author: COLLOTON, Circuit Judge.

text:
    The PPW ROYALTY TRUST Dated September 27, 1989, BY AND THROUGH Donald G. PETRIE, its Trustee; The Estate of Patricia P. Willits, by and through Donald G. Petrie, its Personal Representative; The Estate of William G. Parrott, Jr., by and through Peggy Parrott, its Personal Representative; The Patricia P. Willits Trust Dated July 31, 2003, by and through Donald G. Petrie, its Trustee; The Parrott Revocable Trust dated March 16, 2012, by and through Peggy Parrott, its Trustee; The David E.C. Parrott Irrevocable Trust Dated November 23, 2009, by and through Donald G. Petrie, its Trustee; The Delyn P. Drake Irrevocable Trust Dated November 23, 2009, by and through Donald G. Petrie, its Trustee; The Dianne P. Spook Irrevocable Trust Dated November 23, 2009, by and through Donald G. Petrie, its Trustee; The Pamela P. Waugh Irrevocable Trust Dated November 23, 2009, by and through Donald G. Petrie, its Trustee; The William G. Parrott III Irrevocable Trust Dated November 23, 2009, by and through Donald G. Petrie, its Trustee, Plaintiffs-Appellants, v. George A. BARTON; The Law Offices of George A. Barton, P.C.; Gerard T. Carmody; David H. Luce; Carmody MacDonald, P.C.; John C. Holstein; Polsinelli, P.C., Defendants-Appellees.
    No. 15-1464
    United States Court of Appeals, Eighth Circuit.
    Submitted: November 19, 2015
    Filed: August 11, 2016
    (Amended October 28, 2016)

      Arthur Benson, Jamie Kathryn Lans-ford, Arthur Benson & Associates, Kansas City, MO, Jordan B. Cherrick, Sidley & Austin, Chicago, IL, Adam N. Hallowell, George W. Jones, Jr., Richard Klingler, Carter Glasgow Phillips, Sidley & Austin, Washington, DC, Robert H. Freilich, Neil Popowitz, Freilich & Popowitz, Los Ange-les, CA, for Plaintiffs-Appellants.
    Spencer J. Brown, Daniel Edward Ham-ann, Deacy & Deacy, Kansas City, MO, David Lee Heinemann, Christopher S. Shank, Shank & Moore, Mission Woods, KS, for George A. Barton and The Law Offices of George A. Barton, P.C.
    William James Foland, Philip Sumner, Foland & Wickens, Kansas City, MO, for Gerard T. Carmody, David H. Luce, and Carmody MacDonald, P.C.
    Amy D. Fitts, Douglas S. Laird, General Counsel, Polsinelli, PC, Kansas City, MO, for John C. Holstein and Polsinelli, P.C.
    Before COLLOTON, GRUENDER, and SHEPHERD, Circuit Judges.
   COLLOTON, Circuit Judge.

The PPW Royalty Trust and nine additional trusts and estates (collectively, “the Trusts”) claim rights as the beneficiaries, successors, or assigns of the owners of coal mining royalty interests in Kentucky. Over the course of two-and-a-half decades, the Trusts and their predecessors have sued in both federal and state court over the scope of their rights to receive royalty payments. In this case, the Trusts sued their former attorneys, alleging legal malpractice based on the adverse outcome of one of these cases. The Trusts assert that the attorneys committed malpractice by failing to raise preclusion arguments based on the outcome of a prior case. The Trusts also assert that the attorneys committed malpractice by failing to raise certain constitutional arguments at an earlier phase. The district court dismissed the Trusts’ complaint, concluding that assertion of these arguments would not have changed the outcome of the case. We affirm.

I.

This case arises out of a lengthy and complex series of events involving coal mining rights in Kentucky. In 1946, W.G. Parrott conveyed certain land in Ohio County, Kentucky, to Beaver Dam Coal Company, and Beaver Dam leased the coal mining rights on that land back to Parrott. Willits v. Peabody Coal Co. (Willits I), Nos. 98-5458, 98-5527, 1999 WL 701916, at *1 (6th Cir. Sept. 1, 1999). This lease is described by the parties as the Beaver Dam lease. At the time, Parrott controlled two companies known as Rough River Coal Company and Alston Coal Company. Parrott assigned his mining rights under the Beaver Dam lease to Rough River in exchange for a royalty interest on coal mined by Rough River within certain defined boundary areas. In 1947, Rough River assigned the coal leases to Alston. Id.

In 1954, Alston and Parrott substituted two new royalty agreements for those that arose from Parrott’s transaction with Rough River. Id. One agreement granted royalties to Parrott and his wife, Pauline, and the other granted royalties to Pauline and the couple’s children, Patricia Willits and William G. Parrott, Jr. Under the new agreements, Alston agreed to pay the Par-rotts a portion of the average gross realization on coal mined within certain defined boundary areas. The 1954 royalty agreements granted the Parrotts a smaller royalty percentage than the original 1946 agreement and expanded the boundary areas covered by the agreement. ■ Peabody Coal Company later assumed Alston’s obligations and liabilities under the royalty agreements. The Parrotts assigned their royalty interests in equal shares to their children in 1959, and the Parrott children later distributed their interests to a collection of trusts.

A.

In 1990, Willits, Parrott, Jr., and the PPW Royálty Trust (collectively, “the Par-rott plaintiffs”) sued Peabody Coal Company in federal court in the Western District of Kentucky, alleging breach of contract and fraud based on underpayment of royalties. See Willits I, 1999 WL 701916, at *2. Attorney George Barton represented the Parrott plaintiffs in Willits I. Peabody filed a counterclaim, contending that the royalty agreements violated the rule against perpetuities. Id. Peabody argued that the agreements purported to grant the Parrott plaintiffs the right to receive royalties based on coal mined from land within the boundary areas but acquired by Alston—and later Peabody—after the date of the agreement. For this reason, Peabody asserted, the agreements violated the rule against perpetuities.

On July 3, 1991, the district court issued an order dismissing Peabody’s counterclaim. The court observed that “the agreements in question create no interest whatsoever in land or in the coal leases themselves” but rather created “obligations personal to the parties to those agreements.” The court concluded that “[t]he Royalty Agreements therefore are not subject to and do not violate the Rule Against Perpetuities, whether they cover ‘after-acquired’ property or not.” The case proceeded on other claims.

Several years later in 1997, the district court reyisited its 1991 order. The Parrott plaintiffs argued that the court’s 1991 order dismissing Peabody’s counterclaim necessarily held that the royalty agreements required Peabody to pay royalties for coal mined from “after-acquired” property. The district court observed that the 1991 order did not determine whether the agreements covered “after-acquired” property and that a 1995 order found a genuine issue of material fact on that question. Yet the court noted that “the defendant has conceded that, barring its statute of limitations and relation back objections, summary judgment for the plaintiff is appropriate.” Relying on that concession and rejecting Peabody’s statute of limitations argument, the court granted summary judgment for the Parrott plaintiffs on royalty claims based on coal mined from three “after-acquired” properties (Count VIII of the Third Amended Complaint).

The case went to trial on the remaining claims, and the jury returned a verdict in favor of the Parrott plaintiffs on one breach of contract claim and in favor of Peabody on all remaining claims. Id. at *4. Both parties appealed to the Sixth Circuit. Peabody challenged, among other things, the district court’s 1991 order dismissing its counterclaim. Id. at *5. The Sixth Circuit affirmed the district court’s determination that the royalty agreements did not violate the rule against perpetuities, but declined to accept “the district court’s reasoning that the perpetual nonparticipating royalty interests-at issue are contractual rights, as opposed to interests in property.” Id. at *19. The court of appeals concluded instead that “the royalty interest vested when it was created, even though it was uncertain in the enjoyment.” Id. at *20. The court thus determined that “[t]he royalty holder owns a fee simple interest in Peabody’s contingency” and that none of the plaintiffs’ claims were precluded by operation of the rule against perpetuities. Id.

The Sixth Circuit also reversed the district court’s determination on the statute of limitations that governed the Parrott plaintiffs’ claim concerning after-acquired property. Id. at *19. On remand, therefore, the district court enteréd an amended judgment in favor of Peabody on the Par-rott plaintiffs’ claim for royalties from the three after-acquired properties. Add. 42.

B.

After Willits I, Peabody engaged in several land transactions. Peabody acquired the Beaver Dam Coal Company and its interests within the defined boundaries. In 2007, the Beaver Dam lease, which predated and was subject to the 1954 royalty agreements, was terminated by agreement. The mining rights under that lease merged with the fee simple property interest, then owned by Peabody through its Beaver Dam subsidiary. Additional tenancies in common that predated and were subject to the 1954 agreements were also joined into a single owner in one of Peabody’s subsidiaries, terminating the tenancies in common. Peabody sold the land that formerly made up the tenancies in common to the Armstrong Coal Company, which then began mining coal from the property without paying royalties to the Parrott plaintiffs.

In 2008, the Parrott plaintiffs sued Peabody and Armstrong in Missouri state court, alleging that the companies' had failed to pay royalties under the 1954 agreements. The Parrott plaintiffs also sought a declaratory judgment that the agreements required the companies to pay royalties on coal mined by Armstrong as its “successor or assignee.” Willits v. Peabody Coal Co. (Willits II), 332 S.W.3d 260, 262-63 (Mo. Ct. App. 2010). Peabody and Armstrong moved for summary judgment, arguing that the termination of the Beaver Dam lease and the tenancies in common ended the royalty agreements and that Armstrong was not an assign of Peabody. Attorney Barton again represented the Parrott plaintiffs in Willits II; he was joined as co-counsel by attorneys Gerard Carmody and David Luce.

The Missouri circuit court granted summary judgment for Peabody and Armstrong. The court observed that the case hinged on “whether the 1954 royalty agreements between Alston Coal Co. and William and Pauline Parrott are a product of and dependent upon the Beaver Dam lease and [the tenancies in common].” The court noted that “[a]s a matter of law, the royalty obligation cannot encumber anything greater than the estate held by Alston Coal Co. at the timé the agreement was entered into and may only obligate future assignees to the extent that the Alston interests continue to exist.” Because Alston held interests as a lessee and tenant in common when it entered'into the 1954 royalty agreements, the court determined that Alston “lacked the capacity to grant anything but an overriding royalty,” and could not “obligate subsequent fee simple landowners” to pay royalties.

The court went on to conclude that the royalty interests “depended] on the existence of the original Parrott mineral lease and the tenancies in common.” Therefore, the termination of the Beaver Dam lease and the tenancies in common extinguished the plaintiffs’ royalty interests in question. The court further determined that Armstrong was not a successor or assign of Peabody because the obligations imposed by the agreements did not survive the termination of the underlying property interests. The circuit court thus granted summaiy judgment for Peabody and Armstrong, having concluded that they “have no further obligation to pay royalties to plaintiffs on coal mined on or after January 31,2007.”

The Parrott plaintiffs appealed to the Missouri Court of Appeals. The court of appeals agreed, that the royalty interest did not survive the termination of the Beaver Dam lease and the tenancies in common. Id. at 264-65. The court characterized the royalty interest as an “overriding royalty interest” which “is an interest in the -lease out of which it is carved, and cannot be a property interest of greater dignity than the lease itself.” Id. at 264 (quoting Olson v. Continental Res., Inc., 109 P.3d 351, 354 (Okla. Civ. App. 2004)). Because the court concluded that the royalty interest had been terminated, the court did not reach the question whether Armstrong was an assign or successor of Peabody under the-royalty agreements. Id. at 265.

After the decision of the Missouri Court of Appeals, .the Parrott plaintiffs, retained attorney John Holstein to act as co-counsel with attorneys Barton, Carmody, and Luce to file a motion for rehearing and/or transfer to the Missouri Supreme Court. In their motion, the Parrott plaintiffs argued that the Missouri Court,of Appeals decision in Willits II contradicted the unambiguous terms of the 1954 royalty agreements and case law regarding the interpretation and enforcement of unambiguous contracts. They further argued that the Willits II court’s decision “overlooks, does not address, and directly conflicts with [Willits /].” The Missouri Court of Appeals denied both rehearing and transfer. Id. at 260. The Parrott plaintiffs then filed an application for transfer with the Missouri Supreme Court, which was also denied. Id.

C.

Dissatisfied with the outcome of Willits II, the Parrott plaintiffs filed another lawsuit against Peabody, Armstrong, and the State of Missouri in Missouri state court. Willits v. Peabody Coal Co. (Willits III), 400 S.W.3d 442, 447 (Mo. Ct. App. 2013). Attorney Barton represented the Parrott plaintiffs in Willits III. The Parrott plaintiffs alleged several constitutional claims against the State of Missouri: that the Willits II courts had violated the Full Faith and Credit Clause by refusing to adhere to the earlier federal court judgments in Willits I, that the decisions of Willits II courts were an unconstitutional judicial taking under both the federal and Missouri constitutions, and that the Willits II decisions violated the Parrott plaintiffs’ substantive due process rights under both the federal and Missouri constitutions. The Parrott plaintiffs did not assert any claims against Peabody or Armstrong in Willits III but joined them as “affected parties” under Missouri law. Id. at 447 n.8.

Peabody, Armstrong, and the State of Missouri moved to dismiss the complaint. The circuit court questioned whether the State could be liable for acts of the state judiciary, but determined in any event that the Willits II courts exercised a “judicial function” in deciding the previous cases and were therefore protected by judicial immunity. The court further reasoned that the Parrott plaintiffs raised the issue of full faith and credit in Willits II and that the argument was rejected by both the trial court and the appellate court. The court concluded that the Parrott plaintiffs did not establish a due process violation and that the judicial takings claims failed because “[t]he State did not initiate the action, change existing law, or derive any benefit as the result of the decision.” As a result, the circuit court granted the defendants’ motion to dismiss. The Missouri Court of Appeal affirmed on the alternative ground that the Parrott plaintiffs waived their constitutional arguments by failing to raise them at the first opportunity in Willits II. Id. at 448.

D.

This lawsuit was next. Willits and Par-rott, Jr. died in 2012. Their estates and a collection of trusts that received their respective royalty interests sued the attorneys who represented the Parrott plaintiffs in the prior actions. As relevant to this appeal, the Trusts alleged that the former attorneys committed malpractice by failing to raise preclusion arguments in Willits II based on the federal court judgments in Willits I. The Trusts further argued that their attorneys were negligent in waiving arguments based on theories of judicial takings and substantive due process in Willits II. The attorneys moved to dismiss the complaint for failure to state a claim. See Fed. R. Civ..P. 12(b)(6).

The district court found that the Trusts failed to state a malpractice claim based on failure to assert preclusion arguments, because Willits I and Willits II did not decide the same issues and claims. The court observed that Willits I addressed whether the 1954 royalty agreements were void under the rule against perpetuities. Willits II, on the other hand, considered whether the royalty interests survived the termination of the-Beaver Dam lease and certain tenancies in common. Further, the court determined that “the claims and issues in Willits II could not have been litigated in Willits I” because the termination of the land interests at issue in Willits II did not occur until after Willits I was decided. The court also noted that the Trusts’ attorneys did raise full faith and credit arguments in Willits II, and that the attorneys “generally argued that Wil-lits I was a controlling authority.” The district court therefore determined that assertion of these preclusion arguments would not have changed the outcome of Willits II.

The district court also considered the Trusts’ argument that the attorneys were negligent in failing to allege unconstitutional judicial takings and violations of substantive due process in Willits II. The court observed that there was no taking of private property for public use and that the Willits II ruling “did not so clearly deviate from established precedent such that it amounted to ‘judicial elimination of established property rights’ ” or a violation of due process. Concluding that the Trusts failed to state a claim for legal malpractice, the district court dismissed the complaint.

II.

We review de novo the granting of a motion to dismiss. Murphy v. Aurora Loan Servs., LLC, 699 F.3d 1027, 1033 (8th Cir. 2012). We accept as true the well-pleaded allegations in the complaint and draw all reasonable inferences in favor of the non-moving party, but we are “not bound to accept as true a legal conclusion couched as a factual allegation.” Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)). We also take judicial notice of the opinions and orders from the prior Willits cases, including the facts of what issues and claims were litigated, although we do not accept as true any historical facts found in those decisions that would be material to the issues here. See Levy v. Ohl, 477 F.3d 988, 991 (8th Cir. 2007); Holloway v. Lockhart, 813 F.2d 874, 878-79 (8th Cir. 1987); Fed. R. Evid. 201(b).

To state a claim for legal malpractice under Missouri law, the Trusts must establish four elements: (1) that an attorney-client relationship existed; (2) that the defendant attorneys acted negligently or in breach of contract; (3) that such acts were the proximate cause of the Trusts’ damages; and (4) that, but for the defendant attorneys’ conduct, the Trusts would have been successful in the prosecution of their underlying claim. Nail v. Husch Blackwell Sanders, LLP, 436 S.W.3d 556, 561 (Mo. 2014). In a legal malpractice case, “causation in fact requires proof that ‘but for’ the attorney’s negligence, the result would have been different.” Id. at 562. In granting the attorneys’ motion to dismiss, the district court determined that the Trusts failed to allege adequately that the attorneys were negligent or that the outcome of Willits II would have been different if the attorneys had raised any of the theories identified by the Trusts in their complaint.

A.

The Trusts’ primary theory of legal malpractice is that the attorneys acted negligently in failing to raise preclusion arguments in Willits II. As a matter of federal common law, state courts must give a final federal judgment in a diversity case like Willits I the same preclusive effect that the judgment would receive under state law in the State where the federal court sits. Semtek Int’l Inc. v. Lockheed Martin Corp., 531 U.S. 497, 506-08, 121 S.Ct. 1021, 149 L.Ed.2d 32 (2001). Willits I was litigated in the Western District of Kentucky, and the parties agree that the district court properly applied Kentucky preclusion law. Under Kentucky law, the doctrine of res judicata is comprised of issue preclusion and claim preclusion. The doctrine “stands for the principle that once the rights of the parties have been finally determined, litigation should end.” Coomer v. CSX Transp., Inc., 319 S.W.3d 366, 371 (Ky. 2010) (quoting Slone v. R & S Mining, Inc., 74 S.W.3d 259, 261 (Ky. 2002)).

Issue preclusion “bars the parties from relitigating any issue actually litigated and finally decided in an earlier action.” Yeoman v. Commonwealth, 983 S.W.2d 459, 465 (Ky. 1998). It has five elements: (1) at least one party to be bound in the second case must have been a party in the first case, (2) the issue in the second case must be the same as the issue in the first case, (3) the issue must have been actually litigated in the first case, (4) the issue must have been actually decided in that case, and (5) the decision on the issue in the prior action must have been necessary to the court’s judgment and adverse to the party to be bound. Miller v. Admin. Office of Courts, 361 S.W.3d 867, 872 (Ky. 2011).

Claim preclusion “prohibits the relitigation of claims that were litigated or could have been litigated between the same parties in a prior action.” Miller, 361 S.W.3d at 871. For claim preclusion to apply, three elements must be shown: (1) identity of the parties, (2) identity of the causes of action, and (3) the prior action must have been resolved on the merits. Yeoman 983 S.W.2d at 465.

1.

The Trusts first assert that their attorneys were negligent in failing to argue that Willits I precluded relitigation of issues presented in Willits II. The Trusts identify two propositions that they contend were established in Willits I: (1) that Peabody was required to pay royalties on coal mined from “after-acquired” property, and (2) that their royalty interest was “a vested fee simple property interest in perpetuity.” The Trusts claim that the attorneys committed malpractice in Willits II by failing to advance these preclusion theories.

We reject the “after-acquired” property preclusion argument. Anything the district court in Willits I said about royalties from after-acquired properties did not address the same issue that was litigated in Willits II—i.e., whether the royalty interests continued after termination of the Beaver Dam lease or the tenancies in common. See Yeoman, 983 S.W.2d at 465-66. The attorneys thus would not have succeeded by arguing this aspect of issue preclusion.

The Trusts next assert that Willits I determined that the royalty interest was “a vested fee simple property interest in perpetuity.” The quoted phrase does not appear in any order from Willits I. The Sixth Circuit ultimately characterized the royalty interest as “a fee simple interest in Peabody’s contingency.” Willits I, 1999 WL 701916, at *20. The Trusts contend, however, that Willits I determined that the royalty interest was a perpetual nonparticipating royalty interest. They argue that if their attorneys had asserted issue preclusion on that point, then the Willits II courts could not have concluded that the royalty was instead an overriding royalty interest that ended when the underlying lease terminated.

We see no merit to this claim. As relevant to the Trusts’ claims, the Sixth Circuit’s decision in Willits I was narrowly focused on whether the royalty interest violated the rule against perpetuities. The court did npt determine the precise nature of the royalty interest. Id. at *19-20. Although the court once referred to “the district court’s reasoning that the perpetual nonparticipating royalty interests are contractual rights, as opposed to interests in property,” id. at *19 (emphasis added), the opening line of the opinion described the interests as “overriding royalty interests,” and twice referred to Parrott receiving or assigning an “overriding royalty interest.” Id. at *1. Therefore, the issue decided in Willits II—the continued validity of the royalty interests after termination of the Beaver- Dam lease and the tenancies in common—was not actually decided or necessary to the court’s judgment in Willits I. As such, the attorneys did not commit malpractice by failing to advance the issue preclusion argument. See Nail, 436 S.W.3d at 562.

2.

The Trusts also assert that their attorneys committed malpractice by failing to argue for claim preclusion in Willits II based on Peabody’s failure to raise a compulsory counterclaim in Willits I. Peabody prevailed in Willits II on the ground that the termination of the Beaver Dam lease and certain tenancies in common extinguished the royalty interest of the Parrott plaintiffs. The Trusts assert that Peabody allowed two so-called “Bennett leases” to expire in 1964, thus merging them into a fee simple estate owned by the Bennett family. They argue that Peabody in Willits I could have raised a counterclaim that the expiration of the Bennett leases terminated the 1954 royalty agreements. The Trusts fault their attorneys in Willits II for failing to argue that Peabody was precluded from relying on the termination of the Beaver Dam lease in Willits II when Peabody did not rely on the expiration of the Bennett leases in Willits I.

We agree with the district court that the proffered argument would not have changed the outcome in Willits II, The Missouri courts in Willits II ruled that the Parrott plaintiffs had a royalty interest in the Beaver Dam lease, and that their' interest could not be “a property interest of greater dignity than the lease itself.” 332 S.W.3d at 264 (quotation omit-téd). Thus, when the Beaver Dam lease terminated, the royalty interest arising from that lease terminated. Peabody could not have raised this argument in Willits I, because the Beaver Dam lease was not terminated until after Willits I was resolved. See Coomer, 319 S.W.3d at 371-72. Any argument in Willits I based on the termination of the Bennett leases would have been limited to extinguishing the royalty interest of the Parrott plaintiffs arising from the Bennett leases. The Trusts thus have not stated a malpractice claim based on failure to press this preclusion theory in Willits II.

B.

The Trusts also contend that the attorneys were negligent in failing to assert constitutional arguments concerning judicial takings and substantive due process in Willits II. Citing Stop the Beach Renourishment, Inc. v. Florida Department of Environmental Protection, 560 U.S. 702, 130 S.Ct. 2592, 177 L.Ed.2d 184 (2010), the Trusts argue that the Missouri courts committed a judicial taking and a substantive due process violation in Willits II when they determined that the royalty interests were terminated. The Trusts contend that the attorneys would have prevailed if they had raised these constitutional claims in Willits II.

We agree with the district court (and the state circuit court in Willits III) that the constitutional arguments lack merit. In Stop the Beach, a plurality concluded that courts may violate the Takings Clause by “declaring] that what was once an established right of private property no longer exists.” 560 U.S. at 715, 130 S.Ct. 2592. The plurality observed, however, that where “courts merely clarify and elaborate property entitlements that were previously unclear, they cannot be said to have taken an established property right.” Id. at 727, 130 S.Ct. 2592; see also In re Lazy Days’ RV Ctr., Inc., 724 F.3d 418, 425 (3d Cir. 2013) (stating that “adjudication of disputed and competing claims cannot be a taking”). Willits II did not eliminate an established property right, but instead addressed the open question “whether the 1954 royalty agreements ... are a product of and dependent upon the Beaver Dam lease and [the tenancies in common].” Willits II, 332 S.W.3d at 264. The Missouri court merely clarified and elaborated the rights of the Parrott plaintiffs under the royalty agreements, so a claim of judicial taking would have failed. For the same reasons, the decision did not eliminate an established property right in a way that might have implicated the Due Process Clause. Cf. Stop the Beach, 560 U.S. at 735, 130 S.Ct. 2592 (Kennedy, J., concurring). We therefore conclude that the Trusts have also failed to state a legal malpractice claim based on their constitutional theories.

The judgment of the district court is affirmed.

      . The Honorable Beth Phillips, United States District Judge for the Western District of Missouri.

      . The defendant attorneys moved to strike portions of the Trusts' addendum on appeal. We deny the motion as it relates to the Willits I court documents, because “we may take judicial notice of proceedings in other courts that relate directly to matters at issue.” Great Plains Trust Co. v. Union Pac. R.R. Co., 492 F.3d 986, 996 (8th Cir. 2007). The motion is denied as moot with regard to the remaining document, because the material is unnecessary to our decision, and we do not consider it. See Stewart v. Prof'l Comput. Ctrs., Inc., 148 F.3d 937, 940 n.3 (8th Cir. 1998).

      . The Trusts argue on appeal that the attorneys were negligent in failing to argue in Willits II that Willits I established that Armstrong was an "assign” under the royalty agreements. The Trusts forfeited this argument by failing to raise it in the district court, and the contention has no merit in any event. The court of appeals in Willits II deemed it unnecessary to decide whether Armstrong was an assign, because the answer did not affect the outcome of the case. 332 S.W.3d at 265,

      . We reject the Trusts' argument that the doctrine of judicial estoppel precludes certain arguments raised by the attorneys that are allegedly inconsistent with arguments they presented in Willits III. The attorneys were not parties in Willits III, so the doctrine is inapplicable. Cf. Heinze v. Bauer, 145 Idaho 232, 178 P.3d 597, 603 (2008) (concluding that "statements made on behalf of a client ... are not personal admissions that may be used against the attorney in subsequent litigation”).


source: Caselaw Access Project

author: GRUÉNDER, Circuit Judge.

license: Public Domain

text:
    UNITED STATES of America, Plaintiff-Appellee v. Meigel M. CRADDOCK, Defendant-Appellant
    No. 15-3705
    United States Court of Appeals, Eighth Circuit.
    Submitted: September 22, 2016
    Filed: November 8, 2016

      Rebecca L. Kurz, Research and Writing Specialist, Office of the Fed. Public Defender, Kansas City, MO, argued (Laine Cardarella, Fed. Public Defender, Ronna A. Holloman-Hughes, Asst. Fed. Public Defender, on the brief), for appellant.
    D. Michael Green, Asst. U.S. Atty., Kansas City, MO, argued (Tammy Dickinson, U.S. Atty., on the brief), for appellee.
    Before SMITH,. MELLOY, and GRUENDER, Circuit Judges.
   GRUÉNDER, Circuit Judge.

After a jury trial, Meigel Craddock was convicted of being a felon in possession of a firearm in violation of 18 U.S.C. § 922(g)(1). Craddock was sentenced to a mandatory minimum of fifteen years’ imprisonment under the Armed Career Criminal Act (“ACCA”), 18 U.S.C. § 924(e). Craddock makes two arguments on appeal: (1) the Terry frisk that led to his arrest exceeded its proper scope, and (2) his prior conviction for Missouri burglary does not qualify as a predicate offense under the ACCA. For the reasons discussed below, we reverse as to the first issue and do not reach the second.

I.

A few minutes before 11:00 a.m. on November 20, 2013, Officer Charles Prichard of the Kansas City Police Department was stopped at a stop sign when he observed a green Pontiac enter the intersection and slow down as if to turn in his direction. Instead, the Pontiac hesitated for a few moments before proceeding straight through the intersection. Finding this behavior suspicious, Officer Prichard called in the Pontiac’s license plate number and discovered that the vehicle was stolen. He followed the vehicle but lost sight of it when it turned down a side street. Officer Prichard then proceeded to drive up and down nearby streets looking for the vehicle. At approximately 11:06 a.m., Officer Prichard noticed a man later identified as Craddock walking down the sidewalk of one of the side streets. Officer Prichard discovered the stolen Pontiac parked on the side of the street shortly after passing Craddock, at which point Prichard turned around in order to relocate Craddock. Driving back up the street, Officer Prich-ard saw Craddock standing in the front yard of a residence about fifty feet from the stolen Pontiac. Officer Prichard did not notice any other people in the area.

Officer Prichard parked his vehicle and approached Craddock. When Officer Prich-ard asked Craddock what he was doing, Craddock appeared nervous and said he was going home, but he could not provide Officer Prichard with an address. Believing that Craddock had just exited the stolen Pontiac, Officer Prichard handcuffed Craddock and frisked him for a weapon. The frisk did not reveal a weapon, but Officer Prichard did feel what he believed to be a vehicle key fob in Craddock’s pants pocket. Officer Prichard removed the key fob from the pocket and, after noticing that it had a Pontiac emblem, used it to unlock the stolen Pontiac. After opening the door of the vehicle, Officer Prichard saw a handgun on the floor next to the driver’s seat. Upon learning that Craddock was a convicted felon, Officer Prichard arrested him for possessing, a handgun. Craddock’s DNA was later matched to DNA discovered on the vehicle steering wheel, but insufficient DNA was present on the handgun for it to be tested.

On December 11, 2013, Craddock was indicted on one count of being a felon in possession of a firearm in violation of 18 U.S.C. § 922(g)(1). Craddock moved to suppress the evidence resulting from the frisk of his person and the removal of the key fob from his pocket. The district court denied the motion, and a jury subsequently returned a guilty verdict. After determining that Craddock qualified as an armed career criminal, the court sentenced him to 250 months’ imprisonment and five years of supervised release.

II.

“When considering a suppression order, we review the district court’s factual findings for clear error and review de novo its conclusion about whether the Fourth Amendment was - violated during the search.” United States v. Janis, 387 F.3d 682, 686 (8th Cir. 2004). As an initial matter, Craddock’s proximity to the stolen vehicle and his demeanor when Officer Prichard approached him provided the officer with reasonable suspicion to frisk Craddock for weapons. See Terry v. Ohio, 392 U.S. 1, 30, 88 S.Ct. 1868, 20 L.Ed.2d 889 (1968); United States v. Hanlon, 401 F.3d 926, 929 (8th Cir. 2005) (“[W]hen officers encounter suspected car thieves, they also may reasonably suspect that such individuals ‘might possess weapons.’ ” (quoting United States v. Rowland, 341 F.3d 774, 784 (8th Cir. 2003))).

However, in order to seize items other than weapons, “the officer conducting a pat-down search [must] have probable cause to believe the item in plain touch is incriminating evidence,” United States v. Bustos-Torres, 396 F.3d 935, 944-45 (8th Cir. 2005) (citing Minnesota v. Dickerson, 508 U.S. 366, 376, 113 S.Ct. 2130, 124 L.Ed.2d 334 (1993)). The item need not be contraband, but “[t]o give rise to probable cause, the incriminating character of the object must be immediately identifiable.” Bustos-Torres, 396 F.3d at 945; see also United States v. Cowan, 674 F.3d 947, 953 (8th Cir. 2012) (“A police officer ‘lawfully pat[ting] down’a suspect’s outer clothing’ may seize any ‘object whose contour or mass makes its identity immediately apparent’ as incriminating evidence.” (quoting Dickerson¡ 508 U.S. at 375, 113 S.Ct. 2130) (alterations in .original)). Ultimately, “an item’s incriminatory nature is immediately apparent if the officer at that moment had ‘probable cause to associate the property with criminal activity’ ... meaning ‘the facts available to the officer would warrant a man of reasonable caution in the belief that certain items may be contraband or stolen property or useful as evidence of a crime.’ ” Cowan, 674 F.3d at 953 (quoting Texas v. Brown, 460 U.S. 730, 741-42, 103 S.Ct. 1535, 75 L.Ed.2d 502 (1983) (plurality opinion)). Probable cause requires only “a ‘practical, nontechnical’ probability that incriminating evidence is involved,” id. (quoting Broim, 460 U.S. at 742, 103 S.Ct. 1535), but the officer may not manipulate the item in order to ascertain the incriminating character where it is not immediately apparent to him, see Dickerson, 508 U.S. at 379, 113 S.Ct. 2130.

In this case, the key fob’s incriminating character was not immediately apparent upon plain feel. Officer Prichard testified that he was not able to observe the person driving the car or even identify whether the individual was male or female. Officer Prichard did not observe ■ Craddock exit the vehicle, and Officer Prichard had to turn his patrol car around several times in order to locate Craddock, who did not attempt to flee. While Craddock was relatively close to the stolen vehicle and behaving nervously, circumstances which make this question close, feeling an unidentified key fob in Craddock’s pocket did not provide Officer Prichard with probable cause to conclude that the key fob belonged to the stolen Pontiac. Key fobs are extremely common items carried in the pockets of a large portion of the population on a daily basis. As a result, without more information, Officer Prichard could not have reasonably associated the key fob with the stolen Pontiac at that point. See United States v. Bailey, 417 F.3d 873, 877 (8th Cir. 2005) (explaining that a hunch is insuf-fícient to provide reasonable suspicion, much less probable cause). It was not until Officer Prichard removed the key fob from Craddock’s pocket and observed the Pontiac emblem that he had reason to associate the key fob with the stolen vehicle. Thus, as in Minnesota v. Dickerson, the officer required “a further search, one not authorized by Terry or by any other exception to the warrant requirement” to determine the item’s incriminating character. 508 U.S. at 379, 113 S.Ct. 2130. Accordingly, the key fob’s seizure violated the Fourth Amendment.

The Government raises several counterarguments to suppression. First, it argues that Craddock had no reasonable expectation of privacy in the stolen key fob, the stolen car, or the handgun. While Craddock had no reasonable expectation of privacy in the stolen vehicle or contraband, see United States v. Long, 797 F.3d 558, 568 (8th Cir. 2015), he did have a reasonable expectation of privacy in the contents of his pants pockets. See United States v. $53,082 in U.S. Currency, 985 F.2d 245, 249 (6th Cir. 1993) (finding an expectation of privacy “in items carried on one’s person”). Second, the Government contends that the evidence is admissible under the inevitable discovery doctrine. The inevitable discovery doctrine provides an exception to the exclusionary rule where “the prosecution can establish by a preponderance of the evidence that the information ultimately or inevitably would have been discovered by lawful means.” Nix v. Williams, 467 U.S. 431, 444, 104 S.Ct. 2501, 81 L.Ed.2d 377 (1984). Although the Government argues that the police would have inevitably discovered the contents of the stolen vehicle, the Government does not contend that the police would have inevitably discovered the key fob in Crad-dock’s pocket. Accordingly, inevitable discovery has no bearing on whether the key fob should have been suppressed. To the extent the inevitable discovery doctrine applies to evidence other than the key fob, the district court did not address the question, and we decline to decide it in the first instance.

Accordingly, the officer’s seizure of the key fob exceeded the appropriate scope of a Terry frisk, and it should have been suppressed. As a result, we do not reach Craddock’s sentencing challenge.

III.

For the foregoing reasons, we vacate Craddock’s conviction and remand for proceedings not inconsistent with this opinion.


author: MURPHY, Circuit Judge.

text:
    UNITED STATES of America, Plaintiff-Appellee. v. Stephen THOMAS, Defendant-Appellant.
    No. 15-3717
    United States Court of Appeals, Eighth Circuit.
    Submitted: September 23, 2016
    Filed: November 10, 2016

      Counsel who represented the appellant was Timothy S. Ross-Boon, AFPD, of Des Moines, LA.
    Counsel who represented the appellee was Marc Krickbaum, AUSA, of Des Moines, LA.
    Before RILEY, Chief Judge, MURPHY and SMITH, Circuit Judges.
   MURPHY, Circuit Judge.

Stephen Thomas pled guilty to conspiracy to possess fifteen or more counterfeit access devices and conspiracy to commit mail fraud, in violation of 18 U.S.C. § 371, possession of fifteen or more counterfeit devices, in violation of 18 U.S.C. § 1029(a)(3), and false statements to a federal official, in violation of 18 U.S.C. § 1001(a)(2). The district court sentenced Thomas to 80 months imprisonment, and he appeals. We affirm.

I.

From 2014 to 2015, Thomas was a member of a group of four individuals who obtained gift cards and credit cards embossed with the names of three group members and encoded with stolen information. With the cards the group conducted fraudulent global cash access (GCA) transactions at casinos. In such transactions cash advances are obtained on credit cards at casino kiosks and the receipts are converted into cash by a casino cashier. The group also used such fraudulent cards at restaurants and retail stores. In November 2014, Thomas and Robert Foust traveled to the Ameristar Casino in Council Bluffs, Iowa. During that trip Foust fraudulently-obtained $370 through a GCA transaction. Over the next three months the group was involved in over $28,000 of attempted or completed fraudulent transactions at four casinos and at a Walmart. . .

On February 16, 2015 a hotel employee in Bloomington, Minnesota notified law enforcement that there was a suspicious male, later identified as Thomas, using numerous prepaid credit cards to pay for his room. When Bloomington police officers made contact with Thomas, he provided them with a false name and driver license which prevented them from discovering his outstanding arrest warrant for a 2009 escape from federal prison. The officers were granted entry to Thomas’ hotel room and searched his person but did not make any arrests. Officers later found 30 fraudulent cards in the hotel embossed with the names of the other three people in Thomas’ group.

Three days later law enforcement identified a suspicious piece of mail addressed to Foust at the Econo Lodge Inn and Suites in Des Moines, Iowa. When Foust was confronted, he gave the officers consent to search a package in which 50 fraudulent cards were discovered. Foust thereafter consented to a search of the room he had been sharing with four others, including Thomas. Law enforcement found 82 fraudulent cards in their hotel room and 18 fraudulent cards in a rental van that the group was using.

Thomas was indicted and later pled guilty to conspiracy to possess fifteen or more counterfeit access devices and conspiracy to commit mail fraud, possession of fifteen or more counterfeit devices, and false statements to a federal official. At sentencing the district court determined that his base offense level was 14 under USSG § 2B1.1 because the loss amount was over $95,000. Six levels were added because the offense involved ten or more victims, sophisticated means were used, and Thomas possessed five or more fraudulent forms of identification. See USSG §§ 2Bl.l(b)(2)(A)(i), (b)(10)(c), (b)(ll)(C)(ii), The court added four additional levels after finding under USSG § 3Bl.l(a) that Thomas was “an organizer or leader of a criminal activity that involved five or more participants.” Two more levels were added after finding that Thomas had willfully obstructed justice by providing false identification to the Bloom-ington police on February 16. See USSG § 3C1.1. A total offense level of 23 was reached after three levels for acceptance of responsibility were subtracted. See USSG § 3E1.1.

Thomas was assigned a criminal history category of four because his record included 1999 convictions for possession of a counterfeit credit card and unlawful possession of a controlled drug. Since he had been sentenced for those offenses in January 2000, the district court counted them because they had been imposed within fifteen years of the commencement of his current offense. See USSG § 4A1.2(e)(l). This produced a guideline range of 70 to 87 months, arid the court sentenced him to 80 months. Thomas appeals.

II.

Thomas first argues that the district court erred by increasing his base offense level by eight under USSG § 2B1.1 after finding that the total loss amount attributable to him exceeded $95,000. He and his codefendants had completed over $26,000 of fraudulent transactions and attempted to complete $2,000 more. Law enforcement found 180 unused fraudulent cards in the group’s possession, and the district court attributed $500 to each of these unused cards. See USSG § 2B1.1 cmt. n.3(F)(i). The total loss amount exceeded $95,000. Thomas argues that the court erred by-including amounts from unused cards possessed by the group.

We review de novo “a district court’s interpretation and application of the sentencing guidelines” and its factual findings for clear error. United States v. Gallimore, 491 F.3d 871, 874-75 (8th Cir. 2007). The loss amount “is the greater of actual loss or intended loss,” USSG § 2B1.1 cmt. n.3(A), and intended loss is the monetary “harm that the defendant purposely sought to inflict,” including “harm that would have been impossible or unlikely to occur,” id. cmt. n.3(A)(ii). The loss amount in “a case involving any counterfeit access device or unauthorized access device ... includes any unauthorized charges made with the counterfeit access device or unauthorized access device and shall be not less than $500 per access device.” Id. cmt. n.3(F)(i).

Our court has yet to decide whether the $500 minimum in USSG § 2B1.1 cmt. n.3(F)(i) may be applied to fraudulent cards which have been merely possessed rather than used. Following the plain language of this application note, we conclude that it may. The note itself allows a district court to impose the $500 minimum to “any counterfeit access device or unauthorized access device.” Id. It does not require that the device actually have been used.

This conclusion is supported by the application note’s next sentence which reads:

However, if the unauthorized access device is a means of telecommunications access that identifies a specific telecommunications instrument or telecommunications account ..., and that means was only possessed, and not used, during the commission of the offense, loss shall be not less than $100 per unused means.

Id. This sentence shows that “the authors of the Guidelines knew how to limit the application of these provisions to the use of access devices.” United States v. Cardenas, 598 Fed.Appx. 264, 267 (5th Cir. 2015). Moreover, the second sentence indicates that this application note “treats an unused means of telecommunications access as already within the category of devices to which this section applies.” Id. If “any counterfeit access device or unauthorized access device” were intended to include only devices that had been actually used, there would have been no need to explain how to treat unused unauthorized access devices because such devices would have been “outside the ambit of the provision.” Id. Every circuit to consider this issue has reached the same conclusion. See United States v. Moon, 808 F.3d 1085, 1091 (6th Cir. 2015) (collecting cases). The district court did not err when it concluded that a loss amount of $500 may be attributed to fraudulent cards that are unused.

Thomas also argues on appeal that the government was required to prove that each of his fraudulent cards was usable. Since Thomas failed to present this argument to the district court, we review it for plain error. United States v. Taylor, 679 F.3d 1005, 1007 (8th Cir. 2012). We reverse for plain error “only if there has been (1) an error, (2) that is plain, and (3) that affects substantial rights.” United States v. Pledge, 821 F.3d 1035, 1037 (8th Cir. 2016) (quoting United States v. Richardson, 537 F.3d 951, 959 (8th Cir. 2008)). Here, the district court did not commit plain error because neither the Supreme Court nor our court has addressed whether USSG § 2B1.1 contains a usability requirement, and other circuit courts are divided on the issue. See id.; compare Moon, 808 F.3d at 1092 (“[W]e reject Moon’s argument for reading a ‘usability requirement into U.S.S.G. § 2Bl.l(b).”), with United States v. Onyesoh, 674 F.3d 1157, 1160 (9th Cir. 2012) (“For an unauthorized access device whose usability is not readily apparent ... some proof of usability is required when the defendant does not concede the fact or when the defendant challenges the enhancement.”).

We conclude that the district court did not err by increasing Thomas’ base offense level by eight under USSG § 2B1.1 after finding that the total loss amount for which he was responsible exceeded $95,000.

III.

Thomas next argues that the district court erred by increasing his base offense level by four for being an “organizer or leader of a criminal activity that involved five or more participants” under USSG § 3Bl.l(a). Since this was a factual determination, we review for clear error. Galli-more, 491 F.3d at 874-75.

Thomas first argues that he was not an “organizer or leader” because he and his codefendants were equal partners in the fraudulent scheme. Under USSG § 3B1.1 cmt. n.4, a court should consider the following factors when determining whether a defendant was an “organizer or leader”:

the exercise of decision making authority, the nature of participation in the commission of the offense, the recruitment of accomplices, the claimed right to a larger share of the fruits of the crime, the degree of participation in planning or organizing the offense, the nature and scope of the illegal activity, and the degree of control and authority exercised over others.

The district court did not clearly err on this issue because Thomas’ conduct met almost every one of these factors. In Thomas’ plea agreement he admitted that he had “directed others to use” the fraudulent credit cards and “arranged for” the delivery of several packages of fraudulent cards. He also admitted that his codefen-dants were to provide him with the illegal proceeds and he promised “them a percentage of the money obtained” in exchange. Moreover, every one of his code-fendants indicated that Thomas had been the leader, that he had controlled the fraudulent cards, and that he had controlled the money obtained from the cards. Two of Thomas’ codefendants additionally stated that he had recruited them into the scheme and that he had received the largest share of the illegal proceeds.

Thomas also argues that the criminal activity did not involve “five or more participants” because only four were listed in the indictment. See USSG § 3Bl.l(a). A person qualifies as a “participant” if she is “criminally responsible for the commission of the offense,” but a participant does not need to “have been convicted.” Id. cmt. n.l. The offense here involved at least five participants because unindicted DeShawn Bowen could have been criminally responsible for conspiracy to possess more than fifteen fraudulent access devices. See 18 U.S.C. §§ 371, 1029(a)(3). Bowen traveled with the group, was listed as a driver of the minivan on the rental agreement, and recruited one of the codefendants into the scheme. Moreover, law enforcement officers found seven fraudulent cards when they searched her in Des Moines.

The district court thus did not clearly err when it increased Thomas’ base offense level by four for being an “organizer or leader of a criminal activity that involved five or more participants” under USSG § 3Bl.l(a).

IV.

Thomas also argues that the district court erred when it increased his base offense level by two for obstruction of justice. We accord “great deference to the sentencing court’s decision to grant an enhancement for obstruction of justice.” United States v. Calderon-Avila, 322 F.3d 505, 507 (8th Cir. 2003) (per curiam). Under USSG § 3C1.1(1), a district court may-increase a defendant’s base offense level by two if “the defendant willfully obstructed or impeded, or attempted to obstruct or impede, the administration of justice with respect to the investigation, prosecution, or sentencing of the instant offense of conviction.” A defendant’s conduct that occurs prior to the start of an official investigation fits within the enhancement “if the conduct was purposefully calculated, and likely, to thwart the investigation or prosecution of the offense.” Id. cmt. n.l.

There is sufficient evidence to conclude that Thomas “consciously act[ed] with the purpose of obstructing justice.” United States v. Watts, 940 F.2d 332, 332-33 (8th Cir. 1991) (quoting United States v. Stroud, 893 F.2d 504, 507 (2d Cir. 1990)). When police officers confronted Thomas in February 2015 in Bloomington, Minnesota, he provided them with both a false name and fake identification. Since Thomas had escaped from federal prison in 2009, he could have assumed that officers would have discovered an arrest warrant if he provided them with his real name.- His actions were also “purposefully calculated, and likely, to thwart the investigation or prosecution of the offense,” USSG § 3C1.1 cmt. n.l, and did in fact “significantly obstruct ] .., the official investigation,” id. § 3C1.1 cmt. n.4(G). Thomas’ false name and identification allowed him to evade arrest for three days, during which time the group traveled from Minnesota to Iowa, used or attempted to use four fraudulent credit cards, and received a package containing fifty fraudulent cards. Law enforcement only found the group in Iowa after discovering a suspicious package addressed to Foust which a canine indicated contained narcotics. If Thomas had produced his correct identification in Minnesota, “the investigation and prosecution reasonably would have proceeded more quickly and required less effort.” See United States v. McKanry, 628 F.3d 1010, 1021. (8th Cir. 2011).

The district court thus did not err in finding that Thomas obstructed both his investigation and prosecution.

V.

Thomas finally argues that the district court erred when it assessed three criminal history points for his 1999 conviction for possession of a counterfeit credit card and unlawful possession of a controlled drug. We review criminal history calculations for clear error. United States v. Simms, 695 F.3d 863, 864 (8th Cir. 2012). When determining a defendant’s criminal history category, a district court must count “[a]ny prior sentence of imprisonment exceeding one year and one month that was imposed within fifteen years of the defendant’s commencement of the instant offense.” USSG § 4A1.2(e)(l).

Thomas argues that the district court should not have attributed three points to his 1999 conviction because his sentence had been imposed in January 2000 and his later fraudulent scheme did not begin until February 2015. The district court found, however, that this fraudulent scheme started in November 2014 when Foust traveled with Thomas to the Ameristar Casino in Council Bluffs, Iowa and fraudulently obtained $370 through a GCA transaction. Thomas argues that these reports by Foust to law enforcement should not have been credited because he had an incentive to cooperate and his “memory appears sketchy.” Nevertheless, in both of Foust’s statements he consistently described the November 2014 incident in Council Bluffs, which was also corroborated by video surveillance. The district court did not clearly err in assessing three criminal history points for Thomas’ 1999 conviction.

VI.

For these reasons we affirm Thomas’ sentence.

      . The Honorable John A. Jarvey, Chief United States District Judge for the Southern District of Iowa.


author: WOLLMAN, Circuit Judge.

text:
    Tina GRANT, Administrator of the Estate of Johnny Lee Grant, Plaintiff-Appellant, v. CITY OF BLYTHEVILLE, ARKANSAS, Defendant-Appellee.
    No. 15-2427
    United States Court of Appeals, Eighth Circuit.
    Submitted: June 15, 2016
    Filed: November 14, 2016

      Larry Joe Steele, Walnut Ridge, AR, for Plaintiff-Appellant.
    Michael Ray Bearden, Blytheville, AR, Sara Lynn Monaghan, Arkansas Municipal League, North Little Rock, AR, for Defendant-Appellee.
    Before WOLLMAN, MELLOY, and COLLOTON, Circuit Judges.
   WOLLMAN, Circuit Judge.

Johnny Lee Grant, a black male, was fifty-nine years old and had been an at-will employee of the City of Blytheville, Arkansas, (the City), for twenty-seven years when he was fired on September 26, 2012, by Public Works Director Marvin Crawford. Grant filed this action against the City, alleging that he was fired on account of his race and age, in violation of Title VII of the Civil Rights Act of 1964, 42 U.S.C. §§ 2000e to 2000e-17, the Age Discrimination in Employment Act of 1967 (ADEA), 29 U.S.C. §§ 621-634, and 42 U.S.C. § 1983, The district court granted the City’s motion for summary judgment, concluding that Grant had established a pri-ma facie case of race and age discrimination but that he had not shown that the City’s legitimate, nondiscriminatory reason for firing him—insubordination—was pre-textual. Grant appeals. We affirm, although on the ground that Grant failed to establish a prima facie case of race or age discrimination.

We review a grant of summary judgment de novo and will affirm when “there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Torgerson v. City of Rochester, 643 F.3d 1031, 1042 (8th Cir. 2011) (en banc). We view the evidence in the light most favorable to the nonmov-ing party and draw all reasonable inferences in that party’s favor. Id But the nomhoving party “may not rely on allegations or denials.” Mann v. Yarnell, 497 F.3d 822, 825 (8th Cir. 2007). Instead, he must substantiate his allegations with “sufficient probative evidence [that] would permit a finding in [his] favor on more than mere speculation, conjecture, or fantasy.” Id. (quoting Gregory v. City of Rogers, 974 F.2d 1006, 1010 (8th Cir. 1992)). “Where the record taken as a whole could not lead a rational trier of fact to find for the nonmoving party, there is no genuine issue for trial.” Torgerson, 643 F.3d at 1042. We may affirm a grant of summary judgment on any basis supported by the record. Noreen v. PharMerica Corp., 833 F.3d 988, 992 (8th Cir. 2016). We relate the facts in light of these standards.

Johnny Lee Grant was employed by the Street Department, one of several departments that fell under the purview of the City’s Public Works Division. Before he was fired, Grant had been driving a Street Department truck that normally transported a three-person work crew along a route through the City to cut weeds and pick up trash. But one member of the crew had recently died and the other had retired, leaving Grant the sole remaining member of the crew assigned to the truck. On the morning of September 26, 2012, Grant’s immediate supervisor in the Street Department, Roy Simmons, went to the garage where crews were preparing their trucks for the day. Simmons informed Grant that Steven Walker, a forty-five-year-old black male who had recently transferred from another department, would be driving the truck from that point forward and that Grant would continue working on a crew but not as a driver. It is undisputed that the reassignment had no effect on Grant’s title, work hours, or pay, although Grant asserted that the reassignment deprived him of some level of the prestige in the Street Department that he previously held as a driver. After hearing of the reassignment Grant and Simmons then left the garage and went to Crawford’s office, where, according to Grant:

[Crawford] told me that I wouldn’t be driving the truck no more. I said, “Well, that ain’t no problem. I mean, you’re the boss, that ain’t no problem.” And he said, “Well, what you gonna do?” And he said, “What you gonna do, quit?” I told him, “No, no, I’m not gonna quit.” And he said, “You ain’t gonna quit? Well, you’re fired, then.” And I said, “Well, okay.”

Crawford stated in his deposition, however, that after Simmons told Grant that Walker would be driving the truck, Simmons and Grant arrived at Crawford’s office and Simmons told Crawford that Grant “wasn’t going to ... [l]et the new man drive the vehicle.”- After that, according to Crawford:

I asked Johnny, I said, “Johnny,” I said, “what do you mean, you’re not going to do it?” He says, “I ain’t gonna do it.” I said, “Well, Johnny,” I said, “what do you want to do? Are you gonna retire?” He said, “Nope, not going to retire.” I said, “Well, Johnny,” I said, “if you don’t do what I ask, then I’ve got no use for you.” He said, ‘Well.” I said, “The only thing I know to do is just go up and see Ms. Andrews,”

Crawford testified that he believed Grant was refusing to work in any capacity if he was not permitted to drive the truck and that Grant was fired for this insubordination. Simmons, Walker, and Sylvia Campbell (Crawford’s secretary) were also present for some part of these events. Each of them was deposed, and their testimony corresponded in all relevant respects to Crawford’s version of events, ie., that Grant refused to work at all unless he was assigned to drive the truck. Grant, however, flatly denied that he had refused to work.

After receiving a right-to-sue letter from the Equal Employment Opportunity Commission (EEOC), Grant filed his complaint against the City in October 2018, asserting claims of age and race discrimination. Grant sent a copy of his complaint by certified mail to the Mayor of Blytheville, and a receptionist signed for the package on December 16. The Mayor briefly reviewed the complaint that day and, believing that it involved a personnel matter, delivered the complaint to the Human Resources (HR) director. The HR director reviewed the complaint, informed the May- or that it was related to-Grant’s EEOC charge, obtained the Mayor’s signature on the acknowledgment of - service, and returned the acknowledgment on December 17. Neither the Mayor nor the HR director realized that the complaint was separate from Grant’s EEOC charge and that the City was required to take action by filing an answer in the district court.

Because the City had not filed an answer to- his .complaint, Grant eventually filed a motion for entry of default with the Clerk of Court for the Eastern District of Arkansas on April 17, 2014. The Clerk made an entry of default against the City the next day under Rule 55(a), and Grant’s counsel sent a copy of the Clerk’s Default to the Mayor on April 22. See Fed. R. Civ. P. 55(a) (permitting the clerk to enter default when a defendant “has failed to plead or otherwise defend”). When the Mayor received a copy of the Default, he realized that Grant had filed a separate lawsuit in federal court. The Mayor delivered the documents to the City Attorney, who promptly filed a response to set aside the entry of default and an answer to the complaint on behalf of the City.

. The district court entered an order setting aside the Clerk’s entry of default after concluding that the misunderstanding about the nature of Grant’s complaint was good cause for the City’s failure to file a timely answer. The court found that the City’s delay was excusable, that there was no indication of intentional delay or bad faith by the City, that the City acted promptly to file its answer once it became aware of Grant’s lawsuit, and that there was “no real prejudice to Grant by allowing the case to proceed on its normal course.”

The district court later granted the City’s motion for summary judgment, concluding that Grant had established a pn- ma facie case of age and race discrimination by “providing] some facts that raise an inference of [such] disciimination,” but that he had failed to present sufficient evidence to establish that the City’s reason for firing him—insubordination—was a pretext for discrimination.

Grant’s brief argues that the district court erred in setting aside the entry of default against the City, in granting the City’s motion for summary judgment, and in denying Grant’s motion to reconsider.

We consider first the argument that the City’s untimely filed answer entitled Grant to default judgment on the merits of his discrimination claims and that the district court erred by setting aside the entry of default. Although Rule 55(a) permits the entry of default against a party that fails to “plead or defend,” a district court may set aside an entry of default under Rule 55(c) “[f]or good cause shown,” and may set aside a default judgment “in accordance with Rule 60(b).” Although the same factors are typically relevant in determining whether to set aside entries of default and default judgments, “[m]ost decisions ... hold that relief from a default judgment requires a stronger showing of excuse than relief from a mere default order.” Johnson v. Dayton Elec. Mfg. Co., 140 F.3d 781, 783 (8th Cir. 1998). This is because “it is likely that a party who promptly attacks an entry of default, rather than waiting for grant of a default judgment, was guilty of an oversight and wishes to defend the case on the merits.” Id. at 784. We generally consider “whether the conduct of the defaulting party was blameworthy or culpable, whether the defaulting party has a meritorious defense, and whether the other party would be prejudiced if the default were excused.” Id.

The City promptly challenged the entry of default, and the district court properly weighed the appropriate facts before concluding that the entry of default should be set aside. The City’s delay in filing its answer was excusable. Neither the Mayor nor the HR director realized that Grant’s complaint related to a recently filed federal lawsuit that was distinct from the recently concluded EEOC proceedings. Once the Mayor received a copy of the Clerk’s Default, the Mayor and the City Attorney acted promptly to file the City’s response and its answer to Grant’s complaint. Like the district court, we perceive no bad faith or intentional effort to delay on the City’s part. Although the City’s delay was substantial—its answer was filed roughly three months late—it was not culpable or blameworthy, especially considering that Grant’s delay in seeking an entry of default was equally substantial. Moreover, because the City’s answer set forth a meritorious defense to Grant’s claims, allowing the case to proceed on its normal course did not prejudice Grant. The district court thus did not err in setting aside the entry of default.

We turn next to the argument that the district court erred in granting summary judgment to the City on Grant’s discrimination claims. Under Title VII, the ADEA, and § 1983, an employer may not discriminate against an employee with respect to his compensation, or the terms, conditions, or privileges of his employment because of the employee’s race or age. See 42 U.S.C. § 2000e-2; 29 U.S.C. § 628; 42 U.S.C. § 1983; see also Richmond v. Bd. of Regents of the Univ. of Minn., 957 F.2d 595, 598 (8th Cir. 1992) (noting that the burden of showing a prima fade case of discrimination is the same under Title VII, § 1983, and the ADEA).

In the absence of direct evidence, we analyze employment-discrimination claims under the McDonnell Douglas burden-shifting framework. See McDonnell Douglas Corp. v. Green, 411 U.S. 792, 802-03, 93 S.Ct. 1817, 36 L.Ed.2d 668 (1973). Under this framework, if an employee carries his burden of establishing a prima fade case of discrimination, the burden then shifts to the employer to articulate a legitimate, non-discriminatory reason for the adverse employment action. See id. If the employer meets this burden of production, the employee must then “prove by a preponderance of the evidence that the legitimate reasons offered by the [employer] were not its true reasons, but were a pretext for discrimination.” Reeves v. Sanderson Plumbing Prods., Inc., 530 U.S. 133, 143, 120 S.Ct. 2097, 147 L.Ed.2d 105 (2000) (quoting Tex. Dep’t of Cmty. Affairs v. Burdine, 450 U.S. 248, 253, 101 S.Ct. 1089, 67 L.Ed.2d 207 (1981)). “We must affirm the grant of summary judgment on a [discrimination] claim if any essential element of [Grant’s] prima facie case is not supported by specific facts sufficient to raise a genuine issue for trial.” Riser v. Target Corp., 458 F.3d 817, 819 (8th Cir. 2006) (quoting Turner v. Gonzales, 421 F.3d 688, 694 (8th Cir. 2005)).

The district court properly analyzed Grant’s discrimination claims under the McDonnell Douglas burden-shifting framework. Thus, Grant had the initial burden of establishing a prima fade case of race and age discrimination, which required him to show that he was a member of a protected class, that he met the City’s legitimate employment expectations, that ■he suffered an adverse employment action, and that the circumstances give rise to an inference of discrimination based on race or age. See Clegg v. Ark. Dep’t of Corr., 496 F.3d 922, 926 (8th Cir. 2007) (race); Rahlf v. Mo-Tech Corp., 642 F.3d 633, 637 (8th Cir. 2011) (age); see also Young v. Builders Steel Co., 754 F.3d 573, 577 (8th Cir. 2014). Although the “burden of establishing a prima facie case ... is not onerous,” the plaintiff must satisfy every element of his prima fade case, carrying at all times the “ultimate burden of proof and persuasion” to establish that the employer discriminated against him on an impermissible basis. Toigerson, 643 F.3d at 1046-47; see Gibson v. Geithner, 776 F.3d 536, 540 (8th Cir. 2015) (noting that “the threshold of proof necessary to establish a prima fade case is minimal”). The City concedes that Grant met the first three elements of his prima fade case of discrimination based on age and race: he was a member of both protected classes—he was a black male over the age of forty, he met the City’s legitimate employment expectations, and he suffered an adverse employment action. The City argues, however, that Grant did not come forward with sufficient evidence to establish the fourth element of his prima facie case, ie., that the circumstances surrounding his discharge gave rise to an inference of discrimination based on age or race.

Because the required showing for a prima facie case is a “flexible evidentia-ry standard,” a plaintiff can establish an inference of discrimination to satisfy the fourth element “in a variety of ways, such as by showing more-favorable treatment of similarly-situated employees who are not in the protected class, [by showing] biased comments by a decisionmaker,” Pye v. Nu Aire, Inc., 641 F.3d 1011, 1019 (8th Cir. 2011), or by showing pretext with evidence that an employer “failed to follow its own policies” or “shifted its explanation of the employment decision,” Young, 754 F.3d at 578 (noting that “pretext can also satisfy the inference-of-discrimination element” of a prima facie case). -The district court concluded that Grant had established a prima facie case but, as to the inference-of-discrimination element, it did not point to any specific evidence on which it relied, noting only that Grant “provided some facts that raise an inference of discrimination based on race and age.” Viewing the evidence in the light most favorable to Grant, we consider whether he provided sufficient probative evidence on this element of his prima facie case to permit a finding in his favor on his discrimination claims.

To establish that a similarly situated employee not in his protected class was treated more favorably, Grant was first required to identify an employee who was “similarly situated in all relevant respects.” Young, 754 F.3d at 578. Grant failed to identify any such employee. He noted that between January 2012 and February 2014, ■ six other employees of the Street Department, two white and four black, were discharged or left their employment. But Crawford, the decisionmaker in Grant’s termination, did not begin working as the City’s Public Works Director until August 2, 2012, and thus we fail to see the relevance of employment decisions prior to that date. The City’s records indicate that eight employees left the Street Department between August 2012 and February 2014, four black and four white. Of those eight, four were discharged or terminated, and four retired or resigned. Of the four who were discharged or terminated, three were black, one was white, and all four were over the age of forty. Of the three black employees, the “Reason for Leaving” noted for two was “No call/No show5* and for the other was “Walked off the job.” The “Reason for Leaving” noted for the white employee was “Insubordination.” Grant’s brief provides no explanation regarding what specific jobs any of these individuals held and no reference to any evidence in the record that provides such information.

In any event, the employees identified by Grant were not similarly situated but treated more favorably. Like Grant, all of these employees were discharged. The three black employees who were discharged did not engage in similar conduct, and the one white employee who engaged in similar conduct was also fired. Although it is not clear from Grant’s brief, the argument appears to be that discrimihation may be inferred from this evidence because more older black employees were discharged than older white employees, but, as noted by the district court, the Street Department employed more black workers than white workers. This evidence instead shows that Crawford fired both black and white employees, which we view as reflective of an'absence of discriminatory motive. Moreover, Walker, the employee who was assigned to drive the truck instead of'Grant; was, like Grant, black and over forty, which is further evidence that neither age nor race bias was a factor in Crawford’s decision to terminate Grant. This evidence, then, tends to refute any inference of discrimination.

While it is true that, at the time Grant was discharged, only one of nineteen City departments was managed by a black employee, Grant’s brief provides no explanation of how this information is relevant, except to include it among the circumstances that are claimed to establish an inference of discrimination. It is also suggested that an inference of discrimination may be drawn from the “disparity between blacks and whites in pay and preferred job assignments” and the City’s “history of .,. giving good jobs to whites and hiring blacks for the garbage trucks,” but again, the brief does not refer to any evidence, in the record to substantiate these allegations. “The mere recitation of statistics, ... ‘without some evidence tending to show that they indicate a meaningful phenomenon,’ does not show discriminatory motive.” Noreen, 833 F.3d at 994.

Grant’s brief cites the Street Department’s demographics, the argument being that in 2012 the Street Department was “an aging workforce comprised of 48 workers, 22 white and 26 black, whose ages were'19 employees over 55 years old, 7 over 60 years old, and 7 over age 70.” But no details áre presented to explain how these statistics are relevant. “[F]or statistical evidence to be probative ..., it must analyze the treatment of comparable employees.” Evers v. Alliant Techsystems, Inc., 241 F.3d 948, 958 (8th Cir. 2001). There is no explanation of what positions these employees held or whether any of them were fired in similar circumstances or engaged in similar conduct and were not fired. And this data, without substantiation, and without further analysis, does not demonstrate a pattern of discrimination against older black workers. See Noreen, 833 F.3d at 994 (noting that “[variables other than impermissible motive could account for the changing demography of the workforce” and that an employee must show that the “numbers' are statistically significant”). In sum, because Grant’s brief identifies no similarly situated employee outside Grant’s protected class who was treated more favorably by the City, the inference-of-diserimination' element ■ of Grant’s prima fade case has not been established on'this basis.

We have also stated that' evidence of biased comments by a decisionmaker may be used to satisfy the inference-of-diserim-ination element of a plaintiffs prima fade case. See Pye, 641 F.3d at 1019. Grant produced no evidence of any discriminatory remark uttered by Crawford, much less one that can be linked to his discharge. Grant admitted in his deposition that he never heard Crawford say anything derogatory about black people or elderly people. Grant also acknowledged that he had never filed a verbal or written complaint about any allegedly discriminatory comment made by Crawford; Indeed, when. Crawford learned of another employee’s use of racial slurs, Crawford fired that employee. Although Grant testified that he “felt” that he was not being treated fairly by Crawford and that Crawford harbored race and age animus because of the way Crawford spoke to him, Grant could not recount any specific comment made by Crawford that caused him to feel that way. Grant thus failed to identify any biased comments made by a decisionmaker that might establish an animus-based inference of discrimination.

Evidence that an employer failed to follow its own policies may show pretext at the inference-of-discrimination stage of a prima fade case, but Grant admitted that the City had an at-will-employment policy and an employee handbook providing “for disciplinary action that included, but was not limited to a warning or reprimand, suspension, demotion and termination ■without a. requirement for any type of disciplinary procedure before termination.” Although Grant’s brief contends that the handbook and the at-will employment policy were “confusing and contradictory,” Grant produced no evidence that the City failed to follow a policy set forth in the employee handbook or elsewhere in making the decision to discharge him. The brief refers to the term “step discipline” and Crawford’s unfamiliarity with the term, but it also acknowledges that the employee handbook does not require, the use of an escalating-discipline procedure and is, in fact, “silent concerning step discipline.” There has been no showing that the City failed to follow any applicable policy in making the decision to fire Grant and no inference of discrimination has been established on this basis.

Evidence that an employer “shifted its explanation of the employment decision” may also be sufficient to show pretext at the inference-of-discrimination stage of a plaintiffs prima fade case. Young, 754 F.3d at 578. As evidence that the City’s reason for firing him shifted, the brief points to statements made by Judy Andrews, the City Personnel Director, in connection with Grant’s separate proceeding for unemployment benefits before the ADWS, alleging that those statements differ from Andrews’s deposition testimony in this matter. While a change in an employer’s legitimate, nondiscriminatory reason for firing an employee may establish pretext, “the[ ] discrepancy] must actually be substantial.” Twiggs v. Selig, 679 F.3d 990, 994 (8th Cir. 2012). Here, any discrepancy in Andrews’s statements was inconsequential. Andrews submitted a written statement to ADWS, which suggested that she had personally witnessed the conversation between Grant and Crawford that preceded Grant’s discharge. In her deposition, however, she testified that she had not been present to witness this conversation but instead had based her statement to ADWS on a later conversation she had had with Crawford. The substance of Andrews’s statements—that Grant disobeyed an order from Crawford—never changed. The City consistently cited insubordination as its reason for firing Grant, and thus there is no record-based shifting-reasons basis for an inference of discrimination.

Viewing the evidence in the light most favorable to Grant and drawing all reasonable inferences in his favor, we conclude that Grant failed to substantiate his claims of race and age discrimination with sufficient probative evidence to permit a rational trier of fact to find in his favor. Although an employee’s burden to establish a prima fade case of discrimination “is not onerous,” Torgerson, 643 F.3d at 1046-47, Grant failed to carry his burden, and the district court did not err in granting summary judgment to the City. Because the district court committed no error of law in granting summary judgment to the City and because no miscarriage of justice occurred, the district court did not abuse its discretion in denying Grant’s motion for reconsideration. See Anderson v. Family Dollar Stores of Ark., Inc., 579 F.3d 858, 861-62 (8th Cir. 2009) (reviewing underlying summary judgment order de novo, but reviewing denial of a motion to reconsider under Rule 59(e) for abuse of discretion).

The judgment is affirmed.

      . The Honorable D.P. Marshall, Jr., United States District Court for the Eastern District of Arkansas.

      . Johnny Lee Grant died while this appeal was pending. Tina Grant, as the administrator of Grant’s estate, was substituted as a party pursuant to Federal Rule of Appellate Procedure 43(a)(1).

      . The brief also argues that the district court erred in denying Grant’s motion to amend his complaint to add a due-process claim that the Arkansas Department of Workforces (ADWS) improperly withheld unemployment benefits and that Grant should be awarded those benefits. The district court did not err in denying as futile the motion to amend, because ADWS, as an agency of the State of Arkansas, is entitled to sovereign immunity from Grant’s claim. See Pennhurst State Sch. & Hosp. v. Halderman, 465 U.S. 89, 100-01, 104 S.Ct. 900, 79 L.Ed.2d 67 (1984) (noting that state sovereign immunity extends to state agencies); Dover Elevator Co. v. Ark. State Univ., 64 F.3d 442, 446 (8th Cir. 1995) ("Suits in federal court against state agencies are ... barred by the Eleventh Amendment when the suit is in reality a suit against the state” and when "any judgment rendered against the [agency] would ultimately come out of state funds.” (internal citations and quotations omitted)). Grant has not argued that the State of Arkansas has waived its immunity in these circumstances. See, e.g., McCoy v. Carter-Jones Timber Co., 352 Fed.Appx. 119, 121 (8th Cir. 2009) (noting that the "State of Arkansas did not waive its immunity, nor did Congress abrogate that immunity when it enacted § 1983”).

      . Because Grant did not come forward with evidence that “clearly points to the presence of an illegal motive,” he could avoid summary judgment -only by creating the requisite inference of unlawful discrimination under the McDonnell Douglas burden-shifting analysis. Torgerson v. City of Rochester, 643 F.3d 1031, 1044 (8th Cir. 2011).


author: MURPHY,' Circuit Judge.

text:
    William Scott STUART, Jr., Transferee, Appellee v. COMMISSIONER OF INTERNAL REVENUE, Appellant Arnold John Walters, Jr., Transferee, Appellee v. Commissioner of Internal Revenue, Appellant Estate of James Stuart Jr., Deceased, Wells Fargo Bank, N.A., Personal Representative, Transferee, Appellee v. Commissioner of Internal Revenue, Appellant Robert Edwin Joyce, Transferee, Appellee v. Commissioner of Internal Revenue, Appellant
    No. 15-3318, No. 15-3319, No. 15-3320, No. 15-3321
    United States Court of Appeals, Eighth Circuit.
    Submitted: September 20, 2016
    Filed: November 14, 2016

      Steven S. Brown, Denis J. Conlon, Daniel T. Hartnett, Martin & Brown, Chicago, IL, for Appellees.
    Arthur Thomas Catterall, Gilbert Steven Rothenberg, Senior Attorney, Francesca Ugolini, U.S. Department of Justice, Tax Division, Appellate Section, William Wilkins, Internal Revenue Service, Washington, DC, for Appellant.
    Before RILEY, Chief Judge, MURPHY and SMITH, Circuit Judges.
   MURPHY,' Circuit Judge.

William Scott Stuart, Jr., Arnold John Walters, Jr., the Estate of James Stuart Jr., and Robert Edwin Joyce (collectively, former shareholders) owned stock in Little Salt Development Company (Little Salt) until 2003. After Little Salt failed to pay its 2003 taxes, the Commissioner of Internal Revenue (IRS) issued notices of transferee liability to the former shareholders. The United States Tax Court concluded that the former shareholders are liable for a portion of Little Salt’s tax deficiency. The IRS appeals, and we vacate and remand.

I.

Little Salt is a corporation organized under the laws of the state of Nebraska. For many years Little Salt’s primary asset was 160 acres of saline wetland on the outskirts of Lincoln, Nebraska, which Little Salt shareholders used for duck hunting. In 2003 Little Salt sold its land to the city of Lincoln for $472,000. Following the land sale, Little Salt’s only significant asset was c’ash.

While Little Salt was exploring the possibility of selling its land, it received a letter from MidCoast Investments, Inc. (MidCoast). MidCoast offered to purchase Little Salt’s stock after the land sale went through for a price equal to all of the cash held by Little Salt, less 64.92% of Little Salt’s combined federal and state tax liability for 2003. In other words, the purchase price offered by MidCoast for Little Salt’s stock exceeded the amount of money the shareholders would have received if they had liquidated the company and paid the taxes owed for that tax year. Little Salt shareholders accepted MidCoast’s offer.

On August 7, 2003 Little Salt followed through on the agreement by wiring $467,721 in cash to a trust account maintained by counsel for MidCoast. MidCoast in turn wired the $358,826 purchase price for the shareholders’ stock to their counsel’s trust account. Counsel for the shareholders then distributed the purchase price to the shareholders pro rata.

MidCoast subsequently wired the $467,721 it had received in the transaction to an account held in the name of Little Salt at SunTrust Bank, and on the next day $467,000 was transferred from that account to another at the same bank which was entitled “MidCoast Credit Corp. Accounts Payable.” Little Salt recorded this transfer as a shareholder loan.

In December 2003 Little Salt filed a corporate tax return that reported taxable income in the amount of $432,148 and tax due in the amount of $148,456. This 2003 return also noted that Little Salt had $278 in cash, an outstanding shareholder loan of $467,000, and no other assets. Little Salt did not include a payment with its return. Then, in 2004 MidCoast sold all of Little Salt’s shares to Wilder Capital Holdings, LLC. During that same year, Little Salt reported a bad debt deduction of $450,370. That 2004 bad debt deduction created a net operating loss which Little Salt carried back to its 2003 tax return.

In 2007 the IRS issued a statutory notice of deficiency with respect to Little Salt’s 2003 tax return. In the notice, the IRS disallowed the bad. debt deduction reported on Little Salt’s 2004, tax return and the net operating loss carryback deduction on the 2003 tax return. As a result the IRS assessed taxes of $145,923 against Little Salt as well as an accuracy related penalty of $58,369, After unsuccessfully attempting to collect from Little Salt, the IRS issued notices of transferee liability to its former shareholders under 26 U.S.C. § 6901. The notices explained that the IRS was recasting the 2003 transactions between Little Salt and MidCoast as a liquidating distribution of Little Salt’s cash to its shareholders in redemption of their shares, followed by a payment from the shareholders to MidCoast for facilitating the distribution. The shareholders petitioned the Tax Court for review of the notices.

The Tax Court concluded that under the Nebraska Uniform Fraudulent Transfer Act (NUFTA), Neb. Rev. Stat. §§ 36-701 to 36-712, the shareholders were liable for part of Little Salt’s 2003 tax debt. The Tax Court rejected the IRS attempt to rechar-acterize the stock sale as a liquidating distribution to the shareholders under federal law, concluding instead that the substantive liability of the shareholders was a matter of state law. The court did not determine whether the stock sale could have been recast as a liquidating distribution under Nebraska law, but decided instead that Little Salt’s payment of $467,721 to MidCoast had been a fraudulent transfer and that the shareholders were liable under NUFTA as its beneficiaries. The shareholders’ liability for the fraudulent transfer was limited to $58,842, which was the difference between the amount the shareholders received through the stock sale and the amount they would have received if they had instead liquidated Little Salt and paid its taxes. The IRS appeals, arguing the Tax Court erred by failing to consider whether the stock sale should have been recharacterized as a liquidating distribution under Nebraska law and by' limiting the extent of the shareholder liability as transfer beneficiaries.

II.

Tax Court decisions are reviewed “in the same manner and to the same extent” as decisions following civil bench trials in federal district courts. 26 U.S.C. § 7482(a)(1). We therefore review the Tax Court’s factual findings for clear error and its legal conclusions de novo. Estate of Korby v. Comm’r, 471 F.3d 848, 852 (8th Cir. 2006). The IRS argues that the Tax Court erred by (1) failing to consider whether Little Salt’s stock sale should have been recharacterized under state law as a liquidating distribution to the former shareholders, and (2) limiting the liability of the former shareholders as beneficiaries of the transfer from Little Salt to Mid: Coast. Since these questions concern the proper interpretation of Nebraska law, the Tax Court’s conclusions on these points are subject to de novo review.

The IRS issued notices of liability to the former shareholders under § 6901 of the Internal Revenue Code, which permits the IRS as a creditor to collect debts from transferees of debtor property through the same procedure it uses to collect tax deficiencies. See 26 U.S.C. § 6901. Section 6901 is “purely a procedural statute” that “neither creates nor defines a substantive liability but provides merely a new-procedure by which the Gov-eminent may collect taxes.” Comm’r v. Stern, 357 U.S. 39, 42, 44, 78 S.Ct. 1047, 2 L.Ed.2d 1126 (1958). The existence and extent of a transferee’s substantive liability must therefore be established by another source of law. See McGraw v. Comm’r, 384 F.3d 965, 976 (8th Cir. 2004).

The IRS argued before the Tax Court that analysis of its claim against the former shareholders should proceed in two steps. First, the Tax Court should consider whether the former shareholders were transferees within the meaning of § 6901. According to the IRS, this step would necessarily require the Tax Court to determine whether the stock sale should be recharacterized as a liquidating distribution under federal tax law principles. Second, the Tax Court should assess whether the former shareholders received fraudulent transfers under Nebraska law. The IRS argued that resolution of the second step was dependent upon the outcome of the first step, meaning that the proper characterization of a transaction under federal law would control for purposes of the subsequent analysis of liability under state law.

The Tax Court rejected the IRS view of the proper analysis, instead concluding that the question of substantive liability under state law is wholly independent from the question of whether an individual is a transferee for purposes of § 6901. Although the IRS does not challenge this conclusion on appeal, we note that the Tax Court’s conclusion is consistent with every circuit court decision to consider this question to date. See Feldman v. Comm’r, 779 F.3d 448, 458 (7th Cir. 2015); Salus Mundi Found. v. Comm’r, 776 F.3d 1010, 1019-20 (9th Cir. 2014); Diebold Found., Inc. v. Comm’r, 736 F.3d 172, 185 (2d Cir. 2013); Frank Sawyer Trust of May 1992 v. Comm’r, 712 F.3d 597, 605 (1st Cir. 2013); Starnes v. Comm’r, 680 F.3d 417, 429 (4th Cir. 2012).

Although the Tax Court concluded that the question of substantive liability under § 6901 is a question of state law, the court failed to consider the IRS argument that under Nebraska law the stock sale should be recharacterized as a liquidating distribution to the shareholders. The Tax Court instead respected the form of the transaction and concluded that the former shareholders were liable for a portion of Little Salt’s tax deficiency as beneficiaries of the transfer from Little Salt to Mid-Coast. On appeal the IRS argues that the Tax Court’s failure to consider whether the stock sale should be recharacterized under state law was error. We agree.

Other courts applying state statutes similar to NUFTA have recognized that “state fraudulent-transfer law is [ ] flexible and looks to equitable principles like substance over form.” Feldman, 779 F.3d at 459 (internal quotations omitted); see also Diebold, 736 F.3d at 184-85. Moreover, analysis by the Nebraska Supreme Court has made clear that actions under NUFTA are equitable in nature and that “[e]quity looks through forms to substance.” Dillon Tire, Inc. v. Fifer, 589 N.W.2d 137, 141 (Neb. 1999). The Tax Court therefore should have considered the state law re-characterization argument made by the IRS.

Had the Tax Court considered the IRS’s state law recharacterization argument and determined that the stock sale should be recast as a liquidating distribution to the shareholders, the outcome of this case could well have been different. The Tax Court’s decision to limit the IRS’s recovery to $58,842 depends on the shareholders’ status as transfer beneficiaries and its conclusion that $58,842 is the amount by which the shareholders benefitted from Little Salt’s transfer of its cash to Mid-Coast. The rationale underlying this measure of recovery would have little application if the Tax Court had concluded that the stock sale should be recharacterized as a liquidating distribution directly to the former shareholders. If the transaction is recharacterized under Nebraska law, the IRS could be entitled to collect the full amount of its claim from the former shareholders. See Neb. Rev. Stat. § 36—709(b); see also Diebold, 736 F.3d at 190.

Although we agree with the IRS that the Tax Court should have considered whether the stock sale should be recharac-terized as a liquidating distribution to the shareholders under Nebraska law, we decline its invitation to resolve this question in the first instance. A remand will allow for “adequate vetting through the adversarial process and avoid having the appellate court ‘try the action de novo.’ ” Montin v. Estate of Johnson, 636 F.3d 409, 416 (8th Cir. 2011) (quoting Empire Dist. Elec. Co. v. Rupert, 199 F.2d 941, 945 (8th Cir. 1952)).

Since we conclude that this case should be remanded to the Tax Court for consideration of whether the IRS is entitled to a full recovery from the former shareholders as transferees under Nebraska law, we need not now reach the question of whether the Tax Court erred by limiting the IRS’s recovery against the former shareholders as transfer beneficiaries.

Accordingly, we vacate the judgment of the Tax Court and remand to it for further proceedings not inconsistent with this opinion.