The full case caption appears at the end of this opinion.
McMILLIAN, Circuit Judge. Helm Financial Corp. (Helm) appeals from an order entered in the District Court [FOOTNOTE 1]
for the District of Minnesota denying its motion for summary judgment. HelmFinancial Corp. v. MNVA Railroad, Inc., Civil No. 97-1342 (DSD/JMM) (D. Minn.June 24, 1998) (order). For reversal, Helm argues that the district court erred indenying its motion for summary judgment because the transfer of DMVW stockconstituted an unlawful preference and a breach of their common law fiduciary duty.Defendants MNVA Railroad, Inc. (MNVA), Dakota, Missouri Valley & WesternRailroad, Inc. (DMVW), and Larry C. Wood and Diane Wood argue that the districtcourt did not err in denying Helm’s motion for summary judgment because there weregenuine issues of material fact in dispute and because, as a matter of Minnesota law,creditors do not have a common law cause of action for breach of fiduciary duty againstcorporate directors or officers for unlawful distribution of corporate assets toshareholders, absent self-dealing or preferential treatment. For the reasons discussedbelow, we hold that we have appellate jurisdiction and we affirm the order of thedistrict court. The district court had subject matter jurisdiction over this case under 28 U.S.C.� 1332 (diversity jurisdiction). We have appellate jurisdiction under 28 U.S.C. � 1291. The following statement of facts is taken in large part from the district courtorder. Helm is a locomotive and railcar leasing company and a judgment creditor ofMNVA. It is a California corporation with its principal place of business in California.MNVA is a Minnesota corporation with its principal place of business in Minnesota.It was incorporated in July 1986 and operated a short-line freight railroad in Minnesotaand North Dakota. Larry and Diane Wood were officers and directors and majorshareholders of MNVA. DMVW is a North Dakota corporation organized in 1990,with its headquarters in Bismarck, ND, and a wholly-owned subsidiary of MNVA;DMVW operated several spans of railroad trackage in North Dakota under a long-termlease agreement with the Soo Line Railroad. In August 1994 MNVA agreed in principle to the terms of a letter of intent withPioneer Railcorp (Pioneer) under which Pioneer agreed to acquire MNVA’s operatingassets by purchasing MNVA’s stock. MNVA decided to spin off DMVW to MNVA.shareholders as part of the reorganization of MNVA in connection with the sale toPioneer. In October 1994 the deal between MNVA and Pioneer was restructured asa sale of assets instead of a stock purchase. On November 21, 1994, MNVAdetermined that it would be able to pay its debts in the ordinary course of business afterthe proposed distribution of DMVW stock to MNVA shareholders (as required byMinn. Stat. � 302A.551 subd. 1) and approved the distribution of DMVW stock to theexisting MNVA shareholders in proportion to the percentage of stock they owned inMNVA. No consideration was paid to MNVA for the distribution of DMVW stock.DMVW became an independently-operated entity after the distribution. In December1994 MNVA sold its assets to Pioneer for the assumption of some secured debts and$1.00 and thereafter ceased operations. According to MNVA, during the course of winding up its affairs, it was unableto pay all of its creditors in full because it experienced an “unexpected shortfall” afterlosing several substantial claims, including one against the Minnesota Department ofTransportation for reimbursement of track rehabilitation expenses. In May 1996, Helmobtained a state court judgment against MNVA for railcar leasing fees in the amountof $96,028.00, plus interest, and attorney’s fees and costs. In June 1997 Helm filed this complaint in federal district court against MNVA,DMVW, and the individual officers and directors of MNVA (Larry and Diane Wood,Jeffrey Alan Wood, Gilbert A. Gillette, Bennett J. Brown, and Patrick J. Neaton),alleging that the distribution of DMVW stock to MNVA shareholders defraudedMNVA’s creditors in violation of the Minnesota Uniform Fraudulent Transfer Act(UFTA), Minn. Stat. � 513.41-.51, and constituted an unlawful preference ofdefendants as officers, directors, shareholders, and fiduciaries over MNVA’s creditorsin breach of their fiduciary duty to creditors. Helm alleged that the spin off left MNVAinsolvent because DMVW was MNVA’s most valuable asset. Defendants filed ananswer. Helm later dismissed Gillette and settled with Jeffrey Alan Wood and Brown.Helm then filed a motion for summary judgment. On June 24, 1998, the district court denied Helm’s motion for summaryjudgment. The district court first denied summary judgment on the UFTA claim,holding the UFTA did not apply to the spin off of DMVW stock through a stockdistribution by MNVA to its shareholders. See slip op. at 5-6, citing Minnesota ModelBusiness Corporation Act, Minn. Stat. � 302A.551 subd. 3(d) (providing that the UFTAdoes not apply to distributions of stock made by a corporation to shareholders). Thedistrict court next denied summary judgment on Helm’s claim that Larry and DianeWood and Neaton breached their fiduciary duties owed as officers and directors toMNVA’s creditors by distributing DMVW stock to MNVA shareholders and therebypreferring themselves over those creditors when MNVA was insolvent or on the vergeof insolvency. First, the district court held that Minnesota corporations statutes do notcreate such a fiduciary duty to creditors based solely on shareholder status and limitsuch fiduciary duty to officers and directors. See id. at 7. With respect to officers anddirectors, the district court held that Minnesota cases do not extend such a fiduciaryduty over distributions to shareholders. See id. at 8 (citing Minnesota cases and notingthat Minnesota statutes provide liability for illegal distributions but Helm did not allegestatutory claim). The district court also denied Helm’s motion for summary judgment againstNeaton because he was not an officer or director of MNVA at the time he allegedlyreceived payments for certain corporate debts. See id. The district court also foundthat there was a genuine issue of material fact with respect to whether a certainpayment by MNVA to DMVW on January 21, 1997, was an unlawful preference inviolation of the Woods’ fiduciary duty as directors or officers of MNVA and DMVW.See id. at 9. Helm then voluntarily dismissed the remaining claims except those based on theUFTA and breach of fiduciary duty. On July 15, 1998, the district court entered anorder and judgment, based on the parties’ stipulation, dismissing with prejudice theclaims against Neaton, dismissing without prejudice the January 1997 payment claim,and stating that the June 24 order constituted a “final adjudication upon the merits of[Helm's] remaining undismissed claims.” Id., slip op. at 2 (July 15, 1998). Helmappealed. We first consider whether we have appellate jurisdiction. As noted above, thedistrict court denied Helm’s motion for summary judgment on the UFTA and breachof fiduciary duty claims. In general, denials of summary judgment are interlocutory andthus not immediately appealable. However, this denial of summary judgment was notreally an interlocutory order because it had the effect of terminating any furtherconsideration of the UFTA and breach of fiduciary duty claims in the district court. See, e.g., Libbey-Owens-Ford Co. v. Blue Cross & Blue Shield Mutual, 982 F.2d 1031
,1034 (6th Cir.) (Libbey), cert. denied, 510 U.S. 819 (1993); EEOC v. Sears, Roebuck& Co., 839 F.2d 302, 354 n.55 (7th Cir. 1988). Helm then voluntarily dismissed theremaining claims, some with and some without prejudice, in order to expedite appellatereview. The voluntary dismissal must be considered in light of the earlier denial ofHelm’s motion for summary judgment. In general, neither party may appeal from avoluntary dismissal because it is not an involuntary adverse judgment. However, whena party voluntarily dismisses its claims with prejudice in order to expedite appellatereview, the dismissal is a final judgment which can be immediately appealed. See, e.g.,Libbey, 982 F.2d at 1034; Raceway Properties, Inc. v. Emprise Corp., 613 F.2d 656,657 (6th Cir. 1980) (per curiam). In this circuit the voluntary dismissal can be withoutprejudice. See, e.g., Missouri v. Coeur d’Alene Tribe, 164 F.3d 1102
, 1105-07 (8thCir.), cert. denied, 119 S. Ct. 2400 (1999); Chrysler Motors Corp. v. Thomas AutoCo., 939 F.2d 538, 540 (8th Cir. 1991). But see, e.g., Chappelle v. BeaconCommunications Corp., 84 F.3d 652, 654 (2d Cir. 1996) (comparing cases from othercircuits and holding plaintiff cannot appeal from dismissal of some claims when balanceof claims have been voluntarily dismissed without prejudice). We hold that the “expedite review” exception applies to this case. The denialof summary judgment in effect terminated any further consideration of Helm’s breach. of fiduciary duty claim because the district court held that, as a matter of law,defendants as officers and directors did not breach their fiduciary duty owed tocreditors when they spun off DMVW to MNVA shareholders. Helm’s voluntarydismissal of its remaining claims, in order to expedite appellate review, in effect madethe denial of summary judgment a final judgment for purposes of appeal. The July 15order recognized this by stating that the denial of summary judgment constituted a finaladjudication on the merits of the UFTA and breach of fiduciary duty claims. SeeLibbey, 982 F.2d at 1034 (holding appellant’s voluntary dismissal was immediatelyappealable in light of earlier denial of motion for partial summary judgment which hadeffect of terminating appellant’s principal cause of action). Cf. Chrysler Motors Corp.v. Thomas Auto Co., 939 F.2d at 540 (holding appellant’s voluntary dismissal withoutprejudice of remainder of case made grant of motion for partial summary judgment finalfor purposes of appeal). We review de novo the district court’s summary judgment decision, applying thesame standard as the district court. Summary judgment is appropriate if the pleadings,depositions, answers to interrogatories, and admissions on file, together with theaffidavits, if any, show that there is no genuine issue as to any material fact and that themoving party is entitled to judgment as a matter of law. See Fed. R. Civ. P. 56(c). Wealso review de novo the district court’s interpretation of state law. See Salve ReginaCollege v. Russell, 499 U.S. 225, 231 (1991). For reversal, Helm argues that the district court erred in holding that, as a matterof law, defendants did not breach their fiduciary duty owed to creditors when theytransferred DMVW stock to MNVA shareholders. (Helm has not pursued its UFTAclaims on appeal. See Reply Brief for Appellant at 1; Brief for Appellant in Supportof Appellate Court Jurisdiction at 1 n.1.) This is a legal argument. Helm argues that,under Minnesota common law, the officers and directors of an insolvent corporationbreach their fiduciary duty owed to creditors if they approve a transfer of corporateassets under which the officers and directors recover more than general creditors of thecorporation. Corporate officers and directors cannot grant themselves a preferenceover creditors. See Snyder Electric Co. v. Fleming, 305 N.W.2d 863
, 869 (Minn.1981) (en banc) (Snyder Electric); Swanson v. Tomlinson Lumber Mills, 239 N.W.2d216, 221 (Minn. 1976) (en banc) (Swanson). Helm thus argues that defendants’decision to spin off DMVW to MNVA shareholders secured an advantage tothemselves (and others) at the expense of corporate creditors solely because of theirrelation to the corporation and that, but for the DMVW spin-off, MNVA would havebeen able to pay it and the other creditors. Defendants argue that the district court did not err in holding that, underMinnesota common law, officers and directors are liable to the corporation, but notcreditors, for unlawful distributions of corporate assets to shareholders. Defendantsacknowledge that Minnesota law holds officers and directors to be fiduciaries for thebenefit of a corporation’s creditors, but argue that such a duty arises only when thecorporation is nearly or actually insolvent and only to the limited extent that they areprohibited from securing for themselves, as creditors, a preference over other creditors.See, e.g., In re Metropolitan Cosmetic & Reconstructive Surgical Clinic, P.A., 115B.R. 185, 187 (Bankr. D. Minn. 1990) (citing Minnesota cases); St. James CapitalCorp. v. Pallet Recycling Assocs. of North America, Inc., 589 N.W.2d 511, 515 (Minn.Ct. App. 1999) (St. James Capital); Honn v. Coin & Stamp Gallery, Inc., 407 N.W.2d419, 422 (Minn. Ct. App. 1987) (Honn); B & S Rigging & Erection, Inc. v. Wydella,353 N.W.2d 163, 167-68 (Minn. Ct. App. 1984). Defendants thus argue that nofiduciary duty arose because the distribution of DMVW stock to defendants was adistribution of corporate assets to shareholders and not a repayment of a debt owed todefendants as creditors. Defendants also argue that summary judgment was notappropriate because whether the distribution of DMVW stock left MNVA nearly oractually insolvent, or whether defendants knew, or reasonably should have known, thatinsolvency was likely to occur as a result of the distribution, was a genuine issue ofmaterial fact. We agree with the district court that, under Minnesota law, defendants did notbreach their fiduciary duty as officers and directors to creditors like Helm.Directors and officers may make loans to their corporations andthey may use the same methods as other creditors to collect bona fidecorporate debts owed to them, but only so long as the corporation issolvent. When a corporation is insolvent, or on the verge of insolvency,its directors and officers become fiduciaries of the corporate assets for thebenefit of creditors. Snyder Electric, 305 N.W.2d at 869. This is because “[a]s fiduciaries, they cannot byreason of their special position treat themselves to a preference over other creditors.”Id. Thus, “as fiduciaries to the corporation’s creditors, the officers and directors of aninsolvent corporation cannot approve ‘a transfer or encumbrance of corporate assets. . . , the effect of which is to enable the director or officer to recover a greaterpercentage of his [or her] debt than general creditors of the corporation with otherwisesimilarly secured interests.’” Association of Mill & Elevator Mutual Insurance Co. v.Barzen International, Inc., 553 N.W.2d 446, 451 (Minn. Ct. App. 1996), citing SnyderElectric, 305 N.W.2d at 869. The fiduciary duty of an insolvent corporation’s directorsand officers to preserve and protect the assets of the corporation does not extendbeyond the prohibition against self-dealing or preferential treatment. See St. JamesCapital, 589 N.W.2d at 514-15. Even assuming for purposes of analysis that the distribution of DMVW stock leftMNVA nearly or actually insolvent, or that defendants knew, or reasonably shouldhave known, that insolvency was likely to occur as a result of the distribution, nobreach of fiduciary duty occurred because defendants did not treat themselves to apreference over Helm and other creditors. (There are no allegations of self-dealing bydefendants.) As noted above, the Minnesota Supreme Court in Snyder Electric definedunlawful preferences for corporate officers and directors as “a transfer or encumbranceof corporate assets . . . , the effect of which is to enable the director or officer torecover a greater percentage of his [or her] debt than general creditors of thecorporation with otherwise similarly secured interests.” 305 N.W.2d at 869. Here,there was no debt and thus no preference; defendants were not creditors of MNVA.This fact distinguishes the present case from the cases cited by Helm, in which, asnoted by the district court, the corporate insider was either a corporate creditor (SnyderElectric, 305 N.W.2d at 869 (payment of antecedent debts owed to corporate insider);Honn, 407 N.W.2d at 421 (recovery on promissory notes)) or in a similar position(Swanson, 239 N.W.2d at 220 (extension of debt to one family corporation by a secondfamily corporation which indirectly benefited corporate insider); B & S Rigging, 353N.W.2d at 168 (payment favoring debtor that claimed secondary liability of corporateinsiders)). The transfer of DMVW stock was not a repayment of a debt owed todefendants as creditors (and thus potentially an unlawful preference), but instead adistribution of corporate assets to defendants as shareholders. We hold that the district court correctly held that, as a matter of law, Helm failedto establish that the transfer of DMVW stock constituted an unlawful preference anda breach of defendants’ common law fiduciary duty to creditors. Accordingly, weaffirm the order of the district court. BRIGHT, Circuit Judge, concurring and dissenting. As judgment creditor of MNVA, the Appellant contends that the Woods,shareholders/officers/directors of MNVA, transferred to themselves as MNVAshareholders “MNVA’s most significant income-producing asset”- ownership ofDMVW. Appellant’s Br. at 5. Appellant argues that this asset, but for the transfer tothe Woods as shareholders, would have been paid to MNVA’s creditors, and thus thetransfer of corporate assets to the Woods was to the detriment of the corporation’screditors and to the benefit of the Woods as officers and directors of MNVA. Such a legerdemain in corporate finance is perfectly legitimate under Minnesotacorporation law in limited circumstances. A distribution, such as the stock transferhere, is permitted only when “the corporation will be able to pay its debts in theordinary course of business after making the distribution and the board does not knowbefore the distribution is made that the determination was or has become erroneous.”MINN. STAT. � 302A.511, Subd. 1. Appellant’s claim, however, was not brought under the Minnesota BusinessCorporation Act, Minn. Stat. �� 302A.001- .917. The Appellant instead specificallyrelies on Minnesota common law for its claim, and on this appeal it raises one issue:Whether the Woods, serving as officers and directors of MNVA, breached theirfiduciary duty to the Appellant as creditor when they distributed MNVA’s assets tothemselves as majority shareholders to the detriment of MNVA’s creditors. TheAppellant asserts that the district court erred in determining as a matter of law theWoods did not breach their fiduciary duty when they transferred all the DMVW stockto themselves. Neither party cites any case law in which the Minnesota appellate courts havespecifically stated that officers and directors, such as the Woods, do or do not have afiduciary obligation to creditors when the officers and directors make a distribution toshareholders that has the effect of preferring shareholders’ rights to creditors’ rights.Appellant cites to authority wherein the Minnesota appellate courts have held that inthe context of extending the corporation a loan, “[w]hen a corporation is insolvent, oron the verge of insolvency, its directors and officers become fiduciaries of the corporateassets for the benefit of creditors.” Snyder Elec. Co. v. Fleming
, 305 N.W.2d 863
, 869(Minn. 1981). See also Swanson v. Tomlinson Lumber Mills, Inc., 239 N.W.2d 216,221 (Minn. 1976) (stating that the pertinent issue is “whether the directors or officershave secured an advantage to themselves at the expense of corporate creditors solelybecause of their relation to the corporation”); (Honn v. Coin & Stamp Gallery, Inc., 407N.W.2d 419, 422 (Minn. App. 1987) (recognizing that while shareholders, directors.and officers are not prohibited from making loans to the corporation, “such transactionsare closely scrutinized to insure that they were entered in good faith with a view towardbenefiting the corporation and its creditors”). Although these cases concern loans to a corporation and not the specifictransaction at issue here, the principle underlying the rule that officers and directorsshould not use their unique role to advantage “themselves at the expense of corporatecreditors[,]” Swanson, 239 N.W.2d at 221, applies here. Whether the transaction was a loan or a distribution, when officers or directorsact to the detriment of a corporate creditor to benefit themselves, they have breachedtheir fiduciary duty to the creditors. They have used their special role in thecorporation to obtain a preference over the creditors. After all, in the ordinaryliquidation of a corporation, the creditors get paid before redemption of shares of stock.Here, the transaction put assets into the hands of the stockholders to the ultimatedetriment of creditors, thus endowing the officers and directors with an advantage overother creditors. In this case, a claim of a breach of fiduciary duty may be asserted against theWoods if, at the time of the spin-off, the Woods knew or should have known that theassets of the corporation were insufficient to pay the claims of creditors. As the Swanson court noted: The relationship between corporate officers and directors and thecreditors of a corporation is not altogether clear. While it is said thatcorporate officers and directors are not trustees for corporate creditorsand owe them no fiduciary duty, 3 Fletcher, Cyclopedia Corporations(Rev. vol. 1965) � 849, it appears that this statement is subject to thequalification that there be sufficient assets to pay their claims..Id. at 220. Whether the Woods breached their fiduciary duty to the Appellant is a factissue to be resolved at trial, not as a matter of law. Thus, the district court properlydenied Appellant summary judgment, but on remand it must resolve the issue of thealleged breach of fiduciary duty as a fact issue. Accordingly, I would affirm the order denying summary judgment to theAppellant. I would reverse, however, the trial court’s determination that the Woods arefree of any fiduciary duties to the creditor as a matter of law and would remand thiscase for further proceedings consistent with this opinion. A true copy. Attest: CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT. :::FOOTNOTES::: FN1
The Honorable David S. Doty, United States District Judge for the District of Minnesota.
Helms Financial Corporation v. MNVA Railroad, Inc., et al. United States Court of Appeals For The Eighth Circuit No. 98-2961 Helm Financial Corporation, a California corporation, Appellant, v. MNVA Railroad, Inc.; Dakota, Missouri Valley & Western Railroad,Inc.; Larry C. Wood; Diane Wood, Appellees. Appeal from the United States District Court for the District of Minnesota Submitted: May 14, 1999 Filed: May 1, 2000 Before McMILLIAN, BRIGHT and FAGG, Circuit Judges.