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Menard, Inc. v. Dial-Columbus, LLC

United States Court of Appeals, Eighth Circuit

March 26, 2015

Menard, Inc. a Wisconsin Corporation, Plaintiff - Appellee
Dial-Columbus, LLC, a Nebraska limited liability company also known as Dial Columbus, LLC; DKC-Columbus, LLC, a Nebraska limited liability company, Defendants; Terry L. Clauff, a Nebraska resident, Defendant - Appellant

Submitted: October 7, 2014.

Page 994

Appeal from United States District Court for the District of Nebraska - Lincoln.

For Menard, Plaintiff-Appellee: Kerry L. Kester, Kory D. George.

For Terry L. Clauff, Defendant-Appellant: Mark Davis Hill, Michael Sean Degan.

Before LOKEN, BEAM, and COLLOTON, Circuit Judges.


Page 995

BEAM, Circuit Judge.

The district court granted summary judgment in favor of Menard, Inc., on its claim that Terry Clauff is jointly and severally liable for a contract he signed on behalf of DKC-Columbus, LLC, before the company came into existence. We reverse.


Menard is a Wisconsin corporation that owns and operates home improvement stores. Dial-Columbus, LLC, and DKC-Columbus are Nebraska limited liability companies (LLCs). Clauff is a member of both companies.

Menard operated a retail store in the Westgate Center in Columbus, Nebraska, in a building that it subleased (the Sublease) from Wal-Mart Stores, Inc. On August 28, 2006, Menard entered into a Purchase and Sale Agreement (the PA) with Dial-Columbus to purchase a parcel of property (the Property) that Dial-Columbus owned. Clauff signed the PA in his capacity as a managing member of Dial-Columbus. Menard planned to build a new store on the newly acquired Property and wanted to be relieved of its obligations under the Sublease once the new location opened for business. Menard and Dial-Columbus therefore incorporated a provision into the PA providing that Dial-Columbus would assume full responsibility for all terms of the Sublease thirty days after Menard opened its new store, the " Effective Date." Dial-Columbus's lease assumption responsibilities in the PA specifically included " pay[ing] any and all rents and satisfy[ing] all other obligations under" the Sublease. The PA further stated that Dial-Columbus's responsibilities " were set forth in more detail in the Lease Assignment, Consent & Release" (the Lease Assignment) that was attached as an exhibit to the PA. Dial-Columbus's name, however, appears nowhere in the Lease Assignment. The Lease Assignment instead states that DKC-Columbus sold the Property to Menard and on the stated " Effective Date" agreed to receive by assignment all of Menard's right, title and interest in and to assume all of Menard's liabilities, duties and obligations under the Sublease. The parties (and apparently the district court) seemingly never noticed this discrepancy between the documents until it was pointed out to them at oral argument before this court, and they have provided us no explanation for why or how this discrepancy occurred.

Nonetheless, with the written consent of Wal-Mart, DKC-Columbus and Menard formally executed the Lease Assignment attached to the PA on February 12, 2007. Clauff purported to sign the Lease Assignment in his capacity as a member of DKC-Columbus. However, DKC-Columbus did not file its Articles of Organization with the Nebraska Secretary of State until October

Page 996

30, 2007, and it is undisputed that the company was not a lawfully organized LLC on the date Clauff signed the Lease Assignment. See Neb. Rev. Stat. § § 21-2605, 21-2608 (repealed 2013)[1] (providing that a limited liability company is considered organized after the company has filed its articles of organization with the Nebraska Secretary of State and has received a certificate of organization). Clauff and Menard both claim that DKC-Columbus adopted the Lease Assignment after the company formed, but neither party has provided documentary or other evidence that identifies when or how DKC-Columbus did so. Wal-Mart, as sublessor of the Westgate property and beneficiary of the Sublease obligations fully assigned by Menard to Dial-Columbus and DKC-Columbus, demanded that Menard also continue to be secondarily liable for these commitments. Menard agreed to such requirement.

Menard opened its new store in April 2008. The parties agree that thirty days later Dial-Columbus became responsible for the Sublease under the terms of the PA, and that DKC-Columbus also became similarly accountable via its obligations under the Lease Assignment. Either Dial-Columbus or DKC-Columbus paid rent to Wal-Mart for May and June of 2008; however, neither company made any rental payments after June 2008. Both companies also failed to pay the insurance costs and taxes due under the ...

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