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Soule v. High Rock Holding, LLC

United States District Court, D. Nevada

July 30, 2014

RANDY SOULE, Appellant,
HIGH ROCK HOLDING, LLC and GRANITE INVESTMENT GROUP, LLC, Nevada limited liability companies, Appellees

For Randy Soule, Appellant: Jamie Dreher, Michael D. Knox, Sallie B. Armstrong, Downey Brand LLP, Reno, NV.

For High Rock Holding LLC, Appellee: Jeffrey L. Hartman, HARTMAN & HARTMAN, Reno, NV.

For Granite Investment Group LLC, Appellee: F. DeArmond Sharp, Robison Belaustegui Sharp & Low, Reno, NV.

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This appeal involves the question of whether reliance or reasonable expectation

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of payment from an alter ego at the time of the transaction is a necessary requirement for application of the alter ego doctrine under Nevada law. The Court finds that such a showing is not required. Consequently, it was an abuse of discretion for the bankruptcy court to deny a Rule 56(d) request as said denial was premised on the finding that Plaintiff could not make a showing of reliance or reasonable expectation.

This appeal by Appellant Randy Soule challenges the decision of the United States Bankruptcy Court for the District of Nevada to grant summary judgment and deny his Rule 56(d) request. (Dkt. no. 16.)[1] The Motion for Partial Summary Judgment (" Motion" ) at issue was filed in the bankruptcy court by Appellees High Rock Holding, LLC (" High Rock" ) and Granite Investment Group, LLC (" Granite" ). For the reasons set out below, the bankruptcy court's Order is reversed and this action is remanded to the bankruptcy court for further proceedings consistent with this Order.


The following factual background is derived largely from the findings of fact entered by the bankruptcy court with respect to Appellees' Motion for Partial Summary Judgment and the Complaint. Appellant Soule does not contest the following facts.

Soule was approached by Ron Weddell to fund a loan of $1,000,000 on or about July 31, 2006. (EOR Tab 26 at 277 ¶ 7.) The loan was for Weddell and a number of his companies, though no specific companies were named in the Complaint and the checks were made out to Weddell personally. ( Id. ) On February 6, 2007, Soule extended the loan and funded an additional $200,000 with checks once again made out to Weddell personally. ( Id. ) Weddell funneled $900,000 to High Rock and $200,000 to Granite, but Soule did not loan High Rock or Granite any money directly. ( Id. ) In October 2007, Weddell provided Soule with title to various vehicles in partial payment of the loan. ( Id. ) Soule loaned an additional $250,000 to Weddell personally and in November 2007, Weddell assigned to Soule collateral in the amount of $1,648,000 secured by notes and deeds of trust. ( Id. )

Sometime in October 2007, Weddell and his business partner, Michael Stewart, agreed to submit various disputes involving their various companies to arbitration. (EOR Tab 1 ¶ 16.) Following a hearing, the arbitration panel determined that Weddell and Stewart each own half of the membership interest in High Rock and Granite. ( Id. ¶ 18.) The arbitration panel's decision (" Panel Decision" ) stated that High Rock and Granite were obligated to repay Soule $1,100,000 " in the respective amounts the loan proceeds were utilized." ( Id. ; EOR Tab 26 at 277 ¶ 7.) The Panel Decision makes no mention of joint and several liability. ( Id. ) Soule learned of the Panel Decision sometime after it was confirmed by the First Judicial District Court of the State of Nevada, Carson City, on or about May 18, 2009. (EOR Tab 1 ¶ 21, 25.) High Rock filed bankruptcy on or about November 8, 2009. ( Id. ¶ 26.)

Soule sought partial summary judgment and the parties stipulated to the entry of partial summary judgment in Soule's favor. (EOR Tab 26 at 275-76 ¶ 4.) In its order granting certification of partial summary judgment, the bankruptcy court

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fixed the minimum amount owed by High Rock at $900,000 and the minimum amount owed by Granite at $200,000. ( Id. at 279 ¶ 10.) The partial summary judgment order, however, reserved for trial the issue of whether High Rock and Granite could be held jointly and severally liable for the principal amount of $1,100,000 through an application of the alter ego doctrine. ( Id. at 276-77 ¶ ¶ 5-6.)

On July 26, 2012, about two months before trial, High Rock and Granite moved for partial summary judgment based in part on this alter ego claim. (EOR Tab 17 at 140.) In his opposition, Soule argued that High Rock and Granite failed to meet their burden of supporting their summary judgment argument with admissible evidence. ( Id. at 159-61.) Soule's opposition also asked the bankruptcy court to deny summary judgment pursuant to Fed.R.Civ.P. 56(d) in order to allow Soule more time to process discovery material. ( Id. at 161.) High Rock and Granite filed their reply on September 4, 2012. (EOR Tab 23 at 219.)

The bankruptcy court vacated the trial date of September 27, 2012, and held a hearing on that date instead to address the Motion. (Dkt. no. 16 at 6, 7.) At the hearing, the bankruptcy court found that partial summary judgment should be granted because, based on its review of the allegations in the Complaint, the undisputed facts and the relevant case law, the three elements of alter ego liability could not be met. ( See EOR Tab 25 at 225-51.) The bankruptcy court specifically found that " there is no genuine issue of material fact that there was no reliance, nor was there any reasonable expectation by Mr. Soule that anyone other than Mr. Weddell would repay him." ( Id. at 269:11-14.) The bankruptcy court further found, as to Soule's Rule 56(d) request, that " all the discovery in the world is not necessary regarding Mr. Soule's reliance or his reasonable expectations because he's the only one that would know that." ( Id. at 249:3-5; 255.) Such reliance or reasonable expectation, the bankruptcy court noted, " are necessary elements" to establish alter ego liability. ( Id. at 269:1-5.) Counsel for High Rock and Granite were instructed to prepare findings of fact and conclusions of law consistent with the bankruptcy court's oral ...

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