Bootheel Ethanol Invs. v. Semo Ethanol Coop., Case No. 1:08-CV-59 SNLJ
| Decision Date | 30 September 2011 |
| Docket Number | Case No. 1:08-CV-59 SNLJ |
| Parties | BOOTHEEL ETHANOL INVESTMENTS, L.L.C., Plaintiff, v. SEMO ETHANOL COOPERATIVE, ET AL., Defendants. |
| Court | U.S. District Court — Eastern District of Missouri |
Plaintiff has filed this contract and tort action against defendants in connection with certain financial transactions concerning their limited liability company, Bootheel Ethanol, L.L.C. This matter is before the Court on the defendants' Motion for Summary Judgment (#74), filed May 9, 2011. Responsive pleadings have been filed, and the matter is now ripe for disposition.
The following facts are uncontested except where indicated. The plaintiff and defendant were the two sole members of Bootheel Ethanol, L.L.C., a limited liability company created under the laws of Missouri. During the relevant time period, plaintiff Bootheel Ethanol Investments ("BEI") was the minority (49%) member of Bootheel Ethanol, L.L.C. ("Bootheel") and defendant SEMO Ethanol Cooperative ("SEMO") was the majority (51 %) member.1 Theparties formed Bootheel to build and operate an ethanol-manufacturing facility in Malden, Missouri. They entered into an Operating Agreement which provides that the Agreement and Bootheel LLC "shall be governed by the laws of the State of Missouri."
Under the Operating Agreement, the parties agreed to make initial capital contributions as follows: BEI - $3,866,000.00 and SEMO - $4,023,900.00. Both parties made their respective capital contributions into escrow accounts. Because SEMO was organized as a New Generation Cooperative under § 348.432 RSMo (which allowed it to take advantage of certain tax incentives), SEMO was subject to certain limitations on its investment in Bootheel. As a result, SEMO established an escrow account where its members' investments were deposited, and the funds in that escrow account were subject to an Escrow Agreement with the bank. Certain events had to take place before the money could be released from escrow. Ultimately, the idea behind the escrow account was to hold the invested money until the ethanol plant was sure to become a reality — as evidenced by proof of, for example, debt financing and construction contracts — and, when those and other certain conditions were met, the money in the escrow account could be released to SEMO's "operating account."2 Interest on the escrow account, however, could be deposited in SEMO's operating account in the meantime.
According to the Escrow Agreement, (1) there were no third party beneficiaries to the Escrow Agreement; (2) no creditor of SEMO had any right to proceeds in the account; and (3)although the interest accrued on the account was to be released to SEMO, in the event that SEMO's "Board of Directors determines in its sole discretion that the proceeds should be returned to the subscribers ..., the Bank shall promptly return the proceeds without interest to the subscribers."
The above arrangements — the Agreements and escrow deposits — were made in 2001. At some point, Bootheel required additional funding. Pursuant to the Operating Agreement, members are authorized to loan money to Bootheel; thus, between September 2005 and December 2006, BEI alleges that it made loans to Bootheel totaling $1,276,000.00. (It is not clear to the Court just how much money SEMO actually contributed to Bootheel operations, although it appears SEMO contributed interest earned from its escrow account.) Also, pursuant to § 6.2.3 of the Operating Agreement, "Unless otherwise agreed by the Operating Manager and the lending party, all such loans (I) shall be payable only from the assets of the Company without any recourse against or any right of contribution from any Member." Operating Manager Bill Adcock testified that he, acting on behalf of Bootheel and under the "otherwise agreed" clause of § 6.2.3, agreed with BEI (through BEI's manager, David O'Neill) that the loans would be repaid from SEMO's capital contributions if other funds were not available. O'Neill or his enterprises were apparently the source of the loans. SEMO disputes that the loan arrangement ever existed.3
On September 6, 2006, SEMO voted to dissolve, and the bank began distributing the escrowed funds on September 7. The parties dispute how the funds were distributed — defendants state that the funds were distributed directly to SEMO members (and not to SEMO), but plaintiff states that SEMO had control of the money and attaches a copy of a check for $3,083,897 to the bank for the purchase of money orders for distribution of the funds to SEM) members.4 Plaintiff alleges that SEMO has not repaid its portion of BEI's loans to Bootheel.
In its amended complaint, plaintiff alleges claims of breach of contract against defendant SEMO (Count I) and fraudulent conveyance by the individual defendants (Count II).
Courts have repeatedly recognized that summary judgment is a harsh remedy that should be granted only when the moving party has established his right to judgment with such clarity as not to give rise to controversy. New England Mut. Life Ins. Co. v. Null, 554 F.2d 896, 901 (8th Cir. 1977). Pursuant to Federal Rule Civil Procedure 56(c), a district court may grant a motion for summary judgment if all of the information before the court demonstrates that "there is no genuine issue as to material fact and the moving party is entitled to judgment as a matter of law."Poller v. Columbia Broadcasting System, Inc., 368 U.S. 464, 467 (1962). The burden is on the moving party. City of Mt. Pleasant, Iowa v. Assoc. Elec. Co-op., Inc., 838 F.2d 268, 273 (8th Cir. 1988). After the moving party discharges this burden, the nonmoving party must do more than show that there is some doubt as to the facts. Matsushita Elec. Industrial Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986). Instead, the nonmoving party bears the burden of setting forth specific facts showing that there is sufficient evidence in its favor to allow a jury to return a verdict for it. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249 (1986); Celotex Corp. v. Catrett, 477 U.S. 317, 324 (1986).
In ruling on a motion for summary judgment, the court must review the facts in a light most favorable to the party opposing the motion and give that party the benefit of any inferences that logically can be drawn from those facts. Buller v. Buechler, 706 F.2d 844, 846 8th Cir. 1983). The court is required to resolve all conflicts of evidence in favor of the nonmoving party. Robert Johnson Grain Co. v. Chem. Interchange Co., 541 F.2d 207,210 (8th Cir. 19176). With these principles in mind, the Court turns to the discussion.
Defendants seek summary judgment on both remaining claims in this case — first, on plaintiffs breach of contract claim, and second, on plaintiff's fraud claim. In addition, defendants argue that plaintiff's case should be dismissed with prejudice as a sanction stemming from plaintiffs alleged spoliation of evidence in this matter. Defendants have file a separate motion seeking that sanction, and others, as a result of that alleged spoliation in their Motion to Compel (#80), which will be addressed by separate order. The Court notes that, as a preliminary matter, in this diversity lawsuit, the Court applies the substantive law of the state in which thedistrict court sits. Urban Hotel Dev. Co. v. President Dev. Co., L.C, 535 F.3d. 874, 877 (8th Cir. 2008); Roemmich v. Eagle Eye Dev. L.L.C., 526 F.3d. 343, 348 (8th Cir. 2008). In the present case, Missouri substantive law applies.
No one disputes that BEI provided an infusion of cash to Bootheel totaling somewhere around $1,276,000. The question, rather, is whether BEI is entitled to be repaid to some extent by SEMO (or its successors). Defendants naturally insist that they are not obligated to repay BEI's "loans" to Bootheel, and that they are thus entitled to summary judgment, because (1) Bootheel (through Adcock) and BEI (through O'Neill) did not agree on the terms of the alleged oral agreement such that there was no meeting of the minds and thus no oral agreement, (2) Bootheel's and BEI's records and actions suggest that the loans were actually capital contributions, not loans that required repayment, (3) the Operating Agreement prohibited the oral agreement because the alleged oral agreement would have required SEMO to violate its Escrow Agreement, (4) Bootheel never treated SEMO's capital contribution as a capital contribution and thus it was never subject to use to repay the alleged loans, and/or (5) Adcock (as Bootheel's Operating Manager) had no power to agree that the SEMO members would repay the loans to Bootheel. Each of defendants' arguments is discussed in turn below.
Defendants first claim that the precise terms of the oral contract were not certain, so there could be no "meeting of the minds," and thus no oral contract existed at all.
"To show 'a meeting of the minds,' the plaintiff must show that the terms of the contract were certain or capable of being made certain." Tom's Agspray, LLC v. Cole, 308 S.W.3d 255,259 (Mo. Ct. App. 2010). "To determine whether a meeting of the minds has occurred and an agreement has been reached, the court looks to the intention of the parties as expressed or manifested in their words or acts." Karsch v. Carr, 807 S.W.2d 96, 99 (Mo. Ct. App. 1990).
Defendants rely on Dennis Chapman Toyota, Inc. v. BeIle State Bank, in which the Missouri Court of Appeals noted that "an essential characteristic of an enforceable contract is that its obligations be specifically described in order to enable a court or trier of fact to ascertain what it was the promisor undertook to do." 759 S.W.2d 330, 335 (Mo. Ct. App. 1988) (internal quotations omitted). There, a car dealership claimed that a bank had breached an oral contract to loan...
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