Webster Industries, Inc. v. Northwood Doors, Inc.
| Decision Date | 25 March 2004 |
| Docket Number | No. C 02-3068-MWB.,C 02-3068-MWB. |
| Citation | 320 F.Supp.2d 821 |
| Parties | WEBSTER INDUSTRIES, INC., a Minnesota Corporation; Kretz Lumber Co., Inc., a Wisconsin Corporation; Woodline Manufacturing, Inc., a Minnesota Corporation; Wycombe Wood Products, Inc., a Wisconsin Corporation; and Hart Tie & Lumber, Inc., a Wisconsin Corporation, Plaintiffs, v. NORTHWOOD DOORS, INC., an Iowa Corporation; Partridge River Superior, Inc., a Wisconsin Corporation; Partridge River, Inc., a Minnesota Corporation; Partridge River Holdings, Inc., a Minnesota Corporation; Superior Dimension and Doors, L.L.C., a Minnesota Limited Liability Company; China Hardwood Import Products, L.L.C., a Minnesota Limited Liability Company; Andrew Richey; and Michael Miner, Defendants. |
| Court | U.S. District Court — Northern District of Iowa |
Jeffery S Haff, Jeffrey S. Haff & Associates, PA, Minneapolis, MN, for Hart Tie & Lumber Co., Inc, Kretzlumber Co Inc, Webster Industries Inc, Woodline Manufacturing, Inc, Wycombe Wood Products, Inc, Plaintiffs.
Donna Renae Miller, Grefe & Sidney, Des Moines, IA, for Michael Miner, Northwood Doors, Inc, China Hardwood Imports, Inc, Partridge River Holdings, Inc, Superior Door and Dimension, Inc, Partridge River, Inc, Partridge River Superior, Inc, Defendants.
Ryan Patrick Tang, Law Office of Ryan P. Tang, PC, Cedar Rapids, IA, for Hart Tie & Lumber Co., Inc, Kretzlumber Co Inc, Webster Industries Inc, Woodline Manufacturing, Inc, Wycombe Wood Products, Inc, Plaintiffs.
John Werner, Grefe & Sidney, Des Moines, IA, for Michael Miner, Northwood Doors, Inc, Partridge River, Inc, China Hardwood Imports, Inc, Partridge River Holdings, Inc, Partridge River Superior, Inc, Superior Door and Dimension, Inc, Defendants.
TABLE OF CONTENTS
I. INTRODUCTION ...................................................... 825
A. Procedural Background .......................................... 825
B. Factual Background ............................................. 826
II. LEGAL ANALYSIS .................................................... 828
A. Standards For Summary Judgment ................................. 828
B. The Vendors' Motion For Partial Summary Judgment ............... 829
C. The Defendants' Motion For Partial Summary Judgment ............ 830
1. Choice of law ............................................... 831
2. The "Quantum Valebant" claims ............................... 832
a. Arguments of the parties ................................. 832
b. Analysis ................................................. 832
3. The "Fraudulent Transfer" claims ............................ 834
a. Arguments of the parties ................................. 834
b. Analysis ................................................. 835
i. Applicable law ...................................... 835
ii. Richey's personal guarantee ......................... 837
iii. Northwood's property ................................ 837
4. The "Unjust Enrichment" claims .............................. 839
a. Arguments of the parties ................................. 839
b. Analysis ................................................. 840
5. The "Corporate Opportunities and Duties" claims ............. 841
6. The "Fraud" claims .......................................... 842
a. Arguments of the parties ................................. 842
b. Analysis ................................................. 843
i. Nature of the claims ................................ 843
ii. Elements of the claims .............................. 844
7. The "RICO" claims ........................................... 846
a. Arguments of the parties ................................. 846
b. Analysis ................................................. 847
i. Elements of the RICO claims ......................... 847
ii. Pleading requirements for the RICO claims ........... 847
iii. Supporting evidence ................................. 849
III. CONCLUSION ........................................................ 851
Perhaps fraud, like beauty, is in the eye of the beholder. In this action, where the plaintiffs see a grand conspiracy among allegedly related businesses to defraud suppliers, the defendants see appropriate actions by a secured creditor to wind up a business unexpectedly rendered insolvent by the sudden defection of its primary customer. Unlike art critics and beauty pageant judges, who may make a subjective determination of "beauty," this court's task on motions for partial summary judgment on the plaintiffs' claims is not to determine whether there has been "fraud" or any other wrong-doing. Instead, this court must determine only whether the resisting parties have generated genuine issues of material fact that warrant submitting their view of the case to a jury.
On June 13, 2002, the various plaintiffs captioned above, described collectively herein as "the Vendors," filed a "Petition at Law" in the Iowa District Court for Worth County asserting numerous claims arising from the failure of insolvent defendant Northwood Doors, Inc., to pay for goods and services that it received from the Vendors. More specifically, Webster Industries, Inc., seeks $177,230.88; Kretz Lumber Company, Inc., seeks $76,539.03; Woodline Manufacturing, Inc., seeks $99,154.91; Wycombe Wood Products, Inc., seeks $62,575.70; and Hart Tie & Lumber Company, Inc., seeks $83,708.57. Each Vendor also seeks pre- and post-petition interest on the sum alleged. The defendants named in the petition include two individuals and several corporations in addition to Northwood. The additional corporate defendants are Partridge River Superior, Inc., Partridge River, Inc., and Partridge River Holdings, Inc., all three of which are described collectively herein as the "Partridge Defendants," Superior Dimension and Doors, L.L.C. (SDD), and China Hardwood Import Products, L.L.C. (CHIPS). The individual defendants are Andrew Richey and Michael Miner, who allegedly are or were responsible for the day-to-day operations of the defendant companies. Although the Vendors only provided goods to Northwood, they allege that, at all pertinent times, there existed a unity of interest and ownership among the various defendants, such that the individuality or separateness of each corporation or individual should be disregarded. Failure to pierce the corporate veil in this way, they allege, would sanction a fraud, promote injustice, or both.
The specific claims asserted by the Vendors at the outset of this litigation were the following: (1) Counts I through V of the petition alleged "Actions on Account"; (2) Counts VI through X alleged claims denominated "Quantum Meruit," but these claims were later recharacterized by the Vendors as "Quantum Valebant"; (3) Counts XI through XV alleged actions on "Accounts Stated"; (4) Counts XVI through XX alleged "Fraudulent Transfers"; (5) Counts XXI through XXV alleged "Unjust Enrichment"; (6) Counts XXVI through XXX alleged "Misappropriation of Corporate Opportunity/Breach of Fiduciary Duty/Breach of Duty of Good Faith and Fair Dealing"; (7) Counts XXXI through XXXV alleged "Fraud"; and finally (8) Counts XXXVI through XL alleged claims pursuant to the "Racketeer Influenced and Corrupt Organization Act (RICO)." See Webster Indus., Inc. v. Northwood Doors, Inc., 234 F.Supp.2d 981, 984-86 (N.D.Iowa 2002) (Webster Industries I) (). Defendant Miner removed this action to this federal court on September 9, 2002, citing the Vendors' RICO claims as the basis for federal question jurisdiction. The Vendors did not challenge the removal. Although the Vendors were granted leave to amend their removed complaint on October 15, 2002, that amendment went to the proper identification of one of the defendants rather than to the addition, deletion, or modification of any claims.
Defendant Miner, joined by defendant Northwood, made a pre-answer challenge to some of the claims in the Vendors' removed petition. By order dated November 14, 2002, the court denied Miner's and Northwood's motion to dismiss as to Counts VI through X ("Quantum Meruit," recharacterized as "Quantum Valebant"), but granted the motion as to Counts XXVI through XXX ("Misappropriation of Corporate Opportunity/Breach of Fiduciary Duty/Breach of Duty of Good Faith and Fair Dealing"). See id. at 998. Therefore, Counts I through XXV and XXXI through XL are still pending as to all defendants except Richey, and Counts XXVI through XXX are still pending against all defendants except Northwood, Miner, and Richey.
In a subsequent ruling, on February 13, 2003, the court denied the Vendors' motion for default judgment against the Partridge Defendants, SDD, CHIPS, and Andrew Richey, and granted the motion by these defendants to set aside the entry of default against them by the Clerk of Court, on the ground that these defendants had never been properly served. See Webster Indus., Inc. v. Northwood Doors, Inc., 244 F.Supp.2d 998 (N.D.Iowa 2003) (Webster Industries II). All of the defendants, with the exception of Andrew Richey, were subsequently properly served and eventually appeared and defended in this action.
Trial is scheduled to begin in this matter on April 19, 2004. However, now before the court are two motions for partial summary judgment aimed at eliminating trial on most of the Vendors' claims. The first is the Vendors' December 9,...
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