Cup O' Dirt LLC v. Badlands Airtime, LLC, 4:19-CV-04031-KES

CourtUnited States District Courts. 8th Circuit. United States District Courts. 8th Circuit. District of South Dakota
Docket Number4:19-CV-04031-KES
Decision Date22 February 2021

CUP O' DIRT LLC, Plaintiff,
a North Dakota non-profit corporation;



February 22, 2021


Defendants, Badlands Airtime, LLC, Business Sixteen, LLC, and Charles C. Brennan (the Brennan defendants), move for judgment on the pleadings and to strike plaintiff's jury demand. Dockets 61, 62, 63, 64. Plaintiff, Cup O' Dirt LLC (COD), opposes these motions. Docket 69. COD moves to amend the Amended Complaint (Docket 53), and the Brennan defendants oppose the amendments based upon delay, prejudice, and futility. Dockets 100, 104. COD and the Brennan defendants move for entry of a protective order and to compel discovery. Dockets 74, 76, 83, 86. For the following reasons, the court grants in part and denies in part the motion to amend the complaint, denies the motions for judgment on the pleadings and motion to strike jury demand,

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grants in part COD's motion for protective order, and grants in part and denies in part the parties' motions to compel discovery.


This court stated the factual background of this case as alleged in the Amended Complaint in its order dated January 29, 2020. Docket 52 at 2-5. To the extent that the proposed Second Amended Complaint includes additional or different allegations, the court recites those here:

As of April 13, 2016, the Sears Family Trust and Wade Sears as trustee (collectively referred to as Sears), made loans as an unsecured creditor to Business Sixteen amounting to about $5,000,000. Docket 100-1 ¶ 31. On or about April 13, 2016, and while the state court action between COD and Airtime was pending, Brennan devised and implemented a scheme to defraud COD with Sears' agreement and participation. Id. ¶¶ 2, 6, 10, 32. This scheme was intended to grant Sears a security interest in all assets of Airtime for purported consideration of a $3,000,000 loan made by Sears to Airtime. Id. ¶ 33. The loan itself was fraudulent and illusory. Id. Also as part of this scheme, Brennan caused Business Sixteen to wire $3,000,000 on or about April 14, 2016, as a return to Sears of a portion of the $5,000,000 in loans Sears had previously made to Business Sixteen. Id. ¶ 34. Sears caused $3,000,000 to be wired to Airtime, on or about April 15, 2016, in furtherance of the scheme. Id. ¶ 35.

Concerning the alleged fraudulent Real Presence Radio (RPR) transaction, Brennan acknowledged that the amount to be paid by RPR in

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consideration of Airtime's radio station assets was substantially less than its reasonably equivalent value. Id. ¶ 48. Additional consideration for the transfer of assets to RPR included an acknowledgment by RPR that Airtime had made a charitable donation to RPR of the Federal Communications Commission license, which had a fair market value of at least $600,000. Id. ¶ 49.

In July 2020, Badlands Motor Speedway, LLC, received approximately $5,000,000 for the sale of its assets. Id. ¶ 55. That $5,000,000 accrued to Business Sixteen as the parent entity of Badlands Motor Speedway. Id. Business Sixteen then diverted the proceeds of that sale, and used other income and assets, for purposes other than paying the judgment owed to COD by Airtime. Id. ¶ 57(f)-(g). Both the insolvency of Airtime and Business Sixteen and the claims of COD were matters of public knowledge known to all defendants. Id. ¶ 58.

COD alleges that the acts of the defendants violate SDCL § 20-9-1, which states that every person is responsible for injury to the person, property, or rights of another caused by his willful acts. Id. ¶ 63. Willful acts of the defendants, except RPR, constitute a prima facie tort in violation of SDCL § 20-9-1 and common law fraud, and COD has been damaged by this conduct. Id. ¶¶ 64-65. All defendants, except RPR, have also engaged in fraudulent misconduct committed with willful, wanton, and malicious intent, which is a felony under SDCL § 54-8-22. Id. ¶ 66. And the concerted action among Brennan, Business Sixteen, and others, including DLC Empire, LLC and those yet to be determined, constitutes a civil conspiracy to defraud COD as a

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creditor of Airtime. Id. ¶ 68. Thus, each conspiring defendant is jointly and severally liable to COD in an amount sufficient to satisfy the amounts due. Id. ¶ 69.

COD also alleges a series of entity abuses on the part of Brennan and Business Sixteen. Id. ¶¶ 70-74. Brennan is the sole owner of Business Sixteen, which owns all membership interest in Airtime, and both Brennan and Business Sixteen provided funding to Airtime. Id. ¶ 72. When Airtime was formed, it was undercapitalized and remained insolvent. Id. ¶ 73. While Airtime was insolvent, Brennan acted on behalf of Airtime and Business Sixteen in a manner contrary to Airtime's interests. Id. Airtime was an instrument or alter ego of Brennan. Id. ¶ 71. Because Brennan and Business Sixteen abused the corporate and entity form, and Brennan engaged in fraud and misconduct, COD should be allowed to pierce the corporate veil and enforce its state court judgment against Business Sixteen and Brennan personally. Id. ¶ 74.


I. Motion to Amend Amended Complaint

COD moves to amend the Amended Complaint for the following purposes:

(i) to include facts about events and circumstances occurring in July 2020; (ii) to include facts contained in documents first produced on July 22, 2020; and (iii) to further particularize the facts and legal basis for its claims, as suggested in the Conclusion to its prior Memorandum dated April 28, 2020.

Docket 101 at 1. Defendants oppose the motion and argue that the amendments are untimely, prejudicial, and futile. Docket 104 at 2.

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A. Legal Standard

Federal Rule of Civil Procedure 15 permits both amendments and supplements to pleadings. Fed. R. Civ. P. 15(a), (d). Supplemental pleadings "are intended to cover matters occurring after the original complaint is filed." United States ex rel Kinney v. Stoltz, 327 F.3d 671, 673 n.4 (8th Cir. 2003) (emphasis added). "An amended pleading is designed to include matters occurring before the filing of the bill but either overlooked or not known at the time." United States v. Voracheck, 563 F.2d 884, 886 (8th Cir. 1977) (emphasis added) (quotations and citations omitted). Here, the proposed Second Amended Complaint includes some matters that occurred before and some that occurred after the complaint was filed. There is little distinction between a supplement to a pleading and an amendment to a pleading because the standard applicable to both is essentially the same. Smith v. Brown, No. 16-CV-04014-LLP, 2018 WL 1440328, at *17 (D.S.D. Mar. 22, 2018) (citing Carl Zeiss Meditec, Inc. v. Xoft, Inc., 2011 WL 1326053, at *1 (D. Del. Apr. 5, 2011)). The Brennan defendants do not object to the addition of supplemental material found in paragraphs 31 through 34 of the proposed Second Amended Complaint, although they "disagree with the factual or legal positions articulated[.]" Docket 104 at 1-2. Thus, the court evaluates the remaining amendments under Rule 15(a) and grants the motion to amend as to the supplementary material in paragraphs 31 through 34.

COD's motion to amend its complaint "implicate[s] both Rule 15(a) and Rule 16(b)." Sherman v. Winco Fireworks, Inc., 532 F.3d 709, 715 (8th Cir.

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2008). "Rule 15(a) governs the pretrial amendment of pleadings and states that where an amendment is not sought 'as a matter of course'—as defined by the Rule—'a party may amend its pleading only with the opposing party's written consent or the court's leave.' " Id. (quoting Fed. R. Civ. P. 15(a)(2)). "The Eighth Circuit Court of Appeals takes a 'liberal viewpoint towards leave to amend' and leave 'should normally be granted absent good reason for a denial.' " Libertarian Party of S.D. v. Krebs, 312 F.R.D. 523, 525 (D.S.D. 2016) (quoting Popp Telcom v. Am. Sharecom, Inc., 210 F.3d 928, 943 (8th Cir. 2000)). "A district court appropriately denies the movant leave to amend if 'there are compelling reasons such as undue delay, bad faith, or dilatory motive, repeated failure to cure deficiencies by amendments previously allowed, undue prejudice to the non-moving party, or futility of the amendment.' " Sherman, 532 F.3d at 715 (quoting Sec., Inc. v. Comprehensive Software Sys., Inc., 406 F.3d 1052, 1065 (8th Cir. 2005)).

Rule 16(b) requires that scheduling orders "be modified only for good cause and with the judge's consent." Fed. R. Civ. P. 16(b)(4) (emphasis added). The Eighth Circuit has held that "in cases in which the deadline to amend pleadings has past [sic]," then the "the primacy of Rule 16(b) over Rule 15(a)" establishes that the "good cause" standard applies. Sherman, 532 F.3d at 715-16 (citing Fin. Holding Corp. v. Garnac Grain Co., 127 F.R.D. 165, 165-66 (W.D. Mo.1989)).

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B. Good Cause

1. Diligence

The principal measurement of good cause is "the movant's diligence in attempting to meet the order's requirements." Rahn v. Hawkins, 464 F.3d 813, 822 (8th Cir. 2006) (overruled on other grounds by Avichail ex rel. T.A. v. St. John's Mercy Health Sys., 686 F.3d 548 (8th Cir. 2012)). In Sherman, the Eighth Circuit found the defendant failed to establish good cause to amend its answer to include an affirmative defense for a number of reasons: (1) the motion to amend was filed over seventeen months after the scheduling deadline for amending pleadings; (2) defendant admitted awareness of the defense eight months prior to moving for the amendment; (3) defendant did not apply the defense until the summary judgment stage; and (4) "no change in the law, no newly discovered facts, or any other circumstance made the [affirmative] defense more viable after the scheduling deadline for amending pleadings." Sherman, 532 F.3d at 717-18.

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