Prince-Moore v. TX Dow Empl Crdt

Case: 21-20205 Document: 00516113715 Page: 1 Date Filed: 12/01/2021
United States Court of Appeals
for the Fifth Circuit United States Court of Appeals
Fifth Circuit
FILED
December 1, 2021
No. 21-20205
Lyle W. Cayce
Clerk
Cheryl Prince-Moore,
Plaintiff—Appellant,
versus
Texas Dow Employees Credit Union,
Defendant—Appellee.
Appeal from the United States District Court
for the Southern District of Texas
USDC No. 4:20-CV-1501
Before King, Costa, and Willett, Circuit Judges.
Per Curiam:*
Cheryl Prince-Moore sued her former employer, Texas Dow
Employees Credit Union (TDECU), but the district court dismissed for
failure to state a claim, finding that Prince-Moore had signed a valid
contractual waiver of any claims against TDECU. We AFFIRM.
*
Pursuant to 5th Circuit Rule 47.5, the court has determined that this
opinion should not be published and is not precedent except under the limited
circumstances set forth in 5th Circuit Rule 47.5.4.
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No. 21-20205
I
Proceeding pro se, Prince-Moore alleged that TDECU’s July 2019
termination of her employment constituted unlawful gender, race, and age
discrimination, as well as a violation of the Family and Medical Leave Act
(FMLA), 29 U.S.C. § 2601 et seq. Prince-Moore admitted in her one-page
complaint that she had signed a waiver of all claims against TDECU
(“Agreement”) in exchange for a severance payment, but argued the
Agreement was “void” because she “didn’t have the mental or emotional
competency to make any decision that would affect the rest of my life.” She
added that, at the time of signing the Agreement, she “was secretly suffering
from domestic violence by a family member, living in a deplorable domestic
violence shelter.” TDECU moved to dismiss for failure to state a claim,
arguing, inter alia, that Prince-Moore’s allegations did not plausibly suggest
a degree of mental incapacity that would render the Agreement
unenforceable under Texas law. 1
1
The Agreement stated that it was to be governed by the laws of Texas. We note
that, in past decisions, we have explained that federal common law “‘governs all questions
relating to validity of and defense to purported releases of federal statutory causes of
action.’” Ingram Corp. v. J. Ray McDermott & Co., 698 F.2d 1295, 1316 n.27 (5th Cir. 1983)
(quoting Locafrance U. S. Corp. v. Intermodal Sys. Leasing, Inc., 558 F.2d 1113, 1115 (2d Cir.
1977)); accord Chaplin v. NationsCredit Corp., 307 F.3d 368, 372 (5th Cir. 2002). Some
federal decisions hold that this rule applies even when, as in this case, the release itself
purports to be governed by state law. See Petro-Ventures, Inc. v. Takessian, 967 F.2d 1337,
1340 (9th Cir. 1992); Locafrance, 558 F.2d at 1116 n.3. Here, we have no occasion to resolve
this question, as both parties rely only on Texas-law sources in their briefing, and the
magistrate judge applied only Texas law in her report and recommendation. We thus
“assume[], . . . arguendo” that Texas law applies, given that “we normally do not address
choice of law issues sua sponte” unless failure to do so would result in “manifest injustice.”
Otto Candies, L.L.C. v. Nippon Kaiji Kyokai Corp., 346 F.3d 530, 534 n.1 (5th Cir. 2003); see
also Emps. Ins. of Wausau v. Occidental Petroleum Corp., 978 F.2d 1422, 1430 n.8 (5th Cir.
1992). There is no manifest injustice here in declining to resolve the choice of law issue.
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The magistrate judge agreed with TDECU and recommended
dismissal of Prince-Moore’s claim on basis of the Agreement. Prince-Moore
filed a motion asking the magistrate judge to reconsider the recommendation,
which the district court construed as Prince-Moore’s objections to the
Memorandum and Recommendation pursuant to Federal Rule of Civil
Procedure 72(b). Prince-Moore’s motion restated her arguments that her
termination was unlawful but made no argument regarding her mental
capacity to sign the Agreement. After considering the magistrate’s
recommendation and Prince-Moore’s objections, the district judge adopted
the recommendation of dismissal in a one-page order. No. 4:20-CV-1501,
2021 WL 1537490 (S.D. Tex. Mar. 19, 2021). Prince-Moore timely appealed.
II
Prince-Moore primarily argues that the district court erred in
concluding that she had not alleged mental incapacity sufficient to void the
Agreement. As an initial matter, we reject TDECU’s argument that Prince-
Moore forfeited the mental-capacity issue by failing to raise it below. Her
complaint, in the very next sentence after describing signing the Agreement,
explained that she “didn’t have the mental or emotional competency to make
any decision that would affect the rest of my life,” and goes on to request that
the Agreement be held “null and void.” This was sufficient to preserve the
capacity issue for appeal, even though Prince-Moore’s complaint did not use
the word “capacity.” Indeed, the district court, acknowledging its duty to
“interpret the pro se complaint liberally,” Sause v. Bauer, 138 S. Ct. 2561,
2563 (2018) (per curiam), properly analyzed Prince-Moore’s complaint as
raising a mental incapacity argument.
We will therefore consider Prince-Moore’s arguments regarding her
capacity to contract. However, a party’s failure to file a written objection to
a magistrate judge’s report and recommendation “creates a bar to that
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party’s ‘attacking on appeal the unobjected-to proposed factual findings and
legal conclusions accepted by the district court,’ except for plain error,
‘provided that the party has been served with notice that such consequences
will result from a failure to object.’” Lisson v. O'Hare, 326 F. App’x 259, 260
(5th Cir. 2009) (quoting Douglass v. United Servs. Auto. Ass’n, 79 F.3d 1415,
1429 (5th Cir. 1996) (en banc)). Prince-Moore was so notified, but her
objections to the magistrate’s report nonetheless made no mention of the
mental-capacity issue. We thus review the district court’s dismissal for
failure to state a claim for plain error, rather than the usual de novo review.
III
To prevail under a plain-error standard, Prince-Moore must show
“(1) that an error occurred; (2) that the error was . . . clear or obvious; (3) the
plain error must affect substantial rights; and (4) not correcting the error
would ‘seriously affect the fairness, integrity or public reputation of judicial
proceedings.’” Highlands Ins. Co. v. Nat’l Union Fire Ins. Co. of Pittsburgh, 27
F.3d 1027, 1032 (5th Cir. 1994) (quoting United States v. Olano, 507 U.S. 725,
736 (1993)). The “requirement of an ‘obvious’ error is stringent”; it must be
“so clear that ‘the trial judge . . . w[as] derelict in countenancing it, even
absent . . . assistance in detecting it.’ It is the unusual case that will present
such an error.” Id. (quoting United States v. Frady, 456 U.S. 152, 163 (1982)).
Prince-Moore has not shown that the district court’s dismissal of her claims
was so obviously wrong as to constitute plain error.
“[F]or the purposes of a motion to dismiss” under Rule 12(b)(6), a
court “must take all of the factual allegations in the [plaintiff’s] complaint as
true.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). Nevertheless, in order to
survive such a motion, a plaintiff’s complaint must have “more than labels
and conclusions.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007).
“Threadbare recitals of the elements of a cause of action” or “mere
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conclusory statements do not suffice.” Iqbal, 556 U.S. at 678. Such
conclusions must be supported by “well-pleaded factual allegations” that
“plausibly give rise to an entitlement to relief.” Id. at 679.
The primary allegation in Prince-Moore’s complaint relevant to her
capacity is that she “didn’t have the mental or emotional competency to
make any decision that would affect the rest of my life.” But this allegation is
merely a conclusion; indeed, it is just the sort of “conclusory statement[]”
we have held insufficient for a plaintiff to overcome on lack-of-capacity
grounds a defense of contractual waiver raised in a 12(b)(6) motion. See
Melancon v. Carnival Corp., 835 F. App’x 721, 725, 725 n.11 (5th Cir. 2020).
The only other allegation in Prince-Moore’s complaint relevant to her
mental capacity is her statement that, at the time the Agreement was
executed, she “was secretly suffering from domestic violence by a family
member, living in a deplorable domestic violence shelter.” While this
experience was undoubtedly harrowing, we cannot say that the district court
plainly erred in holding that this allegation did not plausibly suggest mental
incapacity of the kind necessary to set aside the Agreement. 2
2
Prince-Moore’s appellate brief references a note from her doctor (dated
September 24, 2019) that was attached to Prince-Moore’s objections to the magistrate’s
recommendation. Her objections did not explain what the note was intended to show. Even
assuming the district court should have considered it, the note says nothing about Prince-
Moore’s mental capacity, save for a passing reference to “emotional[] trauma[]” caused
by domestic violence. The note mainly recommends in light of Prince-Moore’s “abnormal
physical symptoms and signs” that she “be on intermittent FMLA 4/15/19-9/19/19 and
also short term disability 5/13/19-6/14/19” so that she can “do further testing, adjust
medications, and keep doctor appointments.” We think, as the district court apparently
did, that this note is too far afield of the question of mental capacity to bolster Prince-
Moore’s argument. If anything, it would seem to undercut her position slightly by
conceding that she was capable of intermittent work at the time she signed the Agreement,
suggesting that she would have been able to understand the nature of her actions.
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Texas “law presumes every party to a legal contract to have had
sufficient mental capacity to understand . . . the transaction involved, and, to
overcome this legal presumption, the burden of proof rests upon the party
asserting to the contrary.” Swink v. City of Dallas, 36 S.W.2d 222, 224 (Tex.
Comm’n App. 1931, holding approved). A person “ha[s] the mental capacity
to contract if she appreciate[s] the effect of what she [i]s doing and
underst[ands] the nature and consequences of her acts.” Mandell & Wright
v. Thomas, 441 S.W.2d 841, 845 (Tex. 1969). Importantly, “[n]ervous tension
and anxiety” do not “preclude[] [a] person from understanding the nature
and consequences of his (her) acts.” Schmaltz v. Walder, 566 S.W.2d 81, 84
(Tex. Civ. App.—Corpus Christi 1978, writ ref’d n.r.e.). In Schmaltz, the
court found no genuine question as to whether a party had mental capacity to
contract, even though around the time of contracting she “‘suffered from
emotional and mental distress,’” claimed “‘she was unable to act
rationally,’” “would get nervous and, at times, would start crying.” Id.Similarly, the Texas Supreme Court held “as a matter of law” that a
contracting party “possessed the mental capacity to contract at the time she
executed the agreement,” despite “testimony . . . that she was ‘in shock’”
as a result of “learn[ing] of her husband’s death” three days earlier. Mandell
& Wright, 441 S.W.2d at 845. Another court rejected a mental-incapacity
argument from a contracting party who “at the time of his signing the release
. . . had just suffered a serious financial reversal,” and “claimed that due to
extreme mental and emotional stress he ‘wasn’t thinking straight’ and that
he was not mentally competent ‘to actually conduct business and so
forth’”—with the court noting that “these assertions [were] not founded on
any medical testimony.” Buddy L, Inc. v. Gen. Trailer Co., Inc., 672 S.W.2d
541, 548 (Tex. App.—Dallas 1984, writ ref’d n.r.e.). “Mere nervous tension,
anxiety or personal problems do not amount to mental incapacity.” Id.
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In light of the foregoing case law, we find no plain error in the district
court’s holding that Prince-Moore’s experience with domestic violence and
her residence in a shelter did not make plausible an inference that she did not
understand the nature of her actions in signing the Agreement. The
“[f]actual allegations” in her complaint did not “raise . . . above the
speculative level” the possibility that she lacked capacity to validly sign a
contract. Twombly, 550 U.S. at 555. Though she described an extremely
stressful period in her life, she did not explain how this stress made her unable
to understand the nature of the Agreement. Without such an explanation, her
alleged ordeal (traumatic as it undoubtedly was) is by itself no stronger basis
for voiding a contract than the various forms of extreme mental stress,
anxiety, shock, and other personal problems that the aforementioned Texas
cases held were insufficient to render contracts void for incapacity.
The signed Agreement itself bolsters this conclusion. 3 The language
releasing claims against TDECU is in bold, all-capital letters (unlike the
surrounding text) and appears in a paragraph titled, “Release, Assignment of
All Claims, and Covenant Not to Sue.” Prince-Moore took six days to sign
the Agreement after it was provided to her, and per the Agreement’s terms,
had seven more days after execution to revoke her assent. She therefore had
ample time to weigh her options before deciding whether to sign. In addition,
when Prince-Moore signed the Agreement, she wrote next to her signature,
3
A copy of the signed Agreement was attached to TDECU’s motion to dismiss
and was considered by the magistrate judge in her report and recommendation. Although
a district court ordinarily “may not go outside the complaint” in deciding a Rule 12(b)(6)
motion to dismiss, there is a “limited exception” permitting “consideration of documents
attached to a motion to dismiss,” including contracts, so long as such “documents . . . are
referred to in the plaintiff’s complaint and are central to the plaintiff’s claim.” Scanlan v.
Texas A&M Univ., 343 F.3d 533, 536 (5th Cir. 2003). Here, the Agreement was mentioned
in Prince-Moore’s complaint and was central to her claim. The district court therefore
properly considered the document in ruling on TDECU’s motion to dismiss.
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“No tax’s taken out please!” (evidently referring to the severance payment
promised in the Agreement). We think that, together, the Agreement’s
conspicuous and clear waiver language, the substantial time afforded to
Prince-Moore to read and consider the Agreement, and her handwritten
message next to her signature support the district court’s conclusion that she
understood the nature of her actions in signing the Agreement: she was giving
up her right to sue TDECU in exchange for a severance payment. At the
very least, the district court’s conclusion to that effect was not plainly
erroneous.
IV
Because we affirm the district court’s determination that Prince-
Moore released any claims she may have had against TDECU under the
FMLA or for gender, race, or age discrimination, we need not reach the issue
of whether she stated claims under any of those legal theories.
For these reasons, the district court’s judgment is AFFIRMED.
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