Walker, et al v. Arthur Andersen LLP, et al

Filing 230

OPINION AND ORDER granting #124 Motion to Dismiss; granting #125 Motion to Dismiss; granting #126 Motion to Dismiss; denying #136 Motion to Dismiss. Deft Fastow's motion to dismiss for invalid servide and for lack of personal jurisdiction is DENIED. Defts McMahon's, Whalley's, Buy's and Fastow's motions to dismiss for failure to state a claim are GRANTED. Plaintiff shall file within 20 days an amended complaint. Defendants shall file timely responsive pleadings. (Signed by Judge Melinda Harmon) Parties notified.(htippen, )

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION
In Re Enron Corporation
Securities, Derivative &
"ERISA Litigation
MARK NEWBY, ET AL.,
Plaintiffs
VS.
ENRON CORPORATION, ET AL.,
Defendants
JOE H. WALKER, et al.,
Plaintiff,
VS.
ARTHUR ANDERSEN, LLP, et al.,
Defendants.

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MDL-1446

CIVIL ACTION NO. H-01-3624
CONSOLIDATED CASES

CIVIL ACTION NO. H-03-2345

OPINION AND ORDER
Pending before the Court in H-03-2345, asserting commonlaw

claims

for

common

law

fraud,

conspiracy,

intentional

infliction of emotional distress, and negligent misrepresentation
under Tennessee law against all Defendants, are the following
motions: (1) Defendant Jeffrey McMahon’s (“McMahon’s”) motion to
dismiss or for more definite statement (instrument #124); (2)
Defendant Lawrence G. Whalley’s (“Whalley’s”) motion to dismiss or
for more definite statement (#125); (3) Defendant Richard B. Buy’s
(“Buy’s”) motion to dismiss or for more definite statement (#126);

and (4) Defendant Andrew Fastow’s (“Fastow’s”) motion to dismiss
(#136).1
This action was originally filed in the Circuit Court
for Davidson County, Tennessee, was removed to the United States
District Court for the Middle District of Tennessee by Enron’s
former Outside Directors on diversity and “related to” bankruptcy
jurisdiction, 28 U.S.C. § 1332(a)(1), 1334(b) and 1452, and was
subsequently

transferred

here

by

the

Judicial

Panel

on

Multidistrict Litigation for pretrial proceedings coordinated with
MDL 1446.
The governing pleading is the Complaint, first filed in
the Circuit Court for Davidson County, Tennessee, attached to the
Notice of Removal (#1, Exhibit 1).
Fastow moves for dismissal of the claims against him on
the grounds that (1) Plaintiffs never obtained valid service of
process upon him, (2) the Court lacks personal jurisdiction over
him because the United States District Court for the Middle
District of Tennessee from which the case was transferred lacks
jurisdiction over him, and (3) the complaint fails to state a
claim upon which relief may be granted and fails to satisfy the
heightened pleading requirements of Rule 9(b), applicable to fraud
allegations.
McMahon’s, Whalley’s and Buy’s motions state that the
fraud-based claims (fraud, negligent misrepresentation, conspiracy

1

The remaining Defendants have all been dismissed.
-2-

to commit fraud are not pleaded with the particularity required by
Federal

Rule

of

Civil

Procedure

9(b)

while

the

claim

for

intentional infliction of emotional distress does not satisfy the
fair notice requirement of Federal Rule of Civil Procedure 8(a).
Therefore the complaint fails to state a claim for which relief
can be granted against McMahon, Whalley, and Buy under Federal
Rule of Civil Procedure 12(b)(6).
request

the

Court

to

establish

Alternatively these Defendants
a

deadline

for

the

Walker

Plaintiffs to amend their complaint and provide a more definite
statement pursuant to Federal Rule of Civil Procedure 12(e).
The Court addresses Fastow’s motion first. Although the
Court granted the Walker Plaintiffs four extensions of time to
respond

to

Fastow’s

motion

to

dismiss,

the

last

being

in

instrument #168 on August 14, 2007, giving Plaintiffs until
December 14, 2007 to respond, they have failed to do so. Although
the affidavit of Joshua R. Walker, filed as instrument #84 on
August 18, 2006 in support of Walker Plaintiffs’ motion for
default judgment,2 stated that Fastow was served pursuant to
Tennessee Rule of Civil Procedures 4.04(10) and 4.05 through a
failed

attempt

at

certified

mail,

Fastow

points

out

that

Plaintiffs judicially admitted in their “Fifth Circuit Supplement
to Their Motion to Remand and Their Response to Defendants’ Joint
Motion to Amend and Joint Statement of Unanimous Consent,” filed
on August 6, 2003 nearly a year after the claimed service, that

2

The motion for default was subsequently withdrawn (#94).
-3-

Fastow remained an “unserved Defendant[].”

(in Newby, #1610 at

p.8 and n.6 (“Two Defendants, Arthur Andersen, LLP and Andrew S.
Fastow, were not served with process at the time of the other
Defendants, nor have they made an appearance in this action.”))
Once a defendant has challenged the validity of service
of process, a plaintiff bears the burden to show it was proper.
In re Katrina Canal Breaches Litig., 309 Fed. Appx. 833, 835 (5th
Cir. 2009)(citing Carimi v. Royal Carribean Cruise Line, Inc., 959
F.2d 1344, 1346 (5th Cir. 1992)), cert. denied sub nom. O’Dwyer v.
Louisiana, 130 S. Ct. 803 (2009). Although Plaintiffs have failed
to respond to the motion dismiss, their submissions elsewhere in
the record demonstrate that Fastow was validly served under both
Tennessee and federal law.
As noted, this case was originally filed in a Tennessee
state court and removed to the United States District Court for
the Middle District of Tennessee. Federal Rule of Civil Procedure
4(c) places the burden on the plaintiff to ensure that defendants
are properly served with summons and a copy of the complaint.
Under Federal Rule of Civil Procedure 4(e), service may be made by
“following state law for serving a summons in an action brought in
courts of general jurisdiction in the state where the district
court is located or where service is made.”

The affidavit of

Joshua Walker (#84) states that Andrew Fastow was properly served
under Tennessee Rules of Civil Procedure. Tennessee Rule of Civil
Procedure 4.05 states, “Whenever the law of this state authorizes
service

outside

this

state,

the

-4-

service,

when

reasonably

calculated to give actual notice, may be made:

(a) by any form of

service authorized for service within this state pursuant to Rule
4.04 . . . .”

Rule 404(10) states in relevant part,

Service by mail of a summons and complaint
upon a defendant may be made by the
plaintiff, the plaintiff’s attorney or by any
person authorized by statute.
After the
complaint is filed, the clerk shall, upon
request, furnish the original summons and
certified copy thereof and a copy of the
filed complaint to the plaintiff, the
plaintiff’s attorney or other authorized
person for service by mail.
Such person
shall send, postage prepaid, a certified copy
of the summons and a copy of the complaint by
registered return receipt or certified return
receipt mail to the defendant. . . .
Rule 4.05.5 provides,
When service of summons, process, or notice
is provided for or permitted by registered or
certified mail, under the laws of Tennessee,
and the addressee, or the addressee’s agent,
refuses to accept delivery, and it is so
stated in the return receipt, if returned and
filed in the action, shall be deemed an
actual and valid service of the summons,
process, or notice.
Service by mail is
complete upon mailing. For purposes of this
paragraph, the United States Postal Service
notation that a properly addressed registered
or certified letter is “unclaimed,” or other
similar notation, is sufficient evidence of
the defendant’s refusal to accept delivery.
Walker’s affidavit states that “[a] certified copy of the summons
and a copy of the complaint were sent by certified receipt mail to
Andrew S. Fastow at the address of 1831 Wroxton, Houston, Texas
77005 on November 8, 2002.”
of

the

return

receipt,

Attached to the affidavit is a copy
returned

to

reflecting the mailing was “unclaimed.”

-5-

Plaintiffs’

law

firm,

Moreover the affidavit

and the attached return receipt constitute the proof of service
that must be filed with the court under Federal Rule of Civil
Procedure

4(l)

unless

service

is

waived.

Thus

the

record

indicates that Fastow was properly served under both the Tennessee
and Federal Rules of Civil Procedure.

The attorney who filed

#1610 in Newby was not the same as the one that filed #84 in the
instant case, and his error does not “undo” that service of
summons and process on Fastow under Tennessee law.
Fastow’s second ground for dismissal, lack of personal
jurisdiction here because Fastow lacks sufficient contacts with
Tennessee, from which this case was transferred for pretrial
proceedings by the Judicial Panel on Multidistrict Litigation, was
previously raised by Richard Causey and denied by this Court
(#226).3

This Court has previously concluded that it has “related

to” bankruptcy jurisdiction under 28 U.S.C. § 1334(b) over this
action, and it has not changed its mind. See generally In re Enron
Corp. Sec., Derivative, and “ERISA” Litig., Nos. MDL 1446, et al.,
2002 WL 32107216, *7-8 (S.D. Tex. Aug. 12, 2002); In re Enron
Corp. Sec., Derivative, and “ERISA” Litig., 314 BR 354, 357 (S.D.
Tex. 2004).

When a suit is in federal court on “related to”

bankruptcy jurisdiction, as it was after removal in Tennessee and
here, the sovereign exercising authority is the United States, not
the particular state where it was originally filed.

3

Diamond

Also available as In re Enron Corp., Sec., Derivative &
ERISA Litig., Civ. A. No. H-01-3624, 2010 WL 3257338 (S.D. Tex.
Aug. 17, 2010).
-6-

Mortgage Corp. of Illinois v. Sugar, 913 F.2d 1233, 1244 (7th Cir.
1990)

cert.

denied,

498

U.S.

1089

(1991).

Therefore

the

appropriate inquiry to determine whether a court may exercise
personal jurisdiction over a defendant is whether that party has
minimum contacts with the United States such that subjecting it to
personal jurisdiction does not offend the Due Process Clause of
the Fifth Amendment to the United States Constitution,” so as to
“comport with ‘traditional notions of fair plan and substantial
justice.’”

Id., citing International Shoe Co. v. Washington, 326

U.S. 310, 316 (1990).4

Fastow clearly has more than minimum

contacts with the United States.

Nor does the Court find that it

would offend traditional notions of fair play and substantial
justice to haul him into Court in Tennessee given the expansive
alleged fraud against the former Enron officers.

4

As this Court held in In re Enron Corp. Sec., Derivative, and
“ERISA” Litig., 511 F. Supp. 2d 742, 790 (S.D. Tex. 2005),
[W]here there is “related to” bankruptcy
jurisdiction,
as
here,
the
personal
jurisdiction challenge based on minimum
contacts is irrelevant. 17 Charles A. Wright,
Arthur R. Miller, and Edward H. Cooper, Fed.
Prac.& Proc., § 4106 (2004 Supp.)(“Bankruptcy
Rule 7004 provides for nationwide service of
process in adversary proceedings arising in
the
bankruptcy
courts.
Therefore
in
determining whether the bankruptcy court has
personal jurisdiction over the adversary
defendants, the relevant question to be asked
is not whether defendants have minimum
contacts with the forum state, but whether the
defendants have sufficient contacts with the
United States for the exercise of personal
jurisdiction to comport with traditional
notions
of
fair
play
and
substantial
justice.”). . . .
-7-

Fastow cites a contrary decision, Stangel v. Johnson &
Madigan, P.L.L.P., Cause No. 3:99-CV-1518-D. 1999 WL 1134962 (N.D.
Tex. Dec. 8. 1999), aff’d, 228 F.3d 409 (5th Cir. 2000)(Table).
Stangel is easily distinguishable from the instant case because
Stangel failed to allege a single fact showing, and thus failed to
make a prima facie case, that his claims could have a conceivable
effect on the bankruptcy case, as noted by the Fifth Circuit’s
opinion affirming the district court’s order.

Id., 228 F.3d at

*1.
Therefore the Court examines the claims against all four
Defendants under the Federal Rules of Civil Procedure 8(a), 9(b)
and 12(b)(6).

The Court notes that the Complaint was filed in

while the case was pending in Tennessee state Court, according to
the Notice of Removal, and thus not then subject to federal
pleading standards.
Standards of Review
Federal Rule of Civil Procedure 8(a)(2) provides, “A
pleading that states a claim for relief must contain . . . a short
and plain statement of the claim showing that the pleader is
entitled to relief.”

When a district court reviews a motion to

dismiss pursuant to Fed. R. Civ. P. 12(b)(6), it must construe the
complaint in favor of the plaintiff and take all well-pleaded
facts as true. Randall D. Wolcott, MD, PA v. Sebelius, 635 F.3d
757, 763 (5th Cir. 2011), citing Gonzalez v. Kay, 577 F.3d 600, 603
(5th Cir. 2009).

-8-

“While a complaint attacked by a Rule 12(b)(6) motion to
dismiss does not need detailed factual allegations, . . . a
plaintiff’s

obligation

‘entitle[ment]

to

to

relief’

provide

the

‘grounds’

requires

more

than

of

his

labels

and

conclusions, and a formulaic recitation of the elements of a cause
of action will not do . . . .”

Bell Atlantic Corp. v. Twombly,

127 S. Ct. 1955, 1964-65 (2007)(citations omitted).

“Factual

allegations must be enough to raise a right to relief above the
speculative level.”

Id. at 1965, citing 5 C. Wright & A. Miller,

Federal Practice and Procedure

§ 1216, pp. 235-236 (3d ed.

2004)(“[T]he pleading must contain something more . . . than . .
.

a statement of facts that merely creates a suspicion [of] a

legally cognizable right of action”).

“Twombly jettisoned the

minimum notice pleading requirement of Conley v. Gibson, 355 U.S.
41 . . . (1957)[“a complaint should not be dismissed for failure
to state a claim unless it appears beyond doubt that the plaintiff
can prove no set of facts in support of his claim which would
entitle him to relief”], and instead required that a complaint
allege enough facts to state a claim that is plausible on its
face.”

St. Germain v. Howard,556 F.3d 261, 263 n.2 (5th Cir.

2009), citing In re Katrina Canal Breaches Litig., 495 F.3d 191,
205 (5th Cir. 2007)(“To survive a Rule 12(b)(6) motion to dismiss,
the plaintiff must plead ‘enough facts to state a claim to relief
that is plausible on its face.’”), citing Twombly, 127 S. Ct. at
1974).

See also Alpert v. Riley, No. H-04-CV-3774, 2008 WL

304742, *14 (S.D. Tex. Jan. 31, 2008).

-9-

“‘A claim has facial

plausibility when the pleaded factual content allows the court to
draw the reasonable inference that the defendant is liable for the
misconduct alleged.’”

Montoya v. FedEx Ground Package System,

Inc., 614 F.3d 145, 148 (5th Cir. 2010), quoting Ashcroft v. Iqbal,
129 S. Ct. 1937, 1940 (2009).

Dismissal is appropriate when the

plaintiff fails to allege “‘enough facts to state a claim to
relief that is plausible on its face’” and therefore fails to
“‘raise a right to relief above the speculative level.’” Montoya,
614 F.3d at 148, quoting Twombly, 550 U.S. at 555, 570.
In Ashcroft v. Iqbal, 129 S. Ct. at 1940, the Supreme
Court, applying the Twombly plausibility standard to a Bivens
claim

of

unconstitutional

discrimination

and

a

defense

of

qualified immunity for government official, observed that two
principles inform the Twombly opinion: (1) “the tenet that a court
must

accept

as

true

all

of

the

allegations

contained

in

a

complaint is inapplicable to legal conclusions.” . . . Rule 8
”does not unlock the doors of discovery for a plaintiff armed with
nothing more than conclusions.”; and (2) “only a complaint that
states a plausible claim for relief survives a motion to dismiss,”
a determination involving “a context-specific task that requires
the reviewing court to draw on its judicial experience and common
sense.”

“[T]hreadbare recitals of the elements of a cause of

action, supported by mere conclusory statements do not suffice”
under Rule 12(b).

Iqbal, 129 S. Ct. at 1949.

The plaintiff must

plead specific facts, not merely conclusory allegations, to avoid
dismissal. Collins v. Morgan Stanley Dean Witter, 224 F.3d 496,

- 10 -

498 (5th Cir. 2000) “Dismissal is proper if the complaint lacks an
allegation regarding a required element necessary to obtain relief
. . . .“

Rios v. City of Del Rio, Texas, 444 F.3d 417, 421 (5th

Cir. 2006), cert. denied, 549 U.S. 825 (2006).
As noted, on a Rule 12(b)(6) review, although generally
the court may not look beyond the pleadings, the Court may examine
the complaint, documents attached to the complaint, and documents
attached to the motion to dismiss to which the complaint refers
and which are central to the plaintiff’s claim(s), as well as
matters of public record.

Lone Star Fund V. (U.S.), L.P. v.

Barclays Bank PLC, 594 F.3d 383, 387 (5th Cir. 2010), citing
Collins, 224 F.3d at 498-99; Cinel v. Connick, 15 F.3d 1338, 1341,
1343 n.6 (5th Cir. 1994).

See also United States ex rel. Willard

v. Humana Health Plan of Tex., Inc., 336 F.3d 375, 379 (5th Cir.
2003)(“the court may consider . . . matters of which judicial
notice may be taken”).

Taking judicial notice of public records

directly relevant to the issue in dispute is proper on a Rule
12(b)(6) review and does not transform the motion into one for
summary judgment.

Funk v. Stryker Corp., 631 F.3d 777, 780 (5th

Cir. Jan. 25, 2011).
Even if a plaintiff fails to file a response to a motion
to dismiss despite a local rule’s mandate that a failure to
respond is a representation of nonopposition, the Fifth Circuit
has rejected the automatic granting of dispositive motions without
responses without the court’s considering the substance of the
motion. Watson v. United States, 285 Fed. Appx. 140, 143 (5th Cir.

- 11 -

2008), citing Johnson v. Pettiford, 442 F.3d 917, 918 (5th Cir.
2006), and Johnson v. Louisiana, 757 F.2d 698, 708-09 (5th Cir.
1985). “The mere failure to respond to a motion is not sufficient
to justify a dismissal with prejudice.” Id. Instead there should
be a clear record of delay or contumacious conduct and a finding
that lesser sanctions would not serve the system of justice. Id.,
citing Luna v. Int’l Ass’n of Machinists & Aerospace Workers Local
#36, 614 F.2d 529, 531 (5TH Cir. 1980).
Dismissal under Federal Rule of Civil Procedure 12(b)(6)
is “appropriate when a defendant attacks the complaint because it
fails to state a legally cognizable claim.”

Ramming v. United

States, 281 F.3d 158, 161 (5th Cir. 2001), cert. denied sub nom.
Cloud v. United States, 536 U.S. 960 (2002), cited for that
proposition in Baisden v. I’m Ready Productions, No. Civ. A. H-080451, 2008 WL 2118170, *2 (S.D. Tex. May 16, 2008).

See also

ASARCO LLC v. Americas Min. Corp., 382 B.R. 49, 57 (S.D. Tex.
2007)(“Dismissal “‘can be based either on a lack of a cognizable
legal theory or the absence of sufficient facts alleged under a
cognizable legal theory.’” [citation omitted]), reconsidered in
other part, 396 B.R. 278 (S.D. Tex. 2008).
When a plaintiff’s complaint fails to state a claim, the
court should generally give the plaintiff at least one chance to
amend the complaint under Rule 15(a) before dismissing the action
with prejudice.

Great Plains Trust Co v. Morgan Stanley Dean

Witter & Co., 313 F.3d 305, 329 (5th Cir. 2002)(“District courts
often afford plaintiffs at least one opportunity to cure pleading

- 12 -

deficiencies before dismissing a case, unless it is clear that the
defects are incurable or the plaintiffs advise the court that they
are unwilling or unable to amend in a manner that will avoid
dismissal.”); United States ex rel. Adrian v. Regents of the Univ.
of Cal., 363 F.3d 398, 403 (5th Cir. 2004)(“Leave to amend should
be freely given, and outright refusal to grant leave to amend
without

a

justification

.

.

.

is

considered

an

abuse

of

discretion. [citations omitted]”). The court should deny leave to
amend if it determines that “the proposed change clearly is
frivolous

or

advances

a

claim

insufficient on its face . . . .”

or

defense

that

is

legally

6 Charles A. Wright, Arthur R.

Miller & Mary Kay Kane, Federal Practice and Proc. § 1487 (2d ed.
1990).
Fraud claims must also satisfy the heightened pleading
standard set out in Federal Rule of Civil Procedure 9(b): “In
allegations

alleging

fraud

.

.

.,

a

party

must

state

with

particularity the circumstances constituting fraud or mistake.
Malice, intent, knowledge, and other conditions of a person’s mind
may be alleged generally.”

A dismissal for failure to plead with

particularity as required by this rule is treated the same as a
Rule 12(b)(6) dismissal for failure to state a claim. Lovelace v.
Software Spectrum, Inc., 78 F.3d 1015, 1017 (5th Cir. 1996).

The

Fifth Circuit interprets Rule 9(b) to require “specificity as to
the statements (or omissions) considered to be fraudulent, the
speaker, when and why the statements were made, and an explanation

- 13 -

of why they were fraudulent.”

Plotkin v. IP Axess, Inc., 407 F.3d

690, 696 (5th Cir. 2005).
“Rule

9(b)

applies

by

its

plain

language

to

all

averments of fraud, whether they are part of a claim of fraud or
not.”

Lone Star Ladies Inv. Club v. Schlotzky’s, Inc., 238 F.3d

363, 368 (5th Cir. 2001); Melder v. Morris, 27 F.3d 1097, 1100 n.6
(5th

Cir.

1994).

The

rule

applies

to

claims

for

negligent

misrepresentation where the factual allegations underlying it and
a fraud claim are the same.

Benchmark Elecs. v. J.M. Huber Corp.,

343 F.3d 719, 723 (5th Cir. 2003)(“Although Rule 9(b) by its terms
does not apply to negligent misrepresentation claims, this court
has applied the heightened pleading requirements when the parties
have not urged a separate focus on the negligent misrepresentation
claims. . . . That is the case here, as Benchmark’s fraud and
negligent misrepresentation claims are based on the same set of
alleged facts.”), citing Williams v. WMX Techs., Inc., 112 F.3d
175, 177 (5th Cir. 1997); Berry v. Indianapolis Life Ins. Co.
(“Berry II”), No. 3:08-CV-0248-B, 2010 WL 3422873, *16 (N.D. Tex.
aug. 26, 2010), citing Benchmark and Biliouris v. Sundance Res.,
Inc.,

559 F. Supp. 2d 733, 737 (N.D. Tex. 2008)(dismissing

negligent misrepresentation claim based on the same operative
facts as an insufficient fraud claim).
The pleading standards of Twombly and Rule 9(b) also
apply to pleading a state law claim of conspiracy to commit fraud.
U.S. ex rel. Grubbs v. Kanneganti, 565 F.3d 180, 193 (5th Cir.
2009)(“a plaintiff alleging a conspiracy to commit fraud must

- 14 -

‘plead with particularity the conspiracy as well as the overt acts
. . . taken in furtherance of the conspiracy’”), quoting FC Inv.
Group LLC v. IFX Markets, Ltd., 529 F.3d 1087, 1097 (D.C. Cir.
2008).

If Plaintiffs fail to state a claim for fraud underlying

their civil conspiracy claim, the civil conspiracy claim must be
dismissed, too.

Allstate Ins. Co. v. Receivable Finance, Inc.,

501 F.3d 398, 414 (5th Cir. 2007); American Tobacco Co., Inc. v.
Grinnell,

951

S.W.

2d

420,

438

(Tex.

1997)(“Allegations

of

conspiracy are not actionable absent an underlying [tort]”);
Krames v. Bohannon Holman LLC, No. 3:06-CV-2370-0, 2009 WL 762205,
*10 (N.D. Tex. Mar. 24, 2009).
Federal Rule of Civil Procedure 12(e) provides, “A party
may move for a more definite statement of a pleading to which a
responsive pleading is allowed but which is so vague or ambiguous
that the party cannot reasonably prepare a response.”

Such a

motion is appropriate where “a pleading fails to specify the
allegations

in

a

manner

that

provides

sufficient

Swierkiewicz v. Sorema N.A., 534 U.S. 506, 514 (2002).

notice.”
Such a

motion is “generally disfavored and is used to provide a remedy
only of an unintelligible pleading rather than a correction for
lack of detail”; “it is not intended to correct a claimed lack of
detail.”

Davenport v. Rodriguez, 147 F. Supp. 2d 630, 639 (S.D.

Tex. 2001); Sheffield v. Orius Corp., 211 F.R.D. 411, 414 (D. Or.
2001).
Federal

Rule

of

Civil

relevant part,

- 15 -

Procedure

15(a)

provides

in

A party may amend the party’s pleading once
as a matter of course at any time before a
responsive pleading is served or, if the
pleading is one to which no responsive
pleading is permitted and the action has not
been placed upon the trial calendar, the
party may so amend it at any time within 20
days after it is served. Otherwise a party
may amend the party’s pleading only by leave
of court or by written consent of the adverse
party; and leave shall be freely given when
justice so requires.
A court has discretion in deciding whether to grant leave to
amend.

Foman v. Davis, 371 U.S. 178, 181 (1962).

Since the

language of the rule “‘evinces a bias in favor of granting leave
to amend,” the court must find a “substantial reason” to deny such
a request. Ambulatory Infusion Therapy Specialists, Inc. v. Aetna
Life Ins. Co., Civ. A. No. H-05-4389, 2006 WL 2521411, *3 (S.D.
Tex. Aug. 29, 2006), quoting Smith v. EMC Corp., 393 F.3d 590, 595
(5th Cir. 2004), and Mayeaux v. La. Health Serv. & Indem. Co., 376
F.3d 420, 425 (5th Cir. 2004). Factors for the court to consider
in determining whether there is a substantial reason to deny leave
to amend include “undue delay, bad faith or dilatory motive on the
part of the movant, repeated failure to cure deficiencies by
amendments previously allowed, undue prejudice to the opposing
party, and futility of amendment.”
F.3d 137, 139 (5th Cir. 1993).

Wimm v. Jack Eckerd Corp., 3

The court should deny leave to

amend if it determines that “the proposed change clearly is
frivolous

or

advances

a

claim

insufficient on its face . . . .”

- 16 -

or

defense

that

is

legally

6 Charles A. Wright, Arthur R.

Miller & Mary Kay Kane, Federal Practice and Proc. § 1487 (2d ed.
1990).
The Court has reviewed the Complaint and agrees with
Defendants that it fails to allege facts that describe the
particular

acts

of

each

of

these

moving

Defendants

that

purportedly make each potentially liable under each of the four
causes of action, three5 of which are subject to the heightened
pleading

requirements

of

Rule

9(b).6

Instead

the

Complaint

5

The elements of fraud under Tennessee law are (1) an
intentional misrepresentation of a material fact, (2) knowledge of
the representation’s falsity, (3) an injury caused by reasonable
reliance on the representation, and (4) the misrepresentation must
involved a past or existing fact. Kincaid v. South Trust Bank, 221
S.W. 3d 32, 40 (Tenn. Ct. App. 2006).
The knowledge element
contemplates that representation being made knowingly, without
belief in its truth, or recklessly. Under Rule 9(b) Plaintiffs
must allege with specificity “the statements (or omissions)
considered to be fraudulent, the speaker, when and why the
statements were made, and an explanation of why they were
fraudulent.” Plotkin, 407 F.3d at 696.
For civil conspiracy to defraud Plaintiffs must allege
with specificity (1) a common design between two or more persons
(2) to accomplish by concerted action an unlawful purpose or a
lawful purpose by unlawful means, (3) an overt act in furtherance
of the conspiracy and (4) resulting injury. Kincaid, 221 S.W. 3d
at 38.
For negligent misrepresentation Plaintiffs must allege
and ultimately prove by a preponderance of the evidence that the
defendant, acting in the course of his business or employment or in
a transaction in which he has a pecuniary interest, supplied
information to the plaintiff to guide the plaintiff in a business
transaction,, that the information was false, that the defendant
did not exercise reasonable care in obtaining or communicating the
information, and that the plaintiff justifiably relied on the
information.
Cato v. Batts, No. M2009-02204-COA-R3CV, 2011 WL
579153, *6 (Tenn. Ct. App. Feb. 17, 2011), citing Strange v.
Peterson, No. W1999-00489-COA-CV, 2001 WL 29461, *2 (Tenn. Ct. App.
Jan. 11, 2001), and Robinson v. Omer, 952 S.W. 2d 423 (Tenn.
1997)(citing Restatement (Second) of Torts § 552).
6

For intentional infliction of emotional distress under
Tennessee law, subject to Rules 8(a) and 12(b)(6), Plaintiffs must
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abstractly and formulaically mentions the elements of each cause
of action.
Accordingly, the Court
ORDERS

that

Fastow’s

motion

to

dismiss

(#136)

for

invalid service and for lack of personal jurisdiction is DENIED.
McMahon’s, Whalley’s, Buy’s, and Fastow’s motions to dismiss for
failure to state a claim (#124, 125, 126, and 136), respectively)
are GRANTED.
statement

Since their alternative motions for more definite

under

Rule

12(e)

are

not

appropriately

designated

because the Walker Plaintiffs’ Complaint is not so vague and
ambiguous as to preclude

a reasonable response, but instead

requires greater detail, the Court grants them leave to amend
under Federal Rule of Civil Procedure 15(a).

Accordingly within

twenty days of receipt of this order, Plaintiffs shall file an
amended complaint to satisfy the Federal Rules of Civil Procedure.
Defendants shall file timely responsive pleadings.
SIGNED at Houston, Texas, this

11th

day of

August ,

2011.

___________________________
MELINDA HARMON
UNITED STATES DISTRICT JUDGE

allege (1) conduct that is intentional or reckless, (2) and so
outrageous that it is not tolerated by civilized society, and (3)
and must result in serious mental injury. Bain v. Wells, 936 S.W.
2d 618, 622 (Tenn, 1997). The last element, serious mental injury
is that in which “‘the distress is so severe that no reasonable
[person] could be expected to endure it.’” Miller v. Willbanks, 8
S.W. 3d 607, 615 n.4 (Tenn. 1999)(quoting Restatement (Second) of
Torts § 46 cmt. j (1965)).
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