The following are summaries of selected civil opinions issued by the Fifth Circuit in May 2025. The summaries are overviews of particular aspects of the opinions; please review the entire opinions.
ARBITRATION: Denial of motion to compel arbitration affirmed based on finding of waiver.
Garcia v. Fuentes Restaurant Management Services Inc., No. 24-10699. In this FLSA collective-action case, the Fifth Circuit overhauled its test for contractual-arbitration waiver in view of Morgan v. Sundance, Inc., 142 S. Ct. 1708 (2022). Rejecting its former two-part inquiry (requiring both substantial invocation of the judicial process and prejudice), the Court held that waiver requires “knowingly relinquish[ing] the right to arbitrate by acting inconsistently with that right.” Judge Douglas, joined by Judges Richman and Willett, applied that new standard. The panel noted that the restaurant-chain defendant had (i) answered the lawsuit without raising arbitration, (ii) participated in initial discovery, (iii) engaged in mediation, and (iv) filed a joint status report with the plaintiff stating that it “had no intent to arbitrate.” Those overt acts demonstrated intentional abandonment, so the district court did not err in denying a belated motion to compel arbitration.
This decision highlights two practical consequences. First, the Court found waiver even though the defendant moved to compel arbitration within three weeks of discovering the arbitration agreement and five months of the start of litigation, illustrating that the absence of a prejudice requirement removes a potent defense for tardy movants. Second, early case-management filings and discovery conduct will be scrutinized for waiver, particularly against the backdrop of other evidence corroborating that the party substantially invoked the judicial process. Under Garcia, when a movant possesses sufficient knowledge to waive its right to arbitrate, timely reservation and invocation of that right are indispensable.
CONSUMER PROTECTION: Multi-million dollar award for misrepresentations to consumers affirmed in part and reversed in part.
FTC v. Zaappaaz, L.L.C., No. 24-20234. In this COVID-era PPE fraud case, the Fifth Circuit for the first time adopted a rebuttable presumption that consumers relied on defendants’ widely disseminated misrepresentations when the Federal Trade Commission (“FTC”) brings an action under the FTC Act, 15 U.S.C. § 57b(b). Because Zaappaaz offered no evidence to rebut that presumption, the finding of liability against it stood.
Regarding the remedy, however, the panel split the $37.5 million monetary award. The panel majority affirmed the $12.2 million representing payments for undelivered, unrefunded orders, though Judge Englehardt would have remanded as to this amount. The panel, however, vacated $25.3 million in full-refund relief for late-delivered orders; as the FTC Act permitted only amounts “necessary to redress injury,” not punitive windfalls, the panel remanded that issue to the district court. Following Zaappaaz, counsel should be prepared to prove or disprove consumer reliance and actual loss, rather than assume that a full-refund award is proper.
CREDIT REPORTING: Summary judgment for credit-reporting agency affirmed absent showing that reported information was factually inaccurate.
Reyes v. Equifax Information Services, L.L.C., No. 24-40415. Under the Fair Credit Reporting Act (FCRA), 15 U.S.C. § 1681i, the Fifth Circuit joined six sister circuits in holding that a consumer must first show that challenged credit-report information is factually inaccurate. Said differently, a credit bureau’s reinvestigation duties are not triggered by a purely legal dispute over a valid debt. Reyes had alleged that derogatory credit-report information came from fraudulent charges on a credit card account that resulted in a charge-off. The record showed the balance had been transferred to a new account that she owned and that Equifax reported the charge as furnished. The file was neither “patently incorrect” nor misleading. Rather, Reyes’s claim amounted to an impermissible collateral attack on the underlying liability dispute with the card issuer. Summary judgment for Equifax was thus affirmed.
Reyes heightens the standard for FCRA plaintiffs in the Fifth Circuit: without concrete inaccuracy, plaintiffs cannot meet the “threshold requirement for § 1681i claims.” When, as here, the disagreement is about fraud or unauthorized charges rather than factual accuracy, the consumer must pursue relief from the creditor, not the credit-reporting agency.
INTELLECTUAL PROPERTY: Lanham Act does not authorize claims between co-owners of a trademark.
Reed v. Marshall, No. 24-20198. 90’s R&B artist Di Reed sued her former bandmates for violating the Lanham Act by performing under their co-owned “JADE” mark with another singer. A unanimous Fifth Circuit panel concluded that because the Lanham Act does not afford a trademark infringement cause of action between co-owners of a mark, the district court correctly granted summary judgment for the defendants. Because Reed’s trademark dilution and unfair competition claims similarly relied on use of a co-owned mark, the Court affirmed the summary judgment for the defendants on those claims as well.