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Meyer v. U.S. Bank National Association

United States Court of Appeals, Eighth Circuit

July 6, 2015

David M. Meyer and Nancy R. Meyer Trust UTA Dated October 13, 2006, Plaintiff - Appellant
v.
U.S. Bank National Association, Defendant - Appellee

Submitted February 12, 2015.

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

For David M. Meyer and Nancy R. Meyer Trust, Plaintiff - Appellant: Geordie L. Duckler, Animal Law Practice, Tigard, OR; Justin D. Eichmann, Bradford & Coenen, Omaha, NE.

For U.S. Bank National Association, Defendant - Appellee: Stephen H. Nelsen, Terry R. Wittler, Cline & Williams, Lincoln, NE.

Before RILEY, Chief Judge, LOKEN and SMITH, Circuit Judges.

OPINION

LOKEN, Circuit Judge.

In June 2003, David and Nancy Meyer signed a revolving credit note and revolving credit agreement and later signed a series of term notes and term loan agreements to obtain loans from U.S. Bank to finance their swine production business. In October 2006, the Meyers transferred all their business assets to a revocable trust, The David M. Meyer and Nancy R. Meyer Trust (the Trust), naming themselves as Grantors and Trustees. The revolving credit loan went into default on July 1, 2008. U.S. Bank agreed not to exercise its default rights. The lending relationship continued until the Meyers withheld proceeds from the sale of collateral (hogs); U.S. Bank commenced a replevin action; and the Meyers filed for Chapter 11 bankruptcy protection in August 2010.

In September 2011, the Meyers, individually, sued U.S. Bank in the District of Nebraska, alleging breach of contract, fraud, violations of the Nebraska Uniform Deceptive Trade Practices Act, and unjust enrichment. The district court granted summary judgment dismissing all claims, and we affirmed. Meyer v. U.S. Bank Nat'l Ass'n, 715 F.3d 703 (8th Cir. 2013) (Meyer I). The Trust then commenced this action in state court, alleging that U.S. Bank tortiously interfered with the Trust's contractual relations with a feed supplier. U.S. Bank removed the action, promptly filed a motion for summary judgment, and later sought Rule 11 sanctions. The district court[1] granted summary judgment and imposed a $5,000 sanction against the Trust and its attorneys. The Trust appealed. U.S. Bank moved for additional sanctions under Rule 38 of the Federal Rules of Appellate Procedure, arguing the appeal is frivolous. We affirm the district court's rulings. We conclude the appeal was not frivolous but was frivolously argued. We deny an award of attorneys' fees but grant double costs as a Rule 38 sanction.

I. The Merits

In Meyer I, the Meyers' claims centered on their allegation that U.S. Bank forged their signatures on a document acknowledging a change in the loan agreement terms, which made them appear less creditworthy, forcing the loan into default. To obtain credit extensions, the Meyers were then coerced into signing forbearance agreements releasing U.S. Bank from liability for the forgery. Ultimately, U.S. Bank refused to extend the maturity date again, forcing the Meyers into bankruptcy. Their damage claims included " a loss of performance by the Meyer herd as a result of feed deprivation used by U.S. Bank in further leverage against the Meyers to comply with all demands made by U.S. Bank." We affirmed the grant of summary judgment dismissing these claims because, when the Meyers failed to pay the amount due on their loan when it matured, U.S. Bank " was under no obligation to extend the maturity date yet again. Whatever the accuracy of [U.S. Bank's creditworthiness calculation], the Meyers had failed to comply with the revolving credit agreement, and the Bank was entitled to enforce its rights." 715 F.3d at 705.

In this action, the Trust alleged that it is " the independent entity solely responsible for running" the Meyers' swine business. When the loan matured by reason of the forged debt-acknowledgment, U.S. Bank used " feed deprivation tactics" -- refusing to wire money to the Trust's feed supplier -- to force the Meyers to sign forbearance agreements, conduct that tortiously interfered with the Trust's relationship with the feed supplier. U.S. Bank moved for summary judgment, arguing the Trust's claims were barred by judicial estoppel and res judicata and submitting extensive documentation from Meyer I and the Meyers' bankruptcy proceedings. The district court granted summary judgment, concluding that the determinations in Meyer I " that the Meyers defaulted on their revolving credit agreement with the Bank; the Bank was under no obligation to forbear; and the Bank was free to enforce its rights . . . are res judicata " in this action. Consequently, the complaint " fails to state a claim [of tortious interference] upon which relief can be granted, because it describes no 'unjustified intentional act of interference' on the part of the Bank." [2]

On appeal, the Trust does not challenge the district court's decision on the merits. Rather, seizing on the court's statement that the complaint failed to state a claim upon which relief can be granted, the Trust argues the court erred procedurally by going beyond the Trust's well-pleaded claim of tortious interference in granting U.S. Bank a Rule 12(b)(6) dismissal. Though the procedural principle is sound, the contention in this case is not merely without merit, it is frivolous. U.S. Bank explicitly moved for summary judgment and submitted supporting documents that the court considered without objection. The district court's Memorandum and Order stated that it was granting summary judgment and identified the documents from Meyer I and the Meyers' bankruptcy proceedings on which the court was relying. When the Trust moved for reconsideration, arguing the court had failed to construe the complaint liberally and accept all allegations as true, the district court denied the motion in a second Memorandum and Order, explaining that its " grant of summary judgment in favor of the Bank was governed by Fed.R.Civ.P. 56 because the Court considered matters outside the pleadings, and all parties were given an opportunity to present material pertinent to the motion." There was no procedural error. The court's grant of summary judgment is affirmed.

II. The Rule 11 Sanction

The district court granted U.S. Bank's motion for sanctions, concluding the Trust's tortious interference claim violated Rule 11(b)(2) and (3) of the Federal Rules of Civil Procedure. The claim was frivolous and vexatious because, while brought in the name of the Trust, under Nebraska law " a trust is not a legal personality" and the trustees -- here, the Meyers, the unsuccessful plaintiffs in Meyer I -- were " the proper person[s] to sue or be sued on behalf of such trust." Back Acres Pure Trust v. Fahnlander,233 Neb. 28, 443 N.W.2d ...


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