Helena Agri-Enterprises, LLC v. Great Lakes Grain, LLC

• Decision Date: 10 February 2021
• Docket Number: No. 20-1671,20-1671
• Citation: 988 F.3d 260
• Parties: HELENA AGRI-ENTERPRISES, LLC, Plaintiff-Appellant, v. GREAT LAKES GRAIN, LLC, et al., Defendants, New Heights Farm I, LLC; New Heights Farm II, LLC; Stacy Boersen, Nicholas Boersen, Defendants-Appellees.
• Court: U.S. Court of Appeals — Sixth Circuit

988 F.3d 260

HELENA AGRI-ENTERPRISES, LLC, Plaintiff-Appellant,

v.GREAT LAKES GRAIN, LLC, et al., Defendants,New Heights Farm I, LLC; New Heights Farm II, LLC; Stacy Boersen, Nicholas Boersen, Defendants-Appellees.

No. 20-1671

United States Court of Appeals, Sixth Circuit.

Argued: January 29, 2021

Decided and Filed: February 10, 2021

ARGUED: Zach Zurek, JACKSON WALKER L.L.P., San Antonio, Texas, for Appellant. Ronald J. VanderVeen, CUNNINGHAM DALMAN, PC, Holland, Michigan, for Appellees. ON BRIEF: Zach Zurek, Robert L. Soza, Jr., JACKSON WALKER L.L.P., San Antonio, Texas, Mark J. Magyar, DYKEMA GOSSETT PLLC, Grand Rapids, Michigan, for Appellant. Ronald J. VanderVeen, CUNNINGHAM DALMAN, PC, Holland, Michigan, for Appellees.

Before: SUTTON, BUSH, and MURPHY, Circuit Judges.

SUTTON, Circuit Judge.

Through several corporations, members of the Boersen family have planted corn and soybeans in Western Michigan for several generations. When 2016 delivered a poor crop year, the corporate entities that made up the Boersen operation could not cover their debts. One creditor, Helena Agri-Enterprises, obtained a nearly fifteen-million-dollar judgment against the Boersen entities and the family members who ran them. When they could not pay that debt, Helena sued other Boersen family members and their newly formed companies, claiming that these new corporate forms should not be respected and were fraudulently designed to sidestep the debt. Because Helena has failed to offer a legitimate explanation for slighting the corporate form, we affirm the district court's grant of summary judgment to the defendants.

I.

Arlan and Sandra Boersen are third-generation farmers and took over the family business in 1987. They are the parents of Dennis and Ross Boersen. The brothers, together with their parents, have run the Boersen farming enterprise together for some time. Dennis Boersen and his wife, Stacy Boersen, have one son, Nicholas Boersen. Although the mother and son have helped out with the operation in the past, neither one of them had an ownership stake or held a management position in the entities that controlled the operation.

Family owned though it may have been, the Boersen operation was not a modest Amish farm. At its height, the Boersens farmed about 100,000 acres in Zeeland, a rural community in Western Michigan. The Boersen operation owned about 20,000 of those acres. Leased farmland covered the rest. The operation rotated corn and soybean on the owned and leased land.

The Boersens took a path followed by many farmers. They grew. But expansions of farms sometimes create problems of their own. Twin realities of modern farming are that "those who could not get big have got out," and those "who got big to stay in are now being driven out by those who got bigger." Wendell Berry, The Unsettling of America: Culture and Agriculture 41 (1977). To manage the operation, the Boersens created several corporations, including Boersen Farms, Inc., Boersen Farms Properties, LLC, and Boersen Farms AG, LLC, among others. Some were owned and operated by the parents and brothers together. Others were owned by Dennis alone.

Large-scale farming, and for that matter, small-scale farming, comes with economic complications and fated uncertainties. The complications arise from the yearly imperative of up-front costs and back-end revenue. Farming has become "a way of dependence, not on land and creatures and neighbors but on machines and fuel and chemicals of all sorts, bought things, and on the sellers of bought things—which made it finally a dependence on credit." Wendell Berry, Jayber Crow 183 (2001). Every spring, as before as after, the farmer buys seeds, repairs farm equipment, leases or purchases equipment, sometimes leases land, often buys fertilizers and pesticides. Each cost amounts to a tribute to hope, an anticipation that crops will emerge and that a reasonable market for the goods will exist. The cost-revenue gap usually requires loans or purchases on credit, especially for large-scale, sometimes highly leveraged, operations like the Boersen farms. Even the community gardener knows the uncertainties that come with farming each year: too little rain or too much, too little sun or too much, late frosts, ravenous insects, trespassing rodents. These unpredictable pestilences require crop insurance, which helps to manage the cycle of broken promises that comes with farming. In modern times and with large-scale farms, a large regulatory regime has arisen to handle the pricing and terms of this insurance, often pegged to the Actual Production History of that farmland.

Things did not go well for the Boersen farming operation in 2016. The combination of a poor crop and tumbling crop prices led the Boersen operation to fall behind on its financial obligations. Lenders and suppliers soon came after the Boersen entities and family members for unpaid debts.

One unpaid creditor was Helena Agri-Enterprises, LLC, an agricultural distributor that sells seed, fertilizer, and chemicals. It sold quite a bit of these products on credit to some Boersen family members and several of the Boersen companies. The Boersen entities were not able to pay Helena what they owed it.

In 2018, Helena sued Dennis, his parents, and various Boersen entities in federal court. For some of Helena's claims, the defendants consented to a partial judgment on the pleadings for nearly $15,000,000. Stacy (Dennis's wife) and Nick (Dennis's son) were not parties to the case, and they were not owners or officers in the relevant corporations. While Helena's lawsuit was pending, Stacy created several "Great Lakes Grain" entities—Great Lakes Grain I, II, III, and IV—in an effort to obtain credit for the upcoming season. That did not work.

Without credit, the Boersen operation closed down because it could no longer "obtain financing," and "without financing" it "could not conduct farming operations." R.140-13 at 4. Instead of seeking bankruptcy relief, the companies made arrangements with creditors. Various creditors repossessed most of the Boersen farmland. The rest of their land was subject to mortgage and judgment debts that "exceed[ed] the value of the real property." Id. at 5. Similar arrangements were made with respect to the Boersens’ farming equipment. Secured creditors repossessed most, but not all, of the operation's equipment assets. All told, the Boersen operation avoided bankruptcy but did not have the means to continue farming for a few years.

As the 2019 season approached, Nick Boersen approached his mom Stacy Boersen about a "business opportunity." R.148-1 at 14. He proposed that they farm some of the same land that the Boersen entities had once plowed. Stacy agreed to "partner with [Nick] and move forward [together]." R.148-3 at 4.

Stacy formed New Heights Farm I, LLC, and Nick formed New Heights Farm II, LLC. Each of them is the sole record owner of their respective company. And each company is "separate and independent of the Boersen legacy [entities]." R.140-16 at 3.

Stacy and Nick relied on the farmland's production history to secure funding. They used the credit to lease land and equipment. Some of their leases were from Boersen-judgment defendants (Dennis, Ross, their parents, and several corporations); some were not.

When Helena learned of the New Heights companies, it added them as well as Stacy and Nick to the 2018 lawsuit as defendants. Although none of the new defendants owed Helena money, Helena alleged that Stacy and Nick created "sham" companies to evade the $15,000,000 judgment against the Boersen operation. R.75 at 1. Helena filed state law claims against these new defendants premised on Michigan's Uniform Voidable Transactions Act, successor liability, and veil piercing. The district court granted summary judgment in favor of the new defendants on each claim.

II.

The Uniform Voidable Transactions Act . The Act permits a creditor to void a fraudulent asset transfer from a debtor. Mich. Comp. Laws § 566.37(1)(a). The Act defines a debtor as "a person that is liable on a claim." Id. § 566.31(f). It defines a covered asset as "property of a debtor." Id. § 566.31(b). And it defines a covered transfer to mean "every mode, direct or indirect, absolute or conditional, voluntary or involuntary, of disposing of or parting with an asset or an interest in an asset." Id. § 566.31(q). Taken together, the provisions of the Act mean that a creditor may void the fraudulent disposal of property belonging to a person who is liable on a claim. See Swirple v. MGM Grand Detroit, LLC , No. 345284, 2020 WL 561904, at *2–3 (Mich. Ct. App. Feb. 4, 2020) (per curiam). A transfer of assets can be fraudulent when evidence shows the transferor intended to commit fraud or the economic realities of the transaction confirm that fraud was afoot. Id. ; see also Mich. Comp. Laws §§ 566.34(1)(a), 566.35(1).

From where Helena sits, three fraudulent asset transfers occurred under the Act. Each deserves a turn.

1. Equipment and Land Leases . Helena claims that several equipment and land leases by Stacy and Nick (and their companies) should be voided. Stacy and Nick leased equipment from Boersen Farms & Affiliates, LLC, an entity not subject to the Boersen judgment. And they leased land from Ceres, a third party not subject to the Boersen judgment.

This theory does not work because the statute applies only to "transfer[s] made or obligation[s] incurred by a debtor." Mich. Comp. Laws §§ 566.34, 566.35. Nothing in the statute suggests that arrangements between non-debtors come within its sweep. The statute instead presumes that "the transferor must actually be liable for the claim." Mather Invs., LLC v. Larson , 271 Mich.App. 254, 720 N.W.2d 575, 578 (2006). Helena acknowledges that it does not seek to void any transfer involving a Boersen-judgment debtor. Appellant's Br. 25–27. That concession, when combined with the language of the statute, puts Helena's claim in a difficult place.

Even so, Helena points out,...