IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

No. 06-20867

WILLIAM D. SULLIVAN,

Plaintiff–Appellant,

v.

LEOR ENERGY LLC; LEOR ENERGY LP,

Defendants–Appellees.

Appeal from the United States District Court

for the Southern District of Texas

Before DAVIS, STEWART, and OWEN, Circuit Judges.

PRISCILLA R. OWEN, Circuit Judge:

William Sullivan appeals the district court’s dismissal of his state law

claims against Leor Energy, LLC and Leor Energy LP (collectively Leor). For

the following reasons, we affirm.

I

This case arises out of a contract dispute between Sullivan and Leor.

Sullivan’s First Amended Complaint presents the facts as follows. Leor is an

energy company with rights to certain oil and gas properties in Robertson

County, Texas. Sullivan was introduced to Leor as a possible candidate to serve

as its Chief Executive officer. Numerous discussions ensued for the next two

months, and the parties “tentatively agreed” that Sullivan would become the

United States Court of Appeals

Fifth Circuit

F I L E D

March 15, 2010

Charles R. Fulbruge III

Clerk

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No. 06-20867

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Chief Executive Officer and President of Leor, Sullivan would commit 30% of his

time to Leor’s business, and would receive a salary, additional compensation,

and equity in an entity that was to hold the Robertson County properties.

Attorneys for Leor prepared drafts of an employment agreement, none of which

either party signed. Leor attached to its answer to Sullivan’s Complaint a draft

of an employment agreement, which Leor says was the last that the parties

discussed. It is lengthy and detailed. The compensation provisions

contemplated a base salary of $180,000 per year, a potential discretionary bonus,

and a potential equity interest in an entity that was to be formed. Sullivan

alleges that Leor promised to sign an agreement and that Sullivan therefore

began working for the company. Leor represented to potential investors that

Sullivan was its President and CEO, and Sullivan succeeded in securing

financing for Leor that would enable it to commence exploration of the Robertson

County properties. Shortly after that transaction was consummated, Leor

terminated Sullivan’s employment without cause. A written employment

agreement had never been executed.

Sullivan sued Leor in state court, asserting claims under Texas state law

for breach of contract, quantum meruit, unjust enrichment, fraud, equitable and

promissory estoppel, and “detrimental reliance.” Leor removed the suit to

federal district court based on diversity jurisdiction. The district court dismissed

Sullivan’s amended complaint for failure to state a claim. Sullivan now appeals.

He contends that the district court erred in concluding that the statute of frauds

bars enforcement of the compensation provisions in the unsigned contract.

Alternatively, Sullivan argues that he falls within the partial-performance

exception to the statute of frauds. He also argues that if the statute of frauds

would otherwise apply, the district court erred in dismissing his contention that

either promissory estoppel or equitable estoppel bars application of the statute

of frauds. He further asserts that the district court erred in dismissing his

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Gonzalez v. Kay, 577 F.3d 600, 603 (5th Cir. 2009). 1

Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009). 2

Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (internal citations omitted); see 3

Iqbal, 129 S. Ct. at 1949. 

Scanlan v. Texas A&M Univ., 343 F.3d 533, 536 (5th Cir. 2003). 4

Id.

5

 T EX. BUS. & COM. CODE ANN. § 26.01.

6

3

claims for quantum meruit, unjust enrichment, and fraud, and abused its

discretion in dismissing his claims without granting him leave to amend his

complaint.

II

We review de novo a district court’s dismissal under Rule 12(b)(6),

accepting all well-pleaded facts as true and viewing those facts in the light most

favorable to the plaintiff. “To survive a motion to dismiss, a complaint must 1

contain sufficient factual matter, accepted as true, to state a claim to relief that

is plausible on its face.” “While a complaint attacked by a Rule 12(b)(6) motion 2

to dismiss does not need detailed factual allegations, a plaintiff’s obligation to

provide the ‘grounds’ of his ‘entitle[ment] to relief’ requires more than labels and

conclusions, and a formulaic recitation of the elements of a cause of action will

not do.” In ruling on a motion to dismiss, the district court generally “must not 3

go outside the pleadings.” However, the court may consider documents attached 4

to a motion to dismiss that “are referred to in the plaintiff’s complaint and are

central to the plaintiff’s claim.” 

5

III

Sullivan first argues that the district court erred in finding that his breach

of contract claim is barred by the Texas statute of frauds. He maintains that 6

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Id.

7

See Gilliam v. Kouchoucos, 161 Tex. 299, 302, 340 S.W.2d 27, 29 (1960). 8

 161 Tex. at 302, 340 S.W.2d at 29. 9

4

his agreement with Leor is enforceable because it is an at-will contract that is

performable within one year. 

The statue of frauds bars enforcement of contracts that cannot be

performed within one year unless the contract is in writing and signed by the

party to be charged with the promise. Sullivan asserts that the draft 7

employment contract reflects the essential elements of the parties’ agreement.

That draft states that Leor Energy LLC agrees to employ Sullivan for a fixed

term of approximately two and a half years. The draft contract prohibits

Sullivan from competing with Leor LLC for twelve months after termination of

Sullivan’s employment. It also provides that either party may terminate the

agreement, with or without cause, and specifies remedies in the event of

termination. Leor was entitled to terminate upon giving written notice, and

Sullivan was entitled to terminate upon giving 30 days written notice. 

Sullivan contends that because the contract provides for termination

without cause, it creates an employment-at-will relationship of an indefinite

term, which would be performable in one year and thus not barred by the statute

of frauds. However, under Texas law, a contract for a stated term longer than

one year is not taken out of the statute of frauds when there is a mere possibility

of termination within one year due to contingent events set forth in the contract,

including termination by a party. In Gilliam v. Kouchoucos, the Supreme Court 8

of Texas held that the possibility that a party to a contract might die less than

a year after a contract with a term of more than one year was consummated does

not take the agreement out of the statute of frauds. As a corollary, the Texas 9

court recognized in dicta that the same reasoning applies when a contract

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Id.

10

Id.

11

 9 WILLISTON ON CONTRACTS § 24:9 (4th ed. 2009). 12

5

expressly grants either party the right to terminate at any time a contract with

a stated term of more than one year:

Cont ra c t s fo r se rv ic e fo r m o r e than a

year . . . [terminable] at the election of a party upon the

happening of some event, or even at the mere will of a

party, have generally been held to be within the

statute. The contemplated performance would occupy

more than a year. If the contract should be terminated

within the year, the result would not be an alternative

form of performance, but excusable nonperformance.10

In Gilliam, the Texas court cited Williston on Contracts as support for this

conclusion. Section 24:9 of Williston expresses the view that 11

[o]ral agreements which are subject to a right of

cancellation or defeasance, not by operation of law but

by the express terms of the contract, within the period

of a year – such as a contract for several years’ service

containing a provision permitting termination by either

party on a week’s or a month’s notice – are generally

held to be within the Statute.12

The Texas courts of appeals have continued to follow the rule announced in

Gilliam: 

[I]f an agreement could be fully “performed” within one

year of its making, section 26.01(b)(6) does not apply.

But if the occurrence of some other contingent event,

even if expressly contemplated in the agreement, would

simply terminate the agreement before the agreement

had been fully performed, then the possibility of that

terminating event occurring within one year of the

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Young v. Ward, 917 S.W.2d 506, 511 (Tex. App.–Waco 1996, no writ) (internal 13

citations omitted); see also Collins v. Allied Pharmacy Mgmt., Inc., 871 S.W.2d 929, 934 (Tex.

App.–Houston [14th Dist.] 1994, no writ) (“When a contract is for a term longer than one year,

the mere possibility of termination within a year because of death or another contingent event

does not then insulate it from the statute of frauds.”).

See RESTATEMENT (SECOND) OF CONTRACTS § 130, cmt. b, illus. 6.

14

See 340 S.W.2d at 29; see also 9 WILLISTON ON CONTRACTS § 24:9 (“In accord with the 15

majority view, it has been said, ‘most cases . . . hold a contract to render service for more than

a year to be within the intention and force of the statute, notwithstanding one or both of the

parties may have the option of ending it by notice in a year, because full performance cannot

be rendered in a year consistently with the understanding of the parties.’”); id. (“A case clearly

illustrative of the majority rule that an oral promise subject to an express defeasance within

the period of a year is nevertheless unenforceable, involved an oral agreement under which

defendant agreed to purchase the entire output of buttermilk for a period in excess of one year,

but either party had the option of cancelling the agreement under certain circumstances. The

court held that the optional cancellation provision was a defeasance clause and the agreement

was within the Statue.”).

 161 Tex. at 303, 340 S.W.2d at 29. 16

6

agreement’s making is insufficient to take the

agreement outside of section 26.01(b)(6).13

Although the Restatement (Second) of Contracts appears to take a

contrary position, Texas law is consistent with what the court in Gilliam 14

deemed to be the majority view on this issue. The Gilliam court noted that 15

there was “respectable authority to the contrary,” but that it was “definitely

committed” to its approach. Accordingly, as the alleged agreement is for a 16

stated term of more than a year, and Leor did not sign any document reflecting

the parties’ agreement, enforcement is barred by the statute of frauds. We note

that we express no opinion as to whether the draft agreement was one for “at

will” employment. Whether the employment agreement was “at will” is not

determinative of whether it comes within the Texas statute of frauds.

IV

Sullivan contends that he falls within the partial-performance exception

to the statute of frauds. “Partial performance removes an oral agreement from

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Biko v. Siemens Corp., 246 S.W.3d 148, 161 (Tex. App.–Dallas 2007, pet. denied) 17

(citing Chevalier v. Lane’s Inc., 147 Tex. 106, 213 S.W.2d 530 (1948)).

Wiley v. Bertelsen, 770 S.W.2d 878, 882 (Tex. App.–Texarkana 1989, no writ).

18

Exxon Corp. v. Breezevale Ltd., 82 S.W.3d 429, 439 (Tex. App.–Dallas 2002, pet. 19

denied).

See id. at 441. 20

7

the statute of frauds only if the performance is unequivocally referable to the

agreement and corroborative of the fact that the contract was made.” Sullivan 17

points to the fact that he performed valuable services for Leor and was paid a

salary for that period of time. However, payment of a salary for services

rendered “is insufficient to take the alleged agreement out of the statute of

frauds because the services were fully explained by the salary without supposing

any additional consideration.”18

Furthermore, this partial-performance exception to the statute of frauds

applies only “if denial of performance would amount to a virtual fraud,” which

requires “strong evidence establishing the existence of an agreement and its

terms, [that] the party acting in reliance on the contract has suffered a

substantial detriment for which he has no adequate remedy, and the other party,

if permitted to plead the statute, would reap an unearned benefit.” Sullivan 19

has not demonstrated that he has “suffered a substantial detriment for which he

has no adequate remedy.” Nor has he alleged facts showing that Leor will “reap

an unearned benefit” if the statue of frauds is applied. More importantly, even

if Sullivan could prove that the partial-performance exception applies, he would

be entitled only to reliance damages, and not the contract damages he seeks.20

V

Sullivan argues that promissory estoppel, equitable estoppel, and

“detrimental reliance” bar Leor from invoking the statute of frauds. “If the

elements of promissory or equitable estoppel are met, then a promisee may

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Transcon. Realty Investors, Inc. v. John T. Lupton Trust, 286 S.W.3d 635, 648 (Tex. 21

App.–Dallas 2009, no pet.).

Breezevale Ltd., 82 S.W.3d at 438. 

22

See Loose v. Offshore Navigation, Inc., 670 F.2d 493, 498 (5th Cir. 1982) (noting that 23

an admission in a pretrial order “is usually a waiver of the assertion of a contrary position”).

Kelly v. Rio Grande Computerland Group, 128 S.W.3d 759, 769 (Tex. App.–El Paso 24

2004, no pet.); see, e.g., Watson v. Nortex Wholesale Nursery, Inc., 830 S.W.2d 747, 751 (Tex.

App.–Tyler 1992, writ denied); Crowder v. Tri-C Res., Inc., 821 S.W.2d 393, 397 (Tex.

App.–Houston [1st Dist.] 1991, no writ).

8

enforce an otherwise unenforceable contract.” Under Texas law, promissory

21

estoppel requires that “the agreement that is the subject of the promise must

comply with the statute of frauds. That is, the agreement must be in writing at

the time of the oral promise to sign it.” 

22

The district court concluded that Sullivan had failed to allege all the

elements necessary to bring his claim within the doctrine of promissory estoppel

We assume without deciding that Sullivan’s amended complaint arguably

alleged that Leor agreed to sign a specific written agreement. His promissory

estoppel claim nevertheless fails because he affirmatively asserted in his

response to Leor’s motion to dismiss that no written document was finalized,

rendering him unable to satisfy the elements of promissory estoppel. Sullivan

cannot now change his position. This admission bars Sullivan from taking a

contrary position on appeal.23

With regard to equitable estoppel, some Texas courts have “refus[ed] to

recognize [equitable estoppel] as a distinct cause of action separate from

promissory estoppel or fraud.” It is also far from clear that Texas courts 24

recognize “detrimental reliance” as a distinct cause of action. We do not resolve

either of these issues here because Sullivan has failed to allege reliance

damages. Recovery under an estoppel or reliance theory is “limited to reliance

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Transcon. Realty Investors, 286 S.W.3d at 648 (citing Fretz Constr. Co. v. So. Nat’l

25

Bank of Houston, 626 S.W.2d 478, 483 (Tex. 1981)); see also Wheeler v. White, 398 S.W.2d 93,

97 (Tex. 1965).

Wheeler, 398 S.W.2d at 97. 26

Heldenfels Bros., Inc. v. City of Corpus Christi, 832 S.W.3d 39, 41 (Tex. 1992). 27

Vortt Exploration Co., Inc. v. Chevron USA, Inc., 787 S.W.2d 942, 944 (Tex. 1990). 28

Id. 

29

Johnston v. Kruse, 261 S.W.3d 895, 902 (Tex. App.–Dallas 2008, no pet.). 30

9

damages,” which “put the promisee in the position he would have been in had 25

he not acted in reliance upon the promise.” Sullivan has not alleged reliance 26

damages, and instead is seeking damages based on the compensation provisions

in a draft contract. Sullivan also does not dispute that he was paid a salary for

his services. Sullivan has not stated a claim based on an estoppel theory.

VI

Sullivan further asserts that the district court erred in dismissing his

quasi-contract claims for quantum meruit and unjust enrichment. He

acknowledges that he received a salary from Leor but contends that this does not

preclude him from recovering under a quantum meruit theory since he was not

“fully compensated” by Leor.

Quantum meruit is an equitable claim whereby one who provides services

to another may recover “based on an implied agreement to pay for benefits

received.” Quantum meruit “does not arise out of a contract, but is 27

independent of it.” Recovery should be allowed under this theory when “non 28

payment for the services rendered would result in an unjust enrichment to the

party benefited by the work.” The measure of damages in quantum meruit is 29

the “reasonable value of the work performed.”30

Sullivan has failed to state a claim in this regard. As discussed, he

concedes that Leor paid him a salary, and he has alleged no facts suggesting that

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Heldenfels, 832 S.W.3d at 41. 31

Argyle Indep. Sch. Dist. v. Wolf, 234 S.W.3d 229, 246 (Tex. App.–Fort Worth 2007, 32

no pet.) (internal quotation marks and citation omitted).

Dorsey v. Portfolio Equities, Inc., 540 F.3d 333, 338-39 (5th Cir. 2008). 33

10

the salary was unreasonable. As the district court noted, Sullivan is essentially

arguing that he was not “fully compensated” since he did not receive the salary

and the additional compensation set forth in the unsigned employment contract.

But quantum meruit cannot be used to enforce the terms of an unsigned draft

of a contract, and Sullivan has alleged no facts showing that the salary was not

the “reasonable value” for the services he rendered. Accordingly, the district

court correctly dismissed Sullivan’s claim for quantum meruit. 

Sullivan’s unjust enrichment claim is similarly meritless. A plaintiff may

recover under an unjust enrichment theory “when one person has obtained a

benefit from another by fraud, duress, or the taking of an undue advantage.”31

Unjust enrichment “characterizes the result of a failure to make restitution of

benefits either wrongfully or passively received under circumstances that give

rise to an implied or quasi-contractual obligation to pay.” As discussed, 32

Sullivan has alleged no facts suggesting that Leor was unjustly enriched when

it paid Sullivan only a salary for his services. Accordingly, the district court did

not err in dismissing this claim.

VII

Sullivan next challenges the district court’s dismissal of his fraud claims

for failure to comply with Federal Rule of Civil Procedure 9(b). State law fraud

claims are subject to the heightened pleading requirements of Rule 9(b). To 33

plead fraud adequately, the plaintiff must “specify the statements contended to

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ABC Arbitrage v. Tchuruk, 291 F.3d 336, 350 (5th Cir. 2002) (internal quotation 34

marks and citation omitted).

Club Retro, LLC v. Hilton, 568 F.3d 181, 215 n.34 (5th Cir. 2009). 35

Fahim v. Marriott Hotel Servs., Inc., 551 F.3d 344, 348 (5th Cir. 2008). 36

 F ED. R. CIV. P. 16(b). 37

11

be fraudulent, identify the speaker, state when and where the statements were

made, and explain why the statements were fraudulent.”34

Sullivan alleges that “Leor falsely and recklessly or knowingly represented

to Sullivan that it would employ him and compensate him as its CEO according

to the parties’ negotiated terms of employment” and that “Leor . . . represented

to Sullivan that the parties had an agreement regarding Sullivan’s employment.”

But he does not allege who at the company made the statements or when or

where they occurred. Sullivan has failed to allege fraud with particularity under

Rule 9(b).

VIII

Lastly, Sullivan challenges the district court’s decision to dismiss his

complaint with prejudice. We review the district court’s decision to grant a

motion to dismiss with or without prejudice for abuse of discretion.35

Sullivan argues that the district court should have allowed him leave to

amend his pleadings since, under Federal Rule of Civil Procedure 15(a), leave to

amend should be “freely” given when justice requires. However, Rule 16(b)

governs the amendment of pleadings after the deadline for amendments in the

court’s scheduling order expires, as it had in this case. Rule 16(b) provides 36

that a scheduling order “may be modified only for good cause and with the

judge’s consent.”37

Leor moved to dismiss Sullivan’s original complaint, and Sullivan, on

notice of possible pleading deficiencies, thereafter filed a first amended

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See Adrian v. Regents of Univ. of Calif., 363 F.3d 398, 404 (5th Cir. 2004) (concluding 38

that the district court did not abuse its discretion in denying leave to amend when it had given

plaintiff one opportunity to amend and plaintiff had failed to show what additional facts he

could plead to satisfy the fraud pleading requirements); Goldstein v. MCI WorldCom, 340 F.3d

238, 255 (5th Cir. 2003) (finding no abuse of discretion when plaintiff did not offer a second

amended complaint to the district court and did not suggest what additional facts would cure

the pleading deficiency).

12

complaint. When Leor filed its motion to dismiss the amended complaint,

Sullivan asserted in his opposition that if necessary, he would replead with even

more particularity. Yet in the nine months between the filing of the motion to

dismiss and the court’s ruling, Sullivan made no effort to further amend his

complaint, even though he was on notice of the alleged deficiencies in the

amended complaint. In addition, Sullivan has not asserted what additional facts

he could plead to correct the deficiencies. Thus, the district court was within its

discretion in dismissing the case with prejudice without granting leave to

amend.38

* * *

Therefore, for the reasons discussed above, we AFFIRM the district court’s

judgment.

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