United States District Court, N.D. Texas, Dallas Division
OZ GARMENTS HANGZHOU CO. LTD. and IN HONG KONG GROUP LIMITED, Plaintiffs/Counter-Defendants,
AMERICA ACHIEVEMENT CORP., Defendant/Counter-Plaintiff.
MEMORANDUM OPINION AND ORDER
UNITED STATES DISTRICT JUDGE
the Court is Counter-Defendants Oz Garments Hangzhou Co. Ltd.
and In Hong Kong Group Limited's (collectively
“Oz”) Rule 12(b)(6) Motion to Dismiss
Counter-Plaintiff American Achievement Corp.'s
(“AAC”) counterclaims. Doc. 18. For the reasons
stated, the Court GRANTS Oz's Motion to
Dismiss (Doc. 18).
contract dispute involves parties in the graduation
cap-and-gown business. Oz is a global manufacturing company
that manufactures graduation caps, gowns, and accompanying
apparel. Doc. 1, Oz's Compl., ¶ 10. AAC is in the
business of providing graduation products to schools and
universities, and has utilized Oz as a supplier for some of
its graduation products. Id. ¶ 16; Doc. 13,
AAC's Counterclaims, 3 ¶¶ 1-2. Prior to 2018,
Oz and AAC never operated under any supply agreement and the
only agreements governing the parties were individual
purchase orders. Doc. 1, Oz's Compl., ¶ 18.
around March 15, 2018, the parties agreed on and entered into
the Master Supply Agreement (“Agreement”).
Id. ¶ 19; see also Doc. 1-1, Ex. 1,
Agreement. In early 2018, while the parties were negotiating
the terms of the Agreement, AAC had multiple outstanding
purchase orders with Oz (“Outstanding Orders”).
Doc. 13, AAC's Counterclaims, 3 ¶¶ 3, 6. The
parties thus entered into the Agreement conditioned upon Oz
fulfilling the Outstanding Orders, which was memorialized in
§ 5 and Exhibit F of the Agreement. Id. at 4
¶ 11; Doc. 1, Oz's Compl., ¶ 26; Doc. 1-1, Ex.
1, Agreement, 4 § 5. The parties dispute whether this
condition was met. Compare Doc. 1, Oz's Compl.,
¶ 28 (“The condition precedent was met.”)
with Doc. 13, AAC's Counterclaims, 4 ¶ 12
(“Plaintiffs failed to timely deliver the Outstanding
August 23, 2018, Oz originally brought suit against AAC for
breach of contract alleging that AAC failed to comply with
many of its obligations under the Agreement. See,
e.g., Doc. 1, Oz's Compl., ¶¶ 50-54. On
October 22, 2018, AAC filed its Answer (Doc. 11), and on
November 12, 2018, AAC supplemented its Answer by asserting
two counterclaims against Oz for breach of contract and trade
secret misappropriation under Texas law. Doc. 13, AAC's
Counterclaims, 5-6 ¶¶ 21-33. Oz filed this Motion
to Dismiss (Doc. 18) on December 17, 2018. AAC filed its
Response (Doc. 29) and Oz their Reply (Doc. 34). However,
after the close of briefing, on March 25, 2019, AAC filed a
Notice of Dismissal of its trade secret misappropriation
claim agreeing to dismiss this claim without prejudice. Doc.
35, Notice of Dismissal, 1-2. Thus, the only counterclaim
remaining is AAC's breach-of-contract counterclaim.
Having been fully briefed, the Court now addresses the
sufficiency of this claim.
Rule 8(a)(2) of the Federal Rules of Civil Procedure, a
complaint must contain “a short and plain statement of
the claim showing that the pleader is entitled to
relief.” Fed.R.Civ.P. 8(a)(2). Rule 12(b)(6) authorizes
a court to dismiss a plaintiff's complaint for
“failure to state a claim upon which relief can be
granted.” Id. 12(b)(6). In considering a Rule
12(b)(6) motion to dismiss, “[t]he court accepts all
well-pleaded facts as true, viewing them in the light most
favorable to the plaintiff.” In re Katrina Canal
Breaches Litig., 495 F.3d 191, 205 (5th Cir. 2007).
“The court's review [under 12(b)(6)] is limited to
the complaint, any documents attached to the complaint, and
any documents attached to the motion to dismiss that are
central to the claim and referenced by the
complaint.” Ironshore Europe DAC v. Schiff Hardin,
L.L.P., 912 F.3d 759, 763 (5th Cir. 2019)
(emphasis added) (quoting Lone Star Fund V (U.S.), L.P.
v. Barclays Bank PLC, 594 F.3d 383, 387 (5th Cir. 2010)
survive a motion to dismiss, a plaintiff must plead
“enough facts to state a claim to relief that is
plausible on its face.” Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 570 (2007). “Threadbare
recitals of the elements of a cause of action, supported by
mere conclusory statements, do not suffice.”
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).
“A claim has facial plausibility when the plaintiff
pleads factual content that allows the court to draw the
reasonable inference that the defendant is liable for the
misconduct alleged.” Id. “The
plausibility standard is not akin to a ‘probability
requirement,' but it asks for more than a sheer
possibility that a defendant has acted unlawfully.”
Id. When well-pleaded facts fail to achieve this
plausibility standard, “the complaint has alleged-but
it has not shown-that the pleader is entitled to
relief.” Id. at 679 (cleaned up).
breach-of-contract counterclaim has two parts: (1) that Oz
failed to timely deliver to AAC the Outstanding Orders listed
in Exhibit F to the Agreement (the “First Part”)
and, (2) that Oz solicited, hired, and/or otherwise engaged
AAC contractors in violation of § 15(d) of the Agreement
(the “Second Part”). Doc. 13, AAC's
Counterclaims, 5 ¶¶ 22-23. The Court addresses in
turn whether each part of this breach-of-contract
counterclaim states a claim.
First Part of AAC's Counterclaim Fails Because § 5
of the Agreement Is a Condition Precedent.
argues that the First Part of AAC's breach-of-contract
counterclaim fails to state a claim because the alleged
failure to deliver the Outstanding Orders was not a breach of
an affirmative covenant in the contract, but instead a
condition precedent to contract formation, which cannot form
the basis of a breach-of-contract claim. Doc. 18, Oz's
condition precedent is an act or event that must take place
before performance of a contractual obligation is due.”
Cedyco Corp. v. PetroQuest Energy, LLC, 497 F.3d
485, 488 (5th Cir. 2007) (applying Texas law). Therefore, a
condition precedent cannot form the basis of a
breach-of-contract claim because the condition must occur
before the contract becomes enforceable. Tex. Delta
Mech., Inc. v. Republic Underwriter's Ins. Co., 2011
WL 2572492, at *3 (Tex. App.-Dallas June 30, 2011, no pet.)
(“A condition precedent to an obligation to perform is
an act or event, which occurs subsequently to the making of a
contract, that must occur before there is a right to
immediate performance and ...