Court Opinion

ID: 22789
Source: CourtListenerOpinion
Date Created: 2010-04-25 08:02:41+00
Date Added: 2024-06-11T08:03:22.436986
License: Public Domain

Revised January 2, 2001

               IN THE UNITED STATES COURT OF APPEALS

                       FOR THE FIFTH CIRCUIT

                       _____________________

                            No. 99-60875
                       _____________________

     J R STRIPLING; ROSSON EXPLORATION COMPANY;
     WILLIAM G BOWEN; BROOKHAVEN PUMP & SUPPLY
     COMPANY

                                      Plaintiffs - Appellants

          v.

     JORDAN PRODUCTION COMPANY, LLC

                                      Defendant - Appellee

-----------------------------------------------------------------

     J R STRIPLING; ROSSON EXPLORATION COMPANY;
     WILLIAM G BOWEN; BROOKHAVEN PUMP & SUPPLY
     COMPANY

                                      Plaintiffs - Appellants

          v.

     GUARDIAN ENERGY EXPLORATION CORPORATION;
     JORDAN PRODUCTION COMPANY, LLC

                                      Defendants - Appellees

_________________________________________________________________

          Appeal from the United States District Court
             for the Southern District of Mississippi
_________________________________________________________________

                         November 29, 2000

Before KING, Chief Judge, PARKER, Circuit Judge, and FURGESON,
District Judge.*

KING, Chief Judge:

     Plaintiffs-Appellants J.R. Stripling, Rosson Exploration

Company, William G. Bowen, and Brookhaven Pump & Supply Company

(collectively “Stripling”) appeal from a Rule 54(b) judgment

entered in favor of Defendant-Appellant Guardian Energy

Exploration Corporation (“Guardian”).   For the following reasons,

we REVERSE and REMAND for further proceedings.

                 I. FACTUAL AND PROCEDURAL HISTORY

     On November 2, 1996, Stripling and Jordan Production Company

(“Jordan”) executed a Letter of Intent by which Stripling

proposed to sell Jordan eighty percent of Stripling’s oil and gas

working interest in the Flora Field Unit.1   On January 1, 1997,

the parties entered into a Purchase and Sale Agreement (the

“Agreement”), which memorialized the sale of the working

interest.   Under the Agreement, Jordan agreed to make payments to

Stripling and to undertake a four-phase “Drilling Program” with

     *
        District Judge of the Western District of Texas, sitting
by designation.
     1
        The Flora Field Unit is an oil and gas field containing
a number of oil and gas wells, including producing and shut-in
wells.

                                 2
certain drilling requirements.2   The parties closed on the

Agreement in Mississippi on January 27, 1997.   At the closing,

Jordan tendered its first required payment of $1,650,000.     The

drilling for the first phase of the four-phase Drilling Program

then commenced.

     On November 12, 1997, Stripling brought its first action

against Jordan (“Jordan I”), claiming that Jordan began the

second phase of the Drilling Program without paying the

additional $1,600,000 payment contemplated by the Agreement.     In

Jordan I, Stripling sought a declaratory judgment that the work

for the second phase had begun and that Jordan owed Stripling

$1,600,000.   Stripling also sought damages for breach of

contract.

     During the period of discovery for Jordan I, Stripling

learned that Jordan, prior to executing its Agreement with

Stripling, had entered into an agreement with Guardian Energy

Management Corporation (“GEMC”), the parent of Guardian.      Under

the agreement between GEMC and Jordan, GEMC agreed to purchase

seventy-five percent of the eighty-percent working interest

     2
        The Drilling Program was comprised of one “mandatory”
drilling phase and three subsequent “optional” drilling phases.
Under the first mandatory phase, Jordan was obligated to pay
$1,650,000 and to drill five wells. After phase one’s
completion, Jordan had the option of proceeding with phase two
and paying an additional $1,600,000. This option was available
at the close of each subsequent phase for a total of three
additional phases, with a separate required payment for each
phase.

                                  3
through Guardian, GEMC’s wholly owned subsidiary.    Moreover,

Stripling discovered that Jordan purchased the working interest

with Guardian’s funds.

     In response to this new information, Stripling filed

“Plaintiffs’ Motion for Leave to File an Amended Complaint and

Join a Party-Defendant” (the “Motion to Amend”).    The Motion to

Amend came a month and a half after the deadline to file motions

for joinder of parties as set out in the Case Management Plan

Order.3    On September 29, 1998, despite recognizing that “Rule 15

requires that leave to amend be freely given,” the magistrate

judge determined that the proposed amendment would be futile

because Stripling “failed to point to any facts indicating that

in entering the agreement with [Stripling], Jordan was acting on

behalf of Guardian,” and thus, “there [was] no basis for

[Stripling] to recover from Guardian under the contract with

Jordan.”    Accordingly, the magistrate judge denied Stripling’s

Motion to Amend.

     3
        Under the Case Management Plan Order, the deadline for
motions for joinder was April 17, 1998. Stripling filed its
Motion to Amend on June 29, 1998. Stripling contends that it
filed the motion the moment it discovered that “Jordan bought 75%
of the 80% working interest for and on behalf of Guardian.” The
record reveals that Stripling served discovery requests on Jordan
in both February and April 1998 and that with each request,
Jordan responded that it would produce the requested documents.
However, Jordan did not respond with the relevant documents until
May 29, 1998. The December 1996 letter agreement between Jordan
and Guardian was within those documents.

                                  4
     As a result of the magistrate judge’s order disallowing

joinder of Guardian, on October 6, 1998, Stripling filed a second

suit against Jordan (“Jordan II”), which named both Jordan and

Guardian as party defendants.    In addition, on October 14, 1998,

Stripling filed objections to the magistrate judge’s order and

asked the district court to set it aside.    The district court

consolidated Jordan I and Jordan II.    On November 23, 1998,

Guardian filed a Rule 12 motion to dismiss on the ground that the

magistrate judge’s ruling in Jordan I--that Guardian could not be

liable to Stripling--collaterally estopped Stripling from raising

the issues against Guardian in Jordan II.

     On September 30, 1999, the district court issued two orders.

The first order denied Stripling’s motion to set aside the

magistrate judge’s order, which found that joining Guardian would

be futile.    The second district court order dismissed Guardian

from the consolidated suit on two grounds: (1) Stripling’s claims

were barred by the doctrine of collateral estoppel as a result of

the magistrate judge’s order; and (2) the court lacked personal

jurisdiction over Guardian.    On November 30, 1999, the district

court entered its final judgment pursuant to Rule 54(b) of the

Federal Rules of Civil Procedure.

     Stripling timely appealed the district court’s final

judgment.    On this appeal, we must address three issues.   First,

Stripling contends that the magistrate judge’s order did not

preclude the claims against Guardian.    Second, Stripling argues

                                  5
that it presented a prima facie case of personal jurisdiction

over Guardian based upon either the “contract prong” or the

“doing-business prong” of the Mississippi long-arm statute.

Finally, Stripling asserts that the district court abused its

discretion in upholding the magistrate judge’s finding of

futility.

         II. STRIPLING IS NOT COLLATERALLY ESTOPPED FROM

                   RAISING THE ISSUES IN JORDAN II

     In Jordan II, the district court dismissed Guardian,

concluding that Stripling was collaterally estopped by the

magistrate judge’s order in Jordan I from raising its theories of

recovery against Guardian.    We conclude that the district court

erred in finding that Stripling was collaterally estopped.

                        A. Standard of Review

     This court reviews de novo a district court’s dismissal

under Rule 12(b)(6).    See Shipp v. McMahon, 199 F.3d 256, 260

(5th Cir. 2000).    In addition, “[t]he application of collateral

estoppel is a question of law that we review de novo.”     United

States v. Brackett, 113 F.3d 1396, 1398 (5th Cir. 1997).

                            B. Discussion

     “‘[W]hen an issue of ultimate fact has once been determined

by a valid and final judgment, that issue cannot again be

litigated between the same parties in any future lawsuit.’”

RecoverEdge L.P. v. Pentecost, 44 F.3d 1284, 1290 (5th Cir. 1995)

                                  6
(quoting Ashe v. Swenson, 397 U.S. 436, 443 (1970)).    Under

federal law, collateral estoppel encompasses three elements:

“‘(1) the issue at stake must be identical to the one involved in

the prior action; (2) the issue must have been actually litigated

in the prior action; and (3) the determination of the issue in

the prior action must have been a necessary part of the judgment

in that earlier action.’”   Next Level Communications LP v. DSC

Communications Corp., 179 F.3d 244, 250 (5th Cir. 1999) (quoting

RecoverEdge L.P., 44 F.3d at 1290).

     We find that the district court erred in concluding that

Stripling was precluded by the magistrate judge’s order in Jordan

I from raising its claims against Guardian in Jordan II.    The

threshold inquiry, which is the dispositive inquiry in this

analysis, is whether we are considering “an issue of ultimate

fact [that has] been determined by a valid and final judgment.”4

RecoverEdge L.P., 44 F.3d at 1290 (emphasis added).    We conclude

that the magistrate judge’s order did not qualify as a final

judgment, such that it would provide a preclusive collateral

estoppel effect.   See Alpine View Co. v. Atlas Copco AB, 205 F.3d
208, 219-20 (5th Cir. 2000) (finding that a magistrate judge’s

discovery orders “are not final orders under 28 U.S.C. § 1291”);

Reynaga v. Cammisa, 971 F.2d 414, 416 (9th Cir. 1992) (finding

     4
        Because we find that the magistrate judge’s order did
not qualify as a final judgment for purposes of collateral
estoppel, we need not consider whether the three factors of
collateral estoppel have been met.

                                 7
that a magistrate judge’s order under 28 U.S.C. § 636(b) is not

final); Glover v. Ala. Bd. of Corrections, 660 F.2d 120, 122 (5th

Cir. Unit B Oct. 1981) (“[28 U.S.C. § 636(b)] does not grant to a

magistrate judge the authority to render a final judgment.    Only

a district court can make a magistrate’s decision final, and

therefore appealable.” (footnote omitted)).5

      A magistrate judge’s order issued under 28 U.S.C.

§ 636(b)(1)(A) or § 636(b)(1)(B) only becomes final once the

district court makes it final.    See Alpine View Co., 205 F.3d at

220; Glover, 660 F.2d at 122.    In the present case, it was not

until after the district court ruled on the issues in Jordan II

that it “direct[ed] the entry of a final judgment on . . . the

Order Denying Plaintiffs’ Motion To Set Aside Magistrate’s Order

dated September 30, 1999.”    From this set of circumstances, we

conclude that the magistrate judge’s order was not final at the

time the district court rendered its Memorandum Opinion in Jordan

II.   Accordingly, the district court erred in finding that

Stripling was collaterally estopped from raising the issues in

Jordan II.

      5
           Both Jordan and Stripling consented to referral under 28
U.S.C. §    636(c); however, the district court never formally
referred    the case to the magistrate judge under that subsection.
As such,    the magistrate judge’s order was an order under 28
U.S.C. §    636(b).

                                  8
     III. STRIPLING PRESENTED A PRIMA FACIE CASE OF PERSONAL

                     JURISDICTION OVER GUARDIAN

     Stripling asserts that the district court erred in holding

that the court did not have personal jurisdiction over Guardian.

Stripling contends that it set out a prima facie case for

personal jurisdiction under both the “contract prong” and “doing-

business prong” of Mississippi’s long-arm statute.      See MISS. CODE

ANN. § 13-3-57 (2000).6      We conclude that Stripling met the

requirement of a prima facie showing, and therefore, the district

court erred in dismissing Guardian for lack of personal

jurisdiction at this stage in the proceedings.

                       A. Standard of Review

     We review de novo a dismissal for lack of personal

jurisdiction.   See Alpine View Co. v. Atlas Copco AB, 205 F.3d
6
         Mississippi’s long-arm statute provides in relevant
part:

     Any nonresident person, firm, general or limited
     partnership, or any foreign or other corporation not
     qualified under the Constitution and laws of the state
     as to doing business herein, who shall make a contract
     with a resident of this state to be performed in whole
     or in part by any party in this state, . . . or who
     shall do any business or perform any character of work
     or service in this state, shall by such act or acts be
     deemed to be doing business in Mississippi and shall
     thereby be subjected to the jurisdiction of the courts
     of this state.

MISS. CODE ANN. § 13-3-57.

                                    9
208, 214 (5th Cir. 2000); Jobe v. ATR Mktg., Inc., 87 F.3d 751,

753 (5th Cir. 1996).

                               B. Discussion

       Under the Federal Rules of Civil Procedure, a federal court

sitting in diversity may exercise jurisdiction over a nonresident

corporate defendant only if permitted by state law.       See FED. R.

CIV. P. 4(e)(1), 4(h)(1), 4(k)(1); see also Alpine View Co., 205
F.3d at 214.       We conduct a two-prong analysis to determine if

personal jurisdiction is proper over a nonresident.7      See Latshaw

v. Johnston, 167 F.3d 208, 211 (5th Cir. 1999); Jobe, 87 F.3d at

753.       First, we determine whether the long-arm statute of the

forum state confers personal jurisdiction over the defendant.

See Latshaw, 167 F.3d at 211.       Second, we ask whether the

“exercise of such jurisdiction by the forum state is consistent

with due process under the United States Constitution.”          Id.

       “When a court rules on a motion to dismiss for lack of

personal jurisdiction without holding an evidentiary hearing, it

must accept as true the uncontroverted allegations in the

complaint and resolve in favor of the plaintiff any factual

conflicts[.]”       Id.; see also Bullion v. Gillespie, 895 F.2d 213,

217 (5th Cir. 1990); Thompson v. Chrysler Motors Corp., 755 F.2d
7
        We note that Mississippi’s long-arm statute is not
coextensive with due process. See Tichenor v. Roman Catholic
Church, 32 F.3d 953, 958 (5th Cir. 1994). Therefore, we address
each prong separately. See Coats v. Penrod Drilling Corp., 5
F.3d 877, 882 n.5 (5th Cir. 1993).

                                    10
1162, 1165 (5th Cir. 1985); DeMelo v. Toche Marine, Inc., 711
F.2d 1260, 1270-71 (5th Cir. 1983).   Therefore, the plaintiff

need only present a prima facie case of personal jurisdiction to

satisfy its burden.   See Bullion, 895 F.2d at 217.   From our

review of the record, taking as true the uncontroverted

allegations and resolving any factual conflicts in favor of

Stripling, we conclude that Stripling met its burden of

establishing the minimum prima facie showing that Jordan was

acting in concert with Guardian when it entered the Agreement

with Stripling.8

     Regarding the first prong of our personal jurisdiction

inquiry, a nonresident who makes a contract with a resident of

the state to be performed in whole or in part within the state is

within the reach of the long-arm statute.   See MISS. CODE ANN.

§ 13-3-57; see also Cycles, Ltd. v. W.J. Digby, Inc., 889 F.2d
612, 617 (5th Cir. 1989).   Therefore, the question presented is:

Under the facts of this case, did Stripling present a prima facie

case that Guardian entered a contract with a Mississippi

     8
        We recognize that evidence adduced at trial may mandate
a different conclusion; however, at this stage of the
proceedings, all that is required of Stripling is to meet the low
threshold of a prima facie showing. See Felch v. Transportes
Lar-Mex SA DE CV, 92 F.3d 320, 326 (5th Cir. 1996); Bullion, 895
F.2d at 217.

                                11
resident, which was to be performed in whole or in part within

Mississippi?9

     Stripling and Jordan entered into a contract for the sale of

a working interest in the Flora Field Unit, which is situated in

Mississippi.10   Under that contract, Jordan was to complete the

operations of at least one phase of the Drilling Program.     It is

not disputed that this contract, at least to the extent that it

exists between Stripling and Jordan, is a contract to be

performed in whole or in part in Mississippi because Jordan had

duties of performance in Mississippi.     However, Stripling argues

that Jordan entered the contract with Stripling on behalf of

itself and Guardian, who financed and purchased seventy-five

percent of the eighty-percent working interest in the Field.

Stripling offers up the theories of agency, joint venture, and

assignment in order to connect Guardian with the contract.

Guardian argues in response that its role in this transaction is

that of a mere passive investor.      We find that, under the facts

presented in this case, a prima facie showing exists which

     9
        Because we find that Stripling presented a prima facie
case under the “contract prong” of the Mississippi long-arm
statute, we need not address its “doing-business” argument.
     10
        “A ‘working interest’ ownership is the ownership of oil,
gas, and mineral leases. This interest creates in the owner the
exclusive right and implied obligation to explore for and develop
those minerals by drilling.” TXG Intrastate Pipeline Co. v.
Grossnickle, 716 So. 2d 991, 1007 (Miss. 1997).

                                 12
demonstrates that Guardian’s role may have exceeded that of a

mere investor.

     An agency relationship may be express or de facto.   A de

facto agency may be proven by the presence of three elements at

the time of contracting: (1) “[m]anifestation by the alleged

principal, either by words or conduct, that the alleged agent is

employed as such by the principal,” (2) “[t]he agent’s acceptance

of the arrangement,” and (3) “[t]he parties understood that the

principal will control the undertaking.”   Forest Oil Corp. v.

Tenneco, Inc., 626 F. Supp. 917, 921 (S.D. Miss. 1986) (citing

Engle Acoustic & Tile, Inc. v. Grenfell, 223 So. 2d 613, 617

(Miss. 1969)).   The question whether an agency relationship has

been created is generally one of fact:

     [W]hether an agency has in fact been created is to be
     determined by the relations of the parties as they
     exist under their agreements or acts, with the question
     being ultimately one of intention. . . . [I]f relations
     exist which will constitute an agency, it will be an
     agency whether the parties understood the exact nature
     of the relation or not. Moreover, the manner in which
     the parties designate the relationship is not
     controlling, and if an act done by one person in behalf
     of another is in its essential nature one of agency,
     the one is the agent of such other notwithstanding he
     is not so called.

Engle Acoustic & Tile, Inc., 223 So. 2d at 617-18 (internal

quotations omitted) (emphasis omitted) (quoting 3 AM. JUR. 2D

Agency § 21 (1962)).

     Resolving all factual conflicts in favor of Stripling, the

evidence demonstrates that before the final contract between

                                13
Jordan and Stripling was signed, Jordan agreed to purchase for

Guardian seventy-five percent of the eighty-percent interest that

Jordan was acquiring from Stripling.    As such, prima facie

evidence exists that Jordan may have been acting on behalf of

Guardian, an undisclosed principal.    See Bailey v. Worton, 752
So. 2d 470, 475-76 (Miss. Ct. App. 1999) (“Though an agent is

personally answerable if at the time of making the contract in

his principal’s behalf he failed to disclose the fact of his

agency, the other party to the contract may proceed against the

agent or against the principal.”).11

     The record reveals that there existed an ongoing

relationship between Jordan and Guardian, whereby Jordan had an

obligation to offer oil and gas interests to Guardian or any

other Guardian entity before it made any purchases.     Under this

relationship, after entering the letter of intent with Stripling

on November 2, 1996, Jordan went to Guardian and offered to buy

for Guardian a percentage of the working interest.     Guardian

     11
        Citing to the Restatement of Agency and cases involving
master-servant personal injury cases, Guardian’s primary argument
against this conclusion is that Guardian’s control over Jordan is
essential for a finding of agency. See RESTATEMENT (SECOND) OF AGENCY
§ 1 (1958). Guardian argues that certain letters between Jordan
and Guardian demonstrate that Guardian had the right to choose
not to participate in the drilling of the wells, not a right to
control the project.
     “The control of the principal does not, however, include
control at every moment; its exercise may be very attenuated and,
as where the principal is physically absent, may be ineffective.”
Id. § 14 cmt. a. We find that sufficient control by Guardian
exists to satisfy the prima facie showing necessary at this stage
of the proceedings.

                                 14
agreed, and Jordan and Guardian entered a letter agreement on

December 6, 1996, under which Guardian would pay the purchase

price of seventy-five percent of the eighty-percent interest.     On

January 1, 1997, Jordan and Stripling entered into the proposed

purchase and sale agreement, and the property was purchased with

Guardian’s money.   Before entering the agreement with Jordan,

Guardian hired a natural resource consultant and a petroleum

engineering consultant to review the project.

     Evidence exists which demonstrates that Jordan was holding

title for Guardian and that Guardian could demand and receive an

assignment whenever it deemed appropriate.   Deposition testimony

revealed that there was “[n]o particular reason” that Guardian

was not made a party to the Jordan/Stripling contract, other than

they “chose to do it all in Jordan Production Company.”   The

December 6, 1996 agreement between Jordan and Guardian provided

that Guardian “shall have the right to participate in drilling,

completions, re-works, etc.”

     Finally, in a May 5, 1998 letter from Jordan to Stripling

regarding reworking wells after Stripling filed suit, Jordan

admitted that it was writing on behalf of itself and “as agent

for others” and intended to rework the wells “individually and as

agent for the remaining parties” (emphasis added).   We believe

this evidence is sufficient for a prima facie case that Guardian

entered into a contract through its agent Jordan to be performed

                                15
in whole or in part in Mississippi, thus placing Guardian within

the reach of the state’s long-arm statute.

     Regarding the second prong of our personal jurisdiction

inquiry, a court may only exercise personal jurisdiction over a

nonresident if that exercise of jurisdiction comports with due

process.   Jurisdiction may be asserted only in situations in

which the nonresident has such minimum contacts with the forum

state that its being required to defend a suit in the forum state

would not “offend ‘traditional notions of fair play and

substantial justice.’”   Latshaw, 167 F.3d at 211 (quoting Int’l

Shoe Co. v. Washington, 326 U.S. 310, 316 (1945)).   The focus

here is on whether the nonresident “purposefully availed” itself

of the benefits of the forum state.    See Burger King Corp. v.

Rudzewicz, 471 U.S. 462, 475 (1985).

     “A state exercises ‘specific jurisdiction’ over a

nonresident defendant when the lawsuit arises from or relates to

the defendant’s contact with the forum state.”    Latshaw, 167 F.3d

at 211; Ruston Gas Turbines, Inc. v. Donaldson Co., 9 F.3d 415,

416 (5th Cir. 1993).   Moreover, a defendant’s single act can be

sufficient to confer personal jurisdiction “if that act gives

rise to the claim being asserted,” Ruston Gas Turbines, Inc., 9
F.3d at 416, so long as the defendant “reasonably anticipate[s]

being haled into court” in the forum state.    World-Wide

Volkswagen Corp. v. Woodson, 444 U.S. 286, 297 (1980).

                                16
     We find that Guardian had sufficient contact, on the present

record, to justify the district court’s exercise of specific

jurisdiction.   Because we conclude that Stripling established a

prima facie case of agency to justify the reach of the long-arm

statute, we find that such agency permits a conclusion that

Guardian entered into a contract with a Mississippi resident and

could have reasonably anticipated being haled into Mississippi

court should a suit arise from the Flora Field contract.    Such an

exercise of personal jurisdiction based upon Guardian’s specific

contact with the forum state does not offend “traditional notions

of fair play and substantial justice.”   As such, Stripling met

its prima facie burden, and the district court erred in

dismissing Guardian for lack of personal jurisdiction.

         IV. THE DISTRICT COURT ABUSED ITS DISCRETION IN

                   JORDAN I IN FINDING FUTILITY

     In order to resolve all of the contested issues on this

appeal, we must consider Stripling’s contention that the district

court erred in affirming the magistrate judge’s decision that the

joinder of Guardian would have been futile.   In deciding

Stripling’s Motion to Amend, the magistrate judge concluded that

there was no basis for liability against Guardian; therefore, its

joinder would have been futile.    The district court upheld this

conclusion, stating that it was not clearly erroneous.    Stripling

argues that under the considerations of Federal Rule of Procedure

                                  17
15(a),12 Guardian should have been joined as a party.     Therefore,

Stripling contends that the magistrate judge abused its

discretion in precluding Guardian’s joinder.      We agree.

                         A. Standard of Review

     We review a district court’s denial of leave to amend under

Rule 15(a) for an abuse of discretion.     See Whitmire v. Victus

Ltd., 212 F.3d 885, 887 (5th Cir. 2000); Martin’s Herend Imports,

Inc. v. Diamond & Gem Trading U.S. Am. Co., 195 F.3d 765, 770

(5th Cir. 1999).   The district court’s discretion is limited,

however, by Rule 15(a), which states that leave to amend must be

“freely given when justice so requires.”    FED. R. CIV. P. 15(a);

see also Foman v. Davis, 371 U.S. 178, 182 (1962); Leffall v.

Dallas Indep. Sch. Dist., 28 F.3d 521, 524 (5th Cir. 1994).      “In

the context of motions to amend pleadings, ‘discretion’ may be

misleading, because FED. R. CIV. P. 15(a) ‘evinces a bias in favor

of granting leave to amend.’”     Martin’s Herend Imports, Inc., 195
F.3d at 770 (quoting Dussouy v. Gulf Coast Inv. Corp., 660 F.2d
12
          Rule 15(a) provides in relevant part:

     Amendments. A party may amend the party’s pleading
     once as a matter of course at any time before a
     responsive pleading is served or, if the pleading is
     one to which no responsive pleading is permitted and
     the action has not been placed upon the trial calendar,
     the party may so amend it at any time within 20 days
     after it is served. Otherwise a party may amend the
     party’s pleading only by leave of court or by written
     consent of the adverse party; and leave shall be freely
     given when justice so requires.

FED. R. CIV. P. 15(a).

                                  18
594, 597 (5th Cir. 1981)).    Unless there is a “substantial reason

to deny leave to amend, the discretion of the district court is

not broad enough to permit denial.”      Dussouy, 660 F.2d at 598;

Martin’s Herend Imports, Inc., 195 F.3d at 770.

                             B. Discussion

     It is within the district court’s discretion to deny a

motion to amend if it is futile.       See Martin’s Herend Imports,

Inc., 195 F.3d at 771; Leffall, 28 F.3d at 524.      While this court

has not specifically defined “futility” in this context, we join

our sister circuits that have interpreted it to mean that the

amended complaint would fail to state a claim upon which relief

could be granted.     See, e.g., Shane v. Fauver, 213 F.3d 113, 115

(3d Cir. 2000); Gen. Elec. Capital Corp. v. Lease Resolution

Corp., 128 F.3d 1074, 1085 (7th Cir. 1997); Glassman v.

Computervision Corp., 90 F.3d 617, 623 (1st Cir. 1996); Rudolph

v. Arthur Anderson & Co., 800 F.2d 1040, 1041-42 (11th Cir.

1986).   As these courts have done, to determine futility, we will

apply “the same standard of legal sufficiency as applies under

Rule 12(b)(6).”     Shane, 213 F.3d at 115; Gen. Elec. Capital

Corp., 128 F.3d at 1085; Glassman, 90 F.3d at 623.

     “The question therefore is whether in the light most

favorable to the plaintiff and with every doubt resolved in his

behalf, the complaint states any valid claim for relief.”

Collins v. Morgan Stanley Dean Witter, 224 F.3d 496, 498 (5th

Cir. 2000) (internal quotations omitted) (quoting Lowrey v. Tex.

                                  19
A & M Univ. Sys., 117 F.3d 242, 247 (5th Cir. 1997)); Beanal v.

Freeport-McMoran, Inc., 197 F.3d 161, 164 (5th Cir. 1999).    The

court “may not dismiss a complaint under [R]ule 12(b)(6) ‘unless

it appears beyond doubt that the plaintiff can prove no set of

facts in support of his claim which would entitle him to

relief.’”    Shipp v. McMahon, 199 F.3d 256, 260 (5th Cir. 2000)

(quoting Conley v. Gibson, 355 U.S. 41, 45-46 (1957)); Beanal,
197 F.3d at 164.

     The magistrate judge held that joining Guardian as a

defendant would have been futile because Stripling “failed to

point to any facts indicating that in entering the agreement with

[Stripling], Jordan was acting on behalf of Guardian, rather than

on its own behalf, and pursuant to Guardian’s direction and

control.”    Because of this lack of facts, the magistrate judge

concluded there was no basis for Stripling to recover from

Guardian.    We disagree.

     Under the low threshold by which we evaluate a dismissal

under Rule 12(b)(6) and resolving any doubt in favor of

Stripling, we find that Stripling adduced facts in support of its

claim that would entitle it to relief.    As discussed in the prior

section and without repeating the significant facts, Stripling

produced sufficient evidence for a claim of relief against

Guardian as an undisclosed principal in order to survive

dismissal.

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     We find these facts sufficient to overcome a Rule 12(b)(6)

dismissal motion.   Accordingly, we conclude that the district

court abused its discretion in Jordan I in finding futility.

                           V. CONCLUSION

     For the foregoing reasons, we REVERSE and REMAND for further

proceedings consistent with this opinion.   Costs shall be borne

by the Appellees.

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