In re: AFY, Inc., also known as Ainsworth Feed Yards Company, Inc., Debtor.
Rhett R. Sears; Rhett Sears Revocable Trust; Ronald H. Sears; Ron H. Sears Trust; Dane Sears, Appellees. Robert A. Sears, individually and as testamentary trustee under the will of Redmond Sears, deceased; Korley B. Sears, Appellants,
Submitted: May 15, 2018
from the United States Bankruptcy Appellate Panel for the
SMITH, Chief Judge, BEAM and COLLOTON, Circuit Judges.
COLLOTON, CIRCUIT JUDGE.
Sears and Robert Sears appeal a decision of the Bankruptcy
Appellate Panel affirming a bankruptcy
court's dismissal of their claims in a protracted
family dispute. We agree with the BAP that the claims are
barred by the shareholder standing rule, and we therefore
2007, a group of relatives owned shares in a Nebraska
corporation called Ainsworth Feed Yards Company, Inc.
("AFY"). Several of these parties-Rhett Sears,
Ronald Sears, and Dane Sears-sold their interest to AFY and
Korley Sears through a stock sale agreement. The agreement
conditioned the sale of the shares on delivery of promissory
notes from Korley to Rhett, Ronald, and Dane. Under the
agreement, Ronald and Dane remained employees of AFY but were
not permitted to "be disloyal to AFY or its management
in any way." After the agreement was executed, Korley
and his father Robert Sears were the sole shareholders of
2010, AFY filed for Chapter 11 bankruptcy. The bankruptcy
court later converted the proceeding to a Chapter 7
bankruptcy. Rhett, Ronald, and Dane filed claims for the
moneys owed to them under the stock sale agreement; Robert
and Korley objected to the claims. See Fed. R.
Bankr. P. 3001.
bankruptcy court ultimately concluded that AFY was liable for
the purchase price of the stock sold by Rhett, Ronald, and
Dane. The court also ruled that none of those family members
had breached any duty under the agreement. In early 2014, the
bankruptcy trustee made payments from AFY to Rhett, Ronald,
and Dane of approximately $2.6 million. In 2015, the trustee
certified that AFY's estate had been fully administered.
October 2014, Korley and Robert (both individually and as
testamentary trustee for his late father) filed a lawsuit in
Nebraska state court. They sued Rhett, Ronald, Dane, and also
the Rhett R. Sears Revocable Trust and the Ron H. Sears Trust
(collectively, the "Sears Defendants"). The
plaintiffs alleged that: (1) the Sears Defendants breached
the stock sale agreement; (2) Ronald and Dane breached their
fiduciary duty to AFY; (3) the Sears Defendants were unjustly
enriched by distributions from AFY's bankruptcy; (4) the
Sears Defendants conspired and interfered with AFY's
business expectancies during AFY's bankruptcy; and (5)
the Sears Defendants abused the bankruptcy process.
Sears Defendants removed the complaint from state court to
the federal bankruptcy court. The bankruptcy court ultimately
dismissed the complaint on the ground that the shareholder
standing rule and the doctrine of claim preclusion barred the
plaintiffs' claims. The BAP affirmed. In an appeal from a
decision of the BAP, we are a second reviewing court, and we
review the bankruptcy court's decision de novo.
In re Peoples, 764 F.3d 817, 820 (8th Cir. 2014).
threshold matter, the plaintiffs argue that the bankruptcy
court lacked jurisdiction over the case. A bankruptcy court,
on referral from a district court, has jurisdiction in cases
"arising under title 11, or arising in or related to
cases under title 11." 28 U.S.C. § 1334(b); see
id. § 157(a); Neb. D. Ct. Gen. R. 1.5. A case is
"related to" Title 11 when "the outcome of
that proceeding could conceivably have any effect on the
estate being administered in the bankruptcy."
Specialty Mills, Inc. v. Citizens State Bank, 51
F.3d 770, 774 (8th Cir. 1995) (quoting In re Dogpatch
U.S.A., Inc., 810 F.2d 782, 786 (8th Cir. 1987)). There
is such an effect if the outcome of the case "could
alter the debtor's rights, liabilities, options, or
freedom of action," and could "in any way impact
upon the handling and administration of the bankruptcy
estate." Id. (quoting Dogpatch, 810
F.2d at 786).
case, at a minimum, is "related to" a case under
Title 11. In their complaint, the plaintiffs claimed that the
Sears Defendants breached the stock sale agreement by
obtaining the appointment of a trustee in AFY's
bankruptcy case and by filing "bogus" claims in
AFY's bankruptcy. They asserted that Ronald and Dane
breached a fiduciary duty to AFY and its management, and that
the Sears Defendants were unjustly enriched by receiving
distributions from the AFY bankruptcy estate. They further
alleged that the Sears Defendants tortiously interfered with
the business expectancies of AFY by interfering with
AFY's bankruptcy proceeding. Finally, they claimed that
the Sears Defendants abused the bankruptcy process by
representing themselves as creditors of AFY. The outcome
sought by the plaintiffs, by requiring redistribution of
AFY's bankruptcy estate, could alter AFY's