Rivercliff Company Inc v. Residences At Riverdale GP LLC et al
ORDER granting pltf's 32 Motion to Compel Discovery Responses; the parties are directed to submit an agreed protective order within five days from the entry of this Order; denying pltf's 41 Motion for Summary Judgment; denying defts 39; 46 Motion in Limine; denying defts' 48 Motion for Partial Summary Judgment on Punitive Damages; granting deft Nations' 49 Motion for Partial Summary Judgment on Punitive Damages; denying defts' 51 Motion for Partial Summary Judgment; denying defts' 80 Joint Motion to Strike Affidavit Testimony. Signed by Judge Susan Webber Wright on 12/2/11. (vjt)
IN THE UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF ARKANSAS
RIVERCLIFF COMPANY, INC.
RESIDENCES AT RIVERDALE GP,
LLC, ET AL.
NO: 4:10CV00330 SWW
Plaintiff Rivercliff Company, Inc. (“Rivercliff”) brings this diversity action against
Residences at Riverdale GP, LLC (“RAR GP, LLC”) and Residences at Riverdale, LP (“RAR
LP”) (collectively, “the RAR entities”), David F. Stapleton (“Stapleton”), and Nations
Construction (“Nations”), seeking damages and injunctive relief for trespass to land, breach of
the duty of an adjoining landowner to provide lateral support, and negligence.
Pending before the Court are (1) Rivercliff’s motion for summary judgment (docket
entries #41, #42, #43), Defendants’ responses in opposition (docket entries #61, #62, #63, #66,
#67, #68), and Rivercliff’s replies (docket entries #69, #79); (2) Defendants’ motion to exclude
expert testimony and for summary judgment on Rivercliff’s lateral support claim (docket entries
#46, #47, #54), Rivercliff’s response in opposition (docket entries #70, #71, #77), and
Defendants’ reply (docket entry #82); (3) Defendants’ motion to strike the affidavit of Mark
Wyatt (docket entries #80, #81), Rivercliff’s response in opposition (docket entry #88), and
Defendants’ reply (docket entry #89); (4) Stapleton’s and the RAR entities’ motion for summary
judgment on punitive damages (docket entries #48, #50, #54), Rivercliff’s response in opposition
(docket entry #70, #71, #73), and the separate defendants’ reply (docket entry #83); (5) Nations’
motion for summary judgment on punitive damages (docket entries #49, #52, #53), Rivercliff’s
response in opposition (docket entry #74), and Nations’ reply (docket entry #85); (6) Stapleton’s
and the RAR entities’ motion for summary judgment on Rivercliff’s veil-piercing claim (docket
entries #51, #54, #57), Rivercliff’s response in opposition (docket entries #70, #71, #72), and the
separate defendants’ reply (docket entry #84); and (7) Rivercliff’s motion to compel discovery
responses from Stapleton and the RAR entities (docket entries #32, #33), the separate
defendants’ response in opposition (docket entry #34), and Rivercliff’s reply (docket entry #36).
After careful consideration, and for reasons that follow, Rivercliff’s motion for summary
judgment is denied, Defendants’ motion to exclude expert testimony and for summary judgment
on Rivercliff’s lateral support claim is denied, Defendants’ motion to strike affidavit testimony is
denied, Stapleton’s and the RAR entities’ motion for summary judgment on punitive damages is
denied, Nations’ motion for summary judgment on punitive damages is granted, Stapleton’s and
the RAR entities’ motion for summary judgment on Rivercliff’s veil-piercing claim is denied,
and Rivercliff’s motion to compel discovery responses is granted.
Plaintiff Rivercliff owns real property in Little Rock (“the Rivercliff Property”), which
contains the Rivercliff Apartments. The RAR entities, owned in part by Defendant Stapleton,
purchased property (“the Residences Property”) adjacent to the Rivercliff Property. A steep
hillside exists at or near the area where the Rivercliff and Residences Properties meet, and
Magnolia Avenue, a private road owned and operated by Rivercliff, is located at the crest of the
In October 2008, the RAR entities commenced construction of an apartment complex on
the Residences Property. Rivercliff alleges that its representative warned Stapleton that any
excavation of the aforementioned hillside would likely cause damage to the Rivercliff Property
and that Defendant Stapleton responded that no such excavation would occur. According to
Rivercliff, despite Stapleton’s assurances, agents of the RAR entities, including Defendant
Nations, negligently excavated the base of the hillside, which removed lateral support for the
Rivercliff Property and damaged Magnolia Avenue, the only means of ingress and egress to the
Rivercliff sues the RAR entities for breach of the duty to provide lateral support and
trespass, see Amended Complaint, Counts I & III, and sues Nations for trespass and negligent
excavation. See Amended Complaint, Counts II & IV. By way of relief, Rivercliff seeks
compensatory damages in excess of $100,000, punitive damages, and an injunction requiring the
RAR entities to restore lateral support and restore stability to the hillside. Additionally,
Rivercliff seeks to hold Stapleton liable for damages assessed against the RAR entities under a
veil-piercing theory. See Amended Complaint, Count V.
Rivercliff’s Motion for Partial Summary Judgment
Rivercliff moves for partial summary judgment,1 asserting that the RAR entities are liable
Summary judgment is appropriate when “the pleadings, the discovery and disclosure
materials on file, and any affidavits show that there is no genuine issue as to any material fact
and that the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(c). As a
prerequisite to summary judgment, a moving party must demonstrate “an absence of evidence to
support the non-moving party’s case.” Celotex Corp. v. Catrett, 477 U.S. 317, 325 (1986).
Once the moving party has properly supported its motion for summary judgment, the nonmoving party must “do more than simply show there is some metaphysical doubt as to the
material facts.” Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986).
for injury to the Rivercliff Property under strict liability and negligence standards.
Under Arkansas law, a landowner has an absolute right to subjacent and lateral support of
his property in its natural condition: “One who excavates on his own land, so that by the
operation of the natural and ordinary causes which he takes no precaution to guard against, the
land of another falls into the excavation, is liable to the latter for the injury to the land in its
natural condition, but not for injuries to buildings or improvements, without proof of actual
negligence.” Paris Purity Coal Co. v. Pendergrass, 104 S.W.2d 455, 457 (Ark. 1937).
other words, the absolute right to lateral and subjacent support of land does not extend to the
support of additional weight placed on the land by buildings and other structures.
Here, it is undisputed that the land in question contains improvements and that Rivercliff
seeks relief for damage to Magnolia Avenue. Nevertheless, Rivercliff argues that the defendants
are strictly liable because Magnolia Avenue has served as the entry to the Rivercliff Apartments
for over 60 years, and the “passage of time is adequate to hold a purchaser of adjacent lands
strictly responsible for any damage caused by the excavation.” Docket entry #69, at 5.
According to Rivercliff, when “the improvement has been present for so many years that it is
essentially the natural state of the land, then strict liability may still be applied.” Docket entry
#42, at 5.
The non-moving party may not rest on mere allegations or denials of his pleading but
must “come forward with ‘specific facts showing a genuine issue for trial.’” Id. at 587 (quoting
Fed. R. Civ. P. 56(e)). “[A] genuine issue of material fact exists if: (1) there is a dispute of fact;
(2) the disputed fact is material to the outcome of the case; and (3) the dispute is genuine, that is,
a reasonable jury could return a verdict for either party.” RSBI Aerospace, Inc. v. Affiliated FM
Ins. Co., 49 F.3d 399, 401 (8th Cir. 1995).
Rivercliff cites Bradley v. Valicenti, 185 Pa. Super. 403, 138 A.2d 238 (1958). In that
case, the plaintiff spread a small amount of fill dirt on her land, and five years later, an adjoining
landowner’s excavations caused the plaintiff’s land to fall away. The Superior Court of
Pennsylvania held that the small amount of fill, which was added to the rear of the property
away from the area where excavation occurred, did not negate the plaintiff’s absolute right to
lateral support of her land. The Court noted that “the passage of five years, the resultant use of
the land and exposure to the elements would make it ground in its natural condition.” Id., 185
Pa. Super. at 406-07, 138 A.2d at 240. In a subsequent case, the Pennsylvania Supreme Court
emphasized that Bradley did not create an additional right of lateral support and that the addition
of fill dirt in Bradley was “insignificant . . . and not to the area collapsing and threatened with
collapse.” Albert v. Wright 410 Pa. 383, 388, 189 A.2d 753, 755 (1963).
The Court finds no similarity between this case and the facts in Bradley. More
importantly, the Court finds no Arkansas cases that support Rivercliff’s argument that improved
land can be transformed to its natural state merely by the passage of time. The Court finds that
Plaintiffs are not entitled to summary judgment under a strict liability standard.
Next, Rivercliff argues that it is entitled to summary judgment under a negligence theory
because the RAR entities failed to provide notice that they would remove soil from land adjacent
to and below the Rivercliff Property. According to Rivercliff, lack of notice is proof of
negligence and “the only question [for] the jury to decide is causation.” Docket entry #42, at 6.
Even assuming that Defendants failed to give notice of their intention to excavate, such
inaction is merely evidence of negligence. It is for a jury to decide whether, under the facts and
circumstances presented, an excavator’s failure to give notice of his intention to excavate
amounts to a breach of the duty of ordinary care. Furthermore, Defendants have presented
evidence that the RAR entities took affirmative steps in an effort to prevent harm to adjoining
landowners, see docket entry #63, Ex. #4, and the Court finds that genuine issues of fact exist on
the issue of negligence. Accordingly, Rivercliff’s motion for partial summary judgment will be
Defendants’ Motion to Exclude Opinion Testimony, Motion for Partial Summary
Judgment on Lateral Support Claim, and Motion to Strike Affidavit Testimony
Defendants ask the Court to exclude opinion testimony by Rivercliff’s expert, Mark
Wyatt, asserting that Wyatt’s proposed testimony concerning causation is both irrelevant and
unreliable. Additionally, Defendants seek summary judgment on Rivercliff’s claim that the
RAR entities breached a duty to provide lateral support, asserting that the exclusion of Wyatt’s
testimony leaves Rivercliff without evidence essential to prove causation.
Motion to Exclude Expert Evidence
Rule 702 of the Federal Rules of Evidence permits a witness qualified as an expert by
“knowledge, skill, experience, training, or education” to give his or her opinion when “scientific,
technical, or other specialized knowledge will assist the trier of fact to understand the evidence
or to determine a fact in issue.” In Daubert v. Merrell Dow Pharmaceuticals, Inc., 113 S. Ct.
2786, 2797 (1993), the Supreme Court held that Rule 702 imposes a special obligation upon a
trial judge to insure that the scientific or technical principles and methodology underlying expert
testimony are reliable. Id., see also Kumho Tire Co., Ltd., v. Carmichael, 119 S. Ct 1167, 1175
(1999). Additionally, a trial court must determine whether proffered testimony “fits” the facts
of the case; that is whether the testimony is relevant and sufficiently tied to the facts of the case
that it will aid the jury in resolving a factual dispute. Daubert, 113 S.Ct. at 2796 (citation
Relevance. The parties agree that a shallow slope failure has occurred in the soil directly
beneath Magnolia Avenue. Defendants assert, however, that proof of a deep slope failure is
essential to establish a causal relationship between the excavation work at issue and damage to
Magnolia avenue. According to Defendants, Wyatt’s proposed opinion testimony lacks
relevance because he has acknowledged that he has no objective evidence of deep slope failure,
and his studies reveal, at most, the risk of deep slope failure.
In a report dated April 4, 2011, Wyatt states that the slope in question exhibited no
movement since the 1950's and that an equilibrium condition was disrupted when the toe or base
of the slope was excavated, which caused a progressive slide associated with the on-site fill at
the top of the slope. See docket entry #77, Ex. A, at 6. Wyatt reports that movement at the top
of the slope “appears to be intimately connected with hillside movement” and that development
of scarps and tension cracks indicate that movement will continue. Id. In deposition, Wyatt
testified as follows:
But if I understand your opinion here, you’re saying that the excavation which
took place at the bottom of the hill has caused the shallow failure under
Magnolia Avenue, correct?
My opinion is that excavation at the toe allowed the hillside to move and that we
are seeing the results of that movement. And the first thing you’re going to
see–sliding is going to be exhibited at the weakest point first which is that
shallow slide. But the hillside is moving, is going to move. I mean, analytically
that’s what we see.
Docket entry #46, Ex. F (“Wyatt Dep.”) at 139-140.
Wyatt acknowledges that he has no objective evidence of deep-seated movement, but
according to his report dated April 4, 2011, the results of stability tests indicate “that there is a
significant potential for a deep slide to occur,” which would “almost certainly” take Magnolia
Avenue out of service. See docket entry #77, Ex. A, at 5.
Defendants’ challenge to the relevance of Wyatt’s testimony rests on the proposition that
evidence of deep slope failure is essential to Rivercliff’s lateral support claim. Although Wyatt
has acknowledged that he has no objective evidence that deep slope failure has occurred, the
Court finds that his opinion that the hillside movement is progressive and that such failure is
likely to occur is relevant to Rivercliff’s lateral support claim, particularly Rivercliff’s request
for an injunction requiring the RAR entities to restore lateral support and restore stability to the
Reliability. Several factors might be relevant to a trial court’s inquiry regarding the
reliability of the principles and methodology underlying expert testimony including (1) whether
a theory or technique can be and has been tested, (2) whether a theory or technique has been
subject to peer review and publication, (3) whether, with respect to a particular technique, there
is a high known or potential rate of error and whether there are standards controlling the
technique’s operation, and (4) whether the theory or technique enjoys general acceptance within
a relevant scientific community. Daubert, 113 S.Ct. at 2797. But these factors “may or may not
be pertinent in assessing reliability, depending on the nature of the issue, the expert’s particular
expertise and the subject of his testimony.” Kumho, 113 S. Ct. at 1175-76.
Defendants contend that Wyatt’s opinion is unreliable because it is based on “unscientific
analysis and fallacious reasoning.” According to Defendants, Wyatt reasons that because
damage to Magnolia Avenue followed the excavation at issue, the damage must have been
caused by the excavation. However, Wyatt’s report and his affidavit dated September 30, 2011
indicate that he formed his opinion after numerous visits to the site, reviewing available survey
and topographic data, reviewing engineer reports, and conducting subsurface exploration and
slope stability analyses.
It is clear that Defendants quarrel with the factual basis of Wyatt’s opinion, not his
methodology.2 “‘[T]he factual basis of an expert opinion goes to the credibility of the testimony,
not the admissibility, and it is up to the opposing party to examine the factual basis for the
opinion in cross-examination.’” Arkwright Mut. Ins. Co. v. Gwinner Oil, Inc., 125 F.3d 1176,
1183 (8th Cir. 1997)(quoting Hose v. Chicago Northwestern Transp. Co., 70 F.3d 968, 974 (8th
Cir.1995)). “‘Only if an expert's opinion is so fundamentally unsupported that it can offer no
assistance to the jury must such testimony be excluded.’” Id.(quoting Hose, 70 F.3d at 974). To
the extent that Defendants insist that Wyatt must have evidence of a deep slope failure, they may
attack his opinion on cross examination. Defendants have simply failed to demonstrate that
Wyatt’s testimony is so fundamentally unsupported that it can offer no assistance to the jury.
Motion for Summary Judgment on Lateral Support Claim and Related Motion to Strike
Having denied Defendants’ motion to exclude Wyatt’s testimony, the primary basis for
Defendants’ motion for partial summary judgment (that Rivercliff lacks expert testimony on the
issue of causation) is moot. Defendants also argue that Wyatt’s testimony, even if admissible, is
Defendants’ expert, Sean Baker, acknowledged in deposition that he uses the same
methodology employed by Wyatt in assessing slope stability. See docket entry #77, Ex. #3, at
53-54. Baker testified that he does not challenge Wyatt’s methodology, but he believes that
Wyatt should have employed different assumptions regarding soil parameters. Id. Furthermore,
in a reply brief, Defendants state that they do not questions Wyatt’s qualifications as an expert,
nor do they challenge the methodology of his slope stability analyses.
insufficient to allow a reasonable jury to find in Rivercliff’s favor because his testimony “rests
on the logical fallacy post hoc ergo propter hoc and does not address . . . possible alternative
causes.” For reasons previously stated, Wyatt’s expert report and deposition testimony do not
indicate that he has employed “after this, therefore because of this” logic to reach his conclusion
that Defendants’ excavation resulted in damage to Magnolia Avenue. As for possible alternative
causes, Wyatt testifies by affidavit that although water and movement of weaker fill materials
could have contributed to the movement exhibited, they were not the likely primary cause of
movement. Docket entry #77, Ex. #2, ¶ 7.
Defendants ask the Court to strike Wyatt’s affidavit, asserting that he “did not opine
during his deposition that these alternative possible causes were unlikely to have occurred,
although he had ample opportunity to provide such information.” Docket entry #81, at 12. The
authority to disregard an affidavit and grant summary judgment on the remaining record is
limited to situations “‘where the conflicts between the deposition and affidavit raise only sham
issues.’” Baker v. Silver Oak Senior Living Management Co., L.C. 581 F.3d 684, 690 (8th Cir.
2009)(quoting Camfield Tires, Inc. v. Michelin Tire Corp., 719 F.2d 1361 (8th Cir.1983)). Even
assuming that Wyatt’s affidavit testimony conflicts with his deposition testimony, Defendants
have failed to show that Wyatt’s testimony regarding alternative causes raises only sham issues.
Accordingly, the Court denies the motion to strike and finds that Defendants are not entitled to
partial summary judgment on Rivercliff’s lateral support claim.
Stapleton’s and the RAR Entities’ Motion for Partial Summary Judgment on
Under Arkansas Code § 16-55-206, a plaintiff seeking punitive damages has the burden
to prove, by clear and convincing evidence, the presence of either or both of the following
aggravating factors: (1) the defendant knew or ought to have known, in light of the surrounding
circumstances, that his or her conduct would naturally and probably result in injury or damage
and that he or she continued the conduct with malice or in reckless disregard of the consequences
from which malice may be inferred; or (2) the defendant intentionally pursued a course of
conduct for the purpose of causing injury or damage.3 See Ark. Code Ann. §§ 16-55-206, 207.
Punitive damages are not a favorite of the law in Arkansas, and negligence, even gross
negligence, is never enough to support punitive damages. See In re Aircraft Accident at Little
Rock, 351 F.3d 874, 876 (8th Cir.2003) (quoting Diamond Shamrock Corp. v. Phillips, 256 Ark.
886, 511 S.W.2d 160, 164 (1974) and Louisiana and North West R.R. Co. v. Willis, 289 Ark.
410, 415, 711 S.W.2d 805, 808 (1986)).
Stapleton and the RAR entities assert that Rivercliff is unable to present any evidence
from which a reasonable jury could conclude that the RAR entities acted intentionally or with
conscious disregard of the consequences.
In an effort to show that genuine issues for trial exist
on its claim for punitive damages, Rivercliff submits evidence of the following events. Stapleton
hired a civil engineer group managed by Brian DeLatte (“DeLatte”) in connection with the
Residences Property development project. On April 1, 2008, Stapleton received an email
message from DeLatte, stating that the preliminary site plan for the Residences Property
included massive retaining walls along the northwest and west boundaries of the site. See docket
entry #70, Ex. #10. Stapleton responded: “We don’t want no massive retaining walls!!!!
Anything we can do?” Id. The next day, DeLatte informed Stapleton that a retaining wall was
A plaintiff must also prove that the defendant is liable for compensatory damages, see
Ark. Code Ann. § 160-55-206, but this component is not at issue here.
needed to hold back a 50 to 60 foot cliff. See docket entry #70, Ex. #9. On April 24, 2008, the
City of Little Rock rejected Stapleton’s application for a building permit on the ground that the
proposed retaining wall failed to meet code restrictions. Docket entry #70, Ex. #11. By email
message dated April 20, 2009, an engineer wrote Glenn Calvert, the architect who had submitted
the building permit application, stating: “These comments are the first I’ve heard about a
retaining wall. Also, there is no mention of a retaining wall in the geotech report. I can fake
something in for the building permit, but we’ll need additional data to do a final design.” Docket
entry #70, Ex. #12.
Rivercliff asserts that Stapleton was keenly aware that he needed additional topographic
information necessary to accurately assess the need for a retaining wall, but he failed to obtain
such information. Rivercliff submits evidence that in August 2008, a representative for
Rivercliff asked Stapleton about his intentions regarding excavation, and Stapleton assured him
that he would not excavate the hillside but might remove some vegetation. Docket entry #70,
Ex. #14, at 82.
RAR commenced excavation in October 2008, and the extent of the excavation
is in dispute.
After the excavation in question took place, Stapleton rejected a proposal for the
construction of a retaining wall, see docket 70, Ex. #18. Eventually, Stapleton did install a
retaining wall, but Rivercliff contends that it is insufficient to restore hillside instability caused
by the excavation.
Viewing the evidence in a light most favorable to Rivercliff, the Court finds that a
reasonable juror could find that Stapleton, acting on behalf of the RAR entities, knew or had
reason to know that proceeding with excavation of the hillside without a recommended
retaining wall in place would inflict injury to the Rivercliff Property, but he proceeded with
excavation with conscious indifference to the consequences, from which malice may be inferred.
Accordingly, the Court finds that the separate defendants are not entitled to summary judgment
on punitive damages. However, Rivercliff may not offer evidence that is relevant solely to the
issue of punitive damages without first seeking the Court’s permission, outside the hearing of the
Nations’ Motion for Summary Judgment on Punitive Damages
Nations seeks summary judgment in its favor with respect to Rivercliff’s claim for
punitive damages. In response, Rivercliff acknowledges that “discovery has not revealed a
substantial factual basis upon which punitive damages maybe assessed against Nations.” Docket
entry #74, at 2. In light of Rivercliff’s response, Nations’ motion will be granted.
Stapleton’s and the RAR Entities’ Motion for Partial Summary Judgment - Piercing the
RAR LP is organized under Delaware law, with a principal place of business in Texas,
and RAR GP, LLC, also organized under Delaware law with a principal place of business in
Texas, serves as the general partner for RAR LP. Rivercliff sues the RAR entities for breach of
the duty to provide lateral support and trespass and seeks to hold Defendant Stapleton, part
owner and manager of the entities, liable for damages under a veil-piercing theory. Stapleton
and the RAR entities move for partial summary judgment, asserting that Rivercliff has failed to
raise any material issues of fact with respect to its veil-piercing claim.4
The doctrine of piercing the corporate veil is an equitable remedy; it is not itself a cause
of action for wrongful conduct. See Tamko Roofing Products, Inc., v. Smith Engineering Co.,
450 F.3d 822, 726 n.2 (8th Cir. 2006). Recognizing this distinction, the Court will nevertheless
Before turning to whether summary elimination of Rivercliff’s veil-piercing claim is
warranted, the Court makes the following observations. First, the parties refer to RAR GP, LLC
and RAR LP collectively, even though they are separate business entities. Separate business
entities do not become a single entity merely because the officers or owners of one are also
officer and owners of the other. See K.C. Properties of N.W. Arkansas, Inc. v. Lowell Inv.
Partners, LLC, 373 Ark. 14, 32-33, 280 S.W.3d 1, 16 (2008)(citations omitted).
Second, without discussing which state’s law governs or whether a conflict of law exists,
the parties cite Arkansas cases addressing the doctrine of piercing the corporate veil, and they
fail to address the impact of conflicting statutory provisions.3
Even assuming that RAR LP and RAR GP, LLC are properly regarded as a single entity
and that Arkansas common law governs Rivercliff’s veil-piercing claim, the Court finds that
Rivercliff has presented genuine issues for trial. The veil-piercing doctrine generally provides
that an owner of a corporation may be held liable for corporate obligations where the corporation
is a sham and a mere alter ego of the owner. Under the doctrine, liability is imposed on the
individual owner because the corporation is not a bona fide independent entity.4
adopt the parties’ terminology and refer to Rivercliff’s “veil-piercing claim.”
Arkansas has adopted the Revised Uniform Limited Partnership Act, which provides that
a “limited partner is not personally liable, directly or indirectly, by way of contribution or
otherwise, for an obligation of the limited partnership solely by reason of being a limited partner,
even if the limited partner participates in the management and control of the limited partnership.
Ark. Code Ann. § 4-47-303(emphasis added). Delaware law, on the other hand, provides that a
limited partner is not liable for the obligations of a limited partnership unless he participates in
the control of the business. See Del. Code Ann. tit. 6, § 17-303(a).
Rivercliff argues that genuine issues of material fact remain as to the “claims against
Stapleton individually for his own actions.” However, Rivercliff does not assert a tort claim
Arkansas law provides that, in special circumstances, a court may disregard the corporate
facade when the corporate form has been illegally abused to the injury of a third party. K.C.
Properties of N.W. Arkansas, Inc. v. Lowell Inv. Partners, LLC , 373 Ark. 14, 32, 280 S.W.3d 1,
15 (2008)(citing EnviroClean, Inc. v. Arkansas Pollution Control & Ecology Comm'n, 314 Ark.
98, 858 S.W.2d 116 (1993) and Don G. Parker, Inc. v. Point Ferry, Inc., 249 Ark. 764, 461
S.W.2d 587 (1971)). “The conditions under which the corporate entity may be disregarded or
looked upon as the alter ego of the principal stockholder vary according to the circumstances of
each case.” Id. (citing Winchel v. Craig, 55 Ark. App. 373, 934 S.W.2d 946 (1996)).
Here, Rivercliff alleges that Stapleton formed RAR LP and RAR GP, LLC for the single
purpose of developing the Residences Properties. According to Rivercliff, the RAR entities have
been undercapitalized from their inception, and “Stapleton could not afford to undertake a
responsible assessment of the hillside as any recommendation that might require . . . additional
cost would obstruct his project goals.” Docket entry #72, at 12. According to Rivercliff, the
“stacking” of the two limited liability entities “makes ever more remote any accountability for
injury to Rivercliff.”5 Docket entry #72, at 9.
Rivercliff claims that Stapleton has treated the entities as his own by personally
withdrawing substantial funds from the underfunded entities and by paying subcontractors
against Stapleton as an individual. Instead, Rivercliff seeks to hold Stapleton liable for alleged
torts committed by RAR LP and RAR GP, LLC. See Amend. Compl., ¶¶ 48-55. Liability under
the piercing doctrine is not predicated on the individual owner’s participation in tortious activity.
Stapleton and the RAR entities assert that both Arkansas and Delaware statutes provide
that a “person” may serve as general partner in a limited partnership and define the term
“person” to include a limited liability company. See docket entry #84 (citing Del. Code Ann. tit.
6, §§ 17-401(a), 17-101(14) and Ark. Code Ann. §§ 4-47-401, 4-47-102(14)).
directly from his management company, Montford Management LP (“Montford”). According to
Rivercliff, Stapleton received a $31,250 commission when the Residences Property was
“parked” pending sale to RAR LP, a $93,413 commission when RAR LP purchased the
property; and a $268,775 developer fee. Id.
Although it appears that Stapleton does not own a majority of either RAR entity,6
Rivercliff maintains that he controls and manages the entities and acts independently of other
members and partners. To support its claim, Rivercliff presents copies of email communications
and other documents tending to show that Stapleton runs the RAR entities and Montford. See
eg., docket entry #70, Exs. #4, #5, #7, #8, #11. Additionally, Rivercliff presents evidence that
the RAR entities are unable to pay bills as they become due, see docket entry #70, Ex. 21, at 67,
and that the entities’ insurance coverage does not extend to punitive damages or intentional acts.
See docket entry #51, Exs. F, G.
Finally, Rivercliff asserts that the RAR entities are likely insolvent, citing the following
excerpt from the deposition of Ray Bell, an excavator hired by Nations to perform the excavation
work at issue in this case:
So - - have - - have they refused to make the payment that you’ve
They have paid me up to a point. And just like they said, they run out of
Docket entry #70, Ex. 21, at 67.
In support of their motion for partial summary judgment, the separate defendants present
Defendants present a chart showing that Stapleton is a limited partner in RAR LP, owing
a 19.12% share, and member of RAR GP, LLC, owning a 42.50% share. See docket entry #51,
evidence that the RAR entities continue to exist and remain in good standing with the Arkansas
Secretary of State, see docket entry #51, Exs. A, B, and have $1,000,000 in primary liability
coverage and $10,000,000 in excess coverage, see docket entry #51. Regarding capitalization,
it is undisputed that the RAR entities were initially capitalized with at least $2,201,000 in
capital contributions and a $11,500,000 construction loan. However, the Court is without
information regarding budgets and costs associated with the Residences Property development
As for Stapleton’s alleged withdrawals and payments to subcontractors, separate
defendants present evidence that RAR LP entered a management agreement with Montford,
under which Montford collects funds on behalf of RAR LP and pays the entity’s expenses. See
docket entry #84, Ex. A. According to the affidavit of Montford’s controller, Debra Lyn Mino,
Montford established a separate bank account for the management and finances of RAR LP,
funded solely by construction loan money, capital contributions by RAR LP partners, and
income from RAR LP operations. Id. Mino denies that Stapleton received a $93,413
commission payment. According to Mino, RAR LP agreed to pay a 4% developer fee, totaling
$538,000 and that half of the fee was contributed to RAR LP, and “half was paid to either RAR
LLC or Montford in monthly increments of $17,500.” Id.
Reviewing the record in a light most favorable to Rivercliff, the Court finds that
summary judgment is not warranted.4 Whether to pierce the corporate veil is a fact-intensive
inquiry, and the record reveals genuine issues of material fact regarding the sufficiency of
As previously stated, the Court assumes for the purpose of review that RAR LP and
RAR GP, LLC are properly regarded as a single entity and that Arkansas common law governs
Rivercliff’s veil-piercing claim.
capitalization and whether Stapleton has abused the separate legal status of the RAR entities and
treated them as his own.
Rivercliff’s Motion to Compel
Rivercliff seeks an order compelling Stapleton, RAR LP, and RAR GP, LLC to provide
complete responses to discovery requests seeking financial information, including copies of
financial projections or budgets related to the Residences project; closing statements and
documents associated with the purchase of the Residences Property; and financial statements,
bank statements, accounting records, tax returns, and minutes of meetings for the RAR entities.
The separate defendants object, asserting generally that the information sought is
confidential and lacks relevance because there are no genuine issues for trial as to Rivercliff’s
veil-piercing claim and claim for punitive damages. For reasons previously explained, the
separate defendants are not entitled to summary judgment on punitive damages and veil-piercing
issues. Furthermore, the Court finds that the information sought is relevant and likely essential
to Rivercliff’s claims. As for the separate defendants’ objection that the information sought is
confidential, Rivercliff states that it has no objection to the entry of an agreed protective order
that would prevent disclosure of confidential information.
For the reasons stated, the Court finds that Rivercliff’s motion to compel should be
granted. The parties are directed to provide an agreed protective order within five days from the
entry of this order, and the separate defendants are directed to provide complete responses to the
discovery requests at issue within ten days from entry of the agreed protective order.
IT IS THEREFORE ORDERED that:
Plaintiff’s motion for summary judgment (docket entry #41) is DENIED.
Defendants’ motion to exclude expert testimony and for partial summary
judgment (docket entry #46) is DENIED.
Defendants’ joint motion to strike affidavit testimony (docket entry #80) is
Separate Defendants Stapleton and the RAR entities’ motion for summary
judgment on punitive damages (docket entry #48) is DENIED.
Separate Defendant Nations’ motion for summary judgment on punitive damages
(docket entry #49) is GRANTED.
Separate Defendants Stapleton and the RAR entities’ motion for summary
judgment on Rivercliff’s veil-piercing claim (docket entry #51) is DENIED.
Rivercliff’s motion to compel discovery responses (docket entry #32) is
GRANTED. The parties are directed to submit an agreed protective order within
five (5) days from the entry of this order. The agreed order should be mailed to
chambers or attached to an e-mail addressed to email@example.com.
Please type the case name and number in the subject box. Separate Defendants
Stapleton and the RAR entities are directed to provide complete responses to
Rivercliff’s discovery requests within ten (10) days from the entry of the agreed
IT IS SO ORDERED THIS 2nd DAY OF DECEMBER, 2011.
/s/Susan Webber Wright
UNITED STATES DISTRICT JUDGE
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