IN THE UNITED STATES DISTRICT COURT 

 FOR THE NORTHERN DISTRICT OF IOWA 

CEDAR RAPIDS DIVISION

BVS, INC., 

Plaintiff, No. 16-CV-0065-LTS 

vs. ORDER

RHUB COMMUNICATIONS, INC., 

 Defendant. 

____________________ 

I. INTRODUCTION 

This matter is before the Court pursuant to plaintiff BVS, Inc.’s motion for leave 

to file an Amended Complaint. Doc. 17. Plaintiff originally sued defendant RHUB 

Communications, Inc., alleging defendant breached a contract by failing to produce a 

software product. Doc. 3. Plaintiff alleges that “[s]ubsequent to the filing of this 

lawsuit and the Motion to Dismiss, [defendant] failed to perform under another contract 

it has with BVS” and BVS therefore “wishes to amend its Complaint to assert claims for 

breach of contract and declaratory judgment with respect to the other agreement . . . .” 

Doc. 17, at 1. Defendant filed a resistance to plaintiff’s motion to amend the complaint. 

Doc. 22. Defendant alleges “the amendment is futile and could not survive a Rule 12 

motion to dismiss.” Doc. 22, at 2. Neither party requested oral argument on the 

motion, and the Court finds argument unnecessary. 

For the reasons that follow, the Court denies plaintiff’s motion to amend its 

complaint. 

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II. PROCEDURAL HISTORY 

Plaintiff filed a petition in state court alleging a breach of contract in relation to 

defendant’s alleged failure to provide a software product for plaintiff’s business. Doc. 

3. On May 3, 2016, defendant removed the matter to this Court. Doc. 2. After the 

Court granted defendant’s unresisted motion for an extension of time to file a responsive 

pleading, on May 24, 2016, defendant filed a motion to dismiss, or in the alternative, to 

change venue to the Northern District of California. Doc. 9. On June 7, 2016, 

plaintiff filed an unresisted motion for leave to conduct limited discovery and for an 

extension of time to respond to defendant’s motion to dismiss. Doc. 12. On June 8, 

2016, the Court granted that motion. Doc. 14. On September 8, 2016, plaintiff filed 

the instant motion for leave to file an amended complaint. Doc. 17. On the same day, 

plaintiff filed a resistance to defendant’s motion to dismiss. Doc. 18. Defendant’s 

motion to dismiss remains pending before the Court. 

III. STANDARD FOR GRANTING MOTIONS TO AMEND 

Federal Rule of Criminal Procedure 15 provides that leave to amend shall be freely 

given “when justice so requires.” FED. R. CIV. P. 15(a)(2). Courts view motions to 

amend filed before the deadline set out in the scheduling order with a “liberal policy 

favoring amendments.” Kozlov v. Associated Wholesale Grocers, Inc., 818 F.3d 380, 

395 (8th Cir. 2016) (citing In re Graphics Processing Units Antitrust Litig., 540 F. Supp. 

2d 1085, 1090 (N.D. Cal. 2007)); see also Williams v. TESCO Servs., Inc., 719 F.3d 

968, 976 (8th Cir. 2013) (describing the standard as “liberal”). “But parties do not have 

an absolute right to amend their pleadings, even under this liberal standard.” Sherman 

v. Winco Fireworks, Inc., 532 F.3d 709, 715 (8th Cir. 2008) (citing United States ex rel. 

Lee v. Fairview Health Sys., 413 F.3d 748, 749 (8th Cir. 2005)); see also Hammer, 318 

F.3d at 844 (holding that there is no right to amend pleadings). The Rule 15(a) standard 

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is discretionary and leave should only be denied “‘where there are compelling reasons 

such as undue delay, bad faith, or dilatory motive, repeated failure to cure deficiencies 

by amendments previously allowed, undue prejudice to the non-moving party, or futility 

of the amendment.’” Moses.com Sec., Inc. v. Comprehensive Software Sys., Inc., 406 

F.3d 1052, 1065 (8th Cir. 2005) (quoting Hammer v. City of Osage Beach, MO, 318 

F.3d 832, 844 (8th Cir. 2003)) (internal quotation marks omitted). See also United 

States ex rel. Joshi v. St. Luke’s Hosp., Inc., 441 F.3d 552, 557-58 (8th Cir. 2006) 

(holding that a court may deny a motion to amend where there was “undue delay, bad 

faith on the part of the moving party, futility of the amendment or unfair prejudice to the 

opposing party.”) (internal citation omitted). 

IV. DISCUSSION 

Defendant argues the Court should deny plaintiff’s motion to amend because 

Counts II and III are futile. Defendant argues the amended claims fail to allege facts 

establishing that defendant had an obligation to provide continued support services to 

plaintiff during the time period when plaintiff alleges defendant breached the contract. 

A. Standard for Determining if a Claim is Futile

An amendment is futile if “‘the amended complaint could not withstand a motion 

to dismiss under Rule 12(b)(6) of the Federal Rules of Civil Procedures.’” Zutz v. 

Nelson, 601 F.3d 842, 850 (8th Cir. 2010) (quoting Cornelia I. Crowell GST Trust v. 

Possis Med., Inc., 519 F.3d 778, 782 (8th Cir. 2008)). See also In re Senior Cottages 

of Am., LLC, 482 F.3d 997, 1001 (8th Cir. 2007) (stating that denial of leave to amend 

based on futility is appropriate in the face of a legal finding that the proposed complaint 

could not survive a Rule 12 motion). Accordingly, this Court must determine under the 

Rule 12(b)(6) standard if plaintiff’s proposed amended complaint “contain[s] sufficient 

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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) (quoting Bell Atl. Corp v. Twombly, 550 

U.S. 544, 570 (2007)). 

In deciding a motion to dismiss under Rule 12(b)(6), the Court assumes all facts 

in the complaint to be true and construes all reasonable inferences from those facts in the 

light most favorable to the complainant. Morton v. Becker, 793 F.2d 185, 187 (8th Cir. 

1986). The Court need not, however, accept as true wholly conclusory allegations. 

Hanten v. Sch. Dist. of Riverview Gardens, 183 F.3d 799, 805 (8th Cir. 1999). Nor is 

the Court obligated to accept legal conclusions drawn by a party from the facts alleged. 

Westcott v. City of Omaha, 901 F.2d 1486, 1488 (8th Cir. 1990). 

B. The Allegations in the Proposed Claims 

To resolve this issue, the Court must first review Counts II and III of plaintiff’s 

proposed amended complaint. Plaintiff alleges that “[o]n or about January 17, 2014 and 

March 17, 2014, [plaintiff] entered into written contracts with [defendant] for the delivery 

and maintenance of certain servers and software.” Doc. 17-1, ¶6. Plaintiff refers to 

these as the so-called “Server Agreements,” and so for ease of reference will the Court. 

Plaintiff attached the Server Agreements as Exhibits 1 and 2. 

Exhibit 1 consists of two pages. The first page of Exhibit 1 is entitled a purchase 

order, dated January 17, 2014, reflecting the purchase of one unit of a “TM-600.” The 

purchase order contains other provisions. One provision states “title to the products 

shall pass to [plaintiff] only when the products are received by [plaintiff] . . . .” There 

are also provisions regarding “warranty,” “returns or credits” for “[n]onconforming or 

defective products,” “law,” “arbitration,” and other “general” provisions. The second 

page is an invoice on defendant’s letter head, dated January 28, 2014, reflecting a bill 

for approximately $5,500 for the TM-600. 

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Exhibit 2 also consists of two pages. Again, the first page is a purchase order, 

this one dated March 4, 2014, for a number of items, including a TM-1000 HAC. This 

purchase order is, other than the date and description of the product ordered, identical to 

the January 17, 2014, purchase order in all material respects. The second page is an 

invoice tied to the purchase order. This invoice is, other than the date and dollar 

amount, identical to the January 28, 2014, invoice in all material respects. 

Plaintiff further alleges that “[a]s part of the Server Agreements, [defendant] 

agreed to provide software updates and technical support for the [defendant’s] servers 

and software in exchange for BVS paying an annual maintenance fee.” Doc. 17-1, ¶7. 

Plaintiff alleges that “[s]ince entering into the Server Agreements in January and March 

of 2014, [plaintiff] has continued to pay [defendant] the annual fee for ongoing updates 

and support.” Doc. 17-1, ¶16. Plaintiff alleges, however, that “[a]lthough [plaintiff] 

has continued to pay [defendant] for updates and support, in July 2016 [defendant] 

breached the agreements by refusing to support [plaintiff] after [plaintiff] specifically 

sought help.” Doc. 17-1, ¶17. Plaintiff alleges this constituted a breach of the Server 

Agreements. Doc. 17-1, ¶18. 

In Count III, plaintiff alleges defendant “has refused to perform its ongoing 

support obligations under the Server Agreements, apparently believing that [plaintiff’s] 

initial lawsuit [against defendant] somehow absolved [defendant] of its obligation to 

perform under the Server Agreements.” Doc. 17-1, ¶22. Plaintiff therefore asks the 

Court to declare that defendant is obligated to perform its ongoing support obligations 

under the Server Agreements. Doc. 17-1, ¶23. 

C. Analysis 

Plaintiff’s proposed Count II and III are futile as drafted. The claims simply do 

not contain sufficient facts to state a claim. The conclusory allegations in the proposed 

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claims that defendant had an ongoing service obligation are not supported by and are 

inconsistent with the Server Agreements that plaintiff claim factually establish such an 

obligation. To state a breach of contract claim under Iowa law, plaintiff must allege: 

(1) the existence of a contract; (2) the terms and conditions of the contract; (3) that 

plaintiff performed all of the terms and conditions required of it under the contract; (4) 

the defendant breached the contract; and (5) plaintiff suffered damages. Molo Oil Co. 

v. River City Ford Truck Sales, Inc., 578 N.W.2d 222, 224 (Iowa 1998). Plaintiffs’ 

proposed Counts II and III fail to allege facts which would establish the second element: 

that is, the proposed counts fail to articulate terms and conditions of the contract. 

The body of Counts II and III fail to state facts setting forth what continuing 

obligation defendant owed to plaintiff or how defendant breached that obligation other 

than the vague allegation that defendant refused to “help” plaintiff when plaintiff ask for 

help. The Server Agreements themselves, attached to the proposed complaint, do no 

more to establish the terms and conditions of the contract beyond the purchase and deliver 

of a product. The Server Agreements, which consist of purchase orders and invoices, 

speak in terms of products, not services. Nowhere in the documents do they reflect 

defendant had an ongoing performance obligation. The documents do not describe what 

it is exactly that defendant is supposed to do for plaintiff, during what time period, in 

what manner. Indeed, Count II vaguely alleges that defendant breached the Server 

Agreements “by refusing to support [plaintiff] after [plaintiff] specifically sought help.” 

Doc. 17-1, ¶17. Count II fails to describe what help or support plaintiff sought. Count 

II fails to identify where in the “Server Agreements” there is language that could factually 

support a claim that defendant was obligated provide support to plaintiff. Although 

plaintiff alleges that “[a]s part of the Server Agreements, [defendant] agreed to provide 

software updates and technical support for the [defendant’s] servers and software in 

exchange for BVS paying an annual maintenance fee,” (Doc. 17-1, ¶7), there is nothing 

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about a performance obligation or annual fee in the documents that plaintiff represents 

constitute the agreements between the parties. The insufficiency of the pleadings is most 

starkly apparent when the Court contemplates Count III. There, plaintiff asks the Court 

to declare defendant is obligated to perform its ongoing support obligations under the 

Server Agreements. The Court would not have a clue from plaintiff’s complaint or the 

attached Server Agreements just what ongoing support obligations defendant is obligated 

to perform. 

Perhaps there are other documents or materials that reflect an ongoing 

performance obligation by defendant and an annual fee payment requirement by plaintiff. 

If so, the proposed amended complaint does not say so, or attach and incorporate them. 

Perhaps a “TM-600” is a term of art in the industry that somehow incorporates such 

performance obligations by the parties. Perhaps a purchase order for a TM-600 is akin, 

for example, to a purchase order for 600 hours of technical support. But, if documents 

exist to explain the meaning of the terms of art, the proposed Counts II and III fail to 

reflect those obligations, and there is nothing this Court can do to read such obligations 

into the counts as pled. 

V. MAGISTRATE JUDGE’S AUTHORITY 

Although neither party has raised the issue, the Court finds it appropriate to 

address its authority to enter this order, as opposed to issuing a Report and 

Recommendation to the District Court. A magistrate judge may not enter a final ruling 

on dispositive motions, pursuant to the authority conferred in Title 28, United States 

Code, Section 636(b)(1). Although there is some dispute among the federal courts as to 

whether a motion to amend a complaint is a dispositive motion or a nondispositive motion, 

“[t]he weight of authority holds that motions to amend pleadings are non-dispositive 

matters which may be referred to a magistrate judge and reviewed by the district court 

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under the ‘clearly erroneous standard.’” E.E.O.C. v. Exel Inc., 259 F.R.D. 652, 652 

n.1 (N.D. Ga. 2008) (internal citation omitted). See, e.g., Reeves v. DSI Sec. Servs., 

Inc., 395 Fed. App’x 544, 548 (11th Cir. 2010) (“A district court may also designate a 

magistrate judge to rule on certain non-dispositive pretrial motions, such as a motion to 

amend a complaint.”); Palmore v. Hicks, 383 Fed. App’x 897, 899-900 (11th Cir. 2010) 

(“An order disposing of a motion to amend is a non-dispositive pretrial ruling.”) (citing 

cases); Hall v. Norfolk S. Ry. Co., 469 F.3d 590, 595 (7th Cir. 2006) (“The district judge 

correctly held that the magistrate judge’s denial of Hall’s motion to amend his complaint 

was nondispositive, subject only to review for clear error.”); Wingerter v. Chester 

Quarry Co., 185 F.3d 657, 660 (7th Cir. 1998) (acknowledging magistrate judge was 

authorized to rule on motion for leave to file third amended complaint); Morrissey v. 

ASD Shared Servs., LLC, 1:12-CV-4345-CAP-AJB, 2013 WL 11330647, at *2 n.2 (N.D. 

Ga. Sept. 3, 2013) (holding that a motion to amend a complaint is not a dispositive 

motion); Knox v. Rhodes, No. 08-cv-277-JPG, 2010 WL 1444875, at *1 (S.D. Ill. April 

9, 2010) (same); Wilson v. City of N.Y., No. 06–CV–229 (ARR)(VVP), 2008 WL 

1909212, at *3–4 (E.D. N.Y. Apr. 30, 2008) (same and collecting cases). Further, 

nowhere in Federal Rule of Civil Procedure 72(a), and Local Rule 72.1, is it expressed 

or implied that magistrate judges are without authority to deny leave to amend a 

complaint. See also United States v. Brunsman, Nos. 1:11–cr–014, 1:13–cv–120, 2013 

WL 3867233, at *1 (S.D. Ohio July 25, 2013) (holding that magistrate judge did not act 

ultra vires in denying a motion to amend).

Accordingly, the undersigned concludes that a magistrate judge has authority to 

rule on a motion to amend a complaint and therefore resolves plaintiff’s motion for leave 

to amend by order. 

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VI. CONCLUSION 

For the reasons set forth above, the Court denies plaintiff’s motion for leave to 

file an amended complaint (Doc. 17). 

 

IT IS SO ORDERED this 29th day of September, 2016. 

 

 

 __________________________________ 

 C.J. Williams 

 United States Magistrate Judge 

 Northern District of Iowa 

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