Hot Stuff Foods, LLC v. Houston Casualty Company
MEMORANDUM OPINION AND ORDER denying 106 Motion for Attorney Fees; denying 113 Motion for Judgment as a Matter of Law. Signed by U.S. District Judge Karen E. Schreier on 1/2/2014. (KC)
UNITED STATES DISTRICT COURT
DISTRICT OF SOUTH DAKOTA
HOT STUFF FOODS, LLC,
HOUSTON CASUALTY COMPANY,
MEMORANDUM OPINION AND
Hot Stuff Foods, LLC, brought an action against its insurer, Houston
Casualty Company, seeking indemnification for losses Hot Stuff sustained
due to a product recall. This court found that the insurance contract the
parties entered into covered the losses incurred from the recall and, therefore,
found in favor of Hot Stuff on the issue of liability. Hot Stuff Foods, LLC v.
Houston Cas. Co., Civ. No. 11-4055, 2012 WL 2675225 (D.S.D. July 5, 2012).
The case proceeded to a jury trial on the issue of damages. The jury awarded
Hot Stuff $755,268.07 for recall expense and crisis response/consultant
expenses and $200,000 for lost gross profit. Docket 97.
HCC moves for a judgment as a matter of law on the issue of lost gross
profit, arguing there was no legally sufficient basis for the jury to find Hot
Stuff was entitled to lost profits. Hot Stuff resists the motion and separately
moves for attorneys’ fees under SDCL 58-12-3, claiming HCC’s refusal to pay
under the insurance policy was vexatious or without reasonable cause. For
the following reasons, HCC’s motion for judgment as a matter of law is denied
and Hot Stuff’s motion for attorneys’ fees is also denied.
The underlying facts of this lawsuit were laid out in detail in this
court’s previous summary judgment order. Hot Stuff Foods, LLC v. Houston
Cas. Co., Civ. No. 11-4055, 2012 WL 2675225 (D.S.D. July 5, 2012); Docket
43. In that order, this court found HCC is required to indemnify Hot Stuff for
losses Hot Stuff incurred due to a product recall. A jury trial was held to
determine the amount HCC was required to indemnify Hot Stuff.
During the trial, Hot Stuff alleged it was entitled to damages under two
separate provisions in the insurance policy. First, Hot Stuff claimed it was
entitled to $755,268.07 for recall expenses and crisis response/consultant
expenses (“recall expenses”). Second, Hot Stuff claimed it was entitled to
$933,227.24 for lost profits.
The jury trial lasted four days. During the trial, Hot Stuff called five
witnesses and introduced multiple exhibits. HCC called three witnesses1 and
introduced multiple exhibits.
The witnesses that Hot Stuff called who are relevant to this order are
Steve Watkins, Jeff Seccombe, and Jason Gaddes. Watkins is the president of
Hot Stuff. He received a degree in business and accounting and passed the
One of HCC’s witnesses, Jubin Merati, Ph.D., is a forensic economist
and testified as an expert witness on the issue of lost profits.
Certified Public Accountant exam. He has worked at Hot Stuff, or at one of
Hot Stuff’s parent/affiliate companies, for nearly 27 years. He served in
various roles over those 27 years, including acting as a sales representative,
financial manager, director, secretary and treasurer, managing director, and
chief financial officer. At the time of trial, Watkins had served as president of
the company for over a year.
Seccombe is a central regional sales manager for Hot Stuff.2 He has
worked at Hot Stuff for about eight years. As the central regional sales
manager, he manages seventeen states and is involved in Hot Stuff’s military
business. Gaddes is also a member of Hot Stuff’s sales force. His territory
includes twelve states. He also manages a vending distributor that has
twenty-two divisions nationally. He has worked at Hot Stuff for over eight
At the conclusion of the trial, the jury returned a verdict which found
Hot Stuff was entitled to $755,268.07 for recall expenses and $200,000 for
lost profits. The award of $200,000 for lost profits forms the basis for HCC’s
motion for judgment as a matter of law.
There are three members of Hot Stuff’s sales force not including
JUDGMENT AS A MATTER OF LAW
Standard of Review
Under Federal Rule of Civil Procedure 50, a party can move for
judgment as a matter of law if the party against whom relief is sought has
been fully heard on that issue. Fed. R. Civ. P. 50(a)(1). If the court does not
grant the motion, “the court is considered to have submitted the action to the
jury subject to the court’s later deciding the legal questions raised by the
motion.” Fed. R. Civ. P. 50(b). In deciding a renewed motion for judgment as a
matter of law, the court may enter a judgment on the jury’s verdict, order a
new trial, or enter judgment on the motion. Id.
“When federal jurisdiction is premised on diversity of citizenship, a
federal district court applies the sufficiency standards of the state in which it
sits.” In re Levaquin Prods. Liab. Litig., 700 F.3d 1161, 1165 (8th Cir. 2012).
Thus, South Dakota’s sufficiency standards apply for purposes of HCC’s
motion. Under South Dakota law,
the trial court must determine whether there is any substantial
evidence to sustain the action. The evidence must be accepted
which is most favorable to the nonmoving party and the trial
court must indulge all legitimate inferences therefrom in [its]
favor. If sufficient evidence exists so that reasonable minds could
differ, [judgment as a matter of law] is not appropriate.
Roth v. Farner-Bocken Co., 667 N.W.2d 651, 658-59 (S.D. 2003); see also
SDCL 15-6-50(a). Furthermore, in a diversity case, the court applies the
substantive law of the forum state, which here is South Dakota, to determine
if the standard was satisfied. Hinz v. Neuroscience, Inc., 538 F.3d 979, 984
(8th Cir. 2008).
A jury verdict should not be set aside “unless there is a complete
absence of probative facts to support the verdict.” Walsh v. Nat’l Computer
Sys., Inc., 332 F.3d 1150, 1158 (8th Cir. 2003) (internal citation omitted). But
“when the record contains no proof beyond speculation to support the verdict,
then judgment as a matter of law is appropriate.” Hinz, 538 F.3d at 984.
Lost Profits Discussion
HCC argues that there was no legally sufficient evidentiary basis for the
jury to find Hot Stuff was entitled to $200,000 in lost profits. HCC is not
arguing that Hot Stuff cannot recover lost profits under the insurance
contract; rather, HCC argues the evidence Hot Stuff put forth cannot support
a $200,000 award.
The South Dakota Supreme Court has articulated some general
principles regarding lost profits.3 As with any type of damages, damages for
lost profits “must not be speculative, contingent, or uncertain and there must
be reasonable proof of the amount thereof.” Olson v. Aldren, 170 N.W.2d 891,
These cases, however, are different from the situation here because
they did not involve an insurance contract that explicitly provided for lost
profits coverage. The Supreme Court faced the questions of: (1) whether lost
profits damages were recoverable generally, and (2) if so, what was the amount
of the damages. Here, damages for lost profits are recoverable under the terms
of the insurance policy, and the only issue is how much, if any, should be
awarded for lost profits.
895 (S.D. 1969); see also Lamar Adver. of S.D., Inc. v. Heavy Constructors, Inc.,
745 N.W.2d 371, 380 (S.D. 2008) (stating that courts should consider the
circumstances in which damages occur and determine whether a claim for
damages is “remote, speculative, or uncertain”). As far as calculating the
amount of lost profits, “[a]ny reasonable method of estimating a prospective
profit is acceptable. Absolute certainty is not required.” Olson, 170 N.W.2d
895 (internal citation omitted); see also Hepper v. Triple U Enter., Inc., 388
N.W.2d 525, 529 (S.D. 1986) (“Mathematical precision is not required but loss
must be shown in a manner reasonable under the circumstances.”).
Under the circumstances here, there is no doubt that lost profits are
recoverable under the insurance policy. The insurance contract provides:
[HCC] agrees to indemnify [Hot Stuff] for LOSS resulting directly
from an ACCIDENTAL PRODUCT CONTAMINATION . . . . LOSS
shall mean . . . [l]oss of GROSS PROFIT, incurred as a result of
an ascertainable reduction in sales revenue caused solely and
directly by an ACCIDENTAL PRODUCT CONTAMINATION for the
of twelve months following discovery of the
ACCIDENTAL PRODUCT CONTAMINATION or
during which [Hot Stuff’s] sales revenue for [Hot
Stuff’s] PRODUCT(S) remain less than the level that
could have been reasonably projected had the
ACCIDENTAL PRODUCT CONTAMINATION not
whichever shall be the period first to expire.
GROSS PROFIT shall mean the difference between:
the revenue that could have been reasonably
projected, but which has been lost solely and directly
as a result of an ACCIDENTAL PRODUCT
the variable cost that would have been incurred, but
which have been saved as a result of not making
these sales (including the cost of raw materials, and
all other saved costs).
Docket 28-1 at 4-5, 14. The court found in an earlier order that an accidental
product contamination occurred when Hot Stuff mislabeled its products,
thereby triggering the abovementioned indemnification provision. Hot Stuff
Foods, LLC v. Houston Cas. Co., Civ. No. 11-4055, 2012 WL 2675225 (D.S.D.
July 5, 2012). The issue then comes down to whether Hot Stuff introduced
sufficient evidence at trial so that a reasonable computation of the amount of
lost profits, if any, was possible.
Hot Stuff sought $199,604.02 for lost profits attributed to recall
products and $733,623.22 for lost profits attributed to new products for a
total lost profits claim of $933,227.24. In calculating its losses for recall
products, Hot Stuff compared its 2010 profits from recall products with its
2011 profits from recall products. Before comparing its 2010 profits, however,
Hot Stuff adjusted the 2010 profits for customers who were first-time buyers
of a particular product, referred to by Hot Stuff as a “time-adjustment.” The
adjustment was meant to illustrate the estimated profits resulting from what
customers supposedly would have purchased in 2010 had they begun
purchasing the product in January 2010 or before. The time-adjustment
works by finding the average monthly volume that was purchased by the
customer for the months following the first-time purchase and multiplying
that average by twelve to project what the full year total would have been had
the customer been purchasing the product from the beginning of 2010. For
example, if a customer purchased 600 units of Product X in 2010 but did not
begin purchasing Product X until July 2010, the customer’s time-adjusted
total would be 1,200 units.4 Hot Stuff then determined what its margin, or
profits, would have been in 2010 using 1,200 units instead of 600 units.
To calculate the total amount of lost profits for recall products, Hot
Stuff only considered the customers who purchased fewer recall products in
2011 than they did in 2010, taking into account the time-adjustment.5 Hot
Stuff also excluded from its calculation customers it knew were not ongoing
customers. A summation of the lost profits from those customers who had a
decrease when comparing 2010 time-adjusted numbers to 2011 numbers
amounted to $199,604.02—the amount Hot Stuff sought for lost profits
attributed to recall products.
The average monthly volume is the total units sold (600) divided by the
number of months during which the customer was considered to be a
purchaser of that product (6). The full year time-adjusted total then is found by
multiplying the average monthly volume by the total months in the year (12).
Hot Stuff’s lost profits damages calculation for recall products does not
take into account any customers who generated more 2011 profits than the
2010 time-adjusted profits.
Hot Stuff also asked the jury to award lost profits damages for new
products that were first introduced in 2011. Hot Stuff’s theory for these
damages was that the recall caused the company to fall behind in getting its
new products ready to market at trade shows and in being able to meet
timelines for certain customers. To generate a specific damages number, Hot
Stuff compared its 2011 profits with its projected 2011 profits as set out in its
Hot Stuff creates a plan at the end of each year to project profits for the
upcoming year. Watkins and members of the sales team project profits by
estimating the type and amount of product each customer will purchase each
month. These numbers are generated, in part, by discussions with
customers,6 distributors, and brokers. Once Watkins and the sales team
finish creating the plan, the plan is then examined by a group of analysts to
assess the reasonableness of the plan. Ultimately, the board must approve
In calculating its lost profits for new products, Hot Stuff compared its
actual 2011 profits from new products with the profits it had projected in its
During his testimony, Watkins stressed the importance of talking to
individual customers to get a better estimate of what the customer intended to
purchase during the upcoming year.
Prior to 2010, Watkins was the only person charged with developing the
plan. Hot Stuff added more parties and additional information to the process in
hopes that it would make the plan more accurate.
2011 plan. The difference between the two was $733,623.22, which is the
total amount Hot Stuff asked the jury to award for lost profits for new
HCC attacks Hot Stuff’s lost profits evidence in three ways. First, HCC
objects to Watkins’s qualifications and his ability to testify regarding lost
profits. Second, HCC takes issue with Hot Stuff’s calculation of its lost profits
in relation to the recall products. And third, HCC disputes Hot Stuff’s
calculation of lost profits in relation to the new products.
The court first addresses Watkins’s ability and qualifications to testify
about lost profits. This court addressed the issue of whether a president of a
company can testify on the issue of lost profits in Diesel Machinery, Inc. v.
B.R. Lee Industries, Inc., 328 F. Supp. 2d 1029, 1039-40 (D.S.D. 2003). After
noting the president’s education and extensive experience at the company,
this court found that, under South Dakota law, he “clearly was qualified” to
testify about the company’s lost profits. Id. at 1039. The Eighth Circuit Court
of Appeals affirmed this court’s finding, stating that a “business owner’s
testimony is sufficient to support an award of lost profits.” Diesel Mach., Inc.
v. B.R. Lee Indus., Inc., 418 F.3d 820, 837 (8th Cir. 2005) (citing Pullman v.
Land O’Lakes, Inc., 262 F.3d 759, 765 (8th Cir. 2001) and Olson v. Aldren,
170 N.W.2d 891, 895 (S.D. 1969)). The Eighth Circuit specifically held that
the president/owner’s experience in the business provided the foundation to
testify to “his estimate on DMI’s growth rate, a ten-year projection on lost
profits (based on DMI’s history of having at least ten-year relationships with
other manufacturers), a 25% ‘Other Equipment’ estimate . . . , and an
estimate of the amount DMI would realize from the sale of parts and service.”
Id. at 837.
Here, Watkins received a degree in business and accounting and
passed the Certified Public Accountant exam. He has worked at Hot Stuff, or
at a parent/affiliate company, for nearly 27 years. He served in various roles
over those 27 years, including acting as a sales representative, financial
manager, director, secretary and treasurer, managing director, and chief
financial officer. Watkins has served as president of the company for over a
year. Because of his education and extensive experience at Hot Stuff,
Watkins’s testimony had proper foundation and was sufficient to support an
award of lost profits. His specific testimony on the issue of lost profits went
no further than the type of testimony that the Eighth Circuit permitted from
the owner/president in Diesel Machinery. Id.
Lost Profits from Recall Products
Next, the court examines the issue of lost profits relating to the recall
products. HCC’s first contention deals with Hot Stuff’s methodology in
calculating its lost profits. First, HCC argues that because Hot Stuff had an
overall increase in profits from its recall products in 2011 when compared to
its 2010 profits, it cannot have a claim for lost profits. Second, HCC argues
Hot Stuff cannot recover lost profits because its 2011 actual profits from
recall products exceeded its projected profits from recall products, as set out
in its 2011 plan. Both of these arguments put forth the same proposition:
Because Hot Stuff had a strong year in 2011, it should not be able to recover
lost profits. And third, HCC argues Hot Stuff’s calculation using its timeadjustment is not reasonable.
The insurance contract explicitly provides the method for calculating
lost profits. The contract requires HCC to indemnify Hot Stuff for a loss of
gross profit—which is the difference between (1) the revenue that could have
reasonably been projected, but which was lost solely and directly as a result
of the recall, and (2) the variable costs that would have been incurred, but
which have been saved as a result of not making the sales—incurred as a
result of an ascertainable reduction in sales revenue caused solely and
directly by the recall. Docket 28-1 at 4-5, 14. The provisions in the insurance
contract do not deny Hot Stuff lost profits if it exceeds either its 2010 profits
or its projected 2011 profits. Under the contract, Hot Stuff was only required
to make a reasonable projection of what its profits would have been had the
recall not occurred. Hot Stuff is entitled to indemnification for such losses so
long as they were caused solely and directly by the recall.
In making its projection of lost profits from the recall products, Hot
Stuff looked at customer sales from 2010 and made the time-adjustment for
ongoing customers who purchased a recall product for the first time in 2010.
When comparing these projected profits to its actual 2011 profits, there was
an ascertainable reduction. Whether Hot Stuff’s projection was reasonable is
a question of fact for the jury. See, e.g., FB & I Bldg. Prods, Inc. v. Superior
Truss & Components, a Div. of Banks Lumber, Inc., 727 N.W.2d 474, 480 (S.D.
2007) (“Whether damages have been proven with reasonable certainty is a
question of fact.”); Von Sternberg v. Caffee, 692 N.W.2d 549, 555 (S.D. 2005)
(“Whether the fact of a loss has been proven to a reasonable certainty is
ordinarily a question for the trier of fact.”); Lord v. Hy-Vee Food Stores, 720
N.W.2d 443, 454-55 (S.D. 2006) (“An award of damages is a factual issue to
be determined by the jury. . . . [T]he difficulty in computing damages should
not be confused with the requirement of proving damages[.]”) (internal
citations omitted). HCC thoroughly cross-examined Watkins regarding the
reasonableness of his projection and also put on an expert of its own to
address the issue of reasonableness. The jury heard this evidence and
performed its role as the fact finder.8 When considering Watkins’s
The court instructed the jury that Hot Stuff had the burden to prove by
the greater convincing force of the evidence the amount of lost profits and that
the verdict must be based on evidence and not upon speculation, guesswork,
or conjecture. Docket 94 at 6.
methodology, the court cannot say his projection was unreasonable as a
matter of law so as to take this fact issue out of the hands of the jury.
HCC also takes issue with the evidence Hot Stuff put forth to show the
recall was the cause of its alleged lost profits for the recall products. The
insurance contract provides that the lost profits must be caused “solely and
directly” by the recall.
Hot Stuff’s methodology in computing its lost profits for recall products
goes to the issue of causation. Hot Stuff limited its computation to only the
recall products and to only those customers who purchased fewer recall
products than they did in 2010, after applying the time adjustment to certain
customers. Hot Stuff could have attempted to claim lost profits for customers
who actually purchased more recall products in 2011. Limiting its alleged lost
profits for recall products to customers who purchased less assists in
Hot Stuff also introduced evidence that its business was thriving at the
end of 2010 (with the expectation of continued growth in 2011) and that the
industry in general did significantly better in 2011 (up 10.1 percent when
compared to 2010). Watkins testified that the reduced profits for the recall
products were caused by the recall. Seccombe testified that customers
suspended ordering because of the recall. Docket 116-2 at 11-13. Seccombe
also testified that Hot Stuff was unable to place orders at trade shows for
recall products because Hot Stuff did not have product in the pipeline to meet
the orders, which was an effect of the recall. Docket 116-2 at 18-19. Gaddes
testified that the recall disrupted getting products out in 2011 and that Hot
Stuff lost a lot of business because of the recall. In all, Hot Stuff introduced
sufficient evidence at trial for the jury to determine that the recall caused, at
least some, lost profits with respect to the recall products. See, e.g., Maryott v.
First Nat’l Bank of Eden, 624 N.W.2d 96, 101 (S.D. 2001) (noting that whether
an act was the cause of damages is a question of fact for the jury). Therefore,
the court finds Hot Stuff introduced legally sufficient evidence for the jury to
determine Hot Stuff was entitled to lost profits from recall products under the
terms of the insurance policy.
Lost Profits from New Products
HCC also argues Hot Stuff did not put forth sufficient evidence to
establish lost profits with respect to new products. HCC takes issue with the
methodology Hot Stuff employed in claiming $733,623 for losses and again
contends Hot Stuff failed to establish causation.
The language in the contract controls what was required of Hot Stuff.
The contract requires Hot Stuff to make a reasonable projection of what it
could have profited had the recall not occurred. Hot Stuff is entitled to
indemnification for such losses so long as they were caused solely and
directly by the recall.
For losses associated with new products, Hot Stuff compared its 2011
actual profits with its projected 2011 profits from its plan. Much like the case
for recall products, whether Hot Stuff’s projection of 2011 profits in its plan
was reasonable is a question of fact for the jury.
Hot Stuff put forth sufficient evidence to show its projections made in
the 2011 plan were in fact reasonable. Watkins testified about the intricacies
involved in creating the plan. Several Hot Stuff employees were involved in the
process. Discussions took place with customers, distributors, and brokers to
ensure the accuracy of the projections. The plan was also examined by a
group of outside analysts.
HCC specifically claims that because they were “new” products, Hot
Stuff’s projections of its profits from the new products are inherently
speculative and unreasonable. In addition to the evidence presented above,
Watkins testified that although the new products were called “new,” they were
actually just permutations (e.g., a change in size) of older products that had
sales histories. The new products were created after lengthy discussions with
customers about their needs. Because the new products were, in most cases,
minor changes to older products and were created after discussions with
customers, Hot Stuff’s projections of its profits from the new products were
not, as a matter of law, overly optimistic, unreasonable aspirations. There
was a reasonable basis using the older products by which Hot Stuff made its
projections. Therefore, Hot Stuff put forth sufficient evidence to have the jury
decide this issue of fact.
Turning again to the issue of causation, the contract required Hot Stuff
to show the lost profits relating to new products were solely and directly
caused by the recall. Hot Stuff’s main causation theory for the new products
was that the recall caused the company to fall behind in getting its new
products ready to market at trade shows and that the company was unable to
meet timelines for certain customers. Watkins, Seccombe, and Gaddes all
testified to the same. HCC contested this causation theory through vigorous
cross-examination of these witnesses. In the end, it was an issue for the jury
In sum, the majority of HCC’s criticisms go to either the weight given to
Hot Stuff’s evidence or the credibility given to Hot Stuff’s witnesses. These are
issues exclusively for the fact-finder. Here, the jury’s lost profits verdict of
$200,000—when Hot Stuff asked for just under $1 million—suggests that the
jury carefully considered the evidence, read the court’s instructions, and
found that $200,000 of lost profits were caused solely and directly by the
recall. There is no reason for the court to now second-guess the jury’s
findings of fact and disrupt the jury’s verdict. HCC’s motion for a judgment as
a matter of law is therefore denied.
Hot Stuff moves for attorneys’ fees in the amount of $333,768.70
pursuant to SDCL 58-12-3. SDCL 58-12-3 allows an insured to recover
attorneys’ fees “if it appears from the evidence that [the insurer] has refused
to pay the full amount of such loss, and that such refusal is vexatious or
without reasonable cause[.]” The objective of this statute “is to discourage
contesting insurance coverage and to reimburse an insured for any
reasonable attorney’s fees necessarily incurred in defending or enforcing a
valid insurance contract right.” Tripp v. W. Nat’l Mut. Ins. Co., 664 F.3d 1200,
1205 (8th Cir. 2011).
Hot Stuff only seeks attorneys’ fees for the time period and conduct of
HCC following this court’s summary judgment order (Docket 43) in which the
court found the recall was covered by the insurance policy. Hot Stuff argues
that because HCC’s attorney recommended to the jury during closing
argument that it award $417,758.06 for recall expenses, HCC should have
provided that sum to Hot Stuff immediately after this court’s summary
judgment order. By not doing so, Hot Stuff claims HCC’s conduct was
vexatious and without reasonable cause.
As an initial matter, it is important to note that HCC has not conceded
the issue of liability, i.e., whether the recall is covered by the insurance
policy. Thus, HCC’s position is, and always has been, that Hot Stuff is not
entitled to any damages because HCC is not required to indemnify it under
Additionally, the total amount of Hot Stuff’s claim has been hotly
contested throughout this litigation. Hot Stuff has not directed the court to
any evidence on the record that shows there was ever some mutually-agreed
upon sum to which Hot Stuff was entitled.9 Instead, the record shows (as was
evident during the trial) that the amount of damages, both for recall expenses
and for lost profits, was always in dispute. E.g., Docket 43 at 23 (“Because
there are questions of fact regarding the amount of damages, the damages
issue will be submitted to a jury for determination.”). Indeed, the jury only
considered the issue of damages. The trial lasted four days, three of which
were dedicated to introducing evidence on the sole issue of the amount of
damages owed under the insurance policy. The issue of lost profits, which the
court addressed in detail above, was especially contested: Hot Stuff requested
$933,227.24 and HCC claimed Hot Stuff was not entitled to any lost profits.
The jury ultimately concluded that $200,000 in lost profits was the proper
amount under the policy. Based on these facts and on the evidence presented
at trial, the court finds HCC had “a bona fide and reasonable factual ground
The comment by HCC’s attorney made during closing argument is not
evidence. Bierle v. Liberty Mut. Ins. Co., 992 F.2d 873, 878 (8th Cir. 1993)
(“Closing arguments are not evidence[.]”). Rather, the comment was a strategic
decision made by the attorney at the conclusion of the trial after hearing all of
for contesting” the amount of damages. Howie v. Pennington Cnty., 563
N.W.2d 116, 119 (S.D. 1997).
Even assuming HCC valued Hot Stuff’s claim at $417,758.06
immediately following this court’s summary judgment order, HCC’s conduct
following that order was still not vexatious or without reasonable cause. Hot
Stuff sought an additional $1.5 million in damages over and above the
$417,758.06 HCC’s counsel suggested during closing argument. It is likely
that the same amount of discovery, number of motions, and extent of a trial
would have taken place anyway, especially when considering the contentious
nature of the lost profits claims. In other words, Hot Stuff’s attorneys’ fees
were more than likely unavoidable, and the fees were not incurred because of
any vexatious or unreasonable conduct on the part of HCC.10 Therefore, Hot
Stuff is not entitled to an award of attorneys’ fees under SDCL 58-12-3.
Hot Stuff put forth legally sufficient evidence during trial to submit the
issue of lost profits to the jury and to uphold the jury’s verdict of $200,000 for
lost profits. Separately, HCC’s conduct in litigating the issue of the amount of
damages was reasonable and not vexatious. Accordingly, it is
Because the court finds that HCC’s conduct was not vexatious or
unreasonable, the court does not need to address the issue of whether Hot
Stuff can amend its complaint.
ORDERED that HCC’s renewed motion for judgment as a matter of law
(Docket 113) is denied.
IT IS FURTHER ORDERED that Hot Stuff’s motion for attorneys’ fees
(Docket 106) is denied.
IT IS FURTHER ORDERED that Hot Stuff’s motion to amend its
complaint (Docket 77) is denied as moot.
Dated January 2, 2014.
BY THE COURT:
/s/ Karen E. Schreier
KAREN E. SCHREIER
UNITED STATES DISTRICT JUDGE
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