Justia U.S. 8th Circuit Court of Appeals Opinion Summaries

Menard operated a store in a building subleased from Wal-Mart. In 2006, Menard entered into a Purchase Agreement (PA) with Dial; Clauff signed as a managing member of Dial. Menard planned to build a store and wanted to be relieved of its obligations under the sublease. Menard and Dial agreed that Dial would assume responsibility for the sublease after Menard opened its new store. With Wal-Mart’s consent, DKC (Chauff's other LLC) and Menard executed an Assignment. Clauff purported to sign as a member of DKC. DKC did not file Articles of Organization until later. Clauff and Menard claim, but neither provided evidence, that DKC adopted the Assignment after the company formed. Menard remained secondarily liable. Menard opened its new store in 2008. When the Sublease expired in 2011, Wal-Mart was owed more than $700,000. Menard paid $350,000 and sued Dial, DKC, and Clauff. The district court granted summary judgment, finding Clauff liable under Nebraska Revised Statute 21-2635: "[a]ll persons who assume to act as a limited liability company without authority to do so shall be jointly and severally liable for all debts and liabilities of the company." The Eighth Circuit reversed for determination of whether common law or section 21-2635 preclude Clauff's argument that his liability may be avoided because DKC adopted the contract and commenced performance. View "Menard, Inc. v. Clauff" on Justia Law

Butler sells agricultural and construction equipment, primarily for Caterpillar. In 2002, Butler formed North Central to take over its leasing operations. The companies are ultimately controlled by the same family and share space. Butler performs North Central’s accounting and ordering functions and initially pays the wages of its employees. Caterpillar assigned separate dealer codes, but Butler used its code to order equipment for itself and North Central. Under North Central's like-kind-exchange (LKE) program, North Central sold its used equipment to third parties, who paid a qualified intermediary, Accruit, which forwarded proceeds to Butler; Butler purchased new Caterpillar equipment for North Central and transferred it to North Central via Accruit, charging the same amount that Butler paid for the equipment. Butler's LKE transactions facilitated favorable Caterpillar financing terms. Butler essentially received a six-month, interest-free loan from each exchange. From 2004-2007 North Central claimed nonrecognition treatment of gains from 398 LKE transactions under IRC 1031, so that the gain was not included in gross income at the time of actual sale or gain. The IRS declared that the transactions were not entitled to nonrecognition treatment, reasoning that North Central structured the transactions to avoid the related-party exchange restrictions of section 1031(f). The district court analyzed Butler's unfettered access to the cash proceeds and the relative complexity of the transactions and entered judgment in favor of the government. The Eighth Circuit affirmed. View "North Cent. Rental & Leasing, LLC v. United States" on Justia Law

Licensees entered into a licensing agreement with Safeblood Tech for the exclusive rights to market patented technology overseas. After learning that they could not register the patents in other countries, Licensees sued Safeblood for breach of contract and sued Safeblood, its officers, and patent inventor for fraud, constructive fraud, and violations of the Arkansas Deceptive Trade Practices Act (ADTPA), Ark. Code 4-88-101 to -115. The district court dismissed the fraud claims at summary judgment. The remaining claims proceeded to trial and a jury found for Licensees, awarding them $786,000 in contract damages and no damages for violations of the ADTPA. The district court awarded Licensees $144,150.40 in prejudgment interest. The Eighth Circuit reversed as to the common-law fraud claim and the award of prejudgment interest, but otherwise affirmed. Licensees produced sufficient evidence that the inventor made a false statement of fact; the district court did not abuse its discretion when it gave the jury a diminution-in-product-value instruction; and Licensees waived their inconsistent-verdict argument. View "Yazdianpour v. Safeblood Techs., Inc." on Justia Law

Hutterites disavow individual property ownership for a communal lifestyle. The Hutterian Church has three conferences. South Dakota’s Hutterville Colony belonged to the Schmiedeleut Conference. Hutterville’s nonprofit corporation operates a communal farm, conducts business, and owns all property. In 1983, when the Colony formed, Kleinsasser led Schmiedeleut Conference. Several ministers repudiated Kleinsasser’s leadership in 1992 and followed Wipf. Colonies following Wipf ratified a new constitution. Kleinsasser’s colonies did not. Each group claimed that it was the true Schmiedeleut. Waldner, Hutterville’s ecclesiastical leader, its corporation’s president, and a director, was loyal to Kleinsasser. The complaint alleges that through “sham” corporate meetings in 2008-2009, Wipf faction members were elected to replace Waldner faction officers and directors. Each faction conducted business in the name of the company. In 2009 a state trial court determined that Wipf faction members were the duly elected directors and officers. Waldner and Kleinsasser excommunicated Wipf faction members. State courts rejected a challenge to the excommunication, reasoning that control of the corporation could not be determined without addressing religious questions. In a second state action, the supreme court reversed appointment of a receiver, concluding that even corporate dissolution is beyond secular jurisdiction. As the factions were contesting the receiver’s accounting, the Waldners filed suit under RICO, as individuals and in their “official” capacities as purported directors and officers, claiming that attorneys worked with the Wipf faction to “wrest control” of Hutterville, and that the receiver was part of the plan. The district court dismissed, reasoning that official capacity standing required knowing who truly controls Hutterville, which involves religious disputes; individual claims for property damages claims were dismissed based on the renunciation of individual property. The Eighth Circuit affirmed. View "Hutterville Hutterian Brethren, Inc. v. Sveen" on Justia Law

Oliver was manager and part-owner of PSC. Oliver and PSC sought to refinance property on Lake Superior. Meecorp required additional collateral. Oliver identified 14 other income-producing properties and his interest in each. The sum of the “Oliver values” was more than $1 million. Gandolf, owned by Oliver and PSC, supplied: cash-flow projections, the value of Oliver’s interests, member-control agreements, certificates of good standing, and Schedule K-1s for Gandolf-owned LLCs associated with each property. Gandolf did not supply the deeds of ownership. Meecorp concluded that Oliver, individually, could not pledge adequate collateral for a loan of $1.32 million, having no direct interest in the properties. Meecorp requested that Gandolf, as owner of the remaining governance rights and the 100% owner of the financial rights, pledge its interests in the LLCs. Oliver, as Gandolf’s representative, signed the pledge. Meecorp delivered the funds. Oliver and PSC defaulted. Meecorp learned that neither Oliver nor Gandolf’s LLCs owned the pledged properties; Gandolf’s LLCs were general partners in undisclosed limited partnerships that owned each property. Undisclosed limited partners owned up to 99.99% of the equity in the properties; limited-partnership organizational documents prohibited the general partners (LLCs) from pledging their interests without consent. Meecorp sued. The district court granted Meecorp summary judgment on its breach-of-the-note claim against PSC and its breach-of-guaranty claim against Oliver, awarding $2,366,191.88, and entered judgment against Gandolf for breach-of-the-guaranty and against Gandolf, Oliver, and PSC for fraud. The Eighth Circuit affirmed. View "Meecorp Capital Mkts., LLC v. Oliver" on Justia Law

PIC sought a declaratory judgment to determine whether PIC was required to defend and indemnify its insured, LSi, a computer and technology company with respect to a lawsuit filed by Hodell, concerning business software developed and sold by LS. The district court found LSi did not have coverage under either of its consecutive policies with PIC because it did not provide notice of Hodell’s claims or potential claims to PIC as required. There were regular email references to possible legal action as early as March, 2007. On November 21, 2008, Hodell filed suit against LSi. On December 8, 2008, LSi first notified PIC of Hodell’s claims. The Eighth Circuit affirmed judgment in favor of PIC, reasoning that a claim was made while the 2007 policy was in place, but LSi did not properly give notice under that policy. View "Philadelphia Cons. Holding Corp. v. Hodell-Natco Indus., Inc." on Justia Law

Lincoln, a meat-packing company, and Puretz, an investor, formed Hastings, an Illinois LLC, to bid on cattle-processing plants being sold at a bankruptcy auction. Puretz was to contribute 70% of acquisition and start-up capital; Lincoln 30%, plus management and 40,000 head of cattle per year. Additional details about financing and operations were to be negotiated. To bid, Hastings had to deposit $250,000. Puretz contributed $150,000; Lincoln contributed $100,000. Hastings successfully bid at $3,900,000. Negotiations regarding operations and financing deteriorated. Hastings closed the purchase. Lincoln refused to contribute additional funds and dissociated from Hastings. Under Illinois law, if a member dissociates and the LLC does not dissolve, the LLC must purchase the dissociating member’s distributional interest. Lincoln sought a determination of fair value. The district court held that Lincoln and Puretz each held a 50% interest in Hastings, that the value of Hastings on the dissociation date was $3,900,000, and that Lincoln’s only contribution was $100,000, rejecting Lincoln’s assertions that its identification of the opportunity, business plan, and “sweat equity” had “substantial value.” The court concluded that the value of Lincoln’s interest was $1,950,000, less 30% that Lincoln failed to contribute ($1,170,000), plus return of $100,000, and awarded Lincoln $880,000. The Eighth Circuit reversed. Lincoln and Puretz contemplated that any capital contributed to Hastings would be returned in proportion to their contributions before profits or losses generated by operations were divided equally. Because Lincoln did not make its 30% contribution to capital, it was not entitled to a 30% distribution. View "Lincoln Provision, Inc. v. Aron Puretz" on Justia Law

MHFS filed suit against the County, the Commission, and others for interfering with its business operations at the Baxter County Airport. The court concluded that the district court did not err in dismissing MHFS's claims for breach of contract where MHFS did not allege any breach of contract distinct from the breach of the duty to act in good faith; Arkansas law does not recognize a "continuing tort" theory; even if the court were to assume such acts were intentional, MHFS failed to state a claim for intentional interference with its business relationship; the district court correctly dismissed MHFS's civil rights claims for denial of procedural due process where MHFS was not deprived of any property or liberty interest; the district court did not abuse its discretion by declining to exercise supplemental jurisdiction over state law claims; and the district court did not abuse its discretion in denying the motion to amend following its dismissal of the action. Accordingly, the court affirmed the judgment of the district court. View "Mountain Home Flight Service v. Baxter County, et al." on Justia Law

After the company it hired to compile research on the greeting cards market, Monitor, transmitted confidential market research it had prepared for Hallmark to a private equity firm, Clipper, Hallmark filed suit against Monitor and Clipper. Hallmark settled with Monitor and a jury awarded Hallmark compensatory and punitive damages in the case against Clipper. The court concluded that the jury had sufficient evidence to find that Hallmark's PowerPoint presentations constituted trade secrets under the Missouri Uniform Trade Secrets Act, Mo. Rev. Stat. 417.450 et seq; the jury verdict did not give Hallmark a double recovery where Hallmark's settlement with Monitor and its jury verdict against Clipper compensated Hallmark for independent injuries and no reduction of the jury award was necessary; and the punitive damages against Clipper were permissible under Missouri law where defendant acted with reckless disregard for Hallmark's rights and the Due Process Clause where it was not grossly excessive. Accordingly, the court affirmed the district court's denial of Clipper's motion for judgment as a matter of law and, alternatively, to alter or amend the judgment. View "Hallmark Cards v. Monitor Clipper Partners" on Justia Law

St. Jude sued its competitor, Medtronic, for tortiously interfering with its business relationship with an employee. After the parties arbitrated their claims, St. Jude then sued the employee's wife (defendant) for related claims. On appeal, St. Jude challenged the district court's grant of summary judgment in favor of defendant. Defendant had left her at-will employment with St. Judge to work for Medtronic and her husband's sales at St. Jude dropped significantly. As a preliminary matter, the court concluded that Florida law applied because Florida was the forum that rendered the arbitration judgment. Applying Florida's requirements for res judicata, the court reversed the district court's dismissal of Counts 1, 3, 5, and 6 arising from defendant's acts as a St. Jude employee because they were not barred by res judicata; the court affirmed the district court's dismissal of Counts 2 and 4; and the court remanded for further proceedings. View "St. Jude Medical S.C., Inc. v. Cormier" on Justia Law