Fifth Circuit Risks Losing Big Cases Amid Judge Shopping Worries

The US Court of Appeals for the Fifth Circuit is facing the prospect of not being able to weigh in on a pair of cases with national significance, as some parties try to move high-profile cases out of the federal appeals court’s jurisdiction.

The circuit is considering a request to block a lower court order that a case against the Consumer Financial Protection Bureau (CFPB) should be transferred to the federal court in Washington, after a trial judge said it didn’t belong before him in Fort Worth. The full appeals court has also been asked to stop a challenge by Elon Musk’s SpaceX to the National Labor Relations Board’s constitutionality from being moved out of southern Texas to California.

The Fifth Circuit is weighing the cases as Texas trial judges face scrutiny over whether legal challenges filed in their courts actually belong there. And some observers say the circuit’s recent actions might give the impression that the court is acting to keep those major cases within its jurisdiction.

Several of the cases in which venue questions have been raised are asking judges to bar or mandate an administrative action by the government, said Michael Smith, a partner with the law firm of Scheef & Stone who has argued venue issues before the Fifth Circuit. “If the Fifth Circuit is interested in weighing in on whether a statute or regulatory action should stand or not, it might have an interest in making sure that those cases stay in the courts that they were filed in,” Smith said.

When a federal case is transferred, it’s considered to be under the jurisdiction of the new court once it’s docketed, has a new case number, and is assigned a new judge. Until then, legal experts said the Fifth Circuit can step in to consider the proper venue for the case — if a party brings it up to the appeals court in time. Once the case is fully transferred, it can only be sent back if the new presiding judge agrees.

The bar for an appeals court to reverse a transfer order is high. It’s typically presented to the court as a petition for a writ of mandamus, a form of extraordinary relief that can only be granted when there is a “clear abuse of discretion.” The en banc Fifth Circuit said in a 2008 decision that mandamus is “an appropriate means of testing” a district court’s ruling under a federal statute on how cases can be transferred.

Tobias Wolff, a professor with the University of Pennsylvania Carey Law School, said that simply disagreeing with a district court’s analysis on venue may not be enough to grant that remedy. He said that it’s rare for a transfer order to even be reviewed by an appeals court, let alone be reversed.

“And so if the Fifth Circuit has decided we want to start exercising more control, extraordinary means is the only path available for them to do that,” Wolff said.

However, Wolff said, the circuit should be wary of the message it’s sending if it repeatedly takes significant steps to hold onto cases.

“They are creating a public appearance that they’re trying to use extraordinary means to hold on to high impact and high-profile cases,” said Wolff. “And I think that courts should reflect seriously on the public appearance that they are creating, whatever their motivation might be.”

Lost Jurisdiction

The venue issue became particularly visible for attorneys two years ago, when the circuit said it lost jurisdiction of a case from a “ghost gun” company after a judge in the Western District of Texas transferred it to the federal court in New Jersey, and the new presiding judge declined to send the case back.

Fifth Circuit Judge Jerry Smith called the New Jersey court’s refusal to return the case “unprecedented” in a 2022 opinion. He, joined by Judges Catharina Haynes and Rhesa Barksdale, rejected other arguments by the plaintiffs to revive their claims, and said that the plaintiffs’ failure to ask for a stay of the transfer order was “fatal” to their other legal arguments.

David Coale, partner at Lynn Pinker Hurst & Schwegmann in Dallas who regularly writes about the Fifth Circuit, said that the gun case “kind of woke up the bar.”

“Lawyers realized that this sort of theoretical issue about a circuit not having authority over cases that have been transferred out is actually a real thing,” Coale said. He said that some attorneys are now “aggressively pushing for these transfers, to get it out of the Fifth Circuit in ways where the Fifth Circuit can only ask and doesn’t have any authority to get it back.”

In March, the Fifth Circuit directed that a Western District of Texas judge ask a Washington DC federal judge to return a case transferred there, saying the lower court’s decision was effectively “because of court congestion.” The Washington judge hasn’t yet acted on the request to act on the challenge to a Commodity Futures Trading Commission (CFTC) decision to revoke permission for a political betting marketplace.

SpaceX Dust-Up

In the SpaceX case, US District Judge Rolando Olvera on Feb. 15 granted a motion from the NLRB to transfer the matter to the US District Court for the Central District of California, finding that the new court is “the venue in which most events giving rise to this case occurred.”

SpaceX then went to the Fifth Circuit, asking the appeals court to stay the transfer. But the case had already been docketed in the Central District of California, prompting the New Orleans-based appeals court to ask for it to be sent back to Texas while it weighed the venue issue.

On March 5, a divided Fifth Circuit panel rejected SpaceX’s request that it block the transfer order. In a 15-page dissent, Judge Jennifer Walker Elrod wrote that the decision “permits an erroneous view of the requirements for filing claims in our circuit, risks confusion amongst the district courts of our circuit, and deprives plaintiffs of the opportunity to seek justice in a lawful venue.”

She also said that the NLRB doesn’t deny trying to avoid Fifth Circuit precedent in SEC v. Jarkesy, an opinion written by Elrod in which the circuit found the Securities and Exchange Commission’s (SEC) use of in-house courts is unconstitutional. Elrod said that “NLRB’s desire to avoid our circuit’s precedent is further justification for exercising our discretion in granting mandamus relief.”

Soon after, an unidentified Fifth Circuit judge requested that the case be paused and SpaceX asked the en banc circuit to take up the mandamus petition. The court hasn’t yet ruled on that request.

A coalition of legal scholars are urging the circuit against granting the en banc rehearing. In an amicus brief, the scholars said SpaceX could have sought another form of appeal and that en banc reversal would encourage “other litigants to forum shop by invoking insignificant contacts in various states as hooks to push litigation away from the venue in which the relevant events took place,” the law professors said.

Maggie Gardner, a Cornell Law School professor who signed the amicus brief, said that one of the arguments for why mandamus petitions should only be used in rarely is that “once litigants notice that the Fifth Circuit might be amenable to the sort of mandamus petition, you’re going to see them all the time.”

She said that the rise in these kinds of petitions “is indicative of the dangerous procedural road that the circuit is heading towards, or appears to be trying to open up.”

In another twist to the SpaceX case, the original three-judge panel this week took the rare step of asking in-house NLRB lawyers to answer a series of questions about their contacts with the clerk’s office at the California court. In a filing on Wednesday, those attorneys defended their actions, saying they had an obligation to determine the case’s status.

The Fifth Circuit hasn’t yet publicly responded to that filing.

Lawyers and legal scholars called the circuit’s questioning of the attorneys highly unusual. Wolff said that circuit appeared to be suggesting that disagreeing with its ruling “somehow constituted dishonesty and a lack of candor on the part of lawyers.”

“That’s really surprising, and it is not correct to say that lawyers are being dishonest or without acting without candor if they simply disagree with the position of court, and are clear in articulating that disagreement and engage in appropriate advocacy,” he said.

Judge Shopping Woes

US District Judge Mark Pittman in the Northern District of Texas on March 28 also ordered that a lawsuit filed in his Fort Worth court by the US Chamber of Commerce and banking trade groups against the CFPB be transferred to the Washington federal trial court.

“Venue is not a continental breakfast; you cannot pick and choose on a Plaintiffs’ whim where and how a lawsuit is filed,” the judge wrote.

Pittman’s decision was viewed as particularly noteworthy, as the Northern District of Texas has come under scrutiny for litigants “judge shopping” there, due to case assignment rules that guarantee a handful of judges hear cases filed in specific divisions. The district’s chief judge said last week that the court won’t change its case assignment rules, despite guidance from the federal judiciary urging courts to guard against the practice.

The plaintiffs have taken the matter up to the Fifth Circuit, which has issued an administrative stay on the transfer order until Friday. The US Chamber and the other groups challenging the CFPB’s rule on credit card late fees haven’t filed for a writ of mandamus in that case.

The Fifth Circuit has declined to grant a writ of mandamus to move a case from another Northern District of Texas court scrutinized for judge shopping. A three-judge panel, in another opinion written by Elrod, said in 2022 that it wouldn’t grant a motion to move an anonymous whistleblower’s Medicaid fraud lawsuit against Planned Parenthood Federation of America from Amarillo, where US District Judge Matthew Kacsmaryk hears all civil lawsuits, to Austin in the Western District of Texas.

Lawyers tracking the venue disputes predict that more will soon reach the Fifth Circuit.

“As long as there continue to be forum disputes about wanting to be in certain courts in the Fifth Circuit, I think we’re going to see more and more fights like this, unless a general sort of consensus is reached among the courts around the country about how to handle these intra-circuit transfers,” said Coale, the Dallas attorney. But, he added, it’s unlikely that such an agreement could be reached.