Court Opinion

ID: 9957629
Source: CourtListenerOpinion
Date Created: 2024-04-04 18:00:57.532537+00
Date Added: 2024-06-11T08:18:31.765596
License: Public Domain

Case: 23-50376           Document: 75-1         Page: 1      Date Filed: 04/04/2024

          United States Court of Appeals
               for the Fifth Circuit                                   United States Court of Appeals
                                                                                Fifth Circuit

                                  ____________                                FILED
                                                                           April 4, 2024
                                    No. 23-50376                         Lyle W. Cayce
                                  ____________                                Clerk

Avialae S De RL DE CV,

                                                                 Plaintiff—Appellant,

                                         versus

Cummins, Incorporated,

                                            Defendant—Appellee.
                  ______________________________

                  Appeal from the United States District Court
                       for the Western District of Texas
                            USDC No. 3:19-CV-380
                  ______________________________

Before Richman, Chief Judge, and Oldham and Ramirez, Circuit
Judges.
Per Curiam:*
      Avialae S De RL DE CV (“Avialae”) brought six breach of contract
claims against Cummins, Inc. The district court partly granted Cummins’s
Rule 12(b)(6) motion and dismissed four of Avialae’s claims. The court also
denied Avialae’s later motion for leave to amend. The remaining two breach

      _____________________
      *
          This opinion is not designated for publication. See 5th Cir. R. 47.5.
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                                  No. 23-50376

of contract claims went before a jury, which returned a verdict for Avialae.
Avialae then appealed the district court’s earlier orders. We affirm.
                                       I.
       In reviewing the grant of a Rule 12(b)(6) motion to dismiss, we accept
“all well-pleaded facts as true and view[] those facts in the light most
favorable to the plaintiffs.” Meador v. Apple, Inc., 911 F.3d 260, 264 (5th Cir.
2018) (quotation omitted). Here, Avialae’s amended complaint alleges the
following:
       Avialae is a Mexican limited liability company that manufactures
industrial component parts. Cummins is an Indiana corporation that
manufactures diesel engines.
       In 2014, Cummins contacted Avialae to discuss the manufacture of
certain component parts. The parties executed multiple contracts by which
Avialae would supply diesel engine parts to Cummins. The contracts covered
six projects: the Dual Source Project, the Shim Rework Project, the
Washer/Shim Prototype Project, the Housing Rework Project, the CRIN
Rework Project, and the MRC Injector Rework Project. Ultimately,
Cummins cancelled or postponed all of these projects. Cummins also
declined to compensate Avialae for most of the resources that it invested in
these projects.
       In 2016, Avialae brought suit for breach of contract in Texas state
court. The lawsuit was removed to federal court and eventually dismissed in
2018 for failure to prosecute. See Avialae S. De R.L. De C.V. v. Cummins, Inc.,
No. EP-16-CV-00188-DCG, 2018 WL 3342885 (W.D. Tex. Mar. 5, 2018).
       In 2019, Avialae brought a second suit for breach of contract in Texas
state court. After the lawsuit was removed to federal court, Avialae filed an
amended complaint. Cummins moved to dismiss this complaint under Rule

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12(b)(6) for failure to state a claim. In July 2020, the district court dismissed
four of the six breach of contract claims (relating to the Dual Source,
Washer/Shim Prototype, CRIN Rework, and MRC Injector Rework
projects). Avialae moved for leave to again amend its complaint regarding
those four claims. The district court denied Avialae’s motion for failure to
show good cause.
        The remaining breach of contract claims (relating to the Shim Rework
and Housing Rework projects) went before a jury, which returned a verdict
for Avialae. The district court entered final judgment, and Avialae timely
appealed.
                                              II.
        This court has jurisdiction over this appeal under 28 U.S.C. §§ 1332
and 1291.1 We de novo review the grant of a Rule 12(b)(6) motion to dismiss.

        _____________________
        1
            As a sociedad de responsabilidad limitada, Avialae is essentially a Mexican LLC.
Accordingly, one might think that Avialae would be required to allege the citizenship of all
of its members, so as to assure the court of complete diversity. See, e.g., SXSW, LLC v.
Fed. Ins. Co., 83 F.4th 405 (5th Cir. 2023); MidCap Media Fin., LLC v. Pathway Data, Inc.,
929 F.3d 310 (5th Cir. 2019). Avialae is a foreign LLC, however, not an American one. And
when examining the citizenship of foreign legal entities for purposes of § 1332, our court
does not always look through to assess the citizenship of members or beneficiaries. See
Note, Elisabeth C. Butler, Diversity Jurisdiction and Juridical Persons: Determining the
Citizenship of Foreign-Country Business Entities, 97 Tex. L. Rev. 193, 201–02 (2018)
(discussing cases). Rather, we ask whether the entity is a “juridical person” under the law
that created it. See Stiftung v. Plains Mktg., LP, 603 F.3d 295, 298–99 (5th Cir. 2010). That
is, we look to whether the entity “can own property, make contracts, transact business, and
litigate in its own name.” Cf. Fellowes, Inc. v. Changzhou Xinrui Fellowes Off. Equip. Co., 759
F.3d 787, 788 (7th Cir. 2014). If so, the entity is a citizen of the foreign country under which
laws it was created. See Stiftung, 603 F.3d at 298–99. Avialae is a juridical person created
under the laws of Mexico which makes contracts, transacts business, and may sue and be
sued. See Inmexti, S. de R.L. de C.V. v. TACNA Servs., Inc., No. 12-CV-1379-BTM (JMA),
2012 WL 3867325, at *3 (S.D. Cal. Sept. 6, 2012); ROA.76. Avialae is a citizen of Mexico;
Cummins is not; therefore, diversity is complete.

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Meador, 911 F.3d at 264. We review the denial of a motion for leave to amend
for abuse of discretion. See id.
                                       III.
       Avialae challenges the district court’s partial grant of Cummins’s
motion to dismiss and denial of its motion for leave to amend. We reject both
challenges. We first (A) explain why the district court did not err in
dismissing four of Avialae’s breach of contract claims. We then (B) explain
why the district court did not abuse its discretion in denying Avialae’s motion
for leave to amend its complaint.
                                       A.
       First, the four dismissed breach of contract claims.
       To withstand a Rule 12(b)(6) motion to dismiss, a complaint must
allege “more than labels and conclusions,” as “a formulaic recitation of the
elements of a cause of action will not do.” Bell Atl. Corp. v. Twombly, 550 U.S.
544, 555 (2007). It must state a “plausible claim for relief,” rather than facts
“merely consistent with” liability. Ashcroft v. Iqbal, 556 U.S. 662, 678–79
(2009) (quoting Twombly, 550 U.S. at 557). We do not accept as true
“conclusory     allegations,   unwarranted        factual    inferences,   or   legal
conclusions.” BRFHH Shreveport, LLC v. Willis-Knighton Med. Ctr., 49
F.4th 520, 525 (5th Cir. 2022) (quotation omitted).
       As relevant to Avialae’s Texas state law breach of contract claims, a
complaint must plausibly allege “(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 that
breach.” Villarreal v. Wells Fargo Bank, N.A., 814 F.3d 763, 767 (5th Cir.
2016) (quotation omitted).

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       We agree with the well-reasoned opinion of the district court that
Avialae failed to plausibly allege the existence of a contract with respect to
the Dual Source, Washer/Shim Prototype, CRIN Rework, and MRC Injector
Rework projects. We first (1) discuss the Dual Source and Washer/Shim
Prototype projects, followed by (2) the CRIN Rework and MRC Injector
Rework projects.
                                       1.
       Start with the two breach of contract claims related to the Dual Source
and Washer/Shim Prototype projects. The Dual Source Project was an
umbrella project encompassing several product families, including the
products in the Washer/Shim Prototype Project.
       As Avialae alleges, Cummins discussed the possibility of Avialae
producing parts for both of these projects. Cummins informed Avialae of its
supplier requirements, and Avialae expended resources to comply with the
requirements, including the production of samples. At some point, Cummins
told Avialae that, while it was selected as a supplier for the Dual Source
Project, Avialae needed to provide additional samples and improve its
production processes. In August 2015, Cummins issued six washer/shim
purchase orders to Avialae. In its amended complaint, Avialae construes
these purchase orders as evidence of two contracts: one involving the
umbrella Dual Source Project, and one involving the subsidiary
Washer/Shim Prototype Project. Since Cummins later cancelled the
purchase orders and the overall Dual Source Project, Avialae claims that
Cummins breached both contracts.
       But Avialae does not plausibly allege that Cummins entered into a
contract with Avialae with respect to the Dual Source or Washer/Shim
Prototype projects. See Villarreal, 814 F.3d at 767. In particular, Avialae does

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not plausibly allege a valid offer and acceptance. Cf. Schriver v. Tex. Dep’t of
Transp., 293 S.W.3d 846, 851 (Tex. App.—Fort Worth 2009).
       Take the Dual Source Project first. Avialae claims that the first three
August 2015 purchase orders served as Cummins’s acceptance of a Dual
Source Project contract with Avialae. See ROA.83 (“These three purchase
orders mark Plaintiff’s entry into the Dual Source Project.”). But purchase
orders typically serve as offers, not acceptances. See Gulf States Utils. Co. v.
NEI Peebles Elec. Prods., Inc., 819 F. Supp. 538, 549 (M.D. La. 1993)
(collecting cases); Maverick Int’l, Ltd v. Occidental Mukhaizna LLC, No. 1:10-
CV-782, 2011 WL 13134197, at *3 (E.D. Tex. Mar. 1, 2011); see also Tex.
Bus. & Com. Code Ann. § 2.206(a)(2) (“[A]n order . . . to buy goods
for prompt or current shipment shall be construed as inviting acceptance
either by a prompt promise to ship or by the prompt or current shipment of
conforming or non-conforming goods…”). To be sure, a purchase order
could theoretically serve as an acceptance. Cf. Tex. Bus. & Com. Code
Ann. § 2.204(a) (“A contract for sale of goods may be made in any manner
sufficient to show agreement…”). But the order would need to respond to a
sufficiently detailed price quotation or proposal. Cf. Operating Tech. Elecs.,
Inc. v. Generac Power Sys., Inc., No. 4:12-CV-345-Y, 2014 WL 11498165, at *4
(N.D. Tex. Mar. 11, 2014), aff’d, 589 F. App’x 292 (5th Cir. 2015) (mem.);
Crest Ridge Constr. Grp., Inc. v. Newcourt Inc., 78 F.3d 146, 152 (5th Cir. 1996)
(Benavides, J., specially concurring). Given the fluid and shifting nature of
the discussions between Avialae and Cummins, Avialae does not plausibly
allege that the three August 2015 purchase orders responded to and accepted
the definitive terms of a Dual Source Project contract offer made by
Cummins.
       Turning to the Washer/Shim Prototype Project, Avialae also seeks to
use the six August 2015 purchase orders to show evidence of a contract. But

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here, Avialae instead alleges that the purchase orders serve as an offer from
Cummins that Avialae accepted.
        Even if the purchase orders constituted an offer that could be accepted
by “a prompt promise to ship or by the prompt or current shipment of
conforming goods,” see Tex. Bus. & Com. Code Ann. § 2.206(a)(2),
Avialae did not plausibly allege that it accepted the offer. Moreover, four of
the six purchase orders called for delivery dates in August, September, and
October 2015,2 prior to Cummins’s cancellation of the orders in November
2015. Yet, Avialae did not allege that it fulfilled these orders before the
November cancellation. Because Avialae must allege its own performance to
state a valid claim for breach of contract, see Villarreal, 814 F.3d at 767, its
failure to do so dooms its claim regarding the Washer/Shim Prototype
Project.

        _____________________
        2
          Avialae attached the purchase orders as an exhibit to its response to Cummins’s
motion to dismiss. ROA.144–53; see also ROA.129 (“See Exhibit B for a sample of the
purchase orders issued by Defendant-CUMMINS.”). But in its reply brief, Avialae argues
that this court cannot consider the purchase order documents because they were not
attached to the complaint or Cummins’s Rule 12(b)(6) motion. See Grey Br. 6. This
argument fails because plaintiff invited any error. And it is unclear there was error in any
event. “When a defendant attaches documents to its motion that are referenced in the
complaint and are central to the plaintiff’s claims, however, the court can also properly
consider those documents.” Inclusive Communities Project, Inc. v. Lincoln Prop. Co., 920
F.3d 890, 900 (5th Cir. 2019). Here, plaintiff Avialae attached the documents to its
opposition, but it is unclear why that matters. Cf. Tellabs, Inc. v. Makor Issues & Rts., Ltd.,
551 U.S. 308, 322 (2007) (“[C]ourts must consider the complaint in its entirety, as well as
other sources courts ordinarily examine when ruling on Rule 12(b)(6) motions to dismiss,
in particular, documents incorporated into the complaint by reference . . . .”). The
purchase orders were repeatedly referenced in Avialae’s complaint and were central to its
breach of contract claims about the Dual Source and Washer/Shim Prototype projects.

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                                      2.
       Consider next the two breach of contract claims related to the CRIN
Rework and MRC Injector Rework projects.
       As Avialae alleges, Cummins discussed the possibility of Avialae
producing parts for both of these projects. And Cummins requested that
Avialae provide sample parts for evaluation. Avialae produced and delivered
the samples to Cummins, which later cancelled or indefinitely postponed the
projects. In its amended complaint, Avialae claims that Cummins breached
the parties’ contracts by failing to pay for the CRIN and MRC samples.
       But Avialae does not plausibly allege any contracts by which Cummins
agreed to pay for the CRIN and MRC samples. See Villarreal, 814 F.3d at 767.
A contract requires the basic element of consideration—“a bargained-for
exchange of promises or return performance [that] consists of benefits and
detriments to the contracting parties.” Marx v. FDP, LP, 474 S.W.3d 368,
378 (Tex. App.—San Antonio 2015). Avialae alleges that it agreed to provide
the samples, but Avialae does not allege that Cummins promised to do or not
do anything in exchange for production of the relevant samples. Without
such consideration, Avialae merely alleges that it fulfilled a non-contractual
request for samples, which does not support a breach of contract claim.
                                     B.
       Finally, the motion for leave to amend.
       Avialae sought leave to amend its already amended complaint on July
29, 2020, almost five months after the district court’s March 2, 2020
deadline for such motions. Since the amendment would require the
modification of the scheduling order, the good cause requirement of Rule
16(b) applies. See Filgueira v. U.S. Bank Nat. Ass’n, 734 F.3d 420, 422 (5th
Cir. 2013).

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          This court applies a four-factor test to assess good cause and
determine whether a district court has abused its discretion in denying an
untimely motion to amend pleadings. See S&W Enters., LLC v. SouthTrust
Bank of Ala., NA, 315 F.3d 533, 536 (5th Cir. 2003). We consider: (1) the
explanation for lack of a timely motion, (2) the amendment’s importance,
(3) the potential prejudicial impact if allowed, and (4) the availability of a
continuance to mitigate any prejudice. See id. Since all four factors weigh
against Avialae, the district court did not abuse its discretion in denying
Avialae’s untimely motion for leave to amend.
          With respect to the first factor, Avialae’s explanation for the lack of a
timely motion is that it did not know about its complaint’s deficiencies until
the district court’s ruling on Cummins’s Rule 12(b)(6) motion. This
explanation is insufficient. As the district court cogently remarked, Avialae’s
“own pleading deficiencies, raised by the Court in its Memorandum
Opinion, are not an adequate explanation for delay.” ROA.350; cf. Whitaker
v. City of Houston, 963 F.2d 831, 837 (5th Cir. 1992) (affirming the denial of a
motion to amend where the plaintiff did not seek leave to amend his
complaint while a Rule 12(b)(6) motion to dismiss was pending).
          With respect to the second factor, the proposed amendment is not
important. For the most part, the proposed amended complaint merely adds
words like “offers” and “accepts.” See, e.g., ROA.229, 230, 234, 235. But
without additional factual allegations, these legal conclusions do not correct
the problems identified by the district court. Cf. BRFHH Shreveport, 49 F.4th
at 525.
          With respect to the third factor, the amendment would have
prejudiced Cummins, at least in part, by requiring it to respond to yet another
set of pleadings. Including Avialae’s previously abandoned lawsuit,
Cummins had already responded to five sets of pleadings over the course of

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two separate cases. Mindful of the district court’s “broad discretion to
preserve the integrity and purpose of the pretrial order,” Geiserman v.
MacDonald, 893 F.2d 787, 790 (5th Cir. 1990) (quotation omitted), we agree
that a sixth shot would have prejudiced Cummins.
       With respect to the fourth factor, the district court found a
continuance was not in the interests of justice “given repeated delays in the
litigation of the [case].” ROA.352. Moreover, a continuance would not avoid
the prejudice to Cummins from litigating yet another set of pleadings. See also
Filgueira, 734 F.3d at 423–24. Mindful also of “district judges’ power to
control their dockets by refusing to give ineffective litigants a second chance
to develop their case,” see S&W Enters., 315 F.3d at 537 (quotation omitted),
we defer to the district court’s decision not to grant a continuance.
       Because all four factors weigh against Avialae, we conclude that the
district court did not abuse its discretion in denying Avialae’s untimely
motion for leave to amend.
       AFFIRMED.

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