Pub Hlth Equip & Supply Co. v. Clarke Mosquito Control Prod., et al

Filing

UNPUBLISHED OPINION FILED. [10-50193 Reversed and Remanded] Judge: TMR , Judge: FPB , Judge: EBC Mandate pull date is 12/30/2010 [10-50193]

Pub Hlth Equip & Supply e: 10-50193 Document: 00511317536 Cas Co. v. Clarke Mosquito Control Prod., et al

Page: 1 Date Filed: 12/09/2010

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IN THE UNITED STATES COURT OF APPEALS United States Court of Appeals FOR THE FIFTH CIRCUIT Fifth Circuit FILED
December 9, 2010 N o . 10-50193 Lyle W. Cayce Clerk

P U B L I C HEALTH EQUIPMENT & SUPPLY CO., INC., P la in t if f -A p p e lla n t v. C L A R K E MOSQUITO CONTROL PRODUCTS, INC.; C L A R K E ENVIRONMENTAL MOSQUITO MANAGEMENT, INC.; C L A R K E ENGINEERING TECHNOLOGIES, INC., D e fe n d a n t s -A p p e lle e s

A p p e a l from the United States District Court fo r the Western District of Texas U S D C No. 5:08-CV-895-OLG

B e fo r e REAVLEY, BENAVIDES, and CLEMENT, Circuit Judges. P E R CURIAM:* A p p e lla n t Public Health Equipment & Supply Co., Inc. ("Public") appeals t h e district court's order granting Appellees' Clarke Mosquito Control Products, I n c .'s , Clarke Environmental Mosquito Management, Inc.'s, and Clarke E n gin eerin g Technologies, Inc.'s (collectively "Clarke") 12(b)(6) motion to dismiss a n d denying Public's motion to amend. We reverse. Reviewing the second

Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not be published and is not precedent except under the limited circumstances set forth in 5TH CIR. R. 47.5.4.

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No. 10-50193 d e n i a l of leave to amend is moot, but we reach it only to fault the magistrate ju d g e 's holding that the amendment would be futile. In its original state court petition--the live pleading--Public alleges that it had an exclusive distribution agreement with Clarke to distribute Clarke's in s e c t ic id e s and equipment for the territory covering Arizona, New Mexico, O k la h o m a , and Texas. Public added Mexico to its territory through an agency a g r e e m e n t with Flores Leal. Public alleges that Clarke deliberately cut Public o u t of the business in Mexico by dealing directly with Leal in violation of Public's e x c lu s iv e distribution agreement with Clarke and interfering with Public's a g e n c y relationship with Leal. Public also alleges that Clarke made agreements jo in t ly to pursue business with Public in (1) Jefferson County, Texas, and (2) C a m e r o n , Willacy, and Hidalgo Counties. Despite Clarke's agreements to

c o o p e r a t e and share profits in these enterprises, Clarke used Public's contacts a n d introductions to procure these contracts for Clarke only. P u b lic originally filed suit in state court in Bexar County. It brought c la im s for (1) tortious interference with contracts and business relationships, (2) c o n s p ir a c y , and (3) breach of contract. Clarke answered, counterclaimed, and r e m o v e d the case predicated on diversity. On January 5, 2009, the district court e n te r e d a scheduling order requiring that amended pleadings be filed by March 2 3 , 2009, and closing discovery on June 8, 2009. On January 16, 2009, Clarke file d its 12(b)(6) motion to dismiss. On February 6, 2009, Public responded and a lt e r n a t iv e ly moved for leave to amend. Four months later, on June 5, 2009, the d is t r ic t court granted Clarke's motion to dismiss without addressing--and t h e r e b y implicitly denying--Public's motion for leave to amend. On August 31, 2009, Public renewed its motion for leave to amend, a t t a c h i n g its proposed amended complaint. On November 6, 2009, the

m a g is tr a t e judge recommended denying Public's motion, and on December 3, 2 0 0 9 , the district court overruled Public's objections without comment and 2

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No. 10-50193 a d o p t e d the magistrate judge's recommendation. After ruling on Clarke's

c o u n t e r c la im , the district court entered final judgment. This appeal followed. W e review a district court's dismissal under Rule 12(b)(6) de novo, a c c e p t in g all well-pleaded facts as true. Sullivan v. Leor Energy, LLC, 600 F.3d 5 4 2 , 546 (5th Cir. 2010). We must construe the complaint in the light most fa v o r a b le to the plaintiff and draw all reasonable inferences in plaintiff's favor. Lovick v. Ritemoney Ltd., 378 F.3d 433, 437 (5th Cir. 2004). "To survive a m o t io n to dismiss, a complaint must contain sufficient factual matter, accepted a s true, to state a claim to relief that is plausible on its face." Ashcroft v. Iqbal, 1 2 9 S. Ct. 1937, 1949 (2009) (internal quotation omitted). "A claim has facial p la u s ib ilit y when the plaintiff pleads factual content that allows the court to d r a w the reasonable inference that the defendant is liable for the misconduct a lle g e d ." Id. "The court's review is limited to the complaint, any documents a t t a c h e d to the complaint, and any documents attached to the motion to dismiss t h a t are central to the claim and referenced by the complaint." Lone Star Fund V (U.S.), L.P. v. Barclays Bank PLC, 594 F.3d 383, 387 (5th Cir. 2010). "The c o u r t's task is to determine whether the plaintiff has stated a legally cognizable c la im that is plausible, not to evaluate the plaintiff's likelihood of success." Id. W e review the district court's denial of a motion to amend for abuse of d is c r e t io n . Fahim v. Marriott Hotel Servs., Inc., 551 F.3d 344, 347 (5th Cir. 2 0 0 8 ). Rule 15 governs motions to amend made before the expiration of a s c h e d u lin g order's deadline and provides that "[t]he court should freely give le a v e when justice so requires." FED. R. CIV. P. 15(a)(2); see Fahim, 551 F.3d at 3 4 7 . Post-deadline motions to amend are covered by Rule 16(b)'s more stringent r e q u ir e m e n t s and "may be [granted] only for good cause and with the judge's c o n s e n t." FED. R. CIV. P. 16(b)(4); Fahim, 551 F.3d at 348. T h e district court erred when it implicitly denied Public's first motion for le a v e to amend. "Denial of a motion to amend is warranted for undue delay, bad 3

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No. 10-50193 fa it h or dilatory motive on the part of the movant, repeated failure to cure d e fic ie n c ie s by amendments previously allowed, undue prejudice to the opposing p a r ty by virtue of the allowance of the amendment, [and] futility of the a m e n d m e n t ." Rosenblatt v. United Way of Greater Houston, 607 F.3d 413, 419 (5 t h Cir. 2010) (internal quotation omitted). "We have held that a district court a b u s e s its discretion, however, when it gives no reasons for denying a timely m o t io n to amend, at least when the defendant would not be unduly prejudiced b y the amendment." United States ex rel. Steury v. Cardinal Health, Inc., ___ F .3 d ___, 2010 WL 4276073, *6 (5th Cir. 2010). This was Public's first motion to amend, made before the deadline to a m e n d , so bad faith and/or dilatory motive is not an issue here. Moreover, P u b lic 's motion was not merely a bare request to amend appended to the end of a response to a motion to dismiss, but was instead clearly set out and titled in a section of its response. United States ex rel. Willard v. Humana Health Plan o f Texas Inc., 336 F.3d 375, 387 (5th Cir. 2003). Public laid out the grounds on w h ic h the amendment should be permitted, explaining that its state court p e t it io n was drafted to comply with Texas's lenient notice pleading standards a n d sought leave to replead, if necessary. Therefore, Public moved with

s u ffic ie n t clarity to allow the district court to determine whether to allow the a m e n d m e n t . The defendants would not have been prejudiced had the district c o u r t allowed the amendment at the time, because the plaintiff moved to amend f u l l y four months before the close of discovery. Nor are we convinced that a llo w in g the amendment would be futile. F ir s t , in order for dismissal to be appropriate on the basis of a successful a ffir m a t iv e defense, that defense must appear on the face of the complaint. EPCO Carbon Dioxide Prods., Inc. v. JP Morgan Chase Bank, N.A., 467 F.3d 4 6 6 , 470 (5th Cir.2006). The district court granted Clarke's motion to dismiss because it found that the distributorship agreement was unenforceable under 4

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No. 10-50193 t h e statute of frauds.1 The statute of frauds requires that agreements meeting c e r t a in criteria must be in writing. The district court based its finding that the a g r e e m e n t violated the statute of frauds not on the face of the petition but on C la r k e 's motion to dismiss which argued that the agreement--if any--was oral. In its petition, Public alleged that it had an exclusive distribution agreement w it h Clarke. The law does not require that plaintiffs plead affirmatively that a c o n t r a c t is written. Id. ("[P]leadings need not identify every element of [a] claim, p a r tic u la r ly where the contested elements relate to the affirmative defense of the s t a t u t e of frauds."). In order for an agreement to violate the statute of frauds on t h e face of the complaint, the plaintiff must indicate that the agreement is not w r it t e n . A court may not assume that every contract is oral absent allegations o f a writing. Absent an amendment alleging an oral contract--which the court c o u ld not anticipate--Public's motion to amend would not be futile based on the s t a t u t e of frauds. S e c o n d , Public's answer to Clarke's statute of frauds argument makes it c le a r that any determination regarding the validity of the contract would be a q u e s t io n of fact and thus not appropriate for dismissal on 12(b)(6). In its

r e s p o n s e to the motion to dismiss, Public argued that the agreement was e v id e n c e d in multiple documents spanning the years of the agreement as allowed b y the merchant's exception to the statute of frauds. The UCC provides that w r it in g s confirming sales between merchants may serve to satisfy the statute of f r a u d s . TEX. BUS. & COM. CODE § 2.201(b). While the question of whether a c o n t r a c t falls into the statute of frauds is a question of law, Beverick v. Koch P o w e r , Inc., 186 S.W.3d 145, 149 (Tex. App.­Houston [1st Dist.] 2005, pet. d e n ie d ), "[w]hether the circumstances of a particular case fall within an

Texas courts have held that a distributorship is a contract for the sale of goods and therefore subject to the statute of frauds. See Con't Casing Corp. v. Siderca Corp., 38 S.W.3d 782, 788 (Tex. App.­Houston [14th Dist.] 2001, no pet.).

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No. 10-50193 e x c e p t i o n to the statute of frauds is generally a question of fact." Adams v. P e t r a d e Int'l, 754 S.W.2d 696, 706 (Tex. App.­Houston [1st Dist.] 1988, writ d e n ie d ). So, even if Public amended and alleged that the contract met the s t a t u t e of frauds under the merchant's exception, the district court could not h a v e used Rule 12(b)(6) to make the determination regarding the enforceability o f the agreement. Therefore, allowing Public to amend would not have been fu tile . Accordingly, the court erred when it implicitly denied Public's first

m o t io n for leave to amend. T h e dismissal is reversed. Because the first motion to amend should have b e e n granted and it is now apparent that a plausible complaint can be filed, w h e n that is done the court can move beyond the pleadings stage. R E V E R S E D and REMANDED.

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