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U.S. Fifth Circuit Court of Appeals Case A Reminder of the Sometimes Unpredictable Nature of Litigation

Litigation can be a bit unpredictable for several reasons. Among other things, a court may focus more heavily on what seemed like lesser aspects of a case, the courts may suddenly decide to shift policy in an area of established precedent, or there may be a lack of precedent on the matter being litigated. For those reasons and more, it is hard to know with a high degree of certainty how a court will rule on any particular case.

Other times, unexpected outcomes occur because a court makes a factual or legal finding that appears arguably inconsistent with established procedural or substantive law. In those instances, judicial review serves one of its key purposes: oversight of the decisions by the lower courts. Appellate review will investigate the record of the lower court to determine if any error or abuse was actually committed. In some cases, the lower court simply gets it wrong and makes a mistake worthy of an official reminder and correction from the court above.

Earlier this year, that is exactly what a panel of judges sitting in the Fifth Circuit Court of Appeals did in an Insurance Claims case, finding that a District Court judge erred in issuing a sua sponte dismissal of three remaining claims after initially dismissing two claims in an action by an insurance company seeking declaratory judgment.

Most of the time, a court will not take any action unless requested to do so by one of the parties. This principle is at the core of our adversarial legal system. A civil case is initiated by a plaintiff petitioning the court, indicating to the court, among other things, who did what, why the court has jurisdiction to hear the case, what the plaintiff is requesting, and what legal bases support the claims being brought. Sometimes, however, a court acts purely on its own volition. These actions are called “sua sponte” acts and they are relatively uncommon yet allowed under certain circumstances.

In Century Surety Co. v. Cylie Blevins, et al., No.14-31131, Cylie Blevins’s son suffered an injury at a hotel in Louisiana after drinking from a cup containing sodium hydroxide that he found in the laundry room of the hotel. The family sued the hotel in the 15th Judicial District Court in Lafayette, Louisiana. On the date of the injury, the hotel had a general insurance policy in force that was issued by Century Surety Company (Century); Century agreed to defend the hotel, but informed the hotel that it had no duty to defend against suits for bodily injury not covered under the Policy, including those caused by minerals or other harmful materials.

Century filed for declaratory judgment in the United States District Court for the Western District of Louisiana asserting no duty to defend or indemnify the hotel under the Policy, because the purported injury in the underlying suit was a bodily injury caused by a toxic substance in the cup, and therefore excluded under the policy’s toxic substance exception. The hotel responded with five counterclaims against Century alleging, among other things, bad faith, unfair commercial practices, and breach of contract. Century moved to dismiss the claims for bad faith and unfair commercial practices and the

The District Court granted Century’s motion, but then without warning dismissed the three remaining claims sua sponte, and subsequently dismissed the entire declaratory judgment action without prejudice under the abstention doctrine. Both parties appealed. The Court of Appeals reviewed the ruling and found error; the court partially reversed and remanded the case indicating that the only exception to the well established rule that litigants must “be given notice and an opportunity to respond before a district court dismisses claims sua sponte” occurs when the claim is patently frivolous. Davoodi v. Austin Independent School District, 755 F.3d 307 (5th Cir. 2014). Finding that the District Court failed to provide notice of its intent to dismiss nor opportunity to defend the claims not challenged by Century, the Appeals Court reversed the dismissal of the three counterclaims and remanded the case for further proceedings, giving both parties a chance to respond to the lower court's attempt to dismiss the three unchallenged claims.

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