REVISED JANUARY 15, 2003
UNITED STATES COURT OF APPEALS
For the Fifth Circuit
No. 02-10090
S&W ENTERPRISES, L.L.C., a Nevada Limited Liability Company,
Plaintiff-Appellant,
VERSUS
SOUTHTRUST BANK OF ALABAMA, NA, an Alabama Banking Corporation,
Defendant-Appellee.
Appeal from the United States District Court
For the Northern District of Texas, Dallas Division
January 6, 2003
Before HIGGINBOTHAM, DUHÉ, and DeMOSS, Circuit Judges.
DUHÉ, Circuit Judge:
Appellant S&W Enterprises, L.L.C. appeals from the district
court’s order granting summary judgment in favor of Appellee
SouthTrust Bank of Alabama, N.A., arguing that the court abused its
discretion in denying Appellant leave to amend its complaint.
Appellant argues also that fact issues preclude summary judgment.
We affirm.
BACKGROUND
SouthTrust Bank of Alabama (“SouthTrust”) sold to Daiwa Bank
Limited (“Daiwa”) a $10 million participation in a $24 million loan
SouthTrust had issued to Medical Technology Systems, Inc. The
agreement between SouthTrust and Daiwa (“Participation Agreement”)
prohibited Daiwa from assigning its interest without SouthTrust’s
consent, which consent SouthTrust agreed not to withhold
unreasonably. Thereafter, Daiwa and S&W Enterprises, L.L.C.
(“S&W”) entered into an agreement (“Purchase Agreement”) whereby
S&W would acquire Daiwa’s participation interest. S&W’s obligation
to purchase and Daiwa’s obligation to sell the participation
interest were contingent on SouthTrust’s consent to the assignment
agreement (“Assignment”) that would consummate the purchase. When
the parties sought SouthTrust’s consent to the Assignment, S&W
alleges that SouthTrust imposed unreasonable conditions before it
would consent. S&W refused to meet the conditions, and SouthTrust
refused to consent to the Assignment. S&W sued SouthTrust for
breach of contract, alleging that it was a third party beneficiary
to the Participation Agreement, and tortious interference with
prospective advantage, naming the Assignment.
The district court, on SouthTrust’s 12(b)(6) motion, dismissed
S&W’s breach of contract claims, leaving S&W to pursue only its
interference with prospective advantage claim. The court’s Third
Amended Scheduling Order, issued March 7, 2001, set the deadline
for amendment of pleadings at June 11, 2001 and the deadline for
completion of discovery at October 5, 2001. Trial was scheduled
for the court’s February 4, 2002 docket.
On March 8, 2001, the Texas Supreme Court decided Wal-Mart
Stores, Inc., v. Sturges, 52 S.W.3d 711 (Tex. 2001). Sturges
2
clarified that tortious interference with prospective advantage
requires a plaintiff to show that the defendant’s conduct, rather
than being a lawful means to obtain the advantage, was
“independently tortious or wrongful.” Id. at 717.
On September 25, 2001, more than three months after the
deadline for amendment of pleadings and more than six months after
Sturges was decided, S&W moved for leave to amend, ostensibly to
conform its pleadings to the requirements of Sturges. S&W
acknowledged that it was aware of the Sturges decision before the
deadline for amendment of pleadings, but explained that its counsel
failed to understand the impact of the case on S&W’s interference
with prospective advantage claim until after the deadline expired.
In fact, S&W’s proposed amended complaint added a new cause of
action, interference with contract, involving a contract not before
named in the pleadings, the Purchase Agreement between S&W and
Daiwa.
Before the district court ruled on S&W’s motion to amend,
SouthTrust filed its motion for summary judgment on the tortious
interference with prospective advantage claim asserted in the
original complaint. In the same opinion and order, the district
court denied S&W leave to amend and granted summary judgment to
SouthTrust. Emphasizing that S&W offered no adequate explanation
for its delay in seeking leave to amend, the court denied leave
because S&W’s motion was untimely and amendment would unduly
prejudice SouthTrust, who would require more discovery, or
3
alternatively, unnecessarily delay the trial. The court then
granted summary judgment, finding that S&W failed to demonstrate a
fact issue suggesting SouthTrust’s unreasonableness in refusing to
consent to the Assignment. S&W timely appeals.
DISCUSSION
I. DENIAL OF S&W’S MOTION FOR LEAVE TO AMEND
We review for abuse of discretion the district court’s denial
of leave to amend. Herrmann Holdings Ltd. v. Lucent Technologies
Inc., 302 F.3d 552, 558 (5th Cir. 2002).
The district court denied S&W leave to amend based on the
lenient standard of Federal Rule of Civil Procedure 15(a), which
provides that leave to amend “shall be freely given when justice so
requires.” SouthTrust argues, and S&W now concedes, that Federal
Rule of Civil Procedure 16(b) governs amendment of pleadings once
a scheduling order has been issued by the district court. Rule
16(b) provides that a scheduling order “shall not be modified
except upon a showing of good cause and by leave of the district
judge.” The good cause standard requires the “party seeking relief
to show that the deadlines cannot reasonably be met despite the
diligence of the party needing the extension.” 6A Charles Alan
Wright et al., Federal Practice and Procedure § 1522.1 (2d ed.
1990).
This Court has not ruled on the applicability of Rule 16(b) to
amendment of pleadings after the deadline set by a scheduling
4
order. We owe the trial court “‘broad discretion to preserve the
integrity and purpose of the pretrial order,’” Geiserman v.
MacDonald, 893 F.2d 787, 790 (5th Cir. 1990)(quoting Hodges v.
United States, 597 F.2d 1014, 1018 (5th Cir.1979)), which, toward
the end of court efficiency, is to expedite pretrial procedure.
Hodges, 597 F.2d at 1018. Several circuits,1 as well as district
courts within our circuit,2 have applied Rule 16(b) when leave to
amend would require modification of the scheduling order. We take
this opportunity to make clear that Rule 16(b) governs amendment of
pleadings after a scheduling order deadline has expired. Only upon
the movant’s demonstration of good cause to modify the scheduling
order will the more liberal standard of Rule 15(a) apply to the
district court’s decision to grant or deny leave.
The district court denied S&W leave to amend because its
motion was untimely and because of potential prejudice to
SouthTrust or, alternatively, unnecessary delay of the trial. The
court premised its denial also on its conclusion that S&W offered
1
See, e.g., Parker v. Columbia Pictures Industries, 204 F.3d
326, 342 (2nd Cir. 2000); In re Milk Prods. Antitrust Litig., 195
F.3d 430, 437 (8th Cir.1999); Sosa v. Airprint Sys., Inc., 133 F.3d
1417, 1419 (11th Cir.1998) (per curiam); Johnson v. Mammoth
Recreations, Inc., 975 F.2d 604, 610 (9th Cir.1992); Riofrio Anda
v. Ralston Purina Co., 959 F.2d 1149, 1154-55 (1st Cir.1992).
2
See, e.g., Dallas Area Rapid Transit v. Foster, 2002 WL
31433295, at *1 (N.D.Tex. Oct. 28, 2002); Howell v. Standard Motor
Products, Inc. 2001 WL 196969, at *1 (N.D.Tex. Feb 26, 2001);
Porter v. Milliken & Michaels, Inc. 2001 WL 378687, at *1 (E.D.La.
April 12, 2001); Bakner v. Xerox Corp. Employee Stock Ownership
Plan 2000 WL 33348191, at *13 (W.D.Tex. Aug. 28, 2000).
5
no adequate explanation for its failure to comply with the
scheduling order.3 As the district court noted, the same facts were
known to S&W from the time of its original complaint to the time it
moved for leave to amend. S&W could have asserted interference
with contract from the beginning, but fails to explain why it did
not. S&W’s explanation for its delayed analysis of Sturges
–inadvertence– is tantamount to no explanation at all.
In the context of allowing untimely submission of expert
reports, this Court has applied a four-part test to determine
whether the district court’s refusal to modify its scheduling order
was an abuse of discretion. We find this test appropriate as well
in the context of untimely motions to amend pleadings. We consider
“‘(1) the explanation for the failure to [timely move for leave to
amend]; (2) the importance of the [amendment]; (3) potential
prejudice in allowing the [amendment]; and (4) the availability of
a continuance to cure such prejudice.’” Reliance Ins. Co. v. La.
Land & Exploration Co., 110 F.3d 253, 257 (5th Cir. 1997)(quoting
Geiserman v. Macdonald, 893 F.2d 787, 791 (5th Cir. 1990)).4
3
“S&W offers no adequate basis for its failure to amend within
the deadlines established by the court. ... S&W offers no
explanation for the delayed analysis of Sturges, which resulted in
its untimely filing. Moreover, S&W wholly fails to explain why it
could not have set forth a claim of tortious interference with a
contract at the time its lawsuit was filed in 1998.” S&W Enters.,
L.L.C. v. SouthTrust Bank of Ala., 180 F. Supp.2d 811, 815
(N.D.Tex. 2001).
4
Our previous opinions in Estate of Strangi v. Comm’r, 293 F.2d
279 (5th Cir. 2002), and Lyn-Lea Travel Corp. v. American Airlines,
Inc., 283 F.3d 282 (5th Cir. 2002), did not apply the good cause
6
Three of the four factors weigh against S&W–the first because
S&W offers effectively no explanation, and the third because, as
S&W would assert a different cause of action, SouthTrust would be
required to conduct additional discovery. The fourth factor weighs
against S&W because, while a continuance could be granted for
additional discovery, the district court found that a continuance
would unnecessarily delay the trial. In view of district judges’
“power to control their dockets by refusing to give ineffective
litigants a second chance to develop their case,” Reliance
Insurance, 110 F.3d at 258, we conclude that it was within the
judge’s sound discretion not to grant a continuance. Taking the
court’s conclusions as a determination that good cause to modify
the scheduling order is absent, we find no abuse of discretion in
the district court’s refusal to grant leave to amend.
II. SUMMARY JUDGMENT
A. Standard of review
We review a district court’s grant of summary judgment de
standard. Estate of Strangi discussed Rule 15(a) because Tax Court
Rule 41(a), which governs amendment of pleadings in the Tax Court,
was modeled on Rule 15(a). The parties in Estate of Strangi were
not subject to a deadline for amendment of pleadings. In Lyn-Lea
Travel, we found no abuse of discretion in the district court’s
allowing amendment after the deadline for pleadings had expired.
We were not called upon in either case to consider the interaction
between Rules 15(a) and 16(b). Having done so today, we conclude
that the presence of a scheduling order renders the Rule 15 inquiry
secondary. To the extent that Lyn-Lea Travel may be in tension
with Geiserman and Reliance Insurance, we are bound to apply
Geiserman and Reliance Insurance, which predate Lyn-Lea Travel and
are germane to the district court’s right to enforce its scheduling
order.
7
novo, applying the same standards as would the district court.
Pratt v. Houston, 247 F.3d 601, 605-06 (5th Cir. 2001). Summary
judgment shall be rendered when the pleadings, depositions, answers
to interrogatories, and admissions on file, together with
affidavits, if any, show that there is no genuine issue of material
fact and the moving party is entitled to judgment as a matter of
law. Fed. R. Civ. P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317,
322, 106 S.Ct. 2548 (1986). Once a movant makes a properly
supported motion, the burden shifts to the nonmovant to show that
summary judgment should not be granted. Id. at 321-25, 106 S.Ct. at
2551-54. The nonmovant may not rest upon allegations in the
pleadings, but must set forth and support with summary judgment
evidence facts showing the existence of a genuine issue for trial.
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255-57, 106 S.Ct.
2505, 2513-14(1986). All evidence and the reasonable inferences to
be drawn therefrom must be viewed in the light most favorable to
the non-movant. United States v. Diebold, Inc., 369 U.S. 654, 655
(1962).
B. SouthTrust’s motion for summary judgment
SouthTrust argued that its refusal to consent to the
Assignment, reasonable or not, could not be the basis of the
independent tort required by Sturges. S&W contended that
SouthTrust’s conduct was tortious in that SouthTrust breached its
duty to perform its contract obligation to Daiwa with the
“faithfulness” required by law, citing Montgomery Ward & Co. v.
8
Scharrenbeck, 204 S.W.2d 508 (Tex. 1947). The district court
granted summary judgment, concluding that S&W demonstrated no fact
issue as to SouthTrust’s unreasonableness.
S&W admits that it produced no evidence in support of the
factual predicate to its faithfulness argument, SouthTrust’s
unreasonableness. It argues it was not required to do so because
SouthTrust, having presented the district court with a pure
question of law, never shifted to S&W the burden of demonstrating
a fact issue. S&W argues also that SouthTrust conceded in its
memorandum in support of summary judgment that it had acted
unreasonably.
While we do not agree that SouthTrust conceded its own
unreasonableness, we see merit in S&W’s contention that SouthTrust
never shifted to S&W the burden of producing a fact issue. Even
so, we conclude that we must affirm summary judgment because
SouthTrust’s unreasonableness would not constitute an independent
tort as required by Sturges. Summary judgment must be affirmed if
it is sustainable on any legal ground in the record, In re Jones,
966 F.2d 169, 172 (5th Cir. 1992), and it may be affirmed on
grounds rejected or not stated by the district court. Landry v.
Airline Pilots Ass’n, 892 F.2d 1238, 1252, (5th Cir. 1990).
In support of its position that SouthTrust’s alleged
unreasonableness violated a duty of faithfulness, S&W cites
Scharrenbeck, 204 S.W.2d 508, in which the Texas Supreme Court
stated: “‘Accompanying every contract is a common-law duty to
9
perform with care, skill, reasonable expedience and faithfulness
the thing agreed to be done, and a negligent failure to observe any
of these conditions is a tort, as well as a breach of the
contract.’” Id. at 510 (quoting 38 Am. Jur. § 20 (1941)). This
language from Sharrenbeck must be considered in context. The
defendant in Sharrenbeck negligently repaired the plaintiff’s
heater, which then caused a fire that destroyed the plaintiff’s
house. The Texas Supreme Court held that the plaintiff was not
limited to recovery in contract; the basis for the plaintiff’s tort
recovery was a duty implied by law regardless of the contract
obligation. As the supreme court later explained in Southwestern
Bell Telephone Co. v. Delanney, 809 S.W.2d 493, 494 (Tex. 1991),
“Although the contract obligated the defendant to put the water
heater back in good working order, the law also implied a duty to
the defendant to act with reasonable skill and diligence in making
the repairs so as not to injure a person or property by his
performance.” In contrast, a duty owed only by virtue of contract
obligation, such as that owed by SouthTrust, does not give rise to
tort liability. Id. The damages arising from the defendant’s
conduct are instructive also; if damages arise solely from the loss
of the contract benefit, the claim sounds only in contract. Id. at
495; Jim Walter Homes, Inc. v. Reed, 711 S.W.2d 617, 618 (Tex.
1986). Other damages, such as property damage or personal injury,
can be recovered in tort. Id.
SouthTrust owed a duty not to withhold consent unreasonably
10
solely because of the Participation Agreement between it and Daiwa.
SouthTrust’s breach would entitle Daiwa to recover only for loss of
the contract benefit of obtaining SouthTrust’s consent to an
assignment of Daiwa’s participation interest. We hold that
SouthTrust’s failure to consent to the Assignment, regardless of
its reasonableness, was not independently tortious and therefore
provides no basis for S&W’s interference with prospective advantage
claim.
III. CONCLUSION
We find no abuse of discretion in the district court’s denial
of leave to amend. SouthTrust’s unreasonableness in failing to
consent to the Assignment is insufficient to constitute the
independent tort required by Sturges. We therefore affirm the
judgment of the district court.
AFFIRMED.
11