Ahlgren v. Muller, Civ. No. 19-303 (JRT/LIB)

• Decision Date: 10 February 2020
• Docket Number: Civ. No. 19-303 (JRT/LIB)
• Citation: 438 F.Supp.3d 981
• Parties: Erik A. AHLGREN, in his capacity as assignee in the assignment for the benefit of creditors of Ashby Farmers Co-Operative Elevator Company, Plaintiff, v. Diederik MULLER a/k/a Diekie Muller and DM Safaris, a/k/a Diekie Muller Hunting Safaris, Defendants.
• Court: U.S. District Court — District of Minnesota

438 F.Supp.3d 981

Erik A. AHLGREN, in his capacity as assignee in the assignment for the benefit of creditors of Ashby Farmers Co-Operative Elevator Company, Plaintiff,
v.
Diederik MULLER a/k/a Diekie Muller and DM Safaris, a/k/a Diekie Muller Hunting Safaris, Defendants.

Civ. No. 19-303 (JRT/LIB)

United States District Court, D. Minnesota.

Signed February 10, 2020

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Erik A. Ahlgren, AHLGREN LAW OFFICE, PLLC, 220 West Washington Avenue, Suite 105, Fergus Falls, MN 56537, for plaintiff.

Mark G. Schroeder, Adam G. Chandler, and Jason R. Asmus, TAFT STETTINIUS & HOLLISTER LLP, 80 South Eighth Street, Suite 2200, Minneapolis, MN, 55402, for defendants.

MEMORANDUM OPINION AND ORDER

JOHN R. TUNHEIM, United States District Judge

This case arises out of Jerry Hennessey's unauthorized use of funds from his prior employer, the Ashby Farmers Co-Operative Elevator Company (the "Co-Op"). From 2003–2018, Hennessey paid over $5 million of the Co-Op's funds to himself or directly to third parties for his personal benefit. Among others, Hennessey paid Defendant DM Safaris, owned by Defendant Diederik Muller ("Muller"), with checks from the Co-Op to fund exotic hunting trips for himself and his wife.

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Upon discovery of the fraud in 2018, the Co-Op ceased operations and appointed an Assignee, Plaintiff Erik Ahlgren, to pursue claims and remedies on behalf of the Co-Op and its creditors. Ahlgren brought this action in January 2019, seeking to void unauthorized payments to Defendants.

Presently before the Court is Defendants' Motion to Dismiss for lack of personal jurisdiction under Fed. R. Civ. P. 12(b)(2) and failure to state a claim under Fed. R. Civ. P. 12(b)(6). For the reasons set forth below, the Court will deny Defendants' Motion to Dismiss under Rule 12(b)(2), grant in part and deny in part Defendants' Motion to Dismiss under Rule 12(b)(6), and will deny Ahlgren leave to amend.

BACKGROUND

I. FACTUAL BACKGROUND

The Co-Op is a grain farmers' cooperative based in Ashby, Minnesota. (First. Am. Compl. ("FAC") ¶ 1, July 11, 2019, Docket No. 47.) The Co-Op purchases grain from local farmers, who are also owners of the Co-Op, and sells it to grain markets. (Id. ¶ 14.)

In 1989, the Co-Op hired Jerry Hennessey, a resident of Minnesota, as its general manager. (Id. ¶ 14.) Between June 2003 and September 2018, Hennessey received over $5.4 million in unauthorized funds from the Co-Op by writing checks from the Co-Op to himself and directly to third parties, including Defendants. (Id . ¶¶ 15–17.) Hennessey used the checks for personal bills, home improvement projects, property purchases, and domestic and international hunting trips unrelated to the business of the Co-Op. (Id. ¶ 16.) Hennessey disguised his fraud from the Co-Op by coding the checks as feed purchases or other ordinary expenses. (Id. ) All of the checks identified the Co-Op as the payor. (Id. ¶ 18.)

Muller is a resident of South Africa and maintains an address in California. (Id. ¶ 2; Decl. of Diederik J. Muller ("1^st Muller Decl.") ¶ 2, Feb. 28, 2019, Docket No. 13.) He owns and operates DM Safaris, which provides guided hunting services and accommodations in South Africa. (1^st Muller Decl. ¶ 3.) DM Safaris is incorporated and headquartered in South Africa but maintains an office and bank account in California. (Id. ; Decl. of Erik A. Ahlgren ("Ahlgren Decl.") ¶ 16, Ex. N at 152, Aug. 26, 2019, Docket No. 55.)¹ DM Safaris is not licensed to do business in Minnesota, does not have property or agents in Minnesota, and does not maintain a bank account in Minnesota. (1^st Muller Decl. ¶ 5.) DM Safaris operates a website and Facebook page that generally advertises its services to an international and United States audience. (2^nd Decl. of Diederik J. Muller ("2^nd Muller Decl.") ¶ 2, Sept. 9, 2019, Docket No. 59.)

Muller met Hennessey for the first time in February 2012 at a Safari Club International ("SCI") hunting convention held in Nevada. (FAC ¶ 21; First Muller Decl. ¶¶ 6–7.) Hennessey wrote Muller an unauthorized check for $45,000 at the Nevada convention as down payment for a South African hunting trip later that year. (FAC ¶ 21; Affidavit of Erik. A. Ahlgren ("Ahlgren Aff.") ¶ 4, Ex. 1 ("Hennessey Aff.") ¶ 13, May 30, 2019, Docket No. 33.) Following the 2012 Nevada convention, Muller and Hennessy corresponded via telephone and email while Hennessey was in Minnesota to finalize details for the 2012 trip. (Hennessey Aff. ¶ 12.) Hennessey was responsible for making his own travel arrangements to and from South Africa. (Id. ) Hennessey and his wife then flew to South

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Africa in May 2012 for the hunt. (Id. ¶ 14.) After the trip and while still in South Africa, Hennessey paid Muller for the animals he took and completed appropriate paperwork to have the animals shipped back to him in Minnesota. (Id. ¶ 15.)

In 2013, Hennessey and Muller again met at the SCI convention in Nevada and, again, Hennessey wrote Muller and DM Safaris an unauthorized check—this time for $100,000—to pay for another South African hunting trip with DM Safaris. (Id. ¶ 18.) Following the 2013 convention, Hennessey and Muller again corresponded by email and phone while Hennessey was in Minnesota to finalize details for the trip. (Id. ¶ 19–20.) Like the first trip, Hennessey paid for the animals he took and completed paperwork for the animals to be shipped to Minnesota. (Id. ¶ 20.) A problem developed, however, when the skins of the animals taken never arrived in Minnesota. (Id. ¶ 21.)

In 2014, Hennessey met with Muller at the SCI convention in Nevada to discuss the problem with the 2013 trip. (Id. ¶ 22.) Following the SCI convention, Muller returned to Minnesota with Hennessey and the pair spent three to four days ice fishing, snowmobiling, and discussing problems with the 2013 trip. (Id. ; Ahlgren Decl. ¶ 19, Ex. Q at 202.) After Muller left Minnesota, he refunded Hennessey $8,000 for the 2013 trip. (Hennessey Aff. ¶ 23.)

In January 2015, prior to SCI Convention in Nevada, Muller called Hennessey from South Africa and requested a $100,000 loan from Hennessey to purchase black impalas for his business.² (Id. ¶ 24; 2^nd Muller Decl. ¶ 3.) Muller promised to repay the loan within one year. (Hennessey Aff. ¶ 24; 2^nd Muller Decl. ¶ 3.) Hennessey obliged and sent Muller an unauthorized check for $100,000. (Hennessey Aff. ¶ 24; 2^nd Muller Decl. ¶ 3.) Later that month, at the 2015 SCI convention in Nevada, Muller gave Hennessey a check for $20,000 as an additional refund for the problems associated with the 2013 trip. (Hennessey Aff. ¶ 24.) The $100,000 loan has yet to be repaid. (Id. ¶ 25.)

Hennessey's fraud was discovered in September 2018. (Id. ¶ 35.) By this time, Hennessey had obtained a credit line of over $7 million for the Co-Op in his ongoing efforts to conceal his fraud and cover the Co-Op's expenses. (Ahlgren Decl. ¶ 4, Ex. C at 24–25.) On February 14, 2019, Hennessey pleaded guilty to mail fraud and income tax evasion. (Id. at 23.)

As a result of Hennessey's fraud, the Co-Op was forced to close and has been unable to pay its debts. (Ahlgren Decl. ¶ 3, Ex. B at 13.) In December 2018, the Co-Op executed an assignment (the "Assignment") with Erik Ahlgren for the benefit of the Co-Op's creditors. (Id. ) Pursuant to Minn. Stat. §§ 576-77, Ahlgren has committed to liquidating and administering the Co-Op's assets and may pursue any claim or remedy that could be asserted by the Co-Op or by a creditor of the Co-Op. (FAC. ¶¶ 5–7.) According to reports filed with the Assignment, the Co-Op has forty-three creditors, most of which are based in Minnesota. (Ahlgren Decl. ¶ 3, Ex. B at 20–21.)

II. PROCEDURAL BACKGROUND

Ahlgren originally brought this action in Grant County District Court on January 8, 2019, alleging three Counts: (I) actual fraud pursuant to the Minnesota Uniform Voidable Transactions Act ("MUVTA"), Minn. Stat. §§ 513.44(a)(1), 513.47 ; (II)

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constructive fraud pursuant to MUVTA, Minn. Stat. §§ 513.45(a), 513.47 ; and (III) unjust enrichment. (Notice of Removal ¶ 1, Ex. A at 7-8, 14-17, Feb. 8, 2019, Docket No. 1.) Defendants removed the case to this Court on February 8, 2019. (Id. at 1.)

On February 28, 2019, Defendants moved to dismiss the complaint for lack of personal jurisdiction pursuant to Rule 12(b)(2) and for failure to state a claim pursuant to Rule 12(b)(6). (Mot. to Dismiss, Feb. 28, 2019, Docket No. 10.) The Court allowed written discovery limited to personal jurisdiction before ruling on the motion to dismiss. (Order on Stipulation, Mar. 22, 2019, Docket No. 19.) On May 30, 2019, Ahlgren moved to amend the pleadings. (Mot. to Alter Pleadings, May 30, 2019, Docket No. 30.) The Court granted Ahlgren's motion and denied Defendants' motion to dismiss without prejudice. (Order, June 21, 2019, Docket No. 44.)

On July 11, 2019, Ahlgren filed an amended complaint, which alleges four Counts: (I) actual fraud pursuant to the MUVTA, Minn. Stat. §§ 513.44(a)(1), 513.47; (II) constructive fraud pursuant to the MUVTA, Minn. Stat. §§...