UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF TEXAS

DALLAS DIVISION

BAYLOR UNIVERSITY MEDICAL

CENTER, ET AL.,

Plaintiffs,

VS.

EPOCH GROUP, L.C.,

Defendant,

VS.

VAN ENTERPRISES, INC. EMPLOYEE

BENEFIT TRUST, ET AL.,

Third-Party Defendants.

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) CIVIL ACTION NO.

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) 3:03-CV-2392-G

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MEMORANDUM OPINION AND ORDER

Before the court is the motion of third-party defendants Van Enterprises, Inc.

Employee Benefit Trust and Van Enterprises, Inc. (collectively, “Van”) to dismiss

defendant/third-party plaintiff Epoch Group, Limited Company (“Epoch”)’s claims

against them for (1) lack of standing and (2) failure to state a claim on which relief

can be granted. Also before the court is Epoch’s motion for leave to file an amended

 

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third-party complaint against Van. For the reasons discussed below, the motions are

granted in part and denied in part.

I. BACKGROUND

On May 5, 2004, the plaintiffs, Baylor University Medical Center, Our

Children’s House at Baylor, Baylor Medical Center at Grapevine, Baylor Medical

Center – Irving, and Baylor All Saints Medical (collectively, “Baylor”), filed their first

amended complaint against Epoch seeking recovery for breach of contract and late

payment of claims. See generally Plaintiffs’ First Amended Complaint.

On May 24, 2004, Epoch filed a motion for summary judgment under FED. R.

CIV. P. 56 arguing that, as a matter of law, (1) Baylor is not entitled to recover for

breach of contract or for late payment of claims because Epoch is not a party to any

contract with Baylor, and (2) the Employee Retirement Income Security Act of 1974

(“ERISA”), 29 U.S.C. § 1001, et seq., completely preempts Baylor’s breach of contract

claims. See generally Defendant’s Brief in Support of Third Motion to Dismiss/For

Summary Judgment. On August 18, 2004, this court denied that motion and

determined, among other things, that Baylor’s breach of contract claim was not

completely preempted by ERISA. See generally August 18, 2004, Memorandum

Order. In response to motions by Epoch to reconsider Epoch’s motion to dismiss as

it relates to ERISA preemption, or in the alternative for leave to file another motion

 

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1 The scheduling order has been amended twice since it was issued: first,

to extend the deadline for filing motions for summary judgment to September 8,

2005, see Order entered August 15, 2005, and, second, to extend the deadline for

Epoch and Van to file dispositive motions against each other to October 4, 2005, see

Order entered August 30, 2005.

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to dismiss reasserting its ERISA preemption argument, this court denied both

requests. October 29, 2004, Memorandum Order.

On March 16, 2005, this court issued its scheduling order setting the trial for

the court’s four-week docket beginning January 3, 2006. Order Establishing Schedule

and Certain Pretrial Requirements (“scheduling order”) ¶ 2. Among the deadlines

included in the court’s scheduling order was a requirement that all amended pleadings

were to be filed by June 16, 2005.1

 Id. ¶ 3.

On April 7, 2005, Epoch filed a third-party complaint against Van,

Defendant’s Original Third Party Complaint (“Third-Party Complaint”), which Van

answered on June 20, 2005. Van’s Original Answer to Third Party Complaint. On

that same date (four days after the amended pleadings were due), Van also filed the

instant motion to dismiss Epoch’s third-party complaint. Van Enterprises, Inc.

Employee Benefit Trust’s and Van Enterprises, Inc.’s Motion to Dismiss Pursuant to

Rule 12(b)(1) and 12(b)(6) (“Motion to Dismiss”). On July 12, 2005, Epoch filed

this motion for leave to file a first amended third-party complaint against Van. 

Motion for Leave to File First Amended Third-Party Complaint (“Motion for Leave”). 

 

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2 Although Van did not file a response to Epoch’s motion for leave, the

motion is opposed. Van did not agree to the motion when it was filed on July 12,

2005. See Certificate of Conference, Motion for Leave at 5. In addition, Van argues

in its reply to Epoch Group L.C.’s response to motion to dismiss pursuant to Rule

12(b)(1) and 12(b)(6) (“Reply”) that Epoch’s motion for leave is untimely. Reply

¶ 14.

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Van has not filed a response to this motion,2

 but both parties have argued Van’s

motion to dismiss. See generally Defendant’s Response in Opposition to Third-Party

Defendants’ Motion to Dismiss Pursuant to Rule 12(b)(1) and Rule 12(b)(6) and

Brief in Support of Defendant’s Opposition to Third-Party Defendants’ Motion

(“Response”); Van Enterprises, Inc. Employee Benefit Trust’s and Van Enterprises,

Inc.’s Reply to Epoch Group L.C.’s Response to Motion to Dismiss Pursuant to Rule

12(b)(1) and 12(b)(6) (“Reply”); Defendant’s Surrreply to Third-Party Defendants’

Reply to Defendant’s Response in Opposition to Third-Party Defendants’ Motion to

Dismiss Pursuant to Rule 12(b)(1) and 12(b)(6) and Supporting Brief.

II. ANALYSIS

The third-party defendants assert two grounds for dismissal: (1) the court

lacks subject matter jurisdiction over this case because the third-party plaintiff does

not have standing; and (2) the third-party plaintiff has failed to state a claim upon

which relief can be granted. Motion to Dismiss at 2-3.

In general, a third-party defendant may raise by motion any of the defenses

enumerated in Rule 12(b), and the principles that govern the disposition of Rule

12(b) motions in other contexts apply under FED. RULE CIV. P. 14 as well. 6 C.

 

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WRIGHT & A. MILLER, FEDERAL PRACTICE & PROCEDURE (“WRIGHT & MILLER”)

§ 1455 (2d ed. 1990) at 431-32.

A. Motion for Dismissal under Rule 12(b)(1)

1. Subject Matter Jurisdiction - Legal Standard

Federal courts are courts of limited jurisdiction. See Kokkonen v. Guardian Life

Insurance Company of America, 511 U.S. 375, 377 (1994); Owen Equipment and Erection

Company v. Kroger, 437 U.S. 365, 374 (1978). A federal court may exercise

jurisdiction over cases only as expressly provided by the Constitution and laws of the

United States. See U.S. CONST. art. III §§ 1-2; see also Kokkonen, 511 U.S. at 377.

Federal law gives the federal district courts original jurisdiction over “all civil actions

arising under the Constitution, laws, or treaties of the United States.” 28 U.S.C.

§ 1331. A party seeking relief in a federal district court bears the burden of

establishing the subject matter jurisdiction of that court. United States v. Hays, 515

U.S. 737, 743 (1995); McNutt v. General Motors Acceptance Corporation of Indiana, Inc.,

298 U.S. 178, 189 (1936); Langley v. Jackson State University, 14 F.3d 1070, 1073

(5th Cir.), cert. denied, 513 U.S. 811 (1994).

Rule 12(b)(1) of the Federal Rules of Civil Procedure authorizes the dismissal

of a case for lack of jurisdiction over the subject matter. See FED. R. CIV. P. 12(b)(1). 

A motion to dismiss pursuant to Rule 12(b)(1) for lack of subject matter jurisdiction

must be considered by the court before any other challenge because “the court must

 

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find jurisdiction before determining the validity of a claim.” Moran v. Kingdom of

Saudia Arabia, 27 F.3d 169, 172 (5th Cir. 1994) (internal citation omitted); see also

Ruhrgras AG v. Marathon Oil Company, 526 U.S. 574, 577 (1999) (“The requirement

that jurisdiction be established as a threshold matter . . . is inflexible and without

exception”) (citation and internal quotation marks omitted). 

On a Rule 12(b)(1) motion, which “concerns the court’s ‘very power to hear

the case . . . [,] the trial court is free to weigh the evidence and satisfy itself as to the

existence of its power to hear the case.’” MDPhysicians & Associates, Inc. v. State Board

of Insurance, 957 F.2d 178, 181 (5th Cir.) (quoting Williamson v. Tucker, 645 F.2d

404, 413 (5th Cir.), cert. denied, 454 U.S. 897 (1981)), cert. denied, 506 U.S. 861

(1992). In ruling on a motion to dismiss under Rule 12(b)(1), the court may rely on:

 “1) the complaint alone; 2) the complaint supplemented by undisputed facts; or

3) the complaint supplemented by undisputed facts and the court’s resolution of

disputed facts.” MCG, Inc. v. Great Western Energy Corporation, 896 F.2d 170, 176

(5th Cir. 1990) (citing Williamson, 645 F.2d at 413). When a Rule 12(b)(1) motion

is filed in conjunction with other Rule 12 motions, the court should consider the Rule

12(b)(1) jurisdictional attack before addressing any attack on the merits. Hitt v. City

of Pasadena, 561 F.2d 606, 608 (5th Cir.1977) (per curiam). This requirement

prevents a court without jurisdiction from prematurely dismissing a case with

prejudice. Id.

 

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2. Epoch’s Standing to Bring Third-Party Claims

Van argues that Epoch’s claims against Van should be dismissed under Federal

Rule of Civil Procedure 12(b)(1) because this court lacks subject matter jurisdiction

over Epoch’s claims. Van asserts that although the plaintiff Baylor specifically states

that it is not seeking benefits under an ERISA plan, Epoch’s sole basis for joining Van

in this suit is “pursuant to an ERISA plan.” Therefore, Van argues, Epoch -- being

neither a participant in, nor beneficiary of, an ERISA plan -- lacks standing under

ERISA, and this court lacks subject matter jurisdiction. Motion to Dismiss at 4;

Reply at 4. Moreover, Van maintains, Epoch lacks standing since it has not alleged a

dispute between Van and Epoch in its complaint. Reply at 5. Epoch responds that

its third-party claims against Van are within this court’s supplemental jurisdiction

under 28 U.S.C. § 1367. Response at 6.

The policy underlying Rule 14 is to promote judicial economy by eliminating

circuity of action. See, e.g., Powell, Inc. v. Abney, 83 F.R.D. 482, 485 (S.D. Tex.

1979); Crude Crew v. McGinnis & Associates, Inc., 572 F. Supp. 103, 109 (E.D. Wis.

1983) (“The general purpose of Rule 14 is to avoid circuity of actions and to expedite

the resolution of secondary actions arising out of or in consequence of the action

originally instituted.”). Rule 14 thus permits a defendant to bring into a civil suit any

person “not a party to the action who is or may be liable to the third-party plaintiff

for all or part of the plaintiff’s claim against the third-party plaintiff.” FED. R. CIV. P.

 

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3 28 U.S.C. § 1332(a) provides that “[t]he district courts shall have

original jurisdiction of all civil actions where the matter in controversy exceeds the

sum or value of $75,000, exclusive of interest and costs, and is between [persons of

diverse citizenship].” 28 U.S.C. § 1332(a).

4 The practice commentary states that: “D’s impleader claim against X [a

nondiverse third-party defendant] gets ancillary jurisdiction, and nothing in

subsection (b) of § 1367 changes that.” Practice Commentary, 28 U.S.C. § 1367.

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14(a). Accordingly, Rule 12(b)(1) challenges to a court’s subject matter jurisdiction

over third-party claims will generally be unsuccessful since such proceedings have

been considered ancillary to the main action and therefore do not require

independent subject matter jurisdiction. 6 WRIGHT & MILLER § 1455 at 434.

Section 1367(a) provides that

in any civil action of which the district courts have original

jurisdiction, the district courts shall have supplemental

jurisdiction over all other claims that are so related to

claims in the action within such original jurisdiction that

they form part of the same case or controversy under

Article III of the United States Constitution.

28 U.S.C. § 1367(a). Congress, however, has limited this grant of subject matter

jurisdiction. Section 1367(a) does not apply to claims by plaintiffs against parties

made part of the action by Rule 14 if the original jurisdiction of the district court is

based on 28 U.S.C. § 1332.3

 28 U.S.C. § 1367(b). The practice commentary

emphasizes that the limitation in § 1367(b) applies only to plaintiffs who attempt to

assert claims against third-party defendants.4

 Practice Commentary § 1367

(“Subdivision (b) of § 1367 is concerned only with efforts of a plaintiff to smuggle in

 

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5 The plaintiffs concede that there is diversity jurisdiction, as each of the

plaintiffs is a Texas non-profit corporation and Epoch is a foreign corporation, and

the amount in controversy exceeds $75,000. Plaintiffs’ Brief in Support of Response

(continued...)

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claims that the plaintiff would not otherwise be able to interpose.”). This limitation

does not apply to a third-party plaintiff’s claims against a third-party defendant; it is

well-settled that there need be no independent jurisdictional basis for a defendant’s

claim against a third-party defendant if jurisdiction over the original parties exists via

diversity of citizenship or presence of a federal question. 6 WRIGHT & MILLER

§ 1444 at 321-24 (citing Fawvor v. Texaco, Inc., 387 F. Supp. 626, 629 (E.D. Tex.

1975), aff’d, 546 F.2d 636 (5th Cir. 1977)).

The mere fact that a third-party claim arises from the same general facts as the

original dispute is not sufficient, however; it will be dismissed if it is an entirely

independent claim. United States v. Joe Grasso and Son, Inc., 380 F.2d 749, 751 (5th

Cir. 1967). In other words, third-party practice is proper under Rule 14 only if the

third-party defendant is or may be liable to the defendant for all or part of the

plaintiff’s recovery, or the defendant attempts to pass on to the third party all or part

of the liability asserted against the defendant. Id. (citing 1A BARRON & HOLTZOFF,

FEDERAL PRACTICE AND PROCEDURE § 426 at 664-69 (1960 ed.); 3 Moore’s Federal

Practice ¶ 14.07 at 512 (2d ed. 1966)).

Here, there is no question that this court has original jurisdiction over the

dispute between Epoch and Baylor.5

 Epoch has been “haled into court against [its]

 

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5

(...continued)

to Epoch’s Third Motion to Dismiss/For Summary Judgment at 2; see also Plaintiffs’

First Amended Complaint ¶¶ 1-2. 

6 Although Epoch did not attach the Administration Agreement to its

original Third-Party Complaint against Van, that agreement was subsequently

included in documentation related to the motion to dismiss and will therefore be

considered by the court on Van’s 12(b)(1) motion. See Exhibit B attached to Motion

for Leave; Exhibit 1 attached to Response.

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will,” Owen Equipment and Erection Company, 437 U.S. at 376, and seeks to assert

claims, pursuant to Rule 14, which form part of the same case or controversy as the

original action. The instant case represents a traditional use of third-party practice:

derivative liability. The Equitable Life Insurance Society of the United States v. Lafferty,

No. 3:02-CV-2453-D, 2003 WL 22946473, at *2 (N.D. Tex. Feb. 11, 2003)

(“Because the liability of the third-party defendant to the defendant on the impleader

claim is derivative of the defendant’s underlying liability to the plaintiff in the

underlying case, the impleader claim by definition is concerned with the same

transaction or occurrence, or common nucleus of operative fact, as the underlying

suit.”). Epoch seeks to shield itself from paying Baylor’s claims by virtue of an

Administration Agreement.6

 Under this Administration Agreement, Van retained

Epoch to serve as Claims Supervisor, whereby Epoch processed claims for benefits

and Van provided funding to pay for such claims. Response at 2. According to the

response, Epoch was responsible for paying Baylor only if the services Baylor provided

fell within coverage of the Plan. Id. at 3. Van and the Plan were then required to pay

 

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for claims processed by Epoch if the claims were covered by the Plan. Id. Upon

resolution of the original claim, Van may be liable to Epoch for all or part of Baylor’s

claim against Epoch. Van’s derivative liability to Epoch thus falls within the

traditional use of third-party practice, precluding dismissal under Rule 12(b)(1).

With regard to Van’s argument that Epoch lacks standing in this third-party

action because it did not allege an injury, see Motion to Dismiss at 5 and Reply ¶ 10,

third-party practice under Rule 14 does not require imminent injury. Third-party

actions are proper even though the third-party defendant’s liability is contingent. 

Travelers Insurance Company v. Busy Electric Company, 294 F.2d 139, 145 (5th Cir.

1961). In fact, Rule 14’s “is or may be liable” language makes it clear that third-party

practice is proper even though a third-party defendant’s liability is not automatically

established upon resolution of the third-party plaintiff’s liability to the original

plaintiff. 6 WRIGHT & MILLER § 1446 at 373 (citing Powell, 83 F.R.D. at 486;

Travelers Insurance Company, 294 F.2d at 145). As already stated, Van “may be liable”

to Epoch upon resolution of Baylor’s original claim against Epoch, so Epoch does not

lack standing for failure to allege an injury.

The court concludes that jurisdiction over Epoch’s claims against the thirdparty defendants exists on the basis of section 1367(a). Accordingly, Van’s motion to

dismiss Epoch’s third-party complaint for lack of subject matter jurisdiction is denied.

 

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B. Motion for Dismissal under Rule 12(b)(6)

1. Failure to State a Claim - Legal Standard

Rule 12(b)(6) authorizes dismissal of a complaint for “failure to state a claim

upon which relief can be granted.” FED. R. CIV. P. 12(b)(6). There are two primary

principles that guide the court’s determination of whether dismissal under Rule

12(b)(6) should be granted. First, a motion under Rule 12(b)(6) should be granted

only if it appears beyond doubt that the nonmovant could prove no set of facts in

support of its claims that would entitle it to relief. Conley v. Gibson, 335 U.S. 41, 45-

46 (1957); Leffall v. Dallas Independent School District, 28 F.3d 521, 524 (5th Cir.

1994); see also Kaiser Aluminum & Chemical Sales, Inc. v. Avondale Shipyards, Inc., 677

F.2d 1045, 1050 (5th Cir. 1982) (citing 5B WRIGHT & MILLER § 1357 at 598

(1969), for the proposition that “the motion to dismiss for failure to state a claim is

viewed with disfavor and is rarely granted”), cert. denied, 459 U.S. 1105 (1983). 

Second, the court must accept all well-pleaded facts as true and view them in the light

most favorable to the nonmovant. See Capital Parks, Inc. v. Southeastern Advertising

and Sales System, Inc., 30 F.3d 627, 629 (5th Cir. 1994); Norman v. Apache Corporation,

19 F.3d 1017, 1021 (5th Cir. 1994); Chrissy F. by Medley v. Mississippi Department of

Public Welfare, 925 F.2d 844, 846 (5th Cir. 1991). However, conclusory allegations

and unwarranted factual deductions will not suffice to avoid a motion to dismiss. 

United States ex rel. Willard v. Humana Health Plan of Texas Inc., 336 F.3d 375, 379

 

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(5th Cir. 2003). In addition, a court must not look beyond the pleadings when

determining whether a complaint states a claim upon which relief may be granted. 

Carpenters Local Union No. 1846 v. Pratt-Farnsworth, Inc., 690 F.2d 489, 499-500 (5th

Cir. 1982), cert. denied, 464 U.S. 932 (1983).

2. Van’s Motion to Dismiss Under Rule 12(b)(6)

Third-party complaints are subject to the pleading requirements of Rule 8 and

must set forth a short and plain statement of the claim showing that defendant is

entitled to relief from the third party. 6 WRIGHT & MILLER § 1453 at 417. 

Specifically, for complaints filed under Rule 14, the complaint must indicate that the

third-party defendant is or may be liable to the third-party plaintiff for all or part of

the plaintiff’s claim against the defendant. Id. at 417-18 (citing Joe Grasso and Son,

Inc., 380 F.2d at 751-52).

Epoch’s original third-party complaint addresses Van’s liability to Epoch for all

or part of Baylor’s claims. Specifically, Epoch’s complaint alleges:

9. If the claims for benefits submitted by Baylor to

EPOCH for medical services that Baylor provided as

identified under either Count V(A) or V(B) are both

covered and payable under the Plan then the Third-Party

Defendants would be responsible for paying those claims,

not EPOCH.

10. If EPOCH is found to be liable to Baylor with regard

to either Count V(A) or Count V(B), as it relates to

participants or beneficiaries in the Plan, then Third-Party

Defendants are liable to EPOCH for any sums assessed

against EPOCH with respect to Count V(A) and for any

 

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7 Although Van argues that Epoch seeks relief from Van solely on ERISA

grounds, Reply ¶¶ 2, 5-6, Epoch explicitly concedes it lacks standing under ERISA. 

Response at 4. Therefore, the court will not discuss Van’s arguments regarding

alleged ERISA claims; instead, only the contractual claims asserted by Epoch will be

addressed.

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sums assessed against EPOCH with respect to Count V(B)

relating to participants or beneficiaries in the Plan.

Third-Party Complaint ¶¶ 9-10. However, even if Epoch addresses liability

sufficiently in order to satisfy Rule 14 requirements, Epoch’s third-party complaint

may still be dismissed for failure to state a claim in compliance with Rule 8

requirements. 6 WRIGHT & MILLER § 1453 at 417.

Since Epoch claims that its proposed amended complaint is merely clarifying

its contractual claims against Van, see Response at 6, n.3, the court looks to that

document to elucidate those claims. Essentially, Epoch argues that Van (i.e., both

Van Enterprises, Inc. Employee Benefit Trust and Van Enterprises, Inc.) breached a

written contract (the Administration Agreement), as well as an oral or implied-in-fact

contract. See generally Defendant’s First Amended Third-Party Complaint (“Amended

Complaint”) at 2-6, attached to Motion for Leave as Exhibit 1.7

 However, since the

court may not consider proposed amendments and documents not attached to the

original complaint when deciding a motion under Rule 12(b)(6), Lovelace v. Software

Spectrum Inc., 78 F.3d 1015, 1017 (5th Cir. 1996); Carpenters Local Union No. 1846,

690 F.2d at 499-500, the court returns to the original pleadings. 

 

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8 As stated previously in note 5, subject matter jurisdiction for the original

action (Baylor v. Epoch) is based on diversity of citizenship. Accordingly, these claims

are controlled by Texas law. See Erie Railroad Company v. Tompkins, 304 U.S. 64, 78

(1938); Rogers v. Corrosion Products, Inc., 42 F.3d 292, 295 (5th Cir.), cert. denied, 515

U.S. 1160 (1995).

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Under Texas law,8 a breach of contract claim requires: (1) the existence of a

valid contract; (2) performance or tendered performance by the plaintiff; (3) breach

of the contract by the defendant; and (4) damages to the plaintiff resulting from the

defendant’s breach. Kay v. North Texas Rod & Custom, 109 S.W.3d 924, 927 (Tex.

App.--Dallas 2003, no pet.). A contract in fact is implied where, despite the absence

of any express declaration of intent by the parties, their acts are such as to indicate,

according to common understanding and the ordinary courses of dealing between

men, a mutual intent to contract. A/S Hydraulico Works v. Fort Worth & Denver

Railway Company, 483 F. Supp. 518, 521 (S.D. Tex. 1980) (citing 13 Tex. Jur. 2d

Contracts § 5). Such a contract can be formed by conduct. See Live Oak Insurance

Agency v. Shoemake, 115 S.W.3d 215, 219 (Tex. App.--Corpus Christi 2003, no pet.). 

Although Rule 8 pleading requirements are minimal, a complaint based on breach of

contract must describe the alleged terms of the contract in a sufficiently specific

manner to give the defendant notice of the nature of the claim. American Realty Trust,

Inc. v. Travelers Casualty and Surety Company of America, 362 F. Supp. 2d 744, 753

(N.D. Tex. 2005). For instance, a claim on a written contract must either (1) quote

relevant contractual language; (2) include a copy of the contract as an attachment; or

 

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9 As mentioned above, an unsigned “Administration Agreement” was

attached to Epoch’s response, see Exhibit 1 attached to Response, and motion for

leave, see Exhibit B attached to Motion for Leave, but not to its original third-party

complaint. Consequently, the Administration Agreement cannot be considered on a

motion to dismiss under Rule 12(b)(6). Lovelace v. Software Spectrum Inc., 78 F.3d at

1017; Carpenters Local Union No. 1846, 690 F.2d at 499-500.

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(3) summarize the contract’s purported legal effect. Id. (citing 5 WRIGHT & MILLER

§ 1235 at 393; FED. R. CIV. P. Official Form 3). Presumably, there is no reason why a

party alleging an oral contract should be excused from providing a corresponding level

of detail. Id.

Epoch’s causes of action depend upon the existence of a contract or behavior of

the parties evincing such a contract. In its pleading, however, Epoch fails to identify

or attach any contract or agreement between itself and Van. Although Epoch argues

that its complaint sufficiently states a breach of contract claim through the allegation

that “Van Enterprises retained EPOCH to serve as the Claims Supervisor for the Plan

. . .”, Response at 5 (citing Third-Party Complaint ¶5), Epoch fails to allege the

number of writings involved, their dates, the specific subject matter or terms of the

contracts, or any other information which would give Van notice of the basis upon

which Epoch may be entitled to relief.9

 In addition, Epoch has not alleged facts

regarding the behavior of the parties that would give rise to a possible implied-in-fact

contract claim. Therefore, Epoch’s petition does not include sufficient operative facts

to support its breach of contract claims. See Askanase v. Fatjo, 148 F.R.D. 570, 573-

74 (S.D. Tex. 1993) (“The cross-claims of the [cross-claimants] merely state in

 

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conclusory fashion that they are entitled to indemnity and/or contribution from

[cross-defendants]. This falls far short of meeting the fair notice requirement of Rule

8.”); cf. McCann v. Texas City Refining, Inc., 984 F.2d 667, 674 (5th Cir. 1993)

(plaintiff failed to state claim for tortious interference with employment contract

where complaint did not allege existence of employment contract). In short, Epoch

has failed to aver a set of facts, which, if proven, would entitle it to relief on its breach

of contract claim. See Conley, 355 U.S. at 45-46.

Accordingly, since Epoch has failed to give Van notice of the nature of its

claim, Epoch’s original third-party complaint is dismissed under Rule 12(b)(6).

C. Epoch’s Motion for Leave to Amend Third-Party Complaint

 If it appears that a more carefully drafted pleading might state a claim upon

which relief could be granted, the court should give the claimant an opportunity to

amend its claim rather than dismiss it. Friedlander v. Nims, 755 F.2d 810, 813 (11th

Cir. 1985); Taylor v. Dallas County Hospital District, 976 F. Supp. 437, 438 (N.D. Tex.

1996). Epoch therefore argues, in support of its motion for leave, that granting leave

to amend will “preserve its claims against Third-Party Defendants.” Motion for Leave

at 2. Epoch cites Rule 15(a) of the Federal Rules of Civil Procedure for the

proposition that leave should be “freely given when justice so requires.” Id. (citing

FED. R. CIV. P. 15(a)). While this is a correct statement of the general rule regarding

amendment of pleadings, “Rule 16(b) governs amendment of pleadings after a

 

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10 Federal Rule of Civil Procedure 15(a) provides that leave to amend

should be “freely given when justice so requires.” The Fifth Circuit has repeatedly

held that Rule 15(a) evinces a liberal amendment policy. See, e.g., Lowrey v. Texas A &

M University System, 117 F.3d 242, 245 (5th Cir. 1997); Nance v. Gulf Oil Corporation,

817 F.2d 1176, 1180 (5th Cir. 1987); Youmans v. Simon, 791 F.2d 341, 348 (5th Cir.

1986). A motion to amend under Rule 15(a), therefore, should not be denied unless

there is a substantial reason to do so. Jacobsen v. Osborne, 133 F.3d 315, 318 (5th Cir.

1998) (citing Leffall v. Dallas Independent School District, 28 F.3d 521, 524 (5th Cir.

1994)).

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[district court’s] scheduling order deadline has expired.” S&W Enterprises, L.L.C. v.

SouthTrust Bank of Alabama, NA, 315 F.3d 533, 536 (5th Cir. 2003). “Rule 16(b)

provides that a scheduling order ‘shall not be modified except upon a showing of good

cause and by leave of the district judge.’” Id. at 535 (citing FED. R. CIV. P. 16(b)). 

“The good cause standard requires the ‘party seeking relief to show that the deadlines

cannot reasonably be met despite the diligence of the party needing the extension.’”

Id. (citing 6A WRIGHT & MILLER § 1522.1 at 231). “Only upon the movant’s

demonstration of good cause to modify the scheduling order will the more liberal

standard of Rule 15(a) apply to the district court’s decision to grant or deny leave.”10

Id. at 536. The Fifth Circuit established a test in S&W Enterprises for determining

whether an untimely motion to amend should be allowed, despite the existence of a

scheduling order: “(1) the explanation for the failure to timely move for leave to

amend; (2) the importance of the amendment; (3) potential prejudice in allowing the

amendment; and (4) the availability of a continuance to cure such prejudice.” Id. at

536 (internal quotations and brackets excluded). As discussed below, three of the

 

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four factors weigh against granting Epoch leave to amend its original third-party

complaint.

1. Explanation for Failure to Timely Move for Leave to Amend

The first factor weighs against Epoch because it has offered no adequate basis

for its failure to amend prior to the court-ordered deadline. Epoch bears the burden

of showing that, despite its due diligence, the deadlines of the scheduling order could

not be met. However, in its motion for leave, Epoch merely addresses the

requirements under Rule 15(a). See generally Motion for Leave at 2-4. According to

Epoch, the motion was untimely because Epoch had no reason to believe its thirdparty complaint needed amendment until Van filed its motion to dismiss after the

scheduling order deadline expired. Id. at 3. 

The motion to amend in this case was made more than three years after the

events in question had occurred. It was made almost two years after the filing of

Baylor’s original complaint, and almost four weeks after the scheduling order’s

deadline for amended pleadings. See generally Docket Sheet; Scheduling Order. 

Despite such delay, the proposed amendment appears to rely on an agreement known

to Epoch from the time of its original pleading, but not included therein. See

“Administration Agreement,” attached to Epoch’s Motion for Leave as Exhibit B. 

Epoch therefore could have clarified its theory at that time or, at the very least,

within the two months remaining before the scheduling order deadline. 

 

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Consequently, Epoch’s only explanation for the delay – notice that its third-party

complaint may need amendment upon Van’s motion to dismiss – “is tantamount to

no explanation at all.” S & W Enterprises, 315 F.3d at 536. Nor does the bare

assertion that “the proposed amendment will not cause undue prejudice to ThirdParty Defendants,” Motion for Leave at 3, offer an explanation for its failure to

timely move for leave to amend. STMicroelectronics, Inc. v. Motorola, Inc., 307 F. Supp.

2d 845, 850-51 (E.D. Tex. 2004). The amended claims are not the result of new

information discovered in investigations, recent breach of agreements between the

parties, or disclosure of facts previously hidden by nonmovants; instead, Epoch seeks

to amend its complaint to avoid dismissal under Rule 12(b)(6). Motion for Leave at

2. However, the facts on which Epoch’s breach of contract claim is based were fully

known to Epoch from the outset of the lawsuit and, indeed, were relied on by Epoch,

though under a different theory, in its original third-party complaint. It was not until

that theory was challenged by Van in its motion to dismiss that the amendment was

tendered. Therefore, this factor weighs against Epoch.

2. Importance of the Amendment

While it is important for a court to allow amendment of claims so that cases

may be heard on their merits, Epoch’s failure to timely amend its claims undercuts

the importance of the amended complaint. Accordingly, the court does not weigh

this factor in favor of granting or denying leave. However, should this court grant

 

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11 Dismissal with prejudice for failure to state a claim is a decision on the

merits and essentially ends the plaintiff’s lawsuit. Hitt v. City of Pasadena, 561 F.2d

606, 608 (5th Cir. 1977); see also Rule 41. However, Rule 41(b) expressly provides

that the district court may specify that a dismissal is without prejudice; in such

circumstances, a second suit is not barred. 9 WRIGHT & MILLER § 2373 at 401. 

“The cardinal principle is that the second action is precluded unless the new

allegations supply a material deficiency of the complaint in the first action.” Estevez v.

Nabers, 219 F.2d 321, 323 (5th Cir. 1955). It appears to the court that the present

circumstances merit a dismissal without prejudice.

12 The court notes that since Van has not engaged in any discovery to date,

Motion for Leave at 3, Van could effectively conform any future discovery to Epoch’s

first amended complaint. However, the potential for delay -- given that Van is

beginning discovery within such a compressed time frame -- leads the court to be

concerned that the trial date would nonetheless be affected.

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Van’s motion to dismiss without prejudice, Epoch is free to file an independent claim

for relief against Van in this forum or another, particularly if new facts come to light

or Epoch is able to recast its claim in compliance with Rule 8 standards.11 Therefore,

all is not lost for Epoch.

3. Potential Prejudice in Allowing the Amendment

The third factor also weighs against Epoch. Van may suffer prejudice if a cause

of action based on additional documents is added approximately four months prior to

trial (January 2006) and within approximately two months of the close of discovery

(October 31, 2005). See Scheduling Order ¶¶ 2, 6. While the court could extend the

discovery period in order to cure this prejudice, such an extension would cause undue

delay and possibly require the court to reset the current trial date and/or extend other

pretrial deadlines.12 

 

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13 Because Epoch has failed to meet the good cause standard of Rule 16(b),

the court need not address whether Epoch’s motion satisfies the requirements of Rule

15(a). See S & W Enterprises, 315 F.3d at 536.

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4. Availability of a Continuance to Cure Such Prejudice

In light of Epoch’s failure to present any adequate explanation for its untimely

motion, such disruption to the court’s docket is unwarranted. See Reliance Insurance

Company v. Louisiana Land and Exploration Company, 110 F.3d 253, 258 (5th Cir.

1997) (“District judges have the power to control their dockets by refusing to give

ineffective litigants a second chance to develop their case”); Guillory v. Domtar

Industries Inc., 95 F.3d 1320, 1332 (5th Cir.1996) (“It is well established that the

district court is entitled the [sic] manage its court room and docket”); Freeman v.

Continental Gin Company, 381 F.2d 459, 469 (5th Cir.1967) (“A busy district court

need not allow itself to be imposed upon by the presentation of theories seriatim”).

The fourth factor, therefore, also weighs against granting Epoch leave to amend.

Epoch has not shown that it was diligent in its attempt to file for leave to

amend its third-party complaint by the deadline established by the court’s original

scheduling order. Epoch has failed to show good cause, pursuant to FED. R. CIV. P.

16(b), to modify the scheduling order, and its motion for leave to amend is

accordingly denied.13

 

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III. CONCLUSION

For the reasons stated above, Van’s motion to dismiss under 12(b)(1) is

DENIED, Van’s motion to dismiss under 12(b)(6) is GRANTED, and Epoch’s

motion for leave to amend its third-party complaint is DENIED. Under the

circumstances of this case, Epoch’s claims against Van are DISMISSED without

prejudice.

SO ORDERED.

September 1, 2005.

 

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