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

• Court: United States District Courts. 8th Circuit. United States District Court of Minnesota
• Writing for the Court: JOHN R. TUNHEIM, Chief Judge
• Citation: 555 F.Supp.3d 688
• 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. 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. Jay Link and Link's Wild Safaris, Defendants. 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. JPMorgan Chase Bank, N.A., d/b/a Chase Card Services, Defendant. 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. Cabela's Inc. and Capital One Bank (USA), National Association, Defendants. 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. First National Bank of Omaha, Inc., Defendant. 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. Samuel Fejes and Fejes Guide Services, Ltd., Defendants.
• Docket Number: Civil No. 19-303 (JRT/LIB), Civil No. 19-305 (JRT/LIB), Civil No. 19-1576 (JRT/LIB), Civil No. 19-1607 (JRT/LIB), Civil No. 19-1647 (JRT/LIB), Civil No. 19-2385 (JRT/LIB)
• Decision Date: 16 August 2021

555 F.Supp.3d 688

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.

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.
Jay Link and Link's Wild Safaris, Defendants.

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.
JPMorgan Chase Bank, N.A., d/b/a Chase Card Services, Defendant.

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.
Cabela's Inc. and Capital One Bank (USA), National Association, Defendants.

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.
First National Bank of Omaha, Inc., Defendant.

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.
Samuel Fejes and Fejes Guide Services, Ltd., Defendants.

Civil No. 19-303 (JRT/LIB)
Civil No. 19-305 (JRT/LIB)
Civil No. 19-1576 (JRT/LIB)
Civil No. 19-1607 (JRT/LIB)
Civil No. 19-1647 (JRT/LIB)
Civil No. 19-2385 (JRT/LIB)

United States District Court, D. Minnesota.

Signed August 16, 2021

555 F.Supp.3d 695

Erik A. Ahlgren and Sarah Catherine Duffy, Ahlgren Law Office PLLC, 220 West Washington Avenue, Suite 105, Fergus Falls, MN 56537; Matthew R. Burton, Morrison Sund PLLC, 5125 County Road 101, Suite 200, Minnetonka, MN 55345, for plaintiff.

Mark G. Schroeder, Adam Gregory Chandler, and Jason R. Asmus, TAFT Stettinius & Hollister LLP, 80 South Eighth Street, Suite 2200, Minneapolis, MN 55402, for defendants Diederik Muller, DM Safaris, Jay Link, Link's Wild Safaris, Samuel Fejes, and Fejes Guide Services, Ltd.

Johanna R. Hyman, Michael M. Krauss, and Peter Kieselbach, Greenberg Traurig LLP, 90 South Seventh Street, Suite 3500, Minneapolis, MN 55402, for defendant JPMorgan Chase Bank, N.A.

Nelson Moon Hua, K&L Gates LLP, 1717 Main Street, Suite 2800, Dallas, TX 75201; Joseph C. Wylie, K&L Gates LLP, 70 West Madison Street, Suite 3100, Chicago, IL 60602; and James D. Knudsen, Stich Angell Kriedler & Unke PA, 3601 Minnesota Drive, Suite 450, Minneapolis, MN 55435, for defendants Cabela's Inc. and Capital One Bank (USA), National Association.

Jared M. Goerlitz, Goerlitz Law PLLC, P.O. Box 25194, 7595 Currell Boulevard, Saint Paul, MN 55125, for defendant First National Bank of Omaha, Inc.

William H. Ingaldson, Ingaldson Fitzgerald PC, 813 West Third Avenue, Anchorage, AK 99501, for defendants Samuel Fejes and Fejes Guide Services, Inc.

MEMORANDUM OPINION AND ORDER

JOHN R. TUNHEIM, Chief Judge

Plaintiff Erik Ahlgren was appointed assignee for the benefit of creditors of the Ashby Farmers Co-Operative Elevator Company (the "Co-Op") after the discovery of fraud committed by the Co-Op's manager, Jerry Hennessey. Ahlgren initiated these now-consolidated actions pursuant to the Minnesota Uniform Voidable Transactions Act ("MUVTA")¹ to claw back payments made by Hennessey to Defendants—a variety of safari and hunting guide services and credit card companies—using Co-Op funds for Hennessey's personal purposes. Ahlgren alleges that Hennessey's transactions with Defendants were actually and constructively fraudulent and therefore voidable under the MUVTA. The parties have now filed motions for summary judgment.

The Court will deny, at least in part, all Motions. First, there remain genuine disputes of material facts about whether the Co-Op's creditors acted reasonably in their failure to discover the fraud, and thus the Court cannot determine whether any of Ahlgren's claims are untimely. Second, as to the merits of Ahlgren's actual fraud claim, the Court cannot weigh the evidence to determine whether Hennessey had actual intent to defraud the Co-Op's creditors at the time of each transaction. Moreover, Defendants Diekie Muller and DM Safaris, Jay Link and Link's Wild Safaris, and Samuel Fejes and Fejes Guide Services (the "Safari Defendants") may be able to show that Hennessey had apparent authority

555 F.Supp.3d 696

to enter the transactions, and therefore they may be able to prove a good faith affirmative defense to protect against liability. Third, because the parties have presented conflicting expert reports regarding the Co-Op's insolvency at the time of the transactions at issue, the Court cannot resolve the constructive fraud claim at this stage.

However, the Court can make several determinations to narrow the cases as they proceed toward trial. First, Defendants Capital One and Cabela's are each exposed to liability for only a portion of the payments by Hennessey: because Capital One assumed liability for the Cabela's credit card on September 25, 2017, it is not liable for claims related to payments prior to that date; and Cabela's is not liable for claims related to payments after September 25, 2017. The Court will accordingly grant, in part, Capital One and Cabela's Motion. Second, Defendants JPMorgan Chase, Cabela's Inc. and Capital One, and First National Bank of Omaha (the "Credit Card Defendants") will not be able to assert a good faith affirmative defense to the actual fraud claim because there is no evidence in the record showing that the Co-Op could be vicariously liable for the debts satisfied by Hennessey's payments on his personal credit card accounts. Third, two of the Defendants’ general affirmative defenses are inapplicable: in pari delicto, because there is no allegation of wrongdoing on the part of the Co-Op's creditors, merely negligence; and equitable estoppel, because there is no evidence of Defendants’ reliance on the creditors’ conduct.

BACKGROUND

I. FACTUAL BACKGROUND

A. Underlying Criminal Fraud

These consolidated cases arise out of fraud committed by Jerry Hennessey in his role as manager of the Ashby Farmers Co-Operative Elevator Company, which was formed under Minnesota Statutes § 308A and located in Ashby, Minnesota. (ECF No. 19-1607, Decl. Nelson M. Hua ("Hua Decl.") ¶ 2, Ex. A-4 ("State Court Decision") ¶ 1, Apr. 19, 2021, Docket No. 82-4.) Hennessey started working for the Co-Op in December 1988. (Hua Decl. ¶ 2, Ex. A-1 ("1^st Hennessey Dep. Excerpts") at 87:8–10, Apr. 19, 2021, Docket No. 82-1.) As manager, Hennessey oversaw the Co-Op's daily operations, controlled its bank accounts, and obtained loans to support the Co-Op. (ECF No. 19-305, Aff. Erik A. Ahlgren ("Ahlgren Aff.") ¶ 8, Ex. A ("Plea Agreement") ¶ 2, Feb. 22, 2021, Docket No. 79.) When Hennessey started, the Co-Op's financial situation was poor, (1^st Hennessey Dep. Excerpts at 73:5–8), and Hennessey wanted the Co-Op to improve financially, (ECF No. 19-303, Decl. Jared M. Goerlitz ("Goerlitz Decl.") ¶ 12, Ex. 11 ("2^nd Hennessey Dep. Excerpts") at 207:25–208:2, May 18, 2021, Docket No. 135-11.) Hennessey intended the Co-Op to remain current on its debts, (2^nd Hennessey Dep. Excerpts at 208:3–208:14), and employees testified that they were never told to not pay the Co-Op's creditors. (Hua Decl. ¶ 2, Ex. A-10 ("Goeden Dep.") at 82:13–19, Apr. 19, 2021, Docket No. 82-10.) During his time as manager, Hennessey also began trading grain futures, supposedly for the benefit of himself and Co-Op member farmers. (2^nd Hennessey Dep. Excerpts at 73:21–74:3.)

In 2018, the Co-Op's primary lender, CoBank, refused to renew the Co-Op's line of credit ("LOC") until the Co-Op provided a financial audit. (Hua Decl. ¶ 2, Ex. A-5 ("Ahlgren Dep.") at 19:7–22, Apr. 19, 2021, Docket No. 82-5.) CoBank informed the Co-Op Board of Directors ("Board") that their loan was being called due, and the Board discovered that Hennessey had left town and was not responding to calls. (ECF No. 19-2385, Decl. William H. Ingaldson ("Ingaldson Decl.") ¶ 3, Ex. B at 6:2–7:6, Apr. 5, 2021, Docket No. 76–2.)

555 F.Supp.3d 697

After an investigation, Hennessey was charged with mail fraud in violation of 18 U.S.C. § 1341 and income tax evasion under 26 U.S.C. § 7201, to which he pleaded guilty on February 14, 2019. (Plea Agreement ¶ 1.)

Hennessey admitted to knowingly and intentionally devising and executing a scheme to "defraud and to obtain money and property from [the Co-Op] and its member farmers" from 2003 through September 2018. (Id. ¶ 2.) Hennessey further admitted to "using his position and his control over the [Co-Op's] bank accounts" to write checks to himself and third parties for his personal benefit. (Id. ) All told, Hennessey embezzled over $5 million in funds from the Co-Op. (Id. ¶¶ 2, 10.)

According to his admissions in the Plea Agreement, Hennessey hid his fraud by writing descriptions on carbon copies of checks indicating that they were for the purchase of corn, soybeans, supplies, or other operating expenses, which he then provided to the Co-Op's bookkeeper, meaning the Co-Op's accounting records showed that the payments were...