Searching over 5,500,000 cases.

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

Meadowfresh Solutions USA, LLC v. Maple Grove Farms, LLC

Court of Appeals of Missouri, Southern District, First Division

September 6, 2019

MEADOWFRESH SOLUTIONS USA, LLC, et al., Plaintiffs-Respondents,
MAPLE GROVE FARMS, LLC, a Missouri limited liability company, et al., Defendants-Appellants.

          APPEAL FROM THE CIRCUIT COURT OF GREENE COUNTY Honorable Michael J. Cordonnier, Circuit Judge

          Nancy Steffen Rahmeyer, J.

         Appellants[1] 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 fact that the other members received compensation for their services provided to Maple Grove.

         Appellants began to exclude Mr. Fulton from Maple Grove business and communications, including changing the company's bank account and loan accounts. On July 3, 2015, there was an attempt to hold an official meeting of Maple Grove. The members of Maple Grove did not send notice indicating that any vote would take place, and Mr. Fulton, the only one authorized to act on Meadowfresh's behalf, did not appear. At that meeting, the members voted to remove M r. Fulton as the manager of Maple Grove. Minority members, the Dahlstroms and M r. Bounous, purportedly voted on behalf of Meadowfresh.

         Appellants also attempted to remove M r. Fulton as Maple Grove's DFA authorized representative. When that attempt was rejected by DFA because they did not have Meadowfresh's signature, Appellants attempted to solve the problem by retroactively altering various corporate documents to reflect the expulsion of Meadowfresh as the majority owner of Maple Grove.[6]

         Post-Meeting Consequences and Damages

         After the meeting, Appellants took actions to prevent Mr. Fulton from accessing Maple Grove funds and removed his ability to oversee Maple Grove operations. Appellants failed to pay Meadowfresh its interest in the company and doubled the other members' interest in Maple Grove.

         The minority members redistributed Meadowfresh's membership interest among themselves, with no compensation to the Fultons, and gifted to Mr. Bounous, who had previously only been a member of Meadowfresh and not Maple Grove, a 25% membership interest in Maple Grove for no consideration or capital contribution. Although Appellants' actions purportedly caused a forfeiture of all Meadowfresh's interest in Maple Grove, they compounded the Fultons' (the largest owners of Meadowfresh) damages by refusing to release them from their obligations under personal guaranties on the debts held by Maple Grove.[7]

         As a result of the actions taken at the July 3, 2015 meeting, Mr. Fulton was no longer able to manage Maple Grove. Mr. Fulton was forced to sell some of his shares in his farm in New Zealand. Mr. Fulton lost his $114, 000 base salary along with an additional $24, 000 he was receiving for feed. He also incurred attorney's fees. He received $134, 000 for his shares of his New Zealand farm but estimated a loss of 50% on the value of the shares due to the market conditions at the time in New Zealand. Curtis Hall and Leon Rinehart took over as purported co-managers of Maple Grove, changed the bank account from Mr. Fulton being a signatory and without his knowledge, denying him access to the funds of Maple Grove.

         After the July 2015 meeting, Mr. Fulton discovered that Appellants had attempted to kick him out as manager and filed the underlying lawsuit based on Appellants' actions. After Respondents filed the underlying lawsuit, Appellants created a company that did business with Maple Grove called All American Cattle Leasing, LLC ("AACL").[8]AACL borrowed 2.1 million dollars and purchased the loans held by Maple Grove; the original loans were not repaid. Appellants acknowledged that they did this so that Meadowfresh and the Fultons would remain guarantors on the notes. The guaranties of debts under these notes were in proportion to each members' ownership interest. Accordingly, the Fultons, as owners of a 75% interest in Meadowfresh, were guarantors of the largest amount of debt. Appellants acknowledged that they could foreclose on Maple Grove's assets if they wanted. Appellants wanted the assets held in a different company other than Maple Grove because "[t]hat's the only way [Appellants] could get the assets."

         AACL also entered into a lease agreement with Maple Grove where AACL owned the cattle and leased them to Maple Grove. AACL's lease agreement with Maple Grove included terms favorable to AACL. Maple Grove paid the expenses while AACL got 100% of the proceeds from milk sales. The lease began in February of 2016 for a period of two years. The lease agreement provided that 100% of all proceeds earned for milk production owned by AACL at Maple Grove would be paid to AACL for the first 12 months. Maple Grove had to pay all health and maintenance costs of the cows. Accordingly, Maple Grove had to pay all expenses associated with the cows that it could not afford to buy, but 100% of all the proceeds from those cows went to AACL for the first twelve months. Maple Grove was already a defendant in this lawsuit at the time the lease was made.

         Maple Grove began to fail as a business with a high "cull and death rate" of the dairy cows. Several AACL cows died in the first year. The lease agreement provided that any loss more than 10% is to be reimbursed to AACL. The loss was over 10%. Dr. Ted Dahlstrom admitted that the "cull and death rate" was high and that it occurred under his watch. In fact, Maple Grove lost 62% of the AACL herd. Maple Grove had to cover all expenses, give AACL all proceeds, and reimburse AACL for the cost of the cows. Maple Grove had not paid all proceeds for milk production to AACL and Maple Grove had not reimbursed AACL for the costs of the cattle deaths.

         Maple Grove owed AACL $250, 000 under the lease and approximately another $275, 000 in loans. These are debts on the books of Maple Grove. Maple Grove only paid AACL $5, 000. AACL had the ability to foreclose on Maple Grove and all assets owned by Maple Grove. AACL had no other business other than with Maple Grove. AACL has never provided written notice of any meeting and it has never produced any meeting minutes. AACL has no budgets or corporate books and uses the same email address as Maple Grove. Maple Grove paid the attorney's fees for AACL up through June 30, 2017. The attorney's fees between Maple Grove and AACL were not separated until after Respondents sent discovery requests regarding attorney's fees.

         The Criminal Charges

         Several months after Respondents' filed their civil suit and approximately three years after Mr. Fulton began receiving compensation for his work, Dr. Ted Dahlstrom and Kyle Bounous, on behalf of Appellants, contacted the Barry County Sheriff's Department and told Detective Evenson their concerns with Mr. Fulton's compensation. According to Mr. Bounous, he contacted his personal attorney, Donald Cupps, regarding Mr. Fulton's compensation before going to the Sheriff's office. Mr. Bounous told Mr. Cupps he was concerned about the checks Mr. Fulton had written to himself. Mr. Cupps told Mr. Bounous to take the information, the checks, and the operating agreement to the Barry County Sheriff's Department.

         Mr. Bounous and Dr. Ted Dahlstrom went to the Barry County Sheriff's Department and met with Detective Evenson. Dr. Ted Dahlstrom testified at trial that he did not provide Detective Evenson with all of the details related to Mr. Fulton's compensation. He testified the information provided to the detective could be interpreted as false and that he now interprets it as false. Dr. Ted Dahlstrom admitted he did not point out the provision in the operating agreement giving Mr. Fulton sole discretion to pay expenses and did not mention that they received advice from an attorney on that same issue the year before. Dr. Ted Dahlstrom admitted he did not tell the detective about Curtis Hall receiving a salary or that his veterinary clinic was paid by Maple Grove. Dr. Ted Dahlstrom testified that he "regret[ted] not giving all the information to the sheriff's department."

         However, based on the information provided to Detective Evenson, the Barry County Prosecuting Attorney filed a criminal complaint against Mr. Fulton in May 2016. The criminal complaint contained one count of Class B felony theft, pursuant to section 570.030, RSMo Cum. Supp. 2009, and alleged that:

on or about November 30, 2012 . . . the defendant appropriated funds of a value of at least twenty-five thousand dollars, which property was owned by Maple Grove Farms LLC, and the defendant appropriated such property without the consent of Maple Grove Farms and with the purpose to deprive them thereof.

         The funds Appellants alleged Mr. Fulton "stole" were paid to him as his compensation for his full-time work as manager of Maple Grove. The probable cause statement in support of the complaint stated that Mr. Fulton did not have authorization to pay himself and was based on Appellants' representations to the Barry County Sheriffs' Department.

         After charges were filed, Mr. Fulton appeared in Barry County Circuit Court through counsel where he presented evidence to the prosecuting attorney that the statements made to the Sheriff's office by Appellants were false and the subject of the ongoing civil lawsuit. Mr. Fulton spent $5, 000 in attorney's fees defending the criminal charges. The Barry County Prosecuting Attorney voluntarily dismissed the criminal charges against Mr. Fulton. Detective Evenson testified (through deposition transcript) that after he learned about the pending lawsuit, he no longer believed there was probable cause for filing charges against Mr. Fulton.

         The Fultons were devastated and terrified that criminal charges were filed against Mr. Fulton. Mrs. Fulton testified that it negatively impacted Mr. Fulton's health. The Fultons felt uncomfortable, quit attending events they had been invited to, and were afraid people were talking about them. Mr. Fulton amended his petition against Appellants to include a claim for malicious prosecution.[9]

         The Pending Lawsuit

         Respondents' lawsuit alleged nineteen counts arising from the breakdown in the business relationship among the parties. Respondents chose not to submit all counts to the jury.[10] The issues before the jury were:

(1) Mr. Fulton's claims (Count XVI) against the Dahlstroms, the Halls, Leon Rinehart, and Bounous for malicious prosecution;
(2) Meadowfresh's (Count III) claims against Maple Grove, the Dahlstroms, the Halls, Leon Rinehart, and Bounous for breach of contract;
(3) Meadowfresh's and the Fultons' claims (Count IX) against Maple Grove, the Dahlstroms, the Halls, Leon Rinehart, Bounous, and AACL for civil conspiracy;
(4) Mr. Fulton's claims (Count IV) against Maple Grove, the Dahlstroms, the Halls, Leon Rinehart, and Bounous and for breach of contract;
(5) Mr. Fulton's claims (Count VIII) against Maple Grove, the Dahlstroms, the Halls, Leon Rinehart and Bounous for tortious interference with a contract;
(6) The Fultons and Meadowfresh's claims (Count X) for piercing the corporate veil of the Maple Grove Appellants, Meadowfresh Appellants, and AACL;
(7) Maple Grove's claim against Mr. Fulton for conversion;
(8) Maple Grove's claim against Mr. Fulton for negligence; and
(9) whether Respondents Meadowfresh and Mr. Fulton were entitled to attorney's fees.

         Prior to trial, the trial court entered partial summary judgment on Count I of Respondents' Fifth Amended Petition in Respondents' favor as to whether a quorum was present at the July 3, 2015 meeting, whether Mr. Fulton had been removed as manager, and whether Meadowfresh had been expelled as a member of Maple Grove. The court held all actions "purported to have been taken by the company at that meeting are necessarily void and of no effect." Appellants did not contest the trial court's entry of summary judgment on this issue and admitted all facts upon which the summary judgment was based.

         A two-week jury trial was conducted on the remaining issues. Respondents and Appellants (except Carol Dahlstrom and Lisa Hall) testified, along with three expert witnesses on behalf of Respondents. After Respondents and Appellants presented their evidence, the trial court entered a partial directed verdict as to the element of breach on Respondents' breach of contract claim based on its prior entry of summary judgment finding that Appellants' conduct in conducting the July 3, 2015 meeting in the absence of a quorum was in violation of the operating agreement.

         The jury found in favor of Respondents on every count submitted, as well as Appellants' counterclaim. The jury also found that Appellants created and misused AACL, and pierced the corporate veil as to that company.

         While Appellants' claim multiple allegations of error on appeal, the gravamen of their primary and first argument challenges the trial court's grant of a partial directed verdict on the issue of whether Appellants' breached the Maple Grove Operating Agreement by conducting the July 3, 2015 meeting without a quorum. The trial court's basis for entry of partial directed verdict was its entry of summary judgment on that issue, which Appellants do not challenge. Instead, Appellants argue that because the trial court entered summary judgment finding that a quorum was not achieved as required by the operating agreement, it was impossible for them to breach the contract because their actions were "void and ...

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.