Meadowfresh Solutions USA, LLC v. Maple Grove Farms, LLC
Decision Date | 06 September 2019 |
Docket Number | No. SD 35231,SD 35231 |
Parties | MEADOWFRESH SOLUTIONS USA, LLC, et al., Plaintiffs-Respondents, v. MAPLE GROVE FARMS, LLC, a Missouri limited liability company, et al., Defendants-Appellants. |
Court | Missouri Court of Appeals |
586 S.W.3d 329
MEADOWFRESH SOLUTIONS USA, LLC, et al., Plaintiffs-Respondents,
v.
MAPLE GROVE FARMS, LLC, a Missouri limited liability company, et al., Defendants-Appellants.
No. SD 35231
Missouri Court of Appeals, Southern District, Division One.
Filed: September 6, 2019
Rehearing and/or Transfer Denied September 27, 2019
Application for Transfer Denied November 19, 2019
Attorneys for Appellants – Thomas W. Millington, Harold F. Glass, Kate Millington, Jeffry O. Young of Springfield, MO.
Attorneys for Respondents – S. Jacob Sappington, Randy P. Scheer, Kayla M. Campbell of Springfield, MO.
Nancy Steffen Rahmeyer, J.
Appellants1 appeal the trial court’s judgment in favor of Meadowfresh Solutions USA, LLC ("Meadowfresh"), John W. "Jock" Fulton, and Susan Maree Fulton (collectively, "Respondents") after a jury found that the attempt by minority members of Maple Grove to oust majority member Meadowfresh from the company and to remove Mr. Fulton as managing member caused Respondents over 7.3 million dollars in damages. Appellants bring eleven points on appeal. Finding no merit to any of Appellants' points, we affirm the judgment.
Facts in the Light Most Favorable to the Verdicts
Background and Parties
This case involves a dispute among the members of Maple Grove, a Missouri limited liability company that operated a large dairy farm in Jasper County. The company was owned by Respondent Meadowfresh and Appellants the Dahlstroms, the Halls, and Leon Rinehart.2
Meadowfresh was undisputedly the largest owner of Maple Grove, with at least a 63% interest in the company and made the largest capital contribution of all the members.
Meadowfresh’s members were the Fultons, the Dahlstroms, and Kyle Bounous. The Fultons owned approximately 75% of Meadowfresh. Accordingly, by virtue of their interest in Meadowfresh, the Fultons had the largest interest in Maple Grove.
The Operating Agreements
Meadowfresh and Maple Grove were governed by their respective operating agreements, which were signed by all of their respective members. Pursuant to the terms of the Maple Grove Operating Agreement, Mr. Fulton was the sole manager of Maple Grove. Likewise, Mr. Fulton was the sole manager of Meadowfresh.
Both operating agreements provided the manager, Mr. Fulton, with:
the exclusive right, power, authority and responsibility to manage and operate the business and affairs of the Compan[ies] and to make all decisions with respect thereto and enter into transactions on behalf of the Compan[ies] for apparently carrying on the business of the Compan[ies] and no Member shall have any right or power to act for or on behalf of the Compan[ies] or make decisions with respect thereto.[3 ]
The Operating Agreements also spelled out the procedure for calling a meeting of the members. Section 10 of the Operating Agreements required a "majority in interest" of the members to be present to achieve a quorum.
Day-to-Day Operations of Maple Grove
Maple Grove’s main source of revenue came from milk production. Maple Grove sold its milk to Dairy Farmers of America ("DFA"), which required Maple Grove to designate an authorized representative. Maple Grove selected its managing member, Mr. Fulton, an experienced dairy farmer from New Zealand, as the DFA representative.
In addition to being the designated DFA representative for Maple Grove, Mr. Fulton managed Maple Grove from the fall of 2011 to July 2015, and treated the position as a full-time job, averaging 60 to 70 hours per week. Mr. Fulton searched for best practices and handled the finances and performed compliance work. His wife, Susan Fulton, assisted with paperwork from the home office. Mr. Fulton regularly communicated with the other members regarding issues such as using particular minerals in the feed and the health of the cows. Mr. Fulton did not make decisions regarding minerals and animal health unilaterally.
Although there was never a formal vote for anyone to receive money from Maple Grove, the members were compensated for providing services. Curtis Hall, a member of Maple Grove, worked on the farm daily as an employee of Maple Grove and received a salary of $45,000 to $50,000 a year.4 Likewise, Kyle Bounous, a member of Meadowfresh but not Maple Grove, was also paid for silage purchased from him by Maple Grove. One year, Mr. Bounous received close to $80,000 from Maple Grove for the silage. Leon Rinehart was a member of Maple Grove and raised some calves for which Maple Grove acknowledged it owed him. Leon Rinehart’s son, Kyle Rinehart, received a salary while employed by Maple Grove.
Drs. Ted and Carol Dahlstrom, members of both Meadowfresh and Maple Grove, are veterinary doctors and owned The Animal Clinic of Monett, LLC ("the Animal Clinic"). The Animal Clinic provided veterinary services and care for the cows and it billed Maple Grove for those services. The Animal Clinic charged Maple Grove $483,979 for services throughout the years. The Animal Clinic made between 10 and 20 percent profit on veterinary services to Maple Grove. Dr. Ted Dahlstrom acknowledged receiving compensation for providing veterinary services to Maple Grove.
Mr. Fulton’s Compensation as Manager
Mr. Fulton testified that the operating agreement authorized him to be compensated for serving as manager. Mr. Fulton’s salary for the first 17 to 18 months was $3,500 per month. He did not take a draw his first 12 months because he wanted to make sure the business was profitable. Instead, during this first year, Mr. Fulton’s $42,000 salary was left in the company and treated as a capital contribution.
In August 2012, Mr. Fulton sent two emails to "[a]ll the members of Maple Grove and Meadowfresh, plus Tammy and Kyle Rinehart" explaining he "just wanted them all to know what [he] was doing and how [his] thought process was working. And [he] felt like [he] needed to get compensated for the stuff [he] was doing, at least something[.]" Mr. Fulton’s August 15, 2012 email proposed the following:
a) Compensation for the $14,000 income negotiated in August 2011 as part of the original purchase deal. This is to be considered as a "fee" to get business started.
b) Compensation of $3500/month from 11/1/2011 until 31/10/2012 for strategic, financial and planning and organizational services provided.
c) Shareholders to review the ongoing compensation, i.e.: from 11/01/2012 at a strategic planning meeting to be arranged for mid October 2012.
In May 2013, Mr. Fulton wrote to Dr. Ted Dahlstrom and Leon Rinehart, stating "I write to seek approval (need majority only) for an increase in my management fee." At trial, Mr. Fulton explained that he "didn't need approval, because [he] already had it through the operating agreement, but what [he] wanted to make sure of was that people were engaged and connected."
Mr. Fulton received no negative feedback or objections regarding his compensation proposal in the August 2012 emails. In fact, the Dahlstroms sent an email to Mr. Fulton, on or around May 24, 2013, approving a pay raise. Further, during his tenure as manager, he never received a single text, e-mail, document, note or notification at any point in time that the members had problems with the way he was managing the farm.5
In November 2012, Mr. Fulton started receiving an actual salary rather than receiving credit as a capital contribution. Mr. Fulton set his salary at $114,000. Mr. Fulton asked for the increase because the job required more time and management and more personal capital input than he ever expected. Over the four years he was at Maple Grove, Mr. Fulton received total compensation in the amount of $350,122.
Mr. Fulton claimed that his salary as manager was discussed "at length a lot of times" especially with Mr. Bounous and the Dahlstroms. These conversations were held during meetings conducted in Mr. Fulton’s home basement. He further testified, "We had heaps and heaps of meetings before this whole thing started and continued after it started." According to Mr. Fulton, Mr. Hall was the only one who was not informed of Mr. Fulton’s pay increase.
The Dahlstroms acknowledged that Mr. Fulton would receive a management fee in a letter they sent to immigration officials supporting Mr. Fulton’s application for a green card:
Now that he is in a position to apply for a green card we have taken the opportunity to utilize his skills to assist us improve our business and investment opportunities here in the United States.... A farm we collectively have an investment share in, will also pay him a management fee that will grow as the business grows.
Dr. Ted Dahlstrom admitted there were no texts, emails, notes or documentation to prove there was an agreement not to compensate members for services.
The Breakdown in the Relationship
In 2015, the members of Maple Grove became upset with Mr. Fulton’s rate of compensation. They questioned Mr. Fulton’s authority to pay himself a salary for his full-time work despite the...
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