author: REAVLEY, Circuit Judge.

text:
    Charla ALDOUS; Charla G. Aldous, P.C., doing business as Aldous Law Firm, Plaintiffs-Appellants Cross-Appellees v. DARWIN NATIONAL ASSURANCE COMPANY, Defendant-Appellee Cross-Appellant
    No. 16-10537
    United States Court of Appeals, Fifth Circuit.
    FILED March 16, 2017

      Bobby Mark Rubarts, Brent Edward Basden, Koning Rubarts, L.L.P., Bobby Mark Rubarts, K & L Gates, L.L.P., Dallas, TX, for Plaintiffs-Appellants Cross-Appellees
    Craig Brinker, Thomas M. Spitaletto, Esq., Wilson, Elser, Moskowitz, Edelman & Dicker, L.L.P., Craig Brinker, Henslee Schwartz, L.L.P., Dallas, TX, for Defendant-Appellee Cross-Appellant
    Before REAVLEY, ELROD, and GRAVES, Circuit Judges.
   REAVLEY, Circuit Judge.

Litigation over two trusts begat litigation between the prevailing party, Albert Hill III, and his attorneys. Appellant Charla Aldous is one of those attorneys, and she prevailed against her erstwhile client. In addition to establishing an entitlement to significant attorney’s fees, Al-dous and her cohort also successfully defended against breach of contract and professional negligence claims, among others. Hill’s claims against the attorneys triggered insurance coverage provided by appellee Darwin National Assurance, Co., Aldous’s insurer. And now, in this third layer of litigation, we confront the resulting coverage dispute. Aldous claims Darwin did not pay enough to fully cover the costs of her defense. Darwin asserts it paid too much.

This case was decided in favor of Darwin on summary judgment. In a ruling that effectively doomed Aldous’s claims, the district court ruled she was judicially es-topped from claiming defense costs in excess of $668,068.38. Building on this ruling, the district court further found that Darwin was entitled to recover “overpay-ments” on an equitable “money had and received” theory. Aldous appealed.

In addition to issues raised by the district court’s summary judgment ruling, we are also called upon to decide whether the district court erred in partially granting a motion to dismiss brought by Darwin. Lastly, Darwin has filed a cross-appeal, contending that judgment should not have been granted in favor of Aldous with respect to a breach of contract claim.

I. BACKGROUND

Along with Lisa Blue and Steve Malouf, Aldous represented Hill in litigation that resulted in a judgment for their client valued at $114,745,870. (The association mf lawyers Blue, Aldous, and Malouf are hereinafter referred to as “BAM.”) BAM represented Hill on a contingency basis, but Hill did not want to pay. Litigation ensued. After BAM sued Hill, Hill counterclaimed, alleging breach of fiduciary duty, duress, breach of oral contract, fraud, and professional negligence.

Aldous had a valid professional liability insurance policy through Darwin (the “Policy”), and Hill’s counterclaims triggered coverage. Blue and Malouf were also covered under separate policies through separate insurers. BAM had already retained Alan Loewinsohn to represent its affirmative claims against Hill and requested that the insurers allow Loewinsohn to handle the defense as well. The insurers relented. The various parties agreed (and continue to agree) that Darwin is responsible only for one-third of the covered costs of defense; Blue and Malouf (or their insurers) were separately responsible for their one-third shares.

BAM ultimately prevailed against Hill, securing an award of $21,942,961 in earned attorney’s fees (offset by $691,175.93), costs of $479,595.67, and the “reasonable costs and fees in defending against Hill Ill’s counterclaims in the amount of $2,586,560.11.” By the time judgment was entered, Aldous and Darwin were already embroiled in this coverage dispute.

Aldous filed this suit in Texas state court, and it was removed to federal court on the basis of diversity jurisdiction. As relevant here, Aldous alleged breach of contract, breach of the duty of good faith and fair dealing, violations of the Texas Insurance Code, and violations of the Texas Deceptive Trade Practices Act. She also sought a declaratory judgment that Darwin is liable for the costs associated with the prosecution of her affirmative claims against Hill to the extent those affirmative claims were inextricably intertwined with her defense. Darwin counterclaimed, alleging (among other things) breach of contract, unjust enrichment, and money had and received. The district court partially granted a Rule 12(b)(6) motion filed by Darwin, dismissing Aldous’ breach of the duty of good faith and fair dealing claim, as well as a Texas Insurance Code § 541 claim and the Texas Deceptive Trade Practices Act claim. Subsequently, the parties filed cross-motions for summary judgment.

On summary judgment, the district court ruled largely in favor of Darwin. In a ruling with major consequences, the district court ruled that Aldous was judicially estopped from claiming that the costs in defending against Hill’s counterclaims exceeded $668,068.38. This ruling meant that Darwin’s coverage obligations were limited to $222,689.44 — one-third of the total cost to defend. Darwin had paid Aldous far more than that, $502,364.59. Based on this ruling, Aldous’ breach of contract claim necessarily failed. The judicial estoppel ruling also meant that Darwin had overpaid, and the district court ruled that Darwin could recover this overpayment through an action for money had and received. The district court further ruled that Aldous was not entitled to costs related to the prosecution of her affirmative claims against Hill, even if she could show those affirmative claims were inextricably intertwined with her defense against Hill’s counterclaims. And, as clarified in a subsequent order, the district court granted summary judgment against Darwin with respect to its breach of contract counterclaim, reasoning that the anti-subrogation rule prevented it from asserting subrogation rights against its own insured.

II. STANDARD OF REVIEW

Summary Judgment. Summary judgment rulings are subject to de novo review. Cal-Dive Int’l, Inc. v. Seabright Ins. Co., 627 F.3d 110, 113 (5th Cir. 2010). “We will affirm the district court’s judgment if no genuine issues of fact are presented and if judgment was proper as a matter of law.” Id. On cross-motions for summary judgment, we consider “each party’s motion independently, viewing the evidence and inferences in the light most favorable to the nonmoving party.” Morgan v. Plano Indep. Sch. Dist., 589 F.3d 740, 745 (5th Cir. 2009).

Motion to Dismiss. Dismissal for failure to state a claim is also reviewed de novo. Colony Ins. Co. v. Peachtree Const., Ltd., 647 F.3d 248, 252 (5th Cir. 2011). Dismissal is appropriate if, assuming the truth of all facts alleged in the complaint, the plaintiff is not entitled to relief as a matter of law. Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009); see Fed. R. Civ. P. 12(b)(6).

III. DISCUSSION

A. Judicial Estoppel

As the parties understand, the district court’s judicial estoppel ruling had major ripple effects. It is the foundation of the grant of summary judgment in favor of Darwin’s equitable claim for relief, and it precludes Aldous from establishing any breach of contract. As we will see, however, the foundation is faulty. Application of judicial estoppel was inappropriate.

Texas law governs the substance of this dispute, but “we apply federal principles of judicial estoppel.” RSR Corp. v. Int’l Ins. Co., 612 F.3d 851, 859 (5th Cir. 2010). There are two basic requirements: “First, it must be shown that ‘the position of the party to be estopped is clearly inconsistent with its previous one; and [second,] that party must have convinced the court to accept that previous position.’" Id. (quoting Hall v. GE Plastic Pac. PTE Ltd., 327 F.3d 391, 396 (5th Cir. 2003)). That said, “the Supreme Court has refused to ‘establish inflexible prerequisites or an exhaustive formula for determining the applicability of judicial estoppel,’ stating instead that different considerations ‘may inform the doctrine’s application in specific factual contexts.’ ” Reed v. City of Arlington, 650 F.3d 571, 574 (5th Cir. 2011) (en banc) (quoting New Hampshire v. Maine, 532 U.S. 742, 751, 121 S.Ct. 1808, 1815, 149 L.Ed.2d 968 (2001)). Even when serving as the basis for a summary judgment ruling, a district court’s judicial estoppel determination is reviewed for abuse of discretion. Kane v. Nat'l Union Fire Ins. Co., 535 F.3d 380, 384 (5th Cir. 2008). “A district court abuses its discretion if it misapplies the law or bases its decision upon erroneous findings of fact.” RSR Corp., 612 F.3d at 859.

After thorough review of the record, we can only conclude that Aldous never took the position (let alone “clearly”) that her defense costs in the underlying suit were limited to $668,068.31 and that the prior court never accepted such a position. The district court’s contrary determination represents an abuse of discretion.

During the prior proceedings, BAM was required to show how much it expended both in prosecuting its claims against Hill and in defending against Hill’s counterclaims. The parties stipulated that these attorney’s fees could be established through declarations, and BAM’s attorney filed a series of relevant declarations (the “Loewinsohn Declarations”). The first of the declarations makes it plain that BAM did not claim its costs of defense were limited to $668,068.31. Therein, Loewin-sohn asserted legal fees of $2,054,178.18, including both affirmative and defensive claims. He expressly declared that the “fees and expenses can all be allocated either to the prosecution of BAM’s breach of contract claim or to the defense of the counterclaims and affirmative defenses asserted by the Hills, which was necessary in BAM’s prosecution of their claim, or both.”

That first declaration was filed on April 29, 2011. After that day, the rest of the litigation concerned only Hill’s counterclaims. On June 29, 2011, Loewinsohn submitted a “supplemental declaration” that further testified that “for the time period of May 1, 2011 to June 24, 2011, for the defense of the Counterclaims,” $668,068.31 had been reasonably expended. Then, on January 9, 2012, he submitted a “second supplemental declaration” which “incorporated by reference” the first and reiterated his opinion “that an attorney’s fee, including expenses, of $668,068.31 was a reasonable and necessary fee for the defense of the Counterclaims.” As can be readily seen, mere recitation of the Loewinsohn Declarations establishes that Aldous never claimed that defense costs totaled $668,068.31. Rather, the fees incurred after April 29 totaled $668,068.31 and were purely defense-related.

Two other notable facts emerge from the declarations and a review of the prior proceedings. First, the reason that fees incurred after April 29 related solely to defending against Hill’s claims is that BAM’s affirmative claims had already been litigated. An evidentiary hearing commencing April 20th resolved those claims. Second, the lion’s share of dispositive defense work was done prior to April 29, as shown by the judge’s ruling that, with one exception, all of Hill’s counterclaims “were legally barred based on her prior rulings” stemming from the April 20 hearing.

The district court’s ruling contains several errors. Most fundamentally, the district court unjustifiably read the supplemental declaration in isolation. It took as Aldous’s binding position that defense costs in the prior proceeding were incurred only between May 1 and June 24 and that those costs totaled $668,068.31. To make this large error, the district court was required to make small antecedent errors.

For example, the district court refused to credit Aldous’s argument that’ the first declaration did not segregate fees and therefore included costs related to defending against Hill. In the district court’s view, this argument was undercut by the fact that “Loewinsohn segregate^] the fees associated with the affirmative and defensive claims in.his supplemental and second supplemental declaration.” Charla G. Aldous, P.C. v. Darwin Nat. Assur. Co., 92 F.Supp.3d 555, 566 (N.D. Tex. 2015). Loewinsohn’s newfound ability to segregate fees is easily explained, however. As mentioned above, after June 29 the only remaining work to be done was defense work.

Further, even the district court’s interpretation of the supplemental declaration ignores its plain language. The supplemental declaration establishes fees incurred “for the time period of May 1, 2011 to June 24, 2011.” When Aldous pointed.out that the declaration was time-limited, the district court closed its ears and refused to consider the point. See id. at 566 (“The purpose of judicial estoppel, however, prevents Plaintiffs from taking positions, such as this one.”). As the district court saw it, judicial estoppel itself precluded Aldous from explaining her prior position. It should go without saying that judicial es-toppel cannot be applied to the question of whether judicial estoppel applies. Aldous should have been permitted make arguments reconciling and harmonizing the declarations.

We also cannot condone the district court’s approach to the second aspect of judicial estoppel — whether the first court accepted the prior inconsistent position. To find judicial estoppel applicable, the district court was required to find that the prior court accepted $668,068.31 as BAM’s total costs on defense. Instead, the prior court issued a judgment “[t]hat BAM shall recover from Hill III its reasonable costs and fees in defending against Hill Ill’s counterclaims in the amount of $2,586,560.11.” (Emphasis added.) As Al-dous argues, this single sentence from the judgment demonstrates that judicial estop-pel was improper.

Nonetheless, the district court found that the “record clearly reflects the court’s acceptance of and reliance on Plaintiffs’ prior position in the Hill lawsuit.” Charla G. Aldous, P.C., 92 F.Supp.3d at 568. The evidence cited by the district court does not show that the prior court accepted $668,068.31 as the full measure of defense costs. It shows .the parties agreed “to be bound by [the prior court’s] attorney’s fees determination” and “agreed that they would submit the issue of attorney’s fees to [a magistrate judge]; that they could appeal only to [a district court judge]; and that they would not request an additional evidentiary hearing before [the district court judge].” Id. The relevance of this procedural background and summary of the parties’ agreements is unclear. What is clear is that the district court erred in assessing the evidence.

Judicial estoppel is an equitable doctrine concerned with “judicial acceptance of an inconsistent position in a later proceeding [that] would create the perception that either the first or the second court was misled.” Reed Elsevier, Inc. v. Muchnick, 559 U.S. 154, 170, 130 S.Ct. 1237, 1249, 176 L.Ed.2d 18 (2010) (quoting New Hampshire v. Maine, 532 U.S. at 750, 121 S.Ct. at 1815). Nothing in the judgment issued by the prior court would suggest that Aldous should not be permitted to claim defense costs in excess of $668,068.31. Indeed, the judgment suggests defense costs far outpacing that figure. Any inconsistency of rulings was con-fected when the district court estopped Aldous from claiming BAM’s costs on defense exceeded $668,068.31. We now undo that error.

B. Aldous’s Claims

1. Breach of Contract

The district court granted summary judgment on Aldous’s breach of contract claim in part because Aldous had already received from Darwin payments in excess of its one-third share of $668,068.31 in defense costs. That logic was predicated on the judicial estoppel ruling and no longer holds. But the district court also granted summary judgment against Aldous for reasons beyond the judicial estoppel ruling. Under the district court’s interpretation of the contract, Darwin “did not breach the contract as a matter of law because the terms of the Policy provide Defendant with discretion to determine reasonable claim expenses.” Charla G. Aldous, P.C., 92 F.Supp.3d at 569. We cannot agree. Summary judgment should not have been granted against Aldous on the breach of contract claim.

“Interpretation of an .insurance contract is a question of law,” meaning our review is de novo. Tesoro Ref. & Mktg. Co., L.L.C. v. Nat’l Union Fire Ins. Co., 833 F.3d 470, 473 (5th Cir. 2016). “Under Texas law, we interpret insurance policies using the same rules of interpretation and construction applicable to contracts generally.” Id. at 474. The Policy contains a promise that Darwin will pay “all” covered “Claim Expenses.” Only “reasonable” expenses qualify, however, and “[t]he determination by the insurer as to the reasonableness of Claim Expenses shall be conclusive on all Insureds.” The district court interpreted these provisions to provide Darwin with a right to decide how much it wants to pay. And there was no breach, according to the district court, because Darwin merely exercised that right and did not do so arbitrarily:

Darwin’s stated reasons for making the deductions demonstrate that it did not arbitrarily make these deductions but rather made a determination as to the reasonableness of the Claim Expenses, as permitted by the Policy, according to reasonable considerations, such as its Billing Guidelines and the fact that it did not have a duty to pay for attorney’s fees associated with BAM’s affirmative claims.

Charla G. Aldous, P.C., 92 F.Supp.3d at 571.

Aldous contends that Darwin, never made a reasonableness determination that should now be treated as binding and that the district court’s interpretation of the Policy renders the duty to defend illusory. According to Darwin, “the District court determined ‘as a matter of law' that Darwin did not breach the Policy in making the reductions, because the Policy gave Darwin the right to do so,” such that “[e]v-idence” of a reasonableness determination was “unnecessary.” This is an accurate description of the district court’s ruling, but it proves Aldous’s point. If the Policy provides Darwin with the unquestionable right to pay only to the extent it pleases, it is illusory. Accordingly, we agree with both aspects of Aldous’ argument.

Darwin’s right to make a binding determination regarding the reasonableness of Aldous’s claims would be implicated only if Darwin actually made a reasonableness determination. Darwin disclaims any obligation to provide evidence of reasonability and goes further still, asserting that “[e]vi-dence showing example of’ the challenged “reductions was ... unnecessary.” Despite this questionable assertion, it assures us “[t]he pleadings and evidence are replete with examples of Darwin’s ‘reasonableness’' determinations.” From a record “replete” with examples, however, it gives us none. Instead, it points us into legal thickets.

For example, Darwin asserts that its reliance on billing guidelines to categorically exclude certain expenses represents a reasonableness determination and explains that “Darwin was clear from the beginning that its consent to Loewinsohn as counsel ... was conditioned upon ‘adherence to Darwin’s Billing and Reporting Guidelines.’ ” The “Billing Guidelines” are not part of the Policy, and Darwin informed Aldous of its intent to utilize them only in a reservation-of-rights letter. But “a unilateral reservation-of-rights letter cannot create rights not contained in the insurance policy.” Texas Ass’n of Cntys. Cnty. Gov’t Risk Mgmt. Pool v. Matagorda Cnty., 52 S.W.3d 128, 131 (Tex. 2000). The same is true of the Billing Guidelines themselves. As a matter of basic contract law, an extra-contractual document — a document to which Aldous never agreed— cannot limit or define her rights under the Policy. Baylor Univ. v. Sonnichsen, 221 S.W.3d 632, 635 (Tex. 2007) (identifying “mutual assent” as a basic component of any contractual agreement); see also Philadelphia Indem. Ins. Co. v. Chicago Title Ins. Co., Case No. 09 C 7063, 2012 WL 2115487, at *5 (N.D. Ill. June 10, 2012) (rejecting an argument that “later-provided conditions can govern the amount to which an insured is entitled when those guidelines were not a part of the original insurance contract.”).

Darwin also refers us to Aldous’s brief, which assertedly “describes and cites extensive evidence of reductions Darwin made to defense bills based on the Billing Guidelines.” Again, reliance on the Billing Guidelines is problematic under the circumstances. Further, survey of the evidence cited in Aldous’s brief suggests that Darwin’s reductions were in fact made arbitrarily and even against the Darwin adjuster’s reasoned judgment.

In correspondence with Aldous, Darwin explained that it reached the proper sum by applying “Billing Guidelines” calling for certain relatively modest deductions “off the top.” Far more significant was its next step — simply cutting the remaining claimed balance in half based on an assumption that half of the claimed costs were associated with prosecution of Aldous’ affirmative claims and were therefore not covered. It made this “50/50 reduction” even though Aldous’s invoicing had already been adjusted to eliminate costs related solely to the affirmative claims. Darwin’s own adjuster initially opposed cutting Aldous’s claimed costs in this 'manner, saying such an approach “would be taking two bites at the apple and would be deducting likely more than we should.” The adjuster was persuaded to fall into line not by Darwin officials asserting “reasonableness” but by the insurance companies representing Blue and Malouf. The record shows that Travelers insurance company pressed the 50/50 reduction. Further, the Travelers adjuster’s rationale had nothing to do with a reasonableness determination. Rather, the evidence indicates that Travelers was still bitter about Loew-insohn’s retention, reasoned “What’s the harm in trying?,” and “suspect[ed]” the insureds wouldn’t “quibble over ahundred thousand here dr there.”

We do not opine on the general enforceability of the Policy provision at issue. We hold that it is simply not implicated on these facts, where there is no evidence that Darwin made any genuine determination as to the reasonableness of claimed fees and instead slashed the claimed defense costs arbitrarily. As Aldous argues, under the circumstances, reading the Policy to effectively immunize Darwin from breach of contract claims would render the contract illusory. See Evanston Ins. Co. v. ATOFINA Petrochemicals, Inc., 256 S.W.3d 660, 669 (Tex. 2008) (‘We cannot adopt a construction that renders any portion of a policy meaningless, useless, or inexplicable.”). Darwin is not entitled to summary judgment on Aldous’s breach of contract claim. In ruling otherwise, the district court erred.

2. Declaratory Judgment

Aldous seeks “a declaration that Darwin was required to pay all of [Loewinsohn’s] attorneys’ fees and costs that were inextricably intertwined with her defense and pursuit of her affirmative claim.” In other words, though the Policy covers only expenses related to the defense against Hill’s claims, Aldous seeks to recover fees related to the affirmative prosecution of her affirmative claims insofar as it can be said the work was “inextricably intertwined” with the defense. The problem with this argument is .that there is absolutely no support for it.

As a federal court with diversity jurisdiction and an obligation to follow Texas law, innovation is verboten. Dean v. Dean, 821 F.2d 279, 284 (5th Cir. 1987). No Texas court has ever held that the duty to defend includes the duty to pay legal fees incurred in the course of prosecuting affirmative claims that are inextricably inter-. twined with the defense. Relied upon by Aldous, Zurich American Insurance Co. v. Nokia, Inc., explains that “[i]f a complaint potentially includes a covered claim, the insurer must defend the entire suit.” 268 S.W.3d 487, 491 (Tex. 2008). The duty to defend the entire suit does not give rise to a duty to prosecute claims helpful to or even inextricably intertwined with that defense, however. Aldous also points to Stewart Title Guaranty Co. v. Sterling, 822 S.W.2d 1 (Tex. 1991). Stewart Title is concerned with the circumstances under which a plaintiff seeking attorney’s fees from a vanquished defendant may also recover attorney’s fees related to defending against that same defendant’s counterclaims — “when the attorney’s fees rendered are in connection with claims arising out of the same transaction and are so interrelated that their ‘prosecution or dá-tense entails proof-or denial of essentially the same facts.’ ” Id. at 11 (quoting Flint & Assocs. v. Intercont’l Pipe & Steel, Inc., 739 S.W.2d 622, 624-25 (Tex. App. 1987)). The case has nothing to do with an insured’s duty to defend and does not support Aldous’ novel argument that the duty to defend may also include a duty to prosecute integrally related affirmative claims.

Aldous cites no Policy language in support of her argument, which the district court rightly viewed as an effort to rewrite the agreement. See Mustang Tractor & Equip. Co. v. Liberty Mut. Ins. Co., Case No. CIV. A. H-91-2523, 1993 WL 566032, at *9 (S.D. Tex. Oct. 8, 1993), aff'd, 76 F.3d 89 (5th Cir. 1996) (declining to extend an-insurer’s duty to defend to cover prosecution of defense-minded affirmative claims because, while “the duty to defend is expansive,” all surveyed “cases uniformly hold that the. duty is limited to cases po^ tentially within the policy coverage”). Al-dous is not entitled to the declarations she' seeks, and summary judgment was properly granted against her on these claims. Based on our rulings thus far, the proper measure of covered defense costs remains an unsettled question of fact.

3. Breach of the Duty of Good Faith and Fair Dealing

Aldous’s claim for breach of the duty of good faith and fair dealing did not survive Darwin’s motion to dismiss for failure to state a claim. For over twenty years, the law in Texas has been clear that an insurer does not owe its insured “a duty of good faith and fair dealing to investigate and defend claims by a third party against its insured.” Maryland Ins. Co. v. Head Indus. Coatings & Servs., Inc., 938 S.W.2d 27, 27 (Tex. 1996). Nonetheless, Aldous asserts that a failure to provide the required defense may represent a breach of the duty of good faith and fair dealing. Consistent with Mid-Continent Casualty Co. v. Eland Energy, Inc., 709 F.3d 515 (5th Cir. 2013), we reject that argument.

“Under Texas law, an insurer owes a duty of good faith in handling its insured’s own claim of loss.” Med. Care Am., Inc. v. Nat’l Union Fire Ins. Co., 341 F.3d 415, 425 (5th Cir. 2003). But there is no common law duty of good faith and fair dealing between an insurer and insured with respect to third-party claims. Eland Energy, 709 F.3d at 520. The parties agree that the viability of the cause of action depends on whether Aldous’ claim is classified as a first-party claim or a third-party claim.

To identify the nature of the claim, it is proper to ask: When the insured “sought coverage” was it to cover its own loss or the loss of a third party? Id. at 520-21; see also Lamar Homes, Inc. v. Mid-Continent Cas. Co., 242 S.W.3d 1, 17 (Tex. 2007) (“[A] first party claim is stated when ‘an insured seeks recovery for the insured’s own loss,’ whereas a third-party claim is stated when ‘an insured seeks coverage for injuries to a third party.’” (quoting Universe Life Ins. Co. v. Giles, 950 S.W.2d 48, 54 n.2 (Tex. 1997))). Here, a third-party (Hill) allegedly suffered a loss and sued the insured (Aldous), who then sought coverage from the insurer (Darwin). Viewed this way, this is not a claim involving the insured’s claim of loss, meaning there is no duty of good faith and fair dealing between the insurer and insured. See Eland Energy, 709 F.3d at 520.

Aldous attempts to distinguish Eland Energy by creating two categories of duty-to-defend disputes. In the first batch, you have mishandled defenses, and Eland Energy fits into this category because there we held that the plaintiff failed to “show that Texas law recognizes a cause of action for an insurer’s mishandling of third-party claims.” Id. at 520. In the second batch, you have failure-to-pay cases, where the insurer did not pay for the defense as required by law. We cannot accept this distinction because Eland Energy’s, holding is that the duty of good faith and fair dealing simply does not exist in the present scenario. See id. It would be a strange duty if its existence depended on whether or how it was violated.

Aldous’s argument, however, is not without force. For in Lamar Homes, at least for purposes of the Prompt Payment Act, the Supreme Court of Texas held that “an insured’s claim for defense costs is a first-party claim because it concerns a direct loss to the insured; that is, the claim does not belong to a third party.” 242 S.W.3d at 17. Ultimately, we find Lamar Homes inapt.

Lamar Homes did not hold that a duty of good faith and fair dealing runs from insured to insurer in circumstances where the duty to defend was triggered and the insurer failed to adequately cover the defense. Indeed, the case had nothing to do with the duty of good faith and fair dealing and concerned statutory, rather than common law, duties. It would be odd if a ruling on the Prompt Payment Act dramatically affected the common law duties of insurers. Lamar Homes, 242 S.W.3d at 16 (describing the issue presented as “whether the ‘Prompt Payment of Claims’ statute ... applies to an insurer’s breach of the duty to defend”). It would be odder still if the catalyst for that change in the law was the Texas legislature’s decision to add the term “first-party claim” to the Prompt Payment Act. See id. at 24 (Brister, J. dissenting) (noting the addition of the phrase in 1991).

Notably, Aldous has pointed to no Texas courts interpreting Lamar Homes to revise the common law duties of insurers in the manner for which she advocates. Most courts that have considered the possibility have rejected it. Further, under Aldous’s view, the duty of good faith and fair dealing only exists (and is violated) when the duty to defend has also been breached. In rejecting-this theory, we follow the Supreme Court of Texas’ pertinent instructions. See Head Industrial, 938 S.W.2d at 28-29 (“[A]n insured is fully protected against his insurer’s refusal to defend or mishandling of a third-party claim by his contractual and Stowers rights.”).

4. Aldous’s Remaining Claims

Aldous’s claims based on the Texas Insurance Code and Deceptive Trade Practices Act are barred as a matter of law under Parkans International LLC v. Zurich Ins. Co., 299 F.3d 514 (5th Cir. 2002). Under Parkans, “[t]here can be no recovery for extra-contractual damages for mishandling claims unless the complained of actions or omissions caused injury independent of those that would have resulted from a wrongful denial of policy benefits.” Id. at 519. We are not at liberty to second-guess this ruling. See Jacobs v. Nat’l Drug Intelligence Ctr., 548 F.3d 375, 378 (5th Cir. 2008).

C. Darwin’s Claims

1. Money Had and Received/Equitable Reimbursement

In light of Our judicial estoppel ruling, the district court’s grant of summary judgment on Darwin’s claim for money had and received cannot stand. Aldous argues that judgment was improper for another reason: under Texas law, an insurer has no right of equitable reimbursement against its insured. For the reasons that follow, as a federal court exercising diversity jurisdiction, we cannot endorse. the district court’s recognition of an insurer’s previously unannounced equitable right of recovery against its insured.

In the words of the district court, an insurer “is entitled to recover to the extent it made overpayments,” and overpayments are payments made but not actually required “under the insurance contract.” Aldous v. Darwin Nat. Assur. Co., Case No. 3:13-CV-3310-L, 2015 WL 1879677, at *5 (N.D. Tex. Apr. 24, 2015). Under this approach, an insurer that makes payments under a policy while coverage is disputed can sue its insured, claiming a right to equitable reimbursement if the coverage dispute is resolved in its favor. And, because the claim is equitable in nature, the insurer need not point to any policy provision granting the right. Rather, the right exists by default.

Under Texas law, if an insurance company disputes coverage with its insured but nonetheless settles the action on the insured’s behalf, there is no right to equitable reimbursement if the third party’s claims are later determined to be uncovered by the policy. Matagorda County, 52 S.W.3d at 135. This is true even where the insurer has provided coverage under a reservation of rights. Id. at 131. But nothing stops insurers from including a right to reimbursement in its Policy or obtaining “the insured’s clear and unequivocal consent to the settlement and the insurer’s right to seek reimbursement.” Id. at 135. The Supreme Court of Texas later described Matagorda County broadly, as a case “declining to recognize an implied-in-fact, an implied-in-law, or an equitable reimbursement right outside of the insurance policy’s provisions.” Excess Underwriters at Lloyd’s, London v. Frank’s Casing Crew & Rental Tools, Inc., 246 S.W.3d 42, 45 (Tex. 2008).

Under the broad reading of Matagorda County suggested by Frank’s Casing, Darwin has no equitable reimbursement right outside of the insurance policy’s provisions. Both of those cases, however, apply where an insurer “settles a claim against its insured when coverage is disputed.” See id. at 43. And much of their reasoning is specifically tailored to that scenario. See id. at 46. (“Our analysis in Matagorda County highlighted the dilemma faced by both insurer and insured when a claimant presents a settlement demand within policy limits and coverage is uncertain.”). Thus, those cases strongly suggest (but do not necessarily dictate) that insurers have no right to equitable reimbursement of costs expended in defending an insured where coverage exists but the scope of the duty to defend is disputed and later resolved in favor of the insurer. See Am. Int’l Specialty Lines Ins. Co. v. Rentech Steel LLC, 620 F.3d 558, 564 (5th Cir. 2010) (“In making our Erie guess, we look first to those Texas Supreme Court cases that, while not deciding the issue, provide guidance as to how the Texas Supreme Court would decide the question before us.”).

The district court did not give due regard to Frank’s Casing and Matagorda County. Moreover, instead of basing its decision on Texas law, the district court relied primarily on Fifth Circuit cases that were not applying Texas law. See Charla G. Aldous, P.C., 92 F.Supp.3d at 573 (relying on United States v. St. Bernard Par., 756 F.2d 1116, 1127 (5th Cir. 1985)) (applying federal law), Peavey Co. v. M/V ANPA, 971 F.2d 1168, 1176 (5th Cir. 1992) (applying Louisiana law), and Adams v. Unione Mediterranea Di Sicurta, 364 F.3d 646, 656 (5th Cir. 2004) (applying federal admiralty and maritime law). Its subsequent “Supplemental Memorandum Opinion and Order” further reveals that the district court’s ruling lacked a basis in Texas law. The district court recognized that federal courts have permitted “restitution for overpayment as a means of recovery under ERISA” and concluded that, “[b]y analogy, the reasons for allowing recovery for overpayments in the context of ERISA are applicable to the court’s decision today, as the concerns also pertain to contracts for liability insurance.” See Aldous, 2015 WL 1879677, at *5. Federal courts are not to make state law, and certainly not “by analogy” to federal law. See Erie R. Co. v. Tompkins, 304 U.S. 64, 69, 58 S.Ct. 817, 818, 82 L.Ed. 1188 (1938) (“There is no federal general common law. Congress has no power to declare substantive rules of common law applicable in a state .... And no clause in the Constitution purports to confer such a power upon the federal courts.”).

The district court’s Supplemental Memorandum Opinion and Order also included citations to Texas cases. While the district court sharpened its analytical focus, the cases cited do not support its conclusion. The district court relied on Fortune Production Co. v. Conoco, Inc., 52 S.W.3d 671 (Tex. 2000), and Southwestern Electric Power Co. v. Burlington Northern R.R. Co., 966 S.W.2d 467 (Tex. 1998). We reject application of those cases for the simple reason that they do not involve contracts for insurance. See Miga v. Jensen, 299 S.W.3d 98, 103 (Tex. 2009).

As plaintiff, Dennis Miga had initially been very successful in litigation against Ronald Jensen, securing a judgment in excess of $20 million that was largely upheld on appeal. Id. at 100. Because interest was accruing at an alarming rate, Jensen paid the judgment just prior to filing a petition for review with the Supreme Court of Texas. Id. Texas’ highest court then sided with Jensen on the merits, again rendering judgment in favor of Miga but in an amount just over $1 million. Id. at 101. Miga took the position that the reversal had no financial consequences and denied any obligation to repay the $21,560,150.67 he had received beyond the proper, adjusted judgment amount. Id. Jensen then filed suit for restitution, and the case again wound up before the Supreme Court of Texas, which applied the “restitution-after-reversal rule” and held in Jensen’s favor. Id. at 101-02.

Miga argued that Frank’s Casing (which the Supreme Court of Texas described broadly as a case “in which we declined to recognize an equitable right of reimbursement”) should apply and bar Jensen’s claim. The argument was rejected:

This case involves restitution upon reversal of a judgment, not insurers seeking restitution from an insured on a third-party claim, against the backdrop of a highly regulated industry. ... Restitution in insurance-related cases involves policy concerns not present here:
[Disputes between insurers and policyholders over the insurer’s duty to pay a claim, or to settle or defend a claim brought against the policyholder, present special difficulties for the law of restitution, because the insurer’s duty to indemnify and defend is subject to extensive regulation under local law.

Id. (quoting Restatement (Third) § 35, cmt. c. (Tentative Draft No. 3, 2004)).

Miga suggests that an “equitable right to reimbursement” does not exist at all in the context of insurance cases. It shows that recognition of such a right would be only proper after a thorough and conscientious review of Texas’ regulatory scheme in light of the unique “policy concerns” implicated. And it firmly establishes that we cannot look to generic contract cases when trying to identify equitable rights of insurers against their insureds.

In light of Matagorda County, Frank’s Casing, Miga, and our constrained role, our obligation is clear. We have been asked to recognize, as a matter of Texas law, an insurer’s right to equitable reimbursement for “overpayments” of defense costs. But “it is not for us to adopt innovative theories of recovery for Texas law.” Dean, 821 F.2d at 284. Summary judgment should have been granted in favor of Aldous with respect to Darwin’s claims for equitable reimbursement (however denominated).

2. Breach of Contract

Darwin also seeks the return of money that was not overpaid but that was properly paid. Darwin believes the legal fees Hill paid directly to Aldous should have instead been paid directly to Darwin, at least in a measure commensurate with the legal fees Darwin spent on Aldous’s behalf. This scenario seems ready-made for subrogation. See Fortis Benefits v. Cantu, 234 S.W.3d 642, 645 (Tex. 2007) (explaining how subro-gation rights “prevent the insured from receiving a double recovery, first from the insurer, then from the third party”). Darwin paid at least some measure of Aldous’s legal fees, and Aldous then recovered legal fees from Hill. Understandably, Darwin thinks it is entitled to some of the money paid by Hill.

For whatever reason, however, Darwin did not seek subrogation against Hill. That is, it did not intervene in the prior litigation, step into the shoes of Aldous, and assert (for its own benefit) Aldous’s right to attorney’s fees against Hill. Darwin concedes that it cannot assert sub-rogation rights against Aldous, its own insured. This result follows from the very nature of subrogation rights. As a “purely conceptual” matter, an insurer cannot be subrogated against “an insured because an insurer who seeks subrogation stands in the shoes of the insured.” State Farm Mut. Auto. Ins. Co. v. Perkins, 216 S.W.3d 396, 401 (Tex. App. 2006). “Because a person cannot sue himself for damages, that person’s insurer, who stands in the person’s shoes for subrogation purposes, cannot sue the person either.” Id.

According to Darwin, this analysis misses the point. Darwin isn’t seeking to assert subrogation rights. Rather, Darwin is alleging Aldous violated the terms of the Policy — ordinary breach of contract. Thus, Darwin argues it “had a subrogation right against Hill as a result of its payments on Aldous’ behalf, and Aldous impaired Darwin’s subrogation rights by successfully suing Hill for money paid by Darwin that Aldous recovered and then withheld.” Or, as stated in the reply brief, “Darwin had the right to step into Aldous’ shoes to recover the defense fees it paid against Hill, but is not attempting to do so in this lawsuit because Aldous prevented it from doing so.” Thus, with its contract claim, Darwin is attempting to belatedly achieve the same ends it should have achieved through subrogation. Its labored argument fails.

The relevant Policy provision provides:

The Insurer shall be subrogated to all Insureds’ rights of recovery against any person or organization. All Insureds shall assist the Insurer in effecting any rights of indemnity, contribution and apportionment available to any Insured, including the execution of such documents as are necessary to enable the Insurer to pursue claims in the Insureds’ names and shall provide all other assistance and cooperation which the Insurer may reasonably require. All Insureds shall cooperate with the Insurer and do nothing to jeopardize, prejudice or terminate in any way such rights.
The Insurer shall not exercise any such rights against any Insureds except as provided herein. Notwithstanding the foregoing, however, the Insurer reserves the right to exercise any rights of subrogation against any Insured with respect to any Claim brought about or contributed to by the intentional, criminal, fraudulent, malicious or dishonest act or omission of such Insured.

The Policy provides Darwin with subro-gation rights, but Aldous did not breach the Policy by seeking attorney’s fees against Hill. Indeed, she arguably assisted Darwin, who could have benefited from the adjudication. Darwin should have asserted its subrogation rights against Hill. See, e.g., Fortis Benefits, 234 S.W.3d at 648; Ortiz v. Great S. Fire & Cas. Ins. Co., 597 S.W.2d 342, 343 (Tex. 1980). Instead, it sat on its rights and, after being sued, brought claims directly against its insured. As the district court stated, “[Darwin] provides no case law to support a conclusion that receiving a judgment for attorney’s fees is tantamount to jeopardizing, prejudicing, or terminating Darwin’s subrogation rights.” Aldous, 2015 WL 1879677, at *2.

IV. CONCLUSION

The district court’s judgment is REVERSED and, with respect to Darwin’s breach of contract and equitable claims, ruled in favor of Aldous. The case is REMANDED for proceedings consistent with this opinion.

      . Though not relevant here, we also typically ask whether the party to be estopped acted inadvertently. Reed v. City of Arlington, 650 F.3d 571, 574 (5th Cir. 2011) (en banc).

      . That is not to say that the lion’s share of defensive costs were necessarily incurred during that time. The cost of the defense work done during that period is a disputed question of fact. And, as will be seen later, we reject Aldous’s argument that Darwin must pay all costs of prosecuting BAM’s affirmative claims to the extent the costs were "inextricably intertwined” with the defense. It does, however, vindicate Aldous’s position, taken early in the coverage dispute, that the April 20th hearing, though ostensibly intended only to resolve BAM’s affirmative claims, would serve as the proving ground for BAM’s defense as well.

      . The district court's interpretation of the Loewinsohn Declarations requires the acceptance, of a very unlikely fact — that BAM did not spend any resources defending against the counterclaims until May 1, 2011, even though Hill filed the counterclaims on February 15, 2011. The district court had an explanation: "Hill filed his counterclaims on February 15, 2011, and Aldous provided notice of this counterclaim to Darwin on March 9, 2011.... Thus, Loewinsohn’s estimation that his work for defense occurred between May 1, 2011-June 24, 2011, is not unreasonable, despite Plaintiffs attempt to make it appear so.” 92 F.Supp.3d at 566-67. Without remarking on whether this reasoning is plausible, we note that it includes a clear error of fact. Aldous provided notice of the counterclaims to Darwin on February 17, 2011, a mere two days after Hill filed them.

      . Darwin asserts that collateral estoppel also applies because "[t]he amount of fees and expenses reasonably incurred in the defense of the Fee Counterclaim that was submitted to Darwin for coverage was distinctly at issue in the Fee Lawsuit, was in fact litigated, and was determined” in the prior proceedings. Darwin does not point us to the specific ruling it believes should be given preclusive effect, however. In the ordinary course, if collateral estoppel were appropriate, we would give preclusive effect to rulings deemed "necessary to [the] final judgment.” See Duffy & McGovern Accommodation Servs. v. QCI Marine Offshore, Inc., 448 F.3d 825, 829 (5th Cir. 2006). Here, that would mean Aldous has already established "reasonable costs and fees in defending against Hill Ill’s counterclaims in the amount of $2,586,560.11.” Any different prior-court ruling Darwin may have in mind was manifestly not essential to the final judgment. Fortunately for Darwin, it is inappropriate to apply collateral estoppel against a party who did not have a full and fair opportunity to litigate the question. See Taylor v. Sturgell, 553 U.S. 880, 892, 128 S.Ct. 2161, 2171, 171 L.Ed.2d 155 (2008).

      . In the ordinary case, where the insurer has selected and retained counsel, the Billing Guidelines may very well have a wholly different and perfectly appropriate application. But they are not part of the agreement between the insurer and insured.

      . Head. Industrial has been partially superseded by statute as explained in Chickasha Cotton Oil Co. v. Houston General Insurance Co. See Case No. 05-00-01789-CV, 2002 WL 1792467, at *7 (Tex. App. 2002). "However, Head Industrial has not been overruled relative to an insured’s attempt to impose common-law, as opposed to statutory, duties on an insurer with respect to settling third-party claims.” Methodist Hosp. v. Zurich Am. Ins. Co., 329 S.W.3d 510, 517 n.6 (Tex. App. 2009).

      . See Allied World Specialty Ins. Co. v. Freese & Goss, PLLC, Case No. 3:15-CV-02792-N, 2016 WL 6581922, at *3 (N.D. Tex. July 1, 2016) ("Lamar Homes ... only interpreted the meaning of a ‘first-party claim’ within the context of the Texas prompt payment statute.”); One Beacon Ins. Co. v. T. Wade Welch & Assocs., Case No. CIV.A. H-11-3061, 2012 WL 2403500, at *6 (S.D. Tex. June 25, 2012) ("[T]he Texas Supreme Court was construing what the Texas Legislature meant for the statute to cover, not re-writing all of its prior caselaw relating to insurers’ common law duties.”). But see Corinth Inv'rs Holdings, LLC v. Evanston Ins. Co., Case No. 4:13-CV-682, 2014 WL 4222168, at *11 (E.D. Tex. Aug. 25, 2014).

      . Based on this holding, we do not need to reach Aldous's argument that the district court misapplied the law relating to claims for money had and received.

      . Aldous contends that-allegations of a windfall recovery are "repudiated by the evidence” because she "invested over $1.1 million of her own resources” in prevailing against Hill. In deciding this appeal, we need not determine whether she stands to double-recover or whether such a result would be permissible in this case.

      . If anything, Darwin’s inaction is problematic. See Ortiz v. Great S. Fire & Cas. Ins. Co., 597 S.W.2d 342, 344 (Tex. 1980) ("[W]hen an insurer does not assist in the collection of damages from the third party tortfeasor, it must pay its share of the costs and expenses incurred in obtaining recovery from the third party, including attorney fees.”).

      . In Fortis Benefits, the insurance policy at issue included a "Right of Reimbursement,” which provided, in pertinent part: "If benefits are paid under this plan, and any Covered Person recovers against any person or organization by settlement, judgment or otherwise, We have a right to recover from that Covered Person an amount equal to the amount We have paid.” Fortis Benefits, 234 S.W.3d at 645 n.11. Darwin has not claimed any contractual right to reimbursement and yet essentially seeks the same end. "[Ijnsurers are well equipped to evaluate and reduce risk by, for example, 'drafting policies to specifically provide for reimbursement,’ ” and we will not rewrite the contract to grant Darwin rights beyond those it included in the contract. Id. at 649 (quoting Matagorda County, 52 S.W.3d at 136).


source: Caselaw Access Project

author: LESLIE H. SOUTHWICK, Circuit Judge:

license: Public Domain

text:
    UNITED MOTORCOACH ASSOCIATION, INCORPORATED, Plaintiff-Appellant v. CITY OF AUSTIN, Defendant-Appellee
    No. 16-50115
    United States Court of Appeals, Fifth Circuit.
    Filed March 17, 2017

      Dan Ralph Mastromarco, Mastromarco Firm, P.L.L.P., Annapolis, MD, for Plaintiff-Appellant.
    Michael Siegel, Christopher Coppola, Attorney, Meghan Lee Riley, City of Austin Law Department, Litigation Division, Austin, TX, for Defendant-Appellee.
    Before DAVIS, DENNIS, and SOUTHWICK, Circuit Judges.
   LESLIE H. SOUTHWICK, Circuit Judge:

This appeal raises the issue of whether federal law preempts a city’s exercise of regulatory authority over the intrastate operation of charter buses. A national association of charter-bus companies sought to enjoin regulations affecting their operations enacted by the City of Austin, Texas. The district court held that the regulations were not preempted. We AFFIRM.

FACTUAL AND PROCEDURAL BACKGROUND

An Austin city ordinance regulates “charter bus service,” which it defines as “transportation provided for compensation at the request of a third party for the exclusive use of a vehicle with a capacity of at least sixteen persons ... providing service originating, terminating and travelling solely within the city limits.” Austin City Code § 13-2-1(1). Under the first set of relevant regulations, the “permitting regulations,” operators of charter-bus service must obtain a city permit, which requires them to submit an application including various pieces of information as to the association between the holder and its vehicles, the applicant’s criminal history, current vehicle inspections and drivers’ licenses, and proof of valid federal or state operating authority. Id. § 13-2-253.

The permitting regulations also regulate charter-bus operations within Austin. Matters covered include how passengers may be dropped off in relation to the curb and what must be done if a bus breaks down. Id. §§ 13-2-270, 271. Failure to comply with the permitting regulations can lead to revocation or suspension of an operator’s permit. Id. § 13-2-263. The ordinance also contains another set of regulations, the “decal regulations,” which require each operator to display at all times a decal of its permit and, when relevant, a “special event permit.” Id. § 13-2-267, 285.

In 2013, United Motorcoach Association (“UMA”), a national association of professional bus companies, filed this suit against the City seeking a permanent injunction against both the permitting and the decal regulations. It argued that the regulations are preempted by federal law. In March 2014, the district court denied a preliminary injunction on any part of the regulations except for two provisions that are not at issue in this appeal. After UMA amended its complaint in early 2015, cross-motions for summary judgment were filed in July. In January 2016, the district court granted UMA a permanent injunction as to the decal regulations but denied any further relief. UMA’s appeal solely concerns the district court’s ruling- denying relief as to the permitting regulations. The City has not appealed.

DISCUSSION

The arguments about preemption are based on a federal statute captioned “Federal authority over intrastate transportation.” See 49 U.S.C. § 14501. It provides that States and their governmental subdivisions may not enforce rules affecting interstate or intrastate transportation by a motor carrier of passengers, with identified exceptions. Id. § 14501(a). There is much more to the statute, and we will presently analyze the relevant parts.

In determining a federal statute’s preemptive reach, congressional purpose is “the ultimate touchstone.” Medtronic, Inc. v. Lohr, 518 U.S. 470, 485, 116 S.Ct. 2240, 135 L.Ed.2d 700 (1996) (quotation marks omitted). “Evidence of preemptive purpose is sought in the text and structure of the statute at issue,” and “in the first instance [we] focus on the plain wording of the clause, which necessarily contains the best evidence of Congress’ pre-emptive intent.” CSX Transp., Inc. v. Easterwood, 507 U.S. 658, 664, 113 S.Ct. 1732, 123 L.Ed.2d 387 (1993). Nonetheless, “we start with the assumption that the historic police powers of the States were not to be superseded by the Federal Act unless that was the clear and manifest, purpose of Congress.” City of Columbus v. Ours Garage & Wrecker Serv., Inc., 536 U.S. 424, 432, 122 S.Ct. 2226, 153 L.Ed.2d 430 (2002) (quotation marks omitted). That means that when there is “more than one plausible reading [of the text, we] ordinarily accept the reading that disfavors preemption.” Altria Grp., Inc. v. Good, 555 U.S. 70, 77, 129 S.Ct. 538, 172 L.Ed.2d 398 (2008) (quotation marks omitted).

The preemption issue that remains in this suit arises from the district court’s holding that a savings clause in the statute exempted the permitting regulations from preemption. We thus address only whether the permitting regulations are preempted.

The party seeking a permanent injunction must satisfy a four-part test: it must show (1) success on the merits; (2) the failure to grant the injunction will result in irreparable injury; (3) the injury outweighs any damage that the injunction will cause the opposing party; and (4) the injunction will not disserve the public interest. VRC LLC v. City of Dallas, 460 F.3d 607, 611 (5th Cir. 2006). We start with the district court’s preemption rulings, which are legal issues we review de novo. Id.

The key sections of the statute at issue provide:

(a) Motor Carriers of Passengers.—
(1) Limitation on State Law. — No State or political subdivision thereof ... shall enact or enforce any law, rule, regulation, standard, or other provision having the force and effect of law relating to—
(C) the authority to provide intrastate or interstate charter bus transportation.
(2) Matters Not Covered. — Paragraph (1) shall not restrict the safety regulatory authority of a State with respect to motor vehicles, [among other things]....

§ 14501(a). The parties agree the City’s permitting regulations fall within the language of Section 14501(a)(1)(C) because such regulations relate to “the authority to provide intrastate or interstate charter bus transportation.” Our analysis is thus confined to whether Section 14501(a)(2) nonetheless applies to save the regulations from preemption.

UMA contends the permitting regulations do not qualify as an exercise of the City’s “safety regulatory authority” under Section 14501(a)(2) for two reasons. First, UMA argues Section 14501(a)(2)’s plain language indicates that cities may not regulate charter-bus permitting even if such regulations are responsive to safety. Second, UMA argues that, even if the City may regulate charter-bus permits in some circumstances, it did not meet its burden of showing the permitting regulations were genuinely responsive to safety. We now address each argument.

I. Section 11501(a) (2)’s General Applicability

We start with whether Section 14501(a)(2) applies to charter-bus permitting generally. Although no court has addressed the scope of Section 14501(a)(2)’s safety exception, we do not write on a blank slate. Following the Supreme Court’s opinion in Ours Garage, we have, along with other circuits, interpreted language in Section 14501(c)(2)(A) that is identical to the language in Section 14501(a)(2). See VRC, 460 F.3d at 612; Cole v. City of Dallas, 314 F.3d 730, 733-35 (5th Cir. 2002); see also Ours Garage, 536 U.S. at 432, 122 S.Ct. 2226; California Tow Truck Ass’n v. City & Cnty. of San Francisco, 807 F.3d 1008, 1020 (9th Cir. 2015). The City argues we should interpret Section 14501(a)(2) with reference to Ours Garage and these subsequent opinions.

In Ours Garage, the Supreme Court held that Section 14501(c)’s safety exception applies to municipal as well as state tow-truck regulations. Ours Garage, 536 U.S. at 431-32, 122 S.Ct. 2226. When discussing the exception, the Court explained that through it “Congress’ clear purpose” was “to ensure that its preemption of States’ economic authority over motor carriers of property, § 14501(c)(1), ‘not restrict’ the preexisting and traditional state police power over safety.” Id. at 439, 122 S.Ct. 2226. The Court did not then apply the exception to the regulations at issue; it “express[ed] no opinion” on whether they qualified as exercises of the city’s “safety regulatory authority.” Id. at 442, 122 S.Ct. 2226. Instead, it noted that question would turn on whether the regulations were “genuinely responsive to safety concerns ....” Id.

Later courts “applying the principles discussed in Ours Garage [have] on the whole given a broad construction to the safety regulation exception.” VRC, 460 F.3d at 612; see also Houston Prof'l Towing Ass’n v. City of Houston, 812 F.3d 443, 449-51 (5th Cir. 2016); Cole, 314 F.3d at 734-35. This court has rejected a searching standard “wherein the court inquires closely into the legitimacy of the municipality’s safety concern and ensures that it is not a guise for economic regulation.” VRC, 460 F.3d at 612-13. Instead, “we have looked to statements of intent on the face of the ordinance, demonstrating that it was designed to promote safety, as well as to evidence that there was a ‘nexus between the ordinance and public safety.’ ” Houston Prof'l Towing Ass’n, 812 F.3d at 449 (alteration omitted) (quoting VRC, 460 F.3d at 614-15). In other words, when applying Section 14501(c)’s safety exception, we have asked two key questions: “(1) whether the ordinance evinced a safety purpose and (2) whether it promotes safety.” Id. When engaging in this analysis, we have also considered the economic burden on those regulated by the ordinance. VRC, 460 F.3d at 615.

Here, the district court concluded that “Ours Garage, California Tow Truck Association, and other decisions interpreting and applying § 14501(c)(2)(A) may appropriately be considered in interpreting and applying § 14501(a)(2), as both subsections use identical language.” We agree. Both experience and common sense support the “natural presumption that identical words used in different parts of the same act are intended to have the same meaning.” See Atlantic Cleaners & Dyers, Inc. v. United States, 286 U.S. 427, 433, 52 S.Ct. 607, 76 L.Ed. 1204 (1932). Sections 14501(a)(2) and (c)(2)(A) are not merely identical; they inhabit the same section and mirror one another in structure and purpose. Each limits the immediately preceding broad preemption clause, and in each provision the text and context shows that “Congress’ clear purpose ... is to ensure that its preemption of States’ economic authority over motor carriers ... ‘not restrict’ the preexisting and traditional state police power over safety.” See Ours Garage, 536 U.S. at 439, 122 S.Ct. 2226 (quoting § 14501(c)(2)(A)).

To convince us to deviate from this other caselaw, UMA argues the savings clause cannot save the permitting regulations because they “relat[e] to” the City’s authority to provide charter-bus transportation and are therefore preempted under Section 14501(a)(1)(C). UMA contends that the savings clause is framed generally while the preemption clause is framed specifically, so the specific preemption clause should prevail. True, when there is conflict between two provisions, the ordinary rule is that a specific provision will prevail over the general one. See Morton v. Mancari, 417 U.S. 535, 550-51, 94 S.Ct. 2474, 41 L.Ed.2d 290 (1974). We find no conflict, though. Also, we think it incorrect to try to label these as general and specific provisions. They work in tandem, such that the savings clause clarifies that the preemption clause does not restrict the traditional state police power over safety. See Ours Garage, 536 U.S. at 439, 122 S.Ct. 2226. Finally, the savings clause does not swallow the preemption clause; each retains effect. To interpret the savings clause so that it cannot save any preempted rule, on the other hand, would violate “the elementary canon of construction that a statute should be interpreted so as not to render one part inoperative.... ” See Mountain States Tel. & Tel. Co. v. Pueblo of Santa Ana, 472 U.S. 237, 249, 105 S.Ct. 2587, 86 L.Ed.2d 168 (1985) (quotation marks omitted).

Next, UMA attempts to distinguish the phrase “motor vehicles” (to which the safety exception applies) from “carriers” (to which the financial-responsibility exception applies), seemingly suggesting that the disparate usage means states may regulate only the safety of the vehicle and nothing else. See § 14501(a)(2). The safety exception applies to the state’s authority “with respect to motor vehicles,” while the financial-responsibility exception applies to the state’s authority “to regulate carriers.” We agree, then, insofar as UMA argues that such disparate usage requires different meanings for each word — indeed, we heed “Congress’ decision to use different terms to describe different categories of people or things.” See Mohamad v. Palestinian Auth., 566 U.S. 449, 132 S.Ct. 1702, 1708, 182 L.Ed.2d 720 (2012).

Yet UMA’s argued-for conclusion does not follow. “[S]afety regulatory authority ... with respect to motor vehicles” makes sense because charter-bus vehicles (the motor vehicles) may present safety risks; “minimum amounts of financial responsibility” as to “carriers” makes sense because charter-service operators (the carriers) are the financially responsible parties. Grammatically, “safety” modifies “regulatory authority,” not “motor vehicles.” Thus, the provision’s language indicates that the referred-to authority is not merely as to the mechanical safety of motor vehicles themselves; rather, it is the state’s “safety regulatory authority” as such authority is applied to motor vehicles. Such authority must include the type of permitting regulations we have previously held to be covered by that phrase. See Cole, 314 F.3d at 734-35. The interpretation we now adopt permits these terms to retain their distinct, natural meanings.

We also disagree with UMA’s argument that charter-bus permitting is not a “preexisting and traditional state police power” because cities only recently began regulating charter buses through permitting schemes. See Ours Garage, 536 U.S. at 439, 122 S.Ct. 2226. Whether or not the regulatory history surrounding charter-bus permitting regulations qualifies them as “preexisting and traditional,” it is clear that those terms modify “state police power,” not the specific type of regulation at issue in a given case. Thus, when analyzing Section 14501(a)(2), that a type of regulation is new is irrelevant, so long as the exercise of authority is within the state’s traditional safety-regulatory authority. The specific means of exercising such authority will doubtless change over time, but the nature of the authority itself will not. As noted, we have previously held this specie of regulation — permitting—is within the state’s “safety regulatory authority.” See Cole, 314 F.3d at 734-35.

There are distinctions, of course. Tow-truck and charter-bus industries may differ in geographic scope. Differences in practical effect may arise from similar constructions of the laws relating to each. Such differences, UMA argues, should counsel against construing Section 14501(a)(2)’s safety exception broadly, because a broad construction and application will lead to the very “balkanization of permit regimes” Congress meant to curtail through the preemption provision. Such concerns notwithstanding, our focus is on the text of what Congress actually enacted. The specific exception to preemption, as we have explained, does not comfortably bear UMA’s narrow reading. Nor will we interpret the exception narrowly to comport better with the broad policy goals of deregulation. “A congressional decision to enact both a general policy that furthers a particular goal and a specific exception that might tend against that goal does not invariably call for the narrowest possible construction of the exception.” See Ours Garage, 536 U.S. at 440, 122 S.Ct. 2226.

Finally, like the Supreme Court in Ours Garage, we take note of 49 U.S.C. § 31141, which authorizes the Secretary of Transportation to void any “State law or regulation on commercial motor vehicle safety” that, in the Secretary’s judgment, “has no safety benefit ... [or] would cause an unreasonable burden on interstate commerce.” The Secretary, therefore, retains authority to invalidate non-safety-related laws or safety-related laws when they improperly burden interstate commerce. Given all this, the distinctions between Sections 14501(a) and (c) do not persuade us to construe “safety regulatory authority” more narrowly in the former than in the latter.

II. Genuinely Responsive to Safety?

We next ask whether the permitting regulations are “genuinely responsive” to safety. See VRC, 460 F.3d at 612. UMA argues the district court erred in analyzing this question because it did not conduct a provision-by-provision analysis. UMA contends that such a review reveals that certain permitting regulations were not responsive to safety concerns.

A provision-by-provision analysis of regulations generally should be undertaken to determine whether each provision is genuinely responsive to safety. See, e.g., California Tow Truck Ass’n, 807 F.3d at 1014. Here, although the district court did not go through the permitting regulations one by one in its order, we find no error in its analysis. One reason is that, as UMA acknowledges, the district court heard testimony on the various provisions and requested provision-by-provision briefing. In addition, UMA does not provide substantive analysis as to specific provisions that allegedly do not relate to safety, nor did it challenge the provisions in a provision-by-provision manner in district court. In conducting its analysis as it did, the district court was simply addressing the arguments before it.

The question, then, is whether these regulations are responsive to Section 14501(a)(2)’s focus on safety. The district court applied the Ninth Circuit’s two-part test, asking (1) whether there was a safety motivation for the scheme and (2) whether there was a nexus between the provision and the safety concern. See id. at 1019-20. Again, we agree that the caselaw interpreting and applying Section 14501(c)(2)(A) provides the appropriate analysis for analyzing preemption under Section 14501(a)(2). Our cases have applied a test that is similar to the Ninth Circuit’s. See Houston Prof'l Towing, 812 F.3d at 449-51. We now apply that test.

First, we look “to statements of intent on the face of the ordinance” to determine whether “it was designed to promote safety[.]” See id. at 449. Our case-law is illustrative of our approach. In Cole, we considered the preamble to an ordinance but did not discuss whether the city had entered any studies or expert testimony about the dangers being addressed. Cole, 314 F.3d at 734-35. The ordinance stated “that the proposed safety-related regulations for nonconsensual tows would promote the public safety” by, among other things, “contributing to a decrease in the potential for confrontation and violence ....” Id. at 735. In light of the ordinance’s expressed purpose and effect, we concluded the safety purpose was “manifest.” Id. In VRC, we likewise found that there was a safety purpose when the city “considered the possibility of violent confrontation” as “a safety issue and found that” the ordinance would remedy it; when a city administrator testified “that there was a real problem with confrontation between citizens and tow truck drivers and that the signs had been helpful”; and when, “[ljogically, the [ordinance’s requirements] could ... help to defuse the anger of some who actually were towed.... ” VRC, 460 F.3d at 615.

We analyzed the safety exception in another case decided after the district court’s order here. See Houston Prof'l Towing Ass’n, 812 F.3d at 449. There, we discussed the safety exception to determine whether a tow-truck association’s challenge to a city ordinance was barred by res judicata. Id. at 448-49. The association had previously challenged the ordinance, but a district court held it to be within the safety exception. Id. at 446. Our analysis was thus limited to whether intervening amendments to the ordinance had changed the factual and legal basis for the association’s claim of preemption. Id. at 449. After analyzing the applicability of the safety exception, we held they had not. Id. at 450-51. In doing so, we looked to the ordinance’s preamble, which “contain[ed] a number of clauses discussing the safety motivations for the [ordinance].” Id. at 449-50. The preamble revealed the ordinance’s purpose was “to promote safety by expeditiously clearing stalled and wrecked vehicles”; hence we concluded that “[t]here [was] no doubt that safety [was] the justification. ...” Id. at 450.

Here, the ordinance contains numerous safety-purpose statements. See Austin City Code § 13-2-251. The ordinance States that various events make the City a destination for “masses of visitors,” which “impact[s] public safety and impede[s] the flow of pedestrian and vehicular traffic.” Id. For these reasons, the City found its “regulations [would] help to protect and ensure that charter bus services use mechanically safe vehicles, operate their service in a safe manner, and ... meet minimum insurance coverage requirements.” Id. Also, after recounting a history of charter-bus accidents in Texas, the ordinance notes its effectiveness in preventing such “deadly accidents.” Id. It makes clear that “the purpose of the ... regulations is not to generate revenue but as enumerated above, to protect the public health, safety, and welfare.” Id. These statements are similar to those that we have previously held to evidence a safety motivation. See, e.g., Houston Prof'l Towing Ass’n, 812 F.3d at 450; Cole, 314 F.3d at 735. Here, like in those cases, we have no reason to “doubt that safety is the justification for [the regulations].” See Houston Prof'l Towing Ass’n, 812 F.3d at 450.

We next look to “evidence that there was a ‘nexus between the ordinance and public safety.’ ” Id. at 449 (alteration omitted) (quoting VRC, 460 F.3d at 614-15). The district court held there was. It held that the ordinance gave “the City the ability to hold charter bus operators who do not comply with the substantive safety provisions ... accountable.” Examples the district court mentioned included loading and unloading passengers in the street, alternative transportation for passengers when a bus broke down, and prohibitions on the sale of alcohol, controlled substances, and other criminal conduct. It also noted that the permitting requirements “imply the threat of permit revocation,” making them “tools for policing misconduct.”

When the relation between the regulation and safety is obvious and logical, the second prong of our analysis is satisfied. See VRC, 460 F.3d at 615; see also California Tow Truck Ass’n, 807 F.3d at 1020. This is true even if “municipalities are accomplishing some economic regulation, or more precisely consumer protection, while making findings about safety in the preambles of their ordinances.” See VRC, 460 F.3d at 615.

UMA may have a point that the City is accomplishing economic goals, such as consumer protection, via some of the permitting regulations. We have recognized, though, that “safety and consumer protection are not mutually exclusive categories.” See id. We agree with the district court that for most of the regulations, the relation is obvious and logical. For all of them, “the City’s safety concerns are real enough that the court is convinced that they are both reasonably related and genuinely responsive to safety concerns.” See id.

The district court did not err by finding a nexus between the permitting regulations and safety.

The permitting regulations are not preempted by federal law. Thus, no injunction may issue. AFFIRMED.

      . On appeal, UMA argues for the first time that the district court should have enjoined Austin City Code § 12-2-269, which requires charter-bus operators to maintain certain forms of identification. UMA raised this latter argument for the first time in its' response to the City's motion for summary judgment. "A claim which is not raised in the complaint but, rather, is raised only in response to a motion for summary judgment is not properly before the court.” Cutrera v. Bd. of Sup’rs of Louisiana State Univ., 429 F.3d 108, 113 (5th Cir. 2005). The argument has been forfeited.

      . That Austin is a municipality, not a "State,” makes no difference here. "Congress’ reference to the 'regulatory authority of a State’ should be read to preserve, not preempt, the traditional prerogative of the States to delegate their authority to their constituent parts.” Ours Garage, 536 U.S. at 429, 122 S.Ct. 2226. Under the Texas Constitution, home-rule cities such as Austin “have all the powers of the state not inconsistent with the Constitution, the general laws, or the city’s charter.” See Wasson Interests, Ltd. v. City of Jacksonville, 489 S.W.3d 427, 433 n.6 (Tex. 2016) (quotation marks omitted). UMA's opening brief does not argue any specific Texas law denying the City such authority. Any such argument is abandoned. See Edwards v. Johnson, 209 F.3d 772, 775 n.1 (5th Cir. 2000).

      . Section 14501(c)’s structure is parallel to Section 14501(a), in that it contains a general preemption rule and an exception. Specifically, it provides:
      (c) Motor Carriers of Property.—
      (1) General Rule.— ... a State, political subdivision of a State, or political authority of 2 or more States may not enact or enforce a law, regulation, or another provision having the force and effect of law related to a price, route, or service of any motor carrier ... with respect to the transportation of property.
      (2) Matters Not Covered. — Paragraph (1)— (A) shall not restrict the safety regulatory authority of a State with respect to motor vehicles, [among other things]....

      . That exception, also within Section 14501(a)(2), reads: “Paragraph (1) shall not restrict ... the authority of a State to regulate carriers with regard to minimum amounts of financial responsibility relating to insurance requirements and self-insurance authorization.” § 14501(a)(2) (emphasis added).

      . It would indeed make little sense to construe "with respect to motor vehicles” as narrowly as UMA argues. Under UMA’s interpretation, for example, the City could require charter buses to use certain tire sizes, but it could not prohibit drinking and driving, even though drunk driving is undoubtedly a safety concern "with respect to motor vehicles.”

      . The district court cited to an earlier opinion in California Tow Truck Association, which was later modified by the Ninth Circuit. For simplicity’s sake, we cite only the modified opinion. Which opinion is used does not affect our analysis.


author: JAMES L. DENNIS, Circuit Judge:

text:
    UNITED STATES of America, Plaintiff-Appellee v. James Robert KIRKLAND, Defendant-Appellant
    No. 16-40255 consolidated w/ 16-40256
    United States Court of Appeals, Fifth Circuit.
    Filed March 17, 2017

      John Richard Berry, Renata Ann Gowie, Carmen Castillo Mitchell, Assistant U.S. Attorneys, U.S. Attorney’s Office, Houston, TX, for Plaintiff-Appellee.
    Marjorie A. Meyers, Federal Public Defender, Michael Lance Herman, Assistant Federal Public Defender, Federal Public Defender’s Office, Houston, TX, for Defendant-Appellant.
    Before STEWART, Chief Judge, and KING and DENNIS, Circuit Judges.
   JAMES L. DENNIS, Circuit Judge:

James Robert Kirkland appeals his sentence for attempting to use a means of interstate commerce to persuade, induce, entice, or coerce a minor to engage in sexual activity for which any person can be charged with a criminal offense, in violation of 18 U.S.C.- § 2422(b). Kirkland pleaded guilty to the offense pursuant to a plea agreement that required the Government to recommend a sentence at the low end of the applicable guidelines range of 262-327 months. At sentencing, however, rather than recommend the low end of the guidelines range, the Government aggressively argued for a high-end sentence; Kirkland did not object to this apparent breach of the plea agreement. The district court ultimately imposed a midrange sentence of 300 months of imprisonment. On appeal, Kirkland argues that the Government’s breach of the plea agreement constituted reversible plain error. For the reasons that follow, we agree and therefore vacate the sentence and remand for resen-tencing before a different district court judge.

I

In September 2015, an undercover detective, posing as the mother of fictitious 11- and 14-year-old daughters, placed an advertisement on Craigslist soliciting sexual partners for the fictitious girls. Kirkland, who at that time was on supervised release following his 2010 conviction for failing to register as a sex offender, responded to the advertisement and, over the course of multiple email communications, expressed his desire to engage in sexual conduct with the fictitious minors. After exchanging numbers and several text messages with the detective,.Kirkland made' plans to meet the fictitious mother at a mall in Corpus Christi, Texas. Kirkland arrived at the mall at the agreed upon time and was arrested. Police found condoms and packets of lubricant in his possession. After his arrest, Kirkland confessed that he intended to have sexual intercourse with the fictitious minors.

Kirkland was subsequently indicted on one count of attempting to use a means of interstate commerce to persuade, induce, entice, or coerce a minor to engage in sexual activity for which any person can be charged with a criminal offense, in violation of § 2422(b). The United States Probation Office also charged Kirkland with a violation of the conditions of his supervised release and sought revocation.

Kirkland pleaded guilty to the § 2422(b) offense pursuant to a plea agreement. Under the agreement, the Government was required to recommend that Kirkland receive “a sentence of imprisonment at the low end of the guideline[s] range.” The Government also reserved the right to set forth its version of the facts at sentencing, dispute the relevant provisions of the guidelines, and to be released from its obligations under the agreement if Kirkland committed any additional crimes after signing the agreement.

The probation officer’s presentencing report (PSR) calculated a guidelines range of 262-327 months of imprisonment, to which the Government did not object and which the district court ultimately adopted. The PSR also described Kirkland’s criminal history, which included a 1999 North Carolina conviction for indecent liberties with a child, involving Kirkland’s fondling of his eleven-year-old niece. Because of this conviction’s age, it was not assigned criminal history points. Kirkland’s criminal history also included North Carolina convictions for failure to register as a sex offender, bank robbery, and “unlawful concealment of two bags of candy,” and a federal conviction for failure to register as a sex offender. The probation office also submitted a sentencing recommendation, recommending that Kirkland be sentenced to 300 months of imprisonment.

At sentencing, the district court asked several times for the Government’s recommended sentence as to the § 2422(b) offense. Despite its obligation under the plea agreement to recommend the low end of the guidelines range, the Government recommended the high end, 327 months of imprisonment. In support of its recommendation, the Government presented the testimony of Special Agent Heath Hardwick. Agent Hardwick described, in great detail, Kirkland’s 1999 North Carolina conviction for indecent liberties with a child, allegations of prior conduct of similar nature that did not result in criminal proceedings, and Kirkland’s instant § 2422(b) offense. The Government also strongly argued in support of its recommendation for a sentence at the high end of the guidelines range, citing the circumstances of Kirkland’s offense, his prior criminal history, and the underrepresentation of his criminal history in his criminal history category calculation.

When the district court and Kirkland discussed what sentence was appropriate, Kirkland focused somewhat angrily on the Government’s request for a sentence at the high end of the range and equated the requested 327-month term to a life sentence. Kirkland’s counsel argued on his behalf for a below-guidelines sentence of 151 months. However, Kirkland and his counsel did not object to the Government’s apparent breach of its obligation to recommend the low end of the guidelines range.

The district court sentenced to Kirkland to 300 months of imprisonment as to the § 2422(b) offense, stating, “That is midpoint in the guideline tange. It also happens to be the recommended sentence from the United States Probation Office, which, frankly, happens to coincide with my own independent decision.” The district court explained its reasons for the sentence, including Kirkland’s criminal history, the instant offense conduct, and the need to protect the public.

With respect to his supervised release, Kirkland pleaded true to a violation of the terms. The probation office recommended twelve months of imprisonment to be served consecutive to the § 2422(b) sentence, but the court sentenced Kirkland to a consecutive term of twenty-four months. Kirkland appealed his § 2242(b) sentence as well as his revocation sentence, and these appeals were consolidated. However, Kirkland has abandoned any challenge to his revocation sentence.

II

Kirkland challenges only the Government’s breach of the plea agreement. Because Kirkland failed to object to the Government’s breach before the district court, we review his challenge for plain error. See Puckett v. United States, 556 U.S. 129, 138-34, 129 S.Ct. 1423, 173 L.Ed.2d 266 (2009). Under this standard, we apply a four-prong test to determine whether we have discretion to remedy a forfeited error:

First, there must be an error that has not been intentionally relinquished or abandoned. Second, the error must be plain — that is to say, clear or obvious. Third, the error must have affected the defendant’s substantial rights, which in the ordinary case means he or she must show a reasonable probability that, but for the error, the outcome of the proceeding would have been different. Once these three conditions have been met, the court of appeals should exercise its discretion to correct the forfeited error if the error seriously affects the fairness, integrity or public reputation of judicial proceedings.

Molina-Martinez v. United States, — U.S. -, 136 S.Ct. 1338, 1343, 194 L.Ed.2d 444 (2016) (citations and internal quotation marks omitted).

The Government concedes that it erred by breaching the plea agreement and that the error was clear or obvious. However, the Government disputes that this error affected Kirkland’s substantial rights or seriously affects the fairness, integrity, or public reputation of judicial proceedings. For the reasons that follow, we conclude that Kirkland has made a sufficient showing as to both of these requirements.

A. Effect on Substantial Rights

In the context of sentencing, “[a]n error affects an appellant’s substantial rights when there is a reasonable probability that, but for the error, he would have received a lesser sentence.” United States v. Williams, 821 F.3d 656, 657-58 (5th Cir.) (internal quotation marks omitted), reh’g denied, 833 F.3d 449 (5th Cir. 2016). The Government’s breach of its promise to recommend a lesser sentence affects a defendant’s substantial rights unless the record indicates that that the district court would have imposed the same sentence regardless of the Government’s breach. See, e.g., id. at 658 (Government’s breach of plea agreement affected defendant’s substantial rights where there was no indication that the district court would have imposed the same sentence had Government complied with the agreement); United States v. Bellorin-Torres, 341 Fed.Appx. 19, 20-21 (5th Cir. 2009) (similar); United States v. Villarreal-Rodriguez, 356 Fed.Appx. 759, 761 (5th Cir. 2009) (similar). This principle reflects both the applicable legal standard, under which a defendant need only show a “reasonable probability” that the breach affected his sentence, see Williams, 821 F.3d 656, 657-58, and the common sense understanding of the important role the Government’s recommendation plays in sentencing, cf. United States v. Navarro, 817 F.3d 494, 500 (7th Cir. 2016) (“[T]he Supreme Court long ago recognized the importance of the government’s recommendation on the. sentence imposed.” (citing Santobello v. New York, 404 U.S. 257, 262, 92 S.Ct. 495, 30 L.Ed.2d 427 (1971))).

In Williams, the plea agreement required the Government to recommend a sentence at the bottom of the guidelines range, but the Government failed to make the recommendation at sentencing, without objection from the defendant. 821 F.3d at 657. The district court ultimately sentenced the defendant to the top of the guidelines range. Id. Reviewing for plain error, we concluded that the Government’s breach affected the defendant’s substantial rights because there was “no indication the district court would have been unmoved by the Government’s recommendation for a lower sentence.” Id. at 658.

The Government’s breach of its plea agreement with Kirkland is even worse than its breach of the agreement in Williams. Here, the Government did not merely remain silent, in breach of its promise to urge a low-end sentence; rather, the Government aggressively argued for the high end of the guidelines range. Thus, we must consider not only the possibility that the district court would have been influenced by the Government’s recommendation for a low-end sentence but also the possibility that the district court was influenced by the Government’s recommendation of, and argument for, a high-end sentence. In two unpublished decisions involving similar circumstances, we concluded that the Government’s actions affected the defendants’ substantial rights. See Bellorin-Torres, 341 Fed.Appx. at 21; United States v. Onwuka, 71 F.3d 878, 878 (5th Cir. 1995) (unpublished).

The Government argues that the record in this case indicates that its breach did not affect the district court’s sentence, and it points in support to the district court’s consideration of the PSR, the guidelines range, the various recommendations the court received, and the relevant sentencing factors. The Government also highlights the district court’s statement that the 300-month sentence it imposed was the “midpoint in the guideline range” and “also happens to be the recommended sentence from the United States Probation Office, which, frankly, happens to coincide with [the court’s] own independent decision.” On this basis, the Government asserts that there is sufficient evidence that the district court would have imposed the same exact sentence regardless of the Government’s breach. We cannot accept this contention.

It is certainly true that the district court considered the relevant circumstances and did not consider itself bound by the Government’s recommendation. After all, the court did not adopt the Government’s recommendation for a high-end sentence but, instead, imposed a midrange sentence. The district court also showed that it was willing to sentence above any recommendation where it deemed fit, as it did with regard to the revocation of Kirkland’s supervised release. However, the fact that the court exercised independent judgment — which it must do in every case — does not mean that the court did not also consider and give weight to the Government’s recommendation. Indeed, the district court asked the Government for its recommendation several times.

Moreover, the Government did not merely recommend a high-end sentence but also strongly argued and presented testimony in support of that recommendation, recounting in great detail the graphic and sexually explicit facts involved in Kirkland’s offense of conviction and a prior offense and emphasizing his criminal history and his violation of the conditions of his supervised release. The testimony and argument by the Government filled more than nine pages of the sentencing transcript. Therefore, the district court may have been influenced not only by the Government’s recommendation, but also by Government’s passionate emphasis of aggravating factors in support of that recommendation, which brought public safety concerns to the forefront. Cf. Navarro, 817 F.3d at 501 (the Government’s breach of the plea agreement by arguing for an upward departure affected the defendant’s substantial rights because it “focused the district court’s attention” on the relevant application note, “with the weight of the [Government’s recommendation behind it”).

In sum, the record does not indicate that the district court would have imposed the same 800-month sentence had the Government complied with its obligations and recommended a low-end sentence instead of recommending and arguing for a high-end sentence. See Williams, 821 F.3d at 658; Bellorin-Torres, 341 Fed.Appx. at 20-21; Villarreal-Rodriguez, 356 Fed.Appx. at 761; Onwuka, 71 F.3d at 878. Accordingly, the Government’s breach affected Kirkland’s substantial rights because there is a reasonable probability that, but for - the breach, he would have received a lesser sentence.

B. Serious Effect on the Fairness, Integrity, or Public Reputation of Judicial Proceedings

In the fourth prong of the plain-error analysis, we ask whether the forfeited error seriously affects the fairness, integrity, or public reputation of judicial proceedings. Molina-Martinez, 136 S.Ct. at 1343. This prong is not automatically satisfied once the other three prongs are met. United States v. Escalante-Reyes, 689 F.3d 415, 425 (5th Cir. 2012) (en banc). “However, the Supreme Court has instructed that ‘the discretion conferred by Rule 52(b) should be employed in those circumstances in which a miscarriage of justice would otherwise result.’ ” Id. (quoting United States v. Olano, 507 U.S. 725, 736, 113 S.Ct. 1770, 123 L.Ed.2d 508 (1993)).

Whether a plain error would lead to a miscarriage of justice if left uncorrected is determined “on a case-specific and fact-intensive basis.” Puckett v. United States, 556 U.S. 129, 142, 129 S.Ct. 1423, 173 L.Ed.2d 266 (2009). Nevertheless, the courts have recognized that the Government’s breach of a plea agreement constitutes a particularly egregious error that, in the absence of strong countervailing factors, seriously affects the fairnéss, integrity, or public reputation of judicial proceedings. See, e.g., id. at 142-43, 129 S.Ct. 1423 (stating that “when the Government reneges on a plea deal, the integrity of the system may be called into question” but noting that “there may well be countervailing factors in particular cases”); Williams, 821 F.3d at 658 (concluding, without additional discussion, that “the Government’s failure to fulfill its promise affects the fairness, integrity, and public reputation of judicial proceedings” (alteration and internal quotation marks omitted)); United States v. Whitney, 673 F.3d 965, 974 (9th Cir. 2012) (“[I]n the absence of clearly countervailing factors, the government’s breach of the parties’ plea agreement must be considered a serious violation of the integrity of the plea bargain process and the judicial system.”); United States v. Swanberg, 370 F.3d 622, 629 (6th Cir. 2004) (“[Vjiolations of the plea agreement on the part of the government ... directly involve the honor of the government, public confidence in the fair administration of justice, and the effective administration of justice in a federal scheme of government.” (Internal quotation marks omitted)).

This rebuttable presumption that the Government’s meaningful breach of a plea agreement satisfies the fourth prong of the plain-error test appears to be based, in large part, on the inherent unfairness involved in the Government’s inducement of the defendant’s waiver of important constitutional rights by making promises that it ultimately does not keep. See United States v. Goldfaden, 959 F.2d 1324, 1328 (5th Cir. 1992) (“Defendants ... give up constitutional rights in reliance on promises made by prosecutors, implicating the Due Process Clause once the court accepts their pleas. The failure of the Government to fulfill its promise, therefore,' affects the fairness, integrity, and public reputation of judicial proceedings.” (Citation omitted)) abrogated on other grounds as recognized in United States v. Puckett, 505 F.3d 377, 384-85 (5th Cir. 2007); see also, e.g., Whitney, 673 F.3d at 974 (discussing the Government’s inducement of the defendant’s waiver of important rights); Swanberg, 370 F.3d at 629 (the Government’s breach of the plea agreement serves to violate the defendant’s constitutional rights).

It is important to highlight the rebuttable nature of this presumption. In Puckett, the Supreme Court “emphasized that a per se approach to plain-error review is flawed,” and stated that “countervailing factors in particular cases” may warrant affirmance in the face of a meaningful plain error. 556 U.S. at 142-43, 129 S.Ct. 1423 (some internal quotation marks omitted). The Court saw the particular defendant in Puckett as a good example of such a case. Id. at 143, 129 S.Ct. 1423. Under Puckett’s plea agreement, the Government was to inform the district court that it agrees that Puckett qualified for a three-level reduction in his offense level for acceptance of responsibility. Id. at 131, 129 S.Ct. 1423. Puckett’s sentencing was delayed and did not take place for almost three years after the district court accepted his plea. Id. at 132, 129 S.Ct. 1423. During that time, Puckett engaged in additional criminal activity. Id. At sentencing, the Government opposed the reduction in Puckett’s offense level on that basis and thereby breached its obligation under the plea agreement. See id. In discussing the fourth prong of the plain-error test, the Court stated, “Given that [Puckett] obviously did not cease his life of crime, receipt of a sentencing reduction for acceptance of responsibility would have been so ludicrous as itself to compromise the public reputation of judicial proceedings.” Id. at 143, 129 S.Ct. 1423 (emphasis in original).

We find no similarly strong countervailing factors in the instant case. As it did in the district court, the Government points on appeal to the disturbing facts of Kirkland’s offense of conviction and to his equally disturbing criminal history. The Government also suggests that Kirkland has benefited from the “fortuitous operation” of the guidelines, which prevented Kirkland’s 1999 conviction from earning additional criminal history points. However, the Government was aware of the nature of Kirkland’s offense, his criminal history, and the operation of the guidelines when, in the face of all of these factors, it agreed to recommend the low end of the guidelines range in exchange for Kirkland’s guilty plea and his surrender of his constitutional rights. As Kirkland notes in his brief, the deplorable nature of his offenses is “precisely why he bargained for the government’s statement that, notwithstanding those facts, a sentence at the bottom of the advisory range was sufficient in light of all the applicable sentencing factors.” The Government cannot extract benefits from a defendant who it knows has committed bad acts and later argue that it should not be held to its bargain because the defendant has committed those bad acts. Additionally, we note that a sentence at the low end of the guidelines range would have been presumptively reasonable. See United States v. Alonzo, 435 F.3d 551, 554 (5th Cir. 2006) (“[A] sentence within a properly calculated Guideline range is presumptively reasonable.”). Thus, unlike in Puckett, there would be nothing inherently objectionable in Kirkland’s receipt of the benefit of his plea agreement. Cf 556 U.S. at 143, 129 S.Ct. 1423.

In this light, we believe that denying Kirkland the benefit of his bargain would be manifestly unjust and therefore conclude that the Government’s breach of the plea agreement satisfies the fourth prong of the plain-error test.

Ill

The Government’s breach of its obligations under its plea agreement with Kirkland satisfies all four prongs of the plain error test and therefore constitutes reversible plain error. See Molina-Martinez, 136 S.Ct. at 1343. When we conclude that the Government’s breach of a plea agreement constitutes reversible error, a defendant can choose one of two remedies: “[1] specific performance of the plea agreement and resentencing before a different judge, or [2] withdrawal of the guilty plea.” Williams, 821 F.3d at 658. Kirkland requests specific performance of the plea agreement at a resentencing before a different district court judge. Accordingly, we VACATE Kirkland’s sentence and REMAND for resentencing before a different judge.

      . The Government's concession is correct. The plea agreement required the Government to recommend a sentence at the low end of the guidelines range, but the Government did not comply. We have previously found such a breach to be a clear or obvious error. See United States v. Williams, 821 F.3d 656, 657-58 (5th Cir.), reh’g denied, 833 F.3d 449 (5th Cir. 2016).