1

IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

No. 06-20658

MARK NEWBY; ET AL

Plaintiffs

v.

ENRON CORPORATION; ET AL

Defendants

-----------------------------------------------------------------------------------------

LILA WARD, Individually and on Behalf of All Others Similarly Situated;

THE HENRY GROUP, Lead Plaintiff

Plaintiffs-Appellants

v.

STANLEY C HORTON; DANA R GIBBS; LAWRENCE CLAYTON, JR;

KENNETH L LAY; ARTHUR ANDERSEN LLP 

Defendants-Appellees

Appeal from the United States District Court

for the Southern District of Texas

USDC No. 4:03-CV-484

United States Court of Appeals

Fifth Circuit

F I L E D

July 2, 2008

Charles R. Fulbruge III

Clerk
No. 06-20658

*District Judge of the Western District of Texas, sitting by designation.

**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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Before SMITH and PRADO, Circuit Judges, and LUDLUM, District Judge.*

PER CURIAM:**

In this case, we review the district court’s dismissal without prejudice of

the Plaintiffs-Appellants’ claims for failure to timely effect service of process, as

required by Federal Rule of Civil Procedure 4(m). For the following reasons, we

AFFIRM the district court’s ruling. 

I. FACTUAL AND PROCEDURAL BACKGROUND

On February 11, 2003, Lila Ward filed a shareholders’ class action suit

(“the Ward case”) against Stanley Horton, Dana Gibbs, Lawrence Clayton, Jr.,

Kenneth Lay, and Arthur Andersen, L.L.P. (“Defendants-Appellees”), alleging

violations of the Private Securities Litigation Reform Act (“PSLRA”). Horton,

Gibbs, Clayton, and Lay were sued in their capacity as officers and directors of

EOTT Energy Partners, L.P. (“EOTT”), which was the sole general partner to

EOTT Energy Corporation (“EOTT Energy”), an indirect wholly-owned

subsidiary of Enron Corporation (“Enron”). According to the complaint, these

officers and directors caused EOTT to engage in fraudulent practices by making

material misrepresentations and omissions about EOTT’s earnings. DefendantAppellee Arthur Andersen, L.L.P., which provided auditing services for both

Enron and EOTT, allegedly violated its professional duty of care to EOTT

shareholders. The class of plaintiffs consisted of all persons and entities who

purchased common stock units of EOTT between July 2, 2001 and January 22,

2002.
No. 06-20658

1The Newby class was not certified until July 5, 2006, after dismissal of the Ward case. 

3

On February 13, 2003, the Ward case was consolidated with Newby v.

Enron Corp., 4:01-CV-3624, the case designated as the lead case for litigation

involving certain Enron-related persons and entities. The Ward case was

immediately stayed because of prior bankruptcy filings by EOTT and EOTT

Energy and because of a stay of discovery in effect under 15 U.S.C. § 78u4(b)(3)(B), a provision ofthe PSLRA. The bankruptcy stay was eventually lifted,

and in April 2003, the district court lifted the PSLRA’s automatic stay.

However, on July 11, 2003, the district court imposed another stay, which

allowed for continued discovery but prevented the filing of any amended or

responsive pleadings until a determination regarding the Newby class

certification was made.1

On February 17, 2005, Sam Henry, Ted Zigan, Melvin Schulz, and Elsie

Schulz (“Henry Group”) were appointed by the district court as lead plaintiffs in

the Ward case. In addition, Cauley Bowman Carney & Williams P.L.L.C. was

appointed as lead plaintiffs’ counsel. Newly appointed lead counsel attempted

to contact counsel for EOTT and the Defendants-Appellees to coordinate

discovery and the filing of an amended complaint. In response, Mr. Cotham,

counsel for Defendants-Appellees Lawrence Clayton, Jr. and Dana Gibbs,

notified lead plaintiffs’ counsel on August 16, 2005 that Clayton and Gibbs were

never served in the Ward case. Mr. Cotham requested that his clients be

dismissed for insufficiency of process and because the statute of limitations had

already expired. 

Upon further investigation, lead plaintiffs’ counsel determined that none

of the defendants in the Ward case had been served. On December 20, 2005,
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over 120 days after being notified by Mr. Cotham, the Henry Group filed a

motion in the district court, seeking an additional sixty days to effect service,

pursuant to Federal Rule of Civil Procedure 4(m). The Defendants-Appellees

objected to the motion on grounds that after the expiration of 1,053 days from

the filing ofthe complaint,the Henry Group had made no attemptto serve them.

They also filed a cross motion to dismiss under Federal Rule of Civil Procedure

12(b)(5) and 4(m) for failure to timely perfect service. 

Defendant-Appellee Horton additionally asserted that he had already been

dismissed as a party from the Ward case. On December 9, 2004, Regents of the

University of California, the party designated as lead plaintiff for the

consolidated Newby action, conferred with Stanley Horton and several other

parties not named in the Ward case. They all filed an agreed motion for

voluntary dismissal, which the district court granted a day later. Horton argued

that this dismissal released him from all pending consolidated cases, including

the Ward case. 

The district court entered an order on May 15, 2006, denying the motion

for additional time to perfect service, stating only that after considering the

motion, responses, and the cross motion to dismiss, the motion was without

merit. In addition, without specifically referencing or granting the motion to

dismiss, the district court ordered the dismissal of all claims against the

Defendants-Appellees, without prejudice, for failure to timely effect service as

required by Rule 4(m). The district court also denied the Henry Group’s motion

for reconsideration, filed on May 25, 2006. In the order denying reconsideration,

the district courtfound thatthe Henry Group failed to show good cause why they

had failed to serve the Defendants-Appellees for 1,053 days. 

The Henry Group, as lead plaintiffs, filed a timely notice of appeal,
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asserting that the district court abused its discretion in not allowing additional

time to effect service. In addition, Defendant-Appellee Horton filed a motion to

dismiss him from the appeal, reasserting his argument that he was previously

dismissed from the Ward case on December 10, 2004, and asking that he be

released as a party to the appeal. 

II. DISCUSSION

We review a district court’s dismissal under Rule 4(m) for abuse of

discretion. Traina v. United States, 911 F.2d 1155, 1157 (5th Cir. 1990). Under

Rule 4(m), a district court is permitted to dismiss a case without prejudice if a

defendant has not been served within 120 days after a complaint is filed.

Thompson v. Brown, 91 F.3d 20, 21 (5th Cir. 1996). However, if a plaintiff can

establish good cause for failing to serve a defendant, the court must allow

additional time for service. Id. Morever, even if good cause is lacking, the court

has discretionary power to extend time for service. Id. Such relief may be

warranted, “for example, if the applicable statute of limitations would bar the

refiled action, or if the defendant is evading service or conceals a defect in

attempted service.” Fed. R. Civ. P. 4(m) advisory committee’s note (1993). 

To establish good cause, a plaintiff has the burden of demonstrating “at

least as much as would be required to show excusable neglect . . . .” Winters v.

Teledyne Movible Offshore, Inc., 776 F.2d 1304, 1306 (5th Cir. 1985). “[S]imple

inadvertence or mistake of counsel or ignorance of the rules usually does not

suffice . . . .” Id. In addition, “some showing of ‘good faith on the part of the

party seeking an enlargement and some reasonable basis for noncompliance

within the time specified’ is normally required.” Id. (quoting Charles Alan

Wright & Arthur R. Miller, Federal Practice and Procedure § 1165 (1969)). It is
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“irrelevant that the defendant not served within the 120-day period later finds

out about the suit or is in fact later served, so long as there was not good cause

for the failure to serve within the 120 days.” Id. at 1305-06.

According to the Plaintiffs-Appellants, good cause was established solely

by the fact that they would be time-barred in refiling the action because the

statute of limitations has run. However, they also contend that an

amalgamation of other factors—including confusion over the bankruptcy stay

and the PSLRA discovery stay, lack of knowledge as to any defects in service,

and the prolonged length of time before the district court appointed lead

plaintiffs and counsel—also constitute good cause. Alternatively, PlaintiffsAppellants argue that even if good cause does not exist,the district court abused

its discretion by not considering these factors and allowing additional time under

the discretionary provisions of Rule 4(m). Further, they argue that the court’s

cursory dismissal order failed to indicate thatit ever considered its discretionary

powers under Rule 4(m). 

We find that the district court did not abuse its discretion in determining

thatthePlaintiffs-Appellants’ reasons for failing to timely serve the DefendantsAppellees did not constitute good cause. Plaintiffs-Appellants have not

demonstrated any good-faith effort in attempting service and have proffered no

reasonable basis for failing to serve Defendants-Appellees within 120 days of

filing the original complaint. None of the stays affected the ability to effect

service of process. The reasons cited by Plaintiffs-Appellants, therefore, relate

to inadvertence, mistake of counsel, and unfamiliarity with rules, all matters

that fall short of the excusable neglect threshold, especially considering the

length of delay in effecting service and the continued delay after learning of

defects in service. 
No. 06-20658

2Norlock, McDonald, and Traina addressed dismissals under Rule 4(j), the

predecessor to Rule 4(m). Under Rule 4(j), dismissals where service was not effected within

120 days were mandatory absent a showing of good cause, leaving the district court with no

discretionary powers to allow additional time for service for other reasons. Changes

reflected in Rule 4(m), however, did not affect any provisions relating to good cause or

prejudice, and these cases, therefore, continue to apply in Rule 4(m) dismissals. See

Petrucelli v. Bohringer & Ratzinger, 46 F.3d 1298, 1307 n.11 (3d Cir. 1995) (holding that

Rule 4(m) did not impact prior decisions under Rule 4(j) that articulated the standard for

good cause); Sanchez v. Perez, No. 96-40049, 1996 WL 512289, at *2 (5th Cir. Aug. 30,

1996) (citing Norlock, 768 F.2d at 658 in holding that “[a] district court may order a

dismissal under Rule 4(m) even where it will operate as ‘with prejudice’ because the statute

of limitations has run.”); McWherter v. Collins, No. 95-20347, 1995 WL 725358, at *2 (5th

Cir. Oct. 20, 1995) (“A Rule 4(m) dismissal may be ordered even when the ‘without

prejudice’ dismissal operates as a ‘with prejudice’ dismissal because the applicable statute

of limitations has run.”); Sefati v. M.D. Anderson Hosp., No. 94-20737, 1995 WL 449727, at

*1 (holding that the proper time to consider the practical effect of a dismissal with prejudice

is under the broad discretion afforded a district court under Rule 4(m)). 

3Plaintiffs-Appellants argue that because the running of the statute of limitations

prevents refiling, the dismissal, despite being without prejudice, was effectively one with

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In addition, we have rejected the argumentthat dismissal is unwarranted

when the statute of limitations period has run. Redding v. Essex Crane Rental

Corp. of Ala., 752 F.2d 1077, 1078 (5th Cir. 1985). “It is not our function to

create exceptions to the rule for cases in which dismissal without prejudice may

work prejudice in fact . . . .” Norlock v. City of Garland, 768 F.2d 654, 658 (5th

Cir. 1985); see also McDonald v. United States, 898 F.2d 466, 468 (5th. Cir. 1990)

(“[D]ismissal is not unwarranted simply because the limitations period has

run.”); Traina v. United States, 911 F.2d 1155, 1157 (5th Cir. 1990) (“It is well

settled that inability to refile a suit does not bar dismissal . . . . ).2

We also find that the district court did not err by disallowing additional

time for service under the discretionary provision of Rule 4(m). Although the

advisory guidelines to Rule 4(m) suggest that the bar to refiling the Ward case

might justify relief, the power nonetheless remains discretionary.3 The record
No. 06-20658

prejudice, running afoul to the provisions of Rule 4(m). Because of this, they argue that the

court first should have addressed certain factors dictated in cases reviewing dismissals for

failure to prosecute under Rule 41(b). Under Rule 41(b), a court may dismiss claims for

failure to prosecute with or without prejudice, but effective dismissals with prejudice where

the running of the statute of limitations prevents refiling will be treated as involuntary

dismissals and affirmed only upon a showing of “a clear record of delay or contumacious

conduct by the plaintiff, and where lesser sanctions would not serve the best interests of

justice.” Sealed Appellant v. Sealed Appellee, 452 F.3d 415, 417 (5th Cir. 2006) (footnote

and quotation omitted); see also Veazey v. Young’s Yacht Sale & Serv., Inc., 644 F.2d 475,

477 (5th Cir. 1981); Boazman v. Econ. Lab., Inc., 537 F.2d 210, 213 (5th Cir. 1976). The

district court, however, dismissed the Ward case based solely on the provisions of Rule 4(m)

and not Rule 41(b). As such, cases discussing dismissals under Rule 41(b) are inapplicable

here.

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indicates that not only did Plaintiffs-Appellants fail to serve DefendantsAppellees for a period of over 1,000 days,they also waited an additional 126 days

after receiving direct notice from certain Defendants-Appellees of defects in

service before seeking leave from the court for additional time. This additional

delay alone exceeded the 120-day time limit of Rule 4(m). Based on the extent

of the delay, we refuse to find an abuse of discretion by the district court. 

Morever, “[t]he absence of a discussion of the district court’s discretionary

powers in the court’s order does not demonstrate that the court misapplied

[R]ule 4(m).” Thompson, 91 F.3d at 21. A review of the record indicates that the

district court was fully briefed on all issues and was aware of its discretionary

powers under Rule 4(m), along with reasons why such relief might be granted.

Therefore, although the district court’s orders were brief, there is no indication

that it failed to consider its discretionary powers. 

III. CONCLUSION

The district court did not err by rejecting as good cause the PlaintiffsAppellants’ reasons for failing to serve the Defendants-Appellees within 120

days. Further, based on the severe delay in effecting service, the district court
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did not abuse its discretion by refusing to grant additional time to effect service

under the discretionary powers of Rule 4(m), even considering that the running

of the statute of limitations would prevent refiling. Because of our holding, it is

unnecessary to reach the merits of Defendant-Appellee Horton’s motion to

dismiss him from the appeal. 

AFFIRMED.