Tyson Fresh Meats, Inc v. Lauer Limited, LLC et al
Filing
62
MEMORANDUM Opinion and Order granting in part and denying in part 30 Motion to Dismiss Due to Lack of Personal Jurisdiction and Motion to Dismiss Due to Improper Venue or, in the Alternative, Motion for Change of Venue (See Order Text). Signed by Senior Judge Donald E OBrien on 1/16/2013. (des)
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF IOWA
WESTERN DIVISION
TYSON FRESH MEATS, INC.,
Plaintiff,
No. 11-CV-4040-DEO
v.
LAUER LIMITED, L.L.C.; L & L
PORK, INC.; LAUER FINISHING,
L.L.C.; COLERIDGE GRAIN &
FEED, L.L.C.; ROBERT LAUER,
DAVID HANSEN, DALE HANSEN,
ROY D. MILLER, AND JAMES
KUCHTA,
Memorandum and Opinion Order
Defendants.
____________________
TABLE OF CONTENTS
I.
INTRODUCTION
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2
II.
FACTS . . . . . . . . . .
A. Lauer Limited . . . .
B. Individual Defendants
C. Defendant L & L Pork .
D. Lauer Finishing . . .
E. Coleridge Grain . . .
. 3
. 5
. 8
. 9
. 12
. 13
III.
PERSONAL JURISDICTION . . . . . . . . . . . . . . . 15
A.
Overview of Plaintiff’s Personal Jurisdiction
Arguments . . . . . . . . . . . . . . . . . . . 19
B. Personal Jurisdiction as to Lauer Limited . . . 21
1. General Jurisdiction
. . . . . . . . . . . 21
2. Specific Jurisdiction . . . . . . . . . . . 23
C. Whether Piercing the Corporate Veil and/or Alter Ego
Theory Can Confer Jurisdiction Over Shareholders or
Third Party Entities
. . . . . . . . . . . . . 24
D. Piercing the Corporate Veil and Alter Ego Theory
E.
. . . . . . . . . . . . . . . . . . . . . . . 25
1. Choice of Law . . . . . . . . . . . . . . . 25
2. Piercing the Corporate Veil . . . . . . . . 29
a. Grossly Inadequate Capitalization . . . 31
b. Solvency/Insolvency at the Time the Debt at
Issue was Incurred . . . . . . . . . . 33
c.
Diversion by Owners of Entity Funds or
Assets to Their Own or Other Improper Uses
. . . . . . . . . . . . . . . . . . . 35
d. Entity as a Mere Facade for the Personal
Dealings of the Owners and Disregard of
Corporate Formalities
. . . . . . . . 39
e. Conclusion . . . . . . . . . . . . . . 40
3. Alter Ego Theory
. . . . . . . . . . . . . 41
a. Whether Coleridge Grain and Lauer Finishing
Control and Have a Sufficient Unity of
Ownership with Lauer Limited Such That
Lauer Limited has an Independent Existence
in Form Only . . . . . . . . . . . . . 48
Intentional Interference with Contract . . . . . 56
1. General Jurisdiction
. . . . . . . . . . . 57
2. The Calder Effects Test . . . . . . . . . . 58
IV.
IMPROPER VENUE . . . . . . . . . . . . . . . . . . . 62
V.
CHANGE OF VENUE . . . . . . . . . . . . . . . . . . . 65
VI.
CONCLUSION AND SUMMARY . . . . . . . . . . . . . . . 69
I.
INTRODUCTION
On May 2, 2011, Tyson Fresh Meats, Inc. (hereinafter
“Plaintiff”),
filed
Defendants:
Lauer
a
Complaint
Limited,
against
L.L.C.
the
(hereinafter
original
“Lauer
Limited”); L & L Pork, Inc. (hereinafter “L & L Pork”);
Robert Lauer, and David Hansen.
2
Docket No. 2.
On February
13, 2012, Plaintiff filed their First Amended Complaint, again
naming the original Defendants and the following newly added
Defendants:
Coleridge Grain & Feed, L.L.C.; Lauer Finishing,
L.L.C. (Lauer Finishing); Dale Hansen, Roy Miller, and James
Kuchta.
Docket No. 26.
Plaintiff alleges the following causes of action:
breach
of
enrichment
contract
against
against
all
all
Defendants;
Defendants;
and
(2)
(3)
(1)
unjust
intentional
interference with contract against L & L Pork, Inc.; Coleridge
Grain, L.L.C.; and David Hansen and Robert Lauer.
Currently
Defendants’
before
Motion
this
to
Court,
Dismiss
Due
is:
to
(1)
Lack
newly
of
added
Personal
Jurisdiction and Improper Venue, or in the Alternative, Motion
for Change of Venue; and (2) original Defendants’ Joinder in
Motion
to
Dismiss
Due
to
Improper
Venue
or,
in
the
Alternative, Motion for Change of Venue, which fully adopts
the arguments set forth in their Co-defendants’ brief. Docket
No. 30.
II.
FACTS
Plaintiff is a corporation organized under the laws of
the State of Delaware with a packing facility located near
Storm Lake, Iowa. Docket No. 26, 2. Plaintiff’s headquarters
3
are in Dakota Dunes, South Dakota.
Id.
The United States’ hog industry can be broken into four
types
of
operations:
(1)
sow/farrowing
or
birthing
operations, (2) nursery operations, (3) finishing operations,
and (4) packer/ processing operations. See Tyson Foods, Inc.,
Fiscal 2010 Fact Book, available from Tyson Foods, Inc.
Plaintiff, as well as acting as a food distributor, maintains
pork packing/processing plants, including one in Storm Lake,
Iowa.
Id.
A farrowing or birthing operation consists of the
care of a sow herd during gestation, farrowing, and lactation.
See Iowa State University Extension and Outreach: Ag Decision
Maker, Returns from Farrowing and Finishing Hogs, available at
http://www.extension.iastate.edu/agdm/livestock/html/b1-30.h
tml, last visited January 15, 2013.
Baby hogs are typically
weaned from their mothers at between 19 to 21 days of age.
Id.
After being weaned, hogs are generally sold to a nursery
where they are housed for approximately “6 weeks before being
sold” to a finishing operation as 50 pound feeder pigs.
Id.
Finishing operations then house and feed the hogs until they
reach approximately 270 pounds, at which point they are sold
to processing plants such as Plaintiff.
Id.
finished pig takes approximately 184 days.
4
From birth to
Id.
This Court includes this basic information related to the
structure of the hog industry to aid in understanding the
relationship of the Defendants, which, as will become apparent
throughout this Memorandum and Opinion Order, is essential to
determining
whether
this
Court
can
exercise
personal
jurisdiction over them.
The remainder of this Section will
consider
each
the
nature
of
Defendant
individually,
the
relationship between each Defendant, and the actions of each
Defendant relevant to Plaintiff’s causes of action.
A.
Lauer Limited
Defendant Lauer Limited was a Nebraska Limited Liability
Corporation that acted as a hog finishing operation with its
principal place of business in Lyons, Nebraska.
26, 2.
Docket No.
During the relevant time period, the members of Lauer
Limited were David Hansen, Dale Hansen, Roy Miller, Robert
Lauer, and James Kuchta.
Docket No. 26, 3.
In July and again
in August of 2010, Lauer Limited and Plaintiff entered into “a
series of contracts (hereinafter “the Contracts”) in which
Lauer Limited agreed to deliver 4,800 head of hogs . . . for
staggered delivery” to Plaintiff’s facility in Storm Lake,
Iowa, from February 16, 2011, to November 15, 2011.
No. 26-1.
Docket
The Contracts were signed in the State of Nebraska
5
by Robert Lauer on behalf of Lauer Limited, and John Wolfgram,
a buyer for Tyson, on Tyson’s behalf. Docket No. 30-3, 58-59.
On or around September 28, 2010, Lauer Limited’s members
decided to dissolve the company due to unsustainable losses.1
Docket No. 26, 8.
At the time the decision to dissolve the
company was made, Lauer Limited had 8,000 pigs on hand, which
was, according to Robert Lauer, approximately, 3,000 head
short of what was required pursuant to the Contracts with
Tyson.
Docket No. 39-2, 48.
Also according to Robert Lauer,
all of the 8,000 pigs on hand at the time of the decision to
1
In explaining how Lauer Limited got into such a dire
economic state, Robert Lauer testified that from 2006 through
2009, Lauer Limited’s hogs suffered from virile strains of
Porcine Reproductive & Respiratory Syndrome (PRRS) and
circovirus.
PRRS attacks a pigs immune system, allowing
“bacteria and other viruses to proliferate and do damage.”
The Pig Site, Porcine Reproductive & Respiratory Syndrome
(PRRS), available at http://www.thepigsite.com/diseaseinfo/97
/porcine-reproductive-respiratory-syndrome-prrs, last visited
September 5, 2012. There are two varieties of circovirus that
have been identified, PCV-1 and PCV-2. The Pig Site, Pork
Health Fact Sheet - Circovirus Infection in Swine, available
at
http://www.thepigsite.com/articles/1/health-and-welfare
/813/, last visited September 5, 2012. Both strains appear to
attack or work in concert with the immune system. Id. The
most severe of the two strains, PCV-2, “can cause a wide
variety of clinical signs and symptoms.” Id.
Robert Lauer also indicated that in the Fall of 2009,
despite record harvests, corn prices increased in an
unexpected manner but hog prices did not increase at the same
pace, resulting in unsustainable input costs. Docket No. 392, 48. In addition, throughout 2008 and 2009, Robert Lauer
felt costly mistakes were made marketing Lauer Limited’s hogs.
Docket No. 39-2, 48.
6
dissolve the company went to fulfill pre-existing contracts
with Tyson.
Docket No. 39-2, 49.
Plaintiff alleges it first learned of the members of
Lauer Limited’s plan to dissolve in November of 2010.
No. 26, 5.
Robert
Lauer
Docket
From December 2010, through January of 2011,
expressed
his
intention
to
buy-out
Lauer
Limited’s Contracts with Plaintiff or find another party to
fulfill
the
Contracts.
Docket
No.
26,
5.
occurred, and the Contracts went unfulfilled.
This
Id.
never
Plaintiff
claims damages pursuant to the breach of the Contracts of not
less than $225,000.
Docket No. 26, 11.
Plaintiff also alleges that “[b]efore, during, and after
execution of the Contracts,” Lauer Limited “functioned as an
inadequately capitalized shell company designed to shield the
assets” of the other Defendants; that Lauer Limited failed to
follow typical corporate formalities when doing business with
the other Defendants; that it “shared millions of dollars
worth of land, buildings, equipment, labor, and capital” and
“effectively operated as” the same entity as some of the other
entity Defendants; and that at least three years prior to
7
entering into the Contracts, it had unsustainable “debt to
asset ratios . . . .”2
B.
Docket No. 26, 4, 5 and 7.
Individual Defendants
The individual Defendants were the members of Lauer
Limited.
David Hansen and Robert Lauer reside in Hartington,
Nebraska.
Docket No. 26, 3.
Nebraska.
Id.
Dale Hansen resides in Lincoln,
Roy Miller resides in Lyons, Nebraska.
James Kuchta resides in Randolph, Nebraska.
Id.
Id.
Each member of Lauer Limited made an initial capital
investment of $54,000.00.
Docket No. 39-2, 13.
Though
certain members took on additional responsibilities according
to the testimony of Robert Lauer, the members of Lauer Limited
had equal decision making authority.
Docket No. 32-2, 11.
Throughout the existence of Lauer Limited, the members often
paid the expenses of the operation out-of-pocket.3
At the
2
As of September 30, 2009, Lauer Limited’s balance sheet
showed assets of $754,587.84 and total long term liabilities
of $3,119,983.75.
Docket No. 39-2, 32.
In 2009, Lauer
Limited reported losses of $1,325,745.00. Docket No. 39-2,
44. As of July 1, 2010, Robert Lauer estimated that the total
assets of Lauer Limited was approximately $850,000.00 and the
total liabilities was above $3,300,000.00. Docket No. 39-2,
34 and 35.
3
On June 15, 2010, Lauer Limited payed L and L Pork,
owned by Robert Lauer, $30,000.00 as reimbursement for a short
term loan. Docket No. 39-2, 42. On December 10, 2010, Lauer
Limited wrote a check to L & L Pork for $50,000.00 as
repayment of a short term loan.
Docket No. 39-2, 38. On
8
dissolution of Lauer Limited, the members took out a loan for
$1,200,000.00, in order to cover Lauer Limited’s existing
obligations.
Docket No. 39-2, 14.
By the terms of the note,
each member became personally liable for the $1,200,000.00
amount.
Id.
At
the
conclusion
of
Lauer
Limited’s
dissolution, all of Lauer Limited’s obligations, including
feed costs, vet fees, building rent, etc., were paid in full
with the exception of its obligation to Tyson. Docket No. 392, 54.
Robert Lauer testified that the members of Lauer
Limited made a conscious decision to make good on all of its
existing obligations but its obligation to Tyson.
Docket No.
39-2, 54.
C.
Defendant L & L Pork
Defendant L & L Pork “is a Nebraska Limited Liability
Corporation
with
its
Hartington, Nebraska.”
principal
place
Docket No. 26, 2.
of
business
in
The members of L &
L Pork are Robert Lauer, President and Director, and Robert
Lauer’s wife, Secretary and Director.
Id.
L & L Pork was,
December 30, 2010, Lauer Limited wrote a check to David Hansen
for $167,917.38 as a reimbursement for feed bought for Lauer
Limited’s hogs.
Docket No. 39-2, 37.
On at least two
separate occasions Lauer Limited paid back Roy Miller
$48,000.00 and $27,686.37, respectively. Docket No. 39-2, 43.
9
during
the
relevant
time
period,
a
farrowing
operation,
selling 18 day old pigs almost exclusively to Lauer Limited.4
Docket No. 30-3, 111.
Plaintiff alleges that L & L Pork and Lauer Limited
“effectively” operated as a “single entity.”
7.
Docket No. 26,
Plaintiff also alleges that L & L Pork failed to follow
typical corporate formalities when doing business with Lauer
Limited.
Docket No. 26, 5.
Pursuant to a contract which expired in 2004, Lauer
Limited purchased hogs from L & L Pork for $285 per hog.
Docket No. 39-2, 7.
The contract also included a clause
preferential to Lauer Limited; the clause provided that it was
the intention of the parties that Lauer Limited was to earn at
least $3 per hog, suggesting that if Lauer Limited was not
4
Robert Lauer testified that L & L Pork sold hogs to a
Mr. Mullenhoff and a Mr. Sohler, as well as Lauer Limited, in
2010. Mr. Lauer estimated that 95% of L & L Pork hogs were
sold to Lauer Limited. Docket No. 30-3, 111.
Sometime in the Fall of 2010, L & L Pork liquidated its
sow herd. Docket No. 39-2, 26. Currently, L & L Pork rents
its farrowing unit to a third party. Docket No. 39-2, 5.
5
According to the testimony of Robert Lauer, this price
at some point changed to $30 per hog pursuant to a verbal
agreement. Docket No. 39-2, 7.
When L and L Pork started selling its hogs to a third
party, they sold them for $40 per head, suggesting the $30 per
head price offered Lauer Limited was favoritism reflecting
Robert Lauer’s ownership interest in both entities. Docket
No. 39-2, 28.
10
earning at least $3 per hog, the price L and L Pork received
per hog would decrease.6
Docket No. 39-2, 8.
L and L Pork,
along with Robert Lauer, individually, provided free labor to
Lauer Limited which had no employees of its own.7
Docket No.
39-2,
Pork
28.
Plaintiff
also
alleges
“L
&
L
made
approximately 107 loans to Lauer Limited[,] totaling about
$1,900,000 during a two-year period from September 2008[,]
through September 2010.”8
Docket No. 26, 7.
In October of 2010, rather than selling its hogs to Lauer
Limited, L and L Pork began selling its hogs to a third party.
Docket No. 39-2, 6.
In his deposition, Robert Lauer admitted
that, had Lauer Limited not dissolved, those hogs would have
been sold to Lauer Limited and used to fulfill the Contracts
6
This preferential term appears to have been honored, at
least to some extent, up through Lauer Limited’s dissolution
in 2010.
For instance, Robert Lauer testified that in
December of 2010, Lauer Limited wrote a check to L and L Pork
for $40,000.00 for the overpayment of pigs. Docket No. 39-2,
39.
7
From September of 2008, to September of 2009, L and L
Pork paid $193,907.03 in salaries and wages. Docket No. 39-2,
4. It is unclear from the record how much of these salaries
and wages reflected labor on behalf of Lauer Limited and how
much reflected labor on behalf of L and L Pork.
8
The record currently before this Court does reflect that
L and L Pork often covered substantial portions of Lauer
Limited’s expenses, though it does not reflect the exact
amount of 1.9 million. Docket No. 39-2, 37, 38, and 42.
11
here at issue.
D.
Docket No. 39-2, 36.
Lauer Finishing
Defendant
Lauer
Finishing
“is
a
Nebraska
Limited
Liability Corporation with its principal place of business in
Hartington, Nebraska.”
Id.
Robert Lauer and his wife own
Lauer Finishing, and Robert Lauer acts as its managing member.
Id.
Lauer Finishing was incorporated solely for the purpose
of purchasing land and finish barns to be rented to third
parties.
Docket No. 39-2, 26.
As of 2010, Lauer Finishing
owned 25 acres of land, upon which were situated the 8
finishing barns utilized by Lauer Limited in its hog finishing
operation.
Docket No. 39-2, 26.
Initially, Lauer Finishing
rented its finishing barns to Lauer Limited pursuant to a
contract, but the contract expired in 2005.
53.
Docket No. 39-2,
As of 2010, there was no formal rental agreement between
Lauer
Limited
and
Lauer
Finishing.
Docket
No.
39-2.
According to the expert opinion of Mr. Robert L. Kirchner, a
Certified Fraud Examiner, Lauer Limited paid Lauer Finishing
$19,000.00 per month in rent.
Docket No. 23-13, 6.
12
Also as
of 2010, Lauer Finishing did not have any salaried employees.
Docket No. 39-2, 52.
E.
Coleridge Grain
Defendant
Coleridge
Grain
“is
a
Nebraska
Limited
Liability Corporation with its principal place of business in
Coleridge, Nebraska.”
Docket No. 26, 3.
During the relevant
time period, Robert Lauer, David Hansen, and Brian Eddie each
owned equal 1/3 interests in Coleridge Grain.
Docket No. 39-
2, 6.
Coleridge
Grain
operated
as
producer, and hog trucking company.
and 43.
a
grain
bank,
hog
feed
Docket No. 39-2, 30, 42,
During the relevant time period, Coleridge Grain had
approximately 5 to 7 customers for which it stored grain and
produced food, including Lauer Limited and L and L Pork.
Docket No. 39-2, 41.
According to Robert Lauer, Coleridge
Grain’s customers would purchase grain, premix, and drugs and
deliver them to Coleridge Grain for storage. Docket No. 39-2,
41.
Coleridge Grain would then mix and grind the ingredients
on the customers behalf, who would then be responsible for
picking up the finished feed.
Docket No. 39-2, 41 and 42.
Coleridge Grain also owned 2 hog trailers and 4 semis. Docket
No. 34-1, 30.
David Hansen testified that Coleridge Grain
13
hauled for Lauer Limited, his own finishing operation (Hansen
Hog Haven), Paulson Pork, and a Mr. Broberg, as well as
occasionally covered for other trucking companies that were
unable to fulfill their obligations.
Docket No. 34-1, 30.
Pursuant to the Contracts with Plaintiff, Lauer Limited
was
to
arrange
for
the
delivery
facility in Storm Lake, Iowa.
of
hogs
to
Plaintiff’s
Docket No. 34-2, 2.
Lauer
Limited typically utilized the services of Coleridge Grain to
deliver
its
Plaintiff
hogs
would
to
then
Plaintiff.
pay
Docket
Coleridge
Grain
No.
upon
34-1,
30.
delivery.
Docket No. 34-2, 2.
As previously noted, Coleridge Grain also produced Lauer
Limited’s feed. Docket No. 39-2, 41. Upon dissolution, Lauer
Limited
owed
Coleridge
Docket No. 39-2, 37.
Grain
$727,332.53
for
services.9
Robert Lauer has admitted that had he
and David Hansen not been part owners of Coleridge Grain, the
feed bill would not have been allowed to grow so large and be
paid so late.
Docket No. 39-2, 43.
In other words, Coleridge
Grain gave Lauer Limited preferential treatment based on the
9
The Plaintiff contends that Defendant was purchasing
grain from Coleridge Grain. However, the record is clear that
Coleridge Grain’s customers bought the grain, as well as any
other ingredients that would constitute the final feed
product, and Coleridge Grain merely provided storage and mixed
and ground the feed ingredients.
14
common ownership between the two companies.
On December 1, 2010, Robert Lauer sold his interest in
Coleridge Grain for $108,000.00.
Docket No. 39-2, 54.
50%
of his shares went to David Hansen and 50% of his shares went
to Brian Eddie, leaving Mr. Eddie and Mr. Hansen 50/50 owners.
Docket No. 50.
Though not an express condition of the sale,
it was understood at the time of the sale that Lauer Limited
would do all it could to pay off its feed bill.
39-2, 54.
Docket No.
On December 30, 2010, Lauer Limited did indeed pay
off its $727,332.53 feed bill in full.
Docket No. 39-2, 37.
In December of 2010, Coleridge Grain purchased Lauer
Limited’s remaining hogs.
Docket No. 39-2, 39.
Though
Plaintiff insinuates that this in some manner interfered with
their contracts with Lauer Limited, the record is clear that
these hogs were not slated to fulfill the Contracts here at
issue and that Coleridge Grain in fact delivered the hogs in
question once finished to Plaintiff in fulfillment of other
contracts between Lauer Limited and Tyson.
Docket No. 39-2,
39; see also Docket No. 50 and 51.
III.
PERSONAL JURISDICTION
An
action
may
be
dismissed
for
lack
of
personal
jurisdiction pursuant to Federal Rule of Civil Procedure
15
12(b)(2).
The party asserting personal jurisdiction has the
burden to make a prima facia showing that jurisdiction is
proper. Viasystems, Inc. v. EBM-Papst St. Georgen GMBH & Co.,
KG, 646 F.3d 589 (8th Cir. 2011). A court considering whether
personal jurisdiction is proper must view the evidence then
available in a light most favorable to the party asserting
jurisdiction and resolve all factual conflicts in favor of
that
party.
Goss
Graphic
Systems,
Inc.
v.
Man
Roland
Druckmaschinen Aktiengesellschaft, 139 F. Supp. 2d 1040 (N.D.
Iowa
2001)
(citing
Dakota
Industries,
Inc.
v.
Dakota
Sportswear, Inc., 946 F.2d 1384, 1387 (8th Cir. 1991)).
As a threshold issue, in order for a federal court to
exercise personal jurisdiction, the forum state’s long-arm
statute must provide sufficient grounds.
See Romak USA, Inc.
v. Rich, 384 F.3d 979, 984 (8th Cir. 2004).
jurisdiction
is
proper
under
the
forum
If personal
state’s
long-arm
statute, the exercise of personal jurisdiction must still
comport with a defendant’s constitutional Due Process Rights.
Id.
Iowa Rule of Civil Procedure 1.306 provides for personal
jurisdiction over a defendant to the full extent of the
Constitution.
Med-Tec, Inc. v. Kostich, 980 F. Supp. 1315
16
(N.D. of Iowa 1997).
Thus, the question here presented is
whether forcing newly added Defendants to defend themselves in
the United States District Court for the Northern District of
Iowa would violate their constitutional due process rights.
The Due Process Clause requires that a defendant “have
certain
minimum
contacts
with”
a
forum
“such
that
the
maintenance of the suit does not offend ‘traditional notions
of fair play and substantial justice.’”
International Shoe
Co. v. State of Washington, 326 U.S. 310, 316 (1945) (quoting
Milliken
v.
Meyer,
311
U.S.
457,
463
(1940)).
Minimum
contacts are contacts, ties or relations with a forum State
such that a defendant “should reasonably anticipate being
haled into court there.”
World-Wide Volkswagen Corp. v.
Woodson, 444 U.S. 286, 299 (1980).
Traditional notions of
fair play and substantial justice refer to the reasonableness
of requiring a defendant “to defend a particular suit” in the
forum in which it is brought.
292).
Id. at 292 (citing 326 U.S. at
A determination of whether the exercise of personal
jurisdiction is ultimately reasonable requires a court to
consider the defendant’s burden of defending in the forum
state, as well as:
the forum State’s interest in adjudicating
the dispute . . . the plaintiff’s interest
17
in obtaining convenient and effective
relief . . . the interstate judicial
system’s interest in obtaining the most
efficient resolution of controversies; and
the shared interest of the several States
in
furthering
fundamental
substantive
social policies . . . .
Id.
(internal citations omitted).
The Supreme Court has recognized the existence of two
types
of
personal
jurisdiction:
specific
and
general.
Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S.
408, 414-15 (1984).
Specific jurisdiction refers to the
exercise of “personal jurisdiction over a defendant in a suit
arising out of or related to the defendant’s contacts with the
forum.” Id. at 414, fn. 8. General jurisdiction occurs when,
though the suit may not arise out of a defendant’s contacts
with the forum, the defendant’s independent contacts with the
forum are so “continuous and systematic” that the exercise of
personal jurisdiction as to any cause of action remains
justified.
Id.
at
415
(citations
omitted).
Thus,
the
distinction between specific and general jurisdiction is a
recognition that fairness requires more or less contacts with
a forum depending on whether the conduct of the defendant at
18
issue
is
part
of
the
purported
basis
for
personal
jurisdiction.
In interpreting and synthesizing Supreme Court case law,
the
Eighth
considered
Circuit
when
has
identified
determining
five
whether
factors
an
to
exercise
be
of
jurisdiction comports with constitutional Due Process:
(1) the nature and quality of the
[defendant’s] contacts with the forum
state;
(2)
the
quantity
of
the
[defendant’s] contacts with the forum
state; (3) the relation of the cause of
action to the [defendant’s] contacts; (4)
the interest of the forum state in
providing a forum for its residents; and
(5) the convenience of the parties.
Dakota Industries, Inc. v. Dakota Sportswear, Inc., 946 F.2d
1384, 1390 (8th Cir. 1991) (citing Land-O-Nod Co. v. Bassett
Furniture Industries, 708 F.2d 1338 (8th Cir. 1983)).
The first three factors are the predominant “factors, and
the remaining two factors are secondary . . . .”
Johnson v.
Arden, 614 F.3d 785, 794 (8th Cir. 2010) (citation omitted).
A court must look at all of the factors together and “examine
the totality of the circumstances in making a personaljurisdiction determination.”
A.
Overview
of
Id.
Plaintiff’s
Personal
Jurisdiction
Arguments
The
Plaintiff
first
argues
19
this
Court
has
personal
jurisdiction over the newly added Defendants as to its breach
of contract and unjust enrichment causes of action because
this Court is entitled to pierce Lauer Limited’s corporate
veil and/or Lauer Limited is the alter ego of the newly added
Defendants.
In
other
words,
Plaintiff
contends
Lauer
Limited’s contacts and the newly added Defendants’ contacts
are one and the same; and, because this Court has personal
jurisdiction over Lauer Limited, this Court has personal
jurisdiction
over
the
newly
added
Defendants.
However,
Plaintiff’s argument raises three issues: (1) Does this court
have personal jurisdiction over Lauer Limited in the first
place?
(2) Would piercing Lauer Limited’s corporate veil
and/or determining Lauer Limited is the alter ego of the newly
added Defendants allow this Court to treat Lauer Limited’s
contacts as the contacts of the newly added Defendants? and
(3) Has Plaintiff presented a prima facie case justifying
piercing Lauer Limited’s corporate veil and/or declaring Lauer
Limited the alter ego of the newly added Defendants?
These
issues are addressed sequentially within Sections III(B) (pgs.
21-24), III(C) (pgs. 24-25), and III(D) (pgs. 25-56) of this
Memorandum and Opinion Order.
20
Plaintiff
also
contends
this
Court
is
entitled
to
exercise specific jurisdiction over Coleridge Grain because it
intentionally interfered with the Contracts here at issue.10
This argument is dealt with in Section III(E) (pgs. 56-62) of
this Memorandum and Opinion Order.
B.
Personal Jurisdiction as to Lauer Limited
As previously noted, the Supreme Court has recognized
that a Court can have two types of personal jurisdiction: (1)
general, and (2) specific.
Plaintiff does not contend Lauer
Limited is subject to this Court’s general jurisdiction.
However, because this issue affects much of the analysis
necessary to address other issues facing this Court, this
Court will first determine whether it may exercise general
jurisdiction over Lauer Limited.
1.
General Jurisdiction
It is undisputed that Lauer Limited was “a Nebraska
Limited Liability Corporation with its principal place of
business in Lyons, Nebraska.”
Docket No. 26, 3.
10
Plaintiff’s
Plaintiff does not contend that the other newly added
Defendants, Lauer Finishing, Dale Hansen, Roy Miller, and
James Kuchta, intentionally interfered with its contracts.
See Docket No. 26. However, Plaintiff has implied that its
intentional interference contract claim applies to all
Defendants but has yet to formally motion the Court to add
them as parties to the claim. Docket No. 44, 7.
21
principal place of business is in Dakota Dunes, South Dakota.
Docket No. 34-1, 2. Entering into the Contracts here at issue
is the only contact Plaintiff alleges Lauer Limited had with
the State of Iowa.
and
negotiations
See Docket No. 26.
relating
to
the
All of the discussions
Contracts
occurred
in
Nebraska between Plaintiff’s agent stationed in Nebraska and
representatives of Lauer Limited.
Docket No. 39-2.
In
addition, the Contracts were actually signed in Nebraska; and
the hogs that were subject to the Contracts were entirely
raised in Nebraska. Docket No. 30-3, 58-59 and Docket No. 392.
Thus, the record indicates Lauer Limited’s only actual
contact with the State of Iowa was the Contracts’ requirements
that Lauer Limited arrange for delivery of the hogs to Storm
Lake, Iowa; however, the actual delivery of the hogs was
undertaken by Coleridge Grain, not Lauer Limited; and the
Plaintiff, not Lauer Limited, paid for those deliveries.
Docket No. 34-1, 30 and Docket No. 34-2, 2.
Given Lauer Limited’s limited contacts with the State of
Iowa,
this
Court
is
persuaded
jurisdiction over Lauer Limited.
that
it
lacks
general
See Hall-Magner Group v.
Convocation Flowers, Inc., 2012 WL 3069782, 4 (S.D. Cal. 2012)
(holding that the occasional delivery of flowers into a
22
jurisdiction is “not sufficient to create general jurisdiction
. . . .”); Smith Enterprise, Inc. v. Capital City Firearms,
2003 WL 2561882, 2 (D. Ariz. 2008) (holding that a company
with 40 clients to whom they deliver goods within the forum
was not subject to the forum’s general jurisdiction absent
additional contacts); and Bearry v. Beech Aircraft Corp., 818
F.2d 370, 376 (5th Cir. 1987) (holding that the “flow” of a
company’s products into a state “does not create a general
presence in that state . . . .”).
2.
Specific Jurisdiction
Though Coleridge Grain actually brought the hogs to Iowa
rather than Lauer Limited, it has long been accepted that a
“lack of physical presence” in a forum does not necessarily
Kinsella v. Belforte, II, 373
defeat personal jurisdiction.
F. Supp. 2d 957, 964 (S.D. Iowa 2005); see also Burger King
Corp. v. Rudzewicz, 471 U.S. 462, 476 (1985) (“Jurisdiction .
. . may not be avoided merely because the defendant did not
physically enter the forum State”).
The Contracts required
Lauer Limited to arrange for delivery of hogs to Storm Lake,
Iowa.
It
was
Lauer
Limited,
not
Plaintiff,
that
contracted Coleridge Grain to make the deliveries.
settled
law
that
“[a]
delivery
23
term
that
subIt is
requires
a
nonresident defendant to deliver an item to a plaintiff in the
plaintiff’s forum state supports the existence of personal
jurisdiction
over
the
nonresident
defendant.”
K-V
Pharmaceutical Co. v. J. Uriach & CIA, S.A., 648 F.3d 588 (8th
Cir. 2011); see also Papachristou v. Turbines, Inc., 902 F.2d
685, 686 (8th Cir. 1990) (providing that a contract term
calling
for
delivery
of
goods
within
a
forum
state
was
sufficient, despite a lack of other contacts, to give the
forum specific jurisdiction over the defendant).
though
this
Court
lacks
general
jurisdiction
Therefore,
over
Lauer
Limited, this Court does have specific jurisdiction over Lauer
Limited as to Plaintiff’s breach of contract and unjust
enrichment causes of action.
C.
Whether Piercing the Corporate Veil and/or Alter Ego
Theory Can Confer Jurisdiction Over Shareholders or Third
Party Entities
In Lakota Girl Scout Council, Inc. v. Havey Fund-Raising
Management, Inc., the Eighth Circuit held that when a subject
entity’s corporate veil has been pierced, jurisdiction over
the
subject
entity
stockholders.”
“will
support
jurisdiction
over
the
519 F.2d 634, 638 (8th Cir. 1975); see also
Select Comfort Corp. v. Innovation Ads, Inc., 2011 WL 31715
24
(D. Minn. 2011) (stating that “[a] court may find personal
jurisdiction over a defendant through piercing the corporate
veil”).
In Epps v. Stewart Information Services Corp., the
Eighth Circuit stated that “[p]ersonal jurisdiction can be
properly asserted over a corporation if another is acting as
its alter ego, even if that alter ego is another corporation.”
327 F.3d 642, 649 (8th Cir. 2003).
Thus, as to Plaintiff’s
breach of contract and unjust enrichment causes of action,
alter
ego
and/or
piercing
the
corporate
veil
theory
is
sufficient to subject the newly added Defendants to the
personal jurisdiction of this Court, as long as Plaintiff
succeeds in making prima facie showing that Lauer Limited’s
corporate veil should be pierced and/or Lauer Limited is the
alter ego of the newly added Defendants.
D.
Piercing the Corporate Veil and Alter Ego Theory
1.
Choice of Law
As a threshold matter, this Court must determine whether
to employ Iowa or Nebraska law when piercing the corporate
veil and/or applying alter ego theory.
A “federal district
court must apply the conflict of law rules of the state in
which it sits.”
Modern Leasing, Inc., of Iowa v. Falcon Mfg.
Of California, Inc., 888 F.2d 59, 62 (8th Cir. 1989) (citing
25
Klaxon Co. V. Stentor Electric Mfg. Co., 313 U.S. 487, 496
(1941)).
“The Iowa courts have generally adopted the ‘most
significant relationship’ rule in the choice of law area . .
. .”
Sedco Intern., S.A. v. Cory, 522 F. Supp. 254, 313 (S.D.
Iowa 1981) (quoting Berghammer v. Smith, 185 N.W.2d 226, 230
(Iowa 1971)). The most significant relationship rule requires
a court “‘to apply to any issue in litigation the law of the
state which has the most significant relationship with the
parties and the principal interest in the issue . . . .”
Id.
at 231.
While neither the Iowa Courts nor the Eighth Circuit has
determined which states’ law applies to questions of piercing
the corporate veil or alter ego theories in cases involving an
Iowa plaintiff and out-of-state entity defendant, this Court,
after reviewing relevant case law, is persuaded that because
Lauer Limited is a Nebraska entity, Nebraska law applies.
Most jurisdictions recognize the internal affairs doctrine
whereby “‘the law of the state of incorporation” is used to
determine “issues relating to the internal affairs of a
corporation;’” and this Court is persuaded that Iowa courts,
if presented the opportunity, would do the same.
Matson
Logistics, L.L.C. v. Smiens, 2012 WL 2005607, 5 (D. Minn. June
26
5, 2012) (quoting Rupp v. Thompson, 2004 WL 3563775, 3 (D.
Minn. Mar. 17, 2004));
See also Kalb, Voorhis & Co. v. Am.
Fin. Corp., 8 F.3d 130, 132 (2d Cir. 1993) (“The law of the
state of incorporation determines when the corporate form will
be disregarded and liability will be imposed on shareholders
. . . .”); Judson Atkinson Candies, Inc. v. Latini-Hohberger
Dhimantec, 529 F.3d 371, 378 (7th Cir. 2008) (noting that
“Texas has the same choice-of-law rule for veil-piercing as
Illinois, namely that the law of the state of incorporation
governs such claims”); Tomlinson v. Combined Underwriters Life
Ins. Co., 2009 WL 2601940, 3 (N.D. Okla. August 21, 2009)
(noting that “the majority of jurisdictions addressing this
question
have
also
applied
the
law
of
the
state
of
incorporation to veil-piercing issues”) and MHC Investment Co.
v.
Racom
Corp.,
254
F.
Supp.
2d
1090
(S.D.
Iowa
2002)
(applying the internal affairs doctrine to an out-of-state
entity in a breach of fiduciary duty context).
Though the
parties’ Contracts called for delivery in Iowa, which would
generally
imply
Iowa
contract
law
applies,
the
internal
affairs doctrine still specifically applies to piercing the
corporate veil and/or alter ego theories because whether or
not
the
independence
of
an
out-of-state
27
entity
will
be
respected “‘is collateral to and not part of the parties’
negotiations or expectations with respect to the contract.’”
Id. at 6 (quoting Dassault Falcon Jet Corp. v. Oberflex, Inc.,
909 F. Supp. 345, 348 (M.D.N.C. 1995).
The internal affairs
doctrine also has the added benefit of recognizing that the
state of organization generally “‘has the greater interest in
determining when and if’” limited liability may “‘be stripped
away’”
from
an
entity
organized
pursuant
to
its
laws.
Dassault Falcon Jet Corp. v. Oberflex, Inc., 909 F. Supp. 345,
349 (M.D.N.C. 1995) (quoting Soviet Pan Am Travel Effort v.
Travel Committee, Inc., 756 F. Supp. 126, 131 (S.D.N.Y.
1991)).
Finally, the internal affairs doctrine “provides
consistency and predictability to” an entity and its owners;
if
an
entity
were
potentially
subject
to
piercing
the
corporate veil and/or alter ego theories of each and every
state, consistency and predictability would be eviscerated,
rendering investment prohibitive.
Id.; see also Restatement
(Second) Conflict of Laws, Section 302) (“Matters internal to
a corporation’s affairs, such as holding shareholders or
directors personally liable, is a matter best left to the laws
of one state.
Otherwise, shareholders or the corporation
could be faced with conflicting demands from various states”).
28
Thus, in determining whether Lauer Limited’s Corporate Veil
may be pierced or whether Lauer Limited is the alter ego of
the newly added Defendants, this Court will apply Nebraska
law.
2.
Piercing the Corporate Veil11
Under Nebraska law, an entity is generally “viewed as .
. . complete and separate . . . from its shareholders and
officers, who are not, as a rule, liable for” its “debts and
obligations . . . .”
Christian v. Smith, 276 Neb. 867 at 883
(Neb. 2008) (citing Baye v. Airlite Plastics Co., 260 Neb. 385
(Neb. 2000)).
Courts will generally respect the separateness
of an entity and its shareholders “until sufficient reason to
the contrary appears.” Id. (citing Southern Lumber & Coal Co.
v. M.P. Olson Real Estate and Construction Co., 229 Neb. 249
(Neb. 1988)).
Under a piercing the corporate veil theory, a plaintiff
“must allege and prove that” the target entity “was under the
11
As previously noted, the members of Lauer Limited
include Robert Lauer, David Hansen, Dale Hansen, Roy D.
Miller, and James Kuchta.
Defendants Dale Hansen, Roy D.
Miller, and James Kuchta are the “newly added” Defendants
requesting a Motion to Dismiss for Lack of Personal
Jurisdiction, and Plaintiff contends that jurisdiction is
appropriate as to these newly added Defendants because their
contacts are the contacts of Lauer Limited due to piercing the
corporate veil and/or alter ego theory.
29
actual
control
of
the
shareholder[s]
and
that
the
shareholder[s] exercised such control to commit a fraud or
other wrong in contravention of the plaintiff’s rights.”
Id.
(citing Baye, 260 Neb. 385).
Fraud, in the context of piercing the corporate veil,
requires
a
plaintiff
to
show
that
the
entity
and/or
shareholders’ conduct was imbued with the “badges, signs,
indicators, or indica of fraud . . . .”
J.L. Brock Builders,
Inc. v. Dahlbeck, 223 Neb. 493, 498 (Neb. 1986).
Badges,
indicators, and indica of fraud are not the same as proof of
actual criminal fraud but “are facts” with the “tendency to
show the existence of fraud . . . .”
Gifford-Hill & Co. v.
Stoller, 221 Neb. 757, 764 (Neb. 1986) (citing and quoting
from Montana Nat’l Bank v. Michels, 193 Mont. 295 (Mont.
1981)).
It is sufficient that the facts in question “furnish
. . . a reasonable inference of fraud, according to the weight
to which they may be entitled from their intrinsic character
and the special circumstances attending the case.”
the
fraud
is
not
apparent,
Nebraska
courts
Id.
look
to
When
the
following factors to determine whether the inference of fraud
is sufficiently strong:
(1) Grossly inadequate capitalization; (2)
Insolvency of the debtor corporation at the
30
time the debt is incurred; (3) Diversion by
the
shareholder
or
shareholders
of
corporate funds or assets to their own or
other improper uses; and (4) The fact that
the corporation is a mere facade for the
personal dealings of the shareholder and
that the operations of the corporation are
carried on by the shareholder in disregard
of the corporate entity.12
J.L. Brock Builders, 223 Neb. at 498. (quoting United States
National Bank of Omaha v. Rupe, 207 Neb. 131, 135 (Neb.
1980)).
In this case, Plaintiff does not allege and the record
does not support a finding of fraud per se.
Thus, this Court
must consider the factors the Nebraska Supreme Court outlined
in National Bank of Omaha.
a.
207 Neb. at 135.
Grossly Inadequate Capitalization
Inadequate capitalization refers to “capitalization very
small in relation to the nature of the business of the
corporation and the risks entailed.”
759 N.W.2d 447, 462 (Neb. 2008).
Christian v. Smith IV,
It is “measured at the time
of incorporation” and does not refer to capital added to cover
entity expenses at later dates.
Id.
Entity losses, though
relevant if excessive, do not necessarily translate into
12
“These factors ‘are not acts of fraud in themselves
but, rather, are elements of circumstantial proof of fraud.’”
MeccaTech, Inc. v. Kiser, 2008 WL 1774992, 10 (D. Neb. 2008)
(quoting Medlock, 642 N.W.2d 113, 124 (Neb. 2002)).
31
inadequate capitalization. Id. “Undercapitalization presents
a question of fact that turns on the nature of the business of
the particular corporation.”
Id.
As previously indicated, David Hansen, Dale Hansen, Roy
Miller, Robert Lauer, and James Kuchta were the members of
Lauer Limited.
Docket No. 26, 3.
Of these members, only Dale
Hansen, Roy Miller, and James Kuchta explicitly assert that
piercing the corporate veil is inappropriate.
Each
member
of
Lauer
Limited
made
an
Docket No. 30.
initial
capital
contribution of $54,000.00. Docket No. 39-2, 13. Hog markets
are highly volatile and typically require significant, upfront capital investments.
See Mark Greenwood, Managing
Volatility is Job No. 1, National Hog Farmer, available at
http://nationalhogfarmer.com/marketing/managingvolatility-job-no-1,
Throughout
its
last
existence,
visited
Lauer
consisted of its hog inventory.
35.
January
Limited’s
15,
2013.
only
assets
Docket No. 39-2, 32, 34, and
All of the land and associated buildings Lauer Limited
utilized were owned by Lauer Finishing.
Docket No. 39-2, 26.
The record indicates that each members’ $54,000.00 initial
capital contribution paled in comparison to the operating
costs of Lauer Limited, which included grain, feed production,
32
rent for the finishing barns, electricity bills, management
fees,
professional
Docket No. 39-2.
marketing
fees,
and
veterinary
fees.
Throughout the relevant time period, the
members of Lauer Limited, either individually or through
related entities, were forced to pay a significant amount of
company expenses out-of-pocket to keep the company afloat.
Docket No. Docket No. 39-2,
37, 38, 42, and 43.
Upon final
dissolution of Lauer Limited, the members of Lauer Limited
were forced to pay Lauer Limited’s outstanding obligations
through a $1,200,000.00 loan which obligated each member
individually.
Docket 39-2, 14.
All of these facts strongly
indicate Lauer Limited was grossly, inadequately capitalized.
b.
Solvency/Insolvency at the Time the Debt at
Issue was Incurred
An entity “is insolvent if it is unable to pay its debts
as they become due in the usual course of its business, or if
it has an excess of liabilities . . . over its assets at fair
valuation.”
Smith
IV,
759
N.W.2d
at
463.
The
record
indicates Lauer Limited failed this test on both counts.
As previously noted, the members of Lauer Limited had to
repeatedly infuse money into the company in order to pay for
its debts when they became due.
33
Docket 39-2, 37, 38, 42, and
43. As one example, the record generally supports Plaintiff’s
allegation that “L & L Pork,” which was owned solely by Robert
Lauer and his wife, made approximately 107 loans to Lauer
Limited,
totaling
about
$1,900,000.00,
during
a
two-year
period from September 2008, through September 2010.
No.
26,
7.
$641,948.
In
2008,
Lauer
Limited
Docket No. 39-2, 45.
Lauer
$19,324.38.
Limited’s
checking
Docket No. 39-2, 32.
losses
of
In 2009, Lauer Limited
reported losses of $1,325,745.00.13
2010,
reported
Docket
Id.
As of September 30,
account
was
overdrawn
by
Also as of September 30,
2010, Lauer Limited had a Coleridge Grain bill of $363,010.21,
which was more than 90 days overdue; and Robert Lauer admitted
that this debt would not have been allowed to grow so large
had Coleridge Grain not been owned in part by David Hansen and
himself.
Limited’s
Docket No. 39-2, 43.
final
dissolution
Finally, just prior to Lauer
on
December
30,
2010,
Lauer
Limited’s outstanding bill with Coleridge Grain had ballooned
to $727,332.53.
Docket No. 39-2, 39.
All of these facts
strongly indicate Lauer Limited was unable to pay its bills as
13
Robert Lauer testified that a significant amount of
these losses were due to a change in Lauer Limited’s
accounting practices (they changed to a fixed valuation of
hogs), rather than actual losses. Docket No. 39-2, 44. He
estimated that they probably actually lost between $600,000.00
and $700,000.00. Id.
34
they became due in the regular course of business when it
entered into the Contracts with Tyson in July of 2010.
Lauer Limited’s liabilities also greatly exceeded its
assets.
Docket No. 39-2, 32, 34, 35, and 44.
As of December
31, 2009, Lauer Limited had $3,547,710.63 in liabilities and
assets valued at $774,943.29.
Docket No. 39-2, 32.
As of
July 2010, when the Contracts became effective, Robert Lauer
estimated that Lauer Limited had liabilities in excess of
$3,300,000.00 and assets of approximately $850,000.00. Docket
No. 39-2, 34 and 35.
Thus, at the time it entered the Contracts with Tyson,
Lauer Limited was insolvent, in that it both could not pay its
debts in the ordinary course of business and had liabilities
that greatly exceeded its assets.
c.
Diversion by Owners of Entity Funds or
Assets to Their Own or Other Improper Uses
Improper diversion of an entity’s assets or funds occurs
when an owner of the entity “appropriates and uses [entity]
funds and property for his personal purposes and thereby
defrauds and causes damages to creditors . . . .”
Smith IV,
759 N.W.2d at 463.
The
record
indicates
Lauer
35
Limited
had
no
funds
to
appropriate; on the contrary, the members of Lauer Limited, as
previously noted, repeatedly infused capital into the business
to keep it afloat.
Docket 39-2, 37, 38, 42, and 43.
In
addition, the sole property owned by Lauer Limited was its
hogs and any grain it had on hand at a given moment.
No. 39-2, 36.
Docket
Lauer Limited did not own the finishing barns
it utilized, any land, or any equipment, and there is no
indication the members of Lauer Limited diverted the hogs or
funds raised from sale of the hogs for their own purposes.
Id.
Plaintiff does allege that Defendants Robert Lauer and
David Hansen “took actions to improperly dispose of or sell
pigs
that
were
growing
and
destined
to
fulfill
the
requirements of Contracts,” but the record does not support
this allegation.
Docket No. 26, 6.
While Robert Lauer,
acting on behalf of L and L Pork, did sell the hogs that Lauer
Limited
would
have
purchased
if
Lauer
Limited
dissolved, this was not yet Lauer Limited property.
No. 39-2, 26 and 36.
had
not
Docket
It is also clear that Coleridge Grain,
a majority of which was owned by Robert Lauer and David
Hansen, purchased Lauer Limited’s remaining hogs in December
of 2010; but, as previously noted, those hogs were not slotted
36
to fulfill the Contracts here at issue.
Docket No. 39-2, 39.
In any event, Coleridge Grain continued to feed the hogs and
delivered them to Plaintiff in fulfillment of other contracts
Lauer Limited had with Plaintiff.
Id.
Plaintiff also alleges, on information and belief, that
“the feed and expenses for the hogs intended to fulfill the
Contracts were commingled with those of L & L Pork, Robert
Lauer and/or Coleridge Grain.”
one sense, accurate.
Docket No. 26, 4.
This is, in
The record clearly indicates that
Coleridge Grain acted as a food bank which often stored grain
and other feed ingredients from various entities in the same
facilities.
Docker No. 39-2, 42.
However, Robert Lauer
testified that the grain and other feed ingredients of the
various entities were separate in the sense that Coleridge
Grain kept records of who owned what.
42.
Docket No. 39-2, 41 and
With fungible products, such as grain and other feed
ingredients,
this
arrangement
is
entirely
legitimate.
Furthermore, there is absolutely no information of record
indicating that either Coleridge Grain, L and L Pork, Robert
Lauer,
or
any
other
entities
owned
by
Dale
Hansen
were
improperly usurping grain and other feed ingredients that
ultimately belonged to Lauer Limited.
37
Thus, the members of
Lauer Limited did not divert the funds or assets of Lauer
Limited
for
their
own
purposes
by
ignoring
corporate
formalities.
However, it is a general principle of corporate law that
owners of an insolvent entity “cannot participate in” even the
legitimate “distribution of its assets until the claims of
creditors are paid.”
J.L. Brock Builders, Inc. v. Dahlbeck,
391 N.W.2d 110, 116 (Neb. 1986) (quoting 15A W. Fletcher,
Encyclopedia of the Law of Private Corporations § 7417, 137).
As stated in the Encyclopedia of the Law of Private
Corporations:
If the assets or capital [of an entity] are
distributed
to
stockholders,
either
directly
or
indirectly,
or
if
the
stockholders are allowed to withdraw assets
leaving creditors unpaid, they may be
compelled to repay what they have received,
at the suit of creditors . . . at least to
the extent necessary to realize the ratable
liability of each stockholder for corporate
debts, if the company has not retained
sufficient assets to pay its debts.
15 A W. Fletcher, Encyclopedia of the
Corporations § 7417, 137 (emphasis added).
Law
of
Private
While Plaintiff was not, strictly speaking, a creditor of
Lauer Limited, Lauer Limited did, upon signing the Contracts,
have an obligation to Plaintiff.
Instead of fulfilling that
obligation, Lauer Limited’s members consciously decided to
38
fulfill all of its other obligations to the exclusion of
Plaintiff.
Docket No. 39-2, 54.
Some of the obligations the
members decided to make good on resulted in payments to
individual members and other entities of which some of the
members
were
part
owners,
resulting
in
both
direct
and
indirect distributions to the members, while Tyson was left
out in the cold.14
Docket No. 39-2, 37, 38, 39, 42, and 43.
Thus, the members of Lauer Limited, though they did not usurp
Lauer Limited’s assets or property by ignoring separateness of
Lauer Limited, did use the dissolution process as an end
around
to
divert
what
company
funds
were
available
to
themselves and other entities of which they were part owners.
d.
Entity as a Mere Facade for the Personal
Dealings of the Owners and Disregard of Corporate Formalities
“The
separate
entity
concept
of”
an
entity
“may
be
disregarded where the” entity “is a mere shell, serving no
legitimate business purpose, and is used as an intermediary to
perpetuate fraud on the creditors.”
14
Smith IV, 759 N.W.2d at
Some examples include:
(1) on December 30, 2010,
Lauer Limited wrote a check to Coleridge Grain for $727,332.53
feed production; and (2) on December 30, 2010, Lauer Limited
wrote a check to David Hansen for $167,917.38 for grain he had
bought that was used by Lauer Limited. Docket No. 39-2, 37.
39
463.
After considering the record currently available, this
Court is not persuaded that Lauer Limited qualifies as a mere
facade for the personal dealings of its members.
Lauer
Limited was in the legitimate business of finishing hogs, and
the record indicates the members put forth a good faith effort
in executing that business.
Unfortunately, the business
proved unsuccessful. Furthermore, there is no indication that
the members used Lauer Limited to their financial benefit and
the detriment of those to whom they owed obligations. Though,
they
did
themselves
succeed
upon
in
diverting
dissolution,
some
the
company
record
assets
supports
to
the
conclusion that these funds were paid as reimbursements for
capital contributions or services.
After all, in order to
dissolve, Lauer Limited took out a $1,200,000.00 loan for
which the members were individually liable, and Lauer Limited
never reached a point where it was able to make distributions
to individual members.
e.
Docket No. 39-2, 14 and 47.
Conclusion
While the record does not indicate Lauer Limited was a
mere facade established to facilitate the personal dealings of
its
members,
it
strongly
indicates
40
Lauer
Limited
was
undercapitalized,
insolvent
at
the
time
it
entered
the
Contracts with Tyson, and its dissolution was used to divert
company assets back to individual members and entities the
individual
members
owned
to
the
detriment
of
Tyson.
Therefore, Plaintiff has made a prima facie showing that Lauer
Limited was under the actual control of its members and that
those members exercised such control so as to commit a wrong
in contravention of Tyson’s rights.
See J.L. Brock Builders
Inc., 391 N.W.2d at 117-18 (holding that “[e]stablishing three
of the four factors” for purposes of piercing the corporate
veil “is sufficient . . . .”).
3.
Alter Ego Theory
Throughout
these
proceedings,
Plaintiff
has
treated
piercing the corporate veil and alter ego theory as synonymous
doctrines.
This Court, however, is persuaded the term “alter
ego” is often used by courts in two incompatible senses.
In
one sense, courts refer to a subject entity whose corporate
veil has been pierced as the “alter ego” of its shareholders.
In the second sense, courts refer to a subject entity as the
“alter ego” of another entity or individual, regardless of
whether or not the other entity or individual has an ownership
interest in the subject entity.
41
This second sense is akin to
finding that the subject entity is acting as the mere agent or
instrumentality of the individual or other entity at issue.
The
distinction
is
important
because
piercing
the
corporate veil of a subject entity does not allow a court to
impose liability on an individual or entity which is not an
owner of the subject entity.15
Once the corporate veil is
pierced, the liable parties are revealed to be nothing more
and nothing less than the shareholders/owners of the subject
entity.
However,
under
the
alter
ego/instrumentality
approach, the emphasis is placed on whether a third party
exercised sufficient control over the subject entity such that
the subject entity is a mere agent or instrumentality of the
15
This fact is inherent in the very nature of the test
for piercing the corporate veil. For instance, a plaintiff
“must allege and prove that” the target entity “was under the
actual
control
of
the
shareholder[s]
and
that
the
shareholder[s] exercised such control to commit a fraud or
other wrong in contravention of the plaintiff’s rights.”
Christian, 276 Neb. at 883 (citing Baye, 260 Neb. 385)
(emphasis added).
In addition, the relevant factors to
determine whether a fraud has been perpetrated include the
capitalization of the entity, the relevant solvency of the
corporation at the time the debt in question is incurred, the
diversion of entity funds by shareholders, and whether the
entity is a mere facade for the activities of shareholders,
all of which are meant to determine whether the underlying
owners of the entity should be held responsible for a wrong
perpetrated by the entity and which are irrelevant to
implicating a non-owner. J.L. Brock Builders, 223 Neb. at 498
(quoting United States Nat. Bank of Omaha v. Rupe, 207 Neb.
131, 135 (Neb. 1980)).
42
third party’s interests, regardless of whether the third party
owned a controlling interest in the subject entity.16
In this case, though Lauer Finishing, Coleridge Grain,
and Lauer Limited have some shareholders in common, Lauer
Finishing and Coleridge Grain do not own any interest in Lauer
Limited.
Thus, in order for Plaintiff to establish that
Coleridge
Grain
and
Lauer
Finishing’s
contacts
are
the
contacts of Lauer Limited, it must establish that Lauer
Limited
was
“organized
and
controlled
and
its
business
conducted in such a manner as to make it merely an agency,
instrumentality, [or] adjunct” of Coleridge Grain and Lauer
Finishing. Hayes v. Sanitary and Imp. Dist. No. 194, 196 Neb.
653, 664 (Neb. 1976) (quoting 18 Am. Jur. 2d, Corporations, §
17, 565).
After thorough review of relevant case law from a number
of jurisdictions, this Court has found that it is quite rare
for a Plaintiff to argue, as here, that a subject entity that
is not owned, at least in part, by a third party is in fact
16
Though it is not necessary that the third party own a
controlling interest in the subject entity, this is still
obviously relevant to a determination of whether the subject
entity was in fact a mere instrumentality or agent of the
third party.
43
the third party’s alter ego.17
Plaintiff does, however, cite
some Eighth Circuit case law supporting its argument.
Lakota
Girl
Scout
Council,
Inc.
v.
Havey
In
Fund-Raising
Management Inc., the Eighth Circuit stated that “[e]ven a nonowned corporation” may be deemed the alter ego of another.
Lakota
Girl
Scout
Council,
Inc.
v.
Havey
Fund-Raising
Management, Inc., 519 F.2d 634, 637 (8th Cir. 1975). However,
the Lakota Girl Scout Council Court was considering whether
the contacts of an individual shareholder could be considered
the contacts of an entity he predominantly owned, and so,
17
The only two cases, including those cited by Plaintiff,
this Court found in which a subject entity was determined to
be the alter ego of a third party, which did not have an
ownership interest in the subject entity, was from a district
court in the Eastern District of Missouri in Greater St. Louis
Const. Laborers Welfare Fund v. Mertens Plumbing and
Mechanical, Inc., and a Nebraska Supreme Court decision,
Ehlers v. Bankers’ Fire Ins. Co., 552 F. Supp. 2d 952 (E.D.
Mo. 2007) and 108 Neb. 756 (Neb. 1922). Given the state of
case law, this Court strongly considered ruling that alter ego
theory simply does not apply to an entity that is not, at
least in part, owned by a third party. When, as here, there
are some overlap in common owners between a subject entity and
a third party entity, but the third party entity does not own
an interest in the subject entity, the subject entity’s
corporate veil could still be pierced to hold the common owner
of the two entities liable, and his ownership interest in the
third party entity could then become the subject of additional
proceedings necessary for satisfaction of any judgment.
However, in the context of a single individual or a small
group of individuals who together own several entities, though
the entities have no ownership interest in each other, such as
here, this Court is persuaded that alter ego theory may be
applicable.
44
though the Court stated alter ego/instrumentality theory could
apply
to
“[e]ven
a
non-owned
corporation,”
a
non-owned
corporation was not directly under consideration. 519 F.2d at
637.
Plaintiff also cites the Eighth Circuit’s decision in
Epps v. Stewart Information Services Corp., which cites the
Lakota Girl Scout Council Court’s opinion in detail. 327 F.3d
642 (8th Cir. 2003).
whether
a
However, the Epps Court was considering
subsidiary’s
contacts
could
be
considered
the
contacts of its parent, and so Epps too does not squarely
consider the fact pattern under consideration here.
Id.
Further complicating matters, Plaintiff has failed to
cite case law employing Nebraska law.18
However, in Ehlers v.
Bankers’ Fire Ins. Co., a case in which two entities had the
same underlying ownership, though neither entity owned an
interest in the other, the Supreme Court of Nebraska stated
that a “Court of equity will not permit mere corporate forms
to serve as a cloak and shield to the perpetration of a fraud,
but
will
examine
the
whole
transaction,
looking
through
corporate forms to the substance of things, to protect the
rights of the innocent parties.” Ehlers v. Bankers’ Fire Ins.
Co., 108 Neb. 756 (Neb. 1922).
18
In Hayes v. Sanitary and Imp.
As previously noted, Nebraska law is controlling.
45
Dist. No. 194, the Supreme Court of Nebraska also stated that
“the
notion
of
separate
corporate
existence
of
.
.
.
affiliated corporations will not be recognized” in certain
circumstances.
196 Neb. 653, 664 (Neb. 1976) (quoting 18
Am.Jur.2d, Corporations, § 17, 565).
An affiliate generally
refers to a parent, subsidiary, or sibling or sister entity.
Blacks Law Dictionary, (9th ed.), affiliate.
A parent is an
entity “that has a controlling interest in another” entity; a
subsidiary is an entity “in which a parent” entity “has a
controlling
share;”
and
sibling
or
sister
entities
are
entities “controlled by the same, or substantially the same,
owners.”
Black’s Law Dictionary (9th ed.), corporation.
Id.
As previously noted, Lauer Limited was owned by Robert Lauer,
David Hansen, Dale Hansen, Roy Miller, and James Kuchta;
Coleridge Grain, during the relevant time period, was owned by
Robert
Lauer,
David
Hansen,
and
Brian
Eddie;
Finishing is owned by Robert Lauer and his wife.
and
Lauer
Thus, in the
sense that each entity shares common owners, they are sibling
or sister entities and, according to the Supreme Court of
Nebraska in Hayes and Ehlers, alter ego theory may apply.
46
Under Nebraska law, though a third party entity may be
held liable for the actions of a sibling entity, the test for
determining
whether
such
liability
lies
has
not
been
developed.
Again, Plaintiff has not cited any case law
involving Nebraska law on point, and, after a thorough search,
this Court was unable to find any.
In Epps, the Eighth Circuit stated that there is “[n]o
all embracing rule” for determining “the relationship between
two” entities.
327 F.3d at 649.
“The circumstances in each
case must be examined to determine whether” an entity “through
the activities of another” entity “has subjected itself to”
the jurisdiction of a particular forum.
Id.
In Greater
Kansas City Laborers Pension Fund, Inc., the Eighth Circuit
stated that “the alter ego doctrine . . . provides that the
legal fiction of” a separate entity “may be rejected in the
case of” an entity “that (1) is controlled by another to the
extent that it has independent existence in form only and (2)
is used as a subterfuge to defeat public convenience, to
justify wrong, or to perpetrate fraud.”
Greater Kansas City
Laborers Pension Fund v. Superior General Contractors, Inc.,
104 F.3d 1050, 1055 (8th Cir. 1997).
Id.
In HOK Sport Inc.
v. FC Des Moines, L.C., the Eighth Circuit indicated that a
47
subject “entity is the alter ego of” another entity “if (1)
the”
other
entity
“influences
and
governs
the”
subject
“entity; (2) a unity of interest and ownership exists such
that the” subject “entity and the” other entity “cannot be
separated; and (3) giving effect to the fictional separation
between the” subject entity and the other entity “would
‘sanction a fraud or promote injustice.’”19
495 F.3d 927, 935
(8th Cir. 2007).
a.
Whether Coleridge Grain and Lauer Finishing
Control and Have a Sufficient Unity of Ownership with Lauer
Limited Such That Lauer Limited has an Independent Existence
in Form Only
As previously noted, Robert Lauer, David Hansen, Dale
Hansen, Roy Miller, and James Kuchta were the members of Lauer
Limited.
Limited
Docket No. 26, 3.
took
on
additional
Though certain members of Lauer
responsibilities,
the
record
indicates they each had equal decision making authority.
Docket No. 32-2, 11.
Robert Lauer, David Hansen, and Brian
19
HOK involved the question of whether a non-profit
organization could be considered the alter ego of its sole
shareholder. Regardless, this Court is persuaded the Eighth
Circuit standard announced in HOK is appropriate whether the
subject entity and the other entity or individual under
consideration own an interest in each other or simply have
common underlying ownership.
48
Eddie each had an equal 1/3 interest in Coleridge Grain.
Docket No. 39-2, 6.
Dale Hansen, Roy Miller, and James
Kuchta, who together owned a majority interest in Lauer
Limited, had no interest in Coleridge Grain; and Brian Eddie
had no interest in Lauer Limited.
Additionally, Robert Lauer
and his wife are the sole owners of Lauer Finishing and L and
L Pork.
Dale Hansen, David Hansen, Roy Miller, and James
Kuchta did not have an ownership interest in Lauer Finishing
or L and L Pork.
Thus, though Lauer Limited has common owners
with Coleridge Grain, Lauer Finishing, and L and L Pork, the
unity of ownership was never complete; in fact, none of the
entities shared the same blocks of majority ownership.
Alter ego theory requires that the subject entity (Lauer
Limited) be influenced and controlled by the third party
entity (Coleridge Grain, L and L Pork, and Lauer Finishing),
not vice versa.
HOK Sport, 495 F.3d at 935.
This is an
important distinction because a third party sister or sibling
entity may have owners who have no interest in the subject
entity, making it particularly harsh, and perhaps unfair, to
hold the third party sister or sibling entity responsible for
the subject entity’s actions.
In this case, neither Bob
Eddie, 1/3 owner of Coleridge Grain, nor Robert Lauer’s wife,
49
1/2 owner of Lauer Finishing, had any ownership interest in
Lauer Limited. It would require exceptional circumstances for
this Court to rule that an entity of which they (Bob Eddie and
Sylvia J. Lauer) are part owners may be held responsible for
Lauer Limited’s liability to Plaintiff.
While it makes sense to say a third party sister or
sibling entity that controls a subject entity shares the
subject entity’s contacts, the reverse does not hold true. As
an example, the law will sometimes hold a parent responsible
for the actions of their child, but the law never holds a
child responsible for the actions of their parent.
While
some
of
the
owners
of
Lauer
Limited
had
a
controlling interest in Coleridge Grain and Lauer Finishing,
the owners of Coleridge Grain and Lauer Finishing simply did
not have a controlling interest in Lauer Limited.
In this
sense, it was Lauer Limited, not Coleridge Grain and Lauer
Finishing, that had the formal ability to exercise influence
and control within the relationship.
Though this Court is
persuaded that alter ego theory does not live or die by the
scheme of actual, underlying ownership, a plaintiff should at
least be able to point to some evidence indicating how an
entity with underlying ownership that also makes up a minority
50
interest in a subject entity would be able to dictate the
actions of the subject entity.
However, in this case, the
evidence indicates that the formal ownership of the various
entities correlated with the actual control brought to bear;
that is, Lauer Limited exercised control over its sister and
sibling entities and not vice versa.
For example, Lauer Limited was able to utilize Coleridge
Grain’s feed processing services without paying their bills in
a timely manner.
Docket No. 39-2, 43.
As the Plaintiff even
noted, Coleridge Grain’s practice of providing large amounts
of feed to Lauer Limited without collecting payment therefore
effectively provided “Lauer Limited with working capital” that
would have otherwise not been available.
Docket No. 26, 8.
Clearly, this arrangement was beneficial to Lauer Limited, not
Coleridge Grain.
In
addition,
Lauer
Limited
paid
Lauer
Finishing
$19,000.00 per month rent for use of its finishing barns.
Docket No. 23-13, 6.
There is no reason to believe that this
amount was excessively high, or that Lauer Finishing, through
Robert Lauer, was able to exercise control over Lauer Limited.
In order to do so, Lauer Finishing would have had to convince
Dale Hansen, David Hansen, Roy Miller, and James Kuchta, all
51
of whom had an equal say in running Lauer Limited, to give up
something for nothing.
Furthermore, the relationship between L and L Pork and
Lauer Limited provides perhaps the most striking example of
Lauer Limited’s ability to exercise control over its sibling
or sister entities.20
The contract between L and L Pork and
Lauer Limited called for Lauer Limited to pay L and L Pork $28
per hog.
Docket No. 39-2, 7.
Though the contract expired in
2004, the record supports the fact that the parties continued
to follow the terms of the contract, excepting a $2 per hog
increase sometime after 2004.
Docket No. 39-2, 7 and 8.
However, when L and L Pork began selling hogs to an unrelated,
third party upon Lauer Limited’s dissolution in 2010, it sold
them for $40 per head, indicating the arrangement between L
and L Pork and Lauer Limited favored Lauer Limited.
Docket
No. 39-2, 27. In addition, the contract between Lauer Limited
and L and L Pork provided that Lauer Limited was to earn at
least $3 per pig, suggesting that if Lauer Limited did not
earn at least $3 per pig, the price L and L Pork received
20
As previously noted, Defendant’s motion to dismiss for
lack of personal jurisdiction does not apply to L and L Pork.
However, since L and L Pork’s relationship with Lauer Limited
was similar to Lauer Finishing’s relationship with Lauer
Limited, L and L Pork is relevant.
52
would go down.
Docket No. 39-2, 8-10.
L and L Pork also
provided some of Lauer Limited’s labor free of charge and gave
Lauer Limited over $1,900,000 worth of loans over a two year
period.
Docket No. 39-2, 28.
The Plaintiff has presented a report from a Mr. Robert L.
Kirchner, a Certified Fraud Examiner.
(Exhibit J).
Docket No. 23-13
After reviewing the corporate records of Lauer
Limited, L and L Pork, Coleridge Grain, and Lauer Finishing,
Mr. Kirchner concluded:
Lauer Limited, L & L Pork, and Lauer
Finishing violated corporate separateness,
ignored corporate formalities, com[m]ingled
money and other critical assets, engaged in
non-arm’s length transactions, and operated
as one entity. As between Lauer Limited
and Coleridge Grain, these entities also
violated corporate separateness, ignored
corporate formalities, com[m]ingled money
and other critical assets, and engaged in
non-arm’s length transactions.
Docket No. 23-13, 1.
As
an
initial
matter,
it
should
be
noted
that
Mr.
Kirchner is not an attorney and claims no special knowledge of
farming practices. Docket No. 30-3, 119. After reviewing Mr.
Kirchner’s opinion, it is apparent it was based upon the same
information
this
Court
has
already
Docket No. 23-13.
53
thus
far
considered.
While this Court agrees that Lauer Limited and its sister
or
sibling
entities
often
ignored
corporate
formalities,
engaged in some non-arms length transactions, and to some
degree ignored entity separateness, they did so because Lauer
Limited was able to exercise influence and control over
Coleridge Grain, Lauer Finishing, and L and L Pork and not
vice versa.
Nearly every transaction between Lauer Limited
and Coleridge Grain, L and L Pork, and Lauer Finishing inured
to the benefit of Lauer Limited.
Furthermore, this Court rejects Mr. Kirchner’s legal
conclusion
that
Lauer
Limited,
L
and
Finishing operated as a single entity.
L
Pork,
and
Lauer
Though the divisions
between each entity were often blurred due to Lauer Limited’s
influence over the other entities, it is undisputed that Lauer
Limited ultimately paid rent to both L and L Pork and Lauer
Finishing for use of their buildings; that Lauer Limited paid
for the hogs produced by L and L Pork; and that Lauer Limited
paid for Coleridge Grains’ services.
Single entities do not
pay their left hand with their right unless the exchange has
little to no actual consequences, which was not the case here.
It is undisputed that Lauer Limited’s payments made to Lauer
Finishing and L and L Pork did not benefit 4/5 of Lauer
54
Limited’s
members,
Coleridge
Grain
members;
this,
and
did
that
not
rather
Lauer
benefit
than
the
Limited’s
3/5
of
level
of
payments
Lauer
to
Limited’s
formality
and
sophistication of their agreements, is the true hallmark of
separate corporate existence.
In
conclusion,
to
the
extent
that
Lauer
Limited,
Coleridge Grain, Lauer Finishing, and L and L Pork operated as
a single entity, they did so because Lauer Limited had control
and influence over Coleridge Grain, Lauer Finishing, and L and
If anything,21 Coleridge Grain, Lauer Finishing, and
L Pork.
L and L Pork were the alter egos of Lauer Limited and not vice
versa.
As previously noted, a third party sister or sibling
entity controlled by a subject entity generally will not be
held responsible for the subject entity’s actions, especially
when
the
third
party
sister
or
sibling
entity
involves
minority owners who have no interest in the subject entity,
such as here. Therefore, Plaintiff has failed to make a prima
facie showing that the exercise of jurisdiction over Coleridge
Grain and Lauer Finishing is appropriate based on alter ego
21
This Court does not conclude that Coleridge Grain,
Lauer Finishing, and L and L Pork were in fact the alter egos
of Lauer Limited but merely that Lauer Limited had formal
control and often exercised actual control over the other
entities to some extent.
55
theory.
Thus, Plaintiff’s breach of contract and unjust
enrichment causes of action against Coleridge Grain, and all
of Plaintiff’s claims against Lauer Finishing, are hereby
dismissed.
E.
Intentional Interference with Contract
As previously noted, Plaintiff’s intentional interference
with contract claim has only been brought against Defendants
L & L Pork, Coleridge Grain, David Hansen and Robert Lauer.22
Docket No. 26.
Defendants L & L Pork, Robert Lauer, and David
Hansen have not filed a motion to dismiss for lack of personal
jurisdiction.
Thus, the sole question here is whether this
Court can exercise personal jurisdiction over Coleridge Grain
as to Plaintiff’s intentional interference with contract cause
of action.
Plaintiff contends this Court has personal jurisdiction
over Coleridge Grain pursuant to the Supreme Court test
announced in Calder v. Jones.
465 U.S. 783 (1984).
However,
prior to considering Plaintiff’s argument, this Court will
22
Plaintiff has subsequently implied that all of the
newly added Defendants intentionally interfered with the
Contracts, but Plaintiff has not formally motioned this Court
to amend their complaint to include all newly added Defendants
to this count. Docket No. 44, 9 fn. 7.
56
briefly consider whether this Court may exercise general
jurisdiction over Coleridge Grain.
1.
General Jurisdiction
As previously noted, general jurisdiction occurs when,
though the suit may not arise out of a defendant’s contacts
with the forum, the defendant’s independent contacts with the
forum are so “continuous and systematic” that the exercise of
personal jurisdiction as to any cause of action remains
justified.
Helicopteros, 466 U.S. at 414.
Again, Coleridge Grain “is a Nebraska Limited Liability
Corporation with its principal place of business in Coleridge,
Nebraska.”
Docket No. 26,3.
It is undisputed that Coleridge
Grain, on behalf of Lauer Limited, delivered Lauer Limited’s
hogs to Plaintiff’s facility in Storm Lake, Iowa.
Docket No.
34-1, 30. However, this is the only general contact Plaintiff
alleges Coleridge Grain had with Iowa.
See Docket No. 26.
After careful consideration, this Court is persuaded that
Coleridge
Grain’s
contacts
with
the
State
of
Iowa
are
insufficient to subject it to the general jurisdiction of this
Court.
See Johnson v. Arden, 614 F.3d 785, 795 (8th Cir.
2010) (stating that the occasional delivery of goods does not
constitute continuous or systematic contacts) and Felch v.
57
Transporters Lar-Mex SA DE CV, 92 F.3d 320, 328 (5th Cir.
1996) (stating that Plaintiff failed to establish that the
delivery of goods into the forum was “sufficiently substantial
such
that
the
exercise
of
jurisdiction
on
a
general
jurisdiction basis comported with the requirements of the due
process clause”).
2.
The Calder Effects Test
In Calder v. Jones, the Supreme Court considered whether
a California plaintiff could maintain a cause of action
against
Florida
defendants
for
writing
and
editing
allegedly libelous article which was sold in California.
U.S. 783, 784-85 (1984).
an
465
One of the Calder defendants had
only been to California on two occasions:
once on a pleasure
trip prior to publication of the article at issue, and once to
testify in an unrelated trial.
Id. at 786.
The Supreme Court
ultimately determined that jurisdiction against the defendants
was proper because they engaged in “intentional conduct . . .
calculated to cause injury” in California.
(1984).
465 U.S. 783, 791
In doing so, the Calder Court noted that defendants’
“intentional, and allegedly tortious, actions were expressly
aimed at California,” and “they knew that the brunt of the
58
injury would be felt by” the plaintiff in California.
Id. at
789.
The
Eighth
Circuit,
rather
than
viewing
Calder
as
announcing independent grounds for a finding of personal
jurisdiction,
has
consideration
of
Industries,
Inc.,
stated
that
additional
946
F.2d
it
merely
factors
1384,
.
.
1391
“requires
.
(8th
the
.”
Dakota
Cir.
1991).
However, the Eighth Circuit has subsequently indicated that
[a] defendant’s tortious acts can serve as
a source of personal jurisdiction [under
Calder] . . . where the plaintiff makes a
prima facie showing that the defendant’s
acts (1) were intentional, (2) were
‘uniquely’ or expressly aimed at the forum
state, and (3) caused harm, the brunt of
which was suffered-and which the defendant
knew was likely to be suffered-there.
Lindgren v. GDT, L.L.C., 312 F. Supp. 2d 1125, 1132 (S.D. Iowa
2004) (quoting Zumbro Inc. v. Cal. Natural Prods., 861 F.
Supp. 773, 782-83 (D. Minn. 1994) (Kyle J.)).
After a thorough review of the record, this Court is
persuaded that Plaintiff has failed to allege sufficient facts
to show that Coleridge Grain’s actions were uniquely or
expressly aimed at the State of Iowa.
Coleridge Grain did
request payment for its feed processing services, and this no
doubt contributed to Lauer Limited’s inability to meet its
obligations to Plaintiff. Docket No. 39-2, 37. However, this
59
request was uniquely and expressly aimed at Lauer Limited
within the State of Nebraska, not the Plaintiff’s plant in
Iowa.
Any effect such a request may have had on Plaintiff’s
Contracts, and Plaintiff’s facility in Storm Lake, Iowa, was
collateral
and
not
Plaintiff in Iowa.
uniquely
or
expressly
aimed
at
the
As previously noted, in Calder, the
Defendants were directing libelous statements at the Plaintiff
in the Plaintiff’s home forum.
case,
Coleridge
Grain
465 U.S. 783, 784-85.
merely
requested
payment
In this
for
services provided in Nebraska from a Nebraska entity.
No. 39-2, 37 and 54.
intentionally
or
its
Docket
There is no indication its bill was made
improperly
exorbitant
in
order
to
harm
Plaintiff’s interests; in fact, the record indicates Coleridge
Grain allowed Lauer Limited’s bill to slide for a number of
years, which, if anything, allowed Lauer Limited to comply
with pre-existing contracts with Plaintiff.26 Docket No. 39-2,
26
Even if this Court’s analysis is wrong and Coleridge
Grain’s request for payment for services rendered was somehow
expressly or uniquely aimed at Plaintiff within the State of
Iowa, it was not improper or unjustified. Under both Iowa and
Nebraska law, there is no cause of action for intentional
interference unless the defendants’ actions in question are in
some manner “improper” or “unjustified.”
In re Quality
Processing, Inc., 9 F.3d 1360, 1364 (8th Cir. 1993) (citing
Matheson v. Stork, 239 Neb. 547, (1991)); and Jones v. Lake
Park Care Center, Inc., 569 N.W.2d 369, 377 (Iowa 1997). “A
party is justified in interfering with a third party’s
contract if it ‘asserts in good faith a legally protected
60
43.
Plaintiff also alleges that Coleridge Grain caused Lauer
Limited to be inappropriately capitalized, which, if true,
would no doubt effect Lauer Limited’s ability to meet its
obligations to Plaintiff.
Docket No. 26, 12.
However, this
Court simply does not comprehend how Coleridge Grain was able
to effect Lauer Limited’s capitalization.
Only
the
underlying
owners
of
an
Docket No. 26, 13.
entity
may
be
held
responsible for determining the entity’s capitalization.
The Plaintiff also contends Coleridge Grain purchased
hogs from Lauer Limited that were slated to fulfill contracts
with Plaintiff.
Docket No. 26, 12.
However, the hogs
Coleridge Grain purchased were later applied to fulfill preexisting contracts Lauer Limited had with Plaintiff and did
interest of its own . . . .’” In re Quality Processing, Inc.,
9 F.3d at 1365 (quoting Restatement (Second) of Torts § 773);
see also Berger v. Cas’ Feed Store, Inc., 543 N.W.2d 597, 599
(Iowa 1996) (“‘[I]f there is no desire at all to accomplish
the interference and it is brought about only as a necessary
consequence of the conduct the actor engaged in for an
entirely different purpose, his knowledge of this makes the
interference intentional, but the factor of motive carries
little weight toward producing a determination that the
interference was improper.’”) (quoting Restatement (Second) of
Torts § 767 cmt. d).
61
not affect the Contracts here at issue.
Docket No. 39-2, 39
and Docket No. 51, 3.
Therefore,
Plaintiff
has
failed,
either
through
an
exercise of general jurisdiction, alter ego theory, or the
Calder effects test, to make a prima facie showing that
Coleridge Grain is subject to this Court’s jurisdiction, and
all Plaintiff’s causes of action against Coleridge Grain are
hereby dismissed.
IV.
IMPROPER VENUE
As previously noted, all named Defendants contend that
this Court is an improper venue and dismissal is appropriate
pursuant to Federal Rule of Civil Procedure 12(b)(3).
No. 30 and 31.
Docket
28 U.S.C. Section 1391(b), the applicable
federal venue statute, provides:
A civil action may be brought in (1) a judicial district in which any
defendant resides, if all defendants are
residents of the State in which the
district is located;
(2) a judicial district in which a
substantial part of the events or omissions
giving rise to the claim occurred, or a
substantial part of the property that is
the subject of the action is situated; or
(3) if there is no district in which an
action may otherwise be brought as provided
in this section, any judicial district in
which any defendant is subject to the
62
court’s personal jurisdiction with respect
to such action.
Under 28 U.S.C. Section 1391(b), a court should not “ask
which of two or more potential forums is the ‘best’ venue . .
. .”
Setco Enterprises, Corp. v. Robbins, 19 F.3d 1278, 1281
(8th
Cir.
1994).
Rather,
the
question
is
whether
a
plaintiff’s chosen forum has “a substantial connection to the
claim . . . .”
Plaintiff
Id.
contends
that
courts
making
venue
determinations in contract disputes look “to such factors as
where the contract was negotiated or executed, where it was to
be performed, and where the alleged breach occurred.”
Docket
No. 30-1, 12 (citing Gulf Ins. Co. v. Glasbrenner, 417 F.3d
353, 357 (2d Cir. 2005)) and Wright & Miller, Federal Practice
and Procedure §3806.1.
negotiation
and
much
While it is undisputed that the
of
the
execution
of
the
Contracts
occurred in Nebraska, the performance and breach of the
Contracts occurred in Iowa.
In arguing that performance of the Contracts took place
in Nebraska, Defendants note that Lauer Limited purchased and
raised their hogs in Nebraska, but this is the execution of
the Contract, not the performance. The Contracts at issue did
not require Lauer Limited to purchase and raise hogs in a
63
certain manner, they simply required Lauer Limited to deliver
hogs to Plaintiff’s plant in Storm Lake, Iowa, and then
spelled out the terms whereby Plaintiff would be compensated.
Clearly, the Contracts were to be performed in the State of
Iowa; and “the place of performance is a proper venue for
breach of contract claims.” Zack’s Famous Frozen Yogurt, Inc.
v. Swanner, 1988 WL 86793, 2 (E.D. La. 1988).
In
discussing
where
the
alleged
breach
occurred,
Defendants contend that it occurred at Plaintiff’s hog buying
facility in Laurel, Nebraska, when Robert Lauer informed
Plaintiff’s buying agent that Lauer Limited would not be able
to fulfill the contracts.
Defendants’
argument
has
Docket No. 30-1, 13.
a
simplistic
appeal,
While
legally
speaking, a breach of contract occurs where performance was to
take place but did not.
See Great Rivers Cooperative of
Southeastern Iowa v. Farmland Industries, Inc., 934 F. Supp.
302, 305 (S.D. Iowa 1996) (stating that a breach of contract
claim “originates where the performance should have taken
place,
but
did
not”).
Thus,
Lauer
Limited’s
breach
of
contract occurred in Iowa.
Finally, 28 U.S.C. Section 1381(b) specifically provides
that venue is proper not only where a substantial part of the
64
“events” occurred but also where a substantial part of the
“omissions” occurred.
It seems clear to this Court that
relevant omissions would include a failure to perform within
a forum under the terms of a valid contract, such as occurred
here.
It also seems clear that, in a breach of contract
cause of action, a failure to perform is as substantial an
omission as can be made.
Thus, in as far as it is undisputed
that Lauer Limited breached its Contracts to deliver hogs to
Plaintiff’s facility in Storm Lake, Iowa, this Court is a
proper venue.
V.
CHANGE OF VENUE
Defendant also requests transfer of venue pursuant to 28
U.S.C. § 1404(a), which provides:
[f]or the convenience of parties and
witnesses, in the interest of justice, a
district court may transfer any civil
action to any other district or division
where it might have been brought . . . .
The primary purpose of § 1404(a) is to provide a district
court discretion to transfer venue for reasons of convenience
and fairness “despite the propriety of the plaintiff’s venue
selection.”
The
Eighth
Van Dusen v. Barrack, 376 U.S. 612, 634 (1964).
Circuit
has
recognized
that
“considerable
deference” is given “to a plaintiff’s choice of forum,” and,
65
therefore, the “party seeking a transfer under section 1404(a)
typically bears the burden of proving that a transfer is
warranted.”
In re Apple, Inc., 602 F.3d 909, 913 (8th Cir.
2010).
A court should consider “the convenience of the parties,
the convenience of witnesses, [and] the interests of justice,”
as well as any other relevant factors. Terra Intern., Inc. v.
Mississippi Chemical Corp., 119 F.3d 688, 696 (8th Cir. 1997).
Under the general category of “Convenience,” a court should
consider . . .
(1) the convenience of the parties, (2) the
convenience of the witnesses – including
the willingness of witnesses to appear, the
ability to subpoena witnesses, and the
adequacy of deposition testimony, (3) the
accessibility to records and documents, (4)
the location where the conduct complained
of occurred, and (5) the application of
each forum state’s substantive law.
Id. at 696.
Under the general category “Interest of Justice,” a court
should consider:
(1) judicial economy, (2) the plaintiff’s
choice of forum, (3) the comparative costs
to the parties of litigating in each forum,
(4) each party’s ability to enforce a
judgment, (5) obstacles to a fair trial,
(6) conflict of law issues, and (7) the
advantages
of
having
a
local
court
determine questions of local law.
66
Id.
In support of its Motion for Change of Venue, Defendant
focuses on the convenience of the parties, the convenience of
the witnesses, the location of the documentary evidence, and
judicial efficiency.
As
to
the
Docket No. 30-1, 16-19.
convenience
of
the
parties,
all
parties
concerned, with the exception of Dale Hansen, are closer to
the courthouse in Sioux City, Iowa, than any other federal
courthouse.
Docket No. 34-1.
Therefore, Plaintiff’s choice
of venue is greatly superior to any alternate venues.
As to the convenience of the witnesses, Defendants fail
to identify any specific non-party witness they would like to
call who resides closer to another venue.
In order to be
successful in a motion to change venue, “‘the party seeking
the transfer must clearly specify the essential witnesses to
be called and must make a general statement of what their
testimony will cover.’”
Medicap Pharmacies, Inc. v. Faidley,
416 F. Supp. 2d 678, 687 (S.D. Iowa 2006).
Though the
Defendants insinuate they will need to call bankers and
accountants associated with their business interests in order
to defend themselves, they have given this Court no reason to
believe that those bankers or accountants will not live near
67
the Defendants, who, as previously noted, live closer to the
Sioux City courthouse than other potential courthouses.
The Defendants do note that Plaintiff’s witnesses reside
outside this district, but, while this is true, most of them
are still closer to this venue.
Furthermore, a “question of
the accessibility of witnesses depends upon whether those
witnesses will willingly appear, and whether alternative means
of producing their testimony exist.” Terra Int’l Inc. v Miss.
Chem. Corp., 922 F. Supp. 1334, 1360 (N.D. Iowa 1996).
reasonable
to
assume
that
if
Plaintiff
would
It is
have
any
difficulty procuring its own witnesses, they would not have
chosen this forum.
Finally, as noted by Defendant, “all
essential non-party fact witnesses identified to date are
located within this Court’s subpoena range.”27
Docket No. 34,
20.
As to judicial economy, because this Court has already
invested a substantial amount of time in determining whether
this Court has personal jurisdiction, a transfer of venue, at
this juncture, may require another district court to retrace
this Court’s steps.
Though the Defendants note that an
27
Pursuant to Federal Rule of Civil Procedure 45(b)(2),
a federal subpoena may be issued to anyone within the district
of the issuing court or within 100 miles of the courthouse.
68
enforcement
of
this
Court’s
judgment
would
require
an
additional action in Nebraska, the burden of this enforcement
action would pale in comparison to the burden already imposed
upon this Court in answering the questions raised by the
parties’ arguments.
For the above reasons, Defendants’ motion for change of
venue is hereby denied.
VI.
CONCLUSION AND SUMMARY
The newly added Entity Defendants’28 Motion to Dismiss Due
to Lack of Personal Jurisdiction is hereby granted as to
Defendants Lauer Finishing and Coleridge Grain. Lauer Limited
is not the alter ego of Lauer Finishing and Coleridge Grain;
and
Coleridge
Grain
is
not
subject
to
the
personal
jurisdiction of this Court pursuant to the Calder effects
test.
The newly added Member Defendants’ (Dale Hansen, Roy
Miller, and James Kuchta) Motion to Dismiss Due to a Lack of
Personal Jurisdiction is hereby denied.28
28
Plaintiff has made
The Original Entity Defendants, Lauer Limited and L and
L Pork, have not filed a Motion to Dismiss Due to a Lack of
Personal Jurisdiction.
69
a prima facie showing that Lauer Limited’s corporate veil may
be pierced; and, therefore, because this Court has personal
jurisdiction over Lauer Limited, this Court has personal
jurisdiction
over
Lauer
Limited’s
newly
added
member
Defendants.29
The causes of action remaining before this Court are:
(1) Plaintiff’s breach of contract cause of action against
Lauer Limited, L and L Pork, Robert Lauer, David Hansen, Dale
Hansen, Roy Miller, and James Kuchta; (2) Plaintiff’s unjust
enrichment cause of action against Lauer Limited, L and L
Pork, Robert Lauer, David Hansen, Dale Hansen, Roy Miller, and
James Kuchta; and (3) Plaintiff’s intentional interference
with contract cause of action against L and L Pork, David
Hansen, and Robert Lauer.
All Defendants’ Motion to Dismiss for Lack of Venue is
hereby denied; and all Defendant’s Motion for Transfer of
Venue is hereby denied.
29
The Original Member Defendants, Robert Lauer and David
Hansen, have not filed a Motion to Dismiss Due to a Lack of
Personal Jurisdiction.
70
IT IS SO ORDERED this 16th day of January, 2013.
__________________________________
Donald E. O’Brien, Senior Judge
United States District Court
Northern District of Iowa
71
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