NOT RECOMMENDED FOR FULL-TEXT PUBLICATION
                           File Name: 09a0484n.06

                                           No. 08-3753                                FILED
                                                                                   Jul 13, 2009
                          UNITED STATES COURT OF APPEALS                     LEONARD GREEN, Clerk
                               FOR THE SIXTH CIRCUIT


VALLEY CITY STEEL, LLC,                                  )
                                                         )
       Plaintiff-Appellee,                               )      ON APPEAL FROM THE
                                                         )      UNITED STATES DISTRICT
               v.                                        )      COURT FOR THE NORTHERN
                                                         )      DISTRICT OF OHIO
LIVERPOOL COIL PROCESSING, INC.,                         )
                                                         )
       Defendant,                                        )
                                                         )
               and                                       )
                                                         )
VCS PROPERTIES LLC, SHILOH CORPORATION,                  )
SHILOH INDUSTRIES, INC.,                                 )
                                                         )
       Defendants-Appellants.                            )




BEFORE: SILER, COOK, and GRIFFIN, Circuit Judges.

       GRIFFIN, Circuit Judge.

       Following an asset purchase agreement and a subsequent bankruptcy filing, plaintiff sought

to recover funds paid in the course of a transaction that it now considers to be a constructive

fraudulent transfer. A jury empaneled by the United States District Court for the Northern District

of Ohio found in favor of plaintiff and awarded damages. Defendants were denied judgment as a

matter of law and now appeal that denial. Because plaintiff failed to present any evidence on a
No. 08-3753
Valley City Steel, LLC v. Liverpool Coil Processing, Inc.


necessary statutory element of fraudulent transfer, we vacate and remand for entry of judgment in

favor of defendants.

                                                 I.

       The parties are all involved in the steel business. The present dispute began when plaintiff

Valley City Steel, LLC (“VCS”), a steel processing facility, filed a voluntary petition for relief

pursuant to Chapter 11 of the Bankruptcy Code. On July 13, 2004, VCS, as debtor-in-possession,

filed a complaint alleging constructive fraudulent transfer against defendants in the United States

Bankruptcy Court for the Northern District of Ohio. On August 2, 2005, the United States District

Court for the Northern District of Ohio granted a motion pursuant to 28 U.S.C. § 157(d) to withdraw

the referral to the bankruptcy court. The district court denied defendants’ motion for summary

judgment, and the case proceeded to a jury trial. The defendants are Shiloh Industries, Inc., Shiloh

Corporation, Shiloh Automotive, Inc. (now known as Shiloh Industries, Inc. Wellington Stamping

Division), Liverpool Coil Processing, Inc., and VCS Properties LLC.

       The relationship among the parties and other companies relevant to this litigation is complex.

Shiloh Corporation is a wholly-owned subsidiary of Shiloh Industries, Inc. Valley City Steel

Company (not to be confused with plaintiff Valley City Steel, LLC) was also a wholly-owned

subsidiary of Shiloh Industries, Inc. which became VCS Properties LLC following a statutory

merger, although Shiloh Industries remained the sole member.




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       Patrick James, a man of Indian descent, was the sole owner of Viking Steel LLC.1 James

sought to purchase certain assets from Valley City Steel Company and formed Valley City Steel-

7779 LLC as a vehicle for doing so. Valley City Steel-7779 LLC later changed its name to Valley

City Steel, LLC – plaintiff in this case. Viking Steel contributed $200,000 as initial capitalization

for VCS. Ultimately, VCS entered into an Asset Purchase Agreement with VCS Properties LLC

whereby VCS “generally acquired substantially all of the personal property and some intangible

assets” of VCS Properties LLC, “other than Excluded Assets as defined in the Asset Purchase

Agreement [] subject only to Permitted Encumbrances as defined in the Asset Purchase Agreement.”

VCS, as part of the Asset Purchase Agreement, also agreed to assume certain liabilities to trade

creditors and employees, including certain pension obligations.

       As part of VCS’s asset purchase, VCS Properties LLC entered into a Membership Interest

Subscription Agreement in which it received a 49% membership interest in VCS, and Viking Steel

retained ownership of the remaining 51%. In consideration for the 49% membership interest, VCS

Properties LLC contributed “[t]hat portion of the Purchased Assets (as defined in the Asset Purchase

Agreement) whose value is greater than the purchase price therefore as set forth in the Asset

Purchase Agreement.” VCS Properties LLC valued its contribution as $12,000,000. The Asset

Purchase Agreement was consummated on July 31, 2001.




       1
        James’s ethnicity is relevant because his participation allowed the new venture to qualify
as a “minority business enterprise” with General Motors, Ford, and Chrysler.

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       On the same day, VCS obtained loans from Comerica Bank to finance the cash portion of its

acquired assets. The Comerica loan was secured by a mortgage, and Comerica obtained liens on

VCS assets and a personal guarantee from James. VCS also entered into a lease with VCS

Properties LLC to rent the real estate upon which VCS operated.

       VCS was in default on its loan agreement with Comerica by April 2002 and was in

bankruptcy proceedings by the following year. Shiloh and VCS Properties LLC filed a declaratory

judgment action against Comerica but settled and redeemed their real estate. Pursuant to the

bankruptcy court’s sale order, VCS Properties LLC continues to own the real estate and leases it to

the purchaser of VCS’s operating assets.

       The jury found in favor of plaintiff on its claim of constructive fraudulent transfer and

awarded $1,693,000 against VCS Properties LLC, $1,693,000 against Shiloh Industries, Inc., and

$1,292,000 against Shiloh Corporation. The district court denied defendants’ motion for judgment

as a matter of law and alternative motion for a new trial. Defendants timely appealed.

                                                II.

       Defendants argue that plaintiff failed to establish the elements of constructive fraudulent

transfer, and thus the district court erred in denying their motion for judgment as a matter of law.

We agree. “Judgment as a matter of law is appropriate when viewing the evidence in the light most

favorable to the non-moving party, there is no genuine issue of material fact for the jury, and

reasonable minds could come to but one conclusion in favor of the moving party.” Tisdale v.




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Federal Express Corp., 

, 527 (6th Cir. 2005) (internal quotation marks and citations

omitted).

       The jury rejected plaintiff’s claim under Ohio Rev. Code § 1336.04(A)(2)(b) alleging that

defendants knew or should have known that plaintiff would become insolvent as a result of the

transaction.   However, the jury found that defendants engaged in a constructive fraudulent

conveyance in violation of Ohio Rev. Code § 1336.04(A)(2)(a). The relevant statutory language

states that a “transfer made or an obligation incurred by a debtor is fraudulent” when “the debtor

made the transfer or incurred the obligation”:

       (2) Without receiving a reasonably equivalent value in exchange for the transfer or
       obligation, and . . . .

               (a) The debtor was engaged or was about to engage in a business or a
       transaction for which the remaining assets of the debtor were unreasonably small in
       relation to the business or transaction.

1336.04(A).

       On appeal, defendants make two arguments: (1) plaintiff presented no evidence that VCS

received less than reasonably equivalent value for the property it transferred, and (2) plaintiff failed

to prove that VCS was left with unreasonably small assets after the transaction.

                                                  A.

       In order to prevail on its claim for constructive fraudulent transfer, plaintiff must prove that

the transfer was made without “receiving an equivalent value in exchange for the transfer or

obligation. . . .” Ohio Rev. Code § 1336.04(A)(2). The jury found for plaintiff, answering “no” to

the question: “Do you find by a preponderance of the evidence that, at the time of the 2001

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transaction, the value of the property received by Plaintiff from VCS Properties, LLC was reasonably

equivalent to the value of the property transferred by Plaintiff to VCS Properties, LLC?”        The

district court ratified the jury’s decision, but defendants correctly note that the court did so in a

conclusory manner. The district court responded to defendants’ arguments by merely stating that

“the plaintiff did more than present evidence that, in hindsight, the financial projections turned out

to be incorrect. The Court finds that the plaintiff offered evidence from which a reasonable jury

could conclude that it was reasonably foreseeable that the plaintiff would fail.” The district court

offered no support for its conclusion.

       Defendants argue that the district court erred by not granting their motion for judgment as

a matter of law because “the plaintiff failed to put on any evidence that Valley City Steel did not

receive reasonably equivalent value for the property it transferred.”

       Plaintiff’s expert, Charles Deutchman, testified at trial that he accepted the $24 million

valuation made by Williams & Lipton, the appraisers who reviewed the 2001 transaction.2

Deutchman not only accepted the valuation agreed to during the transaction, he admitted that he was

not qualified to appraise the assets that were transferred. Plaintiff presented no other testimony

regarding valuation.

       Plaintiff responds by noting that “[v]alue is not measured by an appraisal alone.” It argues

that valuation is ultimately a fact question for the jury and that the jury “had many sources of



       2
        Of the $24 million transferred, approximately $12 million was in cash, from the Comerica
loans, and the remaining $12 million was in consideration for the 49% membership interest.

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evidence” to consider. Plaintiff suggests that the jury could credit the following facts in determining

the reasonableness of the valuation: defendants were “able to move [their] debt to the new

enterprise, essentially refinancing [their] own debts,” Williams & Lipton’s appraisal “qualified its

findings,” and the appraisal did not use as conservative of a valuation as Comerica. However, none

of these is a sufficient substitute for presenting affirmative evidence to establish the elements of

plaintiff’s case.

        Defendants did transfer some liabilities to the new entity, but plaintiff does not show that

there is anything inherently fraudulent in such an act. In fact, the Williams & Lipton appraisal takes

this into consideration by analyzing the $24 million in net assets. Plaintiff’s own expert testified that

the $24 million in net assets was the result of subtracting the approximately $3.6 million of assumed

liabilities from the $27 million of total assets that were transferred. Thus, the $24 million in net

assets does not reflect any transferred debt.

        Plaintiffs also argue that the jury could have discounted the appraisal because Williams &

Lipton qualified it with the following statement: “due to the lack of actual sales comparable data,

the cost associated with installation and possible disassembly, and the special design and application

of the equipment, the values listed could be considered theoretical in nature and are based upon the

experience of the appraiser of Williams and Lipton Company . . . .” However, even if the jury

rejected the appraisal, which they were entitled to do, plaintiff presented no evidence of its own

regarding valuation. Valuation is a factual matter for the jury to resolve, but plaintiff must provide

the jury with information upon which to base a verdict. See Burton v. Triplett, 2002-Ohio-580, *6


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(Ohio Ct. App. 2002) (unpublished) (rejecting plaintiff’s valuation argument because the only

evidence offered regarding valuation was presented by defendants).3 Plaintiffs cannot rebut adverse

testimony with no testimony; the jury is the factfinder, but plaintiff still carries the burden to present

the jury with affirmative evidence.

        Additionally, plaintiff suggests that Comerica’s use of a more conservative figure reflects its

belief “that the Williams and Lipton number is not necessarily indicative of what the assets are really

worth.” However, Steven Davis, Comerica’s loan officer, testified that Comerica based its loans on

the “forced liquidation value” of assets, not on their fair market value. (Blue Br. 27.) In this regard,

we have ruled that a “reasonably equivalent value” must be evaluated based on the facts known at

the time of the transaction. In re Chomakos, 

, 770-71 (6th Cir. 1995). While Comerica

is understandably concerned about its ability to recover its loan if conditions change, such analysis

does not reflect the valuation of the transaction at the time it was consummated. See 

(“The

critical time is when the transfer is ‘made.’ Neither subsequent depreciation in nor appreciation in

value of the consideration affects the . . . question whether reasonable [sic] equivalent value was

given.” (quoting Collier on Bankruptcy § 548.09 (15th ed. 1984))).

        Plaintiff’s failure to present evidence challenging the valuation prevents it from establishing

that VCS failed to receive “a reasonably equivalent value” as required by Ohio Rev. Code §



        3
         Plaintiff attempts to distinguish Burton based on the “procedural lapses in the introduction
of evidence” involved in that case. However, in Burton the plaintiff at least attempted to introduce
relevant evidence, although that evidence was ultimately determined to be inadmissible. In the
instant case, there was no such attempt.

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1336.04(A)(2). Because plaintiff was unable to establish this element of constructive fraudulent

transfer, this case should not have been submitted to the jury, and defendants were entitled to

judgment as a matter of law.

                                                 B.



       In view of our disposition, we need not address defendants’ additional argument that plaintiff

failed to present sufficient evidence to establish that the transaction left VCS with “unreasonably

small” assets “in relation to the business or transaction” in violation of Ohio Rev. Code §

1336.04(A)(2)(a). Similarly, it is unnecessary for us to decide defendants’ issues regarding the

calculation of damages or their alternative request for a new trial.

                                                 III.

       For these reasons, we vacate and remand with instructions for the district court to enter

judgment in favor of defendants.




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