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
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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.
20
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.
21