* 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should not be published and is not precedent except under the limited circumstances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.

IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

_______________

No. 96-40488

Summary Calendar

_______________

MARK PETROLEUM, INC.,

Plaintiff-Appellant,

VERSUS

LESTER H. SMITH; SMITH ENERGY COMPANY, INC.; 

STEVEN WOLF; PETROSAKH LIMITED; PETROSAKH USA, INC.;

MIKE KERR; MARK C. MCKINLEY; LAWRENCE E. GLENN;

LABRADOR OIL COMPANY; GORDY GAS CORPORATION; 

and RUSSELL D. GORDY,

Defendants-Appellees.

_________________________

Appeal from the United States District Court

for the Eastern District of Texas

(9:94-CV-80)

_________________________

November 1, 1996

Before SMITH, DUHÉ, and BARKSDALE, Circuit Judges.

JERRY E. SMITH, Circuit Judge:*

Mark Petroleum, Inc. (“Mark”), appeals the denial of leave to

amend its complaint, and appeals the dismissal of its claims

pursuant TO FED. R. CIV. P. 12(b)(6). We affirm in part and reverse
1 The major difference between Quanto’s and Mark’s suits is the documents

to which each alleges the fraud attaches. Similarly, Quanto did not name the

Smith defendants, choosing to name only the Petrosakh defendants, Smith’s

successors in interest.

2 Quanto and Mark agreed subsequently that Mark would seek a non-suit in

the state court action to enable Mark to pursue the instant action. The non-suit

was originally granted, but the state court later reinstated both the action and

its original order compelling arbitration and staying the proceedings pending

arbitration. 

2

and remand in part.

I.

Mark filed the instant action alleging fraudulent inducement

in connection with various contracts entered into with defendants

governing a business relationship to develop an oil field on

Sakhalin Island. Prior to Mark’s filing of this action, Quanto

International Company, Ltd., had filed a similar action in Texas

state court1 and had been compelled to arbitration by court order.2

Although Quanto is a separate entity from Mark, George Mirkin, one

of the two principals and directors of Mark, is Quanto's president

and majority shareholder. Quanto also had assigned to Mark, under

a previous Declaration of Trust, all prospective benefits to which

Quanto was entitled with respect to the Sakhalin Island project.

At least one of Quanto and Mark is a signatory to each of the

various contracts entered into with defendants in relation to the

project.

Upon defendants’ motion, the district court issued an order

staying discovery pending resolution of the state court matters.
3

After the case was reassigned to a different judge, the court

requested that the parties provide additional briefing on the stay

and on defendants’ motion to dismiss for collateral estoppel. The

court subsequently denied Mark’s motion for leave to file a second

amended complaint and granted the motion to dismiss, holding that

Mark was collaterally estopped from relitigating the arbitration

issues that had been adjudicated in state court. 

 

II.

Mark first contends that the district court erred in denying

its motion for leave to file a second amended complaint. Facing

defendants’ motion to dismiss, which asserted that Mark’s claim was

barred by collateral estoppel, Mark sought to amend his complaint

to conform the allegations contained in the complaint to a party

affidavit that had been submitted some sixteen months earlier. The

district court, after noting properly the standards that govern

disposition of the motion, denied Mark’s motion, citing undue

delay, bad faith, and failure to cure deficiencies by an amendment

allowed previously.

The decision to grant leave to amend is entrusted to the sound

discretion of the district court, and thus we review for abuse of

discretion only. See Wimm v. Jack Eckerd Corp., 3 F.3d 137, 139

(5th Cir. 1993). The district court may consider such factors as

undue delay, bad faith or dilatory motive, repeated failure to cure
3 Mark asserts, for the first time on appeal, reasons for delaySSthat his

clients travel frequently out of town, that they are non-native English speakers,

that the facts are complex, and that it needed to file quickly to prevent a

limitations defense. Although we refuse to review reasons proffered for the

first time on appeal, we caution nonetheless that we do not view such factors as

mitigating an attorney’s ethical and legal duty to make a reasonable

investigation of the facts prior to filing suit. See, e.g., FED. R. CIV. P. 11.

4

deficiencies by amendments previously allowed, undue prejudice to

the non-movant, and futility. See Foman v. Davis, 371 U.S. 178,

182 (1962). 

The district court first cited Mark for undue delay, noting

that Mark had waited more than sixteen months to amend its

complaint to assert facts that are in direct contradiction to facts

asserted in its two prior complaints. In particular, Mark sought

to amend its complaint to conform to a party declaration submitted

along with the original complaint asserting that Quanto was acting

without Mark’s consent in filing its state court suit, and thus

Mark could not be estopped collaterally by the state court’s

decision to compel arbitration. 

The district court noted that Mark had been, or should have

been, aware of all facts relevant to such claims, and thus its

failure to amend its complaint sooner, absent any reason for delay,

evinced inexcusable neglect.3 Because the sole purpose of the

amendment was to escape dismissal under collateral estoppel, the

court also found that Mark sought to amend improperly to gain a

tactical advantage. See Dussouy v. Gulf Coast Inv. Corp., 660 F.2d

594, 597 (Former 5th Cir. 1981). Furthermore, Mark had failed to
4 We pause briefly to address directly two of Mark’s asserted errors in the

district court’s ruling. First, citing Corwin v. Marney, Orton Invs., 843 F.2d

194, 199 (5th Cir.), cert. denied, 488 U.S. 924 (1988), Mark contends that the

defendants’ failure to object to the motion requires automatically that the court

grant it. We do not read Corwin so to require, and we note that failure to

object alone, absent a letter evincing defendants’ “clear expression of

acquiescence to an amendment, and their statement in the letter that an amendment

would be for their own benefit,” id., is insufficient to support a claim of abuse

of discretion. We similarly reject Mark’s argument that the denial of leave to

amend, notwithstanding the fact that Mark complied with the court’s deadline for

filing motions to amend, is per se abuse of discretion. See Wimm, 3 F.3d at 141-

42 (same).

5

correct its pleading when given leave to file its first amended

complaint two months after filing the original action.

There was no abuse of discretion. The court considered

properly the Foman factors and provided “substantial reasons” for

its decision to deny leave. See Jamieson by and Through Jamieson

v. Shaw, 772 F.2d 1205, 1208 (5th Cir. 1985).4 

III.

Mark next asserts that the district court erred in dismissing

its claim under FED. R. CIV. P. 12(b)(6) because it improperly

applied the Texas collateral estoppel doctrine. We review de novo

a grant of a motion to dismiss. See Cinel v. Connick, 15 F.3d

1338, 1341 (5th Cir.), cert. denied, 115 S. Ct. 189 (1994). 

We are required, under the Full Faith and Credit Act,

28 U.S.C. § 1738, to accord state court judgments the same

preclusive effect provided by the law of the state in which the

judgment was rendered. See A.L.T. Corp. v. Small Bus. Admin., 801

F.2d 1451, 1455 (5th Cir. 1986). Under Texas law, collateral
5 The district court cited in support of its conclusion Chemetron Corp. v.

Business Funds, Inc., 682 F.2d 1149, 1190-91 (5th Cir. 1982), vacated and

remanded, 460 U.S. 1007, initial opinion adhered to on remand, 718 F.2d 725 (5th

Cir.) (adhering to partial dissent), vacated for rehearing en banc, 718 F.2d 730

(5th Cir. 1983) (settled before rehearing en banc). Chemetron has no

precedential force, because the panel opinion was vacated. See Avondale

Shipyard, Inc. v. Insured Lloyd’s, 786 F.2d 1265, 1273 n.11 (5th Cir. 1986). The

final judgment requirement for collateral estoppel in the Fifth Circuit remains

in flux. See Marine Shale Processors, Inc. v. United States Envtl. Protection

Agency, 81 F.3d 1371, 1380 n.2 (5th Cir. 1996). 

6

estoppel “bars relitigation of any ultimate issue of fact actually

litigated and essential to the judgment in a prior suit, regardless

of whether the second suit is based upon the same cause of action.”

Bonniwell v. Beech Aircraft Corp., 663 S.W.2d 816, 818 (Tex. 1984).

A prior adjudication will be given estoppel effect only where (1)

the parties have been fully heard; (2) the court has supported its

decision with a reasoned opinion; and (3) the decision was subject

to appeal or was in fact reviewed on appeal. See Mower v. Boyer,

811 S.W.2d 560 (Tex. 1991) (citing Scurlock Oil Co. v. Smithwick,

724 S.W.2d 1, 6 (Tex. 1986)).

The district court recognized the “final judgment” requirement

for collateral estoppel, yet concluded incorrectly that finality

requires only that the issue have been fully litigated, not that a

final judgment have been obtained. Because we are required to

apply Texas collateral estoppel doctrine when reviewing Texas state

court adjudications, we need not decide whether this is in fact a

correct statement of law in the Fifth Circuit,5 but note only that

it states Texas law incorrectly. A Texas state court order

compelling arbitration and granting a stay pending arbitration is
7

an interlocutory order that is not subject to appeal under either

the Texas or federal arbitration acts. See Bethke v. Polyco, Inc.,

730 S.W.2d 431, 434 (Tex. App.SSDallas 1987, no writ); Purdy v.

Monex Int’l, Ltd., 867 F.2d 1521, 1523 (5th Cir.), cert. denied,

493 U.S. 863 (1989). An interlocutory order not subject to appeal

(or not in fact reviewed on appeal) is not entitled to preclusive

effect under Texas’s collateral estoppel principles. See Mower,

811 S.W.2d at 562-63.

The denial of leave to amend is AFFIRMED. The judgment of

dismissal is REVERSED, and this matter is REMANDED for further

proceedings.