Rigorous Pleading Standards for Partnership Formation and Related Tort Claims Under Rule 12(b)(6)

Introduction

In Peykoff v. Cawley, the Fifth Circuit confronted a diversity suit arising from a failed entrepreneurial event that generated over $200,000 in losses. Alex Peykoff and his corporate vehicle, the Satisfied Life Foundation, Inc. (together “Plaintiffs”), alleged that they and the defendants—Charrissa Cawley and her company, Game Changer Publishing, L.L.C. (“GCP,” together “Defendants”)—had formed an unwritten partnership to host a multi-day conference in Mexico. When the event lost money and Defendants allegedly diverted Plaintiffs’ clients to a new brand, Peykoff sued for breach of partnership agreement, breach of fiduciary duty, tortious interference, business disparagement, and negligent misrepresentation. The district court dismissed all claims under Rule 12(b)(6) and denied leave to amend; on appeal, the Fifth Circuit affirmed.

Key issues:

• What facts must a plaintiff plead to show the formation of a partnership under the Texas Revised Partnership Act?
• Can bare recitals of statutory partnership factors satisfy the “plausibility” standard of Rule 12(b)(6)?
• What pleading requirements govern state-law tort claims (tortious interference, disparagement, negligent misrepresentation) in federal court?

Parties:

• Plaintiffs/Appellants: Alex Peykoff and Satisfied Life Foundation, Inc.
• Defendants/Appellees: Charrissa Cawley and CBCG, L.L.C. (d/b/a Game Changer Publishing)

Summary of the Judgment

The Fifth Circuit, applying Bell Atlantic Corp. v. Twombly and Ashcroft v. Iqbal, held that:

1. Plaintiffs’ “threadbare recitals” of the five statutory factors for partnership formation under the Texas Revised Partnership Act (TRPA) were insufficient to state a plausible claim for breach of partnership.
2. Without a properly pleaded partnership, the derivative breach of fiduciary duty claim also failed.
3. Plaintiffs offered no factual detail about an existing contract or a reasonably probable future business relationship, so their tortious-interference claims could not survive.
4. No facts showed that Defendants’ communications were false, a required element of both business disparagement and negligent misrepresentation.
5. The district court did not abuse its discretion by dismissing with prejudice and denying leave to amend, given Plaintiffs’ failure to propose concrete amendments.

The appellate court affirmed the Rule 12(b)(6) dismissal in full.

Analysis

1. Precedents Cited

• Federal Pleading Standards:
  • Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007) – “plausibility” standard.
  • Ashcroft v. Iqbal, 556 U.S. 662 (2009) – adoption and elaboration of Twombly.
  • In re Katrina Canal Breaches Litig., 495 F.3d 191 (5th Cir. 2007) – de novo review of 12(b)(6).
  • McLin v. Twenty-First Judicial District, 79 F.4th 411 (5th Cir. 2023) – accept well-pleaded facts.
  • Blackburn v. City of Marshall, 42 F.3d 925 (5th Cir. 1995) – missing element dooms claim.
  • Hale v. King, 642 F.3d 492 (5th Cir. 2011) – confine review to complaint and attachments.
• Texas Partnership Law:
  • Tex. Bus. Org. Code § 152.051–.052 – five factors for partnership formation.
  • Ingram v. Deere, 288 S.W.3d 886 (Tex. 2009) – profit-sharing and control are most important.
  • Nguyen v. Manh Hoang, 507 S.W.3d 360 (Tex. App.—Houston 2016) – totality of circumstances.
  • Bombardier Aerospace Corp. v. SPEP Aircraft Holdings, LLC, 572 S.W.3d 213 (Tex. 2019) – fiduciary duties in partnerships.
• Tort Law in Texas:
  • Prudential Ins. Co. v. Financial Review Services, 29 S.W.3d 74 (Tex. 2000) – elements of tortious interference with contract.
  • Coinmach Corp. v. Aspenwood Apt. Corp., 417 S.W.3d 909 (Tex. 2013) – interference with prospective relations.
  • Forbes v. Granada Biosciences, Inc., 124 S.W.3d 167 (Tex. 2003) – business disparagement requires falsity.
  • General Electric Capital Corp. v. Posey, 415 F.3d 391 (5th Cir. 2005) – negligent misrepresentation element of false information.
• Leave to Amend:
  • Club Retro LLC v. Hilton, 568 F.3d 181 (5th Cir. 2009) – denial of leave to amend reviewed for abuse of discretion.
  • Edionwe v. Bailey, 860 F.3d 287 (5th Cir. 2017) – futility justifies denial when no proposed amendment is offered.

2. Legal Reasoning

Partnership Formation: Under TRPA § 152.052, a partnership requires facts showing (1) profit-sharing; (2) intent to be partners; (3) participation in control; (4) sharing of losses; and (5) capital contribution. Plaintiffs merely recited these factors without factual enhancement. Cawley’s unilateral statements to third parties—absent reciprocal conduct by Peykoff—did not establish mutual intent. And GCP’s “experience” was an intangible service, indistinguishable from independent-contractor work, not a partner’s capital contribution. Thus, the complaint fell short of Twombly/Iqbal’s plausibility bar.

Breach of Fiduciary Duty: Derivative of the failed partnership claim. No partnership, no fiduciary duty. Plaintiffs pointed to no other fiduciary relationship.

Tortious Interference:

• With existing contract: No contract terms alleged, so element (1) failed.
• With prospective relations: No detail on client identity, negotiations, or reasonable probability of new business—only that the event had lost money.

Business Disparagement & Negligent Misrepresentation: Both require a false statement. Plaintiffs did not plead why Cawley’s statements (stepping aside from the venture, past success, or investment recovery) were actually false rather than unauthorized or optimistic predictions.

Leave to Amend: Plaintiffs requested amendment in a single, boilerplate sentence—without outlining any additional facts. Under Fifth Circuit precedent, such a “bare-bones” request is futile, and denial of leave does not constitute an abuse of discretion.

3. Impact

• This decision reinforces the requirement that plaintiffs in federal court—even in diversity cases—must plead detailed facts, not merely legal labels or formulaic recitals, to survive a Rule 12(b)(6) motion.
• It signals that courts will strictly apply Texas’s partnership-formation factors, demanding more than vague promises or one-sided representations.
• Plaintiffs asserting state-law torts must identify the falsehood in alleged defamatory or misrepresentative statements, and must describe existing contracts or probable business relationships with sufficient specificity.
• The ruling discourages shotgun pleadings and emphasizes the futility of indefinite requests for leave to amend absent specific proposed changes.

Complex Concepts Simplified

• “Plausibility” Standard (Twombly/Iqbal): A complaint must contain enough factual detail that a court can reasonably infer the defendant’s liability—not just recite legal elements.
• Partnership Factors:
  1. Profit-sharing;
  2. Mutual intent to partner;
  3. Shared control/management;
  4. Agreement to share losses;
  5. Contribution of capital or property (tangible or intangible, but more than mere services).
• Tortious Interference: One must show a specific contract or a demonstrably probable business opportunity, plus wrongful conduct that caused actual loss.
• Business Disparagement vs. Negligent Misrepresentation:
  • Disparagement: false statements harming a business’s reputation.
  • Negligent misrepresentation: false information given in a business context causing economic harm.
• Leave to Amend: Courts “freely” grant leave under Rule 15—but a plaintiff must explain what new facts or theories would cure defects, or amendment is deemed futile.

Conclusion

Peykoff v. Cawley crystallizes the Fifth Circuit’s insistence on fact-rich pleadings in diversity cases under Rule 12(b)(6). Bare recitals of partnership elements, cursory mentions of client relationships, or unelaborated claims of misrepresentation cannot withstand dismissal. Going forward, practitioners must carefully allege each element with supporting facts—identifying specific agreements, detailing communications, and demonstrating falsity—if their state-law claims are to survive the plausibility threshold.