                   United States Court of Appeals
                         FOR THE EIGHTH CIRCUIT
                                 ___________

                                 No. 04-1984
                                 ___________

American Anglian Environmental        *
Technologies, L.P.,                   *
                                      *
      Appellant,                      *
                                      * Appeal from the United States
      v.                              * District Court for the Eastern
                                      * District of Missouri.
Environmental Management              *
Corporation,                          *     [PUBLISHED]
                                      *
      Appellee.                       *
                                 ___________

                           Submitted: February 16, 2005
                              Filed: June 21, 2005
                               ___________

Before WOLLMAN, HANSEN, and BENTON, Circuit Judges.
                         ___________

BENTON, Circuit Judge.

        In December 1994, American Anglian Environmental Technologies, L.P.
("AAET") and Environmental Management Corporation ("EMC") formed a limited
liability company – EA2 Systems, L.C (the "company"). As required by state law,
AAET and EMC adopted an Operating Agreement. See §§ 347.081.1, 347.015 (13)
RSMo 1994. By the Agreement, AAET and EMC each owned 50 percent as a
"Member." The Agreement contained a buy/sell provision allowing either AAET or
EMC to make an unconditional offer/acceptance at a price it chose – forcing the
offeree to choose either to buy the offeror's entire interest, or to sell the offeree's
entire interest.

      On March 26, 2001, EMC made an unconditional offer to sell its half – or buy
out AAET – for $4,231,629.50, based on a total value of $8,463,259.00. On July 23,
AAET opted to buy EMC's half. Closing was set for September 20.

       On August 21 – before closing – the company distributed $500,000 in cash,
half to EMC and half to AAET. AAET immediately demanded that EMC return its
money. EMC refused. Nonetheless, closing occurred on September 20, 2001.

      After closing, AAET arranged independent audits of the company's financial
condition as of closing. As a result, AAET claims that the company's books and
records were not maintained in accordance with generally accepted accounting
principles ("GAAP"). AAET asserts these accounting discrepancies reduced the
company's total value by $713,000.

       Invoking diversity, AAET sued EMC claiming breach of contract, breach of
fiduciary duty, and breach of duty of good faith and fair dealing, and unjust
enrichment. The district court granted summary judgment to EMC on all claims.
AAET appeals. This court reviews de novo the grant of summary judgment, viewing
the facts most favorably to AAET. See Rose - Matson v. NME Hospitals, Inc., 133
F.3d 1104, 1107 (8th Cir. 1997). Jurisdiction being proper under 28 U.S.C. § 1291,
this court reverses in part, affirms in part, and remands.

                                        I.
      As a Member, AAET has standing to enforce the Operating Agreement. See
§ 347.081.2 RSMo 2000. AAET argues that the district court erred in granting
summary judgment because the August distribution of cash is prohibited by the
Operating Agreement, specifically sections 3.4(a), 5.3(a), 5.3(b), and 12.5.

                                         -2-
        The fundamental principle of interpreting operating agreements is to ascertain
the intent of the parties and give effect to it. See Goldstein and Price, L.C. v. Tonkin
& Mondl, L.C., 974 S.W.2d 543, 551 (Mo. App. 1998). A clear and unambiguous
operating agreement must be enforced according to its terms. Id. The parties may,
however, modify a provision of the Operating Agreement by making a new contract
as to it. Id.

                                         A.
      Section 3.4(a) generally prohibits distributions from the company:

      Except as expressly provided in this Agreement or by law, no Member
      shall be entitled to withdraw or reduce such Member's Capital
      Contribution or to receive any distributions from the Company.

The district court ruled that this section 3.4(a) did not apply generally to cash
distributions, but only to a "distribution from Members' Capital Accounts." To the
contrary, section 3.4 is clear and unambiguous when read together with section 3.3,
which provides that Capital Accounts shall be maintained in accordance with IRS
Regulation 1.704-1(b)(2)(iv). That Regulation requires that a Member's capital
account be decreased by any "property distributed." I.R.S. Reg. § 1.704-
1(b)(2)(iv)(e). See also I.R.S. Reg. § 1.704-1(b)(5), example 14(v); cf. Derges v.
Hellweg, 128 S.W.3d 186, 188 (Mo. App. 2004). Therefore, section 3.4 does prohibit
cash distributions from the company to the Members except "as expressly provided
in this Agreement or by law."

       The district court did recognize that one kind of distribution – distributions of
Net Cash from Operations – is expressly provided in the Operating Agreement. In
fact, section C.6 requires such distributions:




                                          -3-
      Except as otherwise provided in Section C.7[1] or Section C.8[2] hereof,
      Net Cash From Operations, if any, shall be distributed not later than the
      ninetieth day after the end of each Fiscal Year as follows:
               ...
               [after payment of debt and taxes]
               ...
      (d) . . . the remainder to the Members pro rata in accordance with their
      Percentage Interests.

The August distribution is not authorized by section C.6, because it was made over
90 days after the end of the fiscal year on December 31.

      EMC counters that, in the two preceding years, cash distributions to the
Members were made in similar amounts, over 200 days after fiscal-year-end, without
objection (or rejection) from either party:

            Date                         Total Amount of Distributions
            March 24, 1999               $600,000
            August 31, 1999              $300,000
            July 31, 2000                $600,000
            October 25, 2000             $500,000
            December 19, 2000            $700,000
            August 21, 2001              $500,000 (distribution at issue)

In fact, of the five previous distributions to Members, only one occurred within 90
days after the end of the fiscal year.



      1
      The parties agree that section C.7 does not apply to the August distribution,
because it did not cause liabilities to exceed assets. See also § 347.109.1(2) RSMo
2000.
      2
        The parties agree that section C.8 "Distributions Upon Winding Up" does not
apply to the August distribution.

                                        -4-
       EMC moved for the summary judgment granted by the district court. EMC
must demonstrate there is no genuine issue as to any material fact and it is entitled to
judgment as a matter of law. See FED. R.CIV. P. 56(c). EMC thus had the burden to
show that the August distribution was authorized. EMC contends that it was similar
to the five previous distributions. The only facts presented by EMC regarding the
previous distributions were: "Each distribution was made at random dates and without
formal meetings or objections at points in time that EMC determined cash in account
exceeded current liabilities beyond the net of current accounts receivable and current
accounts payable and liabilities."

       On a motion for summary judgment, these facts are viewed most favorably to
AAET, along with any permissible, reasonable inferences. See Matsushita Elec.
Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587-88 (1986). The "random dates"
fact does not bring the distribution within section C.6, and viewed favorably to
AAET, makes the distribution violate the Agreement. The absence of "formal"
meetings, viewed favorably to AAET, does not exclude "informal" meetings. Finally,
EMC determined the distribution on a balance-sheet basis, while the Agreement
defines "Net Cash from Operations" on a net-cash-income basis. EMC did not meet
its burden of demonstrating that the August distribution was authorized by the
Operating Agreement.

                                           B.
       The district court rejected this analysis based upon its view of the exercise of
authority within the company. By the Operating Agreement, day-to-day project
management was the responsibility of a Project Manager appointed by EMC, assisted
by a deputy appointed by AAET. Throughout the company's life, EMC managed the
financial affairs and day-to-day business operations of the company. The parties
agree that: "AAET consented to EMC managing the day-to-day finances of EA2 [the
company] since 1995," and "EMC personnel handled the day-to-day business


                                          -5-
operations of EA2 [the company], including the accounting and bookkeeping
functions."

       While EMC was the day-to-day manager of the company, the Operating
Agreement establishes a Management Committee with four representatives, two each
from AAET and EMC. The Agreement then empowers the Management Committee
in sections 5.3(a), 5.3(b), and 12.5:

            5.3 Authority of the Management Committee.

             (a) Authority. The Management Committee shall have the sole
      and complete authority to manage and operate the business of the
      Company . . . . Without limitation, the Management Committee shall
      have the authority to:
                     ...
                    (vii) Invest, manage, and distribute Company funds to the
             Members in accordance with the provisions of this Agreement .
             ...
                     ...
             (b) Action. Action of the Management Committee shall be
      effected by favorable vote of a majority of all members of the
      Management Committee, provided that action of the Management
      Committee regarding the following matters may be effected only by the
      unanimous agreement of all of its members:
                     ...
                      (ii) the performance of any act in contravention of this
             Agreement;
                     ...
                     (xviii) approving payments to Members or Affiliates for
             expenses exceeding an aggregate amount of $2,000 in any month
             and not within the budgets referred to in parts (xv) and (xvii)
             above;
                    (xix) approving or authorizing expenditures in excess of
             those authorized in the budgets referred to in parts (xv) and
             (xvii) above.

                                        -6-
                    ....
             12.5 Bank Accounts. All funds of the Company shall be
      deposited in a separate bank, money market or similar account or
      accounts approved by the Management Committee and in the name of
      the Company. Withdrawals therefrom shall be made only by persons
      authorized to do so by the Management Committee, and only as follows:
             (a) for operating expenses within budgets that have been approved
      by the Management Committee;
             (b) for capital expenditures within budgets that have been
      approved by the Management Committee, subject to the review by the
      Management Committee of the percentage of completion of a given
      capital project; and
             (c) for other purposes as approved by the Management
      Committee.

       The parties agree that the Management Committee did not approve the August
distribution. As discussed in part A above, the August distribution violated section
C.6 of the Operating Agreement. The Agreement says that "any act" – including late
cash distributions – made "in contravention of this Agreement" requires the
"unanimous agreement" of the Management Committee. Withdrawals of company
funds must be within Management-Committee-approved budgets, or otherwise
approved by the Management Committee. Emphasizing the prohibition on self-
payments, the Agreement states that any payment to a Member for Project or
Marketing expenses over $2,000 – not in a unanimously approved budget – requires
unanimous consent of Management Committee.

       The district court ruled that the Management Committee in effect delegated to
EMC the authority to determine cash distributions, as to both timing and amount.
The fact that EMC determined in the past that net cash was available without a
"formal" meeting does not indicate how the Management Committee acted on cash
distributions, if at all. The record lacks any evidence as to the procedures of, and
delegation by, the Management Committee.


                                        -7-
       The district court relied on two other justifications. First, the district court
emphasized that AAET knew of a possible cash distribution while it considered
whether to sell its half, or buy the other half. EMC notified AAET in its buy/sell
"trigger" letter that:

      Until the Closing, however, EA2 [the company] will continue to make
      cash distributions to EMC and AAET from time to time from available
      cashflow from operations.

In its response/acceptance to purchase, AAET stated only:

      AAET will expect EMC to continue to meet its obligations to the
      Company and AAET as a member of the Company and as provided in
      the Company's Operating Agreement. Consistent with these obligations,
      AAET will expect EMC to take no actions contrary to the best interests
      of the Company and to cause the Company to be operated in the normal
      and ordinary course of business through the Closing.

The parties agree that after the August distribution, AAET sent three letters to EMC
objecting to the distribution but re-affirming the closing. The parties vehemently
dispute whether AAET objected to the continuation of cash distributions before the
August distribution. AAET asserts that the paragraph just quoted (from the
response/acceptance to purchase) objects to distributions, by requesting that EMC
not act "contrary to the best interests of the Company" and operate it in the "normal
and ordinary course of business." EMC answers alternatively that AAET's response
is so general that it does not address EMC's specific statement that it would continue
cash distributions, or that operating in the "ordinary course" authorizes the
distributions. AAET's President – a member of the Management Committee – avers
that AAET's response means that EMC should not "adversely affect the value of the
assets" of the company. On summary judgment, dispute over reasonable
interpretations of material letters should not be resolved against the non-movant. See
W.S.A., Inc. v. Liberty Mutual Insurance Co., 7 F.3d 788, 790 (8th Cir. 1993).

                                         -8-
         Second, the district court relied on the proposition that the Operating
Agreement permits distributions during the period that a buy/sell offer is outstanding.
While this is accurate for the 90-day period during which section C.6 requires
distributions, it does not resolve the legality of the August distribution.

      The summary judgment as to the August cash distribution is reversed, and the
cause remanded.

                                         II.
       AAET objects to the remainder of the summary judgment, contending EMC did
not properly keep the company books using the accrual method, thus overvaluing the
company. AAET's expert testified that the books were not maintained consistent with
GAAP, that adjustments and reclassifications were appropriate and necessary, and
that the previous outside auditors did not make the adjustments. AAET invokes the
Operating Agreement:

            12.1 Accounting Method. The books of the Company shall be
     kept on the accrual method or any other accounting method as may be
     designated by the Management Committee from time to time in
     accordance with the [Internal Revenue] Code.

AAET concedes that EMC arranged audits of the company by a major accounting
firm for the years 1995 through 2000, and that AAET received the resulting
statements when completed. AAET also contends that EMC refused to disclose all
the financial information AAET requested before opting to buy, so that AAET could
not evaluate the effect of the accounting discrepancies.

       AAET claims EMC is liable for one-half of the overvaluation due to these
discrepancies. AAET's President claims that if it had known of the discrepancies
prior to opting to buy:


                                         -9-
      AAET would have demanded that the [the company] EA2's books be
      adjusted and that the price be recalculated, would have considered
      selling its interest in the [the company] EA2 to EMC at the set price, or
      would have taken other steps in an effort to obtain relief.

       AAET's requested relief is prohibited by the Operating Agreement. The
Agreement here provides: once the buy/sell offer is made, it is "irrevocable," "shall
not be conditioned on anything," and requires no "representations and warranties."
This preempts recalculating the price and "other steps" for relief (other than enforcing
the buy/sell provision). Here, accounting values are not an integral part of the buy-
sell provision, and the initial offer/acceptance may not have conditions. Compare
KBL Properties, LLC v. Bellin, 900 So. 2d 1160, 1162 n.3 (Miss. 2005); Eikon King
St. Manager, L.L.C. v. LSF King St. Manager, L.L.C., 109 S.W.3d 762, 764 (Tex.
App. 2003); PAMI-LEMB I Inc. v. EMH-NHC, L.L.C., 857 A.2d 998, 1010 (Del.
Ch. 2004).

       As to the ultimate decision whether to buy or sell, AAET never states that it
would have sold – rather than bought – half of the company. AAET's strongest
statement is that it would have "considered" selling. The buy/sell provision in the
Operating Agreement is intended to achieve finality, expeditiousness, fairness and
continuity. See Stevens A. Carey, Buy/Sell Provisions in Real Estate Joint Venture
Agreements, 39 REAL PROP. PROB. & TR. J. 651(2005). AAET cannot defeat this
clear and unambiguous provision by a contingent, speculative possibility. See Hahn
v. McDowell, 349 S.W.2d 479, 482 (Mo. App. 1961); Lebrecht v. United Rys. Co.,
237 S.W. 112, 114 (Mo. 1921).

      In sum, this court will implement the policy of Missouri:

      to give the maximum effect to the principle of freedom of contract and
      to the enforceability of operating agreements.


                                         -10-
§ 347.081.2 RSMo 2004.3 The District Court did not err in granting summary
judgment as to the accounting discrepancies.

       The judgment of the district court is reversed in part, affirmed in part, and the
case remanded.
                     _______________________________




      3
        This Missouri language is identical to that in nine other states: COLO REV.
STAT. § 7-80-108(4); DEL. CODE ANN. tit. 6, § 18-1101(b); KAN. STAT. ANN. §
17–76,134(b); MISS. CODE ANN. § 79-29-1201(2); N.H. REV. STAT. ANN. § 304-
C:78(II); N.J. STAT. ANN. § 42:2b-66(a); OKLA. STAT. ANN. tit. 18, § 2058(D); UTAH
CODE ANN. § 48-2c-1901; WASH. REV. CODE ANN.§ 25.15.800(2); cf. 15 PA. CONS.
STAT. ANN. § 8913 (committee comment).

                                         -11-
