CROOKSTON, Minn. - A Polk County District Court judge this week decided Anderson Seed Company Inc. of Mentor, Minn., owes $1.85 million to a CHS Inc. elevator in Pierre, S.D.
The judge also, for the first time, made the company's co-owner and its manager personally liable for part of the judgment.
Judge Kurt Marben of Crookston, refused the Pierre elevator's legal theory the Andersons acted improperly as a corporation, to remove the legal shield that typically protects shareholders from their company's debts.
At the same time, however, Marsden accepted the CHS fraud theory that managers had committed a fraud. He made each jointly and verbally partially liable for making new seed delivery deals when they both knew the company was "irretrievably insolvent."
Marben ordered co-owner Ron Anderson of Mentor jointly liable for up to $1.38 million of the claims. Separately, he said Ron's daughter, Stephanie Anderson, of Fosston, Minn., a former general manager of Anderson Seed, but not an owner, jointly liable with her father and the company for up to $1.2 million.
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It was the first time either of the Andersons had received a personal judgment in the case.
The Anderson Seed case touched hundreds of farmers in the region. In South Dakota, it undermined the legalities of some grain marketing contracts, influenced Public Utilities Commission races, changed grain marketing laws, and led to a state criminal inquiry. In North Dakota, the case led to the payout of $1 million from a state indemnity fund and a separate payment from Legumex Walker and Anderson for seed that had left the state.
In his judgment, which could see minor adjustments before it's filed in final form in 30 days, Marben said CHS was owed $622,957 for breach of contract for unpaid delivered sunflowers, as well as $756,815 for net costs and damages from contracts they withheld delivery on and resold. He added 10 percent annual interest and subtracted amounts paid to CHS under earlier claims made and paid through the North Dakota Public Service Commission and South Dakota PUC, for the net liability of $1.85 million.
CHS attorney Jon Brakke of Fargo declined to comment, except to say the "judgment tells the whole story." Milt Handcock, general manager of Midwest Cooperative of Pierre was not immediately available. Midwest Cooperative is an affiliate of CHS, serving several locations in west-central South Dakota.
CHS filed suit on Feb. 23, 2012. The case was heard in Crookston Aug. 4 to 7. Ron Anderson and Gary Leistico, an attorney for the Andersons in St. Cloud, Minn., were not available for comment. Parties not satisfied with a district court decision can appeal first to a Minnesota Appeals Court and then to the Minnesota Supreme Court.
Anderson Seed was owned by Ron Anderson and his former wife, Ramona. Their daughter, Stephanie Anderson was general manager for the company from May 2009 through June 2011.
Financial woes started when the company had $3 million in cost overruns on a processing plant completed at Redfield in July 2011. Trouble mounted in 2011 when growers failed to deliver crops they'd contracted with the company. Stephanie tried to use a "high-low" strategy of averaging losing contracts with profitable new contracts, but it was "unreasonable" for her to believe this could pay the debt owed to growers and CHS, Marben said.
The judge confirmed that Ron Anderson was at "all times" the "dominant decision maker for the company." He said Ron Anderson had properly capitalized the company but suffered in a "downturn in the sunflower seed market" and entered contracts with CHS on Sept. 29, 2011, when he knew the company was beyond hope. Marben determined that while Ron Anderson had operated the company while insolvent to maximize value for sale to pay off debts that were personally guaranteed to US Bank Corp., he said that isn't the same as taking money from the Anderson Seed bank accounts.
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Ron Anderson's former wife, Ramona, owned 50 percent of the Anderson Seed but was not included in this suit, although she is named in a separate South Dakota suit in Spink County at Redfield, filed by Dakota Mill & Grain of Rapid City, S.D. No court date is scheduled on that case. South Dakota authorities explored a criminal fraud but discontinued it for reasons that weren't explained.
