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Ccs, Inc v. K&M Enterprises

February 27, 2013

CCS, INC., PLAINTIFF-APPELLANT,
v.
K&M ENTERPRISES, L.L.C., SHANE T. KLINE AND SCOTT MORRISON, DEFENDANTS-APPELLEES.



Appeal from the Iowa District Court for Polk County, Robert B. Hanson, Judge.

The opinion of the court was delivered by: Mullins, J.

A construction company appeals from an adverse summary judgment decision on breach of contract, breach of contract implied-in-fact, and unjust enrichment claims against the principal members of a limited liability company. AFFIRMED.

Considered by Vaitheswaran, P.J., and Tabor and Mullins, JJ.

CCS, Inc. appeals the district court's decision to grant Shane Kline's and Scott Morrison's motion for summary judgment on breach of contract, contract implied-in-fact, and unjust enrichment claims. CCS, Inc. argues tax returns showing improper distributions from a limited liability company to Kline and Morrison, and the sale of the company's assets after its administrative dissolution create a genuine issue of material fact sufficient to preclude summary judgment on each claim. For the reasons contained herein, we affirm.

I. Background Facts & Proceedings

This case arises out of a dispute over payment for services between K&M Enterprises, L.L.C. (K&M) and CCS, Inc. (CCS). K&M is a limited liability company organized in Iowa. Shane Kline and Scott Morrison each held a 50% membership interest in K&M. CCS is a construction company incorporated in Nebraska.

In 2009, K&M served as a subcontractor on a school construction project. During that time K&M employed more than ten employees. To complete the construction project, a K&M employee reached an oral agreement with CCS to perform directional drilling for the laying of fiber optic pipe. CCS completed the work and provided K&M with an invoice for $50,570.10. K&M never paid CCS.

In August 2010, the Iowa Secretary of State administratively dissolved K&M for failure to file a biennial report. In June 2011, CCS filed a petition against K&M, Kline, and Morrison. CCS made allegations of breach of oral contract, breach of contract implied-in-fact, and unjust enrichment against K&M. CCS further alleged that K&M was merely an alter ego of Kline and Morrison and that it was undercapitalized, was used to promote fraud, and was a mere sham. Kline and Morrison, as individuals, moved for summary judgment.

The district court heard Kline's and Morrison's motion for summary judgment. On the morning of the hearing, Kline and Morrison presented an affidavit from K&M's accountant asserting neither Kline nor Morrison accepted cash, property, or distributions as part of K&M's dissolution. CCS presented K&M's tax returns from 2009 and 2010. CCS's attorney argued the tax returns documented improper distributions and a sale of K&M's assets for profit. The court granted the motion for summary judgment. The court denied CCS's subsequent motion to reconsider. This appeal followed.

II. Standard of Review

Our review of the district court's decision to grant partial summary judgment is for correction of errors at law. Mueller v. Wellmark, Inc., 818 N.W.2d 244, 253 (Iowa 2012). Summary judgment is appropriate where "there are no genuine issues of material fact" and "the movant is entitled to a judgment as a matter of law." Iowa R. Civ. P. 1.981(3); see also Mueller, 818 N.W.2d at 253. To determine whether summary judgment is appropriate, we view the evidence submitted in the light most favorable to the nonmoving party. Mueller, 818 N.W.2d at 253.

III. Analysis

CCS contends the district court erred in granting summary judgment in favor of Kline and Morrison, as individual defendants, on CCS's claims against K&M for breach of contract, breach of contract implied-in-fact, and unjust enrichment. The district court limited its decision to "whether the court should pierce the corporate veil and subject Kline and Morrison to individual liability."

One of the hallmark features of a limited liability company is the limited liability of its members and managers. Iowa Code ยง 489.304 (2009). A member or manager is not liable for the "debts, obligations, or other liabilities of a limited liability company, whether arising in contract, tort, or otherwise" solely by reason of acting as a member or manager. Id. To hold Kline and Morrison individually liable for K&M's debts and obligations, the parties agree the court must disregard K&M's ...


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