Malone v. Kantner
| Decision Date | 02 September 2015 |
| Docket Number | 4:12-CV-3190 |
| Parties | THERESA MALONE, individually and as a derivative action on behalf of BLUE VALLEY FOODS, INC., a Nebraska corporation, et al., Plaintiffs, v. DOUGLAS KANTNER, et al., Defendants. |
| Court | U.S. District Court — District of Nebraska |
This matter is before the Court on three motions for summary judgment filed by plaintiffs (filing 257) and defendants (filings 282 and 291), as well as plaintiffs' Motion to Strike Index (filing 295), and defendants' Objections to Plaintiffs' Index of Evidence (filing 321). For the reasons discussed below, all of these motions are denied.
1. BLUE VALLEY FOODS, INC. UNDER DOUGLAS KANTNER
Blue Valley Foods, Inc. ("Blue Valley") was a Nebraska corporation with a plant in Hebron, Nebraska, that produced imitation cheese and other cheese products. Filing 292 at 8. Defendant Douglas Kantner became a director of Blue Valley in 2002, and a majority shareholder in 2003. Filing 293-1 at 1. Kantner acted as CEO of Blue Valley, and had the "final say" on its business decisions. Filing 299-12 at 33. Defendant Kevin Rutter was also a director of Blue Valley at certain points in time, and acted as Blue Valley's controller at various times. See, filing 292 at 8; filing 301-12 at 182. In 2004 plaintiffs became minority shareholders in Blue Valley. See, e.g., filing 301-10 at 19. The plaintiffs were also employees of Blue Valley at various times. Filing 292 at 8.
Kantner also owned Kantner Group, Inc., filing 299-12 at 21, a holding company that in turn owned Kantner Ingredients, Inc.; Chianti Cheese Company of New Jersey, Inc.; and Kantner Custom Dairy Products, LLC (collectively, the "Kantner Companies"). Filing 299-12 at 21, 91. Rutter wasalso employed by Kantner Ingredients, Inc., and later by Kantner Group, Inc. Filing 301-12 at 11.
After Kantner became majority shareholder, he moved several of Blue Valley's business operations from Hebron, Nebraska, to Wapakoneta, Ohio, where the Kantner Companies had their headquarters. See filing 293-1 at ¶ 25. The Kantner Group provided various services for Blue Valley, and charged Blue Valley an administrative fee for those services. Filing 299-12 at 93-94.
Kantner also opened a line of credit for Blue Valley with Fifth Third Bank, which was secured with Blue Valley assets and was not cross-collateralized with the assets of the Kantner Companies. Filing 292 at 11. In 2008, Kantner moved this line of credit from Fifth Third Bank to Wells Fargo Bank; the parties disagree about the reasons for the move. See, filing 292 at 12; filing 300 at 8. This line of credit was cross-collateralized with the assets of other Kantner Companies. Filing 292 at 12.
During his tenure at Blue Valley, Kantner continued to participate in business activities related to the other Kantner companies. On some occasions, Blue Valley purchased from or sold to Kantner Companies. Filing 292 at 13. Blue Valley also transacted business with other companies. Filing 292 at 13.
In 2008, Kantner purchased through the Kantner Group a company called Custom Dairy Products, LLC, which he renamed Kantner Custom Dairy Products, LLC ("Custom Dairy"). See filing 293-1 at ¶ 3. This company produced shredded cheese. Filing 292 at 9. The purchase of Custom Dairy was funded in part by the assets of Custom Dairy itself, and in part by an over-advance on the Wells Fargo line of credit. Filing 299-12 at 54.
Blue Valley eventually experienced financial difficulties, for reasons that are disputed by the parties. See, filing 292 at 3; filing 300 at 4. In 2009, Blue Valley was placed into receivership, and its assets were liquidated. Filing 293-1 at ¶ 20.
2. PLAINTIFFS' ALLEGATIONS OF MISCONDUCT
The foregoing sequence of events is essentially undisputed. But other events alleged to have occurred during that time are highly contested, and often unclear from the present record.
After the plaintiffs became minority shareholders, they began to have concerns about Kantner's management of the company. In 2006, the plaintiffs retained attorney Rodney M. Confer to represent their interests as shareholders. Filing 284-1 at 3. Confer wrote a letter to Kantner on behalf of the plaintiffs, expressing "serious questions about Blue Valley's compliance with the Nebraska statutes and general corporate law since [Kantner] tookcontrol in January 2004." Filing 284-1 at 3. The record does not indicate that anything happened as a result of that letter.
Eventually, the plaintiffs each individually filed suit, at different times in 2011. See, filing 299-1; filing 299-4; filing 299-5; filing 299-6; filing 299-7. The suits were joined on July 25, 2012. See filing 299-8. The plaintiffs allege that during discovery for this action, they learned that Kantner and Rutter had been mismanaging Blue Valley in breach of their fiduciary duties, and concealing this mismanagement from the plaintiffs. Filing 298 at 26. Briefly summarized, plaintiffs' allegations include that:
(1) Kantner and Rutter engaged in self-dealing by entering into transactions on behalf of Blue Valley with other Kantner Companies. Filing 175 at ¶¶ 17(e)-(g). The plaintiffs allege these transactions were unfair to Blue Valley, either because Blue Valley was required to pay more than was fair, because Blue Valley was forced to purchase inferior products, or because Blue Valley was required to sell its products for less than was fair. Filing 175 at ¶¶ 17(e)-(g).
(2) Kantner and Rutter charged Blue Valley exorbitant administrative fees. Filing 175 at ¶ 17(k). Additionally, plaintiffs contend that Kantner and Rutter charged Blue Valley administrative fees for their own personal expenses unrelated to services performed for Blue Valley. Filing 175 at ¶ 23(l).
(3) Kantner and Rutter cross-collateralized financial obligations using Blue Valley assets along with the assets of the Kantner Companies to secure credit for the benefit of the other Kantner Companies, or for Kantner and Rutter personally. Filing 175 at ¶ 63. The plaintiffs additionally claim that the Kantner Companies and Kantner have wrongfully retained possession of the money received as a result. Filing 175 at ¶ 64.
(4) Kantner usurped Blue Valley's corporate opportunity when he failed to obtain shareholder approval for his purchase of Custom Dairy. See filing 175 at ¶ 71.
(5) The liquidated assets of Blue Valley were improperly used to satisfy debts of Kantner, Rutter, and the Kantner Companies. Filing 175 at ¶ 34(o).
(6) Kantner and Rutter either misrepresented information about Blue Valley's financial status to plaintiffs or concealed such information when they had a fiduciary duty to disclose it. See generally filing 175 at ¶¶ 21-32.
(7) Kantner and Rutter failed to maintain and preserve corporate records appropriately. Filing 298 at 41.
(8) Kantner and Rutter wrongfully appropriated Blue Valley's funds, see filing 175 at ¶ 34, intellectual property, see filing 175 at ¶ 34(n), and cheese shredder, filing 300 at 74, for the benefit of themselves or the Kantner Companies.
(9) Kantner and Rutter employed various strategies to exclude plaintiffs from involvement in and knowledge of the operations of Blue Valley, including failing to hold shareholder meetings, refusing to provide plaintiffs with financial information, and failing to seek or obtain shareholder approval for many decisions affecting the operation of Blue Valley. See generally filing 175 at ¶ 17.
Three summary judgment motions are now before the court. First, plaintiffs have moved for partial summary judgment as to standing. Filing 257. Second, defendants move for summary judgment on the basis of the statute of limitations. Filing 282. Third, defendants move for summary judgment, or in the alternative, partial summary judgment, on the basis of several different arguments. Filing 291. The court denies all three motions for the reasons below.
Summary judgment is proper if the movant shows that there is no genuine dispute as to any material fact and that the movant is entitled to judgment as a matter of law. See Fed. R. Civ. P. 56(a). The movant bears the initial responsibility of informing the Court of the basis for the motion, and must identify those portions of the record which the movant believes demonstrate the absence of a genuine issue of material fact. Torgerson v. City of Rochester, 643 F.3d 1031, 1042 (8th Cir. 2011) (en banc). If the movant does so, the nonmovant must respond by submitting evidentiary materials that set out specific facts showing that there is a genuine issue for trial. Id.
On a motion for summary judgment, facts must be viewed in the light most favorable to the nonmoving party only if there is a genuine dispute as to those facts. Id. Credibility determinations, the weighing of the evidence, and the drawing of legitimate inferences from the evidence are jury functions, not those of a judge. Id. But the nonmovant must do more than simply show that there is some metaphysical doubt as to the material facts. Id. In order to show that disputed facts are material, the party opposing summary judgment must cite to the relevant substantive law in identifying facts that might affect the outcome of the suit. Quinn v. St. Louis County, 653 F.3d 745, 751 (8th Cir. 2011). The existence of a mere scintilla of evidence in support of the nonmovant's position will be insufficient; there must be evidence on which the jury could conceivably find for the nonmovant. Barber v. C1 Truck Driver Training, LLC, 656 F.3d 782, 791-92 (8th Cir. 2011). Where the record taken as a whole could not lead a rational trier of fact to find for the nonmoving party, there is no genuine issue for trial. Torgerson, 643 F.3d at 1042.
The plaintiffs' operative complaint asserts seven claims for relief, styled as: (1) breach of fiduciary duty, (2) fraudulent misrepresentation and concealment, (3) conversion, (4) breach of loyalty and fair dealing, (5) civil conspiracy, (6) money...
To continue reading
Request your trial