Court Opinion

ID: 3043082
Source: CourtListenerOpinion
Date Created: 2015-10-13 23:10:39.545318+00
Date Added: 2024-06-11T11:49:02.604483
License: Public Domain

United States Court of Appeals
                          FOR THE EIGHTH CIRCUIT
                                  ___________

                                  No. 06-2433
                                  ___________

HOK Sport, Inc., case filed as HOK     *
Sport, Inc., now known as Sport Venue *
Event,                                 *
                                       *
              Appellee,                *
                                       * Appeal from the United States
       v.                              * District Court for the
                                       * Southern District of Iowa.
FC Des Moines, L.C., doing business as *
Des Moines Menace Soccer Club;         *
The Stadium Foundation; Kyle Krause, *
                                       *
              Appellants.              *
                                 ___________

                            Submitted: March 15, 2007
                               Filed: August 10, 2007
                                ___________

Before RILEY, BOWMAN, and ARNOLD, Circuit Judges.
                           ___________

RILEY, Circuit Judge.

     After a ten-day trial, the jury returned a verdict in favor of HOK Sport, Inc.
(HOK Sport) and against FC Des Moines, L.C., doing business as Des Moines
Menace Soccer Club (The Menace), The Stadium Foundation (TSF), and Kyle Krause
(Krause) (collectively, the defendants) in the amount of $436,800. The district court1
entered judgment in accordance with the verdict. The defendants appeal. We affirm.

I.     BACKGROUND
       A.     Factual Background
       HOK Sport is a subsidiary of Hellmuth, Obata + Kassabaum, Inc., the largest
architectural firm in the United States. HOK Sport has designed stadiums for twenty-
four Major League Baseball and thirty National Football League franchises, as well
as soccer, minor league baseball, and collegiate stadiums.

       Krause is the president and chief executive officer of Kum & Go, L.C. (Kum
& Go), a chain of convenience stores located throughout the Midwest. Krause owns
approximately 90% of FC Des Moines, which owns The Menace. The Menace is a
minor league soccer club located in Urbandale, Iowa, a suburb of Des Moines, Iowa.
Krause, as the owner of The Menace, wanted a new soccer stadium built in Urbandale
to increase the market value and prestige of The Menace. Upon completion of the
stadium, the City of Urbandale would have owned the stadium and received a nominal
rent payment. Calcio, a for-profit entity owned by Krause, would have operated the
stadium as a for-profit business. Under this arrangement, The Menace, as a tenant of
the stadium, would have paid rent to Calcio.

       On November 8, 2001, Krause created TSF, a nonprofit corporation. According
to TSF’s Articles of Incorporation, TSF was to “be operated exclusively for the
benefit of . . . the City of Urbandale, Iowa . . . by constructing and maintaining a
stadium.” TSF raised funds to build the stadium from both public and private sources,
including a $2 million donation from Krause that was contingent upon construction
of the stadium.

      1
      The Honorable Thomas J. Shields, United States Magistrate Judge for the
Southern District of Iowa, to whom the case was referred for final disposition by
consent of the parties pursuant to 28 U.S.C. § 636(c).
                                         -2-
       Krause was TSF’s president, sole officer, and only member of its board of
directors. Under Krause’s supervision, TSF filed articles of incorporation with the
Secretary of State and drafted bylaws. Krause, however, did not always treat TSF and
The Menace as separate entities. For example, TSF lacked a bank account from
November 8, 2001 until March 2002, and in the interim, TSF’s deposits were credited
to The Menace’s bank account. TSF was incorporated without any capital despite
accounting entries showing TSF owed $78,0002 to The Menace for services rendered
before TSF was incorporated. Krause requested employees of The Menace and
Kum & Go work as volunteers for TSF. These volunteers provided accounting and
other services to TSF. The only person ever to be a full-time employee of TSF was
Sharon Krause, Krause’s wife. TSF never held a board meeting.

       On September 7, 2000, The Menace sent out a Request for Proposals for
Architectural Services (RFP). The Menace selected and contracted with HOK Sport
as the architect for the stadium. The RFP indicated the stadium’s initial seating
capacity would be between 5,000 and 7,000 and the estimated cost of construction
would be between $13.3 and $15.4 million. The location for the new stadium was
N.W. 142nd Street and Aurora Avenue in Urbandale. The RFP set the completion
date as the spring of 2002; however, Krause later moved the completion date to the
spring of 2003. To accommodate this construction schedule, HOK Sport treated the
project as a fast-track project, in which subsequent design phases may be started even
though a previous one had not yet been completed.

      On November 7 and 21, 2001, HOK Sport mailed letter agreements to TSF
regarding the performance of architectural services for the stadium. On December 4,
2001, Krause, on behalf of TSF, signed the letter agreement dated November 21,
2001. The letter agreement provided HOK Sport would provide architectural services

      2
       The $78,000 included a charge for tax preparations for the year 2000, well
before TSF was incorporated.
                                         -3-
for the stadium, including planning analysis, programming, conceptual design, and
cost estimates. The letter agreement contained a future services clause, which
provided:

      It is anticipated that upon conclusion of the Conceptual Design Services
      the project will be defined with sufficient detail and parameters to
      proceed with basic design services from Schematic Design through
      Construction Administration as identified in [the American Institute of
      Architects (AIA)] B141 Agreements. This letter agreement will act as
      a letter of intent to the effect that HOK Sport will be retained by the
      Owner to continue providing design services for this project through
      completion of construction. The professional services fees payable to
      HOK Sport and its consultants shall range from 8.0% of a $10,600,000
      construction cost to 8.5% of a $8,000,000 construction cost.

Pursuant to the future services clause, in February 2002, HOK Sport mailed a contract
based on AIA B141CM3 to TSF. TSF never signed or agreed to the proffered
contract.

      HOK Sport started programming and conceptual design work for the stadium
in November 2001. Generally, the programming and conceptual design work includes
some design work, site planning, and drawings with limited detail. On December 10,
2001, HOK Sport submitted a $30,000 invoice to The Menace for services rendered
before December 1, 2001. On January 3, 2002, The Menace paid HOK Sport the
$30,000. HOK Sport completed the programming and conceptual design work in late
January or early February 2002. On April 5, 2002, HOK Sport submitted a second
$30,000 invoice for services rendered through January 30, 2002.

      3
      HOK submitted a contract based on AIA B141CM, rather than AIA B141,
because AIA B141CM is appropriate when the owner hires a construction manager.
TSF hired the Weitz Company as the construction manager for the stadium project.
                                         -4-
      HOK Sport also simultaneously performed schematic design work. By March
29, 2002, HOK Sport had generally completed the preliminary schematic design work,
and, on April 9, 2002, HOK Sport billed TSF $142,416 for the work. Shortly
thereafter, TSF paid $172,416 to HOK Sport for both the second invoice for the
programming and conceptual design work and the schematic design work. Before
writing the $172,416 check, TSF had $9,300.26 in its newly opened bank account.
To cover the balance of the check, Krause ordered Kum & Go to deposit $190,000 in
TSF’s bank account.

       HOK Sport completed the design development phase on June 26, 2002. Design
development includes designing the mechanical, electrical, and structural systems in
greater detail. In the pre-construction phase, Weitz Company (Weitz), the
construction manager, developed cost estimates and schedules, as well as reviewed
plans and specifications. On July 17, 2002, based on HOK Sport’s design
development plans, Weitz submitted a cost estimate of $19,661,358 for the stadium.
The $19,661,358 estimate exceeded the construction budget, which then was between
approximately $8 and $14 million. In response, Krause ordered HOK Sport to delay
the design and construction work and to begin value engineering, that is, cutting
features to reduce the cost of the project. Accordingly, HOK Sport stopped work.
The construction documents were approximately 75% complete when HOK Sport
stopped work.

      On April 29, 2003, the City of Urbandale decided not to move forward with the
stadium. As a result, Krause presented the stadium project to other cities in Iowa,
including Des Moines, West Des Moines, Waukee, Grimes, Carlisle, Altoona, and
Johnston. During presentations to these cities, Krause represented he was acting on
behalf of TSF and used materials prepared by HOK Sport. HOK Sport submitted an
invoice to The Menace for $710,377.58 for services rendered through July 31, 2002.
TSF never paid the invoice because the cost estimate exceeded the project budget.

                                        -5-
       B.    Procedural Background
       HOK Sport filed a complaint, bringing four causes of action: (1) breach of
contract against TSF and The Menace; (2) unjust enrichment against TSF and The
Menace; (3) quantum meruit against TSF and The Menace; and (4) civil fraud against
TSF, The Menace, and Krause. HOK Sport also sought to hold Krause personally
liable by disregarding TSF’s and The Menace’s corporate form. TSF brought
counterclaims against HOK Sport for (1) breach of contract and (2) negligent
misrepresentation.

       The Menace filed a motion for summary judgment, arguing The Menace was
not a proper party to the dispute. The district court denied The Menace’s motion. The
dispute proceeded to trial. At the conclusion of the evidence, HOK Sport and the
defendants filed motions for judgment as a matter of law; however, The Menace never
argued it was not a proper party to the dispute. The district court denied the motions.
The jury returned a verdict, finding (1) HOK Sport had not proven its breach of
contract claim against TSF and The Menace; (2) HOK Sport had proven its breach of
implied contract and unjust enrichment claims against TSF and The Menace; (3) HOK
Sport had not proven its fraudulent misrepresentation claim against TSF, The Menace,
and Krause; (4) HOK Sport had proven Krause should be held personally liable for
the damages award against TSF, but HOK Sport had not proven Krause should be held
personally liable for the damages award against The Menace. The jury also found
TSF had not proven either its breach of contract counterclaim or its negligent
misrepresentation counterclaim. The jury awarded HOK Sport $436,800 in damages.
The district court entered judgment in accordance with the verdict.

      This appeal followed. The defendants argue the jury instructions misstated the
applicable law by instructing (1) Iowa Code § 504A.101 (2003) did not preempt
common-law rights, including the alter ego doctrine and the remedy of piercing the
corporate veil; (2) the veil of a nonprofit corporation could be pierced because it was
undercapitalized; and (3) the veil of a nonprofit corporation could be pierced because

                                          -6-
it failed to follow corporate formalities. The defendants also argue insufficient
evidence supports disregarding TSF’s corporate form and a new trial is warranted.
The Menace further contends it is not a proper party. The defendants appealed neither
the amount of damages nor the district court’s judgment on the defendants’
counterclaims.

II.    DISCUSSION
       We review de novo the denial of a motion for judgment as a matter of law,
applying the same standard as the district court. Canny v. Dr Pepper/Seven-Up
Bottling Group, Inc., 439 F.3d 894, 899 (8th Cir. 2006). “If during a trial by jury a
party has been fully heard on an issue and there is no legally sufficient evidentiary
basis for a reasonable jury to find for that party on that issue, the court may determine
the issue against that party and may grant a motion for judgment as a matter of law.”
Fed. R. Civ. P. 50(a)(1) (2005). All reasonable inferences and facts are viewed in the
light most favorable to the nonmoving party. Christensen v. Titan Distrib., Inc., 481
F.3d 1085, 1092 (8th Cir. 2007). In reviewing the denial of a motion for judgment as
a matter of law, we neither assess credibility nor weigh the evidence. Synergetics, Inc.
v. Hurst, 477 F.3d 949, 956 (8th Cir. 2007). “[W]here conflicting inferences
reasonably can be drawn from evidence, it is the function of the jury to determine
what inference shall be drawn.” Canny, 439 F.3d at 900 (quotation omitted). “We are
reluctant to set aside a jury’s verdict and will not do so lightly.” Id. (internal quotation
marks omitted). We can affirm the denial of a motion for judgment as a matter of law
on any basis the record supports. Christensen, 481 F.3d at 1094.

                                            -7-
       A.     Jury Instructions on Disregarding TSF’s Corporate Form
       We review de novo matters of law, including jury instructions interpreting state
statutes. See Minn. Supply Co. v. Raymond Corp., 472 F.3d 524, 537 (8th Cir. 2006);
Archer Daniels Midland Co. v. Aon Risk Servs., Inc. of Minn., 356 F.3d 850, 855 (8th
Cir. 2004). Because the federal courts have diversity jurisdiction over the instant
dispute pursuant to 28 U.S.C. § 1332, we apply the law of the State of Iowa. See Doe
v. Baxter Healthcare Corp., 380 F.3d 399, 407 (8th Cir. 2004). In applying Iowa law,
we must accept the decisions of the Iowa Supreme Court as the controlling precedent.
See St. Paul Fire & Marine Ins. Co. v. Schrum, 149 F.3d 878, 880 (8th Cir. 1998).
The Iowa Supreme Court, however, has not expressly considered the issues presented
in this dispute. To predict how the Iowa Supreme Court would resolve the issues,
Lindsay Mfg. Co. v. Hartford Accident & Indemn. Co., 118 F.3d 1263, 1267-68 (8th
Cir. 1997), we will consider “relevant state precedent, analogous decisions, considered
dicta, and any other reliable data.” Riordan v. Church of Jesus Christ of Latter-Day
Saints, 416 F.3d 825, 829 n.2 (8th Cir. 2005) (quotation and ellipsis omitted).

       Under Iowa law, an entity’s corporate form can be disregarded either by
applying the alter ego doctrine or by piercing the corporate veil. See Team Cent., Inc.
v. Teamco, Inc., 271 N.W.2d 914, 923 (Iowa 1978) (en banc). Typically, a corporate
entity and its owners are separate and distinct. This arrangement encourages
investment by limiting the owners’ exposure to the amount invested. See Briggs
Transp. Co. v. Starr Sales Co., 262 N.W.2d 805, 809 (Iowa 1978). Nonetheless,
“[w]here equity requires us to examine the purposes of a corporation, we are not
bound by forms, fiction, or technical rules,” we want the truth. Benson v. Richardson,
537 N.W.2d 748, 762 (Iowa 1995). Disregarding the entity’s corporate form under
either the alter ego doctrine or the remedy of piercing the corporate veil is an
extraordinary measure that should be reserved for exceptional circumstances, see In
re Ballstaedt, 606 N.W.2d 345, 349 (Iowa 2000); Grand Lodge of Iowa of the Indep.
Order of Odd Fellows v. Osceola Lodge No. 18, 178 N.W.2d 362, 368 (Iowa 1970),

                                          -8-
and the party seeking to do so bears the burden of proof, see C. Mac. Chambers Co.
v. Iowa Tae Kwon Do Acad., Inc., 412 N.W.2d 593, 598 (Iowa 1987) (en banc).

       To further the public convenience, cure wrongs, protect against fraud, and
advance the ends of justice, the alter ego doctrine disregards an entity’s corporate
form if the entity is “merely an instrumentality or device set up to ensure the
avoidance of the legal obligations.” Benson, 537 N.W.2d at 761 (citing Kline v.
Kline, 305 N.W.2d 297, 299 (Mich. Ct. App. 1981) (per curiam)). A corporate entity
is the alter ego of a person if (1) the person influences and governs the entity; (2) a
unity of interest and ownership exists such that the corporate entity and the person
cannot be separated; and (3) giving legal effect to the fictional separation between the
corporate entity and the person would “sanction a fraud or promote injustice.”4 Frank
McCleary Cattle Co. v. C.A. Sewell, 317 P.2d 957, 959 (Nev. 1957), cited with
approval in Odd Fellows, 178 N.W.2d at 368; accord Benson, 537 N.W.2d at 761.
The alter ego doctrine applies to nonprofit corporations to the same extent it applies
to for-profit corporations. E.g., Odd Fellows, 178 N.W.2d at 364, 368.

       Piercing the corporate veil is a common-law equitable remedy whereby an
entity’s corporate form is disregarded to prevent an injustice. See id. at 368; see also
United States v. Bestfoods, 524 U.S. 51, 62 (1998). Under Iowa law, disregarding an
entity’s corporate form by piercing the corporate veil is appropriate if “‘the

      4
       In addition to applying to persons using a corporate entity as a mere
instrumentality, the alter ego doctrine also applies to a corporate entity using another
corporate entity as a mere instrumentality. See Schnoor v. Deitchler, 482 N.W.2d
913, 915-16 (Iowa 1992) (en banc) (“Courts have disregarded the separate corporate
personalities of parent and subsidiary corporations in certain circumstances to prevent
the parent corporation from perpetuating a fraud, evading just responsibility, or
defeating public convenience.”);William Meade Fletcher, Fletcher Cyclopedia of the
Law of Corporations § 41.10 (2006) (“Under the alter ego doctrine, when a
corporation is the mere instrumentality or business conduit of another corporation or
person, the corporate form may be disregarded.”).
                                          -9-
corporation is a mere shell, serving no legitimate business purpose, and used primarily
as an intermediary to perpetuate fraud or promote injustice.’” In re Ballstaedt, 606
N.W.2d at 349 (quoting C. Mac. Chambers, 412 N.W.2d at 597 (quoting Briggs
Transp., 262 N.W.2d at 810)). “[M]ere identity of . . . ownership and corporate
management is not alone sufficient to permit a piercing of the corporate veil.” Team
Cent., 271 N.W.2d at 923.

       “An abuse of the corporate privilege may justify piercing the corporate veil as
to persons who actively participate in the conduct of corporate affairs and have
provided inadequate capitalization.” Briggs Transp., 262 N.W.2d at 810. The
corporate form can be disregarded if “(1) the corporation is undercapitalized,
(2) without separate books, (3) its finances are not kept separate from individual
finances, individual obligations are paid by the corporation, (4) the corporation is used
to promote fraud or illegality, (5) corporate formalities are not followed[,] or (6) the
corporation is merely a sham.” Lakota Girl Scout Council, Inc. v. Havey Fund-
Raising Mgmt., Inc., 519 F.2d 634, 638 (8th Cir. 1975), cited with approval by C. Mac
Chambers, 412 N.W.2d at 598. A party seeking to pierce the corporate veil need not
prove all six factors, but it must prove at least one of the factors. See Fazio v.
Brotman, 371 N.W.2d 842, 846 (Iowa Ct. App. 1985). For example, fraud is a
sufficient, but not necessary, condition for piercing the corporate veil. See Adam v.
Mount Pleasant Bank & Trust Co., 355 N.W.2d 868, 872 (Iowa 1984) (“Fraud is not
a prerequisite for piercing the corporate veil.”); State ex rel. Miller v. Internal Energy
Mgmt. Corp., 324 N.W.2d 707, 715 (Iowa 1982) (“[F]raud constitutes a sufficient
basis for piercing the corporate veil.”); see also Team Cent., 271 N.W.2d at 923. For
the same equitable reasons, courts apply the remedy of piercing the corporate veil to
both for-profit and nonprofit corporations. See William Meade Fletcher, Fletcher
Cyclopedia of the Law of Corporations § 41.75 (2006).

                                          -10-
              1.     Iowa Code § 504A.101
       Krause argues the alter ego doctrine and the remedy of piercing the corporate
veil are inapplicable to nonprofit corporations because Iowa Code § 504A.101 (2003)5
is the exclusive means to impose personal liability on the directors of nonprofit
corporations. Unless the language of a statute directly negates the common law, the
statute must be interpreted in conformity with the common law. Rieff v. Evans, 630
N.W.2d 278, 285 (Iowa 2001) (en banc). If, however, the statute has preempted
common-law rights, the common law must recede. Id. at 285-86. “[S]tatutes will not
be construed as taking away common law rights existing at the time of enactment
unless that result is ‘imperatively’ required by the language of the statute.” Collins
v. King, 545 N.W.2d 310, 312 (Iowa 1996); accord Bestfoods, 524 U.S. at 63 (stating
“‘to abrogate a common-law principle, the statute must speak directly to the question
addressed by the common law’” (quoting United States v. Texas, 507 U.S. 529, 534
(1993))).

      5
       Section 504A.101 provides:

             Except as otherwise provided in this chapter, a director, officer,
      employee, or member of the corporation is not liable on the corporation’s
      debts nor obligations and a director, officer, member, or other volunteer
      is not personally liable in that capacity, for a claim based upon an act or
      omission of the person performed in the discharge of the person’s duties,
      except for a breach of the duty of loyalty to the corporation, for acts or
      omissions not in good faith or which involve intentional misconduct or
      knowing violation of the law, or for a transaction from which the person
      derives an improper personal benefit.

Iowa Code § 504A.101 (2003), repealed by Revised Iowa Nonprofit Corporation Act,
(80 G.A.) ch. 1049, § 190 (effective July 1, 2005). Effective July 1, 2005, the Revised
Iowa Nonprofit Corporation Act, Iowa Code chapter 504, replaced the Iowa Nonprofit
Corporation Act, Iowa Code chapter 504A. See Iowa Code § 504.1701(1). Because
HOK Sport filed the instant complaint on August 19, 2003, before the repeal of the
Iowa Nonprofit Corporation Act, Iowa Code § 504A.101 (2003) is the applicable law,
not Iowa Code §§ 504.613, 504.901. See Iowa Code § 504.1703(1)(a), (b).
                                         -11-
       Section 504A.101 had three parts. First, it extended the common-law rule that
stockholders generally are not liable for a corporation’s debts, see Hampson v. Weare,
4 Iowa 13, 15 (Iowa 1857), to the directors, officers, employees, and members of
nonprofit corporations. Second, it exculpated the directors, officers, members, and
other volunteers of nonprofit corporations of personal liability, based solely on their
status with the nonprofit corporation, for torts committed by the nonprofit corporation.
Cf. Estate of Countryman v. Farmers Coop. Ass’n, 679 N.W.2d 598, 603-05 (Iowa
2004) (en banc) (concluding Iowa Code § 490A.603(1), an analogous statute
governing the personal liability of members and managers of limited liability
companies, exculpated members and managers “for company torts ‘solely by reason
of being a member or manager’ of an LLC” (quoting Iowa Code § 490A.603(1))).6
Third, it held the directors, officers, employees, members, and other volunteers of
nonprofit corporations personally liable to the same extent the directors of
corporations typically are held personally liable. See Iowa Code § 490.832 (1999);
id. § 496A.49(13) (1989).

      The language of section 504A.101 does not indicate the Iowa legislature
intended to preempt common-law rights. Cf. Cookies Food Prods., Inc. v. Lakes
Warehouse Distrib., 430 N.W.2d 447, 452-53 (Iowa 1988) (concluding a director
owed the corporation the additional duties of good faith, honesty, and fairness,
although Iowa Code § 496A.34 (1989) only provided self-dealing transactions
involving the corporation and director were not void or voidable assuming either
complete disclosure and ratification or a fair and reasonable transaction). The preface

      6
       After our oral argument in this case, the Iowa Court of Appeals decided Indian
Hills Cmty. Coll. v. Indian Hills Booster Club, 734 N.W.2d 486, No. 06-0392, 2007
WL 911890 (Iowa Ct. App. Mar. 28, 2007) (unpublished table decision), appeal
denied, No. 06-0392 (July 17, 2007). The Iowa Court of Appeals held
section 504A.101 imparted immunity to the directors, officers, and volunteers of
nonprofit corporations. Id. at *3. We refuse to follow the Indian Hills Community
College decision because it is contrary to the Iowa Supreme Court’s analysis in Estate
of Countryman, 679 N.W.2d at 603-04.
                                         -12-
to section 504A.101 is insufficiently precise to negate common-law rights. The
defendants’ interpretation of section 504A.101 is not imperatively required by the
statutory language.7 Forecasting the Iowa Supreme Court’s opinion, we hold
section 504A.101 preempted neither the alter ego doctrine nor the remedy of piercing
the corporate veil.

              2.     Undercapitalization
       The defendants argue the district court erred by instructing the jury that TSF’s
corporate form could be disregarded if TSF were undercapitalized. The defendants
assert nonprofit corporations cannot be adequately capitalized because the Iowa
Nonprofit Corporation Act prohibited the investment of equity capital in nonprofit
corporations. See generally Iowa Code § 504A.26 (2003) (“A [nonprofit] corporation
shall not have or issue shares of stock.”). In support, the defendants cited Macaluso
v. Jenkins, 420 N.E.2d 251, 257 (Ill. App. Ct. 1981), for the proposition “[p]laintiffs,
who consented to contract with [a nonprofit corporation], knowingly assumed the risk
that the [nonprofit corporation] was thinly capitalized.” Id. In Macaluso, the
Appellate Court of Illinois, Second Division, affirmed the jury verdict and trial court’s
decision to pierce the veil of a nonprofit corporation as to the person who “exercised
ownership control over,” “made most or all of the decisions,” “was the sole
representative for,” and “intended to profit from” the nonprofit corporation. Id. at
255. The appellate court also affirmed the trial court’s decision to dismiss the case
against a part-time clerical volunteer of the nonprofit corporation. Id. at 257. In doing

      7
       The rule that statutes in derogation of the common law will not be strictly
construed, see Iowa Code § 4.2, is not applicable because the purview of
section 504A.101 can be interpreted in such a way as to avoid being in derogation of
the common law. Cf. Fabricius v. Montgomery Elevator Co., 121 N.W.2d 361, 364-
65 (Iowa 1963) (interpreting the exclusive remedy provision of the Iowa’s Workers’
Compensation statute not to preclude common-law causes of action against a workers’
compensation insurer), superseded by statute on other grounds, Iowa Code § 88A.14
(1971) (since repealed), as recognized in Bowen v. Kaplan, 237 N.W.2d 799, 801
(Iowa 1976).
                                          -13-
so, the appellate court noted, in dicta, nonprofit corporations had no duty to be
capitalized under Illinois law and the plaintiffs had assumed the risk of nonpayment
by dealing with a thinly capitalized nonprofit corporation. Id. We disagree with the
dicta in Macaluso.

      In the context of a for-profit corporation, the Iowa Supreme Court stated:

      If a corporation is organized and carries on business without substantial
      capital in such a way that the corporation is likely to have no sufficient
      assets available to meet its debts, it is inequitable that shareholders
      should set up such a flimsy organization to escape personal liability. The
      attempt to do corporate business without providing any sufficient basis
      of financial responsibility to creditors is an abuse of the separate entity
      and will be ineffectual to exempt the shareholders from corporate debts.
      It is coming to be recognized as the policy of the law that shareholders
      should in good faith put at the risk of the business unencumbered capital
      reasonably adequate for its prospective liabilities. If capital is illusory
      or trifling compared with the business to be done and the risks of loss,
      this is a ground for denying the separate entity privilege.

Briggs Transp., 262 N.W.2d at 810 (quoting Henry W. Ballantine, Ballantine on
Corporations, § 129 (rev. ed. 1946)).

       The reasoning of the Iowa Supreme Court in Briggs Transportation can
logically be extended to nonprofit corporations.               A corporation may be
undercapitalized due to either an insufficient contribution of equity capital or an
insufficient amount of capital available to satisfy the corporation’s liabilities. See C.
Mac Chambers, 412 N.W.2d at 598; see also Fletcher Cyclopedia of the Law of
Corporations § 41.33 (“‘Inadequate capitalization’ generally means capitalization very
small in relation to the nature of the business of the corporation and the risks attendant
to such businesses.”). Although a nonprofit corporation cannot be financed with
equity capital, nonprofit corporations typically receive donations and have other
sources of funding, such as earned income. See Heather Gottry, Profit or Perish: Non-

                                          -14-
Profit Social Service Organizations & Social Entrepreneurship, 6 Geo. J. on Poverty
L. & Pol’y 249, 261 (1999). Donations, a form of capital, are to a nonprofit
corporation what equity capital is to a for-profit corporation.

       A nonprofit corporation’s veil may be pierced only if it is undercapitalized in
the context of the business that it conducts. Many nonprofit corporations begin
operating with very little capital, yet are not necessarily undercapitalized, if the
nonprofit corporation assumes only small liabilities and the nature of its business is
not particularly risky. Cf. United States v. McGough, 510 F.2d 598, 603 (5th Cir.
1975) (noting nonprofit corporations are “often thinly capitalized”). Alternatively, if
a nonprofit corporation engages in commercial transactions and operates as a
sophisticated business entity in an area of commerce typically frequented by for-profit
businesses, the nonprofit corporation may need to be capitalized to approximately the
same extent that a for-profit corporation should be capitalized. See Medlock v.
Medlock, 642 N.W.2d 113, 127-28 (Neb. 2002) (holding a nonprofit corporation is
subject to the equitable remedy of piercing the corporate veil and explaining “many
of the legal changes now applicable to nonprofits reflect logical extensions of settled
law to the altered reality of nonprofits. Such extensions are based on a fundamental
jurisprudential tenet: Similar factual situations dictate similar legal treatment.”
(quoting Evelyn Alicia Lewis, When Entrepreneurs of Commercial Nonprofits
Divorce: Is it Anybody’s Business? A Perspective on Individual Property Rights in
Nonprofits, 73 N.C. L. Rev. 1761, 1773 (1995))). We hold, anticipating the result
under Iowa law, the veil of a nonprofit corporation may be pierced on grounds the
nonprofit corporation was undercapitalized if the nonprofit corporation has operated
in a fashion similar to a for-profit business without being sufficiently capitalized. To
hold otherwise would be to focus myopically on the entities involved in the
transaction rather than the actual substance of the transaction, see Benson, 537
N.W.2d at 762, and would encourage the unscrupulous to take advantage of others by
shifting liabilities and risks to nonprofit corporations.

                                         -15-
               3.     Failure to Follow Corporate Formalities
       The defendants argue the district court erred by instructing the jury that TSF’s
corporate form could be disregarded if TSF failed to follow corporate formalities.8
The Iowa Limited Liability Company Act of 1992, Iowa Code
§§ 490A.100–490A.1601, limits the extent of the personal liability of members of
limited liability companies to the personal liability of shareholders of corporations,
“except that the failure to hold meetings . . . or the failure to observe formalities
pertaining to the calling or conduct of meetings shall not be considered a factor
tending to establish that the members have personal liability for any debt, obligation,
or liability of the limited liability company.” Iowa Code § 490A.603(2). Compared
to the factors that support piercing the veil of a corporation, section 490A.603(2)
eliminated the failure to hold meetings as a factor that could support piercing the veil
of a limited liability company. See Estate of Countryman, 679 N.W.2d at 602-03.
The elimination of the failure to hold meetings factor for limited liability companies
is rational because the managers or members of limited liability companies may
exercise corporate power without making decisions by voting at formal meetings. See
Iowa Code § 490A.702(1), .705(1); see also Steven C. Bahls, Application of
Corporate Common Law Doctrines to Limited Liability Companies, 55 Mont. L. Rev.

      8
        The defendants proposed a jury instruction stating: “[t]he mere lack of
corporate formalities alone is not enough as a matter of law to impose the remedy of
piercing the corporate veil.” Because The Menace is a limited liability company, the
district court erred by not providing any jury instruction regarding Iowa Code
§ 490A.603(2). The district court, however, did not err in refusing to provide the
defendants’ proposed instruction because (in addition to being untimely) it provided
exculpation beyond the purview of section 490A.603(2). Compare Iowa Code
§ 490A.603(2), supra, with Uniform Ltd. Liab. Co. Act § 303(b) (1996) (“The failure
of a limited liability company to observe the usual company formalities or
requirements relating to the exercise of its company powers or management of its
business is not a ground for imposing personal liability on the members or managers
for liabilities of the company.”). Regardless, any error was harmless because Krause
was not found personally liable for the damages award against The Menace. See Fed.
R. Civ. P. 61.
                                         -16-
43, 63 n.116 (1994); cf. Iowa Code § 490A.701(2), (3) (requiring a majority vote of
the limited liability company members only to dissolve and wind up, to sell or pledge
all or substantially all of the assets, or to merge, and, unless agreed otherwise, a
unanimous vote to amend the articles of organization or operating agreement). In
contrast, a corporation’s board of directors exercise corporate power by voting on
decisions at formal meetings. See id. § 490.801(2), 490.820-.824. Because, in
contrast to a corporation, a limited liability company can be managed without holding
formal meetings, the failure to hold meetings is not an extraordinary occurrence that
supports disregarding its corporate form.

       This distinction is important, because the question here is whether nonprofit
corporations should be treated as limited liability companies or as corporations for
purposes of piercing the corporate veil based on a failure to hold meetings. We hold,
again anticipating Iowa law, the corporate form of nonprofit corporations can be
disregarded based on a failure to hold meetings for two reasons. First, the Iowa
legislature understood how to modify the common-law factors that support piercing
the corporate veil, as the Iowa legislature did in the Iowa Limited Liability Company
Act modifying these common-law factors for limited liability companies. See Iowa
Code § 490A.603(2). Because the Iowa legislature modified the common-law factors
that support piercing the veil of a limited liability company (yet the legislature did not
do so for nonprofit corporations) to give effect to the legislature’s decision not to
modify the common-law factors that support piercing the veil of a nonprofit
corporation, we conclude the factors that support piercing the veil of a corporation
also support piercing the veil of a nonprofit corporation. See generally 2B Norman
J. Singer, Statutes and Statutory Construction § 53.03 (6th ed. 2000) (“By referring
to other similar legislation, a court is able to learn the purpose and course of
legislation in general, and by transposing the clear intent expressed in one or several
statutes to a similar statute of doubtful meaning, the court not only is able to give
effect to the probable intent of the legislature, but also to establish a more uniform and
harmonious system of law.”). Second, this holding is consistent with the notion that

                                          -17-
nonprofit corporations operate in a manner similar to corporations. For example, the
nonprofit corporation’s board of directors exercises corporate power by making
decisions at formal meetings. See Iowa Code § 504A.17, .20, .22 (2003). Treating
a nonprofit corporation as a corporation for purposes of piercing the veil based on the
failure to hold meetings is consistent with the Code of Iowa. See generally Fleur de
Lis Motor Inns, Inc. v. Bair, 301 N.W.2d 685, 689 (Iowa 1981) (“The objective of
statutory construction is to give effect to the intention of the General Assembly.”).

      The district court did not err in instructing the jury on these issues.

       B.    Sufficiency of the Evidence
       Krause argues insufficient evidence supports holding him personally
responsible for TSF’s debts under both the alter ego doctrine and the remedy of
piercing the corporate veil. Viewing all reasonable inferences and facts in favor of
HOK Sport, we conclude legally sufficient evidentiary bases exist to hold Krause
personally liable under both theories.

              1.      Alter Ego Doctrine
       Krause, as the president, only officer, and only member of the board of directors
of TSF, had complete control over TSF’s operations. Krause, and no one else,
represented TSF. Krause used TSF to further his own personal goal: the construction
of a new soccer stadium to increase the value and prestige of The Menace. Krause
developed an elaborate plan to build a stadium to maximize his profits while shedding
any liability or risk: (1) TSF, a nonprofit corporation without any capital, was to raise
funds to pay for the stadium and assume all the risk associated with its construction;
(2) The Menace, a limited liability company controlled by Krause, would be the
primary beneficiary of the stadium, yet, would contribute nothing towards the cost of
construction; (3) Calcio, a for-profit business owned by Krause, would earn a profit
by operating the stadium, yet like The Menace, would contribute nothing towards the
cost of construction; and (4) the City of Urbandale would assume the costs associated

                                          -18-
with owning and maintaining the stadium, yet would receive only a nominal rent
payment from Calcio. When the proprietor of a for-profit business establishes a
nonprofit corporation to assume a liability or risk that otherwise, in the ordinary
course of business, would have been assumed by a for-profit business, and when the
nonprofit corporation accrued liabilities without any means to satisfy the liabilities,
a reasonable jury may easily decide that allowing the for-profit business (or its owner)
to escape the liability would be sanctioning a fraud and promoting an injustice. See
Cent. Nat’l Bank & Trust Co. of Des Moines v. Wagener, 183 N.W.2d 678, 681 (Iowa
1971) (affirming the trial court’s decision to disregard the corporate form when “[t]he
evidence clearly shows the use of the corporation as a tool to juggle assets and
liabilities”). A reasonable jury had a sufficient evidentiary basis on which to conclude
Krause incorporated TSF as a nonprofit corporation to avoid risk and the payment of
legal obligations. Sufficient evidence supports imposing liability on Krause under the
alter ego doctrine.

             2.     Piercing TSF’s Corporate Veil
       Likewise, several factors support piercing TSF’s corporate veil to impose
personal liability on Krause. First, TSF was incorporated without any capital or
donations, despite Krause, on behalf of The Menace, having charged TSF $78,000 for
services rendered before its incorporation. Although Krause intended to make a $2
million donation to TSF in the future, Krause’s donation, like all the other donations
and funds available to TSF, was contingent on the construction of the stadium. TSF’s
debt to HOK Sport, however, was not contingent on the construction of a stadium. By
being in the business of constructing a stadium, TSF needed to be sufficiently
capitalized so TSF could pay its debts even if the stadium project failed. TSF never
had sufficient capital to pay for the stadium’s design in the event the stadium was not
built.

     Second, TSF’s finances were not always kept separate from the finances of The
Menace and of Kum & Go. Krause controlled each of these three entities and shifted

                                         -19-
money among the entities at will. Before TSF had its own bank account, TSF’s
receipts were deposited in The Menace’s bank account. Cf. Briggs Transp., 262
N.W.2d at 810 (affirming the trial court’s decision to pierce the corporate veil because
“sale proceeds were not deposited in the corporate bank account”). Occasionally, The
Menace would loan money to TSF, and, at other times, TSF would loan money to The
Menace. Kum & Go loaned $190,000 to TSF to cover a payment to HOK Sport.
Although The Menace and Kum & Go are corporate entities that are nominally
separate from Krause, this factor still weighs in favor of piercing TSF’s veil because
a reasonable jury could conclude Krause treated each entity as his own slush fund.
TSF’s finances were not kept separate from The Menace’s and Kum & Go’s finances,
and by extension, Krause’s finances.

       Third, TSF failed to observe the typical corporate formalities. TSF has never
held a meeting of the board of directors. TSF and The Menace loaned money back
and forth without any legal documentation. Krause requested employees of The
Menace and Kum & Go work as volunteers for TSF. Cf. Adam, 355 N.W.2d at 872
(noting, in dicta, the Court of Appeals pierced the veil of a corporation, in part,
because (1) the “officers ignored their obligations under the corporate articles and
bylaws,” (2) “there were no board of director meetings” after a certain date, and
(3) the officers personally controlled the business and misused corporate funds).
Sufficient evidence supports imposing personal liability on Krause by piercing TSF’s
veil.

       The defendants’ argument for a new trial similarly is not warranted. See supra;
see also Matrix Group Ltd., Inc. v. Rawlings Sporting Goods, Co., 477 F.3d 583, 593
(8th Cir. 2007) (“The denial of a new trial motion based on the argument that the jury
verdict was against the weight of the evidence is virtually unassailable on appeal.”
(internal quotation marks omitted)).

                                         -20-
       C.     The Menace as a Proper Party
       The Menace concedes it failed to renew the argument it was not a proper party
to the dispute in its motion for judgment as a matter of law and instead argues we can
consider this issue on appeal because the issue is purely a legal one. “‘Failure to
renew a summary judgment argument—when denial was based on factual
disputes—in a motion for judgment as a matter of law under Fed. R. Civ. P. 50(a)(1)
at the close of all the evidence is considered a waiver of the issue on appeal.’” White
Consol. Indus., Inc. v. McGill Mfg. Co., 165 F.3d 1185, 1189 (8th Cir. 1999) (quoting
Wolfgang v. Mid-America Motorsports, Inc., 111 F.3d 1515, 1521 (10th Cir. 1997)).
“However, ‘when the material facts are not in dispute and the denial of summary
judgment is based on the interpretation of a purely legal question, such a decision is
appealable after final judgment.’” Id. at 1190 (quoting Wolfgang, 111 F.3d at 1521).
Here, the district court denied The Menace’s motion for summary judgment based on
the existence of genuine issues of material fact, including (1) the existence of any
express or implied contract between HOK Sport and The Menace; (2) any financial
benefit The Menace reaped from HOK Sport’s partial performance of the contract; and
(3) Krause’s capacity and involvement with the entities. Therefore, because The
Menace’s argument is not purely a legal question, The Menace waived this argument
by failing to renew its summary judgment argument in its motion for judgment as a
matter of law.

III.   CONCLUSION
       We affirm the judgment of the district court.
                       ______________________________

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