Sara Lee Corporation v. Sycamore Family Bakery et al

Filing 570

MEMORANDUM DECISION AND ORDER denying Sycamore Family LLC's 529 Motion for Order Determining Past Distributions and Requiring Proportionate Distributions; and affirming and adopting as the order of the court the 556 Receiver's Revised Report and Recommendation on Accounting for Distributions to Members of Sycamore Family LLC. Signed by Judge Dale A. Kimball on 1/9/2024. (eat)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF UTAH
EARTHGRAINS BAKING COMPANIES
INC.,

MEMORANDUM DECISION
AND ORDER

Plaintiffs,
Case No. 2:09-CV-523-DAK-DBP
vs.
Judge Dale A. Kimball
SYCAMORE FAMILY BAKERY INC.
and LELAND SYCAMORE,

Magistrate Judge Dustin B. Pead

Defendants.
This matter is before the court on the Sycamore Family, LLC’s Motion for Order
Determining Past Distributions and Requiring Proportionate Distributions [ECF No. 529] and
Receiver R. Wayne Klein’s Revised Report and Recommendation on Accounting for Distributions
to Members of Sycamore Family LLC [ECF No. 556]. The court does not find that oral argument
would assist in the determination of these matters. After carefully considering the parties’ written
submissions and the relevant law and facts, the court issues the following Memorandum Decision
and Order.
Sycamore Family LLC’s Motion
The Sycamore Family LLC moves the court for an order determining the amount of past
distributions and requiring proportionate distributions to all members of the Sycamore Family
LLC going forward. The Sycamore Family LLC claims that distributions against Leland Sycamore
can only be calculated between the time of the Charging Order and the time of the Receivership
Order.
Due to years of obstruction by Defendant Leland Sycamore and the Sycamore Family LLC
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with respect to payment of the Judgment Plaintiff received in this case, the court appointed a
Receiver to ensure compliance with the court’s March 6, 2014 Charging Order. The Receiver
was tasked with preparing an accounting listing the amount and value of all distributions to or for
the benefit of any members of the Sycamore Family LLC from the date of the Charging Order.
The Receiver’s Report listed the Sheffield Home as an asset valued at $2,917,400.00 and
explained that Leland Sycamore pledged the Sheffield Home as security for a loan that he had
taken from Wells Fargo. The Report further outlined that Leland Sycamore had stopped paying on
the loan, Wells Fargo had initiated foreclosure proceedings on the Sheffield Home, and the amount
still owed on Leland Sycamore’s loan was approximately $2,112,500.00. The Receiver
recommended that because the Sycamore Family LLC was to lose an asset with the assessed value
of $2,917,400.00 due to Leland’s default on the Wells Fargo loan, the amount of the asset’s value
should be imputed to Leland as a distribution. This, in combination with other amounts, brought
Leland’s total imputed distribution amount to $3,859,898.96. To satisfy that amount, the
Receiver recommended that all assets of the LLC be made available to satisfy Plaintiff’s
Judgment. On November 14, 2019, the court entered a Memorandum Decision & Order adopting
the Receiver’s recommendations. The Sycamore Family LLC appealed the court’s order. The
Tenth Circuit ruled that the Receiver improperly assigned a distribution value to the Sheffield
Home based on assessed values when it should have used the amount of the home’s value at the
time of foreclosure. After remand, the court allowed the Receiver to abandon the Sheffield Home
by transferring title to Wells Fargo as lien holder and stated that the Receiver could determine the
value that abandonment generated for Leland Sycamore based on the foreclosure value of the
Sheffield Home.
The Sycamore Family LLC’s motion misconstrues the Tenth Circuit’s order, which

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reversed the court’s prior distribution order only to the extent that it included the 2018 assessed
value of the Sheffield Property. The Tenth Circuit observed that it was the premature inclusion of
the Sheffield Home’s value from the 2018 assessment, rather than as derived from a foreclosure
that was in error. The court stated that the imputed distribution amount could not be known until
foreclosure. The Tenth Circuit was concerned about the amount attributed to the home’s value, not
the propriety or authority of such a distribution in the first place. The Tenth Circuit expressly
upheld the propriety and authority of the court in determining and ordering imputed distributions
under the Charging Order. The Sycamore Family LLC has exhausted its arguments in regard to
these issues, which are no longer subject to appeal.
The Sycamore Family LLC also appears to suggest that because the future abandonment of
the Sheffield Home is not a past distribution falling between the entry of the Charging Order and
the entry of the Receivership Order, it is technically too late for the value of the Sheffield Home to
be imputed to Leland Sycamore under the Receivership Order. But this argument ignores the
timing of Leland’s impairment of the Sheffield Home. The Charging Order was in place when
Leland Sycamore stopped making payments on his loan obligation to Wells Fargo. The default of
the loan at the time the Charging Order was in place impaired a significant asset of the
Receivership Estate because Leland Sycamore had obtained the loan using the Sheffield Home as
security. If the court were to grant the Sycamore Family LLC’s motion, Leland Sycamore would
avoid a quantifiable distribution that should be imputed as a distribution to him and preclude a fair
recovery for Plaintiff under the Charging Order. In the court’s February 14, 2023 Order, the court
allowed the Receiver to abandon the Sheffield Home to Wells Fargo and stated that the Receiver
could determine the value that abandonment generated for Leland based on the home’s future sale.
For these reasons, the court finds the Sycamore Family LLC’s motion to be without merit.

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It would undermine the purpose of the Charging Order and reward Leland Sycamore for impairing
and dissipating assets in defiance of the Charging Order. Accordingly, the court denies the
Sycamore Family LLC’s Motion for Order Determining Past Distributions and Requiring
Proportionate Distributions [ECF No. 529].
Receiver’s Revised Report and Recommendation
To cure the defect in the original Report and Recommendation identified by the Tenth
Circuit regarding the value of the Sheffield Home, the Receiver has submitted his Revised Report
and Recommendation on Accounting for Distributions to Members of Sycamore Family LLC.
The Revised Report provides a corrected accounting of distributions made to Leland Sycamore.
The Revised Report then summarizes the amounts already paid to EarthGrains and recommends
selling real property assets to pay Plaintiff the amounts necessary to recompense EarthGrains for
payments not made to it as required by the Court’s 2014 Charging Order.
The Receiver’s original Report and Recommendation calculated the amount of prior
distributions that should be imputed to Leland Sycamore as $3,859,898.96, which was based on an
assessed value of the Sheffield Home. The Revised Report and Recommendation is based on the
actual abandonment and foreclosure sale of the Sheffield Home. The Sheffield Home was sold at
a foreclosure auction on May 2, 2023, to Wells Fargo Bank for $2,111,487. This amount
represents Well’s Fargo’s valuation of the property, and Wells Fargo subsequently reduced the
amount that Leland Sycamore personally owes on his personal Wells Fargo loan by that amount.
Therefore, $2,111,487 is the benefit Leland received from the LLC’s asset and is the amount that
should be deemed as a distribution to Leland. This amount makes the imputed prior distribution to
Leland the exact value of the disposed asset at the time of its removal from the LLC.
The $942,498.96 in imputed prior distributions to Leland Sycamore from the original

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Report and Recommendation plus the corrected $2,111,487.00 value of the Sheffield Home,
makes $3,053,985.96, the total distributions to Leland Sycamore. Deducting the $1,375,000 that
the Receiver has already paid to EarthGrains, leaves $1,678,985.96 that the LLC still owes
EarthGrains for prior distributions required by the Charging Order. The Receiver recommends and
the court agrees and directs that the Receiver sell sufficient LLC assets to fund payment to
EarthGrains of this amount due under the Charging Order for prior distributions. The Receiver
may consult with the LLC, or counsel for the LLC if counsel enters an appearance in this case, on
which LLC properties to sell to make that payment. If counsel does not appear for the LLC, the
Receiver may rely on a statement signed by all members of the LLC identifying the properties to
sell. If all members of the LLC do not timely provide a signed statement of unanimous agreement
on which properties to sell, the Receiver shall use his own good faith judgment on which
properties to sell.
When this $1,678,985.96 is paid, it will satisfy the Charging Order’s requirement that prior
imputed distributions for the benefit of Leland Sycamore be paid to EarthGrains. However, that
will not satisfy the LLC’s entire obligation to EarthGrains. The 2012 Judgment against Leland
Sycamore was for $5,740,194.40 plus pre- and post-judgment interest. After this prior distribution
is paid, Leland Sycamore will still owe $2,686,208.44 on the Judgment, along with pre- and
post-judgment interest. Therefore, the Charging Order will still require the LLC to pay
EarthGrains Leland Sycamore’s future distributions from the LLC, which provides for him to
receive a 48% share of LLC distributions, until the Judgment is fully satisfied.
When sufficient assets within the Receivership Estate are sold to pay EarthGrains the
$1,678,985.96 in prior imputed distributions, the LLC can begin making distributions to all LLC
members according to the terms of the LLC, and Leland Sycamore’s 48% share of future

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distributions will be forwarded to EarthGrains until the Judgment is fully satisfied. The court
finds no basis for revisiting its prior ruling that the receivership will not be terminated until the full
Judgment Leland Sycamore owes to EarthGrains has been satisfied. At that time, the Receiver
shall propose to the court a method for terminating the receivership estate and returning control
over the assets to the managers of the Sycamore Family LLC. These findings, however, do not
preclude the parties and Receiver from engaging in settlement negotiations with respect to the
future of the receivership and satisfaction of the Judgment.
Accordingly, the court affirms and adopts as the order of the court the Receiver’s Revised
Report and Recommendation on Accounting for Distributions to Members of Sycamore Family
LLC [ECF No. 556].
DATED this 9th day of January, 2024.
BY THE COURT:

___________________________________
DALE A. KIMBALL,
UNITED STATES DISTRICT JUDGE

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