Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca8-14-02575/USCOURTS-ca8-14-02575-0/pdf.json

Parties Involved:
Ainsworth Pet Nutrition, Inc.
Appellee
Arkat Nutrition, Inc.
Not Party
John Doe
Appellee
FM Service Equipment Group, Inc.
Appellant
John Farmer
Appellee
Kelly Farmer
Appellee
Jerry Friedman
Appellant

Document Text:

United States Court of Appeals

For the Eighth Circuit

___________________________

No. 14-2575

___________________________

Jerry Friedman; FM Service Equipment Group, Inc.

lllllllllllllllllllll Plaintiffs - Appellants

v.

Kelly Farmer, individually and in his capacity as an officer of Arkat Nutrition,

Inc.; John Farmer, individually and in his capacity as an officer of Arkat Nutrition,

Inc.

lllllllllllllllllllll Defendants - Appellees

Arkat Nutrition, Inc.

lllllllllllllllllllll Defendant

Ainsworth Pet Nutrition, Inc.; John Doe

lllllllllllllllllllll Defendants - Appellees

____________

Appeal from United States District Court 

for the Eastern District of Arkansas - Pine Bluff

____________

 Submitted: April 14, 2015

 Filed: June 11, 2015 

____________

Before MURPHY, COLLOTON, and KELLY, Circuit Judges.

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KELLY, Circuit Judge.

Jerry Friedman, a California resident, and FM Service Equipment Group, Inc.,

a California corporation, sued two Arkansas corporations and two employees of one

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of those corporations for breach of contract, promissory estoppel, unjust enrichment,

conversion, and other tort claims. See 28 U.S.C. § 1332. The district court granted

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summary judgment in favor of the defendants, and Friedman appeals. We affirm the

judgment.3

I. Background

The following facts are recounted in the light most favorable to Friedman, the

non-moving party. See Jackson v. Allstate Ins. Co., — F.3d ----, 2015 WL 2115528,

at *5 (8th Cir. May 7, 2015). Kelly Farmer is the founder of Arkat Nutrition, Inc.

(Arkat Nutrition), an Arkansas Corporation formed in 1989. Arkat Nutrition owned

a feed mill in Arkansas known as Plant One. Kelly’s son, John Farmer, worked at

Arkat Nutrition and was in charge of overseeing production of milling operations at

Plant One. Arkat Land Company (Arkat Land) is a limited liability company also

located in Arkansas. Arkat Land owned a separate feed mill known as Plant Two,

though it leased Plant Two to Arkat Nutrition, which used both plants to produce

animal feed. 

Friedman formed FM Service Equipment Group, Inc., for the purposes of 1

completing the oral contract that is the basis of this lawsuit. Thus, for ease of

understanding, we will refer to the plaintiffs collectively as “Friedman.”

The Honorable J. Leon Holmes, United States District Judge for the Eastern 2

District of Arkansas.

We have jurisdiction over this appeal under 28 U.S.C. § 1291. 3

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In February 2007, a tornado damaged Plant One. Arkat Nutrition decided not

to repair the plant because the equipment inside had little useful life left. A

third-party company cleaned up the debris from the tornado but left some scrap with

potential value. Later in 2007, Friedman made an oral deal with the Farmers: He

would act as a broker for Arkat Nutrition to solicit offersfor the remaining equipment

from Plant One. According to Friedman, any sale amount he brokered above

$1.9 million would go to him as a broker’s fee. Friedman says he “had the exclusive

right to contact all potential buyers”; Arkat Nutrition says Friedman was a

“non-exclusive broker” and that “it was understood that Arkat Nutrition could also

continue to attempt to find a buyer on its own.” Friedman successfully sold some of

the equipment to Mid America Pet Food, LLC, and received a commission of

$25,000. Friedman also alleged that he purchased a palletizer from Arkat Nutrition

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for $1000. He dismantled the palletizer and left it at Plant One, where it remained for

at least two years.

In 2010, Arkat Nutrition and Arkat Land transferred most of their assets to a

newly formed company, Arkat Animal Nutrition, LLC (Arkat Animal Nutrition), the

equity interests of which would then be sold to Dad’s Products Company, Inc. (Dad’s

Products). Dad’s Products, however, was not to be responsible for any investor

claims or third-party claims for which Arkat Animal Nutrition wasliable. According

to the Farmers, that sale had been contemplated since 2002, long before Friedman’s

oral deal. The sale was completed in February 2010, and shortly after Dad’s Products

changed its name to Ainsworth Pet Nutrition, Inc. (Ainsworth). After the sale,

Ainsworth hired a third-party company to remove any remaining scrap from Plant

One; that company paid Ainsworth less than $10,000 to keep the scrap. Arkat

Nutrition continued to exist only to collect proceeds from an earlier sale of some

A palletizer is a piece of equipment that Arkat Nutrition used to stack bags of 4

animal feed onto pallets.

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Plant One equipment not sold by Friedman. Arkat Animal Nutrition also briefly

continued to exist as a subsidiary of Ainsworth before merging into it.

After the sale to Ainsworth, Friedman brought this lawsuit. He alleged that he

had “expended considerable resources” to find potential buyers for the Plant One

equipment and had offered “all of the equipment” to one potential buyer for

$2.9 million. Friedman said he did not learn until December 2010 that Arkat

Nutrition had been sold. He also asserted, however, that the deal was modified so

that he would receive any amount paid above $1.5 million, though he did not say

when that modification occurred. He alleged claims for breach of contract, tortious

interference with a contract, unjust enrichment, promissory estoppel, and conversion

(for the palletizer, which he alleges wrongly was sold to Ainsworth). He sought

declaratory judgment and $1 million in owed commission. 

Friedman later moved to amend the complaint to add claims against Arkat

Land. Ainsworth cross-claimed for indemnity and contribution against the Farmers

and Arkat Nutrition, who together filed their own cross-claim for the same against

Ainsworth. Each defendant also moved for summary judgment on all of Friedman’s

claims.

The district court denied Friedman’s motion to amend because the proposed

amended complaint did not add Arkat Land as a plaintiff but added only allegations

regarding that company. Those added allegations, the court ruled, “fall far short of

alleging facts” showing that Arkat Land is the “alter ego” of Arkat Nutrition. The

court noted that, if properly alleged, the alter-ego theory could have justified holding

Arkat Land liable for the wrongdoing of Arkat Nutrition; but the amended complaint

failed to assert this theory in even a conclusory form. And even if Friedman had

properly alleged claims against Arkat Land as a separate entity, the court explained,

those claims would be untimely, and the amendment would be futile.

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The district court later ruled on the defendants’motions for summary judgment. 

The court granted summary judgment in part and denied it in part for Arkat Nutrition

on the claims for breach of contract and promissory estoppel; but the court granted

judgment in full for the Farmers on these claims and on Friedman’s claim for tortious

interference with contract. The court ruled in favor of all defendants on the claims

of unjust enrichment and conversion.5

The district court then set a trial date for Friedman’s breach of contract and

promissory estoppel claims against Arkat Nutrition. Instead of pursuing those claims,

however, Friedman jointly moved with Arkat Nutrition to dismiss with prejudice the

claims against Arkat Nutrition, rendering the court’s summary judgment order final

and appealable. Ainsworth also moved to dismiss its cross claims against Arkat

Nutrition for indemnity. The district court granted both motions and, pursuant to that

order and its earlier order granting summary judgment in part, dismissed all claims

by all parties.

II. Discussion

Friedman appeals the grant of summary judgment for the defendants. In

October 2014, Arkat Nutrition moved to dismiss itself and any adverse claims from

this appeal because Friedman had dismissed his claims against that corporation in the

district court. We granted that motion. This appeal, thus, concerns Friedman’s

claims against only the Farmers and Ainsworth, and he also has abandoned some of

those claims.

The district court also granted Ainsworth’s cross claimfor summary judgment

5

against Arkat Nutrition on its indemnity claims.

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a. Summary Judgment Claims

This court reviews the grant of summary judgment de novo. Swift & Co. v.

Elias Farms, Inc., 539 F.3d 849, 851 (8th Cir. 2008). Summary judgment is

inappropriate only if there is an “outcome determinative” dispute of fact producing

an issue appropriate for trial. Reuter v. Jax Ltd., Inc., 711 F.3d 918, 920 (8th Cir.

2013) (quotation omitted). Because this is a case under diversity jurisdiction, we

apply the substantive law of the forum state (Arkansas). Ashley County, Ark. v.

Pfizer, Inc., 552 F.3d 659, 665 (8th Cir. 2009).

1. Unjust Enrichment

Friedman first argues that the district court improperly granted summary

judgment for the Farmers on his claim of unjust enrichment because Friedman had a

contract with Arkat Nutrition. Although he acknowledges the general rule that “there

can be no unjust enrichment in contract cases,” he says this case meets the

“impossibility” exception to that rule because the Farmers made completion of the

contract impossible.

To be unjustly enriched under Arkansas law, “a party must have received

something of value, to which he or she is not entitled and which he or she must

restore.” Campbell v. Asbury Auto., Inc., 381 S.W.3d 21, 36 (Ark. 2011). The

benefitted party must have acted or intended “to make the enrichment unjust and

compensable.” Id. In other words, a person must have “received money or its

equivalent under such circumstances that, in equity and good conscience, he or she

ought not to retain.” Id. Although an express contract generally precludes an action

for unjust enrichment, that claim may be maintained, for example, when “a contract

has been discharged by impossibility or frustration of purpose.” United States v.

Applied Pharmacy Consultants, Inc., 182 F.3d 603, 607 (8th Cir. 1999) (quoting

Friends of Children, Inc. v. Marcus, 876 S.W.2d 603, 605 (Ark. Ct. App. 1994)).

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It is disputed whether the Farmers gave Friedman an exclusive or

non-exclusive right to broker deals for the Plant One equipment. And Friedman may

be right that this situation would meet an exception to the prohibition of unjust

enrichment in contract cases because the oral contract no longer can be completed. 

But there is no evidence in the record that the Farmers received “money or its

equivalent” in an unjust fashion. Friedman does not say what the unjustly received

thing was; he simply asserts that the Farmers “benefitted individually, and unjustly

from the actions of the Plaintiff.” Ainsworth paid Arkat Animal Nutrition a

considerable sum for the assets of Arkat Nutrition and Arkat Land. But there is no

evidence of the worth of the equipment specifically from Plant One; by the alleged

terms of the oral agreement, that equipment would have to have been sold for more

than $1.5 million for Friedman to have a claim to any commission. The company that

removed the Plant One equipment paid less than $10,000 for it, suggesting its worth

was nowhere near $1.5 million. Moreover, Ainsworth paid Arkat Animal Nutrition

for the assets including Plant One, and Arkat Animal Nutrition is not a party in this

suit.

Even assuming Arkat Nutrition improperly sold its rights in the Plant One

equipment to Ainsworth, and assuming that sale provided an unjust enrichment of

some kind, the only claim would be against Arkat Nutrition (the corporation) and not

the Farmers, who are only agents of Arkat Nutrition. As agents of the corporation,

the Farmers cannot be liable to Friedman on the oral brokering contract. See Grayson

& Grayson, P.A. v. Couch, 388 S.W.3d 96, 104 (Ark. Ct. App. 2012) (“[A]n agent

cannot be held personally liable to a third person on a contract for a disclosed

principal.”). Thus, the district court properly granted summary judgment for the

Farmers on this claim.

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2. Promissory Estoppel

Friedman next argues that summary judgment was improper on his claim for

promissory estoppel. He says there is a dispute of fact whether the Farmers acted

with the actual authority of Arkat Nutrition. If either Farmer lacked the authority to

make the brokerage promise with Friedman, he says, then the agreement between

Friedman and the Farmers “would be a new or different contractual obligation

binding them as an agent acting outside the scope of authority.”

Friedman is correct that, if the Farmers were acting outside the scope of their

authority as agentsfor Arkat Nutrition, they could be liable for the promise. But there

is no evidence to support that claim. The Farmers provided affidavits swearing that,

relevant to this case, they acted only within the scope of their authority as agents for

Arkat Nutrition. Friedman did not provide counter affidavits but, instead, disagreed

with various paragraphs from Kelly Farmer’s affidavit. He points to one of those

contested paragraphs, and his disagreement with it, as the only support for his

argument that the Farmers were acting outside their authority. That paragraph refers

to the “Board Minutes of Arkat Nutrition,” but those minutes are not in the record.

A disagreement about those Board minutesis not a material dispute warranting

reversal of the district court’s judgment. See Torgerson v. City of Rochester, 643

F.3d 1031, 1052 (8th Cir. 2011) (noting that “a disputed fact alone will not defeat

summary judgment, rather there must be a genuine issue of material fact”); Lower

Brule Sioux Tribe v. State of S.D., 104 F.3d 1017, 1021 (8th Cir. 1997) (“[I]t is not

enough that there are factual disputes between the parties, the disputes must be

outcome determinative under prevailing law.” (quotation omitted)). Nor does this

disagreement create a genuine dispute of fact whether the Farmers were acting within

the scope of their authority as agents of Arkat Nutrition. As agents of the

corporation, the Farmers are not liable for the contract between Friedman and Arkat

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Nutrition. See Grayson & Grayson, P.A., 388 S.W.3d at 104. The district court

properly granted the Farmers summary judgment on the promissory estoppel claim.

3. Conversion

Last, Friedman argues that the district court improperly granted summary

judgment to the defendants on his claim for conversion. He asserts that he never

abandoned the palletizer, despite leaving it in Arkansas for at least two years. 

Friedman asserts that, at the least, there is a question of fact whether Ainsworth

converted the palletizer.

To establish liability for conversion under Arkansas law, a plaintiff must prove

that the defendant wrongfully took control of another’s property and denied the owner

his rights to that property. Hatchell v. Wren, 211 S.W.3d 516, 521 (Ark. 2005). The

control over the property can be for the benefit of that defendant or the benefit of

another. Id. Abandonment, however, is a complete defense to conversion. Schmidt

v. Stearman, 253 S.W.3d 35, 42 (Ark. Ct. App. 2007). For property to be considered

abandoned, there must be “a manifest act” of the owner showing intent “to forsake

his or her property.” Id. “Property is abandoned when it has been thrown away or

its possession voluntarily forsaken by the owner.” Id.

We believe the district court properly granted summary judgment to the

defendants on this claim. There is no evidence that any defendant except Ainsworth

possessed the palletizer after Friedman bought itfromthe Farmers, and there is ample

evidence that Friedman abandoned it. After buying and disassembling the palletizer

sometime in 2009, Friedman did nothing with it: He did not check on it or move it to

California but, instead, left it in Arkansas until at least December 2011. And though

Friedman testified that he still cared about the palletizer, he left it outside (2,000

miles away in Arkansas) and allowed the disassembled pieces to rust. Moreover,

Friedman never told anyone at Ainsworth, before the sale or after, that the palletizer

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was his or that he eventually would remove it, even though he communicated with

Ainsworth employees as early as January and February 2010. Friedman’s silence

about the palletizer, despite learning that Ainsworth had purchased Arkat Nutrition

and everything left at Plant One, is strong evidence that he manifested an intent to

abandon it. Cf. Omni Holding & Dev. Corp. v. C.A.G. Invs., Inc., 258 S.W.3d 374,

381 (Ark. 2007) (finding no clear error in trial court’s conclusion that former lessee

abandoned personal property left in building when lessee traveled to Greece instead

of retrieving property within one-week time period given by court). We think no

reasonable jury would find differently.

b. Motion to Amend Complaint

In the proposed amended complaint, asthe district court noted, Friedman does

not name Arkat Land as a party or add any new claims. Instead, he simply inserts

Arkat Land into three paragraphs of his original complaint without describing how

that entity purportedly isrelated to this action. He refersto “Arkat” many other times

throughout the amended complaint, but he attributes that shorthand to only Arkat

Nutrition. Friedman does not refer to Arkat Land anywhere else in the complaint, not

even in his claims or his prayer for relief. Friedman attempted to justify the

amendment by explaining that Arkat Land wasthe “alter ego” of Arkat Nutrition; that

is the same argument he used (unsuccessfully) to explain why the amendment should

relate back and not be untimely.

We normally review the denial of a motion to amend a complaint for abuse of

discretion; but because the court denied the motion on the basis of futility, the court’s

legal conclusions are reviewed de novo. See Zutz v. Nelson, 601 F.3d 842, 850 (8th

Cir. 2010). A district court “should freely give leave [to amend] when justice so

requires.” Fed. R. Civ. P. 15(a). But leave may be denied for many reasons,

including “undue prejudice to the non-moving party, or futility of the amendment.” 

Hammer v. City of Osage Beach, 318 F.3d 832, 844 (8th Cir. 2003) (quotation

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omitted). This court previously has upheld the denial of a motion to amend when the

motion was filed 14 months after the original complaint and six days after the

discovery cutoff date. Williams v. Little Rock Mun. Water Works, 21 F.3d 218,

224–25 (8th Cir. 1994) (noting that addition of new defendants would cause undue

prejudice and that litigant failed to justify “belatedness of her motion”).

We see no abuse of discretion or error of law here. Friedman filed the motion

to amend more than 14 months after he filed the original complaint, though discovery

wasstill open. But the amended complaint added new allegations regarding different

equipment located on a different piece of land (Plant Two) and owned by a different

entity (Arkat Land). Friedman did not add Arkat Land as a new defendant and

instead attempted to pull in that entity, and the Plant Two equipment, into his oral

contract by alleging Arkat Land’s involvement with the Farmers. Though Friedman

testified that the “oral deal” involved only Plant One, he later asserted that John

Farmer “modified” the deal to encompass any equipment at any plant, even though

those plants were owned by different entities. But the original complaintsays nothing

about Plant Two or Arkat Land.

The new facts alleged are not relevant to those asserted in the original

complaint (regarding Plant One and Arkat Nutrition); instead they relate to a separate

entity not mentioned in the original complaint. See Fed. R. Civ. P. 15(c)(1)(C)

(allowing relation back if new party wasrelated to claim set out in original complaint

and had notice of the action or should have known about the action but for the

naming mistake). If Friedman always believed that John Farmer had “modified” the

agreement to include Plant Two, then he should have alleged that in his original

complaint to put Arkat Land on notice of the suit. He did not do that. Instead, he

specified that the deal applied to only the equipment in the plant damaged by

tornado—Plant One.

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Nor does the amended complaint contain sufficient information to meet the

alter-ego rationale for allowing the amendment. Friedman does not allege that Arkat

Land was controlled by Arkat Nutrition “to the extent that it has independent

existence in form only,” or that the corporate veil was abused “to defeat public

convenience, to justify wrong, or to perpetuate a fraud.” Greater Kan. City Laborers

Pension Fund v. Superior Gen. Contractors, Inc., 104 F.3d 1050, 1055 (8th Cir.

1997). Because the claims do not relate back, they would be untimely under

Arkansas’s three-year statute of limitations for each of Friedman’s claims. See Ark.

Code Ann. § 16-56-105(1), (6). The sale to Ainsworth occurred in February 2010;

the amended complaint was filed March 4, 2014. We thus agree with the district

court that the amendment would be futile. See Enervations, Inc. v. Minn. Mining &

Mfg. Co., 380 F.3d 1066, 1069 (8th Cir. 2004) (“The proposed amendment wasfutile

because, even if so amended, Count II would still be time-barred.”). The court thus

properly denied the motion to amend.

III. Conclusion

For the reasons discussed above, we affirm the grant ofsummary judgment for

the defendants and the denial of the motion to amend.

______________________________

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