Malone et al v. Kantner Ingredients, Inc. et al

Filing 167

MEMORANDUM AND ORDER - The motion to dismiss filed by defendants Kantner and Rutter (filing 125 ) is granted in part and denied in part, as set forth above. However, plaintiffs are given leave to replead their fraud claims The motion to dismiss f iled by Kantner Real Estate (filing 126 ) is granted. As to defendant Kantner Real Estate, plaintiffs' operative complaint is dismissed without prejudice. However, plaintiffs are also given leave to replead their claim against Kantner Real Estate. The Kantner Companies' motion to dismiss (filing 150 ) is denied. Plaintiffs shall file any amended complaint on or before July 14, 2014. Ordered by Judge John M. Gerrard. (GJG)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEBRASKA
THERESA MALONE, individually
and as a derivative action on behalf of
BLUE VALLEY FOODS, INC., a
Nebraska Corporation, et al.,
Plaintiffs,

4:12-CV-3190
MEMORANDUM AND ORDER

vs.
DOUGLAS KANTNER, et al.,
Defendants.
This matter is before the Court on three motions to dismiss plaintiffs'
Fourth Amended Complaint (filing 115): a motion to dismiss portions of the
operative complaint for failure to state a claim, filed by defendants Douglas
Kantner and Kevin Rutter (filing 125); a motion to dismiss for lack of
personal jurisdiction, filed by defendant Kantner Real Estate, LLC ("KRE")
(filing 126); and a motion to dismiss for failure to state a claim filed by the
remaining defendants (filing 150). For the reasons discussed below, Kantner
and Rutter's motion will be granted in part and denied in part, KRE's motion
will be granted, and the remaining defendants' motion will be denied.
I. FACTUAL BACKGROUND
Plaintiffs in this diversity action are residents of Nebraska and
minority shareholders in Blue Valley Foods, Inc. ("Blue Valley"), a Nebraska
corporation that made cheese and other dairy products. Filing 115 at ¶ 1, 9–
10. Kantner (a California resident) was a director, as well as the majority
shareholder and president of Blue Valley. Filing 115 at ¶ 11. Kantner was the
owner, either directly or indirectly, of the corporate defendants Kantner
Group, Inc.; Kantner Ingredients, Inc.; Chianti Cheese Company of New
Jersey, Inc.; Kantner Custom Dairy Products, LLC; and Kantner Real Estate,
LLC (collectively, the "Kantner Companies"). Filing 115 at ¶ 12. The Kantner
Companies are all incorporated and have their principal places of business in
states other than Nebraska. Filing 115 at ¶¶ 2–8. According to plaintiffs,
Kantner was responsible for directing the business operations of each of the
Kantner Companies. Filing 115 at ¶ 13. Rutter was Kantner's employee, and

worked for the Kantner Companies and Blue Valley. At various times Rutter
was the controller of Kantner Group and a director and comptroller of Blue
Valley. Filing 115 at ¶ 14–15.
Briefly stated, plaintiffs allege that Kantner and Rutter "conspired to
use their positions as officers and directors of [Blue Valley] to systematically
loot" Blue Valley, through a variety of self-dealing transactions and
fraudulent practices, and that Kantner and Rutter frustrated plaintiffs'
attempts to monitor Kantner and Rutter's activities and to exercise their
rights as minority shareholders. Filing 115 at ¶ 41 & pp. 2–19. For example,
plaintiffs allege that Kantner purchased products for Blue Valley from the
Kantner Companies for "exorbitant prices," then sold Blue Valley's products
to those companies for below-market rates. Filing 115 at ¶¶ 18(f)–(g).
Plaintiffs also allege that Kantner and Rutter used funds drawn from Blue
Valley to satisfy personal obligations or debts incurred by the Kantner
Companies. Filing 115 at ¶ 18(m). And plaintiffs claim that Kantner failed to
hold shareholder meetings or elections and strenuously resisted their
attempts to exercise any oversight. Filing 115 at ¶¶ 18(a)–(d), 78–81.
II. STANDARD OF REVIEW
A. FAILURE TO STATE A CLAIM - RULE 12(B)(6)
A complaint must set forth a short and plain statement of the claim
showing that the pleader is entitled to relief. Fed. R. Civ. P. 8(a)(2). This
standard does not require detailed factual allegations, but it demands more
than an unadorned accusation. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).
The complaint need not contain detailed factual allegations, but must provide
more than labels and conclusions; and a formulaic recitation of the elements
of a cause of action will not suffice. Bell Atlantic Corp. v. Twombly, 550 U.S.
544, 555 (2007). For the purposes of a motion to dismiss, a court must take all
of the factual allegations in the complaint as true, but is not bound to accept
as true a legal conclusion couched as a factual allegation. Id.
And to survive a motion to dismiss under Fed. R. Civ. P. 12(b)(6), a
complaint must also contain sufficient factual matter, accepted as true, to
state a claim for relief that is plausible on its face. Iqbal, 556 U.S. at 678. A
claim has facial plausibility when the plaintiff pleads factual content that
allows the court to draw the reasonable inference that the defendant is liable
for the misconduct alleged. Id. Where the well-pleaded facts do not permit the
court to infer more than the mere possibility of misconduct, the complaint has
alleged—but it has not shown—that the pleader is entitled to relief. Id. at
679.
Determining whether a complaint states a plausible claim for relief will
require the reviewing court to draw on its judicial experience and common
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sense. Id. The facts alleged must raise a reasonable expectation that
discovery will reveal evidence to substantiate the necessary elements of the
plaintiff's claim. See Twombly, 550 U.S. at 545. The court must assume the
truth of the plaintiff's factual allegations, and a well-pleaded complaint may
proceed, even if it strikes a savvy judge that actual proof of those facts is
improbable, and that recovery is very remote and unlikely. Id. at 556.
B. LACK OF PERSONAL JURISDICTION - RULE 12(B)(2)
When jurisdiction is challenged on a pretrial motion to dismiss, the
plaintiff need only make a prima facie showing of jurisdiction. Pangaea, Inc.
v. Flying Burrito LLC, 647 F.3d 741, 745 (8th Cir. 2011); Miller v. Nippon
Carbon Co., 528 F.3d 1087, 1090 (8th Cir. 2008). Nonetheless, if the
defendant controverts or denies jurisdiction, the plaintiff still carries the
burden of proof. Wells Dairy, Inc. v. Food Movers Int'l, Inc., 607 F.3d 515, 518
(8th Cir. 2010). The plaintiff's prima facie showing must be tested, not by the
pleadings alone, but by the affidavits and exhibits presented with the
motions and opposition thereto. Miller, 528 F.3d at 1090; Coen v. Coen, 509
F.3d 900, 904–05 (8th Cir. 2007).
Neither party has requested an evidentiary hearing, and the Court
does not consider a hearing necessary to resolve the pending motion. Where,
as here, the Court does not hold an evidentiary hearing and instead relies on
pleadings and affidavits, the Court must view the facts in the light most
favorable to plaintiffs, and resolve all factual conflicts in plaintiffs' favor.
Pangaea, 647 F.3d at 745.
III. ANALYSIS
Plaintiffs' operative complaint asserts (approximately) eight theories of
recovery. The majority are brought only against defendants Kantner and
Rutter. Those theories are: (1) breach of fiduciary duty; (2) fraudulent
misrepresentation and fraudulent concealment; (3) conversion; (4) breach of
the duty of loyalty and fair dealing; (5) civil conspiracy; (6) money had and
received (brought against all defendants but Rutter); and (7) usurpation of
corporate opportunities (brought solely against Kantner). Plaintiffs assert
their claims on their own behalf and as a derivative action on behalf of Blue
Valley.
The Court will begin by briefly sorting through the defendants' motions
to dismiss. Rutter has moved to dismiss plaintiffs' claims for money had and
received and usurpation of corporate opportunities (filing 127 at 6–7).
Plaintiffs have clarified that they did not intend to assert either of those
claims against Rutter (filing 135 at 1), and so his motion to dismiss is granted
in that respect.
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Kantner and Rutter both move to dismiss plaintiffs' second and fifth
claims, for fraudulent misrepresentation and concealment and for civil
conspiracy. They also contend that plaintiffs have not satisfied the
requirements for bringing a derivative action. In the alternative, Kantner
and Rutter ask that plaintiffs be ordered to provide a more definite statement
of their complaint, to clarify which claims are brought in their individual
capacities and which are brought as derivative actions on behalf of Blue
Valley. Filing 127 at 1. The Court finds that plaintiffs have failed to plead
their fraud claims with the particularity required by Rule 9(b), and those
claims will be dismissed, but with leave to replead. Kantner and Rutter's
motion will otherwise be denied.
The Kantner Companies move to dismiss the sole claim against them,
for money had and received, for failure to state a claim. Filing 150. The Court
finds that plaintiffs have adequately pleaded this claim and will deny the
Kantner Companies' motion.1
Finally, KRE separately moves to dismiss for lack of personal
jurisdiction. Filing 126. On the present record, the Court finds that plaintiffs
have not made a prima facie showing that KRE is subject to jurisdiction in
Nebraska, and the Court will grant KRE's motion. However, it may be that
plaintiffs can allege additional facts that would make the exercise of
jurisdiction over KRE proper; thus, plaintiffs will be given leave to replead
their claims against KRE.
A. KANTNER AND RUTTER'S MOTION TO DISMISS
1. Fraudulent Misrepresentation / Concealment
Kantner and Rutter raise several arguments in support of their motion
to dismiss plaintiffs' fraud claims. They first argue that plaintiffs have failed
to plead their claims with the particularity required by Fed. R. Civ. P. 9(b).
Second and relatedly, Kantner and Rutter argue that plaintiffs have failed to
plead the essential elements of intent and reliance. And finally, they argue
that the claims are barred by the statute of limitations. The Court considers
each argument in turn.
A plaintiff who makes allegations based on fraud must state with
particularity the circumstances constituting the fraud. Fed. R. Civ. P. 9(b); EShops Corp. v. U.S. Bank Nat. Ass'n, 678 F.3d 659, 663 (8th Cir. 2012). The
level of particularity required depends on the nature of a case. Id. This
pleading requirement is interpreted in harmony with the principles of notice
pleading, and to satisfy it, the complaint must allege such matters as the
The Kantner Companies have also moved to dismiss the remaining claims for relief.
However, none of those claims were asserted against the Kantner Companies.
1

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time, place, and contents of false representations, as well as the identity of
the person making the misrepresentation and what was obtained or given up
thereby. Drobnak v. Andersen Corp., 561 F.3d 778, 783 (8th Cir. 2009). In
other words, the complaint must plead the "who, what, where, when, and
how" of the alleged fraud. Id.
Plaintiffs generally allege that Kantner and Rutter defrauded them
and Blue Valley by failing to disclose various self-dealing transactions or
misrepresenting the nature of those transactions. Filing 115 at ¶ 24.
Plaintiffs then provide a number of examples of the alleged
misrepresentations and non-disclosures. Filing 115 at ¶ 24(a)–(j). For
instance, plaintiffs allege that Kantner and Rutter engaged in fraud by
"failing to provide the Plaintiffs with required financial disclosures" and by
"failing to disclose and misrepresenting the nature of transactions where
[they] satisfied [their own] personal obligations . . . or obligations incurred by
various Kantner companies with funds drawn from Blue Valley Foods." Filing
115 at ¶ 24(a)–(g).
With the possible exception of the "why" and "who" underlying their
allegations, plaintiffs have not pleaded their fraud claims with the
particularity that Rule 9(b) demands. The reason for the alleged
misrepresentations and non-disclosures is obvious: if Kantner and Rutter
were, in fact, engaged in a scheme to "loot" Blue Valley through various selfdealing transactions, then they would do their best to keep plaintiffs from
learning the details. Whether plaintiffs have pleaded the "who" is less clear.
They simply allege, in cursory fashion, that Kantner and Rutter both
engaged in each of the listed examples of fraud.
But even if those matters had been pleaded in more detail, the
remaining circumstances of the alleged fraud were not. Most notably,
plaintiffs have not pleaded the timing of any of the alleged acts of fraud. And
plaintiffs have only alleged the circumstances and contents of any alleged
misrepresentations or concealments in the broadest terms. For example,
plaintiffs allege that Kantner and Rutter "fail[ed] to disclose and
misrepresent[ed] the nature of transactions where [they] charged [Blue
Valley] exorbitant amounts for administrative expenses without consulting or
obtaining the consent of the Plaintiffs." Filing 115 at ¶ 24(e). More detail is
needed. The higher degree of notice required by Rule 9(b) is intended to
enable the defendant to respond specifically and quickly to potentially
damaging allegations. Drobnak, 561 F.3d at 783. If there was a
misrepresentation, plaintiffs must more specifically allege its contents—or at
least provide some specifics as to how the statement was false or misleading,
or what information was omitted or concealed.

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Plaintiffs have attempted to allege a systematic, ongoing pattern of
fraudulent conduct that extended over a significant period of time. As such,
they are not required to allege the specific details of every fraudulent act
forming the basis of their complaint. See U.S. ex rel. Joshi v. St. Luke's Hosp.,
Inc., 441 F.3d 552, 557 (8th Cir. 2006). But they must at least allege "some
representative examples" of the alleged fraudulent conduct, specifying the
time, place, and content of the acts and the identity of the actors. Id.
Plaintiffs have not provided any, and have therefore failed to plead their
fraud claims with the particularity required by Rule 9(b). Those claims will
be dismissed. However, the plaintiffs may be able to provide the missing
details, and so the Court will give them leave to replead.
Kantner and Rutter next assert that the fraud claims suffer from
another fatal pleading defect: the lack of any allegations that Kantner and
Rutter (1) intended plaintiffs to rely upon any alleged misrepresentations or
concealed facts, and (2) that plaintiffs did, in fact, reasonably rely, and
suffered damages as a result. Intent and reliance are essential elements of
claims for fraudulent misrepresentation and fraudulent concealment. See,
Knights of Columbus Council 3152 v. KFS BD, Inc., 791 N.W.2d 317, 334
(Neb. 2010); Eicher v. Mid Am. Fin. Inv. Corp., 748 N.W.2d 1, 12 (Neb. 2008).
Plaintiffs do not explicitly allege that Kantner and Rutter engaged in
fraudulent conduct with the intent to induce plaintiffs' reliance. See filing 115
at 5–7. However, "intent" and other states of mind may be alleged generally.
Fed. R. Civ. P. 9(b). And it is apparent from plaintiffs' complaint that
Kantner and Rutter's alleged misrepresentations and omissions were made
with the intent to deceive plaintiffs into approving or simply not learning of
defendants' alleged misconduct. Liberally construed, plaintiffs have
adequately alleged intent.
The same cannot be said for the element of reliance. Plaintiffs allege
only that "any misrepresentations relied upon by the Plaintiffs as to the
nature of these transactions constitute fraudulent misrepresentation . . . ."
Filing 115 at ¶ 25. This is rather non-specific phrasing—plaintiffs have not
actually come forward and alleged that they did reasonably rely on any
misrepresentations or omissions. More importantly, unlike intent, reliance
must be pleaded with particularity. See In re NationsMart Corp. Sec. Litig.,
130 F.3d 309, 321–22 (8th Cir. 1997); see also Blood v. Givaudan Flavors
Corp., 606 F. Supp. 2d 972, 987–88 (N.D. Iowa 2009). Plaintiffs must allege
facts showing how they acted or refrained from acting in response to the
alleged fraud, as well as facts suggesting this reliance was reasonable. They
have not yet done so, and this presents another basis for dismissing their
fraud claims. However, plaintiffs will be given an opportunity to replead their
claims with greater particularity.
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Finally, Kantner and Rutter assert that to the extent plaintiffs seek to
rely upon certain alleged events occurring in 2004 and 2006, their fraud
claims are barred by the statute of limitations. See Neb. Rev. Stat. § 25-207.
This argument is without merit. The events in 2004 and 2006 that
defendants refer to are only mentioned in a separate portion of plaintiffs'
complaint, and do not appear to form part of their fraud claims. See filing 115
at 17. Second, the statute of limitations is an affirmative defense, see Fed. R.
Civ. P. 8(c), and plaintiffs are not required to plead the lack of an affirmative
defense. See Braden v. Wal-Mart Stores, Inc., 588 F.3d 585, 601 n.10 (8th Cir.
2009). Defendants' motion to dismiss under Rule 12(b)(6) is limited to
matters contained in plaintiffs' complaint. See Fed. R. Civ. P. 12(d). And as
noted above, plaintiffs' complaint does not state when any of the alleged
fraud occurred. Thus, no statute of limitations bar is apparent from the face
of the complaint. See Varner v. Peterson Farms, 371 F.3d 1011, 1016 (8th Cir.
2004).
2. Civil Conspiracy
Kantner and Rutter next move to dismiss plaintiffs' claim for civil
conspiracy. A conspiracy is not a separate and independent tort in itself, but,
rather, is dependent upon the existence of an underlying tort. Hatcher v.
Bellevue Volunteer Fire Dept., 628 N.W.2d 685, 696 (Neb. 2001). Without an
underling tort, one cannot state a claim for conspiracy. Id. Kantner and
Rutter assert that there is "no way to tell from the Plaintiffs' pleading which
underlying tort they rely upon." Filing 127 at 5. But plaintiffs have clarified
that it is their conversion and fraud claims which form the basis for their
conspiracy claim. Filing 135 at 6. And although plaintiffs' fraud claims are
out, for now, Kantner and Rutter do not dispute that plaintiffs have stated a
claim for conversion. See filing 115 at ¶¶ 29–33; see also filing 53 at 22–23.
Therefore, this portion of Kantner and Rutter's motion to dismiss is denied.
3. Derivative Action
Kantner and Rutter next argue that the complaint does not clearly
specify which claims are brought by the plaintiffs in their individual
capacities and which are being brought as part of a derivative action on
behalf of Blue Valley. As a general rule, a shareholder may not bring an
action in his or her own name to recover for wrongs done to the corporation or
its property. Trieweiler v. Sears, 689 N.W.2d 807, 828, 836–37 (Neb. 2004).
Such a cause of action belongs to the corporation and not the shareholders.
Id. A shareholder may, however, enforce a cause of action belonging to the
corporation by bringing a derivative suit on the corporation's behalf. Id.
There is a well-recognized exception to the general rule: If the shareholder
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properly establishes an individual cause of action because the harm to the
corporation also damaged the shareholder in his or her individual capacity,
rather than as a shareholder, such individual action may be maintained. Id.
The Court does not find the plaintiffs' complaint to be as confusing as
Kantner and Rutter claim. The nature of several of plaintiffs' claims is
immediately apparent. The seventh claim, for usurpation of corporate
opportunities, is necessarily a derivative action. See In re Digex Inc.
Shareholders Litigation, 789 A.2d 1176, 1189 (Del. Ch. 2000). The allegations
supporting plaintiffs' sixth claim, for money had and received, are limited to
money belonging to Blue Valley—thus, this claim is necessarily brought on
behalf of Blue Valley. See filing 115 at ¶¶ 60–61. And plaintiffs' first, second,
and fourth claims, for breach of fiduciary duty, fraud, and breach of the duty
of loyalty and fair dealing, are explicitly pleaded as both individual and
derivative claims. Each claim alleges that Kantner and Rutter owed a duty to
both Blue Valley and the minority shareholders, and that Kantner and
Rutter breached that duty.2 See filing 115 at ¶¶ 17–19, 23–24, 35–37.
Only plaintiffs' conversion claim presents any difficulty. The
allegations supporting this claim appear to be limited to property belonging
to Blue Valley, such as funds belonging to Blue Valley. See, e.g., filing 115 at
¶ 30(m). However, plaintiffs allege that both they and Blue Valley "have an
ownership interest in said property." Filing 115 at ¶ 32. If this allegation is
true, then the claim is brought in both individual and derivative capacities; if
not, the claim is purely derivative. Kantner and Rutter have not presented
any argument on this precise point, and the Court will not explore the matter
further at this time. For now, it suffices to state that Kantner and Rutter
cannot legitimately claim to be confused about the nature of plaintiffs' claims.
Kantner and Rutter next argue that plaintiffs' derivative claims must
fail because plaintiffs have not satisfied the "demand" requirement.
Normally, to maintain a derivative action, a shareholder must allege the
making of a demand upon the corporation. Kubik v. Kubik, 683 N.W.2d 330,
335 (Neb. 2004); see also Fed. R. Civ. P. 23.1.3 However, this requirement will
be excused where a demand would have been futile. Kubik, 683 N.W.2d at
Whether any or all of these claims may actually be brought as direct (individual) claims is
a separate question, not raised by Kantner and Rutter, and therefore not before the Court
at this time. Nor does the Court need to decide whether this case calls for application of the
rule that a derivative claim may, in certain cases involving closely held corporations, be
treated as a direct action for purposes of recovering damages. See Trieweiler, 689 N.W.2d at
837–38.
2

Plaintiffs' complaint is based solely on Nebraska state law, and the Court examines
Nebraska law to determine if the demand requirement of Rule 23.1 is satisfied. See Cottrell
v. Duke, 737 F.3d 1238, 1247 (8th Cir. 2013).
3

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336. The Court need not determine whether plaintiffs have properly pleaded
a demand, as they have pleaded futility. Where directors of a corporation are
accused of wrongdoing—as is the case here—the generally accepted rule is
that it would be futile to request the same directors to sue themselves. Id.
"One cannot seriously contend that [Kantner and Rutter] would have caused
an action to be brought requiring that [they] account to the corporation."
Anderson v. Clemens Mobile Homes, Inc., 333 N.W.2d 900, 904 (Neb. 1983).
Thus, the Court finds that plaintiffs have properly pleaded a derivative
action, and this aspect of Kantner and Rutter's motion to dismiss is denied.
B. KANTNER COMPANIES' MOTION TO DISMISS
The plaintiffs' sole claim against the Kantner Companies is for money
had and received. The Kantner Companies have moved to dismiss, arguing
that plaintiffs have failed to state a claim for relief. The Court finds that
plaintiffs have stated a claim, and the motion will be denied.
An action in assumpsit for money had and received may be brought
where a party has received money which in equity and good conscience
should be repaid to another. In re Margaret Mastny Revocable Trust, 794
N.W.2d 700, 711 (Neb. 2011). In such circumstances the law implies a
promise on the part of the person who received the money to reimburse the
payor in order to prevent unjust enrichment. Id. at 711–12. To state a claim,
plaintiffs must allege that (1) defendants received money, (2) defendants
retained possession of the money, and (3) defendants in justice and fairness
ought to pay the money to plaintiffs.
Plaintiffs allege that from 2004 to 2009, Kantner ran Blue Valley and
the Kantner Companies as "a joint business operation." Filing 115 at ¶ 58.
And, they claim, Blue Valley and the Kantner Companies
maintained bank accounts at Wells Fargo. The bank accounts
included an operating line of credit that was used by all of the
companies. This account system was set up in a manner such
that all deposits for each company were made to that line of
credit, regardless of which entity was receiving the funds.
Transfers were made from the line of credit to the operating
accounts for each entity's operating account to cover
disbursements made by that entity. All deposits were used to pay
off the line of credit, regardless of which entity was depositing the
funds.
Filing 115 at ¶ 59. Plaintiffs further allege that as a result of this
commingling of funds, Kantner and the Kantner Companies received and
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retained money from Blue Valley that did not rightfully belong to them.
Filing 115 at ¶¶ 60–61. In other words, plaintiffs allege that Kantner used
this joint line of credit to improperly transfer money from Blue Valley to his
other companies. Plaintiffs do not exactly state why this was improper, but a
fair reading of the remainder of their complaint suggests that it was either
because Kantner lacked the authority to do it in the first place, because it
was a self-dealing transaction, or simply because it was not done in a goodfaith effort to serve Blue Valley's interests.
The Kantner Companies first point out that any money from Blue
Valley was actually received by Wells Fargo, and therefore, they argue,
plaintiffs have failed to allege that they received or retained any money. This
argument is not persuasive. If Blue Valley's funds were used to pay down the
line of credit, then as a result, the Kantner Companies would have had access
to additional credit. And, plaintiffs allege, the Kantner Companies did take
advantage of that extra credit, and used it to pay their own expenses. That
the benefit received was access to credit as opposed to a direct exchange of
money is immaterial. A claim for money had and received is not limited to
literal exchanges of money, but extends to money "or its equivalent." In re
Lisco's Estate, 64 N.W.2d 310, 312 (Neb. 1954).
The Kantner Companies next contend that plaintiffs have failed to
allege they were at fault for receiving the transfers, and thus equity does not
demand repayment. Again, the Court is not persuaded. Plaintiffs have not
alleged a situation where the Kantner Companies were the innocent
recipients of Blue Valley's funds. Rather, they have alleged that Douglas
Kantner was directly or indirectly the owner of all the Kantner Companies,
and was responsible for directing their business operations. Filing 115 at ¶¶
12–13. Thus, the Kantner Companies would necessarily have known how the
funds were procured. If that procurement was wrongful, plaintiffs have
stated a colorable claim for money had and received.
A claim for money had and received (while an action at law) is
equitable in nature. City of Scottsbluff v. Waste Connections of Nebraska, Inc.,
809 N.W.2d 725, 743 (Neb. 2011). It is, in essence, a restitution claim for
unjust enrichment. Id. So, plaintiffs must allege facts that the law of
restitution would recognize as an unjust enrichment. This does not require
that the decisional law must have recognized a specific fact pattern as unjust
enrichment. Id. Unjust enrichment (and equity) are flexible concepts. Id.;
Trieweiler, 689 N.W.2d at 835–836. Plaintiffs have alleged that the Kantner
Companies were knowing participants in a scheme to wrongfully deprive
Blue Valley of its funds. That strikes the Court as a situation, if proved, in
which justice and fairness would demand repayment. Thus, the Kantner
Companies' motion to dismiss is denied.
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C. KRE'S MOTION TO DISMISS
KRE is a limited liability company organized in Ohio, and its sole
owner is Kantner, who is a California resident. Filing 34-1 at ¶ 2; filing 115
at ¶ 2. KRE argues that it is not subject to jurisdiction in Nebraska. As noted
above, it is plaintiffs' burden to make a prima facie showing that jurisdiction
over KRE is appropriate. Miller, 528 F.3d at 1090. On the current record,
plaintiffs have not satisfied that burden.4
A federal court may exercise jurisdiction over a foreign defendant only
to the extent permitted by the forum state's long-arm statute and by the Due
Process Clause of the Constitution. Id. Nebraska's long-arm statute confers
jurisdiction to the fullest extent permitted by the United States Constitution,
and so the inquiries are merged and the sole question becomes whether the
exercise of personal jurisdiction would comport with due process. See, Neb.
Rev. Stat. § 25-536(2); Stanton v. St. Jude Medical, Inc., 340 F.3d 690, 693
(8th Cir. 2003).
For the exercise of jurisdiction over a defendant to comport with due
process, the defendant must have minimum contacts with the forum state
such that the maintenance of the suit does not offend traditional notions of
fair play and substantial justice. Pangaea, 647 F.3d at 745. The fundamental
inquiry is whether the defendant has purposefully availed itself of the
benefits and protections of the forum state to such a degree that it should
reasonably anticipate being haled into court there. Viasystems, Inc. v. EBMPapst St. Georgen GmbH & Co., 646 F.3d 589, 594 (8th Cir. 2011). Purposeful
availment is required to ensure that a defendant will not be haled into a
jurisdiction solely as a result of random, fortuitous, or attenuated contacts, or
the unilateral activity of another party or a third person. Stanton, 340 F.3d at
693–94. Jurisdiction is proper, however, where the contacts proximately
result from actions by the defendant himself that create a substantial
connection with the forum state. Id.
The minimum contacts necessary for due process may be the basis for
either "general" or "specific" jurisdiction. Johnson v. Arden, 614 F.3d 785, 794
(8th Cir. 2010). A court obtains general jurisdiction against a defendant who
has "continuous and systematic" contacts with the forum state, even if the
injuries at issue in the lawsuit did not arise out of the defendant's activities
directed at the forum. Id. Specific jurisdiction over a defendant is exercised
when a state asserts personal jurisdiction over a nonresident defendant that

Plaintiffs have verified their complaint; thus, they have not rested on the pleadings alone.
See filing 115-1 through 115-5.
4

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has purposefully directed its activities at the forum's residents in a suit that
arises out of or relates to these activities.5 Id.
The Eighth Circuit has set forth five factors to use in evaluating a
defendant's contacts with a state: (1) the nature and quality of the contacts,
(2) the quantity of those contacts, (3) the relation of the cause of action to the
contacts, (4) the interest of the forum state in providing a forum for its
residents, and (5) the convenience of the parties. Id. The third factor
distinguishes whether the jurisdiction is general or specific. Id. The first
three factors are primary factors, and the remaining two are secondary. Id.
And a court is to look at all the factors in the aggregate and examine the
totality of the circumstances in determining personal jurisdiction. Id.
KRE's contacts with Nebraska are far too limited to subject it to
general jurisdiction in this state, and plaintiffs do not argue otherwise.
Kantner has submitted a declaration averring that KRE has never (among
other things) conducted any business in Nebraska, owned or leased any real
or personal property in the state, been registered with Nebraska's Secretary
of State, solicited business in the state, maintained an account at a Nebraska
financial institution, or had any employee, agent, or representative that
resided in Nebraska or who regularly worked on its behalf in Nebraska.
Filing 34-1. KRE has had no business transactions with a Nebraska company
with the exception of a single loan to Blue Valley that it made in 2007. Filing
34-1 at ¶ 8. Plaintiffs do not dispute any of these facts. Thus, KRE is not
subject to general personal jurisdiction.
Plaintiffs argue that specific jurisdiction over KRE is appropriate,
based upon KRE's alleged receipt of funds from the line of credit that it
shared with Blue Valley and the other Kantner Companies. If true, these
allegations show that KRE's conduct resulted in harm to a Nebraska
corporation. And because KRE was owned by Blue Valley's president, KRE
would necessarily have known that its conduct was causing harm in
Nebraska. But that kind of foreseeability is not a sufficient benchmark for
exercising personal jurisdiction. Burger King Corp. v. Rudzewicz, 471 U.S.
462, 474 (1985).
The necessary minimum contacts must be between the defendant and
the forum state itself, not merely between the defendant and persons who
The specific factors the courts consider when evaluating minimum contacts vary
depending upon whether a claim arises in tort or contract. An action in assumpsit for
money had and received is a quasi-contract claim for restitution; and restitution constitutes
an independent basis for liability in common-law legal systems—comparable in this respect
to a liability in contract or tort. City of Scottsbluff, 809 N.W.2d at 743. So, the Court has
considered caselaw from both contexts. Under any formulation of the minimum contacts
analysis, personal jurisdiction is lacking.
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reside in that state. Walden v. Fiore, 134 S. Ct. 1115, 1122 (2014). In other
words, the plaintiff cannot be the only link between the defendant and the
forum. Id. On the current record, however, that is the only sort of connection
that plaintiffs have shown between KRE and Nebraska. Plaintiffs' complaint
leaves the Court with no clear understanding of the quality or quantity of
KRE's contacts with Nebraska.6 Plaintiffs have alleged only that Blue Valley
and KRE shared a line of credit. They have not alleged any other contacts
between them, let alone acts showing that KRE purposefully availed itself of
the privilege of conducting business in Nebraska.
Jurisdiction may be asserted over defendants who have purposefully
reached out beyond their state and into another by, for example, entering a
contractual relationship that envisioned continuing and wide-reaching
contacts in the forum state. Burger King, 471 U.S. at 479–80. Plaintiffs,
citing VKGS, LLC v. Planet Bingo, LLC, 828 N.W.2d 168 (Neb. 2013), and
Kugler Co. v. Growth Products Ltd., Inc., 658 N.W.2d 40 (Neb. 2003), argue
that a similar relationship existed between KRE and Blue Valley. But Planet
Bingo and Kugler undermine, rather than support, plaintiffs' argument. In
both cases, non-Nebraska companies formed long-term commercial
relationships that involved numerous transactions, communications, and
meetings over the course of several years. See, Planet Bingo, 828 N.W.2d at
178; Kugler, 658 N.W.2d at 48. More importantly, the relationships in those
cases had substantial connections to the State of Nebraska. See Planet Bingo,
828 N.W.2d at 178. Plaintiffs in this case have not alleged facts showing such
a connection. Therefore, the Court finds that, on the current record, KRE is
not subject to the jurisdiction in Nebraska. Accordingly,
IT IS ORDERED:
1.

The motion to dismiss filed by defendants Kantner and
Rutter (filing 125) is granted in part and denied in part, as
set forth above. However, plaintiffs are given leave to
replead their fraud claims.

2.

The motion to dismiss filed by Kantner Real Estate (filing
126) is granted. As to defendant Kantner Real Estate,
plaintiffs' operative complaint is dismissed without

In their brief, plaintiffs assert for the first time that KRE took money from Blue Valley
"on nearly a daily basis over the [c]ourse of at least five years." Filing 135 at 9. However,
the Court declines to consider unsworn allegations raised only in the parties' brief. See
Henthorn v. Dep't of Navy, 29 F.3d 682, 688 (D.C. Cir. 1994).
6

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prejudice. However, plaintiffs are also given leave to
replead their claim against Kantner Real Estate.
3.

The Kantner Companies' motion to dismiss (filing 150) is
denied.

4.

Plaintiffs shall file any amended complaint on or before
July 14, 2014.

Dated this 23rd day of June, 2014.
BY THE COURT:

John M. Gerrard
United States District Judge

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