CARDINAL HEALTH 110 LLC v. TALLA (2026)

ORDER

In 2020, Plaintiff Cardinal Health 110, LLC and five local pharmacies entered into a “Prefund Program,” through which the pharmacies could return unsold pharmaceutical products to Cardinal Health, the original supplier, and immediately receive 80% of the value of the goods. In turn, Cardinal Health returned the products to the original manufacturer for reimbursement. When the manufacturers refused reimbursement on some returns, Cardinal Health demanded that the pharmacies return the value of the rejected product. The pharmacies declined to do so, leading Cardinal Health to file this lawsuit against the pharmacies and two alleged guarantors for breach of contract and related claims.¹

Srinivasa Talla and Srinivas Gadiraju (“Individual Defendants”), who are the alleged guarantors, move to dismiss the claims against them for lack of personal jurisdiction and for failure to state a claim upon which relief can be granted. Based on the allegations within the Second Amended Complaint and the applicable law, the Court concludes that it possesses personal jurisdiction over the Individual Defendants, but that Cardinal Health fails to allege a viable claim against them.

I. Procedural History and Factual Allegations 2

A. Procedural History

Cardinal Health's claims turn largely on alleged contracts between it and the Defendants. The company's pleadings, however, create some uncertainty regarding the governing instruments.

On August 29, 2025, Cardinal Health filed its Complaint, in which it referenced numerous exhibits representing the contracts that allegedly created the obligations that Cardinal Health seeks to enforce in this lawsuit. Cardinal Health represented that it would file the referenced alleged agreements under seal, but failed to do so. (See, e.g., Compl., Doc. 1, ¶ 18(b) (“A true, accurate, and complete copy of the HP Credit Application containing the HP Guaranty will be filed under seal as Exhibit B and incorporated by this reference.”))

Three months later, the Court held a status conference with Cardinal Health to inquire about service on the Defendants. The Court ordered Cardinal Health to file an update regarding service by January 16, 2026. On that date, Cardinal Health informed the Court that it had successfully served several defendants, but moved for substitute service as to Talla. The Court granted the motion.

In early February, Gadiraju moved to dismiss Cardinal Health's causes of action. In response, Cardinal Health moved to amend its pleading, and the Court granted leave. As part of this filing, Cardinal Health attached numerous documents purporting to be the contracts on which the company based its claims. For example, the first document is entitled “Credit Application” and appears to have been completed by Brownsville Pharmacy 3, LLC. (First Am. Compl., Doc. 37, 22–26) Talla appears to have signed the document as the company's Managing Member. Immediately following his signature is “Section IV–Guaranty,” which contains two paragraphs of text and then Talla's signature again. Talla also signed an identical “Guaranty” for four other pharmacies. (See First Am. Compl., Doc. 37, 32 (Harlingen Pharmacy), 37 (Brownsville Pharmacy 4), 40 (Brownsville Pharmacy 2), 45 (Fry's Pharmacy)). Similarly, Gadiraju signed a “Guaranty” for Brownsville Pharmacy 2 (id. at 40) and Fry's Pharmacy (id. at 45).

On April 15, Gadiraju moved to dismiss Cardinal Health's claims within the First Amended Complaint. In response, Cardinal Health again moved to amend its pleading “to address the alleged pleading deficiencies” in the motion to dismiss. (Mt. for Leave, Doc. 49) The Court granted leave, but advised Cardinal Health that “[a]bsent extraordinary circumstances, the Court will not grant Plaintiff Cardinal Health 110 LLC any further motions for leave to amend its complaint.” (Order, Doc. 50)

In its Second Amended Complaint, Cardinal Health again references, but does not attach, exhibits that represent the alleged contracts. As a result, the only alleged contracts that Cardinal Health has submitted to the Court are those that the company attached to its First Amended Complaint. The Court will deem those agreements as the operative contracts for purposes of this lawsuit.

B. Alleged Facts

Cardinal Health brings suit against Talla, Gadiraju, and five pharmacies–Brownsville Pharmacy 2, Brownsville Pharmacy 3, Brownsville Pharmacy 4, Harlingen Pharmacy, and Fry's Pharmacy (collectively, “the Pharmacies”).

Talla is a citizen of New York, while Gadiraju is a citizen of New Jersey. The Pharmacies are located in Cameron County, Texas. They “conducted business in Texas for many years and failed to comply with their payment obligations arising in Texas.” (Sec. Am. Compl., Doc. 51, ¶ 15) According to Cardinal Health, Talla and Gadiraju “owned and/or managed” the Pharmacies, which “sold goods to Texas residents.”³ (Id.)

Between 2012 and 2017, each pharmacy executed a credit application to facilitate the purchase of pharmaceutical products from Cardinal Health. Talla signed the Credit Application for each pharmacy, as well as a Guaranty for all five businesses; Gadiraju signed as a co-guarantor for Brownsville Pharmacy 2 and Fry's Pharmacy.

Each Guaranty Agreement served “as an inducement of Cardinal Health to extent credit to the Applicant[.]” (See, e.g., BP3 Guaranty, Doc. 37, 27) Through the contract, Talla and Gadiraju “jointly and severally, irrevocably and unconditionally guarant[eed] to Cardinal Health ․ the prompt and full payment (and not merely the ultimate collection) and performance of all Obligations ․ to Cardinal Health, whether now existing or hereafter arising ․” (See, e.g., Fry's Guaranty, Doc. 37, 45) The Credit Application defined “Obligations” as “all present and future obligations of Applicant to Cardinal Health [ ], including but not limited to promissory notes and sales on credit.” (See, e.g., Harlingen Pharmacy Agreement, Doc. 37, 31)⁴

In January 2020, each pharmacy entered into an Independent Pharmacy Returns Program with Cardinal Health. Gadiraju signed the “Enrollment Form” for each of the five pharmacies. (See, e.g., Fry's Enrollment, Doc. 37, 54) Cardinal Health alleges that through this “Prefund Program,” “[p]articipants would return and deliver to [Cardinal Health] Returnable Goods, and upon receipt of the Returnable Goods, [Cardinal Health] would prefund the return amount to such participants by paying them a percentage of the refund amounts.” (Sec. Am. Compl., Doc. 51, ¶ 21) Cardinal Health would then return the product to the manufacturer and receive a refund. According to Cardinal Health, each pharmacy was “required to return only Returnable Goods to [Cardinal Health] to be eligible to receive a prefund.” (Id. at ¶ 23)

At various points between 2021 and 2023, each pharmacy independently “submitted Returnable Goods to [Cardinal Health] pursuant to the Prefund Program[.]” (Id. at ¶¶ 30, 40, 50, 65) Cardinal Health “prefunded” hundreds of thousands of dollars to each pharmacy for the full value of the “Returnable Goods,” but as to a significant quantity of the “Returnable Goods,” the manufacturer ultimately refused to reimburse Cardinal Health. Cardinal Health alleges that the value of the rejected product totaled over $1,200,000.

Cardinal Health presented each pharmacy with a demand for repayment. When they refused, Cardinal Health initiated litigation.

After Cardinal Health filed its Second Amended Complaint, Talla and Gadiraju filed the pending Motion to Dismiss.⁵

II. Standard of Review

The Individual Defendants rely on Federal Rules of Civil Procedure 12(b)(2) and 12(b)(6) to urge dismissal of Cardinal Health's causes of action.

“Where a defendant challenges personal jurisdiction [under Rule 12(b)(2)], the party seeking to invoke the power of the court bears the burden of proving that jurisdiction exists.” Luv N' care, Ltd. v. Insta-Mix, Inc., 438 F.3d 465, 469 (5th Cir. 2006). The plaintiff need only make a prima facie case that the court has personal jurisdiction over the defendant. Pervasive Software Inc. v. Lexware GmbH & Co. KG, 688 F.3d 214, 219 (5th Cir. 2012). When faced with a motion to dismiss for lack of personal jurisdiction, a district court “may determine the jurisdictional issue by receiving affidavits, interrogatories, depositions, oral testimony, or any combination of the recognized methods of discovery.” Allred v. Moore & Peterson, 117 F.3d 278, 281 (5th Cir. 1997). As part of this determination, the court “must accept as true the plaintiff's uncontroverted allegations, and resolve in its favor all conflicts between the jurisdictional facts contained in the parties' affidavits and other documentation.” Freudensprung v. Offshore Tech. Services, Inc., 379 F.3d 327, 343 (5th Cir. 2004) (cleaned up).

To survive a Rule 12(b)(6) motion to dismiss for failure to state a claim, 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, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007); Fed. R. Civ. P. 12(b)(6). “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.” Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). A plaintiff's complaint need not contain detailed factual allegations, but it must set forth “more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Twombly, 550 U.S. at 555, 127 S.Ct. 1955. A court considers only the well-pleaded allegations in the complaint and must accept them as true, viewing them in the light most favorable to the plaintiff. Spivey v. Robertson, 197 F.3d 772, 774 (5th Cir. 1999); Sonnier v. State Farm Mut. Auto. Ins. Co., 509 F.3d 673, 675 (5th Cir. 2007); In re Katrina Canal Breaches Litig., 495 F.3d 191, 205 (5th Cir. 2007). These allegations “must be enough to raise a right to relief above the speculative level[.]” Twombly, 550 U.S. at 555, 127 S.Ct. 1955. “Conclusory allegations and unwarranted deductions of fact are not admitted as true, especially when such conclusions are contradicted by facts disclosed by a document appended to the complaint.” Carter v. Target Corp., 541 F. App'x 413, 417 (5th Cir. 2013) (quoting Associated Builders, Inc. v. Ala. Power Co., 505 F.2d 97, 100 (5th Cir. 1974)); see also Residents Against Flooding v. Reinvestment Zone No. Seventeen, City of Houston, Tex., 260 F. Supp. 3d 738, 757 (S.D. Tex. 2017), aff'd sub nom. Residents Against Flooding v. Reinvestment Zone No. Seventeen, 734 F. App'x 916 (5th Cir. 2018).

III. Analysis

A. Personal Jurisdiction

Talla and Gadiraju contest whether the Court may exercise personal jurisdiction over them. The Court concludes that it may.

“A court must have the power to decide the claim before it (subject-matter jurisdiction) and power over the parties before it (personal jurisdiction) before it can resolve a case.” Lightfoot v. Cendant Mortg. Corp., 580 U.S. 82, 95, 137 S.Ct. 553, 196 L.Ed.2d 493 (2017). Personal jurisdiction “protects the defendant against the burdens of litigating in a distant or inconvenient forum.” World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 292, 100 S.Ct. 559, 62 L.Ed.2d 490 (1980).

District courts may exercise general or specific personal jurisdiction over defendants. Mink v. AAAA Dev. LLC, 190 F.3d 333, 336 (5th Cir. 1999). General jurisdiction exists when a defendant has “continuous and systematic” contacts with the forum state. Id. “Specific jurisdiction exists when the nonresident defendant's contacts with the forum state arise from, or are directly related to, the cause of action.” Id. In the present matter, Cardinal Health argues that the Court can exercise specific personal jurisdiction over Talla and Gadiraju.

The Fifth Circuit applies a three-step analysis to determine if specific jurisdiction exists: “(1) whether the defendant has minimum contacts with the forum state, i.e., whether it purposely directed its activities toward the forum state or purposefully availed itself of the privileges of conducting activities there; (2) whether the plaintiff's cause of action arises out of or results from the defendant's forum-related contacts; and (3) whether the exercise of personal jurisdiction is fair and reasonable.” McFadin v. Gerber, 587 F.3d 753, 759 (5th Cir. 2009). In general, the plaintiff bears the burden of demonstrating that personal jurisdiction exists. Danziger & De Llano, L.L.P. v. Morgan Verkamp, L.L.C., 24 F.4th 491, 495 (5th Cir. 2022). But when the plaintiff carries its burden as to the first two steps, the burden shifts to the defendant to demonstrate that personal jurisdiction would be “unfair or unreasonable.” Monkton Ins. Services, Ltd. v. Ritter, 768 F.3d 429, 433 (5th Cir. 2014).

In connection with the first step, the “minimum contacts inquiry is fact intensive and no one element is decisive; rather the touchstone is whether the defendant's conduct shows that it reasonably anticipates being haled into court. The defendant must not be haled into a jurisdiction solely as a result of random, fortuitous, or attenuated contacts, or of the unilateral activity of another party or third person.” McFadin, 587 F.3d at 759 (cleaned up). “[W]ith respect to interstate contractual obligations, [ ] parties who ‘reach out beyond one state and create continuing relationships and obligations with citizens of another state’ are subject to regulation and sanctions in the other State for the consequences of their activities.” Burger King Corp. v. Rudzewicz, 471 U.S. 462, 473, 105 S.Ct. 2174, 85 L.Ed.2d 528 (1985) (quoting Travelers Health Assn. v. Virginia, 339 U.S. 643, 647, 70 S.Ct. 927, 94 L.Ed. 1154 (1950)).

As to the second step, a court considers whether the underlying lawsuit “is related to or arises out of” the defendant's contacts with the forum state. Helicopteros Nacionales de Colombia v. Hall, 466 U.S. 408, 104 S.Ct. 1868, 80 L.Ed.2d 404 (1984). “Even a single purposeful contact may be sufficient to meet the requirements of minimum contacts when the cause of action arises from the contact.” Micromedia v. Automated Broad. Controls, 799 F.2d 230, 234 (5th Cir. 1986).

Finally, for the third step, “defendants bear the burden of proof and it is rare to say the assertion of jurisdiction is unfair after minimum contacts have been shown.” McFadin, 587 F.3d at 759–60. A court examines “(1) the burden on the nonresident defendant, (2) the forum state's interests, (3) the plaintiff's interest in securing relief, (4) the interest of the interstate judicial system in the efficient administration of justice, and (5) the shared interest of the several states in furthering fundamental social policies.” Id. at 760. A court balances these factors to determine if the exercise of personal jurisdiction is fair and reasonable. See, e.g., A.M. v. Salesforce.com, Inc., No. 3:21-CV-1668-L, 2022 WL 2181068, at *8 (N.D. Tex. June 16, 2022) (concluding that exercising personal jurisdiction would not be fair or reasonable after balancing all five factors).

Under this three-step analysis, a guaranty agreement can provide a sufficient basis to warrant the exercise of specific personal jurisdiction. See Marathon Metallic Bldg. Co. v. Mountain Empire Const. Co., 653 F.2d 921, 923 (5th Cir. 1981). In Marathon Metallic, Mountain Empire Construction Company, based out of Colorado, entered into a credit agreement with Marathon, a Houston-based company. Through the agreement, Mountain Empire distributed Marathon's products in Colorado. Dennis Ginther, a corporate officer, director, and shareholder in Mountain Empire, signed a guaranty agreement on behalf of the company, agreeing “without monetary limit and in broad terms, [to] the payment of Mountain Empire's obligations to Marathon.” Marathon Metallic, 653 F.2d at 922.

When a business arose between the companies, Marathon sued Mountain Empire and Ginther in a Texas federal court for unpaid obligations. The district court concluded that it did not possess specific personal jurisdiction over Ginther. The Fifth Circuit reversed, explaining that the guaranty agreement constituted affirmative and purposeful contact with Texas, as the “effect of such a guaranty is to involve Mr. Ginther in each such advance of credit over many months and purposefully to cause business activity, foreseeable by Mr. Ginther, in the forum state.” Marathon, Id. at 923. The Fifth Circuit found it fair and reasonable for Ginther to defend himself in Texas. Although doing so would be “somewhat inconvenient” for Ginther, the court noted that “Texas has an interest in providing a forum for this litigation over a contract that produced substantial business activity in Texas, with consequent extensions of credit, and that requires the application of Texas law.” Id. Consistent with the result in Marathon, federal district courts have exercised specific personal jurisdiction over out-of-state defendants based on guaranty agreements. See e.g., Goodman Co., L.P. v. A & H Supply, Inc., 396 F. Supp. 2d 766, 774 (S.D. Tex. 2005) (exercising personal jurisdiction over Idaho resident that signed guaranty on behalf of a Texas company); NE Corp. v. Fish, No. Civ. A. 3:05CV1525-B, 2006 WL 196951 (N.D. Tex. 2006) (exercising personal jurisdiction over Tennessee resident based on a guaranty agreement); Consolidated Companies, Inc. v. Kern, No. CIV. A. 99-2704, 2000 WL 1036186 (E.D.La. July 25, 2000) (exercising personal jurisdiction over Texas resident where the guaranty induced the extension of credit in Louisiana and the “subsequent business activity” in the state was foreseeable).

Applying these principles to the case at hand, the Court concludes that Cardinal Health has met its burden at the first two steps of the analysis. First, Talla and Gadiraju signed a guaranty agreement for multiple pharmacies located in Texas and that conducted business in Texas. Each Guaranty formed part of the pharmacy's credit application to Cardinal Health. And according to the express terms of the Guaranty, Talla and Gadiraju entered into the contract “as an inducement of Cardinal Health to extend credit” to the pharmacies, which formed part of Cardinal Health selling pharmaceutical products to the pharmacy for resale in Texas. (See, e.g., Harlingen Pharmacy Guaranty, Doc. 37, 32) In no manner can these Guaranty Agreements be viewed as “random, fortuitous, or attenuated contacts” with Texas, much less “the unilateral activity of another party or third person.” Talla and Gadiraju purposefully directed their business at the state of Texas by signing the Guaranty Agreements.

The individual defendants argue that Cardinal Health's “[b]are allegations that a non-resident signed a guaranty, untethered to Texas and devoid of contractual detail, do not establish purposeful availment or forum-directed conduct.” (Motion, Doc. 53, 19) But Talla and Gadiraju overlook that the Guaranty Agreements they signed each represented “Section IV” of the “Credit Application.” Talla signed each Credit Application for a pharmacy with a Texas address and that identified him as the “Billing Contact” or “Managing Member.” Moreover, Gadiraju signed an “Enrollment Form” for the Prefund Agreement for each of the five pharmacies, with each business identifying its location in Texas, and with Gadiraju signing as “President.” This act strengthens Gadiraju's connection to Texas in connection with the Pharmacies' business with Cardinal Health. By signing contracts through which pharmacies located in south Texas would fill prescriptions in south Texas, the Individual Defendants purposefully availed themselves of doing business in south Texas. And the allegation that the value of the “Returnable Goods” at issue in this lawsuit totaled over $1,200,000 also reveals the substantial level of business allegedly conducted under those agreements.

The Individual Defendants also contend that because they conducted no personal activity in Texas–i.e., visiting the state or signing the agreements within it–that Cardinal Health cannot satisfy its burden to establish specific personal jurisdiction. This position also fails. The signing of the Guaranty Agreements that facilitated the Pharmacies' business in Texas suffices to establish personal jurisdiction. For example, in Kern, a Texas resident signed a guaranty agreement for a Texas company to conduct business in Louisiana. Kern, 2000 WL 1036186, at *1. Although the guarantor (Kern) had no connection to Louisiana other than signing the agreement, the district court concluded that it could exercise specific personal jurisdiction against Kern. The same result proves true here.

Second, Cardinal Health's causes of action directly relate to and arise from the Guaranty Agreements, the related Credit Applications, and the Prefund Agreements. Although Talla and Gadiraju contest that Cardinal Health can rely on these contracts in this lawsuit, they cannot refute that Cardinal Health bases its claims on these contracts. Thus, Cardinal Health satisfies the second prong of the three-step analysis.

Finally, neither Talla nor Gadiraju demonstrate that requiring them to defend themselves against Cardinal Health's claims in Texas would be unfair or unreasonable. In fact, neither individual defendant presents a substantive argument in their Motion or Reply on this point. In any event, given that the Individual Defendants signed the contracts for pharmacies located and that conducted business in Texas, and that Cardinal Health rests its causes of action on these agreements, this case does not present the rare occasion when a court relies on step three of the relevant analysis to conclude that it cannot exercise personal jurisdiction over the defendants.

Having concluded that it possesses personal jurisdiction over the Individual Defendants in this matter, the Court turns now to whether Cardinal Health's causes of action survive the Rule 12(b)(6) challenge.

B. Breach of Contract

Cardinal Health alleges a cause of action for breach of contract based on each Guaranty Agreement that Talla and Gadiraju signed for the Pharmacies. In particular, Cardinal Health alleges that by signing the Guaranty Agreements, Talla and Gadiraju “agreed to, among other things, be responsible for any and all monies [that the Pharmacy] owed [Cardinal Health] in the event of a default or breach.” (Sec. Am. Compl., Doc. 51, ¶ 142) Cardinal Health then alleges that Talla and Gadiraju breached the Guaranty Agreements by “failing to pay monies” that each Pharmacy owed to Cardinal Health in connection with the Prefund Agreement. (See e.g., Sec. Am. Compl., Doc. 51, ¶ 145)

A plaintiff alleging a breach of contract claim under Texas law must demonstrate: “(1) a valid contract, (2) plaintiff's performance, (3) defendant's breach, and (4) resulting damages.” Taylor v. Root Ins. Co., 109 F.4th 806, 809 (5th Cir. 2024).⁶

In their Motion, the Individual Defendants challenge that an applicable contract exists, and also contest that Cardinal Health has alleged an actual breach of any agreement. The Court will address each ground for dismissal.

First, Talla and Gadiraju contend that the Guaranty Agreements do not relate to the Prefund Agreement: “The Alleged Personal Guaranties do not create any obligations under the Prefund Program[.]” (Motion, Doc. 53, 14) They explain that the Prefund Agreements, which were signed many years after the Credit Applications and Guaranty Agreements, “are distinct program forms concerning prefunded return credits and a separate operational arrangement with third-party processors.” (Motion, Doc. 53, 11) In essence, the Individual Defendants argue that even if Cardinal Health demonstrated that a Pharmacy breached the Prefund Agreement, Cardinal Health could not rely on the Guaranty Agreement to allege a claim against the Individual Defendants for such a breach.

Cardinal Health's response to this initial argument does not advance its cause, for the reason that Cardinal Health quotes and relies on contractual language that does not appear in the Second Amended Complaint or in any of the contractual instruments that Cardinal Health has filed. Cardinal Health submits the following: “In this instance, the personal guaranties state: ‘The undersigned personally guarantees prompt and full performance of all obligations due and owing by Applicant to Kinray under this and/or any other agreement with Kinray.’ (SAC, Dkt. #49, Ex. A, ¶ 13) (emphasis added).” (Response, Doc. 54, 10) No part of that sentence relates to the present case, but the quoted language represents the foundation of Cardinal Health's response to the Individual Defendants' first argument. Courts do “not independently scour a contract to ferret out potential claims” when a party does not raise them. McCoy v. Stavropoulos, No. 5-21-CV-00877-FB-RBF, 2023 WL 3080012, at *5 (W.D. Tex. Mar. 24, 2023), report and recommendation adopted, 2023 WL 3082357 (W.D. Tex. Apr. 25, 2023); see also United States v. del Carpio Frescas, 932 F.3d 324, 331 (5th Cir. 2019) (“Judges are not like pigs, hunting for truffles buried in the record.”). In light of Cardinal Health's failure to identify the language that it contends binds Talla and Gadiraju as guarantors, or to explain why any such language extends to the Pharmacies' obligations under the Prefund Agreement, the Court concludes that Cardinal Health's breach of contract claim against the Individual Defendants fails on this ground alone.⁷

In addition, Talla and Gadiraju also argue that Cardinal Health fails to allege a viable breach of contract claim because it does not “identify[ ] the specific terms of the Prefund Program agreement that were allegedly breached by [them] individually[.]” (Motion, Doc. 53, 15) In their Reply, they support this argument by arguing that Cardinal Health “cannot identify any Returns Program provision that Defendants breached[,]” and does not allege “that Defendants submitted unauthorized returns, failed to follow the Enrollment Form's return procedures, withheld required documentation, or violated any Returns Program requirement.” (Reply, Doc. 54, 3) In other words, the Individual Defendants contend that because Cardinal Health cannot show that any Pharmacy breached a Prefund Agreement, Cardinal Health could not recover against any guarantor of such a contract.

In response, Cardinal Health argues that “the Defendants breached their respective [Prefund Agreement] by returning ineligible goods under the Returns Program and wrongfully receiving financial benefit from those returns.” (Resp., Doc. 54, 8) And in its Second Amended Complaint, Cardinal Health alleges that each Pharmacy submitted “Returnable Goods” to Cardinal Health, knowing that “they did not qualify as Returnable Goods and knowing that they would ultimately be rejected by the manufacturer.” (Sec. Am. Compl., Doc. 51, ¶¶ 65, 68)

Cardinal Health's position turns on whether the Pharmacies submitted “Returnable Goods” to Cardinal Health that they knew the manufacturer would reject. And that argument depends in large measure on the meaning of “Returnable Goods” for purposes of the governing agreement. “When interpreting a contract, the entire instrument, taken by its four corners, must be read and considered to determine the true intention of the parties.” Sefzik v. Mady Dev., L.P., 231 S.W.3d 456, 460 (Tex. App.—Dallas 2007, no pet.). “We give terms their plain, ordinary, and generally accepted meaning unless the instrument shows that the parties used them in a technical or different sense.” Heritage Res., Inc. v. NationsBank, 939 S.W.2d 118, 121 (Tex. 1996). “We have long held that courts will not rewrite agreements to insert provisions parties could have included or to imply restraints for which they have not bargained.” Tenneco Inc. v. Enter. Products Co., 925 S.W.2d 640, 646 (Tex. 1996). “There is a significant legal difference between a contract's silence-i.e., its failure to address a particular issue-and the presence of an ambiguity in the contract language.” E.P. Towne Ctr. Partners, L.P. v. Chopsticks, Inc., 242 S.W.3d 117, 122 (Tex. App.—El Paso 2007, no pet.). If a contract is silent about an issue, “the question is not one of interpreting the language but rather one of determining its effect.” Sifuentes v. Carrillo, 982 S.W.2d 500, 504 (Tex. App.—San Antonio 1998, pet. denied). “[C]ontractual silence creates a question of law for the court.” CCR Roofing, LLC v. Garner, No. 03-23-00506-CV, 2025 WL 394635, at *3 (Tex. App.—Austin Feb. 5, 2025, no pet.).

Applying these principles to the contracts on which Cardinal Health relies, the Court concludes that the company cannot succeed on its breach of contract claim because the Prefund Agreement does not use, much less define, the phrase, “Returnable Goods.” Cardinal Health alleges that the Prefund Agreement “specif[ied] what pharmaceutical products qualify as Returnable Goods,” (Sec. Am. Compl., Doc. 51, ¶ 24), but the company does not identify which provision performs this function. In its response to the Motion, Cardinal Health references “ineligible goods” and “ineligible returns,” but again identifies no contractual text that defines those terms. Absent any contractual provision that defines the parameters of what pharmaceutical products represented legitimate “Returnable Goods,” Cardinal Health cannot demonstrate that any Pharmacy submitted product that fell outside of those parameters. In other words, Cardinal Health cannot show that any Pharmacy breached the contract.

IV. Conclusion

For these reasons, it is:

ORDERED that Defendants Brownsville Pharmacy #2, LLC, Brownsville Pharmacy #3, LLC, Brownsville Pharmacy #4, LLC, Fry Pharmacy, LLC, Srinivas Gadiraju, Harlingen Pharmacy, LLC, and Srinivasa Talla's Motion to Dismiss Second Amended Complaint (Doc. 53) is GRANTED IN PART AND DENIED IN PART; and

ORDERED that the causes of action that Cardinal Health 110, LLC alleges in Counts Two, Four, Six, Ten, and Twelve of the Second Amended Complaint (Doc. 51) are DISMISSED WITH PREJUDICE for failure to state a claim upon which relief can be granted.

All relief not expressly granted is denied.

FOOTNOTES

1.   In Count Seven, Cardinal Health alleges that Brownsville Pharmacy 4 failed to pay for “goods it ordered and received from [Cardinal Health][,]” (Sec. Amend. Compl., Doc. 51, ¶¶ 117), and then alleges a related claim against the Individual Defendants in Count Eight. Cardinal Health also alleges a general “money had and received” claim in Count Thirteen. The Court's review of the Motion to Dismiss leads it to conclude that no defendant moves to dismiss these counts.

3.   Cardinal Health's usage of the past tense suggests that the Pharmacies no longer conduct business, but the allegations do not render this point clear.

4.   The submitted contracts for Brownsville Pharmacy 2 are largely illegible, but appear to be the same form document as used for the other pharmacies.

5.   While the Motion to Dismiss purports to be on behalf of all Defendants, the arguments within the document pertain only to Talla and Gadiraju. (See, e.g., Motion, Doc. 53, 15 (“Moreover, without identifying the specific terms of the Prefund Program agreement that were allegedly breached by Mr. Gadiraju or Mr. Talla individually, Cardinal has failed to allege a valid breach of contract claim.”)) To the extent that the Pharmacies seek to join the Motion through the Reply brief, such arguments are not properly before the Court. See Jacobs v. Tapscott, 2006 WL 2728827, at *7 (N.D. Tex. Sept. 25, 2006) (“[T]he court will not consider an argument raised for the first time in a reply brief.”), aff'd, 277 F. App'x. 483 (5th Cir. 2008).

6.   The Guaranty Agreements contain a choice of law provision prescribing the application of Ohio law. But neither side cites to authorities from that state for the relevant substantive law, and instead cites to decisions applying Texas law. In light of the parties' briefing, the Court will apply Texas law. See, e.g., Kubbernus v. ECAL Partners, Ltd., 574 S.W.3d 444, 473 (Tex. App.—Houston [1st Dist.] 2018, pet. denied) (“Choice of law issues can be waived if not properly invoked.”); Hitachi Constr. Mach. Americas Inc. v. Amarillo Mach. Co., No. 2:25-CV-155-Z-BV, 2026 WL 1747874, at *3 (N.D. Tex. June 17, 2026) (applying Texas law to a contract that was to be governed by Georgia law because no party sought to enforce the choice-of-law clause). The Court is unaware of any material differences between the law of Ohio and Texas on the issues relevant to the pending Motion.

7.   The Guaranty Agreements that Cardinal Health attached to its First Amended Complaint include the following language: “Each undersigned ․ jointly and severally, irrevocably and unconditionally guarant[ees] to Cardinal Health ․ the prompt and full payment (and not merely the ultimate collection) and performance of all Obligations ․ to Cardinal Health, whether now existing or hereafter arising ․” (Fry's Guaranty, Doc. 37, 45) Cardinal Health makes no argument based on this language and does not allege facts showing that the contract relates to Credit Applications and Guaranty Agreements signed years earlier. As a result, the Court concludes that this contractual language also cannot form the basis of Cardinal Health's causes of action.

Fernando Rodriguez, Jr., United States District Judge