IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF TEXAS DALLAS DIVISION
CALI-CURL, INC.,
Plaintiff,
v.
MARIANNA INDUSTRIES, INC., Civil Action No. 3:23-CV-00320-K MARIANNA BEAUTY HOLDINGS, INC., COHERE BEAUTY HOLDINGS, LLC, and COHERE BEAUTY GROUP, LLC,
Defendants.
MEMORANDUM OPINION AND ORDER
Before the Court are Plaintiff Cali-Curl, Inc.’s (“Cali-Curl”) Motion to Remand (the “Motion to Remand”), Doc. No. 17, Marianna Industries, Inc.’s (“Marianna In- dustries”) Response in Opposition to Plaintiff’s Motion to Remand and Appendix in support thereof, Doc. Nos. 21–22, Cali-Curl’s Reply in Support of its Motion to Re- mand, Doc. No. 27, Defendants Marianna Beauty Holdings, Inc. (“Marianna Hold- ings”), Cohere Beauty Holdings, LLC (“Cohere Holdings”), and Cohere Beauty Group, LLC’s (“Cohere Group” and, collectively with Marianna Holdings and Cohere Hold- ings, the “Parent Defendants”) Motion to Dismiss Plaintiff’s Original Petition (the “Parent Defendants’ Motion to Dismiss”) and Brief and Appendix in support thereof, Docs. No. 11–12, Marianna Industries’ Motion to Dismiss Plaintiff’s Original Petition (“Marianna Industries’ Motion to Dismiss”) and Brief and Appendix in support thereof, Docs. No. 9–10, Cali-Curl’s Response to Marianna Industries’ Motion to Dis-
miss, Doc. No. 26, Marianna Industries’ Reply in Support of Its Motion to Dismiss Plaintiff’s Original Petition, Doc. No. 30, Cali-Curl’s Motion for Leave to Amend (the “Motion for Leave to Amend”), Doc. No. 25, Defendants’ Response to Plaintiff’s Mo- tion for Leave to Amend, Doc. No. 29, and Marianna Industries’ Unopposed Motion for Extension of Time to Reply to Cali-Curl’s Motion to Dismiss Response (the “Mo-
tion for Extension of Time to Reply”). Doc. No. 28. The Court GRANTS Marianna Industries’ Motion for Extension of Time to Reply and has considered Marianna In- dustries’ reply brief together with the Parties’ other submissions. The Court first DENIES Cali-Curl’s Motion to Remand without prejudice. This
case pits Cali-Curl, a Delaware corporation based in Texas, against its Nebraska-based supplier, Nebraska corporation Marianna Industries, and Marianna Industries’ Dela- ware-incorporated parent companies, the Parent Defendants Marianna Holdings, Co- here Holdings, and Cohere Group. Cali-Curl asserts an array of contract, warranty,
and tort claims against Marianna Industries and the Parent Defendants because Mari- anna Industries purportedly undermined the launch of Cali-Curl’s new hair care prod- uct by failing to use reasonable manufacturing processes and making defective versions of the product. Cali-Curl does not allege that the Parent Defendants are directly liable for Marianna Industries’ faulty manufacturing. Cali-Curl also fails to plead facts show-
ing that the Parent Defendants cooperated in the manufacturing or exploited Marianna Industries’ separate corporate existence to defraud Cali-Curl, so the Court finds that Cali-Curl improperly joined the Parent Defendants and that remand is improper. The
Court DENIES the Parent Defendants’ Motion to Dismiss as moot because the Court dismisses the Parent Defendants without prejudice as improperly joined Parties. The Court DENIES Marianna Industries’ Motion to Dismiss Cali-Curl’s initial pleading as moot because Cali-Curl has filed a Motion for Leave to Amend its pleading
that the Court GRANTS in part and DENIES in part without prejudice. Although Cali-Curl has neither a written nor an oral contract with Marianna Industries, Mari- anna Industries has not challenged Cali-Curl’s contract or warranty claims, and, in its proposed amended pleading, Cali-Curl properly pleads these claims in the alternative to its negligence and gross negligence claims. The Court denies Cali-Curl leave to
amend its misrepresentation-based claims because Cali-Curl has not explained who de- frauded Cali-Curl and where they did it as Federal Rule of Civil Procedure 9(b) requires. I. BACKGROUND A. Facts The Court draws the following facts from Cali-Curl’s Original Petition, Doc. No. 1-1 (“Pet.”), and Cali-Curl’s proposed First Amended Complaint, Doc. No. 25-1
(“FAC”), and assumes that they are true. Cali-Curl is a young Dallas-based business that sought to develop a “modern perm system” that would provide customers with long-lasting wavy hair. Pet. ¶¶ 5, 17, 21. The business is incorporated in Delaware and enjoys sophisticated and experienced leadership. Id. ¶¶ 5, 21–24.
In 2017, Cali-Curl initiated collaboration with Marianna Industries, a Nebraska- based manufacturer incorporated in Nebraska, to create Cali-Curl’s product. Id. ¶ 25. Marianna Industries is a wholly-owned subsidiary of Marianna Holdings, a Delaware corporation. Id. ¶¶ 7, 89. Marianna Industries and Marianna Holdings share a princi- pal place of business, and Marianna Holdings provides Marianna Industries with some
insurance, though not enough to cover losses from product defects and recalls. Id. ¶ 89; FAC ¶ 88. In 2021, Marianna Industries became an indirect subsidiary of Cohere Group and Cohere Holdings, each a Delaware limited liability company and citizen of Delaware, when a portfolio company of CORE Industrial Partners, a private equity
fund, acquired Marianna Holdings. Pet. ¶ 86; FAC ¶ 90; Doc. No. 1 at 4 n.2. Like Marianna Holdings, Cohere Group and Cohere Holdings have no employees or opera- tions but guarantee some of Marianna Industries’ debts and “likely” file consolidated tax returns and maintain consolidated financial statements with Marianna Industries.
FAC ¶¶ 87–90. Marianna Industries and the Parent Defendants share three executives, who also comprise the boards of directors for Marianna Industries and Marianna Hold- ings. Id. ¶ 93. Early in their collaboration, Marianna Industries gave Cali-Curl a “baseline prod- uct,” which Cali-Curl modified to meet its needs. Pet. ¶ 18. Between 2017 and 2022,
Marianna Industries served as Cali-Curl’s “contract” manufacturer without a written contract. FAC ¶¶ 25–26. Under an informal arrangement with Cali-Curl, Marianna Industries was to abide by industry standards and operate as a “reasonably prudent”
manufacturer, but there was “no negotiation or meeting of the minds” between Cali- Curl and Marianna Industries on “important issues related to risk allocation or damage limitations.” Id. ¶¶ 25–26, 33. Cali-Curl scheduled the launch of the perm product manufactured by Marianna Industries for April 2022, which coincided with an industry event. Pet. ¶ 26.
At the end of March 2022, Cali-Curl learned that Marianna Industries had ac- quired 4.5-ounce bottles to contain Cali-Curl’s product rather than the 5-ounce bottles Cali-Curl needed. Id. ¶¶ 29–30. The small bottles lacked sufficient capacity to permit proper shaking and mixing of the chemicals used in the product, but Marianna Indus-
tries falsely assured Cali-Curl that it could replicate Cali-Curl’s product in the small bottles by adjusting the concentration of chemicals in existing batches of the product and underfilling the bottles. Id. ¶ 30; FAC ¶¶ 32–36. Although altering the chemistry of existing batches of product is “uncommon,” Cali-Curl launched the modified prod-
uct on schedule in reliance on Marianna Industries’ assurance. Pet. ¶¶ 31–34. After the product launch, customers informed Cali-Curl that the product caused their hair to break or melt. Id. ¶ 32. Cali-Curl tested the modified product and learned that its chemical composition did not match Cali-Curl’s approved formula. Id. ¶ 33. Cali-Curl also discovered that Marianna Industries shipped product that failed quality
control testing, added an ingredient to some of the product that it was not supposed to use, and manufactured batches of defective product that leaked from bottles or pre- cipitated and clogged bottle nozzles. Id. ¶ 38.
Cali-Curl recalled its product. Id. ¶ 36. As a result of its failed product launch, Cali-Curl’s projected gross sales fell from nearly $32 million to $1.5 million for the twelve months beginning in April 2022, and its projected net operating profit over that span fell from a gain of $4.5 million to a loss of $2.3 million. Id. ¶¶ 45–46.
B. Procedural History On January 6, 2023, Cali-Curl filed an Original Petition in the 101st Judicial District Court of Dallas County seeking damages from Marianna Industries for harm to Cali-Curl caused by Marianna Industries’ allegedly improper manufacturing of Cali- Curl’s product and its allegedly false assurances to Cali-Curl that it could properly man- ufacture the product in 4.5-ounce bottles. Id. at 30. Cali-Curl asserted that Marianna
Industries was (1) negligent or (2) grossly negligent in its manufacturing, that Mari- anna Industries’ manufacture of defective product (3) breached an implied contract with Cali-Curl and (4) breached an express warranty and an implied warranty of fitness to Cali-Curl, and that Marianna Industries’ false assurances constituted (5) fraud, (6)
negligent misrepresentation, and (7) a deceptive trade practice. Id. ¶¶ 48–85. Cali- Curl also sought declaratory relief. Id. ¶¶ 86–87. Cali-Curl additionally sought relief from the Parent Defendants on three theo- ries. Id. ¶¶ 88–97. Cali-Curl asserted (1) that the Parent Defendants are liable for
Marianna Industries’ obligations on a veil piercing theory because they are “alter egos,” or extensions, of Marianna Industries, (2) that the Parent Defendants aided and abet- ted Marianna Industries’ tortious conduct, and (3) that the Parent Defendants are re-
sponsible for Marianna Industries’ negligence- and misrepresentation-based torts be- cause they engaged in a joint enterprise with Marianna Industries to “work to manu- facture” product for Cali-Curl. Id. On February 10, 2023, Marianna Industries removed Cali-Curl’s suit to this Court, where it asserted that Cali-Curl had improperly joined the non-diverse Parent
Defendants whose presence would otherwise prevent the Court from exercising juris- diction. Doc. No. 1. About one month later, Marianna Industries moved to dismiss the claims against it for failure to state a claim. Doc. No. 9. The Parent Defendants simultaneously moved to dismiss the claims against them for lack of personal jurisdic-
tion and for failure to state a claim. Doc. No. 11. Cali-Curl subsequently moved to remand the suit to state court. Doc. No. 17. While the Parties’ motions were pending, Cali-Curl moved for leave to amend its Original Petition. Doc. No. 25. Cali-Curl’s proposed First Amended Complaint
abandons Cali-Curl’s deceptive trade practices claim and advances two new theories of liability against the Parent Defendants. FAC at 21; id. ¶¶ 87–94. Cali-Curl contends that the Parent Defendants are liable for Marianna Industries’ obligations either be- cause all Defendants are under the control of their shared officers or because all De- fendants are under the common control of CORE Industrial Partners. FAC ¶¶ 87–94.
Cali-Curl’s proposed amended pleading otherwise retains the allegations set forth in Cali-Curl’s Original Petition, supplemented with allegations describing, among other things, Cali-Curl’s supply arrangement with Marianna Industries, Marianna Industries’
assurances to Cali-Curl about modifying Cali-Curl’s product for use in small bottles, the personnel and services Marianna Industries shares with one or more Parent De- fendants, and the operations Defendants coordinate among themselves. E.g., id. ¶¶ 26, 32–33, 87–94.
II. CALI-CURL’S MOTION TO REMAND The Court begins by holding that it has jurisdiction to decide this case. Cali- Curl’s Motion to Remand challenges the Court’s subject matter jurisdiction over cases between parties that are citizens of different states on the basis that Cali-Curl sued three Defendants—the Parent Defendants—who share its Delaware citizenship. Doc. No. 17 at 5. Cali-Curl contends that it properly sued the Parent Defendants because
they are liable for Marianna Industries’ alleged wrongdoing. Id. at 17–24. The Parent Defendants’ Motion to Dismiss challenges the Court’s personal jurisdiction over the Parent Defendants on the basis that they have no connection to the state of Texas, where the Court sits, and are not responsible for the conduct of Marianna Industries,
who does. Doc. No. 11 at 8–9. Since the Parties’ jurisdictional motions raise similar questions about the propriety of attributing Marianna Industries’ acts to the Parent Defendants, the Court follows common practice and first addresses Cali-Curl’s Motion to Remand challenging the Court’s subject matter jurisdiction. See Sangha v. Navig8 ShipManagement Private Ltd., 882 F.3d 96, 100 (5th Cir. 2018) (noting “general expectation” that courts address subject matter jurisdiction before personal jurisdic- tion). The Court concludes that it has subject matter jurisdiction because Cali-Curl
improperly joined the Parent Defendants, so the Court dismisses the claims against the Parent Defendants without prejudice and denies the Parent Defendants’ Motion to Dismiss the claims against them as moot. A. Legal Standard The Court has diversity jurisdiction over cases removed from state court where
the properly joined defendants are citizens of different states than the plaintiffs and the matter in controversy exceeds the value of $75,000. 28 U.S.C. §§ 1332(a), 1441(a). A plaintiff improperly joins a defendant who shares the plaintiff’s citizenship by committing fraud in the pleading of jurisdictional facts or by joining the defendant
where there is no reasonable basis for the Court to predict that the plaintiff might recover against the defendant. Smallwood v. Illinois Cent. R.R. Co., 385 F.3d 568, 573 (5th Cir. 2004) (en banc). The Court typically determines whether there is a reasona- ble basis for recovery by assessing whether the plaintiff’s claims against the defendant meet federal pleading standards, meaning that they contain “enough facts to state a
claim to relief that is plausible on its face.” Int’l Energy Ventures Mgmt., L.L.C. v. United Energy Grp., Ltd., 818 F.3d 193, 200 (5th Cir. 2016) (citation omitted). In assessing the plaintiff’s pleading, the Court accepts the plaintiff’s factual allegations as true but does not accept the plaintiff’s legal conclusions as true. Wolf v. Deutsche Bank Nat’l Tr.
Co., 745 F. App’x 205, 208 (5th Cir. 2018). The Court construes ambiguities in state law, including the state choice of law principles the Court must apply in diversity ac- tions, in favor of the plaintiff. Zermeno v. McDonnell Douglas Corp., 246 F. Supp. 2d
646, 653–56 (S.D. Tex. 2003) (Rosenthal, J.). If the facts taken as true are “merely consistent with [the] defendant’s liability” under applicable law, they stop “short of the line between possibility and plausibility of entitlement to relief,” and the Court will dismiss the claims against the defendant. Carrillo Funeral Directors, Inc. v. Ohio Sec. Ins. Co., 2017 WL 5070376, at *4 (N.D. Tex. Nov. 3, 2017) (Fish, J.) (quoting Ashcroft v.
Iqbal, 556 U.S. 662, 678 (2009)). The Court may also conduct a “summary inquiry” into facts beyond the pleadings, but only if the facts are, discrete, undisputed, and defeat the plaintiff’s claim. Hicks v. Martinrea Auto. Structures (USA), Inc., 12 F.4th 511, 516 (5th Cir. 2021).
B. Materials Considered The Court resolves Cali-Curl’s Motion to Remand based on Cali-Curl’s Original Petition and its proposed First Amended Complaint, except for the portions of the proposed First Amended Complaint that assert veil piercing theories of liability absent from the Original Petition. The Court agrees with the Parties that it can decide the
Motion to Remand on the pleadings without a summary inquiry into evidence the Par- ties have presented. Doc. No. 17 at 16; Doc. No. 21 at 25. The Court also agrees with Defendants that the Court generally cannot consider pleadings amended after the removal of a suit from state court in deciding whether a
plaintiff has improperly joined a defendant. Doc. No. 29 at 12; Cavallini v. State Farm Mut. Auto Ins. Co., 44 F.3d 256, 264 (5th Cir. 1995). The Court disagrees that the general rule precludes consideration of Cali-Curl’s First Amended Complaint in its en-
tirety. Doc. No. 29 at 12–13. The Court may consider amended allegations that clarify claims pled in the pre-removal Original Petition so long as it does not consider claims or theories of relief not pled in the Original Petition. Compare Bukowski v. Liberty Ins. Corp., 2022 WL 1625173, at *5 (W.D. Tex. May 20, 2022) (considering allegations of fraud sharpened post-removal to satisfy federal pleading standards), with Akerblom v.
Ezra Holdings Ltd., 509 F. App’x 340, 344–46 (5th Cir. 2013) (refusing to consider tort claims and joint enterprise and alter ego theories of liability “raised for the first time after removal”), overruled in part on other grounds by Int’l Energy Ventures, 818 F.3d 193, and Ayala v. Enerco Grp., Inc., 569 F. App’x 241 (5th Cir. 2014) (refusing to consider
theory of “handling and merchandising” negligence because pre-removal pleading al- leged only “packaging and shipping” negligence). Many of Cali-Curl’s revised allegations against the purportedly improperly joined Parent Defendants in its proposed First Amended Complaint clarify Cali-Curl’s
pre-removal pleading, and the Court will consider them. Cali-Curl adds details about the Parent Defendants’ operations and the officers, directors, and services that the Par- ent Defendants allegedly share with Marianna Industries. FAC at 27–30. These details are fairly within the scope of Cali-Curl’s pre-removal veil piercing theory, which posited that the Parent Defendants are liable for Marianna Industries’ obligations because they
are alter egos of Marianna Industries that control Marianna Industries through overlapping operations and personnel. Id.; cf. De La Hoya v. Coldwell Banker Mex., Inc., 125 F. App’x 533, 537–38 (5th Cir. 2005) (considering post-removal evidence bolster-
ing single business enterprise theory of liability because allegations referring to defend- ants collectively and charging them with “joint enterprise” liability fairly raised the theory). The same is not true of Cali-Curl’s proposed new veil piercing theories. The Court will not consider the First Amended Complaint to the extent Cali-Curl asserts
that the Court should pierce Marianna Industries’ corporate veil because Marianna Industries is under the control of the Parent Defendants’ officers or, with the Parent Defendants, under the common control of CORE Industrial Partners. There is no trace of either of these theories in Cali-Curl’s pre-removal pleading. FAC at 27–30.
C. Discussion After review of Cali-Curl’s Original Petition and proposed First Amended Com- plaint, the Court concludes that Cali-Curl improperly joined the Parent Defendants because neither pleading states a claim for relief against a Parent Defendant that sur- vives a Rule 12(b)(6)-type analysis. Cali-Curl’s pleadings share three theories of the
Parent Defendants’ liability, all of which are at least partially derivative of the alleged liability of their subsidiary, Marianna Industries. The first theory of liability, a veil piercing theory, fails because Cali-Curl’s factual allegations do not show that Marianna Industries’ separate corporate existence defrauded Cali-Curl. FAC ¶¶ 85–94. The sec-
ond and third theories of liability, for aiding and abetting and conduct in a joint enterprise, respectively, rest on conclusory allegations from which the Court cannot infer that the Parent Defendants may be liable. Id. ¶¶ 96–98–101.
1. Veil Piercing Liability Cali-Curl has not adequately pled its veil piercing theory because it fails to plead that it suffered from fraud that requires the Court to pierce Marianna Industries’ cor- porate veil. Cali-Curl’s theory is that each Parent Defendant is an alter ego of Marianna Industries, which exists to carry out the Parent Defendant’s purposes and fraudulently
shield the Parent Defendant from claims Marianna Industries. FAC ¶¶ 85–94. Among other things, Cali-Curl alleges that the Parent Defendants share officers, directors, and services with Marianna Industries, that the shared personnel oversee Cali-Curl on be- half of the Parent Defendants, and that Cali-Curl and the Parent Defendants coordi- nate some of their operations. Id. In its briefing, Cali-Curl acknowledges that Mari-
anna Holdings is the only Parent Defendant that owns an interest in Marianna Indus- tries but asserts that there is “absolute” unified control up and down the “corporate ladder” that includes Defendants. Doc. No. 17 at 13–14. Nebraska law governs Cali-Curl’s request to pierce Marianna Industries’ corpo-
rate veil because Texas choice of law principles, to which this Court looks in actions within its diversity jurisdiction, require the Court to use veil piercing standards estab- lished by the jurisdiction of Marianna Industries’ incorporation. Clapper v. Am. Realty Invs., Inc., 2018 WL 3868703, at *18 (N.D. Tex. Aug. 14, 2018) (Fitzwater, J.); Tex.
Bus. Orgs. Code §§ 1.102, 1.104. A Nebraska corporation is distinct from the entities who own and manage it, and the Court may hold the entities liable for the corporation’s obligations only if the entities “actual[ly] control” the corporation and exercise their
“control to commit a fraud or other wrong in contravention of the plaintiff’s rights.” Wolf v. Walt, 247 Neb. 858, 866 (1995) (citation omitted). The Supreme Court of Nebraska has not decided whether the “corporate veil may be pierced to reach a non- shareholder,” but the Court assumes that it can. 407 N 117 St., LLC v. Harper, 314 Neb. 843, 850 (2023). The Court evaluates Cali-Curl’s claim that Defendants have
defrauded “creditors or victims of wrongdoing of their ability to collect” by separating Marianna Industries from the Parent Defendants in light of four non-exclusive factors Nebraska courts use to identify fraud: (1) whether Marianna Industries was grossly inadequately capitalized at its inception, (2) whether Marianna Industries was insol-
vent when it incurred liability to Cali-Curl, (3) whether the Parent Defendants diverted corporate funds or assets to their own or other improper uses, and (4) whether Mari- anna Industries is a “mere façade for the personal dealings” of the Parent Defendants and its operations “are carried on by the [Parent Defendants] in disregard of the cor-
porate” form. Christian v. Smith, 276 Neb. 867, 883 (2008); see also KM Ag Servs., Inc. v. ASI Ag Servs., Inc., 2016 WL 7209672, at *2 (D. Neb. Dec. 12, 2016) (applying Christian, a contract case, to a tort claim); FAC ¶ 93. Assuming without deciding that Cali-Curl sufficiently pleads that the Parent De- fendants actually control Marianna Industries, Cali-Curl’s allegations give no indica-
tion that the Parent Defendants used Marianna Industries’ separate existence to defraud Cali-Curl. Cali-Curl alleges that it is a sophisticated entity boasting an “exec- utive team with significant and world class expertise in the beauty product industry”
that entered a significant supply arrangement with Marianna Industries. FAC ¶¶ 22– 26. Although Marianna Industries allegedly failed to perform under the arrangement, Cali-Curl does not contend that the Parent Defendants led Cali-Curl to believe that they would be involved in supplying Cali-Curl or that the Parent Defendants’ assets were backing Marianna Industries. Id. ¶ 77; RSG, Inc. v. Sidump’r Trailer Co., 2012 WL
4486304, at *7 (D. Neb. Sept. 27, 2012) (refusing to pierce entity’s veil in dispute over “arms-length transaction” between sophisticated parties who allocated risks be- tween themselves). Review of the factors Nebraska courts consider in evaluating allegations of fraud
confirm that none support Cali-Curl’s claim. Cali-Curl does not seriously contend that any of the first three factors favor piercing Marianna Industries’ corporate veil. Cali- Curl does not allege that the Parent Defendants improperly diverted funds from Mari- anna Industries to evade obligations to Cali-Curl. Cali-Curl also fails to plead that
Marianna Industries undertook its obligations to Cali-Curl knowing it could not dis- charge them. Cali-Curl does not allege that Marianna Industries was insolvent when it undertook the obligations. Cali-Curl does allege that it is “unclear” whether Marianna Industries currently has “sufficient capital or assets to satisfy any judgment Cali-Curl might obtain,” FAC ¶ 91, but “[i]nadequate capitalization is measured at the time of
[corporate] formation,” not the time of litigation. S. Lumber, 229 Neb. at 257–58. Taken as true, Cali-Curl’s allegations regarding the last factor—whether Mari- anna Industries is a façade for the Parent Defendants—do not show that any blurring
of the identities of Marianna Industries and the Parent Defendants misled Cali-Curl. See Timm Grandview, LLC v. AmGuard Ins. Co., 2022 WL 4017946, at *7 (D. Neb. Sept. 2, 2022) (refusing to pierce corporate veil where plaintiff could not show that alleged operation of parent and subsidiary as alter egos caused injustice to plaintiff). The Par- ent Defendants’ sharing of personnel and services is not fraudulent. Glob. Credit Servs.
v. AMISUB, 244 Neb. 681, 689–90 (1993). Their coordination of operations is not fraudulent, either. Certified Moving & Storage Co., LLC v. Applied Underwriters, Inc., 2022 WL 1304410, at *5 (D. Neb. May 2, 2022) (dismissing veil piercing claim against affiliates that cooperated in promoting an investment scheme). While Cali-Curl alleges
that Marianna Industries held “itself out as just one entity,” the basis for this allegation is a statement from an unspecified speaker describing Marianna Holdings as a “full- service custom manufacturer, formulator and distributor of client-tailored hair care” and other products. FAC ¶ 85. Cali-Curl appears to believe that this statement is
misleading because it better describes Marianna Industries, a manufacturer. Doc. No. 17 at 18. The Court disagrees. The statement does not indicate that Marianna Hold- ings is interchangeable with any particular manufacturer, and Cali-Curl does not allege that it understood the statement to so indicate when it transacted with Marianna In- dustries. Had the statement misled Cali-Curl about the relationship between Marianna
Industries and Marianna Holdings, Cali-Curl’s allegations still would not advance Cali- Curl’s veil piercing theory absent identification of the speaker. The Court cannot pierce the veil of a Nebraska corporation to prevent fraud unless the person to be held liable
for the corporation’s obligations was at fault in perpetrating the fraud. Slusarski v. Am. Confinement Sys., Inc., 218 Neb. 576, 581 (1984). 2. Aiding and Abetting Liability Turning to Cali-Curl’s second theory of the Parent Defendants’ liability, the Court concludes that there is no reasonable basis for Cali-Curl to recover against the
Parent Defendants for aiding and abetting even if aiding and abetting is a valid legal theory. Cali-Curl’s aiding and abetting theory rests on two, largely conclusory allega- tions. Cali-Curl contends that the Parent Defendants actually or constructively knew that Marianna Industries negligently or grossly negligently operated its manufacturing process for Cali-Curl product and negligently or fraudulently misrepresented to Cali-
Curl its ability to properly make Cali-Curl product in 4.5-ounce bottles. FAC ¶ 98. With that knowledge, the Parent Defendants allegedly furthered their own financial interests by assisting and encouraging Marianna Industries in its purportedly tortious conduct “through the actions of their shared officers, capital, and corporate resources.”
Id. Because Cali-Curl’s aiding and abetting theory depends on matters beyond the internal affairs of Marianna Industries, the Court must apply the law of the jurisdiction with the most significant relationship to the theory. Highland Crusader Offshore Partners,
L.P. v. LifeCare Holdings, Inc., 2008 WL 3925272, at *3 (N.D. Tex. Aug. 27, 2008) (Boyle, J.), aff’d, 377 F. App’x 422 (5th Cir. 2010). The Parties’ briefs ask the Court to apply Nebraska or Texas law. See, e.g., Doc. No. 11 at 31; Doc. No. 17 at 23. Under
either state’s law, Cali-Curl’s aiding and abetting theory fails. Measured against Nebraska substantive law, Cali-Curl’s allegations lack suffi- cient factual content to state an aiding and abetting claim. Under Nebraska law, “civil abetting liability arises for ‘one who counsels, commands, directs, advises, assists, or aids and abets another individual in commission of a wrongful act or tort.’” KD v.
Douglas Cnty. Sch. Dist. No. 001, 1 F.4th 591, 600 (8th Cir. 2021) (quoting Bergman v. Anderson, 226 Neb. 333, 411 (1987)), cert. denied, 142 S. Ct. 485 (2021). In its First Amended Complaint, Cali-Curl recites the elements of aiding and abetting liability, but Cali-Curl’s only factual allegations supporting its contention that the Parent Defend-
ants assisted Marianna Industries in its purportedly tortious conduct are its allegations that the entities’ shared officers took unspecified actions and that the Parent Defend- ants provided Marianna Industries with capital and “corporate resources.” FAC ¶ 98. The Court cannot plausibly infer from Cali-Curl’s vague allegations that the Parent
Defendants are liable for aiding and abetting Marianna Industries’ specific tortious conduct. See Marquis Energy, LLC v. Rayeman Elements, Inc., 2022 WL 676541, at *5 (D. Neb. Mar. 7, 2022) (dismissing “largely inchoate” aiding and abetting claim based on “little more than labels and unsupported legal conclusions”). Cali-Curl does not explain how the actions of the Parent Defendants’ officers or the resources supplied by
the Parent Defendants to Marianna Industries contributed to that conduct. Measured against Texas substantive law, Cali-Curl’s aiding and abetting theory fails for the same reason. For nearly thirty years, the Supreme Court of Texas has
expressly left open the question whether a valid civil claim for aiding and abetting ex- ists, but the claim, if recognized, requires a defendant to substantially assist another in the other’s wrongdoing. See Juhl v. Airington, 936 S.W.2d 640, 644 (Tex. 1996); First United Pentecostal Church of Beaumont v. Parker, 514 S.W.3d 214, 224 (Tex. 2017); Reyn- olds v. Sanchez Oil & Gas Corp., 2023 WL 3311116, at *9–10 (Tex. App.—Houston [1st
Dist.] May 9, 2023, no pet.). The Parties debate at length whether civil aiding and abetting is a valid claim, and there is reason to doubt that the likelihood the claim exists is sufficient to warrant remand. E.g., Doc. No. 17 at 22–24; Doc. No. 21 at 23– 25; Doc. No. 27 at 9–10. A party may not obtain a remand by raising the “‘mere
theoretical possibility’” that a “cause of action exists” against a nondiverse party. Mar- ketfare Annunciation, LLC v. United Fire & Cas. Co., 2007 WL 837202, at *1 (E.D. La. Mar. 15, 2007) (quoting Smallwood, 385 F.3d at 573 n. 9); Jack v. Evonik Corp., 79 F.4th 547, --- (5th Cir. 2023) (finding improper joinder where plaintiff relied on tort theory
unrecognized by Louisiana courts). The Texas Courts of Appeals have repeatedly re- fused to recognize a claim for aiding and abetting. See, e.g., Hampton v. Equity Tr. Co., 607 S.W.3d 1, 5 (Tex. App.—Austin 2020, pet. denied); AmWins Specialty Auto, Inc. v. Cabral, 582 S.W.3d 602, 611 (Tex. App.—Eastland 2019, no pet.); Solis v. S.V.Z., 566 S.W.3d 82, 103 (Tex. App.—Houston [14th Dist.] 2018, pet. denied). Opinions re-
manding potential aiding and abetting claims have drawn on an analogy between recognized claims for knowing participation in breaches of fiduciary duty and unrecog- nized claims for aiding and abetting that the Fifth Circuit has since questioned. Com-
pare Woloshen v. State Farm Lloyds, 2008 WL 4133386, at *3 (N.D. Tex. Sept. 2, 2008) (Fitzwater, J.) (remanding based on analogy with fiduciary duty cases), with In re DePuy Orthopaedics, Inc., 888 F.3d 753, 781 (5th Cir. 2018) (holding that fiduciary duty cases do not “speak[], let alone clearly, to the question” of aiding and abetting liability). Despite the Parties’ extensive briefing, they do not fully address the issues identified
by the Court, so the Court does not decide whether a properly-pled aiding and abetting claim could survive an improper joinder analysis. At minimum, Cali-Curl’s conclusory allegations are insufficient to state a claim. See Sazy v. DePuy Spine, LLC, 2014 WL 4652839, at *4 (N.D. Tex. Sept. 18, 2014) (Lindsay, J.) (finding defendant improperly
joined where court could not discern how defendant’s alleged conduct assisted co-de- fendant in allegedly wrongful conduct). 3. Joint Enterprise Liability Like its aiding and abetting allegations, Cali-Curl’s allegations in support of its third, joint enterprise, theory of the Parent Defendants’ liability are conclusory and fail
to establish a reasonable basis for predicting that Cali-Curl could recover against the Parent Defendants. In its joint enterprise allegations, Cali-Curl contends that the Par- ent Defendants and Marianna Industries agreed to “work to manufacture product for Cali-Curl.” FAC ¶ 100. The Defendants allegedly “shared the same purpose” in this
work, had a “community of financial or pecuniary interest,” and had an “equal right to control and direct” the work. Id. Cali-Curl concludes that the Parent Defendants are liable for Marianna Industry’s purportedly negligent operation of its manufacturing
process for Cali-Curl product and Marianna Industries’ purported misrepresentations to Cali-Curl about Marianna Industries’ ability to produce Cali-Curl product in 4.5- ounce bottles. Id. ¶ 101. The Parent Defendants represent that the Texas law of joint enterprise liability is “identical” with the Nebraska law of joint enterprise liability, and the Parties rely
almost exclusively on Texas law, so the Court will evaluate Cali-Curl’s joint enterprise theory under Texas law. Taylor v. Interstate Hyundai, Inc., 2018 WL 1548898, at *5 (W.D. La. Mar. 5, 2018), rep. & rec. adopted, 2018 WL 1541992 (W.D. La. Mar. 29, 2018). Texas law imposes joint enterprise liability on a person for the tortious acts of
fellow members of a group if the person (1) enters an agreement with members of the group, (2) shares a common purpose to be carried out by the group, (3) shares a com- munity of pecuniary interest in the purpose with the members of the group, and (4) en- joys an “equal right to a voice in the direction of the enterprise, which gives an equal
right of control.” David L. Smith & Assocs., L.L.P. v. Stealth Detection, Inc., 327 S.W.3d 873, 878 (Tex. App.—Dallas 2010, no pet.) (quoting Shoemaker v. Whistler’s Estate, 513 S.W.2d 10, 16–17 (Tex. 1974)). Cali-Curl’s allegations with respect to the second and fourth elements of its jointer enterprise theory are in tension with the remainder of its pleading. The Parent
Defendants might share the purpose of “work[ing] to” manufacture Cali-Curl product with Marianna Industries despite purportedly being “mere shell entities that have no employees and no actual operations,” but Cali-Curl fails to allege how the Parent De-
fendants are involved in carrying out that purpose. FAC ¶¶ 87, 100. Cali-Curl also fails to reconcile its allegation that Marianna Industries is a “mere tool or business conduit” of one or more Parent Defendants with its allegation that the Defendants have an equal right to control and an equal voice in their purportedly common enter- prise. Id. ¶¶ 85, 100. See Burchinal v. PJ Trailers-Seminole Mgmt. Co., LLC, 372 S.W.3d
200, 216 (Tex. App.—Texarkana 2012, no pet.) (finding that entities lacked an equal voice in an enterprise despite their common owners because some had “overriding con- trol” over another). Assuming Cali-Curl can overcome the internal tensions in its pleading, Cali-Curl
fails to allege facts showing that Defendants shared a community of pecuniary interest in a joint enterprise. Cali-Curl does not allege what sort of pecuniary interest the Par- ent Defendants had in working to manufacture product for Cali-Curl, and without that information the Court cannot find that the Parent Defendants are plausibly liable on
a joint enterprise theory. Pecuniary interests that amount to “indirect, potential finan- cial interests” or that members of an enterprise share according to their respective con- tributions to the enterprise cannot support joint enterprise liability. St. Joseph Hosp. v. Wolff, 94 S.W.3d 513, 532 (Tex. 2002); see also Air Liquide Mexico S. de R.L. de C.V. v. Talleres Willie, Inc., 2015 WL 8763961, at *4–5 (S.D. Tex. Dec. 15, 2015) (dismissing
claim based on conclusory community of interest allegations that conflicted with allegations that parties received benefits based on their respective contributions to the enterprise). At most, the Court can infer from Cali-Curl’s pleading that the Parent
Defendants would benefit from Marianna Industries manufacturing product for Cali- Curl because their investment in Marianna Industries might appreciate in value as a result. Even if Defendants share that benefit without special distinctions in their re- turns, Cali-Curl’s pleading fails to set forth a reasonable basis for recovery. The gener- alized interest of common owners in the financial success of the entities they own is
too indirect to constitute a community of pecuniary interest. O’Mara v. Almeria Ship- ping Corp., 2015 U.S. Dist. LEXIS 150950, at *11 (S.D. Tex. June 11, 2015) (rejecting community of interest allegations based on shared ownership and officers under an improper joinder analysis); Stealth Detection, Inc., 327 S.W.3d at 878 (rejecting com-
munity of interest allegations based on shared ownership, directors, officers, real estate, branding, and assets); Burchinal, 372 S.W.3d at 216 (rejecting community of interest allegations based on shared ownership and officers); Seidler v. Morgan, 277 S.W.3d 549, 556 (Tex. App.—Texarkana 2009, pet. denied) (rejecting community of interest alle-
gations based on shared ownership). D. Conclusion Because there is no reasonable basis for any of Cali-Curl’s theories of recovery against the nondiverse Parent Defendants, the Court DENIES Cali-Curl’s Motion to Remand and DISMISSES Cali-Curl’s claims against the Parent Defendants without
prejudice. The Court’s dismissal of the claims against the Parent Defendants moots the Parent Defendants’ Motion to Dismiss the claims, and the Court DENIES the Parent Defendants’ Motion to Dismiss accordingly.
III. CALI-CURL’S MOTION FOR LEAVE TO AMEND Having dismissed the claims against the Parent Defendants, the Court turns to Cali-Curl’s Motion for Leave to Amend its pleading. A. Legal Standard The Court permits amendment of pleadings freely when justice so requires. Fed. R. Civ. P. 15(a). The Court will deny amendment as futile if the amended pleading
would fail to meet the “same standard of legal sufficiency as applies under [Federal Rule of Civil Procedure] 12(b)(6).” Marucci Sports, L.L.C. v. NCAA, 751 F.3d 368, 379 (5th Cir. 2014) (citation omitted). A claim fails to satisfy Rule 12(b)(6) if the plaintiff does not plead facts sufficient to make the claim plausible. City of Clinton v. Pilgrim’s Pride Corp., 632 F.3d 148, 155 (5th Cir. 2010) (citing Iqbal, 556 U.S. at 679). In
assessing the plausibility of its proposed amended claims, the Court assumes that Cali- Curl’s factual allegations are true but does not assume that its legal conclusions are true. Arroyo v. Oprona, Inc., 736 F. App’x 427, 430 (5th Cir. 2018). The Court requires Cali-Curl to plead fraud “with particularity” under Federal Rule of Civil Procedure 9(b).
United States ex rel. Miniex v. Hous. Hous. Auth., 2023 WL 6174416, at *6–7 (5th Cir. Sept. 22, 2023). Because Cali-Curl concedes that its negligent misrepresentation claim is “based on the same conduct [as] and is co-extensive with [its] fraud claim,” Rule 9(b) applies to both claims. Doc. No. 16 at 17 n.1; Benchmark Elecs. v. J.M. Huber Corp., 343 F.3d 719, 723 (5th Cir. 2003). The Parties assume that the substantive law of Texas applies to Cali-Curl’s tort claims, and the Court joins in their assumption. E.g., Doc.
No. 9 at 11; Doc. No. 26. B. Discussion The Court GRANTS Cali-Curl’s Motion for Leave to Amend in part and DE- NIES it in part without prejudice. Because the Court has dismissed the claims against the Parent Defendants, the Court DENIES without prejudice Cali-Curl’s Motion for
Leave to Amend to the extent Cali-Curl proposes to amend its allegations against the Parent Defendants. In its Motion for Leave to Amend, Cali-Curl also abandons its deceptive trade practices claim against Marianna Industries, so the Court DISMISSES the deceptive trade practices claim without prejudice. See Akerblom, 509 F. App’x at
345. Marianna Industries also opposes Cali-Curl’s Motion for Leave to Amend on the basis that Cali-Curl’s proposed amendments to its negligence, gross negligence, negli- gent misrepresentation, and fraud claims are futile. Doc. No. 29 at 9–10. The Court agrees with Marianna Industries’ that Cali-Curl has not pled its negligent misrepresen- tation and fraud claims with the particularity required by Federal Rule of Civil Proce-
dure 9(b) and DENIES Cali-Curl’s Motion for Leave to Amend without prejudice to the extent Cali-Curl proposes to amend these claims. Id. at 23–24. The Court disagrees with Marianna Industries’ contention that the economic loss rule bars Cali-Curl’s neg- ligence and gross negligence claims and GRANTS Cali-Curl’s Motion for Leave to
Amend to the extent Cali-Curl proposes to amend its negligence and gross negligence claims. Marianna Industries does not oppose Cali-Curl’s Motion for Leave to Amend insofar as Cali-Curl seeks to amend its warranty and contract claims, so the Court also
GRANTS Cali-Curl’s Motion for Leave to Amend to the extent Cali-Curl proposes to amend its warranty and contract claims against Marianna Industries. Id. at 25–26. Because the Court grants Cali-Curl’s Motion for Leave to Amend in part, Mari- anna Industries’ Motion to Dismiss Cali-Curl’s unamended pleading is moot, and the
Court DENIES it accordingly. C. Pleading with Particularity Cali-Curl fails to plead its negligent misrepresentation and fraud claims with the particularity required by Federal Rule of Civil Procedure 9(b). While the standard of particularity under Rule 9(b) depends on the facts of a case, at “minimum, Rule 9(b)
requires allegations of the particulars of time, place, and contents of the false represen- tations, as well as the identity of the person making the misrepresentation and what he obtained thereby.” Benchmark Elecs., 343 F.3d at 724 (citation omitted). In its proposed First Amended Complaint, Cali-Curl alleges that Marianna In- dustries misrepresented its ability to prepare a proper perm solution for use in 4.5-
ounce bottles, but Cali-Curl fails to allege where Marianna Industries’ purported mis- representations occurred. FAC ¶¶ 31–32. Rule 9(b) requires Cali-Curl to provide at least some description of where Marianna Industries made the misrepresentations. Dylon v. Bank of Am., N.A., 2017 WL 2266938, at *10 (N.D. Tex. Apr. 28, 2017) (Horan, M.J.), rep. & rec. adopted, 2017 WL 2255195 (N.D. Tex. May 23, 2017) (Lynn C.J.).
Cali-Curl’s generic attribution of the purported misrepresentations to Marianna Industries also falls short of the Rule 9(b) pleading standard. FAC ¶¶ 31–32. Courts in this Circuit often hold that Plaintiffs fail to satisfy Rule 9(b) by alleging that a cor- poration, rather than a specific individual representing the corporation, made a fraud- ulent misrepresentation. See, e.g., United States ex rel. Willard v. Humana Health Plan of
Tex. Inc., 336 F.3d 375, 385 (5th Cir. 2003) (rejecting pleading that attributed misrep- resentation to corporation); James v. Wells Fargo Bank, N.A., 533 F. App’x 444, 447–48 (5th Cir. 2013) (per curiam) (same). That practice enables corporations to meet alle- gations of fraud and protects the reputations of innocent employees who might other-
wise be suspected of wrongdoing. If the identity of the individual who made the mis- representation is peculiarly within the knowledge of the corporation, the Court may relax the Rule 9(b) standard, but Cali-Curl should know which individuals at Marianna Industries allegedly made direct misrepresentations to Cali-Curl—on which Cali-Curl
purportedly relied—about critical operational issues. FAC ¶¶ 70, 74; see Halprin v. FDIC, 2016 WL 5718021, at *4 (W.D. Tex. Sept. 30, 2016) (citing Gonzalez v. Bank of Am. Ins. Services, Inc., 454 F. App’x 295, 298 n.3 (5th Cir. 2011) (per curiam)) (re- fusing to relax Rule 9(b) standard where the identities of employees who made misrep- resentations “should be known to Plaintiffs”). D. Economic Loss Rule The Court rejects Marianna Industries’ contention that the economic loss rule bars Cali-Curl’s negligence and gross negligence claims. The economic loss rule pre-
vents a contracting party from recovering purely economic losses in tort for harm its counterparty causes solely to the subject matter of their contract. Jim Walter Homes, Inc. v. Reed, 711 S.W.2d 617, 618 (Tex. 1986). At least where an injured party has a contract- or warranty-based remedy against some person, the economic loss rule also
prevents the injured party from recovering purely economic losses caused by a defective product on strict liability or negligence theories. Nobility Homes of Texas, Inc. v. Shivers, 557 S.W.2d 77, 80 (Tex. 1977) (strict liability); Pugh v. Gen. Terrazzo Supplies, Inc., 243 S.W.3d 84, 94 (Tex. App.—Houston [1st Dist.] 2007, pet. denied) (negligence); see also Sharyland Water Supply Corp. v. City of Alton, 354 S.W.3d 407, 419 (Tex. 2011)
(declining to decide “whether purely economic losses may ever be recovered in negli- gence or strict liability cases”). The economic loss rule does not bar Cali-Curl’s negligence-based claims merely because Cali-Curl pleads that Marianna Industries breached a contract with and war-
ranties to Cali-Curl. Doc. No. 29 at 24–25. Although Cali-Curl alleges it entered a contract with Marianna Industries for the supply of perm product and received war- ranties from Marianna Industries with respect to the product, Cali-Curl asserts its con- tract and warranty claims in the alternative to its negligence-based claims. Doc. No.
26 at 15; FAC ¶ 78. Marianna Industries, which does not concede that it issued valid warranties to Cali-Curl, contends that pleading in the alternative is unnecessary be- cause it has not challenged the validity of its supply contract with Cali-Curl by moving
to dismiss Cali-Curl’s contract claim. Doc. No. 30 at 8 n.2. The Court disagrees. The Court will not deny Cali-Curl the usual privilege of pleading its warranty, contract, and negligence-based claims in the alternative while Marianna Industries has implicitly re- served the right to challenge the validity of the warranties and the contract at a later stage of the litigation. See Occidental Petro. Corp. v. Wells Fargo Bank, N.A., 573 F. Supp.
3d 1161, 1171 (S.D. Tex. 2021) (Rosenthal, J.) (refusing to dismiss tort claim pled in the alternative to contract claim); Galyean v. Guinn, 2022 WL 15527769, at *7 (N.D. Tex. Oct. 24, 2022) (Pittman, J.) (same where parties had not stipulated to validity of contract).
IV. CONCLUSION The Court DENIES Cali-Curl’s Motion to Remand and DISMISSES the claims against the Parent Defendants without prejudice. The Court DENIES the Parent De- fendants’ Motion to Dismiss as moot. The Court GRANTS in part and DENIES in part Cali-Curl’s Motion for Leave to Amend. Cali-Curl may make only its proposed
amendments to its negligence, gross negligence, warranty, and contract claims. The Court DENIES Marianna Industries’ Motion to Dismiss without prejudice. Within seven days of the entry of this Order, Cali-Curl SHALL FILE (1) its First Amended Complaint, revised to reflect only those amendments permitted by the Order, and (2) redlines showing the differences between the filed pleading and Cali-Curl’s Original Petition and between the filed pleading and Cali-Curl’s proposed First Amended Com- plaint. Cali-Curl MAY FILE a motion for leave to further amend its pleading no later than twenty-one days after the entry of this Order. If Cali-Curl files such a motion, it must (1) attach its proposed amended pleading to the motion and (2) attach a redline to the motion showing the differences between the proposed amended pleading and the pleading the Court has ordered Cali-Curl to file. SO ORDERED. Signed October 3", 2023.
ED KINKEADE UNITED STATES DISTRICT JUDGE