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Cutcliff v. Reuter

United States Court of Appeals, Eighth Circuit

May 4, 2018

Tana S. Cutcliff; James A. Fields; Joshua P. Haeflinger; LaDonna S. Henderson, (as Trustee for LaDonna S. Henderson Living Trust); Patricia A. Reitz, (as Trustee for Frances L. Reitz Trust); Terry J. Schippers; James D. Teegarden, II; Michael S. Trom; James D. Fields Plaintiffs - Appellants
Nathan Paul Reuter; Kathleen Reuter Defendants - Appellees Vertical Group, LLC Defendant

          Submitted: November 14, 2017

          Appeal from United States District Court for the Western District of Missouri - Jefferson City

          Before COLLOTON and GRUENDER, Circuit Judges, and HOLMES, [1] District Judge.

          GRUENDER, Circuit Judge.

         Appellants (the "Creditors") are attempting to collect on judgments against Vertical Group, LLC ("Vertical") and Nathan Reuter by levying assets now belonging to Nathan's wife, Kathleen. For the reasons that follow, we affirm the district court's[2]orders granting summary judgment to Kathleen and to Nathan and denying partial summary judgment to the Creditors.


         As we have previously explained, the Creditors are a group of victims defrauded by a Ponzi scheme run by Nathan and several associates under the aegis of Vertical. See Cutcliff v. Reuter, 791 F.3d 875, 878-80 (8th Cir. 2015).

         In 2006, the Creditors brought suit against Nathan and Vertical to recover their lost investments. Vertical failed to defend that action, and the district court entered an order of default without awarding damages. For his part, Nathan filed for bankruptcy protection, and the district court closed the original matter pending the outcome of the bankruptcy proceedings. The bankruptcy court awarded the Creditors actual and punitive damages. Cutcliff v. Reuter (In re Reuter), 427 B.R. 727, 766-68, 779 (Bankr. W.D. Mo. 2010), aff'd, 443 B.R. 427 (B.A.P. 8th Cir. 2011), aff'd, 686 F.3d 511 (8th Cir. 2012). The district court then reopened the Creditors' original case and entered a final judgment against Vertical with damages. Cutcliff v. Reuter, No. 2:06-cv-04123-NKL, 2014 WL 229179, at *3 (W.D. Mo. Jan. 21, 2014).

          The present appeal arises from a creditors' bill that the Creditors filed to execute these judgments.[3] Because Nathan and Vertical are unable to satisfy these judgments themselves, the Creditors are targeting assets that formerly belonged to Nathan and Kathleen as tenants by the entirety. The Reuters transferred these assets to a revocable trust in 2005 (the "Trust").[4] However, Kathleen revoked the Trust and transferred the assets to her exclusive possession. Thus, the Creditors seek to levy assets now held exclusively by Kathleen.

         To do so, the Creditors allege that Vertical was a "sham company" that masked an underlying partnership (the "Tortfeasor Partnership") consisting of the Reuters, as tenants by the entirety, and the other individuals who perpetrated the fraud. They seek to pierce Vertical's corporate veil; reach the Tortfeasor Partnership, including the Reuters' tenancy by the entirety; and levy the Reuters' assets, which are now owned individually by Kathleen. In the alternative, the Creditors allege that Nathan fraudulently transferred his portion of the Trust to Kathleen.

         Nathan, Kathleen, and the Creditors each sought some form of summary judgment. The district court denied the Creditors' motion for partial summary judgment, granted Kathleen summary judgment on all claims pertaining to her, and granted Nathan summary judgment on all counts related to the Trust. Pursuant to the parties' stipulation, the district court dismissed the remaining claims. The Creditors timely appealed.


         We review de novo the district court's grant of summary judgment. Tension Envelope Corp. v. JBM Envelope Co., 876 F.3d 1112, 1116 (8th Cir. 2017). A motion for summary judgment should be granted only if there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(a).

         As mentioned, the Creditors first seek to pierce Vertical's corporate veil to reach the Tortfeasor Partnership. See Saxton v. St. Louis Stair Co., 410 S.W.2d 369, 376 (Mo.Ct.App. 1966). Assuming they are able to pierce the veil, the Creditors further argue that Nathan's interest in Vertical was created, funded, and held by the Reuters as tenants by the entirety. Because all partners are jointly and severally liable for the partnership's debts and obligations, see Mo. Rev. Stat. § 358.150.1, the Creditors maintain that the Reuter entirety is liable for the Tortfeasor Partnership's obligations, see Dwyer v. ING Inv. Co., 889 S.W.2d 902, 906 (Mo.Ct.App. 1994). In ...

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