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United States v. STABL, Inc.

United States District Court, D. Nebraska

September 30, 2019

UNITED STATES OF AMERICA, Plaintiff,
v.
STABL, INC., LANT, INC., LEON JOHNSON, and ANN JOHNSON, Defendants. STATE OF NEBRASKA, Plaintiff,
v.
STABL, INC., LANT, INC., LEON JOHNSON, and ANN JOHNSON, Defendants.

          MEMORANDUM AND ORDER

          Laurie Smith Camp Senior United States District Judge

         This matter is before the Court on several motions. For the reasons discussed below, Defendants’ Motion for Summary Judgment against the State of Nebraska, Member Case ECF No. 216, [1] will be granted. The State’s Motion for Partial Summary Judgment, ECF No. 221, will be denied. Defendants’ Statement of Objections to Magistrate Judge’s Order, ECF No. 263, will be overruled as moot. The United States’ Joint Motion for Summary Judgment, ECF No. 225, will be granted in part; and Defendants’ Motion for Summary Judgment against the United States, ECF No. 229, will be granted in part.

         FACTUAL BACKGROUND

         In compliance with the Court’s local rules, the parties submitted numbered statements of facts and corresponding responses. Unless otherwise indicated, the following facts are undisputed for purposes of the pending Motions for Summary Judgment.

         Defendant Stabl, Inc. (Stabl)[2] was a Nebraska corporation. Defendant Lant, Inc. (Lant) was also a Nebraska corporation and was the sole owner of Stabl.[3] Lant owned several other companies: Tri-State By-Products, Inc. (Tri-State); Dodge City Services, Inc. (Dodge City); and Great Plains Sales, Inc. (Great Plains). Defendant Leon Johnson was the sole owner of Lant and the president of Lant and Stabl. Leon Johnson also owned Plum Creek Transport, Inc. (Plum Creek). Defendant Ann Johnson is married to Leon Johnson and was an employee of Stabl and Lant.

         From October 1995 until May 28, 2010, Stabl operated a rendering facility in Lexington, Nebraska. In the course of its operations, Stabl violated the Clean Water Act (CWA), 33 U.S.C. §§ 1251–1388 and the Nebraska Environmental Protection Act (NEPA), Neb. Rev. Stat. §§ 81-1501 to 81-1532. The United States Environmental Protection Agency (EPA) and Nebraska Department of Environmental Quality (NDEQ) brought enforcement actions against Stabl, and this Court entered judgment for the plaintiffs in the amount of $2, 285, 874 to be divided equally between the plaintiffs. United States v. Stabl, Inc., No. 8:11CV274, 2014 WL 12576928 (D. Neb. Jan. 10, 2014).

         On May 28, 2010, Darling International, Inc. (Darling), purchased assets from Stabl, Lant, Tri-State, Dodge City, Great Plains, Plum Creek, and Leon Johnson for $15, 200, 000. The sale included virtually all Stabl’s assets. The funds were deposited into an account at Platte Valley State Bank and Trust Company (Platte Valley) under the name of Nebraska By-Products. Leon and Ann Johnson were signatories to the account. The same day, approximately $3.84 million was deducted from the account to pay off Stabl’s bank loans.

         On July 13, 2010, three wire transfers caused a withdrawal of funds from the Platte Valley account, totaling $8 million. Two transfers were for “$2 million to Waddell and Reed, received by UMB Bank of Kansas City, Missouri, listing the originator as ‘Nebraska By-Products, Inc.’ and the originator to beneficiary information as: ‘Leon A. Johnson and Ann M. Johnson . . . .’” Pls. Br. ¶ 33, ECF No. 226. The third transfer was for “$4 million to Edward Jones, received by the Northern Trust Company of Chicago, Illinois, listing the originator as ‘Nebraska By-Products, Inc.’ and the originator to beneficiary information as ‘Leon and Ann Johnson . . . .’” Id. On July 14, 2010, there was $1.437 million remaining in the Platte Valley account, and Stabl had $665, 000 across other accounts. The Platte Valley account was emptied and closed by October 3, 2011. Plaintiffs’ expert witnesses claim the Johnsons received $10, 853, 589 from the sale. ECF No. 236-8 19.

         Lant’s own tax documents and those of its subsidiaries for November 2009 through October 2010 included Form 8594, entitled “Asset Acquisition Statement.” This document allocated the sale proceeds of the May 28, 2010, sale. Form 8594 was not produced in discovery in these enforcement actions.

         In February of 2016, Stabl’s counsel sent a letter to Plaintiffs stating that after the sale, Stabl’s liabilities exceeded its assets by $3, 956, 225. On June 6, 2018, Leon Johnson testified in a deposition that sometime near the asset sale Stabl became insolvent.

         On May 26, 2016, the United States brought an action to collect on its judgment under the Federal Debt Collection Procedures Act (FDCPA), 28 U.S.C. §§ 3001–3308. ECF No. 47. On July 15, 2016, the State of Nebraska brought a similar action to collect under Federal Rule of Civil Procedure 69 and the Nebraska Uniform Fraudulent Transfer Act (NUFTA), Neb. Rev. Stat. §§ 36-701 through 36-712, repealed by 2019 Neb. Laws 70, § 20 (repeal effective Sept. 1, 2019). Member Case ECF No. 15. The cases were consolidated for purposes of discovery and pretrial management on February 28, 2017. ECF No. 37. On March 22, 2019, The State filed a Motion for Partial Summary Judgment, ECF No. 221, both Plaintiffs filed a Joint Motion for Summary Judgment, ECF No. 225, and Defendants filed a Motion for Summary Judgment against both Plaintiffs, ECF No. 229.

         STANDARD OF REVIEW

         “Summary judgment is appropriate when the evidence, viewed in the light most favorable to the nonmoving party, presents no genuine issue of material fact and the moving party is entitled to judgment as a matter of law.” Garrison v. ConAgra Foods Packaged Foods, LLC, 833 F.3d 881, 884 (8th Cir. 2016) (citing Fed.R.Civ.P. 56(c)). “Summary judgment is not disfavored and is designed for every action.” Briscoe v. Cty. of St. Louis, 690 F.3d 1004, 1011 n.2 (8th Cir. 2012) (quoting Torgerson v. City of Rochester, 643 F.3d 1031, 1043 (8th Cir. 2011) (en banc)). In reviewing a motion for summary judgment, the Court will view “the record in the light most favorable to the nonmoving party . . . drawing all reasonable inferences in that party’s favor.” Whitney v. Guys, Inc., 826 F.3d 1074, 1076 (8th Cir. 2016) (citing Hitt v. Harsco Corp., 356 F.3d 920, 923–24 (8th Cir. 2004)). Where the nonmoving party will bear the burden of proof at trial on a dispositive issue, “Rule 56(e) permits a proper summary judgment motion to be opposed by any of the kinds of evidentiary materials listed in Rule 56(c), except the mere pleadings themselves.” Se. Mo. Hosp. v. C.R. Bard, Inc., 642 F.3d 608, 618 (8th Cir. 2011) (quoting Celotex Corp. v. Catrett, 477 U.S. 317, 324 (1986)). The moving party need not produce evidence showing “the absence of a genuine issue of material fact.” Johnson v. Wheeling Mach. Prods., 779 F.3d 514, 517 (8th Cir. 2015) (quoting Celotex, 477 U.S. at 325). Instead, “the burden on the moving party may be discharged by ‘showing’ . . . that there is an absence of evidence to support the nonmoving party’s case.” St. Jude Med., Inc. v. Lifecare Int’l, Inc., 250 F.3d 587, 596 (8th Cir. 2001) (quoting Celotex, 477 U.S. at 325).

         In response to the moving party’s showing, the nonmoving party’s burden is to produce “specific facts sufficient to raise a genuine issue for trial.” Haggenmiller v. ABM Parking Servs., Inc., 837 F.3d 879, 884 (8th Cir. 2016) (quoting Gibson v. Am. Greetings Corp., 670 F.3d 844, 853 (8th Cir. 2012)). The nonmoving party “must do more than simply show that there is some metaphysical doubt as to the material facts, and must come forward with specific facts showing that there is a genuine issue for trial.” Wagner v. Gallup, Inc., 788 F.3d 877, 882 (8th Cir. 2015) (quoting Torgerson, 643 F.3d at 1042). “[T]here must be more than the mere existence of some alleged factual dispute” between the parties in order to overcome summary judgment. Dick v. Dickinson State Univ., 826 F.3d 1054, 1061 (8th Cir. 2016) (quoting Vacca v. Viacom Broad. of Mo., Inc., 875 F.2d 1337, 1339 (8th Cir. 1989)).

         In other words, in deciding “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.” Wagner, 788 F.3d at 882 (quoting Torgerson, 643 F.3d at 1042). Otherwise, where the Court finds that “the record taken as a whole could not lead a rational trier of fact to find for the non-moving party, ” there is no “genuine issue of material fact” for trial and summary judgment is appropriate. Whitney, 826 F.3d at 1076 (quoting Grage v. N. States Power Co.-Minn., 813 F.3d 1051, 1052 (8th Cir. 2015)).

         DISCUSSION

         The State seeks partial summary judgment dismissing Defendants’ third affirmative defense, which states that Nebraska filed its complaint out of time due to the statute of limitations in the NUFTA. Plaintiffs jointly move for summary judgment on the merits. Defendants move for summary judgment dismissing both cases.[4]

         I. NUFTA Statute of Limitations

          The State moves for partial summary judgment dismissing Defendants’ third affirmative defense, which asserts that the NUFTA statute of limitations bars the State of Nebraska’s action. ECF No. 221. Defendants move for summary judgment dismissing the State’s action under the NUFTA as time-barred by the statute of limitations. Member Case ECF No. 216.

         An action under section 36-705(a)(1) of the NUFTA must be brought “within four years after the transfer was made . . . or, if later, within one year after the transfer . . . was or could reasonably have been discovered by the claimant . . . .” Neb. Rev. Stat. § 36-710. The State filed its original complaint on July 15, 2016, more than six years after the July 13, 2010, wire transfers. For the State to show that its action was timely, it must show that it was brought within the discovery rule of the statute. In other words, it must show that it could not reasonably have discovered the transfers or their fraudulent nature before July 15, 2015-one year prior to the date of the State’s Complaint.

         The State argues that this case is analogous to Indiana Bell Telephone Co. v. Lovelady, No. SA-05-CA-285-H, 2008 WL 11408781 (W.D. Tex. Mar. 5, 2008). In Indiana Bell, the court held that the defendants did not meet their burden to prove the affirmative defense of the statute of limitations in their motion for summary judgment.[5] Id. at *2, *4. The court determined that the defendants did not show, as a matter of law, that the plaintiff could reasonably have found the transfers more than one year before they brought their claims against the defendants. The plaintiff learned of two of the three transfers from discovery in the underlying litigation and learned of the third transfer in post-judgment discovery within three months of receiving its judgment.[6] The plaintiff brought its suit against the first group of defendants within a month of receiving the post-judgment discovery.

         The statute of limitations under the Texas Uniform Fraudulent Transfer Act (TUFTA), Tex. Bus. & Com. Code §§ 24.001–24.013, is nearly identical to that in the NUFTA. Compare Tex. Bus. & Com. Code § 24.010, with Neb. Rev. Stat. § 36-710. Also, both statutes instruct courts to use “the principles of law and equity, including . . . the law relating to . . . fraud” to supplement interpretation of the statutes. Tex. Bus. & Com. Code § 24.011; Neb. Rev. Stat. § 36-711.

         In Nebraska, “[a]n action for fraud does not accrue until there has been a discovery of the facts constituting the fraud, or facts sufficient to put a person of ordinary intelligence and prudence on inquiry which, if pursued, would lead to such discovery.” Chafin v. Wis. Province of Soc’y of Jesus, 917 N.W.2d 821, 824 (Neb. 2018) (citing Fitzgerald v. Cmty. Redevelopment Corp., 811 N.W.2d 178 (Neb. 2012)). However, this does not require “that a plaintiff have knowledge of the exact nature or source of a problem, but only that a problem exists.” Kalkowski v. Neb. Nat’l Trails Museum Found., Inc., 826 N.W.2d 589, 597 (Neb. Ct. App. 2013) (citing Nuss v. Alexander, 691 N.W.2d 94 (Neb. 2005)). In other words, “[d]iscovery, as applied to the statute of limitations, occurs when one knows of the existence of an inquiry or damage and not when he or she has a legal right to seek redress in court.” Chafin, 917 N.W.2d at 824 (citing Andres v. McNeil Co., 707 N.W.2d 777 (Neb. 2005); Kalkowski, 826 N.W.2d 589).

         The plaintiff in Indiana Bell sued at least one group of defendants within the four-year statute of limitations for two of the transfers and conducted post-judgment discovery within three months of receiving its judgment for the sole purpose of investigating the defendants’ ability to pay. Here, the State learned on December 3, 2012, in response to discovery in the underlying action, that Stabl had sold virtually all its assets in 2010 as part of a $15.2-million sale. Pl.’s Br ¶ 24, ECF No. 222. That same day, the State learned that Stabl had negative retained earnings of $3, 956, 225 at the end of the 2010 tax year. Id. The State received its judgment against Stabl on January 10, 2014. At that point, a reasonable litigant in the State’s position-with a $1 million judgment against a dissolved corporate defendant whose retained earnings were negative almost $4 million the same year it sold nearly all its assets-would engage in post-judgment discovery to ensure it could recover on its judgment.

         The State argues that it was reasonable not to engage in post-judgment discovery because Stabl sought to appeal the judgment. Stabl filed its notice of appeal in the underlying case on May 2, 2014, and the Eighth Circuit rendered its judgment on August 27, 2015, and issued its mandate on October 21, 2015. That appeal did not prevent the State from conducting post-judgment discovery or seeking to enforce its judgment.[7] This Court denied Stabl’s motion to stay, 8:11cv267, ECF No. 163, and it does not appear that Stabl filed a motion to stay with the Eighth Circuit. Stabl also did not post a bond pursuant to Federal Rule of Civil Procedure 62 or Federal Rule of Appellate Procedure 8. The State could have and should have discovered the transfers and their fraudulent nature before July 15, 2015. The State’s complaint was, therefore, not timely under the NUFTA statute of limitations and is dismissed.

         II. Affirmative Defenses

         In their Answer, ECF No. 71, Defendants assert ten affirmative defenses. The Court has already granted the United States’ Motion to Strike the third affirmative defense of statute of limitations. United States v. Stabl, Inc., No. 8:16CV233, 2018 WL 3758204 (D. Neb. Aug. 8, 2018) (Nelson, Mag. J.). Defendants’ fourth, sixth, seventh, eighth, and tenth purported affirmative defenses are not affirmative defenses, but are defenses to the elements the United States must prove and accordingly are discussed where they are relevant to those claims.[8] The remaining affirmative defenses are discussed below.[9]

         Defendants’ purported waiver and estoppel defenses appear to be based on the same argument. Defendants cite no support for either defense-other than to say that they are valid defenses ...


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