Sommervold v. Wal-Mart, Inc.
Filing
25
OPINION AND ORDER granting 18 MOTION to Dismiss for Insufficient Service of Process (Renewed) filed by Wal-Mart, Inc. Signed by Charles B. Kornmann on 6/19/12. (SKK)
FILED
UNITED STATES DISTRICT COURT
DISTRICT OF SOUTH DAKOTA
NORTHERN DIVISION
JUN 2 0 2012
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JON SOMMERVOLD
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1:11-CV-OI028
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Plaintiff,
-vs-
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ORDER AND
OPINION
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Defendant.
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WAL-MART, INC.,
Defendant renews its motion pursuant to Fed. R. Civ. P. 12(b)(5) for dismissal for
insufficient service of process. This motion is brought against plaintiffs claims of negligence
and strict liability for alleged defective design and strict liability for failure to warn arising out of
trauma he allegedly experienced from a remote-controlled toy water craft that he alleges
exploded while he was handling it. This incident allegedly occurred on August 17,2008.
On August 8, 2011, nine days before the statute of limitations was to run on plaintiffs
claims, plaintiff caused to be served Josh Hehn, one of the assistant managers of defendant's
store in Aberdeen, South Dakota, with a Summons and Complaint. After removing this action
from South Dakota's Fifth Judicial Circuit, defendant brought a motion to dismiss for
insufficient service of process. Defendant argued that plaintiffs service of an assistant manager
at its Aberdeen store, rather than its designated resident agent, violated South Dakota's statute for
service of process against corporations, SDCL § 15-6-4(d)(l). Defendant contended this
violation required the court to dismiss plaintiffs claims with prejudice as the statute of
limitations had long since run. After the court denied defendant's motion based upon an
insufficient record, defendant renews its motion, now supported by affidavits which affidavits are
not disputed by plaintiff.
I.
DISCUSSION
South Dakota law governs the commencement of a civil action when the action is
removed from state court to the federal court on a theory of diversity jurisdiction. See Winkels v.
George A. Honnel & Co., 874 F.2d 567, 570 (8th Cir. 1989). "Since federal rules govern
proceedings only after removal, [FRCP] Rule 3 is irrelevant to whether action was properly
commenced in state court prior to removal." Id. South Dakota statutes also govern with regard
to tolling for statute of limitations purposes. See Groninger v. Davison, 364 F.2d 638, 641, 642
(8th Cir. 1966). Nonetheless, citing Fed. R. Civ. P. 12(b)(5) is an appropriate basis for objecting
when defendant alleges "any ... failure to comply with the procedural requirements in the
applicable [federal or state] service provisions." CHARLES ALAN WRIGHT & ARTHUR R. MILLER,
5B FEDERAL PRACTICE AND PROCEDURE § 1353, at 335-36 (3d ed. 2004).
Fundamentally, "the issue of the validity of service of process is a question of law."
Lekanidis v. Bendetti, 613 NW2d 542,545 (S.D. 2000). A district court has the power to
dismiss a case for failure to comply with its rules. Marshall v. Warwick, 155 F.3d 1027, 1029
(8th Cir. 1998). "Any factual question raised by the affidavits or other evidence presented on a
Ru1e ... 12(b)(5) motion should be detennined by the district court in accordance with Rule
12(d) except that factual issues intertwined with the merits of the case may have to wait until trial
for their resolution and cause a deferral of a decision on the motion." WRIGHT & MILLER,
§ 1353, at 345. Both parties have now made a better record as to the material facts relevant to
service of process.
Prior to February 25, 2005, the effective date of a new version of the then version of
SDCL 15-6-4(d), a plaintiff was pennitted by SDCL 15-6-4(d)(2) to serve a foreign corporation
(such as Wal-Mart) by leaving a copy of the summons with the president or other head of the
corporation, secretary, cashier, treasurer, a director or managing agent of such corporation. By
virtue ofSDCL 15-6-4(e), substituted service was authorized as to both domestic and foreign
corporations. Thus, as to any private corporation, ifno general officer (whatever that meant),
director, managing agent, or other representative mentioned in 15-6-4(d) as qualified to receive
service could "conveniently be found", service could be made by leaving a copy of the summons
at the place of business of such qualified person with any officer or employee over fourteen years
of age. Service as to a domestic private corporation was governed by SDCL 15-6-4(d)( 1).
Since February 25, 2005, the requirements for service have changed. The revised version
covers all defined business entities, including, of course, both domestic and private corporations.
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Service is to be made on the president, partner or other head of the entity, officer, director, or
registered agent. The revised statute provides that if"any" such person "cannot be conveniently
found", service may be made by leaving a copy "at any office of such business entity within this
state, with the person in charge of such office." (emphasis supplied). Why the word "any" was
substituted for "no", I do not know. Obviously, it is highly unlikely that all officers and directors
of most large foreign corporations, such as Wal-Mart, are going to be found in South Dakota.
That is precisely the reason that such corporations appoint resident agents. The present version
allows substituted service, for example, as to Wal-Mart if one of the directors or officers cannot
conveniently be found in South Dakota. Common sense tells us that such will always be the case
as to large multi-state corporations. There is nothing in the record before the court to show that
all officers and directors ofWal-Mart can or cannot conveniently be found in South Dakota.
Again, if anyone of the persons named cannot conveniently be found in South Dakota, the
service here was valid if the assistant manager in Aberdeen was "the person in charge of such
office." I note that the statute says "the person" and not "a person."
As noted above, SDCL 15-6-4(d)(1) governs. Service is properly made, as to a
corporation:
on the president, partner or other head of the entity, officer, director, or registered
agent thereof. If any of the above cannot be conveniently found, service may be
made by leaving a copy of the summons and complaint at any office of such
business entity within this state, with the person in charge of such office.
Id. For ease of reference in this order, service made on persons listed in the first sentence is
"primary service." All remaining persons listed in the statute receive "secondary service."
Compliance with the statute is not discretionary and the statutory list of persons is "exhaustive."
White Eagle v. City of Fort Pierre, 606 NW2d 926,929 (S.D. 2000) (citing Matter of Gillespi,
397 NW2d 476, 478 (S.D. 1986».
Wal-Mart continues to assert, as it did in its first motion, that plaintiff was required to
serve the registered agent, one of the listed primary persons for service of process. I once again
reject that strained interpretation ofSDCL 15-6-4(d)(I). For the purpose of this motion, I am
assuming that at least one of the corporate officers or at least one of the board of directors of
Wal-Mart cannot be conveniently found in South Dakota. At a minimum, the plaintiff is entitled
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to such assumption for the purpose of considering the motion to dismiss. As used in this statute,
the word "any" means "all." Almost all cases to be found in federal or state courts support such a
reading. The term "any" as used in a South Dakota statute means "all" or "every" and suggests a
broad and expansive meaning. Cent. Monitoring Serv., Inc. v. Zakinski, 553 NW 2d 513, 517
(S.D. 1996).
The service made in this case would meet the requirements of the statute if the person
served, Mr. Hehn, was the "person in charge" of the Wal-Mart store at the time service was
made. The record is clear that Mr. Hehn was not the "person in charge", that the actual manager,
Brian Bjordal, the actual "person in charge", was in the store and on duty when service was
attempted. To make matters worse for the plaintiff, he had his receipt of purchase (attached to
Doc. 23, plaintiff's memorandum of law) which showed clearly that the manager of the store in
question was Brian Bjordal. There is nothing in the record to show that plaintiff or his attorneys
directed service to be made on Brian Bjordal or that they gave any other instructions to the
process server. Knowledge that the statute of limitations will soon run tells counsel that very
careful attention must be paid to proper service of process to obtain jurisdiction. The record is
now undisputed that service was not made in compliance with the statute.
Put another way, there was not strict compliance with the statute and plaintiff must show
that Wal-Mart received actual notice of his claims before the statute expired. There is nothing in
the record to show when properly authorized officers ofWal-Mart received actual notice.
However, for the purpose of this motion, the court assumes that such actual notice was timely.
The question then becomes: did plaintiff also show that he "substantially complied" with the
statute by what was done here? See Wagner v. Truesdell, 574 NW 2d 627, 629 (S.D. 1998). We
will discuss this question in more detail later.
A.
Strict Compliance
Plaintiff's counsel argue that primary service was not convenient because eight entities
with the Wal-Mart name ("Wal-Mart entities") were registered with the South Dakota Secretary
of State around the time of service. All Wal-Mart entities operating in South Dakota, including
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defendant, have the same registered agent for service purposes-CTS Corporation, located in
Pierre, SD. Plaintiff s counsel admit knowing this when plaintiff sought service of process.
Plaintiffs convenience argument boils down to two points. First, plaintiffs counsel cite
a bad experience they had with the Hughes County Sheriff's Office for service of process-the
office having taken a week to fulfill its service obligation, in a time-sensitive matter, according to
plaintiff's counsel-and second, because of "the vagueness over the various Wal-Mart's in South
Dakota," plaintiffs counsel chose to serve the store that sold the item in question by private
service to ensure precise notice to defendant.
Counsel for the plaintiffs prior knowledge ofCTS Corporation's existence and status as
the registered agent for all South Dakota-based Wal-Mart entities renders their claim that primary
service was not convenient incredible on its face. Counsel for the plaintiffs only argument
supporting this point is that even if they served CTS Corporation, they still would not have
known which entity they should place as a party on the summons and complaint in order to
perfect service. If plaintiffs counsel directed service to the wrong Wal-Mart subsidiary via CTS
Corporation, a seven-in-eight chance, they contend that they would not be able to validly bring
these claims before the statute of limitations ran, citing Adams v. AlliedSignal Gen. Aviation
Avionics, 74 F.3d 882,885 (8th Cir. 1996). Plaintiffs counsel, however, fail to recognize a
rather common strategy of litigators nationwide who face similar quandaries: they could have
simply named all eight parties as defendants in the complaint. They could have included in the
caption "d/b/a Wal-Mart in Aberdeen, S.D." While South Dakota requires particularity in listing
a party to be served, see R.B.O. v. Priests of the Sacred Heart, 807 NW 2d 808, 811, 812 (S.D.
2011), accurately listing the names of all eight Wal-Mart entities as they appear with the
Secretary of State would have been sufficient to provide proper process, permitting the other
entities to easily dispense with the matter via motions to dismiss or a simple stipulation to
dismiss. Plaintiff's counsel knew the names of all the Wal-Mart entities before seeking service.
The failure of plaintiff's counsel to employ this rather basic strategy to achieve primary service
indicates that any "vagueness" was ephemeral.
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On his second theory of inconvenience, plaintiff s counsel resurrects the argument that
the Hughes County Sheriffs prior actions made service on CTS Corporation inconvenient, even
though this argument was rejected in the prior order. There are three reasons why this argument
is deficient. First, even if plaintiff chose the Hughes County Sheriffs Office to serve process on
the day they tapped the private process server to act, and the office reprised its difficulties and
served process a week late, they still would have served defendant's registered agent before the
statute of limitations had run. Second, South Dakota law accounts for delayed service of process
by sheriffs in granting what is, in effect, a sixty-day extension of the statute of limitations from
the time plaintiff delivers a copy of the summons to the sheriff with the directive to serve it.
Edsill v. Schultz, 643 NW 2d 760, 762-63 (S.D. 2002) (citing SDCL 15-2-31). Third, plaintiffs
counsel could have simply used a private server-as they did in Aberdeen-to serve CTS
Corporation in Pierre. In other words, plaintiff s counsel had two means of conveniently and
timely delivering process to CTS Corporation in Pierre, and chose to use neither.
Since both arguments showing inconvenience are unavailing to plaintiffs counsel,
plaintiff is unable to meet his burden to prove strict compliance with SDCL 15-6-4(d)( 1).
Plaintiff must instead rely upon the doctrine of substantial compliance to prevent dismissal.
B.
Substantial Compliance
Normally, proper service requires a strict adherence to the terms of the statute. This is
because "[p]roper service of process is no mere technicality: that parties be notified of
proceedings against them affecting their legal interests is a 'vital corollary' to due process and the
right to be heard." Spade v. Branum, 643 NW 2d 765, 768 (S.D. 2002) (citing Schroeder v. City
of N.Y., 371 U.S. 208,212 (1962)). The purpose of service and the law's strident desire for
conforming to terms of service is to first advise that a legal proceeding has been commenced, and
then to warn those affected to appear and respond to the claim. Id. (citing Wagner v. Truesdell,
574 NW 2d 627, 629 (S.D. 1998)). The South Dakota Supreme Court's doctrine of substantial
compliance arises out of these two goals. '''Substantial compliance' with a statute means actual
compliance in respect to the substance essential to every reasonable objective of the statute. It
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means that a court should determine whether the statute has been followed sufficiently so as to
carry out the intent for which it was adopted." Wagner, 574 NW 2d at 629 (quoting State v.
Bunnell, 324 NW 2d 418, 420 (S.D. 1982». In practice, this means that the plaintiff must prove
two facts to show that service was in substantial compliance with the statute: (1) that the
defendant received "actual notice" of the complaint, and (2) that plaintiff did all that was
reasonably possible-guided by the service statute's reasonable objectives and considering the
totality of the circumstances-to effectuate personal service on the defendant. See Wagner, 574
NW 2d at 629-30 ("The realities of a case must be considered when proper service of process is
questioned."); see also RB.O., 807 NW 2d at 812 ("After considering 'the realities' of [Wagner],
we held that a strict reading of SDCL 15-6-4(d)(l 0) 'would be an absurdity. "').
The most recent authority on "substantial compliance" applied to service of process in
South Dakota is RB.O. v. Priests of the Sacred Heart, supra. In that case, former students ofa
parochial school on the Lower Brule Indian Reservation in South Dakota brought suit against the
religious organization that ran the school. 807 NW 2d at 809. These plaintiffs asserted claims of
childhood sexual abuse. Id. Defendant filed a motion to dismiss, alleging plaintiffs failed to
timely serve process. Id. In commencing this action. among other missteps, plaintiffs served the
correct registered agent of defendant, but the documents plaintiffs provided to the process server
did not include the proper defendant among the nine defendants listed on the summons and
complaint-Priests of the Sacred Heart. Inc. Id. at 810. Instead. the documents instructed the
process server to serve the "Congregation of the Priests of the Sacred Heart. Inc.," which was a
distinct entity from defendant. Id. While the lower court found that plaintiffs substantially
complied with the same service of process statute at issue here, SDCL 15-6-4(d)(I), the South
Dakota Supreme Court found these errors to be too great and reversed the lower court. In
particular, the Court found that no "actual notice" resulted from the service. The Court felt that
"there was a logical need for Plaintiffs to direct service to the correct business entity" in order to
substantially comply with the statute. Id. at 812.
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The Court in R.B.O. bolstered its finding by citing to White Eagle v. City of Fort Pierre,
supra. In that case, the Court found that plaintiff did not substantially comply with the "service
upon a public corporation" statute, SDCL 15-6-4(d)(4) (current version at SDCL 15-6
4(d)(2)(ii», when it attempted to commence an action against the City of Fort Pierre by serving
the city's financial officer instead of the "mayor or any aldennan or commissioner" as required
under the statute. R.B.O., 807 NW 2d at 812 (citing White Eagle, 606 NW 2d at 927). In White
Eagle, as in this case, the Court found that "there was no showing that the mayor or anyone of
the six common council members could not have been conveniently or timely served." Id. at
930. Also as in this case, "actual notice" was not at issue. The Court implied that a reasonable
objective of the statute was to ensure that process was delivered to the persons listed. Id.
("Absent such service, there is not actual compliance with respect to the substance essential to
every reasonable objective of the statute.") Indeed, to hold otherwise, according to the Court,
"would ultimately serve to eradicate service of process statutes." Id. In other words, actual
notice alone is insufficient.
Plaintiff asks the court to restrict the South Dakota Supreme Court's decision in R.B.O.
to prospective application, so as not to apply to this controversy. Such a request is redundant.
White Eagle provides sufficient, applicable authority to this controversy and was decided in
2000, well before plaintiff filed this case in 2011. Indeed, while R.B.O. is the more recent
controversy, White Eagle is the more relevant matter to this proceeding. In R.B.O., the Court
decided that substantial compliance did not exist because defendant never received true "actual
notice" from the service. White Eagle did not analyze this first step in the substantial compliance
inquiry, instead focusing upon the second step, which is the main issue in this case-whether
plaintiff complied with the reasonable objectives of the statute.
Since plaintiff failed to pursue primary service without showing any actual
inconvenience existed, it is arguable that plaintiff did not comply with the underlying reasonable
objectives of the statute. As in the municipality service of process statute at issue in White
Eagle, the South Dakota Legislature took pains to identify the persons to be served in
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15-6-4(d)(1). The Court in White Eagle found that seeking to serve persons other than those
listed is not actual compliance with the underlying objectives of the statute. The Legislature also
specifically included a safety valve--convenience-which requires all plaintiffs to look to
primary service first. Making a failure to find inconvenience a failure to actually comply with
underlying objectives would give meaning to every word provided by the Legislature, in keeping
with a strict compliance theory. See Gillespi, 397 NW 2d at 478. However, under a substantial
compliance theory, the service of process statute may not be "eradicated," as envisioned in White
Eagle, if the plaintiff failed to exhibit true inconvenience. For example, SDCL 15-6-4(d)(I)
provides another method if primary service is not made-secondary service. With actual notice
assumed, if plaintiff could show that he actually served "the person in charge" of defendant's
"office" by serving Mr. Hehn, his claims could survive dismissal.
Plaintiff is unable to meet this burden. According to the affidavits filed by defendant,
Mr. Hehn was only in charge of the apparel department and the courtesy department when he was
served by plaintiff's private process server. Mr. Hehn avers that he had never and has since
never received legal documents on behalf of defendant. At the time of service, the shift manager
and store manager were both present at the store, comprising two higher levels of authority than
the multiple assistant managers located throughout the store at any given time. To ignore two
levels of authority present at the store and find that the person in charge was rightly served would
be absurd. Plaintiff's counsel served none ofthe actors defined by statute. If the court accepts
the plaintiffs argument, the service of process statute would be "eradicated." In keeping with
White Eagle, such an outcome tells us that plaintiff failed to substantially comply with SDCL 15
6-4(d)(1).
It is a most unpleasant task for any judge to dismiss a case at this stage. I must
nevertheless do what I think is required under all the circumstances.
Because plaintiff failed to strictly or substantially comply with the applicable service of
process statute, plaintiff's claims should be dismissed pursuant to Rule 12(b)(5).
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III.
ORDER
Based upon the foregoing,
IT IS ORDERED that defendants' renewed motion, Doc. # 18, to dismiss plaintiff's
complaint is granted, without the taxation of costs.
Dated this
I~ of June, 2012.
BY THE COURT:
ATTEST:
JOSEPH HAAS, CLERK
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United States District Judge
(SEAL)
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