Argent Holdings, LLC v. East El Paso Physicians Medical Center, L.L.C. et al

Filing 80

ORDER DENYING 53 Motion to Dismiss for Failure to State a Claim; GRANTING 68 Motion to Amend Complaint; DENYING 77 Motion for Judgment on the Pleadings; DENYING 78 Motion for Judgment on the Pleadings Signed by Judge Anne T. Berton. (jg1)

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF TEXAS
EL PASO DIVISION
ARGENT HOLDINGS, LLC,
Plaintiff,
v.
EAST EL PASO PHYSICIANS
MEDICAL CENTER, LLC,
d/b/a Foundation Surgical Hospital
of El Paso, et al.,
Defendants.

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No. EP-17-CV-00199-ATB

MEMORANDUM OPINION & ORDER
On this day, the Court considered:


“Defendant Stanton Nelson’s Motion to Dismiss Plaintiff’s Amended Complaint”
(“Motion to Dismiss”) (ECF. No. 53);



Argent’s “Motion for Leave to Amend Complaint” (ECF. No. 68);



“Defendant Justin Bynum’s Rule 12(c) Motion for Judgment on the Pleadings Seeking
Dismissal of Plaintiff’s Amended Complaint” (“Motion for Judgment on the Pleadings
Regarding Argent’s Claims”) (ECF. No. 77); and



“Defendant Justin Bynum’s Rule 12(c) Motion for Judgment on the Pleadings Seeking
Dismissal of Cross-Claimant’s Claims” (“Motion for Judgment on the Pleadings
Regarding EEPPMC’s Crossclaims”) (ECF. No. 78).
After reviewing the parties’ moving papers and the applicable law, the Court orders that

Argent’s Motion for Leave to Amend Complaint is HEREBY GRANTED and the remaining
motions are HEREBY DENIED WITHOUT PREJUDICE AS MOOT.

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I.

BACKGROUND
On June 28, 2017, Argent filed suit against Defendants East El Paso Physicians’ Medical

Center, LLC d/b/a Foundation Surgical Hospital of El Paso (“EEPPMC”), Foundation Surgical
Hospital Holdings LLC, Randstad Professionals US, LLC d/b/a Tatum, Stanton Nelson, and
Justin Bynum (collectively, “Defendants”). (ECF. No. 1). Thereafter, on August 4, 2017,
Argent filed its Amended Complaint against Defendants. (ECF. No. 15). Argent asserts various
causes of action related to a “Receivables Purchase and Sales Agreement” for the purchase of
medical debt. (Id.). On November 28, 2017, after an extended absence from the litigation,
Nelson filed a Motion to Dismiss Argent’s Amended Complaint. (ECF. No. 53). Thereafter, on
January 5, 2018, Argent sought leave to file a Second Amended Complaint. (ECF. No. 68).
Separately, EEPPMC filed an amended answer containing crossclaims against Justin
Bynum, Stanton Nelson, and Foundation Surgical Hospital Holdings and counterclaims against
Argent. (ECF. No. 57). Bynum now seeks judgment on the pleadings regarding Argent and
EEPPMC’s claims against him. (ECF. Nos. 77, 78).
II.

LEGAL STANDARDS
The Federal Rules of Civil Procedure provide that “a party may amend its pleading only

with the opposing party’s written consent or the court’s leave. The court should freely give leave
when justice so requires.” Fed. R. Civ. P 15(a)(2) (emphasis added). “[T]he language of this
rule ‘evinces a bias in favor of granting leave to amend.’” Chitimacha Tribe of La. v. Harry L.
Laws Co., Inc., 690 F.2d 1157, 1162 (5th Cir. 1983) (citing cases). Consequently, although leave
to amend is not automatic, “there is a strong presumption in favor of granting leave to amend . . .
.” Ackerson v. Bean Dredging LLC, 589 F.3d 196, 208 (5th Cir. 2009) (citation omitted); Ashe v.
Corley, 992 F.2d 540, 542 (5th Cir. 1993). As this strong presumption exists, a court must

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possess “substantial reason” to deny a request for leave to amend. Lyn-Lea Travel Corp. v. Am.
Airlines, 283 F.3d 282, 286 (5th Cir. 2002) (quoting Jamieson v. Shaw, 772 F.2d 1205, 1208 (5th
Cir. 1985)).
In determining whether substantial reason exists to deny leave to amend, the Court
considers the following factors: (1) undue delay; (2) bad faith or dilatory motive on the part of
the movant; (3) repeated failure to cure deficiencies by amendments previously allowed; (4)
undue prejudice to the opposing party; and (5) futility of amendment. Ashe, 992 F.2d at 542
(citing Foman v. Davis, 371 U.S. 178, 182 (1962)). Amendment is futile if “the amended
complaint would fail to state a claim upon which relief could be granted.” Stripling v. Jordan
Prod. Co., 234 F.3d 863, 873 (5th Cir. 2000). In determining futility, the court applies “the same
standard of legal sufficiency as applies under Rule 12(b)(6).” Id. “Even if substantial reason to
deny leave exists, the court should consider prejudice to the movant, as well as judicial economy,
in determining whether justice requires granting leave.” Jamieson, 772 F.2d at 1208 (citation
omitted).
To survive a Rule 12(b)(6) motion to dismiss, a complaint must contain “sufficient
factual matter, accepted as true, to state a claim to relief that is plausible on its face.” Ashcroft v.
Iqbal, 556 U.S. 662, 678 (2009) (internal quotation marks and citation omitted). “A claim has
facial plausibility when the plaintiff pleads factual content that allows the court to draw the
reasonable inference that the defendant is liable for the misconduct alleged.”

Id. (citation

omitted). “Factual allegations must be enough to raise a right to relief above the speculative
level, on the assumption that all the allegations in the complaint are true (even if doubtful in
fact).” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (citations omitted). Consequently,
a complaint requires more than “labels and conclusions, and a formulaic recitation of the

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elements,” and must state more than “an unadorned, the-defendant-unlawfully-harmed-me
accusation.” Id.; Iqbal, 556 U.S. at 678.
Lastly, because Plaintiff alleges fraud, those claims must meet the heightened Rule 9(b)
standard. Williams v. WMX Techs., Inc., 112 F.3d 175, 177 (5th Cir. 1997); see also In re Enron
Corp. Sec., 2010 U.S. Dist. LEXIS 145220, at *75 (S.D. Tex. 2010). Under Rule 9(b) “[i]n
alleging fraud or mistake, a party must state with particularity the circumstances constituting
fraud or mistake.” Fed. R. Civ. P. 9(b). To satisfy Rule 9(b)’s pleading requirements, the
Plaintiff must “specify the statements contended to be fraudulent, identify the speaker, state
when and where the statements were made, and explain why the statements were fraudulent.”
Williams, 112 F.3d at 177-78 (citation omitted). In essence, Rule 9(b) requires “that a plaintiff
set forth the ‘who, what, when, where, and how’ of the alleged fraud.” United States ex rel.
Steury v. Cardinal Health, Inc., 625 F.3d 262, 266 (5th Cir. 2010) (citations omitted).
III.

ANALYSIS
As the parties have filed separate but related motions, the Court will address each in turn.
a.

Leave to Amend

Nelson’s sole argument against granting Argent leave to amend is that the amendment
would be futile. Specifically, incorporating his Motion to Dismiss, Nelson argues: (1) the
Economic Loss Rule prevents Argent’s claims; (2) Nelson, as a corporate officer, possesses no
personal liability for the alleged acts; and (3) Argent fails to state a claim for fraud or negligent
misrepresentation because Argent does not identify a false representation. (ECF. No. 53, p. 3-6;
75, p. 2-7).
First, the Court already rejected Nelson’s arguments regarding the Economic Loss Rule
and personal liability, and will not detail its holding here. (ECF. No. 76, p. 3-4). Indeed, the

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authorities relied on by Nelson, Teclogistics and Tex. Bus. Orgs. Code § 21.223, do not establish
that Nelson lacks personal liability for his alleged fraud. These authorities involve contractual
obligations, rather than tort liability. As explicitly noted by the Teclogistics Court, “section
21.223(a)(2) shields the defendant shareholder or affiliate from individual liability only ‘with
respect to . . . any contractual obligation of the corporation or any matter relating to or arising
from the obligation.’” TecLogistics, Inc. v. Dresser-Rand Grp. Inc., 527 S.W.3d 589, 597 (Tex.
App. 2017) (emphasis added) (citing Tex. Bus. Orgs. Code § 21.223(a)(2)). Rather, in cases
involving tortious or fraudulent conduct by a corporate officer, personal liability may be imposed
on that officer. Walker v. Anderson, 232 S.W.3d 899, 918 (Tex. App. 2007) (citing Tex. Bus.
Orgs. Code § 21.223) (“a corporate officer who knowingly participates in tortious or fraudulent
acts may be held individually liable to third persons even though he performed the act as an
agent of the corporation.”). In the immediate case, Argent does not seek to impose contractual
liability on Nelson, but rather, impose tort liability for Nelson’s alleged fraud and
misrepresentation. (ECF. No. 68-1, p. 7-12). Accordingly, Nelson may be sued individually for
his allegedly tortious acts.
Second, contrary to Nelson’s arguments, Argent identifies Nelson’s alleged
misrepresentation with respect to its fraud claim. To sufficiently plead common law fraud, a
claimant must establish: (1) a material misrepresentation was made; (2) the representation was
false; (3) when the representation was made, the speaker knew it was false or made it recklessly
without any knowledge of the truth and as a positive assertion; (4) the speaker made the
representation with the intent that the other party should act upon it; (5) the party acted in
reliance on the representation; and (6) the party thereby suffered injury.

Italian Cowboy

Partners, Ltd. v. Prudential Ins. Co. of Am., 341 S.W.3d 323, 337 (Tex. 2011). Argent alleges,

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in its proposed Amended Complaint, that Nelson ordered Bynum to represent to Argent that
Bynum had the authority to contract on behalf of EEPPMC, which Argent relied on. (ECF. No.
68-1, p. 8). Even though Nelson’s representation was made to Bynum, an intermediary, this
representation is sufficient to allege fraud on the part of Nelson. See Ernst & Young, L.L.P. v.
Pac. Mut. Life Ins. Co., 51 S.W.3d 573, 578 (Tex. 2001) (“Where a party makes a
false representation to another with the intent or knowledge that it should be exhibited or
repeated to a third party for the purpose of deceiving him, the third party, if so deceived to his
injury, can maintain an action in tort against the party making the false statement for the
damages resulting from the fraud.”).

Accordingly, the Court finds that Nelson’s futility

argument is without merit with respect to Argent’s fraud claims.
Similarly, Argent identifies Nelson’s alleged misrepresentation with respect to its
negligent misrepresentation claim.

To establish negligent misrepresentation, claimant must

prove: (1) the representation was made by a defendant in the course of his business, or in a
transaction in which he had a pecuniary interest; (2) the defendant supplied “false information”
for the guidance of others in their business; (3) the defendant did not exercise reasonable care or
competence in obtaining or communicating the information; and (4) the plaintiff suffered
pecuniary loss by justifiably relying on the representation. Henry Schein, Inc. v. Stromboe, 102
S.W.3d 675, 686 n.24 (Tex. 2002); Blankinship v. Brown, 399 S.W.3d 303, 308 (Tex. App.
2013).

For the same reasons noted above, Argent sufficiently identifies Nelson’s alleged

misrepresentation. Accordingly, the Court finds that Nelson’s futility arguments are without
merit with respect to Argent’s negligent misrepresentation claim.
In sum, the Court finds that amendment is not futile. Furthermore, no other substantial
reason exists to deny Argent leave to amend, and indeed, Nelson identifies none. Particularly

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given Nelson’s lengthy delay in this litigation, justice requires granting leave to amend.
Accordingly, the Court finds that Argent’s Motion for Leave to Amend Complaint should be
granted.
b.

Motion to Dismiss, Motion for Judgment on the Pleadings Regarding
EEPPMC’s Crossclaims, and Motion for Judgment on the Pleadings
Regarding Argent’s Claims

The Court finds that the remaining motions should be denied without prejudice as moot.
Regarding Nelson’s Motion to Dismiss, the filing of an amended complaint moots motions to
dismiss. Reyna v. Deutsche Bank Nat’l Tr. Co., 892 F. Supp. 2d 829, 834 (W.D. Tex. 2012); see
also King v. Dogan, 31 F.3d 344, 346 (5th Cir. 1994) (per curiam) (“An amended complaint
supersedes the original complaint and renders it of no legal effect unless the amended complaint
specifically refers to and adopts or incorporates by reference the earlier pleading.”). Similarly, a
Motion for Judgment on the pleadings is mooted by the Court granting leave to amend. See
Lefevre v. Connextions, Inc., 2014 U.S. Dist. LEXIS 49547, at *4 (N.D. Tex. 2014) (collecting
cases). In this respect, the Court has granted both Argent and EEPPMC leave to amend. (ECF.
No. 76). Accordingly, the Court finds that the remaining motions should be denied without
prejudice as moot.
IV.

CONCLUSION
Based on the foregoing, IT IS HEREBY ORDERED that Argent’s “Motion for Leave

to Amend Complaint” (ECF. No. 68) is GRANTED.
IT IS THEREFORE ORDERED that the DISTRICT CLERK SHALL FILE
Argent’s Second Amended Complaint (ECF. No. 68-1).
IT IS FURTHER ORDERED that “Defendant Stanton Nelson’s Motion to Dismiss
Plaintiff’s Amended Complaint” (ECF. No. 53), “Defendant Justin Bynum’s Rule 12(c) Motion

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for Judgment on the Pleadings Seeking Dismissal of Plaintiff’s Amended Complaint” (ECF. No.
77), and “Defendant Justin Bynum’s Rule 12(c) Motion for Judgment on the Pleadings Seeking
Dismissal of Cross-Claimant’s Claims” (ECF. No. 78) are DENIED WITHOUT PREJUDICE
AS MOOT.
SIGNED and ENTERED this 23rd day of January, 2018.

ANNE T. BERTON
UNITED STATES MAGISTRATE JUDGE

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