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IN THE UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF TEXAS

DALLAS DIVISION

DATA DISCOVERY, INC., §

 §

Plaintiff, §

 §

v. § Civil Action No. 3:05-CV-0949-M

 §

HIENERGY TECHNOLOGIES, INC., §

 §

Defendant. §

MEMORANDUM OPINION AND ORDER

Before the Court is the Motion to Dismiss of Defendant HiEnergy Technologies, Inc.

(“HiEnergy”), filed on May 16, 2005. For the reasons discussed below, this Motion is

GRANTED. 

I. Background

Plaintiff Data Discovery, Inc. (“DDI”) is a Texas corporation with its principal place of

business in Dallas, Texas. DDI has partnered with DFW Homeland Security Alliance, Inc.,

which is apparently a non-profit Texas corporation. DDI and DFW Homeland Security Alliance

have formed a partnership under the name “Alliance.” Defendant HiEnergy is a Delaware

corporation with its principal place of business in California. On December 19, 2003, DDI and

HiEnergy purportedly entered into a contract to refer potential corporate partners to HiEnergy.

DDI contends that HiEnergy breached the contract and is liable to DDI for services it

rendered pursuant to the contract. DDI claims it made a written demand for payment of

 

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$107,300.00 on October 28, 2004, but HiEnergy refused to pay. DDI filed suit in state court for

breach of contract, and on May 10, 2005, HiEnergy removed the case. HiEnergy then filed the

instant (12)(b)(6) Motion to Dismiss, seeking to dismiss this suit for failure to state a claim upon

which relief can be granted.

II. Analysis

When deciding a motion to dismiss, “the district court must take the factual allegations of

the Complaint as true and resolve any ambiguities or doubts regarding the sufficiency of the

claim in favor of the plaintiff.” Jefferson v. Lead Indus. Ass’n., 106 F.3d 1245, 1250 (5th Cir.

1997) (quoting Fernandez-Montes v. Allied Pilots Ass’n., 987 F.2d 278, 284 (5th Cir. 1993)). 

Federal Rule of Civil Procedure 12(b)(6) authorizes the dismissal of a Complaint for “failure to

state a claim upon which relief can be granted.” Fed. R. Civ. P. 12(b)(6). Dismissal pursuant to

Rule 12(b)(6) is appropriate only if there is no set of facts that could be proven consistent with

the allegations in the Complaint that would entitle a plaintiff to relief. Conley v. Gibson, 355

U.S. 41, 46 (1957); Lowrey v. Tex. A & M Univ. Sys., 117 F.3d 242, 247 (5th Cir. 1997). The

Court does not evaluate the Plaintiff’s likelihood of success; instead, the Court only determines

whether the Plaintiffs have stated a legally cognizable claim. United States ex rel. Riley v. St.

Luke’s Episcopal Hosp., 355 F.3d 370, 376 (5th Cir. 2004). The Court is required to “accept as

true all well pleaded facts in the Complaint, and the Complaint is to be liberally construed in

favor of the plaintiff.” Kaiser Aluminum & Chem. Sales, Inc. v. Avondale Shipyards, Inc., 677

F.2d 1045, 1050 (5th Cir. 1982). “The court may consider documents attached to or incorporated

in the Complaint and matters of which judicial notice may be taken” in deciding a motion to

 

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dismiss. Willard v. Humana Health Plan of Tex. Inc., 336 F.3d 375, 379 (5th Cir. 2003) (citing

Lovelace v. Software Spectrum Inc., 78 F.3d 1015, 1017-18 (5th Cir. 1996)). 

HiEnergy argues that DDI does not have capacity to pursue this suit because it is suing in

its own name, without its partner DFW Homeland Security Alliance. In Texas, a partnership is

“an entity legally distinct from its partners for most purposes.” Haney v. Fenley, Bate, Deaton &

Porter, 618 S.W.2d 541, 542 (Tex. 1981). The general rule is that “a partnership cause of action

belongs to and is the specific property of the partnership” and a partner may not “bring suit either

on such a cause of action as a whole, whether in the name of the partnership or in [its] own name,

or for the fractional share of such a cause of action corresponding to [its] fractional interest in the

partnership.” Cates v. Int’l Tel. & Tel. Corp., 756 F.2d 1161, 1176 (5th Cir. 1985); Coast v.

Hunt Oil Co., 195 F.2d 870, 871 (5th Cir. 1952). Thus, all partners are required to join as

plaintiffs with respect to actions based on contracts made on behalf of the partnership. Chien v.

Chen, 759 S.W.2d 484, 490 (Tex. App.–Austin 1988, no pet.). It is uncontested that DDI has

partnered with DFW Homeland Security Alliance to form Alliance. HiEnergy avers that the

contract at issue is between itself and Alliance. Thus, HiEnergy argues that DDI, as a member of

the Alliance partnership, does not have capacity to enforce rights under the contract. 

The contract at issue was attached to Plaintiff’s Original Petition. Thus, the Court may

consider it in determining this Motion to Dismiss. See Willard, 336 F.3d at 379. The contract

notes that “Alliance is two corporations providing services and support . . . .” and in paragraph 5

it states that “[t]he fees for services provided . . . shall be the sole, exclusive and final

compensation due from HiEnergy to Alliance . . . .” The references to “Alliance” indicate that

 

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the contracting parties were HiEnergy and Alliance, not HiEnergy and DDI. In addition, the

contract was signed by the presidents of DDI and DFW Homeland Security Alliance, both of the

members of the Alliance partnership. Thus, the Court finds that the contracting parties were

Alliance and HiEnergy.

DDI cannot sue HiEnergy to enforce Alliance’s contract unless there is present one of two

exceptions to the rule prohibiting a partner from suing on behalf of the partnership. The first is

where a partner is “dormant” or “silent;” there, an action may be brought by the ostensible or

known partner alone if it is the entity “with whom the contract was expressly made.” Chien, 759

S.W.2d at 490; Speake v. Prewitt, 6 Tex. 252, 257 (1851). A dormant partner is a partner whose

name is concealed and thus it is not apparent. Speake, 6 Tex. at 258. The second exception is

that “one partner may sue in [its] own name alone to enforce a contract or legal title held in [its]

own name alone for the benefit of the partnership.” Chien, 759 S.W.2d at 492.

In the present case, neither partner’s full name is mentioned in the partnership name. The

name “Alliance” conceals the identity of both partners, DDI and DFW Homeland Security

Alliance. However, in the contract, both partners’ names are stated in the opening line as

comprising the partnership. Further, the presidents of DDI and DFW Homeland Security

Alliance both signed the contract. DFW Homeland Security Alliance was fully disclosed as

DDI’s partner. Thus, the first exception cannot be met because neither is a silent or dormant

partner to this agreement. Additionally, the agreement was made in the name of the partnership,

Alliance, which refers to both companies. Thus, the second exception is not satisfied here,

because the contract was not made in DDI’s name.

 

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To support the proposition that it can sue in its own name, DDI cites to language in

paragraph 4 of the contract, which states that DDI is to receive the fees for services rendered

pursuant to the contract. The Court finds that this language did not assign to DDI Alliance’s

rights under the contract. This language merely designates where payments are to be sent. In

contrast, an assignment must be “[a] manifestation to another person by the owner of a right

indicating his intention to transfer, without further action or manifestation of intention, his right

to such other person or a third person.” Walters Vill. Mgmt. Co. v. Merchs. & Planters Nat’l

Bank of Sherman, 223 F.2d 793, 798 (5th Cir. 1955). In this case, nowhere in the contract is

there an indication that Alliance intended to transfer its rights under the contract to DDI. While

it is true that paragraph 4 states that “fees for services shall be paid to DDI . . .” that language

must be interpreted in light of paragraphs 2 and 5. Paragraph 5 states that “the above shall be the

sole, exclusive and final compensation due from HiEnergy to Alliance,” and paragraph 2 states

that “fees shall only be due to Alliance . . .” Thus, the contract expressly states that such fees

belong to Alliance as its “exclusive and final compensation,” although fees are to be sent to DDI

pursuant to paragraph 4. Therefore, the Court finds that there is no manifestation of intent by

Alliance to transfer its rights under the contract to DDI.

DDI also asserts that the invoices sent to HiEnergy are evidence that the contract was

between DDI and HiEnergy. It contends that because the invoices display DDI’s logo and were

generated by DDI, they prove that DDI was the contracting party. However, these post-contract

invoices do not indicate the names nor the intent of the contracting parties when the contract was

signed, nor do they reflect an assignment of contract rights. Instead, the invoices merely report

 

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transactions that have occurred pursuant to the contract. 

III. Conclusion

HiEnergy has sufficiently alleged that the contract was between HiEnergy and Alliance

and the Court thus concludes that DDI does not have the right to pursue this claim in its own

name without its partner, DFW Homeland Security Alliance. For the reasons stated herein, DDI

has twenty days to join DFW Homeland Security Alliance as a party to the instant suit, to sue in

the name of the partnership, or to prove that DDI owns this contract claim in its entirety. Failing

such actions, the Court shall dismiss the suit. 

SO ORDERED.

July 1, 2005.

_________________________________

BARBARA M. G. LYNN

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF TEXAS

 

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