Fifth Circuit Gets Out of the Implied Findings Business
Introduction. Federal Rule 52(a) requires that when a district court conducts a bench trial, it is obliged to “find the facts specially.” In its recent significant decision in ENI US Operating Co., Inc. v. Transocean Offshore Deepwater Drilling, Incorporated, 2019 WL 1395256, the United States Court of Appeals for the Fifth Circuit confronted the ongoing viability of the “implied findings” doctrine, a doctrine that had infiltrated the structure of Rule 52 by requiring the Court to “imply” unstated facts to support a trial court’s “ultimate factual conclusion.” The ENI Court disapproved of this doctrine, finding that it was thwarting the straightforward command of Rule 52(a). In doing so, the Court emphasized that Rule 52 impels a district court to state not only the “ultimate factual conclusion” in its findings but also sufficient “subsidiary findings” to identify “the basis of the trial court’s decision.”
The ENI decision thus signals the Fifth Circuit’s departure from the “implicit findings” business.
|INSIGHTS – Fifth Circuit Decisions|
The Dispute in ENI v. Transocean. The issue of the proper application and scope of Rule 52 arose in a case between two companies in the oil-drilling business, who sued each other for breach of contract. ENI claimed that Transocean had provided it with a faulty drilling vessel; and Transocean sued for failure to comply with contract terms. The trial court rejected all of ENI’s claims and awarded Transocean over $160,000,000 in damages. It found no valid breach of contract claim against Transocean, and a legitimate breach of contract claim against ENI.
Fifth Circuit’s Analysis of the Findings. In reviewing the contract at issue, the ENI Court first noted that Transocean had the obligation to do two things: conform with contract requirements and conform with good oilfield practice. Turning to the district court’s findings, the Court found that the district court had only addressed the first requirement. Even so, the district court had “concluded” that Transocean had used good oilfield practice.
The Court noted that this conclusion was not supported by the sparse evidence listed by the district court. It declined to hold that the fact that Transocean initiated corrective actions within the time prescribed by the contract, standing alone, satisfied the required proof of good oilfield practice or proof that repairs were properly done, particularly in light of the extensive contrary evidence submitted at trial. The Court also faulted the district court for failing even to mention a significant two-year period during which ENI experienced several problems with the vessel in question.
On this record, the ENI Court noted that it was unwilling simply to guess as to the factual basis for the district court’s conclusion. It thus vacated the judgment and remanded the case to the district court to make additional factual findings, noting that it was deferring any determination as to whether the district court’s ultimate conclusion was clearly erroneous, pending additional documentation from the district court.
Rule 52(a) Requirements: Basis of Decision Approach. In reaching this decision, the ENI Court determined that it was obligated to re-assess the role of trial courts and reviewing courts established by Rule 52. It thus enumerated the following pertinent guideposts informing this process.
The United States Supreme Court stated in 1943 that Rule 52(a) requires district courts to render findings of fact “in such detail and exactness as the nature of the case permits, of subsidiary facts on which the ultimate conclusion can rationally be predicated.” Kelley v. Everglades Draining Dist., 319 U.S. 415, 420 (1943). The Kelley Court also counseled that a reviewing court was not obliged to “search the record and analyze the evidence in order to supply findings which the trial court failed to make.”
The Fifth Circuit acknowledged this “basis of decision” standard in Gulf King Shrimp Co. v. Wirtz, 407 F.2d 508, 515 (5th Cir. 1969), holding that consonant with the requirements of Rule 52, a district court would be obliged to lay out enough subsidiary findings to allow an understanding of the basis of that court’s decision. A subsequent Fifth Circuit decision, Golf City, Inc. v. Wilson Sporting Goods, Co., 555 F.2d 426, 433 (5th Cir. 1977), emphasized that to satisfy Rule 52(a) requirements, the findings “must be sufficiently detailed to give a clear understanding of the analytical process by which the ultimate findings were reached and to assure that the trial court took care in ascertaining the facts.”
Rule 52(a) Requirements: Implied Findings Appendage. In ENI, the Court acknowledged that despite the clear explication of this “basis-of-decision” approach, an alternative rule had crept into Fifth Circuit jurisprudence, the “implied findings” doctrine. The ENI Court traced the origin of this doctrine to a 1975 decision, Gilbert v. Sterrett, 509 F.2d 1389, 1393 (5th Cir. 1975). Gilbert stated that within the boundaries of Rule 52, the Court of Appeals was authorized to assume that if a particular specific finding was missing, the district court had impliedly made findings consistent with its general holding so long as the implied finding was supported by the evidence. See Becker v. Tidewater, Inc., 586 F.3d 358, 371 n.9 (5th Cir. 2009). In describing Gilbert, the ENI Court noted that Judge Goldbold had dissented in that case, astutely recognizing the inherent conflict between Gulf King Shrimp’s “basis of decision” approach, and the “implied findings” approach in Gilbert.
Fifth Circuit’s Basis for Jettisoning Subsequent Implied Findings Decision. The ENI Court recognized that it had to come to grips with the legitimacy of the Gilbert decision. Because that decision post-dated the Gulf King Shrimp decision, the Court stated that it was going to jettison the Gilbert decision on the basis of its violation of the “rule of orderliness.” That is, the ENI Court construed Gilbert as having overturned the decision in Gulf King Shrimp without any intervening change in the law, citing Mercado v. Lynch, 823 F.3d 276, 279 (5th Cir. 2016). It additionally criticized Gilbert for having contravened the 1943 Kelley decision by the Supreme Court.
Conclusion. The ENI decision signals the Fifth Circuit’s departure from the implied findings business. It now obliges practitioners and courts to scrutinize fact findings rendered in bench trials to ensure compliance with the Rule 52 requirements enunciated in Gulf Coast Shrimp, ensuring that ultimate factual conclusions emanating from bench trials are properly supported by adequate recitations of subsidiary facts and, hopefully, avoiding costly remands in the process.
Lionel M. Schooler is a management-side employment lawyer and recognized authority on employment law, federal appellate practice, and arbitration. Lonnie’s employment practice focuses on counseling clients and litigating, on a nationwide basis, claims under all employment laws, wage and hour claims, and investigations by the Equal Employment Opportunity Commission, the U.S. Department of Labor, and the Texas Workforce Commission. Lonnie is also experienced as an arbitrator on the Commercial and Employment Panels of the American Arbitration Association and as an advocate. He was selected for inclusion by the National Association of Distinguished Neutrals and is certified as a Fellow of the Chartered Institute of Arbitrators for international arbitration matters. Since 2017, Lonnie has served on the Board of Directors of the Houston Bar Association. His previous editorial experience includes serving as editor-in-chief of The Houston Lawyer, a bimonthly publication of the Houston Bar Association.
The opinions expressed are those of the author and do not necessarily reflect the views of the firm, its clients, or any of its or their respective affiliates. This article is for informational purposes only and does not constitute legal advice.