Argued February 9, 2015.
Appeals from the United States District Court for the Southern District of Indiana, Indianapolis Division. No. 1:01-cv-00799-RLY-MJD - Richard L. Young, Chief Judge.
Before Rovner and Sykes, Circuit Judges, and Andrea Wood, District Judge. [*]
Sykes, Circuit Judge.
IGF Insurance Company owed Continental Casualty Company more than $25 million for a crop-insurance business it bought in 1998. In 2002 IGF resold the business to Acceptance Insurance Company for about $40 million. Continental alleges that IGF's controlling family-Gordon, Alan, and Doug Symons-structured the sale so that most of the purchase price was siphoned into the coffers of other Symons-controlled companies, rendering IGF insolvent. More specifically, Continental claims that $24 million of the $40 million purchase price went to three Symons-controlled companies-Goran Capital, Inc.; Symons International Group, Inc.; and Granite Reinsurance Co.-for sham noncompetition agreements and a superfluous and overpriced reinsurance treaty. Continental, still unpaid, sued for breach of contract and fraudulent transfer.
After lengthy motions litigation and a bench trial, the district court found for Continental and pierced the corporate veil to impose liability on the controlling companies and individuals. Continental's damages totaled $34.2 million, so the court entered judgment in that amount jointly and severally against IGF, Symons International, IGF Holdings, Inc., Goran, Granite Re, and Gordon and Alan Symons. (Gordon has since died; his estate was substituted for him. Doug Symons is in bankruptcy.)
Clearing away the factual complexity, this appeal presents three discrete questions for our review: (1) Is Symons International liable to Continental for breach of the 1998 sale agreement? (2) Are Symons International, Goran, Granite Re, Alan Symons, and the Estate of Gordon Symons liable as transferees under the Indiana Uniform False Transfer Act ("IUFTA")? and (3) Are Alan Symons and the Estate of Gordon Symons liable under an alter-ego theory? For the most part, we answer these questions "yes" and affirm the judgment in its entirety.
Like many fraudulent-transfer cases, this one comes to us with a long and complicated factual and procedural history. We'll try our best to simplify. In a nutshell, in February 1998 IGF bought a multi-peril crop-insurance business from Continental at a price to be determined at either side's option by the exercise of a put or call. In January 2001 Continental exercised its put option; under the contractual formula, IGF owed Continental $25.4 million. Around that same time, IGF decided to unload the business and eventually sold it to Acceptance Insurance Company for a total price of about $40 million. The Symons family insisted that the purchase price be structured as follows: $16.5 million to IGF; $9 million to IGF parent companies Symons International and Goran in exchange for noncompetition agreements; and $15 million to Granite Re, an affiliated Symons-controlled company, in exchange for a reinsurance treaty. Acceptance agreed to this arrangement. The key questions in this protracted litigation are whether the payments to Symons International, Goran, and Granite Re were fraudulent transfers undertaken to evade IGF's debt to Continental, and if so, which entities and persons may be held liable.
A. Corporate Structure
The Symons family ran a multinational insurance empire. On paper it stretched from Canada to Barbados, but in reality the companies were all interrelated and operated out of Indianapolis. Business was done through a complex web of parents, subsidiaries, and operating and holding companies, all of which facilitated the easy-but circuitous-flow of money. It was at bottom a Symons-run family business with interlocking equity, boards, and officers, all designed to keep the companies firmly under the family's control.
Many components of the Symons family empire were involved in this litigation at its inception and through trial. The issues on appeal, however, concern only Symons International, Goran, Granite Re, Alan Symons, and the Estate of the late Gordon Symons.
Gordon Symons (Lord of Whitehouses, Nottinghamshire, U.K.) founded the family business in the 1970s. At the time of the events at issue in this suit, the business was run by Gordon's sons Alan and Doug. (Doug filed for bankruptcy while the suit was ongoing; the proceedings against him were stayed.)
Together the Symons family owned 50.4% of Goran, while its officers owned 1.8% and the rest was publicly traded. Goran, in turn, owned 73.1% of Symons International (the rest was also publicly traded) and 100% of Granite Re, which existed to reinsure contracts from other Symons subsidiaries (e.g., Pafco General Insurance Company, Superior Insurance Company, and IGF) as well as third parties. Symons International, for its part, owned 100% of IGF Holdings, Inc., which in turn owned all of IGF.
All told, the Symons family directly or indirectly owned a majority stock interest in Goran, Symons International, IGF, and IGF Holdings. Gordon Symons was Chairman of Goran and all its subsidiaries; he was also President and CEO of Granite Re. During the relevant time period, Alan Symons was President and CEO of Goran; Vice Chairman and CEO of Symons International; Vice Chairman of Granite Re; President and CEO of Superior; and Vice Chairman of IGF and IGF Holdings. He was also a member of all the relevant boards. Doug Symons was Executive Vice President and Chief Operating Officer of Goran; President, CEO, and COO of Symons International; Vice Chairman, Executive VP, and Secretary of IGF Holdings; CEO and Secretary of IGF; Vice Chairman of Granite Re; and was on all the relevant boards. Indeed, at all times the Symons family held a controlling majority of the boards of IGF Holdings and IGF. The Granite Re board consisted of Symons family members, a family associate, and one independent director. Members of the Symons family and three others were also members of Goran's board of directors, with Gordon Symons as Chairman breaking any ties. Commingling of officers and directors in the Goran-affiliated group of corporations was rampant. All this is to say that the Symons family ran the entire show.
At the time of the events at issue here, the Goran constellation of corporations was also undercapitalized. The district court found that Goran and Symons International were balance-sheet insolvent in 1999, 2000, 2001, and 2002. IGF managed to keep its head above water, but when the debt to Continental was factored in, it too was insolvent.
At the same time, Symons family members were well compensated in salaries, consulting fees, and loans from the family companies. Alan, Doug, and Gordon each received large sums of money through unsecured, interest-free loans from Symons-family entities. Between 1999 and 2002, outstanding insider loans ranged from $2 million to more than $8 million; at the end of 2001, the total amount due from directors and officers was $12.6 million. The businesses also supplied security for outside loans to Symons family members-for example, Alan and Doug personally received more than $2.5 million in loans from Huntington Bank secured by preferred shares of Symons International held by Granite Re. More straightforwardly, between 1998 and 2002, each member of the Symons family collected more than $2 million in salary and consulting fees from Granite Re, Goran, and Symons International.
The Symons businesses observed corporate formalities only in their most basic sense. Each was separately incorporated, had its own board, and maintained its own bank account. At the same time, however, all mail went to a single location, and concurrent board meetings were the norm, especially between Goran and Symons International.
B. Crop Insurance
With the corporate background now in place, we proceed to the transactional facts of the case. The story begins 18 years ago with a deal over Continental's crop-insurance business.
On February 28, 1998, Continental entered into a "Strategic Alliance Agreement" with IGF, IGF Holdings, and Symons International pursuant to which Continental sold its crop-insurance business to IGF at a future price to be determined by a complex put/call formula. Until Continental exercised its option, the IGF side of the deal promised to pay Continental a portion of the profits from the pooled crop-insurance business.
Continental exercised its put on January 3, 2001. Under the formula specified in the agreement, the IGF side owed Continental $25.4 million. At the time IGF also owed Continental more than $4 million in shared profits. The IGF side did not pay.
Shortly before Continental exercised its option, IGF decided to sell the crop-insurance business. Three buyers expressed interest: Acceptance Insurance, Archer Daniels Midland (whose buyer consortium actually included Continental), and the Westfield Group. Westfield valued the book of business at approximately $40 million and wanted to pay in one check to IGF, but Alan Symons insisted that the purchase price be divided into separate payments to various Symons-controlled entities. Archer Daniels Midland also priced the business at about $40 million.
Acceptance too valued IGF's book of business at about $40 million, but unlike Westfield it was prepared to accept Alan's terms for how the purchase price would be structured and paid. Acceptance's chairman (and principal negotiator) put it this way: "We're willing to be as flexible as we can be, within regulatory constraints, in making the deal work for you and your companies." Alan Symons proposed the following payment structure: $9 million to Symons International and Goran for noncompetition agreements; $15 million to Granite Re for a reinsurance treaty; and the remaining $16.5 million to IGF directly.
The noncompetition agreements lacked legitimate business justification. Neither Symons International nor Goran actually provided crop insurance; they're just holding companies. Most of the IGF employees who posed a real competitive threat to Acceptance-i.e., those with relationships to insurance agents and brokers-would be retained by Acceptance. Indeed, Acceptance paid a relatively modest $1.4 million to neutralize other competitive threats from the IGF employees with expertise in crop insurance (compared to the $9 million it paid ostensibly to keep the two holding companies at bay).
The Symons family-again, Alan in particular-also devised the reinsurance component of the deal and set the premium. The agreement called for Acceptance to pay Granite Re $6 million immediately and then $9 million over the next three years for "stop-loss" insurance. We'll provide more detail about this aspect of the transaction as needed later in this opinion.
Acceptance consented to these terms, and on May 23, 2001, entered into an agreement to purchase IGF's crop-insurance business for a total of $40.5 million, structured as described above.
C. This Litigation
The IGF side actually commenced this litigation. On June 4, 2001-just after inking the deal with Acceptance- IGF, IGF Holdings, and Symons International filed suit in federal court alleging that Continental had misrepresented the profitability of the crop-insurance business. Continental responded on June 6 with a suit of its own for breach of contract based on the nonpayment of the $25.4 million purchase price for the business. The IGF/Acceptance deal closed later that same day.
The two actions were consolidated, and Continental eventually filed counterclaims for breach of contract and fraudulent transfer, adding Goran, Granite Re, Pafco, Superior, and Gordon, Alan, and Doug Symons as counterclaim defendants. As relevant here, Continental alleged that the counterclaim defendants breached the Strategic Alliance Agreement and fraudulently diverted IGF assets to Goran, Symons International, Granite Re, Pafco, and Superior. Continental also alleged that the Symonses and the interrelated corporate defendants should be held liable for the fraudulent transfer under an alter-ego theory.
After protracted discovery and motions proceedings, the district judge granted Continental's unopposed motion for summary judgment on all claims raised by the IGF side in the original suit. (That decision is not challenged here.) The parties then filed cross-motions for summary judgment on Continental's counterclaims. The judge granted summary judgment for Continental on the breach-of-contract claims and set the remainder of the case for trial.
After a lengthy bench trial, the judge entered a 136-page order finding for Continental on its fraudulent-transfer and alter-ego claims. After some posttrial skirmishes, judgment in the amount of $34.2 million was entered against Alan and Gordon Symons, IGF, IGF Holdings, Symons International, Goran, and Granite Re. As we've noted, Gordon Symons died while postjudgment proceedings were ongoing in the district court; his estate was substituted for him. This appeal followed.
Because the appeal concerns only Continental's counterclaims, the parties are inverted: Continental is now the plaintiff and the Symons-side parties are the defendants. The oversized briefs present a host of issues for our review. Distilling the arguments, we're essentially asked to decide whether the district judge got three main questions right: (1) Is Symons International an obligor on the Strategic Alliance Agreement and thus liable to Continental for breach? (2) Are the defendants liable as transferees under the Indiana Uniform False Transfer Act? and (3) Are the defendants liable under an alter-ego theory?
As always, we review the judge's legal conclusions de novo and his factual findings under the highly deferential clear-error standard. Goodpaster v. City of Indianapolis, 736 F.3d 1060, 1070 (7th Cir. 2013). Indiana substantive law applies. We find no error.
A. Breach of Contract
There's no challenge to the judge's summary-judgment ruling that IGF and IGF Holdings breached the Strategic Alliance Agreement by failing to pay Continental what it was owed for the crop-insurance business. The only breach-of-contract issue raised on appeal is whether the judge correctly found Symons International liable for the breach as well.
Symons International relies on section 3.8.B of the Agreement, which describes the put mechanism and places the burden of payment squarely on IGF Holdings: "In the event [Continental] shall exercise the Put Mechanism, [IGF Holdings] shall be obligated to pay [Continental] an amount equal to 5.85 times the Average Pre-Tax Income as computed pursuant to this Section." But three Symons-family entities- IGF, IGF Holdings, and Symons International-were parties and signatories to the Agreement. And as the district court found, sections 6.8 and 11.1 of the Agreement combine to show that Symons International was clearly on the hook along with IGF and IGF Holdings.
Section 6.8, titled "Further Assurances, " states as follows:
The parties hereto shall use all commercially reasonable best efforts to take, or cause to be taken, all actions or to do, or cause to be done, all things or to execute any documents necessary, proper or advisable under applicable laws and regulations, to consummate and make effective the transactions contemplated by this Agreement … .
(Emphasis added.) Section 11.1, titled "Further Actions, " reinforces the point:
Each of the parties hereto agrees to use all reasonable effort to take, or cause to be taken, all reasonable actions and to do, or cause to be done, all reasonable things necessary, proper or advisable to consummate the transactions contemplated by this Agreement. None of the parties hereto will take or permit to be taken any action that would be in breach of the terms or provisions of this ...