Cargill, Incorporated v. Clark et al
Filing
32
RULING AND ORDER granting 20 Motion for Summary Judgment. The Court has pierced the corporate veil, finding both Defendants Brett Anthony Clark and Squaw Bayou Farms, LLC liable for National Grain and Feed Association arbitration awards rendered and confirmed against Defendant Clark Farm #1, LLC. Cargill is advised to file a separate motion for costs and attorney's fees. Signed by Chief Judge Brian A. Jackson on 8/7/2015. (LLH)
UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF LOUISIANA
CARGILL, INCORPORATED
CIVIL ACTION
VERSUS
BRETT ANTHONY CLARK, ET AL.
NO.: 14-00233-BAJ-SCR
RULING AND ORDER
Before the Court is the Motion for Summary Judgment (Doc. 20) filed by
Plaintiff Cargill, Incorporated (“Cargill”), moving for the Court to find no genuine
issue of material fact, pierce the corporate veil, and hold Defendants Brett Anthony
Clark (“Brett Clark”), Clark Farm #1, LLC (“Clark Farm”),1 and Squaw Bayou
Farms, LLC (“Squaw Bayou”) (collectively, “Defendants”) solidarily liable for two
arbitration awards rendered by the National Grain and Feed Association (“NGFA”),
which were confirmed by judicial order in separate cases, in this Court and in the
27th Judicial District Court of Louisiana. Defendants oppose the motion for
summary judgment and further move to strike Exhibits A–L attached to the motion.
(Doc. 23). Plaintiff filed a reply in response to Defendants’ opposition. (Doc. 24).
The Court has jurisdiction pursuant to 28 U.S.C. § 1332. Oral argument was
held on July 9, 2015, wherein the Court denied in part and deferred in part
Defendants’ motion to strike and deferred the entirety of Plaintiff’s motion for
In their answer, Defendants noted that the correct name of the named defendant is “Clark Farms
#1, L.L.C.” instead of “Clark Farm #1, L.L.C.” (Doc. 8 at ¶ II). Absent a formal motion by a party to
amend a party name or a caption, the Court refers to parties as they are identified on the docket
sheet which, as a default, reflects the naming of parties in the original complaint.
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1
JURY
summary judgment. For reasons explained herein, Defendants’ motion to strike is
DENIED entirely and Plaintiff’s motion for summary judgment is GRANTED.
I.
BACKGROUND
In March and April of 2006, Plaintiff Cargill and Defendant Clark Farm
entered into two separate contracts (Purchase Contract Nos. 26722 and 26766) for
the sale and delivery of bushels of wheat. (See Doc. 1-1 at pp. 1–6). Each contract
contained a provision stating that any disputes arising under any grain contract
between the parties would be subject to binding arbitration proceedings before the
NGFA pursuant to NGFA Arbitration Rules, with judgment of the award to be
entered by any court having jurisdiction over the matter. (Doc. 1-1 at pp. 2, 5). The
contracts were signed by Defendant Brett Clark on behalf co-Defendant Clark
Farm. (Doc. 1-1 at pp. 3, 6). Brett Clark is managing member—the sole member—of
Clark Farm, with 100% financial interest in Clark Farm. (Doc. 20-4 at pp. 2–3).
Clark Farm failed to deliver on both contracts, where delivery was scheduled
between May and June 2008. (Doc. 23-2 at p. 3).2
On October 22, 2008, Brett Clark executed the Operating Agreement of
Squaw Bayou Farms, LLC (“Squaw Bayou”) as the company’s sole member. The
articles of organization were filed and recorded with the Secretary of State on
October 24, 2008. (Doc. 20-11 at p. 28). At the time of organization, Brett Clark was
By Defendants’ own admission, Clark Farm breached the contracts because at the time of the
contracted-for delivery, the market price for wheat bushels was higher than the price that would
have been paid by Cargill. “[Clark Farm] chose to pursue the best avenue available to it to satisfy is
creditors, lien holders and mortgage holders . . . . It sold its crop for the best price it could get and
paid the bills that it could pay with the funds available . . . .” (Doc. 23-3 at pp. 3–4).
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listed as the operational manager and sole member of the Squaw Bayou, with 100%
membership interest. (Id. at p. 29). Also on October 22, 2008, a document was
executed, styled “Minutes of Membership of Clark Farms #1, L.L.C.” in which Brett
Clark, sole member of Clark Farm, stated that the purpose of the Clark Farm was
“significantly impaired” and that it desired to sell its used equipment to “Squaw
Farms, L.L.C.” in a zero-dollar sale, in exchange for Squaw Bayou’s assumption of
debt on specific agricultural security agreements. (Doc. 20-11 at pp. 23–25).
Cargill cancelled two remaining contracts (Purchase Contract Nos. 27399 and
29492) for the sale of bushels of wheat scheduled to be delivered in 2009, citing the
reason for cancellation as Clark Farm’s failure to perform on the 2008 contracts; the
cancellation notice was via letter dated November 7, 2008. (Doc. 20-4 at p. 12).
The dispute regarding the first two contracts was brought before the NGFA
in Arbitration Case No. 2362 against “Clark Farm #1, L.L.C./Brett Anthony Clark.”
(Doc. 1-1 at pp. 7–9). Clark Farm and Brett Clark failed to respond to the notice of
arbitration, and on May 20, 2009, the NGFA entered default judgment in
Arbitration Case No. 2362 against “Clark Farm #1, L.L.C./Brett Anthony Clark” in
the amount of $127,950.00, with interest to run from the date of judgment until
paid in full. (Doc. 1-1 at pp. 7–9). On June 19, 2013, this Court entered judgment
confirming the arbitration award in favor of Cargill and against Clark Farm only.
(08-cv-00456-JJB-RLB, Doc. 27). The judgment, issued by this Court, specifically
stated that the right to proceed to file suit against Brett Anthony Clark and Squaw
Bayou Farms for recovery of damages were reserved. (Id.). Further, on August 27,
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2013, this Court awarded Cargill attorney’s fees and costs in the amount of
$22,179.13 in connection with the matter concerning Purchase Contract Nos. 26722
and 26766. (08-cv-00456-JJB-RLB, Doc. 32). Cargill contends that, to date, neither
Brett Clark nor Clark Farm has paid any amount of this award. (Doc. 20-3 at p. 8).
Defendants do not dispute that no amount of this award has been paid. (Doc. 23-2 at
pp. 1–2).3
On Purchase Contract Nos. 27399 and 29492, Cargill also initiated NGFA
arbitration proceedings against “Clark Farm #1, L.L.C./Brett Anthony Clark.” Clark
Farm and Brett Clark once again failed to respond to the notice of arbitration, and
Cargill was awarded a default judgment against both in Arbitration Case No. 2406
on June 6, 2013 in the amount of $6,000 plus interest from the date of judgment
until paid in full. (Doc. 1-1 at pp. 21–23).4 This arbitration award was confirmed on
September 18, 2014 by the 27th Judicial District Court of Louisiana, St. Landry
Parish in Case No. 14-C-1843, in favor of Cargill and against Clark Farm and Brett
Clark. (Doc. 20-10 at pp. 1–2). Defendants here do not dispute that no amount of
this second award has been paid. (Doc. 23-2 at p. 2).5
3
According to the records of this Court, no appeal was pursued in Civil Action No. 08-00456.
Defendants argue that no delivery was ever due under Contract No. 27399 by virtue of it never
having been a valid contract. (Doc. 23-2 at pp. 3–4). Indeed, the copy of that contract furnished in the
record is unsigned by any party other than the buyer, Cargill. (See Doc. 1-1 at p. 13). Because the
contract was the subject of adjudication before the NGFA, however, the Court does not here opine—
and need not opine—on the validity of Contract No. 27399.
4
There is no record evidence or representation by any party that an appeal was pursued in Case No.
14-C-1843.
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II.
LEGAL STANDARD
Summary judgment is appropriate “if the movant shows that there is no
genuine dispute as to any material fact and that the movant is entitled to a
judgment as a matter of law.” Fed. R. Civ. P. 56(a). A party asserting that a fact
cannot be genuinely disputed must support the assertion by citing materials in the
record, including “depositions, documents, electronically stored information,
affidavits or declarations, stipulations (including those made for purposes of the
motion only), admissions, [and] interrogatory answers” or that an adverse party
cannot produce admissible evidence to support the presence of a genuine dispute.
See Fed. R. Civ. P. 56(c).
“[W]hen a properly supported motion for summary judgment is made, the
adverse party must set forth specific facts showing that there is a genuine issue for
trial.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250 (1986) (quotation marks
and footnote omitted). “This burden is not satisfied with some metaphysical doubt
as to the material facts, by conclusory allegations, by unsubstantiated assertions, or
by only a scintilla of evidence.” Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th
Cir. 1994) (quotation marks and citations omitted). In determining whether the
movant is entitled to summary judgment, the Court “view[s] facts in the light most
favorable to the non-movant and draw[s] all reasonable inferences in her favor.”
Coleman v. Houston Indep. Sch. Dist., 113 F.3d 528, 533 (5th Cir. 1997).
In sum, summary judgment is appropriate if, “after adequate time for
discovery and upon motion, [the non-movant] fails to make a showing sufficient to
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establish the existence of an element essential to that party’s case, and on which
that party will bear the burden of proof at trial.” Celotex Corp. v. Catrett, 477 U.S.
317, 322 (1986).
III.
DISCUSSION
A.
Jurisdiction Over Award from NGFA Case No. 2406
As a preliminary matter, the Court must satisfy itself of its jurisdiction
over—in particular—the $6,000 arbitration award from NGFA Case No. 2406,
which adjudicated Purchase Contract Nos. 27399 and 29492 and which was
confirmed on September 18, 2014 by the 27th Judicial District Court of Louisiana,
St. Landry Parish in Case No. 14-C-1843.
“Federal courts, both trial and appellate, have a continuing obligation to
examine the basis for their jurisdiction. The issues may be raised by parties, or by
the court sua sponte, at any time.” MCG, Inc. v. Great W. Energy Corp., 896 F.2d
170, 173 (5th Cir. 1990). At oral argument, the Court raised the issue of subject
matter jurisdiction over the second award, which totaled $6,000 plus interest.
Although all the contracts here are bilateral contracts between Clark Farm and
Cargill for the sale and delivery of bushels of wheat, the contracts at issue in the
$6,000 judgment were wholly separate from the contracts at issue in the other case
in this Court whose judgment Cargill here seeks to enforce, that is, Civil Action No.
08-00456-JJB-RLB. To be sure, the sets of contracts were discrete and unrelated
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enough that they could be adjudicated in two separate NGFA arbitrations and
subsequently confirmed in two different courts.
Cargill’s own memorandum stated that confirmation of this second NGFA
award had been sought in the 27th Judicial District Court “[d]ue to jurisdictional
issues.” (Doc. 20-3 at p. 9). Counsel for Plaintiff clarified that these jurisdictional
issues indeed referred to the insufficiency of the amount in controversy for federal
diversity jurisdiction. (Oral Argument, 7/9/2015).
Nonetheless, the Court finds here that Plaintiff’s claims are properly
aggregated in the instant suit. It has been long established that, in determining
whether the amount-in-controversy requirement has been met, a single plaintiff
may aggregate two or more claims against a single defendant, even if the claims are
unrelated. See Exxon Mobil Corp. v. Allapattah Servs., Inc., 545 U.S. 546, 585
(2005). See also Parish of Plaquemines v. Total Petrochemical & Ref. USA, Inc., 64
F. Supp. 3d 872, 887 (E.D. La. 2014). As a general matter, claims against two or
more defendants can be aggregated for the purpose of obtaining jurisdictional
amount, only if they are jointly liable to the plaintiff. Aetna Cas. & Sur. Co. v.
Graves, 381 F. Supp. 1159, 1163 (W.D. La. 1974).
Here, the crux of Plaintiff’s suit is founded in its allegation that all three
defendants—Brett Clark, Clark Farm, and Squaw Bayou—are one and the same,
and are thus liable in solido for the court awards entered against Brett Clark and
Clark Farm. Because Plaintiff pleads in good faith that Defendants are jointly and
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severally liable to it for the satisfaction of these judicial awards, aggregation to
satisfy the amount in controversy is permissible.
Although Plaintiff concedes that the Court would not have subject matter
jurisdiction over the second award, standing alone, Plaintiff is free to aggregate
unrelated claims. Together, the awards Plaintiff seeks to enforce meet the amount
in controversy requirement.6 To the extent that Defendants might argue that venue
is improper for Plaintiff’s claims related to the second judicial award in the 27th
Judicial District Court—which is not within the geographical jurisdiction of this
Court—the Court notes that Defendants have effectively waived their right to
challenge venue in this Court by failing to assert a defense of improper venue in
their answer, (Doc. 8), or filing an appropriate motion to dismiss. The Court is
satisfied of its jurisdiction over the second NGFA award at issue in this matter.
B.
Claim or Issue Preclusion
At the time of the filing of the complaint in this matter in April 2014, the
NGFA award in Case No. 2406 had not yet been confirmed by a court. In September
2014, during the pendency of this suit, the 27th Judicial District Court issued
judgment confirming the award of $6,000 plus interest against Clark Farm and
Brett Anthony Clark. (Doc. 20-10). Separate from any argument of jurisdiction,
Defendants assert that the inclusion of claims regarding the $6,000 arbitration
As reviewed supra, this Court entered judgment against Clark Farm confirming the NGFA’s May
20, 2009 award of $127,950.00 plus interest, and separately awarding $22,179.13 in attorney’s fees.
The 27th Judicial District Court entered judgment against Clark Farm and Brett Clark confirming
the NGFA’s June 6, 2013 award of $6,000 plus interest. Hence, the amount in controversy is
calculated to be $156,129.10 exclusive of interest, and not including fees and costs sought by Cargill
in relation to Arbitration Case No. 2406 and to the instant action.
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award is “inappropriate as that particular issue has already be [sic] adjudicated in a
Louisiana State Court.”7 Defendants cite not a single provision of law—statute or
case—which supports an argument of claim or issue preclusion.
Although the state court has issued a final judgment confirming the award in
Case No. 2406, Plaintiff is not attempting to re-litigate the claims that gave rise to
NGFA arbitration proceedings, but instead is seeking to enforce an unpaid
arbitration award by piercing the corporate veil to reach purported alter egos of
defendants to the original arbitration. The U.S. District Court for the Southern
District of New York addressed the same issue in a persuasive case, Feitshans v.
Kahn, No. 06 CIV. 2125 (SAS), 2006 WL 2714706, at *5 (S.D.N.Y. Sept. 21, 2006).
On highly similar facts, the court in Feitshans held that although plaintiffs’ claims
for new damages on claims that had already been arbitrated were barred by res
judicata, their alter ego claims to enforce the prior award, which had not been
satisfied, were not collaterally estopped. Id. at *4–5. There, the court rejected the
defendants’ speculative argument that the identical issue of alter ego liability was
necessarily decided prior to the issuance of the prior arbitration award. Id.
Here, similarly, Defendants have made no showing that the issue of piercing
the corporate veil was actually previously adjudicated in arbitration or in
Defendants did not place at issue any possible preclusive effect of the confirmation of Arbitration
Case No. 2362 by this Court, and indeed the Court would not have been convinced by such an
argument. In Civil Action No. 08-00456 of this Court, which forms part of the basis of the instant
suit, this Court rendered judgment against Clark Farm only, but specifically reserved Cargill’s right
to proceed to file suit against Brett Clark and Bayou Squaw Farms [sic] for recovery of damages
related to that action. (See No. 08-cv-00456-JJB-RLB, Doc. 27). Clearly, the prior ruling and
judgment of this Court in No. 08-00546 does not preclude the action brought in this case. See also
Cargill, Inc. v. Clark, No. CIV.A. 10-487-JJB, 2011 WL 4949015, at *4 (M.D. La. Oct. 18, 2011) (this
Court finding meritless a nearly identical argument made by same defense counsel in the instant
case, Mr. David Carriere, in factually similar case).
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subsequent confirmation by a court. Defendants even admit that neither Clark
Farm nor Brett Clark participated in this second arbitration proceeding, resulting
in the issuance of a default judgment. (Doc. 8 at ¶ XIV–XVI). Defendants have
provided no evidence or substantive argument of claim or issue preclusion that
would bar this Court’s determination of alter ego liability for Defendants Brett
Clark, Clark Farm, and Squaw Bayou—the last of which was not even named as a
defendant in the underlying arbitration in question. Thus, Defendants’ argument of
preclusion has no merit.
C.
Defendants’ Motion to Strike
Before the Court may evaluate Plaintiff’s motion for summary judgment on
the merits, it must properly define the scope of materials properly under
consideration in light of Defendants’ motion to strike all summary judgment
exhibits. (See Doc. 23). Without citation to any legal authority and without
explanation, Defendants argue that the information contained in Exhibits A–L is
“not admissible by mere attachment of copies and without qualification as expert
opinion, authoritative material, and/or affidavits.” (See Doc. 23 at p. 1). Certainly,
under Rule 56, a party is entitled to offer an objection that material cited in a
motion for summary judgment cannot be presented in a form that would be
admissible in evidence. Fed. R. Civ. P. 56(c)(2). In such a situation, the burden is on
the proponent to either show that the material is either admissible as presented or
explain the admissible form that is anticipated. See Fed. R. Civ. P. 56, Advisory
Committee Notes on Rules—2010 Amendment. Plaintiff submitted a reply in which
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it detailed the basis for each exhibit and explained the form of each exhibit that
would be presented to be admitted at trial. (Doc. 24 at pp. 2–6).
At oral argument, Defendants withdrew in part their motion to strike, with
respect to depositions of Brett Clark, found at Docs. 20-4, 20-11. (Oral Argument,
7/9/2015). The Court went on to deny, for reasons read into the record, Defendants’
motion to strike commodity trading archive information,8 government publications,
and copies of the NGFA arbitration decisions and court judgments at issue in this
matter, found at Docs. 20-5–20-10, 20-15. (Oral Argument, 7/9/2015).
The materials for which Defendants’ motion to strike was not denied were
those that fell in the category of subpoenas and documents received pursuant to
subpoenas, found at Docs. 20-12–20-14. In particular, Defendants’ counsel argued
that certain checks from Clark Farm’s business account with Cottonport Bank could
be construed as checks for proper business expenses. (Oral Argument, 7/9/2015)
(“The checks themselves are fine; it’s the interpretation that opposing counsel
applies . . . .”). At oral argument, the Court deferred ruling on whether to strike
these subpoenaed materials and ruled that it would take up that particular issue at
trial. (Oral Argument, 7/9/2015).
Upon further consideration, however, the Court determines that Defendants’
objections to the checks were objections concerning the proper interpretation of
whether the checks were written for a business purpose vel non. The Court is
sufficiently persuaded by Plaintiff’s proffer of the anticipated form of subpoenas and
The Court noted that at trial, counsel would be given an opportunity to demonstrate that
commodity trading information found in the Wall Street Journal was inaccurate or unreliable.
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subpoenaed documents. (See Doc. 24 at p. 6). Particularly in light of the fact that
Defendants’ arguments at oral argument revolved around the interpretation of the
checks as opposed to validity or authentication, the Court hereby DENIES
Defendants’ motion to strike in its entirety. The material shall be within the scope
of the Court’s consideration for the instant motion for summary judgment, with all
reasonable inferences made in Defendants’ favor according to the summary
judgment standard.
D.
Individual Liability of Brett Clark
1.
Jurisprudential Piercing of the Corporate Veil
It is well settled in Louisiana that a corporate entity is a distinct legal entity,
separate from the individuals who comprise it. See La. C.C. art. 24. The exception to
this rule is when there is a justification for piercing the corporate veil. “Under
Louisiana law, the corporate veil may be pierced under the ‘alter-ego’ doctrine,
where the corporate entity is disregarded to such an extent that the affairs of the
corporation are indistinguishable from the affairs of the officer or director.” Tubos
de Acero de Mexico, SA v. Am. Int’l Investment Corp., 292 F.3d 471, 478 (5th Cir.
2002) (First Downtown Dev. v. Cimochowski, 613 So.2d 671, 676 (La. Ct. App.
1993)).9 Plaintiff argues that the Court should find Brett Clark to be an alter ego of
Clark Farm.10
Plaintiff puts forth the “disregard of the corporate entity” as a legal theory separate and apart from
the general alter ego theory, (see Doc. 20-3 at pp. 16–19), but has not provided sufficient law or
argument to convince the Court that the two are distinguishable in any meaningful way. Indeed, as
the alter ego doctrine has been developed in Louisiana case law, the disregarding of the corporate
entity is symptomatic of the presence of an alter ego entity.
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Plaintiff additionally asserts that Brett Clark may be found liable under a theory of intentional
12
The factors used to determine whether the corporate veil should be pierced
under Louisiana’s alter ego test include but are not limited to: (1) commingling of
corporate and shareholder funds; (2) failure to follow statutory formalities for
incorporating and transacting corporate affairs; (3) undercapitalization; (4) failure
to provide separate bank accounts and bookkeeping records; and (5) failure to hold
regular shareholder and director meetings. Benco Constr. Servs., Inc. v. AJ’s
Constr., LLC, No. Civ. A. 09-cv-286, 2010 WL 724363, at *1 (M.D. La. Mar. 1, 2010);
Riggins v. Dixie Shoring Co., 590 So.2d 1164, 1168 (La. 1991).
For purposes of piercing the corporate veil, an LLC is treated as a corporation
in Louisiana. Hollowell v. Orleans Reg’l Hosp., LLC, 217 F.3d 379, 385 n.7 (5th Cir.
2000). With that in mind, courts recognize that the nature of LLCs, as closely-held
entities, limits the weight with which certain factors of the test should be afforded.
For example, LLCs “are not required to comply with all of the corporate formalities
as rigidly as larger corporations.” McDonough Marine Serv., a Div. of Marmac Corp.
v. Doucet, 694 So.2d 305, 310 (La. Ct. App. 1996). Likewise, “[u]nder Louisiana LLC
law, members or managers of LLCs do not have to hold meetings, keep minutes or
act through formal resolutions.” ORX Res., Inc. v. MBW Exp., L.L.C., 32 So.3d 931
and unjustified interference with contractual relations. (Doc. 20-3 at pp. 19–20). The claim of
intentional and unjustified contractual interference, first recognized by the Louisiana Supreme
Court in 9 to 5 Fashions, Inc. v. Spurney, 538 So.2d 228 (La. 1989), has been construed very narrowly
so as to generally limit the claim to just the facts of the 9 to 5 Fashions case. See America's Favorite
Chicken Co. v. Cajun Enterprises, Inc., 130 F.3d 180, 184 (5th Cir. 1997). This Court concurs with its
sister district court in the Western District of Louisiana, which has held that the doctrine of tortious
interference, which addressed liability of officers of corporations in 9 to 5 Fashions, has not been
expanded to apply to managers of LLCs. See M & D Mineral Consultants, LLC v. Wenting Li, No.
CIV.A. 12-2082, 2013 WL 883689, at *2 (W.D. La. Mar. 7, 2013). Because Brett Clark is the
managing member of Clark Farm and Squaw Bayou, which are both LLCs, the tortious interference
theory is not applicable here.
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(La. Ct. App. 2010). Thus, the presence of certain factors normally indicative of an
alter ego must be considered in light of what is reasonable or standard for an LLC.
In arguing that the Court should find Brett Clark and Clark Farm to be alter
egos of one another, Plaintiff focuses nearly exclusively on purported commingling
of personal and company funds. Because the alter ego test is one that considers the
totality of the circumstances, there is no minimum number of factors which must be
met. Indeed, at least one Louisiana circuit court has held that commingling of funds
can on its own constitute sufficient grounds to pierce the corporate veil, where the
trial court found that company funds were used to pay personal expenses and that
business affairs were not performed on a corporate footing. See Morreale v.
Morreale, 10 So.3d 1281, 1285–86 (La. Ct. App. 2009).
The case record before the Court contains 72 pages of bank records from the
Cottonport Bank, which Plaintiff asserts are indicative of substantial commingling
of funds between Brett Clark and Clark Farm. Brett Clark stated at his deposition
that he did not keep his own diary of purchases made by Clark Farm. (Doc. 20-11 at
p. 3). As discussed supra, the Court deems the Cottonport Bank records proper
summary judgment material for consideration, but evaluates them according to the
summary judgment standard of viewing facts in the light most favorable to the nonmovant and drawing all reasonable inferences in the non-movant’s favor.
At oral argument, defense counsel averred that many of the checks were
made out for purposes that could be interpreted as either personal or business use.
Defense counsel pointed to Wal-Mart as one example of a common payee of checks
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from Clark Farm’s business account, arguing that Wal-Mart purchases could be
legitimate business purchases. (Oral Argument, 7/9/2015). The Court agrees that
with a payee such as Wal-Mart, which purveys a wide range of goods, the nature of
an expense is unclear from the face of the check; any such ambiguities at this stage
of litigation are to be resolved in favor of Defendants.
However, the Cottonport Bank records are rife with instances of commingling
that are not ambiguous. For example, Check No. 1842, drawn from Clark Farm’s
account, is written out to St. Thomas Church in the amount of $50.00, with the
memo field reading: “July 29 Birthday” and “Masses for Jacob Anthony Clark.”
(Doc. 20-14 at p. 45). Check No. 1817 from the same business account was paid to
the “Ear, Nose, Throat, and Allergy Clinic” in the amount of $70.00. (Id. at p. 41).
Check 1717 paid $65.00 to “Lisa’s Studio of Dance.” (Id. at 37). Other checks were
addressed to payees such as “J.C. Penney,” “Stage,” and “Aeropostale,” “Pizza Hut,”
and “Piggly Wiggly.” (Id. at pp. 33, 42). Over $1900 was paid to “St. Joseph School”
through Clark Farm’s account, a large portion for tuition, (Doc. 20-14 at pp. 26, 41),
and some amounts for items such as “sweatshirts” and “Amber’s cheerleader
uniform,” (see, e.g., id. at pp. 30, 32, 47).
Despite the fact that Clark Farm is “strictly a farming operation” that farms
only corn, soybeans, milo and wheat, (Doc. 20-11 at p. 3), several checks from the
Clark Farm account were written to animal and veterinary clinics, (see, e.g., Doc.
20-14 at p. 39, 58, 62, 64).
15
Brett Clark stated at his deposition that neither he nor Clark Farm had any
credit cards while Clark Farm was in existence. (Doc. 20-11 at p. 4). Yet check
payments from Clark Farm were made to “American Express” and “Discover” on a
frequent basis from 2005 through 2008. (See, e.g., Doc. 20-14 at pp. 1–3, 6, 9, 11, 17–
20, 22, 25, 38, 40, 46, 48, 52, 61, 63).
According to his deposition testimony, Brett Clark had the sole signing
privilege for Clark Farm’s bank account. (Doc. 20-11 at p. 4). Brett Clark further
stated that his wife, Annie Clark, was not an employee of Clark Farm. (Id. at pp. 4,
11). Yet over eighty Clark Farm checks—totaling over $43,000—were signed by
Annie Clark from October 2005 to March 2009. (See Doc. 20-14 at pp. 4–62). Annie
Clark signed over $5000 worth of Clark Farm checks made out to cash. (Id. at pp. 4,
12, 15, 32, 42, 51, 62, 64). The bank records also reflect at least one instance in
which Annie Clark simply wrote a check out to herself from Clark Farm’s account.
(See Doc. 20-14 at p. 10).
Further, at oral argument, defense counsel represented that, to his
knowledge, the individual Brett Clark is paying the property taxes on some land
still belonging to Clark Farm by title. (Oral Argument, 7/9/2015).
Defendants deny that the bank records reflect personal expenses of Brett
Clark and his family paid by Clark Farm. (See Doc. 23-2 at ¶ 13). On summary
judgment, the Court draws all reasonable inferences in the non-movants’ favor, but
the Court emphasizes that the inferences must be reasonable. Here, no rebuttal has
been offered to counter the evidence reviewed above showing that the Clark Farm
16
company account was being used for personal expenses. Defendants have presented
no explanation for the dozens of checks signed by Annie Clark, who was not an
employee, and according to Clark Farm’s sole member, did not have signing
privileges for the company account. Moreover, Defendants have not offered
legitimate business reasons for checks made out to schools, dance studios, grocery
stores, and department stores. There has been no attempted justification for credit
card payments where neither Clark Farm nor its sole member had a credit card, nor
for veterinary clinic payments where Clark Farm was a strictly agricultural
operation.
Even making all reasonable inferences in favor of Defendants, the evidence
clearly demonstrates that the Clark Farm checking account was being used in
significant part for personal expenses over the span of several years. The Court thus
concludes that the indisputable evidence of commingling of funds is sufficient to
pierce the corporate veil between Brett Clark and Clark Farm.
2.
La. R.S. 12:1320 as Interpreted in Ogea
In their opposition, Defendants rely primarily not on a defense of fact, but
one of law, arguing that the corporate veil for Clark Farm cannot be pierced
pursuant to La. R.S. 12:1320 and the Louisiana Supreme Court’s decision in Ogea v.
Merritt, 130 So.3d 888, 895 (La. 2013).11 (Doc. 23-3). In Ogea, the court interpreted
11
La. R.S. 12:1320 provides:
A. The liability of members, managers, employees, or agents, as such, of a limited
liability company organized and existing under this Chapter shall at all times be
determined solely and exclusively by the provisions of this Chapter.
B. Except as otherwise specifically set forth in this Chapter, no member, manager,
employee, or agent of a limited liability company is liable in such capacity for a
debt, obligation, or liability of the limited liability company.
17
R.S. 12:1320 as a matter of first impression and set forth the general rule that an
individual member is not personally responsible for the liabilities of an LLC beyond
the member's capital contributions, with only specifically enumerated exceptions in
cases of fraud, breach of professional duty, or other “negligent or wrongful act.” Id.
at 897. The Louisiana Supreme Court held that the definitions to the exceptions are
“confined to certain circumscribed subjects of the law.” Id.
Plaintiff does not assert that Defendants’ conduct falls within any of the
statutory exceptions as defined by the Ogea court.12 Instead it argues that Ogea and
La. R.S. 12:1320 do not apply because the Supreme Court of Louisiana explicitly left
undisturbed the jurisprudential doctrine of piercing the corporate veil—that is, the
analysis by which the Court, supra, found Clark Farm and Brett Clark to be alter
egos. Indeed, the court in Ogea specified that it was turning to statutory authority
for controlling principles of law because the plaintiff there had not invoked
jurisprudential doctrine and the lower courts in that case did not rely on it either.
Id. at 895. It follows, then, that in the instant case, where Plaintiff has brought suit
C. A member, manager, employee, or agent of a limited liability company is not a
proper party to a proceeding by or against a limited liability company, except
when the object is to enforce such a person's rights against or liability to the
limited liability company.
D. Nothing in this Chapter shall be construed as being in derogation of any rights
which any person may by law have against a member, manager, employee, or
agent of a limited liability company because of any fraud practiced upon him,
because of any breach of professional duty or other negligent or wrongful act by
such person, or in derogation of any right which the limited liability company may
have against any such person because of any fraud practiced upon it by him.
Although “fraud” was mentioned in its Complaint, (see Doc. 1 at ¶ XXV), Plaintiff did not plead
fraud as a cause of action. At oral argument, Plaintiff confirmed that it has abandoned a claim of
fraud. (Oral Argument, 7/9/2015).
12
18
for the central purpose of piercing the corporate veil, the Court properly adjudicates
such a claim according to longstanding jurisprudentially developed principles.
In Hector v. Mo-Dad Environmental Services, a Louisiana circuit court
similarly noted the limits of Ogea’s analysis, attributable to the posture of that
particular case which was formed by plaintiff and by the lower courts. See Hector v.
Mo-Dad Envtl. Serv., LLC, 134 So.3d 133, 137 (La. Ct. App. 2014). The court in
Hector then proceeded to discuss the factors of the alter ego test and subsequently
held that the corporate veil could be pierced, adding: “It appears that these
companies were set up to avoid liability, but no efforts were made to treat these
companies as separate entities. The avoidance of their responsibility to [the
plaintiff] is not what the law intended . . . .” Id. at 139–40.
The Court notes that, after Ogea, courts interpreting Louisiana law have not
been entirely consistent in their approach of determining individual liability of LLC
members. In some decisions, courts have looked no further than the statutory
framework of La. R.S. 12:1320. See, e.g., Nunez v. Pinnacle Homes LLC, 158 So.3d
71, 74 (La. Ct. App. 2014); Hohensee v. Turner, No. 2014–CA–0796, 2015 WL
1844385 at *11 (La. Ct. App. April 22, 2015). Yet other decisions reflect that courts
maintain their reliance on Louisiana’s jurisprudential piercing of the corporate veil.
See, e.g., Medeaa v. K.A.P. Enterprises LLC, No. 09–1211, 2015 WL 1564876 at *2
(W.D. La. April 7, 2015) (“[I]n remanding the case for us to consider the
applicability of Ogea to the facts of this case, the Fifth Circuit did not invalidate
[jurisprudential] piercing of the corporate veil . . . .”); Collins v. State Farm Ins. Co,
19
160 So.3d 987, 996–97 (La. Ct. App. 2015) (examining evidence of fraud and factors
of the alter ego test to determine whether to pierce the corporate veil, without any
mention of Ogea or R.S. § 12:1320).
Although Ogea has undoubtedly established an important statutory
framework for resolving questions of personal liability of LLC members, it is also
evident that the jurisprudential doctrine of piercing the corporate veil has survived
Ogea. Hence, the Court maintains its finding herein that Brett Clark and Clark
Farm are alter egos of one another, such that Brett Clark is personally liable for the
arbitration awards lawfully rendered against Clark Farm.
E.
Liability of Squaw Bayou
In a separate theory of piercing Clark Farm’s corporate veil, Plaintiff argues
that liability should be extended to Squaw Bayou because Squaw Bayou and Clark
Farm are a single business enterprise.13 The single business enterprise doctrine
allows for piercing the corporate veil when “a corporation is so organized and
controlled as to make it merely an instrumentality of another corporation.” Green v.
Champion Ins. Co., 577 So.2d 249, 257 (La. Ct. App. 1991).14 The single business
enterprise doctrine applies with equal force to LLCs as to other corporate entities.
In its memorandum, Plaintiff describes this theory as Squaw Bayou being Clark Farm
“reincarnated,” citing in support Roddy v. Norco Local 4–750, 359 So.2d 957 (La. 1978). (Doc. 20-3 at
p. 20). Roddy dealt with the affiliation of two labor unions, but for traditional companies or
corporations, a more frequently used term by Louisiana courts is “single business enterprise/entity.”
See, e.g., Brown v. Auto. Cas. Ins. Co., 644 So. 2d 723, 728 (La. Ct. App. 1994), writ denied, 648 So.2d
932 (La. 1995). At oral argument, Plaintiff confirmed that when it dubbed Squaw Bayou to be a
“reincarnation” of Clark Farm, it was referring to the doctrine of single business enterprise doctrine.
(Oral Argument, 7/9/2015).
13
Defendants’ argument regarding Ogea is wholly inapplicable to the single business enterprise
doctrine. As is clear on the face of the statute, La. R.S. 12:1320 concerns the liability of individual
members, managers, employees, or agents. Single business enterprise doctrine, on the other hand, is
used to find liability for another corporate entity.
14
20
See Hollowell v. Orleans Reg'l Hosp. LLC, 217 F.3d 379, 389 (5th Cir. 2000)
(affirming finding that several business entities, including two LLCs, formed a
single business enterprise).
“Upon finding that a group of affiliated corporations constitute a ‘single
business enterprise,’ the court may disregard the concept of corporate separateness
and extend liability to each of the affiliated corporations to prevent fraud or to
achieve equity.” Brown v. Auto. Cas. Ins. Co., 644 So.2d 723, 727 (La. Ct. App.
1995). Ultimately, determining whether an affiliated group of entities constitutes a
single business enterprise is a question of fact for the trial court to decide. Town of
Haynesville, Inc. v. Entergy Corp., 956 So.2d 192, 196 (La. Ct. App. 2007).
“Under Louisiana law, the factors to be considered to determine whether one
entity is an alter ego of another or whether two entities are a ‘single business
enterprise’ are similar.” Jackson v. Tanfoglio Giuseppe, S.R.L., 615 F.3d 579, 587
(5th Cir. 2010). In Green v. Champion Insurance, the court set forth the following
non-exclusive eighteen-factor test to determine whether a group of affiliated entities
constituted a single business enterprise:
1.
2.
3.
4.
5.
6.
7.
Corporations with identity or substantial identity of ownership,
that is, ownership of sufficient stock to give actual working control;
Common directors or officers;
Unified administrative control of corporations whose business
functions are similar or supplementary;
Directors and officers of one corporation act independently in the
interest of that corporation;
Corporation financing another corporation;
Inadequate capitalization (“thin corporation”);
Corporation causing the incorporation of another affiliated
corporation;
21
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
Corporation paying the salaries and other expenses or losses of
another corporation;
Receiving no business other than that given to it by its affiliated
corporations;
Corporation using the property of another corporation as its own;
Noncompliance with corporate formalities;
Common employees;
Services rendered by the employees of one corporation on behalf of
another corporation;
Common offices;
Centralized accounting;
Undocumented transfers of funds between corporations;
Unclear allocation of profits and losses between corporations; and
Excessive fragmentation of a single enterprise into separate
corporations.
So.2d at 257–58. These factors do not constitute an exhaustive list. Id. at 258.
Moreover, no single factor is dispositive on the issue of whether a court may find
that multiple entities constitute a single business enterprise. See id.
Here, Brett Clark is the sole member, manager, and employee of both Clark
Farm and Squaw Bayou. (Doc. 20-11 at pp. 23, 29). On October 22, 2008, Brett
Clark executed Squaw Bayou’s Operating Agreement. (Doc. 20-11 at pp. 29–31).
That same day, an agreement was executed between Clark Farm and Squaw Bayou
to sell Clark Farm’s equipment to “Squaw Farms, L.L.C.,” for zero dollars, in
exchange for the assumption of debt on specific agricultural security agreements.
(Doc. 20-11 at pp. 23–25). In a document of minutes signed by sole member Brett
Clark, Clark Farm stated that it was unable to continue operations, and it
suspended its farming operations “pending an improvement in the economic
condition of the limited liability company.” (Doc. 20-11 at p. 23).
22
Pursuant to the purchase, Squaw Bayou uses the same farming equipment
Clark Farm had used in its farming operations. (Doc. 20-11 at p. 10). Squaw Bayou
farms the same land as Clark Farm did, with the exception of some land that Clark
Farm had lost. (Doc. 20-11 at p. 11). Brett Clark drives a “farm pick-up” truck
owned by Clark Farm, for which Squaw Bayou makes insurance payments. (Doc.
20-11 at pp. 18–19).
Further, the Cottonport Bank records show that a check from Clark Farm’s
account was made out to the Secretary of State in 2005, the memo field reading:
“Squaw Bayou H.C. LLC.” (Doc. 20-14 at p. 7). Such a record, though it predates
Squaw Bayou’s filing of its articles of organization with the Secretary of State in
2008, constitutes evidence tending to show that Clark Farm caused the
incorporation of Squaw Bayou.
Plaintiffs have not shown that all single business enterprise factors are
satisfied—nor must they. Certainly, some factors remain neutral due to a lack of
evidence in the record. Regarding undercapitalization, Squaw Bayou’s Operating
Agreement did not specify the amount of money with which the LLC would be
capitalized. (See Doc. 20-11 at pp. 29–30). Brett Clark does not recall if anything
was paid for the initial capitalization of Squaw Bayou. (Doc. 20-11 at pp. 8–9).
Defendants noted at oral argument, and the Court agrees, that there is no specific
requirement of a minimum capitalization amount for LLCs. (Oral Argument,
7/9/2015).
Although
the
Court
can
23
find
no
affirmative
evidence
of
undercapitalization in the record, Defendants do not provide any evidence showing
that Squaw Bayou was sufficiently capitalized.
Similarly, there is no evidence in the record clearly cutting one way or
another for whether Squaw Bayou was non-compliant with corporate formalities. As
defense counsel noted, there is no statutory requirement to hold member meetings,
and any such requirements would not be practical for a single-member LLC. (See
Oral Argument, 7/9/2015).
Nonetheless, the undisputed evidence in the record, even when viewed in the
light most favorable to Defendants, shows that Clark Farm and Squaw Bayou are a
single business enterprise. The two LLCs, which share a sole manager and member
and a sole employee, farm on essentially the same land, using farm equipment
transferred from one to the other in a zero-dollar sale. One LLC pays insurance on a
truck owned by the other. And bank records indicate that one was directly
responsible for the incorporation of the other. Some factors of the test remain
neutral, but Defendants have not identified any evidence in the record with a
tendency to show that Clark Farm and Squaw Bayou are not a single business
enterprise. Accordingly, the Court finds that the corporate veil of Clark Farm may
be pierced on other grounds, this time to render Squaw Bayou to be the same
business enterprise as Clark Farm, and to hold Squaw Bayou liable for the
arbitration awards lawfully rendered against Clark Farm.
24
IV.
CONCLUSION
Accordingly,
IT IS ORDERED t hat the Motion for Summary Judgment (Doc. 20)
filed by Plaintiff Car gill, Incorpor ated is GRANTED. The Cour t h as pier ced the
corporate veil, finding both Defendants Brett Anthony Clark and Squaw Bayou
Farms, LLC liable for National Grain and Feed Association arbitration awards
r endered and confirmed against Defendant Clark Farm # 1, LLC.
Cargill is advised to file a separate motion for costs and attorney's fees .
.:tJ..
Baton Rouge, Louisiana, this / - day of August , 2015.
BRIAN A. JACKSON, CHIEF JUDGE
UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF LOUISIANA
25
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