v. City of Powell, 42 F.4th 593 (6th Cir. 2022), that requiring developers to apply for permits before allowing development is not a violation of substantive due process and does not impose a de facto “exhaustion requirement.” The Ninth Circuit held that that Knick and Pakdel (Pakdel v. City & Cnty. of San Francisco, 141 S. Ct. 2226 (2021)) do not limit federal court abstention under Railroad Commission of Texas v. Pullman Co., 312 U.S. 496 (1941), and, accordingly, a district court may abstain from considering the constitutional deprivation claims of a developer whose project was rejected by the municipality that later instituted eminent domain proceedings against the same property whose development the local government refused to permit. Gearing v. City of Half Moon Bay, 54 F.4th 1144 (9th Cir. 2022).

Finally, the Eleventh Circuit held that application of nondiscriminatory zoning and building ordinances to “sober homes” is not a violation of the Fair Housing Act, 42 U.S.C. § 3604, or the Americans with Disabilities Act, 42 U.S.C. § 12132. Sailboat Bend Sober Living, LLC v. Fort Lauderdale, Fla., 46 F.4th 1268 (11th Cir. 2022). The Seventh Circuit held that street vendors have no compensable property interest or constitutional right in licenses to sell their products or services. Williams v. City of Detroit, 54 F.4th 895 (6th Cir. 2022).


Until reversal of the panel decision in a later en banc decision, Hunstein v. Preferred Collection & Management Services, Inc., 48 F.4th 1236 (11th Cir. 2022) (en banc) created quite a stir. The en banc decision mollified the creditor bar as it held that a plaintiff claiming harm from a statutory violation has to demonstrate the harm is “real” and concrete in order satisfy Article III standing requirements, and it is acceptable to compare the statutory harm to a common-law tort. Under this analysis, a creditor sending financial information to a third-party vendor is analogous to the tort of public disclosure, but such claim fails because under these facts the information was not disclosed to the public. As a result, the Fair Debt Collection Practices Act’s prohibition against disclosing borrower information to third parties is not violated by a lender employing a collection agency to send demand letters. This decision was followed by Shields v. Professional Bureau of Collections of Maryland, Inc., 55 F.4th 823 (10th Cir. 2022), in which the Tenth Circuit adopted Hunstein.

There were several cases in which parties tried to escape regulatory scrutiny by arguing the regulatory agency’s authority was limited under Seila Law LLC v. CFPB, 140 S. Ct. 2183 (2020). The Tenth Circuit ruled in Integrity Advance, LLC v. Consumer Financial Protection Bureau, 48 F.4th 1161 (10th Cir. 2022), that a party cannot escape enforcement action under the Truth in Lending Act by arguing the CFPB’s structure was held unconstitutional in Seila Law when the chair of the CFPB was properly appointed at the time of the enforcement action. And the Sixth Circuit ruled in Rop v. Federal Housing Finance Agency, 50 F.4th 562 (6th Cir. 2022), that, although the acting director of the Federal Housing Finance Agency was not violating the Appointments Clause and Collins v. Yellen, 141 S. Ct. 1761 (2021), at the time he signed the third amendment to the stock agreement, the district court is still required to determine whether the unconstitutional removal restriction inflicted harm on shareholders. But opponents of enforcement action were cheered by the Fifth Circuit’s ruling in Community Financial Services Association of America, Limited v. Consumer Financial Protection Bureau, 51 F.4th 616 (5th Cir. 2022), in which the Fifth Circuit ruled that the structure of the CFPB violates the Constitution as the result of the Bureau’s holding both enforcement and fund-raising capabilities.

Also in favor of creditors was Lavis v. Reverse Mortgage Solutions, Inc., 40 F.4th 181 (4th Cir. 2022), which held that a creditor’s failure to comply with its Truth in Lending Act § 1635(b) obligations following a borrower’s notice of rescission does not relieve a borrower of her obligation to tender the loan proceeds back to the creditor. And Lamirand v. Fay Servicing, LLC, 38 F.4th 976 (11th Cir. 2022), held that a periodic mortgage statement of money owed sent as required by the Truth in Lending Act can also double as a demand for payment under the Fair Debt Collection Practices Act (FDCPA) and must, accordingly, be truthful and correct to avoid liability under the FDCPA. Bibbs v. Trans Union LLC, 43 F.4th 331 (3d Cir. 2022) opined that a credit report that shows an account has been written off and closed is not seriously misleading and thus is not a violation of the Fair Credit Reporting Act.

Two more Fair Debt Collection Practices Act cases were determined in favor of creditors. Magdy v. I.C. System, Inc., 47 F.4th 884 (8th Cir. 2022), ruled that the FDCPA applies only to “consumers” and thus does not apply to an attorney mistakenly contacted by a debt collection firm as representing a bankruptcy debtor. And Lutz v. Portfolio Recovery Associates, LLC, 49 F.4th 323 (3d Cir. 2022), held that a debt collector does not “negotiate” a loan and thus cannot be charged with violating the FDCPA, 15 U.S.C. §§ 1692e and 1692f based on Pennsylvania’s limitation on consumer interest charges.

Tax Deeds

Surprisingly, we had two tax deed cases this time around. Gunsalus v. County of Ontario, New York, 37 F.4th 859 (2d Cir. 2022) caught some attention when it ruled a tax deed sale is not entitled to the presumption of an exchange for “reasonably equivalent value” under 11 U.S.C. §548(a) and BFP v. Resolution Trust Corp., 511 U.S. 531 (1994). The case, however, appears to be limited to its facts, as the court ruled that BFP is not applicable to tax deed sales and did not take its analysis any further. And the Fourth Circuit ruled in Brusznicki v. Prince Georges County, 42 F.4th 413 (4th Cir. 2022), that Maryland Code Ann., Tax–Prop. § 14-817(d)(3) (tax deed certificates must be offered first to local county residents and employees before being offered to the general public), violates the Privileges and Immunities Clause.


There are two final decisions of interest that do not fit neatly into other categories. Bluegrass Materials Co., LLC v. Freeman, 54 F.4th 364 (6th Cir. 2022), interpreted Kentucky law and held that oil and gas leases terminate by their own terms (typically passage of time), by abandonment, and by forfeiture, and forfeiture requires a prior demand for production that is not accepted. And Wells Fargo Bank, N.A. v. Stewart Title Guaranty Co., 55 F.4th 801 (10th Cir. 2022) delved into the details of title insurance coverage and held that the inability to assemble an insured parcel with other parcels might diminish the value of the land that is conveyed, and thus may affect the amount of coverage under the title policy.


This was a very busy period of time with some interesting decisions but no opinions of note from the Supreme Court.