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Leifker v. Leifker Grain, LLC

United States District Court, W.D. Wisconsin

March 28, 2017

JAMIE R. LEIFKER and CATARI A. LEIFKER, Plaintiffs,
v.
LEIFKER GRAIN, LLC, ROBERT J. LEIFKER, and RITA M. LEIFKER, Defendants.

          FINDINGS OF FACT & CONCLUSIONS OF LAW

          JAMES D. PETERSON DISTRICT JUDGE.

         The case requires the court to value and divide a family farming business. Plaintiffs Jamie R. Leifker and Catari A. Leifker had been raising corn and soybeans with Jamie's parents, defendants Robert J. Leifker and Rita M. Leifker. The farming operation was run through a set of limited liability companies, the two most important of which were Leifker Grain, LLC, and Leifker Farms, LLC. The basic idea was that Leifker Farms would grow corn and soybeans under contracts to Leifker Grain, and Leifker Grain would own the crops and market them to take advantage of commodity market conditions. In 2014, a family conflict led Jamie and Catari to formally withdraw from Leifker Grain, in which they owned a 45 percent interest. Jamie and Catari filed this suit to recover the fair value of their share of Leifker Grain, as provided in Chapter 183 of the Wisconsin Statutes, which governs limited liability companies.

         The parties agree that the fair value of Leifker Grain is its net asset value, which simply means the value of its assets less the amount of its liabilities. But they sharply dispute that value: Jamie and Catari contend that their share is worth $1, 572, 194; Robert and Rita contend that it is $252, 053.

         The case proceeded to a bench trial. This opinion sets forth the court's findings of fact and conclusions of law under Federal Rule of Civil Procedure 52. The court concludes that plaintiffs are entitled to monetary judgment in the amount of $1, 496, 646.90.

         BACKGROUND AND PRELIMINARY RULINGS

         Jamie and Catari seek the fair value of their shares in Leifker Grain. Leifker Grain is an LLC organized under Wisconsin law, so Wisconsin law governs the parties' dispute. Chapter 183 of the Wisconsin Statutes governs rights and obligations of an LLC and its members unless the parties' operating agreement states otherwise. See Gottsacker v. Monnier, 2005 WI 69, ¶¶ 14-19, 45, 281 Wis.2d 361, 697 N.W.2d 436. The parties agree that their operating agreement did not modify their rights and obligations, so Chapter 183 applies.

         Under Wis.Stat. § 183.0604, disassociating members of an LLC are entitled to a distribution for the “fair value” of their shares. Once a member “becomes entitled to receive a distribution, ” that member has the status of a creditor and is entitled to all remedies available to a creditor. Wis.Stat. § 183.0606. A claim arising under Chapter 183 may be enforced against the LLC itself and, if its assets have been liquidated, against members to whom the assets have been distributed in liquidation. Wis.Stat. § 183.0909. Here, the parties agree that Jamie and Catari are entitled to the “fair value” of their shares.

         A. Valuation date

         Chapter 183 does not provide a method to determine an LLC's fair value, but the parties agree that the appropriate method here is the “net asset approach.” Under this approach, Leifker Grain' value is equal to the value of its assets less the amount of its liabilities.

         Robert and Rita contend that Leifker Grain should be valued as of the date of the liquidation of its assets. They contend, essentially, that the liquidation value is fair because Jamie and Catari caused the liquidation by withdrawing from the LLC, and that it would be fair to use the liquidation value because that is what Robert and Rita actually got for the assets. The argument has some equitable appeal, although there are also countervailing equitable arguments, too. But the equities do not matter when the statute is clear. Under Wis.Stat. § 183.0604, the dissociating members are entitled to the fair value of their share “as of the date of dissociation.” The parties agree that the date of dissociation is January 16, 2015, and the court will use that date as the valuation date.

         B. Testimony of Rita Leifker

         Robert and Rita's main challenge to the valuation of Leifker Grain was presented through Rita, who testified extensively about Grain's accounting practices and records. Rita presented what was essentially a forensic analysis of the books of both Leifker Grain and Leifker Farms. She testified that Leifker Grain's accounting practices were shoddy, that Jamie and Catari's expert overlooked various liabilities of Leifker Grain, and that Jamie and Catari actually owe Leifker Grain certain sums of monies because Leifker Grain had paid for their personal expenses. Jamie and Catari objected to Rita's testimony repeatedly throughout the trial. Tr. 1a, at 17:5-16; Tr. 1p, at 81:15-82:10, 121:24-122:12; Tr. 2a, at 122:24-123:19. The court heard Rita's testimony, but deferred ruling on its admissibility until now. The court will exclude Rita's testimony on the accounting matters for two basic reasons.

         First, Rita's testimony about the finances and accounting of the two limited liability companies is an expert analysis that was not properly disclosed in an expert report under Fed.R.Civ.P. 26(a)(2). The court already ruled that Robert and Rita's expert, Ron Helle, had not timely disclosed his opinions and that Robert and Rita would not be allowed to present expert opinion at trial. Dkt. 18. Defendants cannot circumvent this ruling by having Rita provide their expert analysis at trial. See Compania Administradora de Recuperacion de Activos Administradora de Fondos de Inversion Sociedad Anonima v. Titan Int'l., Inc., 533 F.3d 555, 560-61 (7th Cir. 2008).

         Second, even if Rita were testifying in some capacity other than an expert, her testimony and the exhibits on which she relied were not timely disclosed. See Whitfield v. Int'l Truck & Engine Corp., 755 F.3d 438, 447 (7th Cir. 2014). Rita was never disclosed as a witness with knowledge of Leifker Grain's finances. In fact, Rita testified at her deposition that she had “nothing to do with” Leifker Grain. Tr. 2a, at 122:24-123:19.

         Defendants also failed to timely disclose the exhibits on which Rita relied. For example, at trial they sought to introduce Defense Exhibit No. 510, an 184-page document showing crop prices, but they had not produced the document during discovery, and Jamie and Catari saw it for the first time one week before the trial. There are other examples. See, e.g., Defense Exhibit Nos. 550 through 555.1 Jamie and Catari had no meaningful ...


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