Perry Luig v. North Bay Enterprises, Inc.
2016 U.S. App. LEXIS 5703
5th Cir.2016Background
- North Bay contracted to buy Luig’s helicopter for $110,000; the Purchase Agreement required delivery of an airworthy helicopter with a current Certificate of Airworthiness and included an "as is where is" acceptance clause.
- The airworthiness certificate identified the aircraft as a "47 G3B1," but North Bay alleges pre-sale modifications (including removal of a turbocharger) and lack of compliance with FAA Airworthiness Directive 80-04-04.
- After delivery and discovery of potential noncompliance, Luig filed a declaratory-judgment action in state court; North Bay removed and asserted a breach-of-contract counterclaim, later moving for summary judgment on breach.
- The district court denied North Bay’s summary-judgment motion but then sua sponte granted summary judgment for Luig, holding North Bay had not rejected or revoked acceptance (a necessary predicate for contract damages under Texas law), and found the helicopter not airworthy as a matter of law.
- North Bay filed a Rule 59(e) motion presenting new evidence (pilot discovered noise, investigation revealed lack of recorded compliance with AD 80-04-04, North Bay contacted Luig and ceased using the helicopter); the district court denied the 59(e) motion without addressing the new evidence.
- The Fifth Circuit held the district court abused its discretion in denying the 59(e) motion, vacated the sua sponte summary judgment, and remanded for consideration of North Bay’s newly presented argument and evidence.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the district court properly entered sua sponte summary judgment for Luig without notice | North Bay argued it was not given notice or chance to respond and that factual issues (e.g., revocation) existed | Luig relied on district court’s finding North Bay neither rejected nor revoked acceptance | Court: Sua sponte error was cured only because district court considered a 59(e) motion; but denial of 59(e) was itself erroneous, so summary judgment vacated |
| Whether North Bay’s Rule 59(e) motion should have been considered with its new evidence | North Bay argued the new evidence was probative of revocation and excusable because court never gave prior opportunity to address revocation | Luig did not show unfair prejudice from consideration of the new evidence | Court: District court abused its discretion by denying 59(e) without considering the new evidence; remand to consider evidence |
| Whether North Bay may revoke acceptance under Texas law after discovering a nonconformity | North Bay argued Texas law allows revocation if acceptance was induced by difficulty of discovery or seller assurance and revocation occurs within a reasonable time | Luig argued no revocation was pleaded or shown in original briefing | Court: New evidence was probative of grounds for revocation and therefore material to the contract claim |
| Whether the district court’s failure to analyze Templet factors warranted relief | North Bay argued the district court failed to weigh probative value, availability, reason for delay, and prejudice | Luig did not assert substantial prejudice | Court: District court should have applied those factors; its brief denial was an abuse of discretion |
Key Cases Cited
- Celotex Corp. v. Catrett, 477 U.S. 317 (summary judgment standards; parties must have notice/opportunity to respond)
- Templet v. HydroChem, Inc., 367 F.3d 473 (5th Cir. 2004) (standards for reviewing district court denial of Rule 59(e) when new materials are presented)
- Simmons v. Reliance Standard Life Ins. Co. of Tex., 310 F.3d 865 (5th Cir. 2002) (59(e) motion can cure procedural defects from sua sponte summary judgment)
- Atkins v. Salazar, 677 F.3d 667 (5th Cir. 2011) (review for harmless error when court grants sua sponte summary judgment)
- Toshiba Mach. Co., Am. v. SPM Flow Control, Inc., 180 S.W.3d 761 (Tex. App.—Fort Worth 2005) (buyer may revoke acceptance if induced by difficulty of discovery or seller assurance)
- Love v. Nat’l Med. Enters., 230 F.3d 765 (5th Cir.) (procedural irregularities on appeal reviewed for plain error when not raised below)