BMO Harris Bank N.A. v. Kuskie

                UNITED STATES DISTRICT COURT                             
                   DISTRICT OF MINNESOTA                                 

BMO Harris Bank N.A.,                Case No. 22-cv-00435 (KMM/TNL)      

               Plaintiffs,                                               

v.                                                                       

Kenneth Kuskie, John Stedman, Susan                                      
Stedman and Curtis A. Hayes,                                             

               Defendants.                                               

v.                                                                       

Capitol Sales Company, Inc.                                              


               Third-Party Defendant.                                    



    This case involves a dispute between a bank and individuals affiliated with a company 
to which the bank loaned money.  The bank seeks to recover payments that the company’s 
shareholders and former president received from the company while the business was 
insolvent.  The bank also accuses the former president of engaging in a fraudulent scheme to 
make the company appear more successful than it actually was to secure financing from the 
bank.  The shareholders each filed motions to dismiss the bank’s complaint.  [Dkt. Nos. 61, 
76, 51].  The former president seeks indemnification and advancement of legal fees from 
both the company and its shareholders, who have filed motions to dismiss his claims against 
them.  [Dkt. Nos. 56, 66, 80, 71].  For the reasons stated below, the Court grants the 
shareholders’ motions to dismiss and denies the company’s motion to dismiss.  
 I.   BACKGROUND                                                         
    The bank, BMO Harris Bank N.A. (“BMO”), loaned money to Capitol Sales, a 
company specializing in the distribution of consumer electronics, starting in 2011.  [Am. 

Compl. ¶¶ 1, 8, Dkt. No. 49].  When BMO filed its complaint, Capitol Sales owed the bank 
more than $3.2 million.  [Id. ¶ 21.]  BMO sued Capitol Sales in a separate case to recover the 
amount of the defaulted loans.  See BMO Harris Bank N.A. v. Capitol Sales Co., (N.D. Ill.) (No. 
22-cv-132).  In April 2022, BMO obtained a default judgment award of $3.3 million against 
Capitol Sales, which failed to defend against the lawsuit.  See Default Judgment Order, BMO 
Harris Bank N.A. v. Capitol Sales Co., (N.D. Ill. Apr. 20, 2022) (No. 22-cv-132) (Dkt. No. 

24).                                                                      
    In this case, BMO has sued the three shareholders of Capitol Sales—Kenneth 
Kuskie, John Stedman, and Susan Stedman—and its former president and Chief Financial 
Officer (“CFO”), Curtis Hayes.  BMO asserts that between January 2018 and July 2021, 
Capitol Sales was at or near insolvency, yet during that period, Mr. Kuskie received $435,000, 
Mr. Stedman received $355,000, and Ms. Stedman received $355,000 from the company.  

[Am. Compl. ¶¶ 30, 67, 104.]  BMO alleges the Capitol Sales board of directors did not 
approve these payments.  [Id. ¶¶ 51, 69, 105.]  According to the Amended Complaint, the 
shareholders knew or should have known Capitol Sales was insolvent but nonetheless 
accepted the distributions, making the shareholders liable to return the money under state 
fraudulent-transfer law (Counts I—IX).  BMO also alleges that the shareholders breached 
their fiduciary duties to BMO (Count X).                                  
    As for Mr. Hayes, BMO seeks to recover the $998,309.44 in compensation he 
received from Capitol Sales during this same time period as fraudulent transfers under state 
law (Counts XI–XIII).  BMO asserts that Mr. Hayes, in his role of president and CFO of 

Capitol Sales, induced the bank to loan the company money by falsely making Capitol Sales 
appear more solvent than it was.  [Id. ¶¶ 152–53.]  Specifically, BMO alleges that Mr. Hayes 
recorded sales that never occurred, inflated inventory levels and assets, falsified financial 
records, and sold inventory for his own benefit.  [Id. ¶¶ 153, 154, 177.]  BMO alleges Mr. 
Hayes committed Fraud (Count XV), Conversion (Count XV) and Civil Theft (Count 
XVI).1  Like with the shareholders, BMO also asserts that Mr. Hayes breached his fiduciary 

duties to BMO (Count X).  Mr. Hayes, in turn, seeks indemnification and advancement of 
legal fees from both Capitol Sales and the shareholders.                  
    The shareholders filed motions to dismiss both BMO’s complaint and Mr. Hayes’s 
crossclaims against them.  Capitol Sales, as a third-party defendant, filed a motion to dismiss 
Mr. Hayes’s claims against it.  In the discussion that follows, this Order first analyzes the 
viability of the claims brought by BMO and then turns to the claims brought by Mr. Hayes 

against the shareholders and Capitol Sales.                               
 II.  LEGAL STANDARD                                                     
    To survive a Rule 12(b)(6) motion to dismiss, a complaint must contain “enough 
facts to state a claim to relief that is plausible on its face.”  Bell Atl. Corp. v. Twombly, 550 


1 The Amended Complaint misnumbers the claims, counting Count XI twice.  This order 
refers to the claims in the correct numerical order, which means Counts XIII–XVI differ 
from the corresponding section headers in the Amended Complaint.          
U.S. 544, 570 (2007).  This standard does not require the inclusion of “detailed factual 
allegations” in a pleading, but the complaint must contain facts with enough specificity “to 
raise a right to relief above the speculative level.”  Id. at 555.  “Threadbare recitals of the 

elements of a cause of action, supported by mere conclusory statements,” are not sufficient.  
Ashcroft v. Iqbal, 

 (2009) (citing Twombly, 550 U.S. at 555).  In applying this 
standard, the Court must assume the facts in the complaint to be true and take all reasonable 
inferences from those facts in the light most favorable to the plaintiff.  Waters v. Madson, 

 (8th Cir. 2019).  But the Court need not accept as true any wholly conclusory 
allegations or legal conclusions that the plaintiff draws from the facts alleged.  Glick v. W. 

Power Sports, Inc., 

 (8th Cir. 2019).                    
 III.  ANALYSIS OF CLAIMS IN THE FIRST AMENDED COMPLAINT                 
    Although each of the three shareholders filed their own motion to dismiss BMO’s 
complaint, their arguments are essentially the same.  They first argue that BMO’s complaint 
fails to state a claim under the Minnesota Uniform Voidable Transactions Act (“MUVTA”), 

.41–.51, because shareholder distributions are governed instead by the 

Minnesota Business Corporation Act (“MBCA”), Minn. Stat. §§ 302A.551-.559, which does 
not allow BMO to recover from them.  Second, they argue that the bank fails to state a claim 
for breach of fiduciary duty because as shareholders of Capitol Sales, they do not owe a 
fiduciary duty to its creditors.  BMO responds that the MBCA does not apply because the 
allegedly fraudulent payments the shareholders received are not “distributions” within the 
meaning of the statute and the three shareholders are corporate “insiders” of Capitol Sales, 

and therefore have fiduciary duties.                                      
    A. Fraudulent Transfer Claims                                        
    BMO’s fraudulent-transfer claims against the shareholders implicate two Minnesota 
statutes: MUVTA and the MBCA.  MUVTA allows a creditor to recover the value of a 

fraudulent conversion that a debtor made to a third party to avoid collection by the creditor.  
BMO brought its fraudulent-transfer claims under MUVTA and seeks to recover the 
distributions the shareholders received from Capitol Sales.  The MBCA, by contrast, broadly 
governs corporations and outlines when a corporation may make distributions to 
shareholders and when shareholders must return improperly made distributions.  The 
MBCA provides that its sections governing shareholder distributions “supersede all other 

statutes of this state with respect to distributions,” and it makes specific reference to 
MUVTA, stating that “the provisions of sections 513.41 to 513.51 [MUVTA] do not apply 
to distributions made by a corporation governed by this chapter.”  Minn. Stat. § 302A.551, 
subd. 3(d).  In this way, the MBCA “displaces normal rules of fraudulent transfers” when it 
comes to corporate distributions to shareholders.  Buckrey v. Comm’r of Internal Revenue, 

, 

 at *11 (2017).  The parties agree that if the payments 

the shareholders received from Capitol Sales are distributions within the meaning of the 
MBCA, then MUVTA does not, and cannot, apply to those payments.           
    BMO hangs its hat on the payments not being distributions.  It argues that because 
the payments were not made in proportion to the shareholders’ respective shares, and 
because the payments were not authorized by the board of directors, the totality of the 
circumstances demonstrate that these payments are not distributions.  This argument fails 

for several reasons.                                                      
    First, the Amended Complaint controls the Court’s analysis.  In it, BMO plainly and 
repeatedly refers to the payments as distributions (115 times, to be exact).  BMO cannot 
now, in opposition to the shareholders’ motions to dismiss, argue that the payments are not 

distributions when BMO itself called them distributions throughout its pleading with no 
suggestion to the contrary.  “When analyzing a motion to dismiss, the court looks to the 
complaint as pleaded.”  Lake v. Honeywell, Inc., No. 4-96-944, 

, at *2 (D. 
Minn. May 27, 1997); see also Stepps v. Bd. of Trs. of Univ. of Arkansas, No. 4:21-CV-00986-LPR, 

, at *1 n.4 (E.D. Ark. Sept. 6, 2022) (resolving a discrepancy between what 
is contained in the complaint and in the response to a motion to dismiss in favor of the 

complaint because “[a]t this stage of the litigation, the factual allegation made in the 
Amended Complaint controls”).  BMO already amended its complaint once in response to 
the shareholders’ original motions to dismiss, which raised the same argument that MUVTA 
does not apply to shareholder distributions.  BMO had notice of the shareholders’ argument, 
and it could have alleged in its Amended Complaint that the payments were not 
distributions.  Instead, it doubled down on its characterization of the payments at issue.  The 

Court will not now disregard either that decision or the clear assertions in the complaint.  
    Second, by its own terms the MBCA defines “distributions” broadly to include all 
transfers made by the corporation to any of its shareholders.             
         “Distribution” means a direct or indirect transfer of money or  
         other property, other than its own shares, with or without      
         consideration, or an incurrence or issuance of indebtedness, by 
         a corporation to any of its shareholders in respect of its shares.  
         A distribution may be in the form of a dividend or a distribution 
         in liquidation, or as consideration for the purchase, redemption, 
         or other acquisition of its shares, or otherwise.               
Minn. Stat. § 302A.011, subd. 10.  The statute contains no requirement that only payments 
made pro rata or with approval by the board of directors are considered distributions. 
    In an effort to avoid the application of the MCBA, BMO conflates the question of 

whether a distribution was properly or improperly made with whether a payment was a 
distribution at all.  But the MBCA makes clear that those are distinct questions.  Section 
302A.011 defines a distribution as “a direct or indirect transfer . . . by a corporation to any of 
its shareholders.” Minn. Stat. § 302A.011, subd. 10. Section 302A.551 then outlines when 
shareholder distributions are properly authorized: “only if the board determines . . . that the 
corporation will be able to pay its debts in the ordinary course of business after making the 

distribution.”  Id. § 302A.551, subd. 1.  If, however, this requirement is not met and a 
distribution is improper, Section 302A.557 is the sole basis under Minnesota law for 
shareholders to be liable for improper distributions, and that section only allows the 
corporation or its receiver to recover, not a creditor.  Id. § 302A.557, subd. 1.   
         A shareholder who receives a distribution made in violation of  
         the provisions of section 302A.551 is liable to the corporation, 
         its receiver or other person winding up its affairs, or a director 
         under section 302A.559, subdivision 2, but only to the extent   
         that the distribution received by the shareholder exceeded the  
         amount that properly could have been paid under section         
         302A.551.                                                       
Id.  This provision allows for the recovery of improperly made distributions, and notably 
makes no mention of shareholder liability to creditors.                   
    Moreover, if BMO were correct that only properly made distributions count as 
“distributions” under the statute, then section 302A.557 and its avenue of relief for improper 
distributions would be rendered superfluous.  See Hagen v. Steven Scott Mgmt., Inc., 

, 170 (Minn. 2021) (discussing the “canon against surplusage” employed by Minnesota 
courts in interpreting state statutes and its instruction to “avoid interpretations that would 
render a word or phrase superfluous, void, or insignificant, thereby ensuring each word in a 

statute is given effect”).  Accordingly, the fact that the board did not authorize the payments 
Capitol Sales made to its three shareholders certainly affects whether the payments were 
proper, but not whether they were distributions.  Under a plain reading of the MBCA, the 
payments at issue here amount to distributions because they were made “by a corporation to 
any of its shareholders in respect of its shares.”  

 § 302A.011, subd. 10. 
    The Court is not persuaded by BMO’s contention that “in respect of” should be read 

so that only pro rata distributions in proportion to the number of shares held by a 
shareholder qualify as distributions.  First, BMO cites no authority for this proposition.  
Moreover, the plain language of the term does not point to such a limitation.  Cf. Jennings v. 
Rodriguez, 

 (2018) (Thomas, J., Gorsuch, J., concurring in part) (“The 
phrase ‘with respect to’ means ‘referring to,’ ‘concerning,’ or ‘relating to’”) (citing Oxford 
American Dictionary and Language Guide 853 (1999 ed.); accord, Webster’s New Universal 

Unabridged Dictionary 1640 (2003 ed.); American Heritage Dictionary 1485 (4th ed. 2000)).  
A transfer from a corporation to a shareholder “in respect of” its shares simply means that 
the shareholder is receiving that payment because it owns shares.         
    The Court’s reading of the statute is confirmed by the caselaw.  The MBCA’s use of 
the term “distribution” has been broadly interpreted and precludes MUVTA from applying 
to shareholder distributions, properly or improperly made.  In Buckrey, corporate 

shareholders petitioned for review of an IRS determination that the shareholders were liable, 
under a fraudulent-transfer theory, for the corporation’s tax liabilities.  See Buckrey, 

, 

 at *5 (2017).  The Tax Court granted partial summary 
judgment to the shareholders, holding that the corporation’s partial redemption of the 

shareholders’ stock counted as a distribution and consequently was governed by the MBCA 
and not the predecessor to MUVTA.  

.  Commenting that although it “seems 
strange that Minnesota precludes outside creditors from challenging the propriety of a 
corporate distribution,” the court “can’t and won’t ignore the plain language of the statute.”  

  Even if a shareholder distribution “was illegal at the time it occurred, the MBCA doesn’t 
give standing to challenge an illegal distribution” to creditors.  

. 

    An earlier decision by a court in this district aligns with Buckrey’s interpretation of the 
two statutes, holding that the MCBA “renders [MUVTA] inapplicable to corporate 
distributions.”  Helm Fin. Corp. v. MNVA R.R., Inc., Civil No. 97-1342 (DSD/JMM), 

 at *6 (D. Minn. June 24, 1998), aff’d on other grounds, 

 
(8th Cir. 2000).  In Helm, the district court denied summary judgment to a creditor seeking to 
void a distribution as a fraudulent transfer, holding that MUVTA was plainly “not applicable 

to the stock transfer.”  Id.; see also Metro. Steel Fabricators, Inc. v. Michalski (In re Metropolitan Steel 
Fabricators, Inc.), 

 (Bankr. D. Minn. 1996) (noting grant of summary 
judgment on “fraudulent transfer claims pursuant to 

 to the 
extent that the claims are defined as corporate distributions by the Minnesota Business 
Corporation Act”).                                                        
    For these reasons, BMO fails to state a claim against the shareholders for fraudulent 

conversion.  The payments were distributions within the meaning of the MBCA, and the 
MBCA expressly supersedes MUVTA with respect to shareholder distributions.  Because 
BMO seeks to recover the shareholder distributions under MUVTA, but MUVTA does not 
apply, Counts I–IX are dismissed with prejudice.                          

    B. Breach of Fiduciary Duty Claims                                   
    The shareholders also moved for dismissal of BMO’s breach-of-fiduciary-duty claims 
against them (Count X).  Whether BMO states such a claim depends squarely on whether 
the defendant shareholders were also officers or directors of Capitol Sales during the 
relevant time period.                                                     
    For over a century, Minnesota common law has recognized a breach of fiduciary duty 

where officers or directors of an insolvent (or nearly insolvent) corporation prefer their own 
debt over that owed to other creditors of the corporation.  See Taylor v. Mitchell, 

 (Minn. 1900); Taylor v. Fanning, 

 (Minn. 1902); Aiken v. Timm, 

 (Minn. 1920); Farmers Co-op. Ass’n of Bertha, Minn. v. Kotz, 

 
(Minn. 1946), abrogated on other grounds by Rubey v. Vannett, 

 (Minn. 2006); 
Snyder Elec. Co. v. Fleming, 

 (Minn. 1981).  In the Taylor cases, the 

Minnesota Supreme Court held that directors of an insolvent company breached their 
fiduciary duty to the other creditors of the company by authorizing the issuance of notes and 
a mortgage in their names, thereby using their positions as directors “to secure the payment 
of their own debt in preference to debts of other creditors.”  Taylor v. Fanning, 

; see also Taylor v. Mitchell, 

 (Minn. 1900).  In Aiken, the court similarly 
held that a general manager of a corporation acted in bad faith by conveying land to his wife 
for repayment of company debt owed to her and to him, thus preferring the repayment of 
his family’s debt over that of other creditors.  

.         
    Snyder Electric is the most recent case by the Minnesota Supreme Court exploring this 

type of fiduciary breach.  There, the court held that a defendant—who was the sole 
shareholder and chief officer of a corporation—breached his fiduciary duty to other 
creditors by taking advantage of his role as chief officer to have the insolvent company repay 
him for antecedent debts to the detriment of other creditors.  

.  The court 
qualified the limited fiduciary duty that it recognized directors and officers owe to a 
corporation’s creditors:                                                  

         When a corporation is insolvent, or on the verge of insolvency, 
         its directors and officers become fiduciaries of the corporate  
         assets for the benefit of creditors.  As fiduciaries, they cannot by 
         reason of their special position treat themselves to a preference 
         over other creditors.  By “preference” we here mean generally a 
         transfer or encumbrance of corporate assets made while the      
         corporation is insolvent or verges on insolvency, the effect of 
         which is to enable the director or officer to recover a greater 
         percentage of his debt than general creditors of the corporation 
         with otherwise similarly secured interests.                     

 (citations omitted).                                                  

    Thus, it is a well-settled principle in Minnesota law that officers and directors breach 
a fiduciary duty to a corporation’s creditors when they themselves are creditors of the 
corporation and use their position at the company to prefer their own debt over that of 
other creditors.  One case, by the Minnesota Court of Appeals, extended the limited 
fiduciary duty the Minnesota Supreme Court recognized in Snyder beyond the context of a 
director preferring his own debt.  See Drewitz v. Motorwerks, Inc., 

 (Minn. 
Ct. App. 2015).  The Drewitz court held that a director breached his fiduciary duty to 
creditors when he liquidated most of the company’s assets by authorizing shareholder 
distributions that would go to himself and the one other shareholder of the company.  The 
court reasoned that “[i]f the prohibition on ‘preferences’ outlined in Snyder prevents 

corporate directors from favoring their own bona fide debts over those of outside 
creditors . . . this prohibition similarly extends to directors who knowingly ‘prefer’ their share 
of corporate profits over the rights of a pending claimant.”  

. 
    Of course, this Court does not need to follow Drewitz’s application of the fiduciary 
duty recognized in Snyder Electric to encompass all self-preferencing actions by officers and 
directors, and not just repayment of their debts.  See Pleasants v. Am. Exp. Co., 

 (8th Cir. 2008) (“The decision of an intermediate state appellate court is not binding on 
a federal court that seeks to determine state law.”) But the shareholders have pointed to no 
authority stating that Drewitz’s application is incorrect.  The cases they cite predate Drewitz by 
over a decade, and the fact that the Minnesota Supreme Court has not expressed approval of 
Drewitz carries little weight, as it also has not rejected its approach.  This Court declines to 
find at the motion to dismiss stage that Drewitz’s application of Synder Electric is incorrect as a 

matter of law.                                                            
    However, even with the Court agreeing that Drewitz is correct, the breach of fiduciary 
duty claims must fail as to the shareholders.  No authority cited by the parties or discovered 
by the Court holds that individuals, who are solely shareholders, owe a fiduciary duty to the 
creditors of the corporations they own stock in, nor that they can breach that duty merely by 
receiving shareholder distributions from an insolvent corporation.  Cf. Ass'n of Mill & Elevator 

Mut. Ins. Co. v. Barzen Int’l, Inc., 

 (Minn. Ct. App. 1996) (rejecting 
creditor’s attempt to hold sole shareholder liable for corporate debt because “[i]n no case has 
the Snyder Electric holding been extended to create a shareholder’s fiduciary duty to creditors 
based solely on its status as shareholder”).  Generally, under Minnesota law, shareholders of 

a corporation are “under no obligation to the corporation or its creditors” with respect to 
the shares they own.  Minn. Stat. § 302A.425.  Indeed, the only cases holding shareholders 
liable under Minnesota law for a breach of fiduciary duty are cases in which those 
shareholders were also directors or officers of the company.  See, e.g., Snyder, 

 (sole shareholder and chief officer); B & S Rigging & Erection, Inc. v. Wydella, 

 (Minn. Ct. App. 1984) (shareholders, directors, and officers); Drewitz, 

 (director and majority shareholder).                               
    Accordingly, only if BMO has adequately pled that the three defendant shareholders 
in this case—Kenneth Kuskie, John Stedman, and Susan Stedman—were directors or 
officers of Capitol Sales can BMO’s claims against them for breach of a fiduciary duty state a 
claim upon which relief can be granted.  But BMO made answering the question of whether 
the defendant shareholders were also directors or officers difficult by its choice of language 

in the pleading.  In the background section, the Amended Complaint states that “[a]t all 
times relevant, Kuskie, J. Stedman and S. Stedman were shareholders of Capitol Sales.” [Am. 
Compl. ¶ 30] (emphasis added).  And it continues to refer to them as shareholders 
throughout the complaint.  It also alleges that Mr. Kuskie, Mr. Stedman, and Ms. Stedman 
“at all times relevant were insiders” of Capitol Sales.  [Am. Compl. ¶ 17] (emphasis added).  
By way of contrast, BMO alleges that Mr. Hayes was employed by Capitol Sales “since 1986” 
and was “[a]t all times relevant,” the “President and Chief Financial Officer” of the 
company.  [Am. Compl. ¶ 11.]                                              
    The terms shareholder, officer, director, and insider have distinct meanings under 

Minnesota law.  The MBCA, which applies to Minnesota corporations, defines “officer” as 
“the chief executive officer, the chief financial officer,” or “a person elected, [deemed 
elected,] appointed or otherwise designated as an officer” by the board of directors.  Minn. 
Stat. § 302A.011, subd. 18.  Mr. Hayes, therefore, is certainly an officer of Capitol Sales.  The 
MBCA defines a director as “a member of the board,” id. § 302A.011, subd. 9, and a 
shareholder as “a person registered on the books or records of a corporation . . . as the 

owner of whole or fractional shares,” id. § 302A.011, subd. 29.  In contrast, corporate 
“insider” is a term that appears only in MUVTA, which is not applicable to the fiduciary-
breach claims, and does not appear in the MCBA.  When a debtor is a corporation, an 
insider is a director, officer, person in control, a general partner, or a relative of any of the 
preceding terms.  

(8).  So, by alleging that Mr. Kuskie, Mr. Stedman, and 
Ms. Stedman were shareholders and insiders of Capitol Sales, this could mean they were 

directors or officers, but it does not necessarily require that conclusion: the MUVTA’s 
insider definition is not only irrelevant to the MCBA, but it reaches far more broadly than 
the coverage of the common-law fiduciary breach claim.                    
    Rather than clarifying this issue, the section of BMO’s Amended Complaint 
specifically pertaining to the breach of fiduciary duty claims adds to the ambiguity.  First, 
BMO’s use of group pleading obfuscates who allegedly did what.  BMO groups its breach-

of-fiduciary-duty claims against the three shareholders and Mr. Hayes under Count X, 
despite the four defendants having different roles in the company and varying levels of 
involvement, if any, in the factual allegations underpining the alleged breaches of duties.   
    Further, BMO’s use of “and/or” to describe the shareholders’ roles significantly 

exacerbates the lack of clarity stemming from the group pleading.  Count X sets out that 
“Kuskie, J. Stedman and S. Stedman, as officers, directors and/or Shareholders of Capitol 
Sales, owed duties of good faith, loyalty and due care to Capitol Sales, and by operation to 
Capitol Sales’ creditors.”  [Am. Compl. ¶ 137] (emphasis added).  BMO then makes three 
specific allegations concerning how the defendants allegedly breached their fiduciary duties 
to BMO.  First, the “officers, directors and/or Shareholders by their actions or omissions 

allowed the books and records of the Company to be tampered with, manipulated, and 
fraudulently transmitted to creditors for the insiders’ benefit and to the detriment of the 
Company’s creditors.”  [Id. ¶ 138] (emphasis added).  Second, the “payments authorized to 
be paid to Capitol Sales’ insiders (Shareholders and Hayes) by the officers, directors and/or 
shareholders of Capitol Sales” were made when BMO was a creditor of Capitol Sales, and 
“the Shareholders and Hayes further pushed Capitol Sales into insolvency.”  [Id. ¶ 139–40.]  

Third, “Hayes, Kuskie, J. Stedman and S. Stedman, as officers, directors and/or Shareholders, 
by knowingly engaging in self-dealing and self-interest, in the face of Capitol Sales’ 
insolvency” breached their fiduciary duty to Capitol Sales’ creditors.  [Id. ¶ 141] (emphasis 
added).                                                                   
    It is noteworthy that the claims regarding the actions taken are vague and conclusory.  
BMO’s allegation that the shareholders allowed someone else to tamper with the Capitol 

Sales books and records does not describe any self-preferencing behavior that could form 
the basis of liability for a breach of fiduciary duty under Minnesota law.  Nor does the bare 
allegation that the defendants “knowingly engag[ed] in self-dealing and self-interest[ed]” 
behavior aid BMO’s cause—without sufficient supporting factual allegations about what that 

purported self-dealing behavior was, this allegation is nothing more than a conclusory 
assertion the Court need not accept as true.  See Iqbal, 

.   
    But more critically, BMO’s and/or pleading is not enough here.  The assertion that 
the “officers, directors and/or shareholders of Capitol Sales” authorized the payments to the 
shareholders and Mr. Hayes at a time when the company was insolvent, to the detriment of 
creditors like BMO is only sufficient if each of the three shareholders were officers or 

directors of the corporation.  [Am. Compl. ¶ 139.]  BMO never plainly alleges that any of 
them were.  Instead, BMO uses an ambiguous “and/or” construction that leads to 
competing possibilities for the alleged breach of fiduciary duties by the three shareholders, 
one of which states a claim upon which relief could be granted and the other which does 
not.  The allegations in Count X could be read to mean that Mr. Kuskie, Mr. Stedman, and 
Ms. Stedman—as shareholders alone—owed fiduciary duties to BMO; allowed the 

company’s books to be tampered with; authorized payments to Capitol Sales’ insiders when 
it was insolvent; and engaged in self-dealing behavior.  However, as a matter of law, such 
assertions of shareholder activity do not state a claim for breach of fiduciary duty in 
Minnesota.  Alternatively, these allegations could be interpreted to mean that Mr. Kuskie, 
Mr. Stedman, and Ms. Stedman took these actions as officers or directors, in which case the 
Amended Complaint presents a plausible fiduciary-duty claim.              
    BMO’s failure to specify whether it is alleging that Mr. Kuskie, Mr. Stedman, and 
Ms. Stedman were officers or directors is revealing because in their original, now-withdrawn 
motions to dismiss, the shareholders argued that as shareholders, they do not owe fiduciary 

duties to BMO, and that BMO failed to allege they were directors or officers.  [See, e.g., Dkt. 
No. 32 at 7-8.2]  As with the MUVTA claims, BMO had notice of the shareholders’ 
arguments and could have provided clarity through its amendment of the pleadings.  It could 
have plainly asserted that each of the defendants was a director or an officer at the relevant 
time, articulating facts to support such claims.  It did not.             
    In any event, this Court’s task is to determine whether the Amended Complaint 

“contain[s] sufficient factual matter, accepted as true, to ‘state a claim to relief that is 
plausible on its face.’” Iqbal, 

 (quoting Twombly, 550 U.S. at 570).  Evaluating 
whether a complaint states a plausible claim to relief is a “context-specific task” that looks at 
whether the factual content in the complaint “allows the court to draw the reasonable 
inference that the defendant is liable for the misconduct alleged.” Id. at 679, 678.  BMO’s 
pleading falls short because its allegations against the shareholders are susceptible of multiple 

interpretations, one that is consistent with liability and the other that is not.  Id. at 678 
(“Where a complaint pleads facts that are merely consistent with a defendant’s liability, it 



2 Although not properly before the Court for purposes of determining whether BMO has 
failed to state a claim under Rule 12(b)(6), the declaration from Ms. Stedman’s counsel 
demonstrates that when asked to clarify whether BMO was alleging that Ms. Stedman was an 
officer or director of Capitol Sales, BMO’s counsel did not provide any straightforward 
confirmation.  [Decl. of Christopher W. Boline, Ex. A, Dkt. No. 96.]      
stops short of the line between possibility and plausibility of entitlement to relief.”) 
(quotation marks omitted).                                                
    Courts faced with similarly ambiguous complaints have found the pleadings 

insufficient.  The Sixth Circuit, addressing whether a pleading was sufficient to allege 
personal jurisdiction, has affirmed a district court’s dismissal of a case where the complaint 
used similar “and/or” language and was susceptible to multiple interpretations.  Palnik v. 
Westlake Ent., Inc., 

, 250–52 (6th Cir. 2009).  There, the plaintiff sued 
producers and distributors of a movie that used his copyrighted songs without permission.  

.  The major distributors settled, leaving two California-based firms as defendants 

that then moved to dismiss the suit for lack of personal jurisdiction.  

  The complaint 
alleged that the defendants were “producers and/or distributors” of the movie.  

.  
The court explained that if the remaining defendants were producers and distributors, the 
allegations were sufficient to sustain personal jurisdiction, but if they were only producers, 
that was insufficient.  

  But “because one conclusion supports jurisdiction and the other 
does not,” the court concluded that plaintiff’s complaint failed to provide “reasonably 

particular facts that resolve which is the better understanding of the defendants’ actions” and 
did not “sort out the relationship between the defendants.”  

  The Sixth Circuit found 
comfort in Rule 11(b) of the Federal Rules of Civil Procedure, which the court explained 
would have allowed the plaintiff to assert on “knowledge, information, and belief” that the 
defendants were distributors and assert that a reasonable opportunity for discovery would 
provide evidentiary support.  

 at 252–53.                              
    Other courts have reached similar conclusions in the securities fraud context.  
Plaintiffs who allege that they bought a security issued under a materially false or misleading 
registration statement must show that they can trace their shares back to the public offering 

that used the registration statement.  See In re Century Aluminum Co. Sec. Litig., 

 (9th Cir. 2013).  The Ninth Circuit held that investors failed to state a plausible claim 
for relief where the relevant allegation in the complaint could lead to “two possible 
explanations, only one of which can be true and only one of which results in liability.”  

.  In such a case, the Ninth Circuit explained that plaintiffs need to offer “[s]omething 
more” than allegations that are “‘merely consistent with’ their favored explanation but are 

also consistent with the alternative explanation,” such as facts that “exclude the possibility 
that the alternative explanation is true.”  

 at 1108 (quoting Iqbal, 

).  The 
Fourth Circuit has agreed, holding that “and/or” language in a complaint for securities fraud 
must be “coupled with sufficient supporting facts” to give rise to a plausible claim for relief.  
Yates v. Mun. Mortg. & Equity, LLC, 

 (4th Cir. 2014).  In Yates, the 
“plaintiffs’ coy choice of words” gave the court some pause, and it did not find “the 

additional supporting facts sufficient to push the claim” from merely possible to plausible. 

                                                                       
    The same is true with BMO’s complaint.  The use of “and/or” is not always a death 
knell, especially when closely held corporations often have shareholders who are also officers 
or directors.  But BMO has failed to provide any additional facts that exclude the possibility 
that the shareholders here are just shareholders and cause its alternative reading—that they 

are also officers or directors—to rise to the level of plausibility.  Although it describes Mr. 
Kuskie, Mr. Stedman, and Ms. Stedman as being corporate “insiders” of Capitol Sales, this 
could mean that they are merely relatives of directors and officers but not directors or 
officers themselves.  See 

(8).  And being an “insider” by itself is not 

enough to establish a fiduciary duty under Minnesota law.  Looking at the Amended 
Complaint as a whole, BMO’s terse description of the three shareholders as insiders and 
shareholders stands in stark contrast with its specific factual allegations regarding Mr. Hayes, 
for whom BMO provides the year he was hired and the specific roles he held at Capitol 
Sales.  [Compare Am. Compl. ¶ 9 with ¶ 11.]  Even examining the factual allegations pertaining 
to other claims in the complaint does not exclude the possibility that Mr. Kuskie, Mr. 

Stedman, and Ms. Stedman were just shareholders at the time of the transfers.  In explaining 
why the shareholders knew or should have known Capitol Sales was insolvent at the time of 
the payments in question, BMO alleges that the shareholders were “provided with Capitol 
Sales’ financial statements and records to review,” and “controlled ownership of the 
investments in Capitol Sales,” which are consistent with shareholder responsibilities.  [E.g., 
Am. Compl. ¶¶ 42, 116.]                                                   

    The Court is mindful of guidance from the Eighth Circuit that a plaintiff need not 
“rebut all possible lawful explanations for a defendant’s conduct” to survive a motion to 
dismiss.  Braden v. Wal-Mart Stores, Inc., 

 (8th Cir. 2009) (emphasis added).  
But it finds this to be a situation with a “concrete, obvious alternative” requiring a plaintiff 
to “plead additional facts tending to rule out the alternative.”  

 at 597 (citing Iqbal, 

) (quotation marks omitted).                                   
    Given the ambiguous “and/or” phrasing to describe the shareholders’ roles at the 
company that is susceptible to multiple interpretations; the group pleading for these claims; 
and the lack of specific factual allegations supporting BMO’s claims that the shareholders 

breached a fiduciary duty owed to the bank, the Court grants the shareholders’ motions to 
dismiss these claims.  To the extent the claims are pled against Mr. Kuskie, Mr. Stedman, and 
Ms. Stedman solely in their capacities as shareholders, the Court grants the motion to 
dismiss with prejudice because shareholder status alone is not enough to confer a fiduciary 
duty under Minnesota law.  However, the Court otherwise dismisses the claims without 
prejudice to allow refiling if, within the bounds of Rule 11, BMO can allege that the three 

shareholders were also officers or directors.                             
 IV.  ANALYSIS OF CROSSCLAIMS AND THIRD-PARTY COMPLAINT                  
    The shareholders also filed motions to dismiss Mr. Hayes’s amended crossclaims in 
which he seeks indemnification and advancement of legal fees from them.  [Dkt. Nos. 56, 
66, 80].  The shareholders argue that his indemnification claim under 

 is 
preempted by Minn. Stat. § 302A.521; that Minn. Stat. § 302A.521 does not allow for 

indemnification against shareholders; that his indemnification claim under § 302A.521 is 
premature; and that he did not satisfy the requirements of § 302A.521 before seeking 
advancement of legal fees.  They also argue that he has not met the pleading standard to 
pierce the corporate veil and hold them—as opposed to Capitol Sales—liable for 
indemnification and advancement of legal fees.  Capitol Sales incorporates by reference the 
arguments of the shareholders to support its own motion to dismiss Mr. Hayes’s third-party 
complaint against the corporation, which also seeks indemnification and advancement under 
the same statutes.                                                        
    Mr. Hayes responds that he can plead his indemnification claims in the alternative; 

the court can wait to act on his indemnification claim under Minn. Stat. § 302A.521 until the 
underlying proceedings conclude and need not dismiss it; and his written affirmation satisfies 
the statutory requirements.  He also argues that veil piercing is subject to a more liberal 
notice-pleading standard, and that in any event, he provided sufficient facts under either 
pleading standard.                                                        
    A. Indemnification Under 

                       

    Mr. Hayes sought indemnification and advancement of legal fees under 

 and alternatively under Minn. Stat. § 302A.521 from both Capitol Sales and the 
shareholders.  Section 181.970 generally requires an employer to indemnify its employees for 
civil damages that arose while the employee was performing employment duties.  Section 
302A.521 (which is part of the MBCA) requires a corporation to indemnify individuals who 
served the corporation in an “official capacity,” including officers and directors.  Mr. Hayes’s 

indemnification claims under 

 fail because that statute, by its express 
terms, does not apply to “employees and employers who are governed by indemnification 
provisions under section 302A.521.”  Minn. Stat § 181.970, subd. 2(3).  Mr. Hayes agrees 
that Capitol Sales is a corporation and that he served it as an officer.  [Hayes Am. 
Crossclaims ¶ 8, Dkt. No. 50; Hayes Am. Third-Party Compl. ¶ 2, Dkt. No. 50.]  Therefore, 
he is an employee governed by the indemnification provision under § 302A.521, and 

 does not apply to him.                                    
    The Court is not persuaded by Mr. Hayes’s argument that Dochniak v. Dominium 
Management Services, Inc., No. CIV. 06-237 (JRT/FLN), 

, at *7, n.5 (D. 
Minn. Sept. 6, 2007) stands for the proposition that an employee can simultaneously make a 

claim for indemnification under 

 and § 302A.521.  Such a reading 
requires the Court to ignore the plain text of 

 excluding employees and 
employers covered by § 302A.521.  Moreover, in Dochniak, the court granted the employee 
summary judgment on the employer’s counterclaim for negligence because the employee 
would be entitled to indemnification.  See Dochniak, 

, at *7.  Mr. Hayes 
relies on a footnote in Dochniak stating that under either indemnification statute, the 

employer would have to indemnify the employee unless it can show that he acted in bad 
faith.  

 at *7 n.5.  The question presented here was not squarely before the court in 
Dochniak, and the dicta in that footnote cannot override the clear statutory command 
contained in the text of Minn. Stat § 181.970, subd. 2(3).                
    Mr. Hayes’s indemnification claims are dismissed with prejudice to the extent he 
seeks relief pursuant to 

.                           

    B. Indemnification Under Minn. Stat. § 302A.521                      
    The Court next considers Mr. Hayes’s claims seeking indemnification pursuant to 
Minn. Stat. § 302A.521, which does apply to him.  He seeks indemnification from his former 
employer, Capitol Sales, and also asks the Court to pierce the corporate veil to hold the 
shareholders liable for indemnification as the corporation’s “alter ego.”   
    Section 302A.521 requires Capitol Sales to indemnify Mr. Hayes if he (1) has not 

been indemnified by another organization for the same proceedings; (2) acted in good faith; 
(3) did not receive an improper personal benefit; (4) did not have reason to believe his 
conduct was unlawful; and (5) reasonably thought the conduct was in the best interests of 
Capitol Sales.  But “[t]he right to indemnification cannot be determined until the legal 

proceedings have concluded.”  Asian Women United of Minnesota v. Leiendecker, 

 (Minn. Ct. App. 2010); see also Minn. Stat. § 302A.521, subd. 6(5) (directing that a 
court may review the denial of indemnification within 60 days after the termination of the 
underlying proceeding or a written request for indemnification, whichever is later).  Here, the 
underlying legal proceedings have not concluded, so the Court cannot act on Mr. Hayes’s 
request for indemnification from Capitol Sales at this time.  That does not mean that Mr. 

Hayes has failed to state a claim for indemnification, however, so the Court denies Capitol 
Sales’ motion to dismiss the indemnification claim under Minn. Stat. § 302A.521.  
    The same cannot be said for Mr. Hayes’s indemnification claims against the 
shareholders.  The Court dismisses these claims because Mr. Hayes failed to meet the 
pleading standard for piercing the corporate veil.  In essence, there is no factual meat on the 
bones of his claims against the shareholders to permit these claims to survive. 

    Under Minnesota law, courts apply a two-prong test to determine whether a 
corporate veil should be pierced to hold a party liable as the “alter ego” of the entity.  Johnson 
v. Evangelical Lutheran Church in America, CV No. 11-23 (MJD/LIB), 

, at *6 
(D. Minn. July 22, 2011).  First, a court examines the reality of “how the corporation 
operated and the individual defendant’s relationship to that operation.”  Victoria Elevator, 283 
N.W.2d at 512 (quotation omitted).  In Victoria Elevator, the Minnesota Supreme Court listed 

factors that weigh in favor of piercing the corporate veil, including “insufficient 
capitalization,” a “failure to observe corporate formalities,” the “absence of corporate 
records,” any “siphoning of funds by [a] dominant shareholder,” nonfunctioning of 
corporate officials, and the corporation existing as a mere “facade for individual dealings.” 

Id.  Piercing the corporate veil requires several of these factors to be present.  Id.  Second, a 
plaintiff seeking to pierce the corporate veil must also show that there is an “element of 
injustice or fundamental unfairness” that requires holding the individual defendants 
personally liable for the acts of the corporation.  Id.                   
    In Mr. Hayes’s amended crossclaims against the shareholders, he provides two 
paragraphs related to piercing the corporate veil to seek indemnification directly from the 

shareholders.  Both consist of legal conclusions the court need not accept.  See Iqbal, 

.  First, he merely restates the factors identified in Victoria Elevator without any 
factual allegations to support them:                                      
         Co-Defendants are the sole owners of Capitol Sales and as a     
         result of their conduct:                                        
              (a)  Capitol  Sales  has  insufficient  capitalization  for 
              purposes of its corporate undertaking;                     
              (b)  Capitol  Sales  has  failed  to  observe  corporate   
              formalities;                                               
              (c)  Co-Defendants  have  siphoned  funds  from  Capitol   
              Sales to pay themselves; and                               
              (d)  Capitol  Sales  has  failed  to  maintain  adequate  or 
              appropriate corporate records.                             

[Hayes Am. Cross-Claims ¶ 32.]  He then alleges in a similarly conclusory fashion: 
         As a result, piercing the corporate veil for Hayes’ indemnification 
         claim is necessary to avoid injustice or fundamental unfairness. 

[Id. ¶ 32.]  This is simply insufficient to meet his pleading burden.  In Johnson, the court 
dismissed the plaintiff’s claim for alter-ego liability, explaining that “beyond the conclusory 
allegation” of the Victoria Elevator factors being present, there were “no factual allegations to 
support the first prong of piercing the corporate veil” and the “barebones allegation that 
injustice or fundamental unfairness will result” was insufficient to meet the second prong.  

Johnson, 

, at *6–7.  The same is true here.                
    Mr. Hayes provides no facts to support the factors he claims are present.  In his 
background section, he describes that he asked the shareholders to inject more funds into 
“Capitol Sales when it experienced a rapid business decline around the pandemic, and they 
declined.  [Hayes Am. Crossclaims ¶ 12.]  But the shareholders’ decision not to inject more 
funds into Capitol Sales at one point in time does not, by itself, meet Mr. Hayes’s burden.  

First, the shareholders correctly contend that the “adequacy of capitalization must be 
measured at the time of incorporation” because initial undercapitalization “reveals whether 
the corporation was created to avoid liability.” Damon v. Groteboer, 

 (D. Minn. 2013) (quoting NLRB v. Bolivar–Tees, Inc., 

, 730 n.7 (8th Cir. 
2008)).  Second, even if this later undercapitalization was considered, pleading facts that 
satisfy only the undercapitalization factor from Victoria Elevator “would not be enough.” 

Brown v. Pfeiffer, No. 19-cv-3132 (MWW/KMM), 

, at *6 (D. Minn. Mar. 11, 
2020).  This Court would be hard pressed to find any company that has not suffered hard 
times (especially during the pandemic), and the mere fact that investors declined to inject 
additional capital into the company when it was struggling is not enough to hold those 
individuals liable as the alter ego of the company.  Mr. Hayes provides no other facts to 
support his conclusions that Capitol Sales failed to maintain adequate corporate records, 
failed to observe corporate formalities, or that the shareholders siphoned funds from the 
company.                                                                  
    Mr. Hayes contends that he just needs to meet Minnesota’s more liberal notice-

pleading standard for this claim, relying upon Barton v. Moore, 

 (Minn. 
1997), in which the Minnesota Supreme Court held that a plaintiff need only plead “broad 
general statements that may be conclusory” to state a claim for piercing the corporate veil.  

  And it’s true that some cases from this district, relying upon Barton and other cases that 
predated Iqbal, have indeed suggested that plaintiffs only need to meet Minnesota’s lower, 
notice-pleading standard for bringing veil-piercing claims in federal court.  See, e.g., Chairez v. 

AW Distrib., Inc., No. 20-CV-1473 (NEB/TNL), 

, at *5 (D. Minn. Apr. 23, 
2021) (“To survive a motion to dismiss an alter ego claim, a plaintiff need only give notice of 
the theory under which it plans to proceed and its intent to pierce the corporate veil.”); 
Damon v. Groteboer, No. 10-CV-92 (JRT/FLN), 

, at *6 (D. Minn. Mar. 14, 
2011) (same); see also Minn. Wild Hockey Club, LP v. Emil Interactive Games, LLC, No. 16-cv-
1545 (WMW/TNL), 

, at *6 (D. Minn. Dec. 28, 2016) (collecting cases 

and summarizing the different ways courts in this district have approached motions to 
dismiss corporate veil-piercing claims based upon insufficient pleading). 
    This Court is instead persuaded by the reasoning in Minnesota Wild Hockey Club, which 
held that the federal pleading standard for veil-piercing claims “requires more than 
Minnesota’s Barton pleading standard.”  

, at *8. The Court agrees that it 
must apply the federal pleading standard to determine whether a plaintiff states a claim, even 

when applying substantive state law.  Karnatcheva v. JPMorgan Chase Bank, N.A., 

 (8th Cir. 2013); see also Fed. R. Civ. P. 81(c)(1) (providing that the Federal Rules of Civil 
Procedure apply to cases after they are “removed from a state court”). Therefore, conclusory 
claims that merely restate the Victoria Elevator factors, without any factual allegations to 

support them, are insufficient at this stage to support imposing alter ego liability. 
    Nevertheless, facts supporting piercing the corporate veil may emerge during 
discovery in this case, and this order should not be read to “foreclose a future, better-pled 
and substantiated claim in this regard.”  Brown, 

 at *6.  Although the Court 
grants the shareholders’ motions to dismiss the indemnification claim against them, it does 
so without prejudice to allow Mr. Hayes to replead a claim, if he chooses, against the 

shareholders with sufficient factual allegations to support piercing the corporate veil.   
    C. Advancement of Legal Fees Under Minn. Stat. § 302A.521            
    Unlike indemnification, advancement of legal expenses is “critical to the officer’s 
ability to defend himself in litigation” and “must be made promptly, otherwise its benefit is 
forever lost.”  RBA, Inc. v. Reinhart, Civil No. 16-2841 (SRN/DTS), 

, at 
*3 (D. Minn. Aug. 23, 2017) (quotation omitted).  An employee seeking advancement from 

their corporation must provide the corporation with a written affirmation of their good faith 
belief that they meet the criteria for indemnification and a written undertaking to repay the 
advance payment if it is later determined that they are not entitled to indemnification.  Minn. 
Stat. § 302A.521, subd. 3.  A court may not act on an individual’s request for advancement 
under Minn. Stat. § 302A.521 until after the corporation rejects the written request or has 
not acted on it within 60 days after receiving it.  See Minn. Stat. § 302A.521, subd. 6(5)(ii). 
    The parties quibble about when Mr. Hayes satisfied the statute’s requirements for a 
written affirmation.  The Court need not wade into this matter, as all parties agree that the 
requirements were satisfied at the latest by a letter and declaration sent to the shareholders 

and Capitol Sales on July 14, 2022.  [Decl. of Bryan J. Morben, Ex. C, Dkt. No. 87.]  This 
means that Capitol Sales had 60 days, until Sept 12, 2022, to respond to Mr. Hayes’s written 
request for indemnification and advancement of legal fees.  There has been no update 
regarding whether Mr. Hayes’s request for advancement has been granted by Capitol Sales.  
If it has not been approved, it is HEREBY ORDERED.  The only defense to this claim 
offered by Capitol Sales and the shareholders is that the statutorily mandated time for the 

company to act on Mr. Hayes’s request had not passed.  Now that it has, the Court denies 
Capitol Sales’ motion to dismiss Mr. Hayes’s claim for advancement under Minn. Stat. § 
302A.521 and grants Mr. Hayes the relief he seeks.                        
 V.   ORDER                                                              
    For the reasons discussed above, IT IS HEREBY ORDERED:               
    1.  Defendant Susan Stedman’s Motion to Dismiss Plaintiff BMO’s Amended 

      Complaint [Dkt. No. 51] is GRANTED;                                
    2.  Defendant Kenneth Kuskie’s Motion to Dismiss Plaintiff BMO’s Amended 
      Complaint [Dkt. No. 61] is GRANTED;                                
    3.  Defendant John Stedman’s Motion to Dismiss Plaintiff BMO’s Amended 
      Complaint [Dkt. No. 76] is GRANTED;                                
    4.  Defendant Susan Stedman’s Motion to Dismiss Co-Defendant Hayes’s Amended 

      Crossclaims [Dkt. No. 56] is GRANTED;                              
    5.  Defendant Kenneth Kuskie’s Motion to Dismiss Co-Defendant Hayes’s 
      Amended Crossclaims [Dkt. No. 66] is GRANTED;                      
    6.  Defendant John Stedman’s Motion to Dismiss Co-Defendant Hayes’s Amended 

      Crossclaims [Dkt. No. 80] is GRANTED; and                          
    7.  Third-Party Defendant Capitol Sales’ Motion to Dismiss Third-Party Plaintiff 
      Hayes’s Complaint [Dkt. No. 71] is DENIED.                         
    8.  Counts I-IX (fraudulent transfer claims against the shareholders) in BMO’s 
      amended complaint are DISMISSED with prejudice.  Count X (breach of 
      fiduciary duty against the shareholders) is DISMISSED with prejudice to the 

      extent it is based on their status as shareholders and DISMISSED without 
      prejudice to the extent it is based on their status as officers or directors.   
    9.  Crossclaims I–II (indemnification and advancement against the shareholders) are 
      DISMISSED without prejudice.                                       
The claims that remain are Count X (breach of fiduciary duty against Mr. Hayes) and Counts 
XI–XVI (fraudulent transfers, fraud, conversion, and civil theft claims against Mr. Hayes) in 

BMO’s complaint and Count I in Mr. Hayes’s amended third-party complaint  
(indemnification and advancement against Capitol Sales).                  
    LET JUDGMENT BE ENTERED ACCORDINGLY.                                 
Date: January 4, 2023                                                     
                                         s/Katherine Menendez            
                                       Katherine Menendez                
                                       United States District Judge      

                UNITED STATES DISTRICT COURT                             
                   DISTRICT OF MINNESOTA                                 

BMO Harris Bank N.A.,                Case No. 22-cv-00435 (KMM/TNL)      

               Plaintiffs,                                               

v.                                                                       

Kenneth Kuskie, John Stedman, Susan                                      
Stedman and Curtis A. Hayes,                                             

               Defendants.                                               

v.                                                                       

Capitol Sales Company, Inc.                                              


               Third-Party Defendant.                                    



    This case involves a dispute between a bank and individuals affiliated with a company 
to which the bank loaned money.  The bank seeks to recover payments that the company’s 
shareholders and former president received from the company while the business was 
insolvent.  The bank also accuses the former president of engaging in a fraudulent scheme to 
make the company appear more successful than it actually was to secure financing from the 
bank.  The shareholders each filed motions to dismiss the bank’s complaint.  [Dkt. Nos. 61, 
76, 51].  The former president seeks indemnification and advancement of legal fees from 
both the company and its shareholders, who have filed motions to dismiss his claims against 
them.  [Dkt. Nos. 56, 66, 80, 71].  For the reasons stated below, the Court grants the 
shareholders’ motions to dismiss and denies the company’s motion to dismiss.  
 I.   BACKGROUND                                                         
    The bank, BMO Harris Bank N.A. (“BMO”), loaned money to Capitol Sales, a 
company specializing in the distribution of consumer electronics, starting in 2011.  [Am. 

Compl. ¶¶ 1, 8, Dkt. No. 49].  When BMO filed its complaint, Capitol Sales owed the bank 
more than $3.2 million.  [Id. ¶ 21.]  BMO sued Capitol Sales in a separate case to recover the 
amount of the defaulted loans.  See BMO Harris Bank N.A. v. Capitol Sales Co., (N.D. Ill.) (No. 
22-cv-132).  In April 2022, BMO obtained a default judgment award of $3.3 million against 
Capitol Sales, which failed to defend against the lawsuit.  See Default Judgment Order, BMO 
Harris Bank N.A. v. Capitol Sales Co., (N.D. Ill. Apr. 20, 2022) (No. 22-cv-132) (Dkt. No. 

24).                                                                      
    In this case, BMO has sued the three shareholders of Capitol Sales—Kenneth 
Kuskie, John Stedman, and Susan Stedman—and its former president and Chief Financial 
Officer (“CFO”), Curtis Hayes.  BMO asserts that between January 2018 and July 2021, 
Capitol Sales was at or near insolvency, yet during that period, Mr. Kuskie received $435,000, 
Mr. Stedman received $355,000, and Ms. Stedman received $355,000 from the company.  

[Am. Compl. ¶¶ 30, 67, 104.]  BMO alleges the Capitol Sales board of directors did not 
approve these payments.  [Id. ¶¶ 51, 69, 105.]  According to the Amended Complaint, the 
shareholders knew or should have known Capitol Sales was insolvent but nonetheless 
accepted the distributions, making the shareholders liable to return the money under state 
fraudulent-transfer law (Counts I—IX).  BMO also alleges that the shareholders breached 
their fiduciary duties to BMO (Count X).                                  
    As for Mr. Hayes, BMO seeks to recover the $998,309.44 in compensation he 
received from Capitol Sales during this same time period as fraudulent transfers under state 
law (Counts XI–XIII).  BMO asserts that Mr. Hayes, in his role of president and CFO of 

Capitol Sales, induced the bank to loan the company money by falsely making Capitol Sales 
appear more solvent than it was.  [Id. ¶¶ 152–53.]  Specifically, BMO alleges that Mr. Hayes 
recorded sales that never occurred, inflated inventory levels and assets, falsified financial 
records, and sold inventory for his own benefit.  [Id. ¶¶ 153, 154, 177.]  BMO alleges Mr. 
Hayes committed Fraud (Count XV), Conversion (Count XV) and Civil Theft (Count 
XVI).1  Like with the shareholders, BMO also asserts that Mr. Hayes breached his fiduciary 

duties to BMO (Count X).  Mr. Hayes, in turn, seeks indemnification and advancement of 
legal fees from both Capitol Sales and the shareholders.                  
    The shareholders filed motions to dismiss both BMO’s complaint and Mr. Hayes’s 
crossclaims against them.  Capitol Sales, as a third-party defendant, filed a motion to dismiss 
Mr. Hayes’s claims against it.  In the discussion that follows, this Order first analyzes the 
viability of the claims brought by BMO and then turns to the claims brought by Mr. Hayes 

against the shareholders and Capitol Sales.                               
 II.  LEGAL STANDARD                                                     
    To survive a Rule 12(b)(6) motion to dismiss, a complaint must contain “enough 
facts to state a claim to relief that is plausible on its face.”  Bell Atl. Corp. v. Twombly, 550 


1 The Amended Complaint misnumbers the claims, counting Count XI twice.  This order 
refers to the claims in the correct numerical order, which means Counts XIII–XVI differ 
from the corresponding section headers in the Amended Complaint.          
U.S. 544, 570 (2007).  This standard does not require the inclusion of “detailed factual 
allegations” in a pleading, but the complaint must contain facts with enough specificity “to 
raise a right to relief above the speculative level.”  Id. at 555.  “Threadbare recitals of the 

elements of a cause of action, supported by mere conclusory statements,” are not sufficient.  
Ashcroft v. Iqbal, 

 (2009) (citing Twombly, 550 U.S. at 555).  In applying this 
standard, the Court must assume the facts in the complaint to be true and take all reasonable 
inferences from those facts in the light most favorable to the plaintiff.  Waters v. Madson, 

 (8th Cir. 2019).  But the Court need not accept as true any wholly conclusory 
allegations or legal conclusions that the plaintiff draws from the facts alleged.  Glick v. W. 

Power Sports, Inc., 

 (8th Cir. 2019).                    
 III.  ANALYSIS OF CLAIMS IN THE FIRST AMENDED COMPLAINT                 
    Although each of the three shareholders filed their own motion to dismiss BMO’s 
complaint, their arguments are essentially the same.  They first argue that BMO’s complaint 
fails to state a claim under the Minnesota Uniform Voidable Transactions Act (“MUVTA”), 

.41–.51, because shareholder distributions are governed instead by the 

Minnesota Business Corporation Act (“MBCA”), Minn. Stat. §§ 302A.551-.559, which does 
not allow BMO to recover from them.  Second, they argue that the bank fails to state a claim 
for breach of fiduciary duty because as shareholders of Capitol Sales, they do not owe a 
fiduciary duty to its creditors.  BMO responds that the MBCA does not apply because the 
allegedly fraudulent payments the shareholders received are not “distributions” within the 
meaning of the statute and the three shareholders are corporate “insiders” of Capitol Sales, 

and therefore have fiduciary duties.                                      
    A. Fraudulent Transfer Claims                                        
    BMO’s fraudulent-transfer claims against the shareholders implicate two Minnesota 
statutes: MUVTA and the MBCA.  MUVTA allows a creditor to recover the value of a 

fraudulent conversion that a debtor made to a third party to avoid collection by the creditor.  
BMO brought its fraudulent-transfer claims under MUVTA and seeks to recover the 
distributions the shareholders received from Capitol Sales.  The MBCA, by contrast, broadly 
governs corporations and outlines when a corporation may make distributions to 
shareholders and when shareholders must return improperly made distributions.  The 
MBCA provides that its sections governing shareholder distributions “supersede all other 

statutes of this state with respect to distributions,” and it makes specific reference to 
MUVTA, stating that “the provisions of sections 513.41 to 513.51 [MUVTA] do not apply 
to distributions made by a corporation governed by this chapter.”  Minn. Stat. § 302A.551, 
subd. 3(d).  In this way, the MBCA “displaces normal rules of fraudulent transfers” when it 
comes to corporate distributions to shareholders.  Buckrey v. Comm’r of Internal Revenue, 

, 

 at *11 (2017).  The parties agree that if the payments 

the shareholders received from Capitol Sales are distributions within the meaning of the 
MBCA, then MUVTA does not, and cannot, apply to those payments.           
    BMO hangs its hat on the payments not being distributions.  It argues that because 
the payments were not made in proportion to the shareholders’ respective shares, and 
because the payments were not authorized by the board of directors, the totality of the 
circumstances demonstrate that these payments are not distributions.  This argument fails 

for several reasons.                                                      
    First, the Amended Complaint controls the Court’s analysis.  In it, BMO plainly and 
repeatedly refers to the payments as distributions (115 times, to be exact).  BMO cannot 
now, in opposition to the shareholders’ motions to dismiss, argue that the payments are not 

distributions when BMO itself called them distributions throughout its pleading with no 
suggestion to the contrary.  “When analyzing a motion to dismiss, the court looks to the 
complaint as pleaded.”  Lake v. Honeywell, Inc., No. 4-96-944, 

, at *2 (D. 
Minn. May 27, 1997); see also Stepps v. Bd. of Trs. of Univ. of Arkansas, No. 4:21-CV-00986-LPR, 

, at *1 n.4 (E.D. Ark. Sept. 6, 2022) (resolving a discrepancy between what 
is contained in the complaint and in the response to a motion to dismiss in favor of the 

complaint because “[a]t this stage of the litigation, the factual allegation made in the 
Amended Complaint controls”).  BMO already amended its complaint once in response to 
the shareholders’ original motions to dismiss, which raised the same argument that MUVTA 
does not apply to shareholder distributions.  BMO had notice of the shareholders’ argument, 
and it could have alleged in its Amended Complaint that the payments were not 
distributions.  Instead, it doubled down on its characterization of the payments at issue.  The 

Court will not now disregard either that decision or the clear assertions in the complaint.  
    Second, by its own terms the MBCA defines “distributions” broadly to include all 
transfers made by the corporation to any of its shareholders.             
         “Distribution” means a direct or indirect transfer of money or  
         other property, other than its own shares, with or without      
         consideration, or an incurrence or issuance of indebtedness, by 
         a corporation to any of its shareholders in respect of its shares.  
         A distribution may be in the form of a dividend or a distribution 
         in liquidation, or as consideration for the purchase, redemption, 
         or other acquisition of its shares, or otherwise.               
Minn. Stat. § 302A.011, subd. 10.  The statute contains no requirement that only payments 
made pro rata or with approval by the board of directors are considered distributions. 
    In an effort to avoid the application of the MCBA, BMO conflates the question of 

whether a distribution was properly or improperly made with whether a payment was a 
distribution at all.  But the MBCA makes clear that those are distinct questions.  Section 
302A.011 defines a distribution as “a direct or indirect transfer . . . by a corporation to any of 
its shareholders.” Minn. Stat. § 302A.011, subd. 10. Section 302A.551 then outlines when 
shareholder distributions are properly authorized: “only if the board determines . . . that the 
corporation will be able to pay its debts in the ordinary course of business after making the 

distribution.”  Id. § 302A.551, subd. 1.  If, however, this requirement is not met and a 
distribution is improper, Section 302A.557 is the sole basis under Minnesota law for 
shareholders to be liable for improper distributions, and that section only allows the 
corporation or its receiver to recover, not a creditor.  Id. § 302A.557, subd. 1.   
         A shareholder who receives a distribution made in violation of  
         the provisions of section 302A.551 is liable to the corporation, 
         its receiver or other person winding up its affairs, or a director 
         under section 302A.559, subdivision 2, but only to the extent   
         that the distribution received by the shareholder exceeded the  
         amount that properly could have been paid under section         
         302A.551.                                                       
Id.  This provision allows for the recovery of improperly made distributions, and notably 
makes no mention of shareholder liability to creditors.                   
    Moreover, if BMO were correct that only properly made distributions count as 
“distributions” under the statute, then section 302A.557 and its avenue of relief for improper 
distributions would be rendered superfluous.  See Hagen v. Steven Scott Mgmt., Inc., 

, 170 (Minn. 2021) (discussing the “canon against surplusage” employed by Minnesota 
courts in interpreting state statutes and its instruction to “avoid interpretations that would 
render a word or phrase superfluous, void, or insignificant, thereby ensuring each word in a 

statute is given effect”).  Accordingly, the fact that the board did not authorize the payments 
Capitol Sales made to its three shareholders certainly affects whether the payments were 
proper, but not whether they were distributions.  Under a plain reading of the MBCA, the 
payments at issue here amount to distributions because they were made “by a corporation to 
any of its shareholders in respect of its shares.”  

 § 302A.011, subd. 10. 
    The Court is not persuaded by BMO’s contention that “in respect of” should be read 

so that only pro rata distributions in proportion to the number of shares held by a 
shareholder qualify as distributions.  First, BMO cites no authority for this proposition.  
Moreover, the plain language of the term does not point to such a limitation.  Cf. Jennings v. 
Rodriguez, 

 (2018) (Thomas, J., Gorsuch, J., concurring in part) (“The 
phrase ‘with respect to’ means ‘referring to,’ ‘concerning,’ or ‘relating to’”) (citing Oxford 
American Dictionary and Language Guide 853 (1999 ed.); accord, Webster’s New Universal 

Unabridged Dictionary 1640 (2003 ed.); American Heritage Dictionary 1485 (4th ed. 2000)).  
A transfer from a corporation to a shareholder “in respect of” its shares simply means that 
the shareholder is receiving that payment because it owns shares.         
    The Court’s reading of the statute is confirmed by the caselaw.  The MBCA’s use of 
the term “distribution” has been broadly interpreted and precludes MUVTA from applying 
to shareholder distributions, properly or improperly made.  In Buckrey, corporate 

shareholders petitioned for review of an IRS determination that the shareholders were liable, 
under a fraudulent-transfer theory, for the corporation’s tax liabilities.  See Buckrey, 

, 

 at *5 (2017).  The Tax Court granted partial summary 
judgment to the shareholders, holding that the corporation’s partial redemption of the 

shareholders’ stock counted as a distribution and consequently was governed by the MBCA 
and not the predecessor to MUVTA.  

.  Commenting that although it “seems 
strange that Minnesota precludes outside creditors from challenging the propriety of a 
corporate distribution,” the court “can’t and won’t ignore the plain language of the statute.”  

  Even if a shareholder distribution “was illegal at the time it occurred, the MBCA doesn’t 
give standing to challenge an illegal distribution” to creditors.  

. 

    An earlier decision by a court in this district aligns with Buckrey’s interpretation of the 
two statutes, holding that the MCBA “renders [MUVTA] inapplicable to corporate 
distributions.”  Helm Fin. Corp. v. MNVA R.R., Inc., Civil No. 97-1342 (DSD/JMM), 

 at *6 (D. Minn. June 24, 1998), aff’d on other grounds, 

 
(8th Cir. 2000).  In Helm, the district court denied summary judgment to a creditor seeking to 
void a distribution as a fraudulent transfer, holding that MUVTA was plainly “not applicable 

to the stock transfer.”  Id.; see also Metro. Steel Fabricators, Inc. v. Michalski (In re Metropolitan Steel 
Fabricators, Inc.), 

 (Bankr. D. Minn. 1996) (noting grant of summary 
judgment on “fraudulent transfer claims pursuant to 

 to the 
extent that the claims are defined as corporate distributions by the Minnesota Business 
Corporation Act”).                                                        
    For these reasons, BMO fails to state a claim against the shareholders for fraudulent 

conversion.  The payments were distributions within the meaning of the MBCA, and the 
MBCA expressly supersedes MUVTA with respect to shareholder distributions.  Because 
BMO seeks to recover the shareholder distributions under MUVTA, but MUVTA does not 
apply, Counts I–IX are dismissed with prejudice.                          

    B. Breach of Fiduciary Duty Claims                                   
    The shareholders also moved for dismissal of BMO’s breach-of-fiduciary-duty claims 
against them (Count X).  Whether BMO states such a claim depends squarely on whether 
the defendant shareholders were also officers or directors of Capitol Sales during the 
relevant time period.                                                     
    For over a century, Minnesota common law has recognized a breach of fiduciary duty 

where officers or directors of an insolvent (or nearly insolvent) corporation prefer their own 
debt over that owed to other creditors of the corporation.  See Taylor v. Mitchell, 

 (Minn. 1900); Taylor v. Fanning, 

 (Minn. 1902); Aiken v. Timm, 

 (Minn. 1920); Farmers Co-op. Ass’n of Bertha, Minn. v. Kotz, 

 
(Minn. 1946), abrogated on other grounds by Rubey v. Vannett, 

 (Minn. 2006); 
Snyder Elec. Co. v. Fleming, 

 (Minn. 1981).  In the Taylor cases, the 

Minnesota Supreme Court held that directors of an insolvent company breached their 
fiduciary duty to the other creditors of the company by authorizing the issuance of notes and 
a mortgage in their names, thereby using their positions as directors “to secure the payment 
of their own debt in preference to debts of other creditors.”  Taylor v. Fanning, 

; see also Taylor v. Mitchell, 

 (Minn. 1900).  In Aiken, the court similarly 
held that a general manager of a corporation acted in bad faith by conveying land to his wife 
for repayment of company debt owed to her and to him, thus preferring the repayment of 
his family’s debt over that of other creditors.  

.         
    Snyder Electric is the most recent case by the Minnesota Supreme Court exploring this 

type of fiduciary breach.  There, the court held that a defendant—who was the sole 
shareholder and chief officer of a corporation—breached his fiduciary duty to other 
creditors by taking advantage of his role as chief officer to have the insolvent company repay 
him for antecedent debts to the detriment of other creditors.  

.  The court 
qualified the limited fiduciary duty that it recognized directors and officers owe to a 
corporation’s creditors:                                                  

         When a corporation is insolvent, or on the verge of insolvency, 
         its directors and officers become fiduciaries of the corporate  
         assets for the benefit of creditors.  As fiduciaries, they cannot by 
         reason of their special position treat themselves to a preference 
         over other creditors.  By “preference” we here mean generally a 
         transfer or encumbrance of corporate assets made while the      
         corporation is insolvent or verges on insolvency, the effect of 
         which is to enable the director or officer to recover a greater 
         percentage of his debt than general creditors of the corporation 
         with otherwise similarly secured interests.                     

 (citations omitted).                                                  

    Thus, it is a well-settled principle in Minnesota law that officers and directors breach 
a fiduciary duty to a corporation’s creditors when they themselves are creditors of the 
corporation and use their position at the company to prefer their own debt over that of 
other creditors.  One case, by the Minnesota Court of Appeals, extended the limited 
fiduciary duty the Minnesota Supreme Court recognized in Snyder beyond the context of a 
director preferring his own debt.  See Drewitz v. Motorwerks, Inc., 

 (Minn. 
Ct. App. 2015).  The Drewitz court held that a director breached his fiduciary duty to 
creditors when he liquidated most of the company’s assets by authorizing shareholder 
distributions that would go to himself and the one other shareholder of the company.  The 
court reasoned that “[i]f the prohibition on ‘preferences’ outlined in Snyder prevents 

corporate directors from favoring their own bona fide debts over those of outside 
creditors . . . this prohibition similarly extends to directors who knowingly ‘prefer’ their share 
of corporate profits over the rights of a pending claimant.”  

. 
    Of course, this Court does not need to follow Drewitz’s application of the fiduciary 
duty recognized in Snyder Electric to encompass all self-preferencing actions by officers and 
directors, and not just repayment of their debts.  See Pleasants v. Am. Exp. Co., 

 (8th Cir. 2008) (“The decision of an intermediate state appellate court is not binding on 
a federal court that seeks to determine state law.”) But the shareholders have pointed to no 
authority stating that Drewitz’s application is incorrect.  The cases they cite predate Drewitz by 
over a decade, and the fact that the Minnesota Supreme Court has not expressed approval of 
Drewitz carries little weight, as it also has not rejected its approach.  This Court declines to 
find at the motion to dismiss stage that Drewitz’s application of Synder Electric is incorrect as a 

matter of law.                                                            
    However, even with the Court agreeing that Drewitz is correct, the breach of fiduciary 
duty claims must fail as to the shareholders.  No authority cited by the parties or discovered 
by the Court holds that individuals, who are solely shareholders, owe a fiduciary duty to the 
creditors of the corporations they own stock in, nor that they can breach that duty merely by 
receiving shareholder distributions from an insolvent corporation.  Cf. Ass'n of Mill & Elevator 

Mut. Ins. Co. v. Barzen Int’l, Inc., 

 (Minn. Ct. App. 1996) (rejecting 
creditor’s attempt to hold sole shareholder liable for corporate debt because “[i]n no case has 
the Snyder Electric holding been extended to create a shareholder’s fiduciary duty to creditors 
based solely on its status as shareholder”).  Generally, under Minnesota law, shareholders of 

a corporation are “under no obligation to the corporation or its creditors” with respect to 
the shares they own.  Minn. Stat. § 302A.425.  Indeed, the only cases holding shareholders 
liable under Minnesota law for a breach of fiduciary duty are cases in which those 
shareholders were also directors or officers of the company.  See, e.g., Snyder, 

 (sole shareholder and chief officer); B & S Rigging & Erection, Inc. v. Wydella, 

 (Minn. Ct. App. 1984) (shareholders, directors, and officers); Drewitz, 

 (director and majority shareholder).                               
    Accordingly, only if BMO has adequately pled that the three defendant shareholders 
in this case—Kenneth Kuskie, John Stedman, and Susan Stedman—were directors or 
officers of Capitol Sales can BMO’s claims against them for breach of a fiduciary duty state a 
claim upon which relief can be granted.  But BMO made answering the question of whether 
the defendant shareholders were also directors or officers difficult by its choice of language 

in the pleading.  In the background section, the Amended Complaint states that “[a]t all 
times relevant, Kuskie, J. Stedman and S. Stedman were shareholders of Capitol Sales.” [Am. 
Compl. ¶ 30] (emphasis added).  And it continues to refer to them as shareholders 
throughout the complaint.  It also alleges that Mr. Kuskie, Mr. Stedman, and Ms. Stedman 
“at all times relevant were insiders” of Capitol Sales.  [Am. Compl. ¶ 17] (emphasis added).  
By way of contrast, BMO alleges that Mr. Hayes was employed by Capitol Sales “since 1986” 
and was “[a]t all times relevant,” the “President and Chief Financial Officer” of the 
company.  [Am. Compl. ¶ 11.]                                              
    The terms shareholder, officer, director, and insider have distinct meanings under 

Minnesota law.  The MBCA, which applies to Minnesota corporations, defines “officer” as 
“the chief executive officer, the chief financial officer,” or “a person elected, [deemed 
elected,] appointed or otherwise designated as an officer” by the board of directors.  Minn. 
Stat. § 302A.011, subd. 18.  Mr. Hayes, therefore, is certainly an officer of Capitol Sales.  The 
MBCA defines a director as “a member of the board,” id. § 302A.011, subd. 9, and a 
shareholder as “a person registered on the books or records of a corporation . . . as the 

owner of whole or fractional shares,” id. § 302A.011, subd. 29.  In contrast, corporate 
“insider” is a term that appears only in MUVTA, which is not applicable to the fiduciary-
breach claims, and does not appear in the MCBA.  When a debtor is a corporation, an 
insider is a director, officer, person in control, a general partner, or a relative of any of the 
preceding terms.  

(8).  So, by alleging that Mr. Kuskie, Mr. Stedman, and 
Ms. Stedman were shareholders and insiders of Capitol Sales, this could mean they were 

directors or officers, but it does not necessarily require that conclusion: the MUVTA’s 
insider definition is not only irrelevant to the MCBA, but it reaches far more broadly than 
the coverage of the common-law fiduciary breach claim.                    
    Rather than clarifying this issue, the section of BMO’s Amended Complaint 
specifically pertaining to the breach of fiduciary duty claims adds to the ambiguity.  First, 
BMO’s use of group pleading obfuscates who allegedly did what.  BMO groups its breach-

of-fiduciary-duty claims against the three shareholders and Mr. Hayes under Count X, 
despite the four defendants having different roles in the company and varying levels of 
involvement, if any, in the factual allegations underpining the alleged breaches of duties.   
    Further, BMO’s use of “and/or” to describe the shareholders’ roles significantly 

exacerbates the lack of clarity stemming from the group pleading.  Count X sets out that 
“Kuskie, J. Stedman and S. Stedman, as officers, directors and/or Shareholders of Capitol 
Sales, owed duties of good faith, loyalty and due care to Capitol Sales, and by operation to 
Capitol Sales’ creditors.”  [Am. Compl. ¶ 137] (emphasis added).  BMO then makes three 
specific allegations concerning how the defendants allegedly breached their fiduciary duties 
to BMO.  First, the “officers, directors and/or Shareholders by their actions or omissions 

allowed the books and records of the Company to be tampered with, manipulated, and 
fraudulently transmitted to creditors for the insiders’ benefit and to the detriment of the 
Company’s creditors.”  [Id. ¶ 138] (emphasis added).  Second, the “payments authorized to 
be paid to Capitol Sales’ insiders (Shareholders and Hayes) by the officers, directors and/or 
shareholders of Capitol Sales” were made when BMO was a creditor of Capitol Sales, and 
“the Shareholders and Hayes further pushed Capitol Sales into insolvency.”  [Id. ¶ 139–40.]  

Third, “Hayes, Kuskie, J. Stedman and S. Stedman, as officers, directors and/or Shareholders, 
by knowingly engaging in self-dealing and self-interest, in the face of Capitol Sales’ 
insolvency” breached their fiduciary duty to Capitol Sales’ creditors.  [Id. ¶ 141] (emphasis 
added).                                                                   
    It is noteworthy that the claims regarding the actions taken are vague and conclusory.  
BMO’s allegation that the shareholders allowed someone else to tamper with the Capitol 

Sales books and records does not describe any self-preferencing behavior that could form 
the basis of liability for a breach of fiduciary duty under Minnesota law.  Nor does the bare 
allegation that the defendants “knowingly engag[ed] in self-dealing and self-interest[ed]” 
behavior aid BMO’s cause—without sufficient supporting factual allegations about what that 

purported self-dealing behavior was, this allegation is nothing more than a conclusory 
assertion the Court need not accept as true.  See Iqbal, 

.   
    But more critically, BMO’s and/or pleading is not enough here.  The assertion that 
the “officers, directors and/or shareholders of Capitol Sales” authorized the payments to the 
shareholders and Mr. Hayes at a time when the company was insolvent, to the detriment of 
creditors like BMO is only sufficient if each of the three shareholders were officers or 

directors of the corporation.  [Am. Compl. ¶ 139.]  BMO never plainly alleges that any of 
them were.  Instead, BMO uses an ambiguous “and/or” construction that leads to 
competing possibilities for the alleged breach of fiduciary duties by the three shareholders, 
one of which states a claim upon which relief could be granted and the other which does 
not.  The allegations in Count X could be read to mean that Mr. Kuskie, Mr. Stedman, and 
Ms. Stedman—as shareholders alone—owed fiduciary duties to BMO; allowed the 

company’s books to be tampered with; authorized payments to Capitol Sales’ insiders when 
it was insolvent; and engaged in self-dealing behavior.  However, as a matter of law, such 
assertions of shareholder activity do not state a claim for breach of fiduciary duty in 
Minnesota.  Alternatively, these allegations could be interpreted to mean that Mr. Kuskie, 
Mr. Stedman, and Ms. Stedman took these actions as officers or directors, in which case the 
Amended Complaint presents a plausible fiduciary-duty claim.              
    BMO’s failure to specify whether it is alleging that Mr. Kuskie, Mr. Stedman, and 
Ms. Stedman were officers or directors is revealing because in their original, now-withdrawn 
motions to dismiss, the shareholders argued that as shareholders, they do not owe fiduciary 

duties to BMO, and that BMO failed to allege they were directors or officers.  [See, e.g., Dkt. 
No. 32 at 7-8.2]  As with the MUVTA claims, BMO had notice of the shareholders’ 
arguments and could have provided clarity through its amendment of the pleadings.  It could 
have plainly asserted that each of the defendants was a director or an officer at the relevant 
time, articulating facts to support such claims.  It did not.             
    In any event, this Court’s task is to determine whether the Amended Complaint 

“contain[s] sufficient factual matter, accepted as true, to ‘state a claim to relief that is 
plausible on its face.’” Iqbal, 

 (quoting Twombly, 550 U.S. at 570).  Evaluating 
whether a complaint states a plausible claim to relief is a “context-specific task” that looks at 
whether the factual content in the complaint “allows the court to draw the reasonable 
inference that the defendant is liable for the misconduct alleged.” Id. at 679, 678.  BMO’s 
pleading falls short because its allegations against the shareholders are susceptible of multiple 

interpretations, one that is consistent with liability and the other that is not.  Id. at 678 
(“Where a complaint pleads facts that are merely consistent with a defendant’s liability, it 



2 Although not properly before the Court for purposes of determining whether BMO has 
failed to state a claim under Rule 12(b)(6), the declaration from Ms. Stedman’s counsel 
demonstrates that when asked to clarify whether BMO was alleging that Ms. Stedman was an 
officer or director of Capitol Sales, BMO’s counsel did not provide any straightforward 
confirmation.  [Decl. of Christopher W. Boline, Ex. A, Dkt. No. 96.]      
stops short of the line between possibility and plausibility of entitlement to relief.”) 
(quotation marks omitted).                                                
    Courts faced with similarly ambiguous complaints have found the pleadings 

insufficient.  The Sixth Circuit, addressing whether a pleading was sufficient to allege 
personal jurisdiction, has affirmed a district court’s dismissal of a case where the complaint 
used similar “and/or” language and was susceptible to multiple interpretations.  Palnik v. 
Westlake Ent., Inc., 

, 250–52 (6th Cir. 2009).  There, the plaintiff sued 
producers and distributors of a movie that used his copyrighted songs without permission.  

.  The major distributors settled, leaving two California-based firms as defendants 

that then moved to dismiss the suit for lack of personal jurisdiction.  

  The complaint 
alleged that the defendants were “producers and/or distributors” of the movie.  

.  
The court explained that if the remaining defendants were producers and distributors, the 
allegations were sufficient to sustain personal jurisdiction, but if they were only producers, 
that was insufficient.  

  But “because one conclusion supports jurisdiction and the other 
does not,” the court concluded that plaintiff’s complaint failed to provide “reasonably 

particular facts that resolve which is the better understanding of the defendants’ actions” and 
did not “sort out the relationship between the defendants.”  

  The Sixth Circuit found 
comfort in Rule 11(b) of the Federal Rules of Civil Procedure, which the court explained 
would have allowed the plaintiff to assert on “knowledge, information, and belief” that the 
defendants were distributors and assert that a reasonable opportunity for discovery would 
provide evidentiary support.  

 at 252–53.                              
    Other courts have reached similar conclusions in the securities fraud context.  
Plaintiffs who allege that they bought a security issued under a materially false or misleading 
registration statement must show that they can trace their shares back to the public offering 

that used the registration statement.  See In re Century Aluminum Co. Sec. Litig., 

 (9th Cir. 2013).  The Ninth Circuit held that investors failed to state a plausible claim 
for relief where the relevant allegation in the complaint could lead to “two possible 
explanations, only one of which can be true and only one of which results in liability.”  

.  In such a case, the Ninth Circuit explained that plaintiffs need to offer “[s]omething 
more” than allegations that are “‘merely consistent with’ their favored explanation but are 

also consistent with the alternative explanation,” such as facts that “exclude the possibility 
that the alternative explanation is true.”  

 at 1108 (quoting Iqbal, 

).  The 
Fourth Circuit has agreed, holding that “and/or” language in a complaint for securities fraud 
must be “coupled with sufficient supporting facts” to give rise to a plausible claim for relief.  
Yates v. Mun. Mortg. & Equity, LLC, 

 (4th Cir. 2014).  In Yates, the 
“plaintiffs’ coy choice of words” gave the court some pause, and it did not find “the 

additional supporting facts sufficient to push the claim” from merely possible to plausible. 

                                                                       
    The same is true with BMO’s complaint.  The use of “and/or” is not always a death 
knell, especially when closely held corporations often have shareholders who are also officers 
or directors.  But BMO has failed to provide any additional facts that exclude the possibility 
that the shareholders here are just shareholders and cause its alternative reading—that they 

are also officers or directors—to rise to the level of plausibility.  Although it describes Mr. 
Kuskie, Mr. Stedman, and Ms. Stedman as being corporate “insiders” of Capitol Sales, this 
could mean that they are merely relatives of directors and officers but not directors or 
officers themselves.  See 

(8).  And being an “insider” by itself is not 

enough to establish a fiduciary duty under Minnesota law.  Looking at the Amended 
Complaint as a whole, BMO’s terse description of the three shareholders as insiders and 
shareholders stands in stark contrast with its specific factual allegations regarding Mr. Hayes, 
for whom BMO provides the year he was hired and the specific roles he held at Capitol 
Sales.  [Compare Am. Compl. ¶ 9 with ¶ 11.]  Even examining the factual allegations pertaining 
to other claims in the complaint does not exclude the possibility that Mr. Kuskie, Mr. 

Stedman, and Ms. Stedman were just shareholders at the time of the transfers.  In explaining 
why the shareholders knew or should have known Capitol Sales was insolvent at the time of 
the payments in question, BMO alleges that the shareholders were “provided with Capitol 
Sales’ financial statements and records to review,” and “controlled ownership of the 
investments in Capitol Sales,” which are consistent with shareholder responsibilities.  [E.g., 
Am. Compl. ¶¶ 42, 116.]                                                   

    The Court is mindful of guidance from the Eighth Circuit that a plaintiff need not 
“rebut all possible lawful explanations for a defendant’s conduct” to survive a motion to 
dismiss.  Braden v. Wal-Mart Stores, Inc., 

 (8th Cir. 2009) (emphasis added).  
But it finds this to be a situation with a “concrete, obvious alternative” requiring a plaintiff 
to “plead additional facts tending to rule out the alternative.”  

 at 597 (citing Iqbal, 

) (quotation marks omitted).                                   
    Given the ambiguous “and/or” phrasing to describe the shareholders’ roles at the 
company that is susceptible to multiple interpretations; the group pleading for these claims; 
and the lack of specific factual allegations supporting BMO’s claims that the shareholders 

breached a fiduciary duty owed to the bank, the Court grants the shareholders’ motions to 
dismiss these claims.  To the extent the claims are pled against Mr. Kuskie, Mr. Stedman, and 
Ms. Stedman solely in their capacities as shareholders, the Court grants the motion to 
dismiss with prejudice because shareholder status alone is not enough to confer a fiduciary 
duty under Minnesota law.  However, the Court otherwise dismisses the claims without 
prejudice to allow refiling if, within the bounds of Rule 11, BMO can allege that the three 

shareholders were also officers or directors.                             
 IV.  ANALYSIS OF CROSSCLAIMS AND THIRD-PARTY COMPLAINT                  
    The shareholders also filed motions to dismiss Mr. Hayes’s amended crossclaims in 
which he seeks indemnification and advancement of legal fees from them.  [Dkt. Nos. 56, 
66, 80].  The shareholders argue that his indemnification claim under 

 is 
preempted by Minn. Stat. § 302A.521; that Minn. Stat. § 302A.521 does not allow for 

indemnification against shareholders; that his indemnification claim under § 302A.521 is 
premature; and that he did not satisfy the requirements of § 302A.521 before seeking 
advancement of legal fees.  They also argue that he has not met the pleading standard to 
pierce the corporate veil and hold them—as opposed to Capitol Sales—liable for 
indemnification and advancement of legal fees.  Capitol Sales incorporates by reference the 
arguments of the shareholders to support its own motion to dismiss Mr. Hayes’s third-party 
complaint against the corporation, which also seeks indemnification and advancement under 
the same statutes.                                                        
    Mr. Hayes responds that he can plead his indemnification claims in the alternative; 

the court can wait to act on his indemnification claim under Minn. Stat. § 302A.521 until the 
underlying proceedings conclude and need not dismiss it; and his written affirmation satisfies 
the statutory requirements.  He also argues that veil piercing is subject to a more liberal 
notice-pleading standard, and that in any event, he provided sufficient facts under either 
pleading standard.                                                        
    A. Indemnification Under 

                       

    Mr. Hayes sought indemnification and advancement of legal fees under 

 and alternatively under Minn. Stat. § 302A.521 from both Capitol Sales and the 
shareholders.  Section 181.970 generally requires an employer to indemnify its employees for 
civil damages that arose while the employee was performing employment duties.  Section 
302A.521 (which is part of the MBCA) requires a corporation to indemnify individuals who 
served the corporation in an “official capacity,” including officers and directors.  Mr. Hayes’s 

indemnification claims under 

 fail because that statute, by its express 
terms, does not apply to “employees and employers who are governed by indemnification 
provisions under section 302A.521.”  Minn. Stat § 181.970, subd. 2(3).  Mr. Hayes agrees 
that Capitol Sales is a corporation and that he served it as an officer.  [Hayes Am. 
Crossclaims ¶ 8, Dkt. No. 50; Hayes Am. Third-Party Compl. ¶ 2, Dkt. No. 50.]  Therefore, 
he is an employee governed by the indemnification provision under § 302A.521, and 

 does not apply to him.                                    
    The Court is not persuaded by Mr. Hayes’s argument that Dochniak v. Dominium 
Management Services, Inc., No. CIV. 06-237 (JRT/FLN), 

, at *7, n.5 (D. 
Minn. Sept. 6, 2007) stands for the proposition that an employee can simultaneously make a 

claim for indemnification under 

 and § 302A.521.  Such a reading 
requires the Court to ignore the plain text of 

 excluding employees and 
employers covered by § 302A.521.  Moreover, in Dochniak, the court granted the employee 
summary judgment on the employer’s counterclaim for negligence because the employee 
would be entitled to indemnification.  See Dochniak, 

, at *7.  Mr. Hayes 
relies on a footnote in Dochniak stating that under either indemnification statute, the 

employer would have to indemnify the employee unless it can show that he acted in bad 
faith.  

 at *7 n.5.  The question presented here was not squarely before the court in 
Dochniak, and the dicta in that footnote cannot override the clear statutory command 
contained in the text of Minn. Stat § 181.970, subd. 2(3).                
    Mr. Hayes’s indemnification claims are dismissed with prejudice to the extent he 
seeks relief pursuant to 

.                           

    B. Indemnification Under Minn. Stat. § 302A.521                      
    The Court next considers Mr. Hayes’s claims seeking indemnification pursuant to 
Minn. Stat. § 302A.521, which does apply to him.  He seeks indemnification from his former 
employer, Capitol Sales, and also asks the Court to pierce the corporate veil to hold the 
shareholders liable for indemnification as the corporation’s “alter ego.”   
    Section 302A.521 requires Capitol Sales to indemnify Mr. Hayes if he (1) has not 

been indemnified by another organization for the same proceedings; (2) acted in good faith; 
(3) did not receive an improper personal benefit; (4) did not have reason to believe his 
conduct was unlawful; and (5) reasonably thought the conduct was in the best interests of 
Capitol Sales.  But “[t]he right to indemnification cannot be determined until the legal 

proceedings have concluded.”  Asian Women United of Minnesota v. Leiendecker, 

 (Minn. Ct. App. 2010); see also Minn. Stat. § 302A.521, subd. 6(5) (directing that a 
court may review the denial of indemnification within 60 days after the termination of the 
underlying proceeding or a written request for indemnification, whichever is later).  Here, the 
underlying legal proceedings have not concluded, so the Court cannot act on Mr. Hayes’s 
request for indemnification from Capitol Sales at this time.  That does not mean that Mr. 

Hayes has failed to state a claim for indemnification, however, so the Court denies Capitol 
Sales’ motion to dismiss the indemnification claim under Minn. Stat. § 302A.521.  
    The same cannot be said for Mr. Hayes’s indemnification claims against the 
shareholders.  The Court dismisses these claims because Mr. Hayes failed to meet the 
pleading standard for piercing the corporate veil.  In essence, there is no factual meat on the 
bones of his claims against the shareholders to permit these claims to survive. 

    Under Minnesota law, courts apply a two-prong test to determine whether a 
corporate veil should be pierced to hold a party liable as the “alter ego” of the entity.  Johnson 
v. Evangelical Lutheran Church in America, CV No. 11-23 (MJD/LIB), 

, at *6 
(D. Minn. July 22, 2011).  First, a court examines the reality of “how the corporation 
operated and the individual defendant’s relationship to that operation.”  Victoria Elevator, 283 
N.W.2d at 512 (quotation omitted).  In Victoria Elevator, the Minnesota Supreme Court listed 

factors that weigh in favor of piercing the corporate veil, including “insufficient 
capitalization,” a “failure to observe corporate formalities,” the “absence of corporate 
records,” any “siphoning of funds by [a] dominant shareholder,” nonfunctioning of 
corporate officials, and the corporation existing as a mere “facade for individual dealings.” 

Id.  Piercing the corporate veil requires several of these factors to be present.  Id.  Second, a 
plaintiff seeking to pierce the corporate veil must also show that there is an “element of 
injustice or fundamental unfairness” that requires holding the individual defendants 
personally liable for the acts of the corporation.  Id.                   
    In Mr. Hayes’s amended crossclaims against the shareholders, he provides two 
paragraphs related to piercing the corporate veil to seek indemnification directly from the 

shareholders.  Both consist of legal conclusions the court need not accept.  See Iqbal, 

.  First, he merely restates the factors identified in Victoria Elevator without any 
factual allegations to support them:                                      
         Co-Defendants are the sole owners of Capitol Sales and as a     
         result of their conduct:                                        
              (a)  Capitol  Sales  has  insufficient  capitalization  for 
              purposes of its corporate undertaking;                     
              (b)  Capitol  Sales  has  failed  to  observe  corporate   
              formalities;                                               
              (c)  Co-Defendants  have  siphoned  funds  from  Capitol   
              Sales to pay themselves; and                               
              (d)  Capitol  Sales  has  failed  to  maintain  adequate  or 
              appropriate corporate records.                             

[Hayes Am. Cross-Claims ¶ 32.]  He then alleges in a similarly conclusory fashion: 
         As a result, piercing the corporate veil for Hayes’ indemnification 
         claim is necessary to avoid injustice or fundamental unfairness. 

[Id. ¶ 32.]  This is simply insufficient to meet his pleading burden.  In Johnson, the court 
dismissed the plaintiff’s claim for alter-ego liability, explaining that “beyond the conclusory 
allegation” of the Victoria Elevator factors being present, there were “no factual allegations to 
support the first prong of piercing the corporate veil” and the “barebones allegation that 
injustice or fundamental unfairness will result” was insufficient to meet the second prong.  

Johnson, 

, at *6–7.  The same is true here.                
    Mr. Hayes provides no facts to support the factors he claims are present.  In his 
background section, he describes that he asked the shareholders to inject more funds into 
“Capitol Sales when it experienced a rapid business decline around the pandemic, and they 
declined.  [Hayes Am. Crossclaims ¶ 12.]  But the shareholders’ decision not to inject more 
funds into Capitol Sales at one point in time does not, by itself, meet Mr. Hayes’s burden.  

First, the shareholders correctly contend that the “adequacy of capitalization must be 
measured at the time of incorporation” because initial undercapitalization “reveals whether 
the corporation was created to avoid liability.” Damon v. Groteboer, 

 (D. Minn. 2013) (quoting NLRB v. Bolivar–Tees, Inc., 

, 730 n.7 (8th Cir. 
2008)).  Second, even if this later undercapitalization was considered, pleading facts that 
satisfy only the undercapitalization factor from Victoria Elevator “would not be enough.” 

Brown v. Pfeiffer, No. 19-cv-3132 (MWW/KMM), 

, at *6 (D. Minn. Mar. 11, 
2020).  This Court would be hard pressed to find any company that has not suffered hard 
times (especially during the pandemic), and the mere fact that investors declined to inject 
additional capital into the company when it was struggling is not enough to hold those 
individuals liable as the alter ego of the company.  Mr. Hayes provides no other facts to 
support his conclusions that Capitol Sales failed to maintain adequate corporate records, 
failed to observe corporate formalities, or that the shareholders siphoned funds from the 
company.                                                                  
    Mr. Hayes contends that he just needs to meet Minnesota’s more liberal notice-

pleading standard for this claim, relying upon Barton v. Moore, 

 (Minn. 
1997), in which the Minnesota Supreme Court held that a plaintiff need only plead “broad 
general statements that may be conclusory” to state a claim for piercing the corporate veil.  

  And it’s true that some cases from this district, relying upon Barton and other cases that 
predated Iqbal, have indeed suggested that plaintiffs only need to meet Minnesota’s lower, 
notice-pleading standard for bringing veil-piercing claims in federal court.  See, e.g., Chairez v. 

AW Distrib., Inc., No. 20-CV-1473 (NEB/TNL), 

, at *5 (D. Minn. Apr. 23, 
2021) (“To survive a motion to dismiss an alter ego claim, a plaintiff need only give notice of 
the theory under which it plans to proceed and its intent to pierce the corporate veil.”); 
Damon v. Groteboer, No. 10-CV-92 (JRT/FLN), 

, at *6 (D. Minn. Mar. 14, 
2011) (same); see also Minn. Wild Hockey Club, LP v. Emil Interactive Games, LLC, No. 16-cv-
1545 (WMW/TNL), 

, at *6 (D. Minn. Dec. 28, 2016) (collecting cases 

and summarizing the different ways courts in this district have approached motions to 
dismiss corporate veil-piercing claims based upon insufficient pleading). 
    This Court is instead persuaded by the reasoning in Minnesota Wild Hockey Club, which 
held that the federal pleading standard for veil-piercing claims “requires more than 
Minnesota’s Barton pleading standard.”  

, at *8. The Court agrees that it 
must apply the federal pleading standard to determine whether a plaintiff states a claim, even 

when applying substantive state law.  Karnatcheva v. JPMorgan Chase Bank, N.A., 

 (8th Cir. 2013); see also Fed. R. Civ. P. 81(c)(1) (providing that the Federal Rules of Civil 
Procedure apply to cases after they are “removed from a state court”). Therefore, conclusory 
claims that merely restate the Victoria Elevator factors, without any factual allegations to 

support them, are insufficient at this stage to support imposing alter ego liability. 
    Nevertheless, facts supporting piercing the corporate veil may emerge during 
discovery in this case, and this order should not be read to “foreclose a future, better-pled 
and substantiated claim in this regard.”  Brown, 

 at *6.  Although the Court 
grants the shareholders’ motions to dismiss the indemnification claim against them, it does 
so without prejudice to allow Mr. Hayes to replead a claim, if he chooses, against the 

shareholders with sufficient factual allegations to support piercing the corporate veil.   
    C. Advancement of Legal Fees Under Minn. Stat. § 302A.521            
    Unlike indemnification, advancement of legal expenses is “critical to the officer’s 
ability to defend himself in litigation” and “must be made promptly, otherwise its benefit is 
forever lost.”  RBA, Inc. v. Reinhart, Civil No. 16-2841 (SRN/DTS), 

, at 
*3 (D. Minn. Aug. 23, 2017) (quotation omitted).  An employee seeking advancement from 

their corporation must provide the corporation with a written affirmation of their good faith 
belief that they meet the criteria for indemnification and a written undertaking to repay the 
advance payment if it is later determined that they are not entitled to indemnification.  Minn. 
Stat. § 302A.521, subd. 3.  A court may not act on an individual’s request for advancement 
under Minn. Stat. § 302A.521 until after the corporation rejects the written request or has 
not acted on it within 60 days after receiving it.  See Minn. Stat. § 302A.521, subd. 6(5)(ii). 
    The parties quibble about when Mr. Hayes satisfied the statute’s requirements for a 
written affirmation.  The Court need not wade into this matter, as all parties agree that the 
requirements were satisfied at the latest by a letter and declaration sent to the shareholders 

and Capitol Sales on July 14, 2022.  [Decl. of Bryan J. Morben, Ex. C, Dkt. No. 87.]  This 
means that Capitol Sales had 60 days, until Sept 12, 2022, to respond to Mr. Hayes’s written 
request for indemnification and advancement of legal fees.  There has been no update 
regarding whether Mr. Hayes’s request for advancement has been granted by Capitol Sales.  
If it has not been approved, it is HEREBY ORDERED.  The only defense to this claim 
offered by Capitol Sales and the shareholders is that the statutorily mandated time for the 

company to act on Mr. Hayes’s request had not passed.  Now that it has, the Court denies 
Capitol Sales’ motion to dismiss Mr. Hayes’s claim for advancement under Minn. Stat. § 
302A.521 and grants Mr. Hayes the relief he seeks.                        
 V.   ORDER                                                              
    For the reasons discussed above, IT IS HEREBY ORDERED:               
    1.  Defendant Susan Stedman’s Motion to Dismiss Plaintiff BMO’s Amended 

      Complaint [Dkt. No. 51] is GRANTED;                                
    2.  Defendant Kenneth Kuskie’s Motion to Dismiss Plaintiff BMO’s Amended 
      Complaint [Dkt. No. 61] is GRANTED;                                
    3.  Defendant John Stedman’s Motion to Dismiss Plaintiff BMO’s Amended 
      Complaint [Dkt. No. 76] is GRANTED;                                
    4.  Defendant Susan Stedman’s Motion to Dismiss Co-Defendant Hayes’s Amended 

      Crossclaims [Dkt. No. 56] is GRANTED;                              
    5.  Defendant Kenneth Kuskie’s Motion to Dismiss Co-Defendant Hayes’s 
      Amended Crossclaims [Dkt. No. 66] is GRANTED;                      
    6.  Defendant John Stedman’s Motion to Dismiss Co-Defendant Hayes’s Amended 

      Crossclaims [Dkt. No. 80] is GRANTED; and                          
    7.  Third-Party Defendant Capitol Sales’ Motion to Dismiss Third-Party Plaintiff 
      Hayes’s Complaint [Dkt. No. 71] is DENIED.                         
    8.  Counts I-IX (fraudulent transfer claims against the shareholders) in BMO’s 
      amended complaint are DISMISSED with prejudice.  Count X (breach of 
      fiduciary duty against the shareholders) is DISMISSED with prejudice to the 

      extent it is based on their status as shareholders and DISMISSED without 
      prejudice to the extent it is based on their status as officers or directors.   
    9.  Crossclaims I–II (indemnification and advancement against the shareholders) are 
      DISMISSED without prejudice.                                       
The claims that remain are Count X (breach of fiduciary duty against Mr. Hayes) and Counts 
XI–XVI (fraudulent transfers, fraud, conversion, and civil theft claims against Mr. Hayes) in 

BMO’s complaint and Count I in Mr. Hayes’s amended third-party complaint  
(indemnification and advancement against Capitol Sales).                  
    LET JUDGMENT BE ENTERED ACCORDINGLY.                                 
Date: January 4, 2023                                                     
                                         s/Katherine Menendez            
                                       Katherine Menendez                
                                       United States District Judge