Dakota Provisions, LLC v. The Hillshire Brands Company et al
MEMORANDUM OPINION AND ORDER, Signed by U.S. District Judge Karen E. Schreier on 12/27/16. (DJP)
UNITED STATES DISTRICT COURT
DISTRICT OF SOUTH DAKOTA
DAKOTA PROVISIONS, LLC,
THE HILLSHIRE BRANDS COMPANY,
UNLIMITED FREIGHT, INC., and
Defendant The Hillshire Brands Company moves for an order to dismiss
the complaint for failure to state a claim or, alternatively, moves to transfer
venue to the Northern District of Iowa. Docket 4. Defendant Unlimited Freight,
Inc., joins Hillshire’s motion to transfer venue. Docket 11. Defendant AFN, LLC,
moves to dismiss the complaint for failure to state a claim. Docket 9. Plaintiff,
Dakota Provisions, LLC, resists these motions and requests leave to amend its
complaint and add Marko Dimitrijevic, an individual, as a defendant.
For the following reasons, the court grants Dakota Provisions’ motion to
amend, denies the motions to dismiss, and denies the motion to transfer venue
to the Northern District of Iowa.
The facts as alleged in the proposed amended complaint 1 are as follows:
Hillshire suffered an explosion and fire at its processing facility located
near Storm Lake, Iowa. As a result of this fire, Hillshire contacted Dakota
Provisions to inquire as to whether Dakota Provisions could process turkeys for
Hillshire. Dakota Provisions’ turkey processing plant is located in Huron, South
Dakota. Although Dakota Provisions generally only allows its member growers
to utilize its facilities, it agreed to allow Hillshire to process turkeys at its plant.
Under the agreement, Hillshire was responsible for arranging
transportation to deliver live turkeys from Hillshire’s grower farms in Iowa and
South Dakota to Dakota Provisions’ processing plant. Due to patented
technology and specialized equipment located at Dakota Provisions’ processing
plant, Hillshire also agreed to transport the live turkeys in a specially sized
trailer with custom-built cages that conformed to the processing plant’s
requirements. Hillshire hired AFN to work as a brokerage company and to
arrange for transportation of the live turkeys. AFN hired Unlimited Freight as a
motor carrier to transport the turkeys to the processing plant on behalf of
Hillshire. Unlimited Freight hired Marko Dimitrijevic as its driver.
Docket 24 is a multi-purposed document. In filing Docket 24, it appears that
Dakota Provisions intended to file a reply brief and three separate attachments
(a highlighted copy of the amended complaint and a copy of two different
complaints as exhibits). Instead, Dakota Provisions filed all of these documents
in one docket entry. To avoid confusion, the court will refer to Dakota
Provisions’ reply brief (Docket 24 at 1-13) as “Docket 24” and the court will
refer to Dakota Provisions’ proposed amended complaint (Docket 24 at 14-18)
as “Amended Complaint.”
To haul Hillshire’s turkeys to the Huron, South Dakota, processing plant,
Dimitrijevic used a vehicle and specially sized trailer owned by Dakota
Provision. Then, on or about April 12, 2014, at or near Sioux City, Iowa,
Dimitrijevic was involved in an accident while speeding around a curve. 2 The
crash resulted in the destruction of the live haul trailer and the 60 specially
designed cages, each of which contained a live turkey at the time of the crash.
Dakota Provisions’ trailer also suffered significant damages. Dakota Provisions
seeks damages totaling $108,468.48 plus interest.
Dakota Provisions, LLC, instituted this action in Beadle County, South
Dakota in May 2016. Docket 1. The complaint was served on Hillshire on June
8, 2016. Hillshire removed the case with AFN’s consent to this court under 28
U.S.C. § 1441, based on diversity of jurisdiction under 28 U.S.C. § 1332. Id.
Unlimited Freight filed its answer to the complaint (Docket 5) and consented to
removal on July 11, 2016. Docket 6. Dakota Provisions sought leave to amend
its complaint to add additional counts and a new defendant on August 12,
2016. Docket 15.
Motion to Amend the Complaint
Dakota Provisions moves to amend its complaint to make the following
changes: (1) add counts of vicarious liability/agency, negligent hiring,
conversion, and joint and several liability against Hillshire, AFN, and Unlimited
Dimitrijevic was operating the vehicle at 55 miles per hour in a 35 mile per
hour zone. He later pleaded guilty to speeding in violation of Iowa Code
Freight; (2) add Marko Dimitrijevic as an individual defendant; and (3) add
counts of negligence and negligence per se against Dimitrijevic. Docket 15.
Defendants AFN and Hillshire oppose the motion and argue that the proposed
amendments are futile because the amendments fail to state a claim. 3 See
Docket 19; Docket 21. Defendant Unlimited Freight also opposes the motion
but argues that the proposed amendment is futile because the court lacks
personal jurisdiction over Dimitrijevic. Docket 23. As explained further below,
the court will only consider defendants’ arguments as to futility for Counts III,
IV, and V of the proposed amended complaint.
A. Legal Standard
The purpose of pleading under the federal rules “is to facilitate a proper
decision on the merits.” Foman v. Davis, 371 U.S. 178, 181–82 (1962) (rejecting
the approach that, under the federal rules, “pleading is a game of skill in which
one misstep by counsel may be decisive to the outcome”) (internal quotations
omitted). Federal Rule of Civil Procedure 15(a) furthers this purpose by
declaring that “[t]he Court should freely give leave [to amend] when justice so
Hillshire also argues that the motion to amend the complaint should be
denied due to Dakota Provisions’ failure to comply with Local Rule 15.1, which
requires a party to attach a highlighted or underlined copy of its proposed
changes to its motion to amend. Docket 21. Failure to comply with the local
rules can be a reason for denying a motion to amend. Waldner v. N. Am. Truck
& Trailer, Inc., 277 F.R.D. 401, 418 (D.S.D. 2011) (citing United States v. Young,
No. 92–1348, 1992 WL 202469, at *1, tab. op., 972 F.2d 355 (8th Cir. Aug. 24,
1992)) (affirming the district court's denial of a motion to amend that did not
conform to the local rules). Because Dakota Provisions eventually complied
with the rule, see Amended Complaint at 14-18, the court will consider the
merits of Dakota Provisions’ motion to amend.
requires.” Fed. R. Civ. P. 15(a)(2). “[T]his mandate is to be heeded.” Foman, 371
U.S. at 182.
“The Eighth Circuit Court of Appeals takes a ‘liberal viewpoint towards
leave to amend’ and leave ‘should normally be granted absent good reason for a
denial.’ ”Libertarian Party of S.D. v. Krebs, 312 F.R.D. 523, 525 (D.S.D. 2016)
(quoting Popp Telcomm. v. Am. Sharecom, Inc., 210 F.3d 928, 943 (8th Cir.
2000)). Leave to amend should be denied only if evidence exists such as “undue
delay, bad faith, or dilatory motive on the part of the movant, repeated failure
to cure deficiencies by amendments previously allowed, undue prejudice to the
opposing party by virtue of allowance of the amendment, [or] futility of the
amendment.” Roberson v. Hayti Police Dep't, 241 F.3d 992, 995 (8th Cir. 2001)
(citing Foman, 371 U.S. at 182). “Likelihood of success on the new claim or
defenses is not a consideration for denying leave to amend unless the claim is
clearly frivolous.” Becker v. Univ. of Neb., 191 F.3d 904, 908 (8th Cir. 1999)
(citing Gamma–10 Plastics, Inc. v. Am. President Lines, Ltd., 32 F.3d 1244, 1256
(8th Cir. 1994)).
B. The Proposed Amended Complaint is Not Futile.
“[I]t is common practice for a party to seek leave to amend in response to
a motion to dismiss.” Ireland v. Anderson, 2014 WL 3732014, at *2 (D.N.D.
July 25, 2014) (citing Jameson v. State Farm Mut. Auto. Ins. Co., 871 F. Supp.
2d 862, 869 (W.D.Mo. May 14, 2012)). In fact, the Eighth Circuit Court of
Appeals has stated that a “motion to amend a complaint may moot a pending
motion to dismiss.” Pure Country, Inc. v. Sigma Chi Fraternity, 312 F.3d 952,
956 (8th Cir. 2002); see also Janis v. Nelson, 2009 WL 4505933 (D.S.D. Nov.
24, 2009) (holding that the motion to dismiss was rendered moot after plaintiff
filed an amended complaint). “An amendment is futile if ‘the amended
complaint could not withstand a motion to dismiss under Rule 12(b)(6) of the
Federal Rules of Civil Procedure.’ ” Libertarian Party, 312 F.R.D. at 525
(quoting Zutz v. Nelson, 601 F.3d 842, 850 (8th Cir. 2010)).
“To survive a motion to dismiss, a complaint must contain sufficient
factual matter, accepted as true, ‘to state a claim to relief that is plausible on
its face.’ ” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 570 (2007)). “A claim has facial plausibility when the
plaintiff pleads factual content that allows the court to draw the reasonable
inference that the defendant is liable for the misconduct alleged.” Id. “The
plausibility standard is not akin to a ‘probability requirement,’ but it asks for
more than a sheer possibility that a defendant has acted unlawfully.” Id. In this
analysis, the court assumes that all facts asserted in the complaint are true
and construes all reasonable inferences from those facts in a light most
favorable to the complainant. Rochling v. Dep’t of Veterans Affairs, 725 F.3d
927, 930 (8th Cir. 2013). A well-pleaded complaint should survive a motion to
dismiss “even if it strikes a savvy judge that actual proof of those facts is
improbable, and that a recovery is very remote and unlikely.” Twombly, 550
U.S. at 555-56 (internal quotations omitted); accord Johnson v. City of Shelby,
135 S.Ct. 346, 346 (2014) (per curiam) (“Federal pleading rules call for ‘a short
and plain statement of the claim showing that the pleader is entitled to relief,’
Fed. R. Civ. P. 8(a)(2); they do not countenance dismissal of a complaint for
imperfect statement of the legal theory supporting the claim asserted.”).
1. Count III: Vicarious Liability
Because this case is before the court on diversity jurisdiction, this court
must look to state substantive law to define the general scope of an agency
relationship and contours of vicarious liability. Gasperini v. Ctr. for Humanities,
Inc., 518 U.S. 415, 427 (1996) (“Under the Erie doctrine, federal courts sitting
in diversity apply state substantive law and federal procedural law.”). The
parties presently do not dispute which state’s laws should govern Dakota
Provisions’ vicarious liability claim, and the result appears to be the same
under South Dakota and Iowa law. Therefore, the court will analyze the claim
using South Dakota agency law.
“Agency is a creature of state law and, in South Dakota, is governed by
both statutory and common law.” Babinski Props. v. Union Ins. Co., 833 F.
Supp. 2d 1145, 1150 (D.S.D. 2011). South Dakota defines an agency
relationship as “the representation of one called the principal by another called
the agent in dealing with third persons.” SDCL § 59-1-1. “An agency
relationship is either actual or ostensible.” Kasselder v. Kapperman, 316
N.W.2d 628, 630 (S.D.1982). The party claiming that an agency relationship
exists has the burden to prove the existence of the relationship. Id. To
determine whether an agency relationship exists, the court examines “the
relations of the parties as they exist under their agreement or acts.” Id.
“Actual agency exists when a principal and agent expressly agree to enter
into an agency relationship.” A.P. & Sons Constr. v. Johnson, 657 N.W.2d 292,
297 (S.D. 2003); see also SDCL § 59-1-4 (“Agency is actual when the principal
appoints the agent.”). To demonstrate the existence of an actual agency
relationship, a party must show the following elements: “(1) manifestation by
the principal that the agent shall act for him, (2) the agent's acceptance of the
undertaking, and (3) the understanding of the parties that the principal is to be
in control of the undertaking.” A.P. & Sons, 657 N.W.2d at 297. Where an
actual agency relationship exists, the principal may be held liable for the
agent’s negligent or wrongful acts. See Kasselder, 316 N.W.2d at 630
(concluding that the principal was liable for the acts of its agent).
Ostensible agency occurs “when by conduct or want of ordinary care the
principal causes a third person to believe another, who is not actually
appointed, to be his agent.” SDCL § 59–1–5; A.P. & Sons, 657 N.W.2d at 297.
To establish the existence of an ostensible agency relationship, the evidence
should indicate that the principal, by its representations or actions, caused a
third party to believe that a person was its agent. Kasselder, 316 N.W.2d at
630 (citations omitted) (“Ostensible agency for which a principal may be held
liable must be traceable to the principal and cannot be established solely by
the acts, declarations or conduct of an agent.”). Where an ostensible agency
relationship exists, “the principal is bound by the acts of his agent to only
those persons who have ‘in good faith, and without negligence, incurred a
liability or parted with value upon the faith thereof.’ ” Dahl v. Sittner, 429
N.W.2d 458, 462 (S.D. 1988) (quoting SDCL § 59-6-3).
Under South Dakota law, “[a] principal is responsible to third persons for
the negligence of his agent in the transaction of the business of the agency,
including wrongful acts committed by such agent in and as part of the
transaction of such business; and for his willful omission to fulfill the
obligation of the principal.” SDCL § 59-6-9. Further, “[t]he ancient doctrine of
respondeat superior is well established as ‘holding an employer or principal
liable for the employee's or agent's wrongful acts committed within the scope of
the employment or agency.’ ” Kirlin v. Halverson, 758 N.W.2d 436, 444 (S.D.
2008) (quoting Respondeat Superior, Black's Law Dictionary (8th ed. 2004)).
For situations involving subagents, the South Dakota State Legislature has
determined that because “[a] subagent, lawfully appointed, represents the
principal in like manner with the original agent; and the original agent is not
responsible to third persons for acts of the subagent.” SDCL § 59-3-16. But see
Fanset v. Garden City State Bank, 123 N.W. 686, 688 (S.D. 1909) (stating that
“where an agent has authority to employ subagents, [the agent] will not be
liable for the acts or omissions of the subagent, unless in the appointment of
such subagent [the agent] is guilty of fraud or negligence, or co-operates with
the subagent in such acts or omissions”).
Here, the proposed amended complaint plausibly alleges that an agency
relationship existed between Hillshire, AFN, and Unlimited Freight. See, e.g.,
Amended Complaint at 17, ¶¶ 38-39. This agency relationship could be either
actual or ostensible. The agency relationship could be actual in that the
proposed amended complaint alleges that Hillshire was required to use Dakota
Provisions’ vehicle, trailer, and cages to haul the turkeys to the processing
plant and that the vehicle, trailer, and cages were picked up and actually used.
See Amended Complaint at 15, ¶¶ 11-17. One inference from these allegations,
is that a long-standing relationship existed between Hillshire, AFN, and
Unlimited Freight, and that the parties had a contract that allowed Unlimited
Freight and AFN to use the equipment on Hillshire’s behalf. Another inference
is that Hillshire entered into an emergency agreement with AFN and Unlimited
Freight that gave them the actual authority to use Dakota Provisions’
equipment on Hillshire’s behalf.
The agency relationship between Hillshire, AFN, and Unlimited Freight
could also be ostensible. The proposed amended complaint alleges that AFN
and Unlimited Freight used Dakota Provisions’ equipment to transport turkeys
on Hillshire’s behalf. See Amended Complaint at 15, ¶ 17. Thus, it would be
reasonable for Dakota Provisions to believe that Hillshire was holding out AFN
and Unlimited Freight as its agents in arranging for them to make use of
Dakota Provisions’ equipment.
Defendants Hillshire and AFN disagree with Dakota Provisions’ styling of
its claims and argue that all Dakota Provisions has done “is inject buzz works
like ‘agency’ and ‘control’ [into the amended complaint] without any further
factual enhancement.” Docket 19 at 4-5. Hillshire and AFN may be correct that
Dakota Provisions’ amended complaint does not provide many concrete
allegations on the exact make-up of relationship between Hillshire, AFN, and
Unlimited Freight. But the exact nature of the relationship is not presently at
issue. 4 All this court needs to determine is whether the proposed amended
complaint plausibly alleges an agency relationship that could give rise to
Dakota Provisions’ vicarious liability claim.
Under South Dakota statute and common law, the proposed amended
complaint plausibly alleges facts that are sufficient to show that the defendants
had an agency relationship and to impose vicarious liability among the
defendants. First, the proposed amended complaint alleges that Dakota
Provisions, as an innocent third party, can hold Hillshire, as the principal,
liable for the destruction of Dakota Provisions’ property by Hillshire’s agents
who were acting within the scope of their employment. Amended Complaint at
15, ¶¶ 11-17; see also SDCL § 59-6-9; Kirlin, 758 N.W.2d at 444; Dahl, 429
N.W.2d at 462. Second, the proposed amended complaint alleges the
reasonable inference that even if AFN were not liable for Unlimited Freight’s
acts, Hillshire, as the principal, could still be held liable to Dakota Provisions
for the acts of Unlimited Freight, a lawfully appointed subagent. Amended
Complaint at 17, ¶ 39; see also SDCL § 59-3-16. Finally, the proposed
amended complaint plausibly alleges that AFN could be held liable for
Unlimited Freight’s actions because either AFN was negligent in the
Discovery may unearth additional information that shows whether an agency
relationship existed between the defendants and, if so, what type of agency
relationship the defendants had. Discovery may also show (as AFN argues) that
AFN was an independent contractor and cannot be held vicariously liable for
Dakota Provisions’ loss. Such concerns, however, can be dealt with at the
summary judgment stage.
appointment of Unlimited Freight or AFN cooperated in the negligent acts of
Unlimited Freight. Amended Complaint at 17, ¶¶ 38-40; see also Fanset, 123
N.W. at 688.
Thus, after construing the facts and the reasonable inferences from those
facts as true and in a light most favorable to Dakota Provisions, see Rochling,
725 F.3d at 930, the court finds that Dakota Provisions has pleaded sufficient
facts to survive a motion to dismiss on its vicarious liability claim. Dakota
Provisions’ vicarious liability claim, therefore, is not futile. 5
2. Count IV: Negligent Hiring
Count IV of the proposed amended complaint alleges that each of the
defendants were negligent in their respective hiring roles. See Amended
Complaint at 17, ¶¶ 42-48. It appears from the parties’ responsive pleadings
that the parties largely agree that South Dakota law governs Dakota Provisions’
negligent hiring claim. Thus, the court will analyze Dakota Provisions’ negligent
hiring claim under South Dakota law.
“ ‘Generally, the law imposes no duty to prevent the misconduct of a
third person.’ ” Finkle v. Regency CSP Ventures Ltd. P’ship, 27 F. Supp. 3d 996,
999 (D.S.D. 2014) (quoting Walther v. KPKA Meadowlands Ltd. P’ship, 581
N.W.2d 527, 531 (S.D. 1998)). “The South Dakota Supreme Court, however,
This result would appear to be the same under Iowa law. See, e.g., McGraw v.
Wachovia Sec., L.L.C., 756 F.Supp.2d 1053, 1080-83 (N.D. Iowa 2010)
(discussing vicarious liability of principals for the acts of agents under Iowa
law); Benson v. Webster, 593 N.W.2d 126, 130-31 (Iowa 1999) (describing Iowa
agency law, and explaining circumstances where a principal can be held liable
for the acts of an agent).
has ‘acknowledged that employers can be held responsible for the negligent
acts of their employees under a respondeat superior theory, and that negligent
hiring and supervision of an employee may also give rise to liability.’ ” Id.
(quoting Rehm v. Lenz, 547 N.W.2d 560, 566 (S.D.1996)). “Broadly stated, a
negligent hiring claim suggests that at the time an employee was hired, it was
negligent for an employer to engage the employee's services based on what the
employer knew or should have known about the employee.” Kirlin, 758 N.W.2d
at 452 (emphasis in original).
The South Dakota Supreme Court has recognized that an employer’s
duty to conduct an investigation into an employee’s background at the time the
employee is hired depends largely on “the degree of contact the employee will
have with the public in the prospective job.” Iverson v. NPC Int’l, Inc., 801
N.W.2d 275, 280 (S.D. 2011). “ ‘When an employee comes into minimum
contact with the public or those in a special relationship with the employer, the
employer need not perform a background investigation.’ ” Id. (quoting McGuire
v. Curry, 766 N.W.2d 501, 507 (S.D. 2009)). “But, ‘[t]he opposite is true when
the employee makes frequent contact with the public and those in a special
relationship with the employer.’ ” Id. (quoting McGuire, 766 N.W.2d at 507).
A review of South Dakota Supreme Court decisions provides several
examples of where the court has found that an employee’s contact with the
public, at the time the employee was hired, was not substantial enough to
impose a duty on the employer to perform a background investigation. See,
e.g., Iverson, 801 N.W.2d at 279-80 (concluding that Pizza Hut, who hired a
behind the scenes utility worker, did not have a duty to conduct a background
check on a non-managerial backroom employee); McGuire, 766 N.W.2d at 507
(concluding that the defendant-speedway, who hired a minor to deliver alcohol
to the speedway’s concession stands, did not have a duty to conduct a
background check when hiring the minor due to the minor’s limited contact
with the public); Kirlin, 758 N.W.2d at 442-43 (concluding that a heating,
ventilation and air conditioning company did not have a duty to conduct a
background check when hiring its employee due to his limited contact with the
While the South Dakota Supreme Court has yet to decide a case to
conclude that an employer had a duty to perform a background check on an
employee at the time the employee was hired, the court’s decision in Kirlin cites
cases from other jurisdictions where such a duty was imposed. See Kirlin, 758
N.W.2d at 452-53 (citing cases). In Ponticas v. K.M.S. Investments, 331 N.W.2d
907 (Minn. 1983), the Minnesota Supreme Court concluded that an employer,
an apartment complex, had a duty to investigate the background of a
prospective employee, an apartment manager, when the employee would have
extensive contact with the public, i.e. apartment tenants. Ponticas, 331 N.W.2d
at 913. Surrounding jurisdictions have adopted similar rules for negligent
hiring. See Godar v. Edwards, 588 N.W.2d 701, 709 (Iowa 1999) (“We now join
those jurisdictions that have recognized a claim by an injured third party for
negligent hiring and conclude that an employer has a duty to exercise
reasonable care in hiring individuals, who, because of their employment, may
pose a threat of injury to members of the public.”); Greening v. Sch. Dist. of
Millard, 393 N.W.2d 51, 57 (Neb. 1986) (quoting Restatement (Second) of Torts
§ 411 (1965)) (stating that “an employer ‘is subject to liability for physical harm
to third persons caused by his failure to exercise reasonable care’ in selecting
the employee, even if such employee is an independent contractor.”)).
The Colorado Supreme Court’s decision in Raleigh v. Performance
Plumbing and Heating, 130 P.3d 1011 (Colo. 2006), is also helpful here. In
Raleigh, Corey Weese was hired to work as a plumber for Performance
Plumbing in 1996. Raleigh, 130 P.3d at 1013. When Weese applied he listed
that he had no moving violations on his license but admitted that his license
was under suspension. Id. at 1013-14. A review of Weese’s background would
have revealed several traffic infractions. Id. at 1014 n.3. In 1997, after being
provided a work truck, Weese was involved in a car accident that severely
injured the Raleighs, who were stopped in the right hand lane of a highway to
hook a tow rope between their two vehicles. Id. at 1014. The Raleighs brought a
negligent hiring claim alleging that Performance Pluming breached its duty to
investigate Weeser’s background before entrusting him with a company vehicle.
Responding to the Raleighs’ claim, the Colorado Supreme Court
concluded that while the tort of negligent hiring can operate to hold an
employer liable for intentional or negligent acts of an employee that are either
within or outside of the scope of employment, this was not such a case. Id. at
1018. The court’s decision was based on the fact that, at the time of the
accident, Weeser was commuting from work. Id. The court went on to note,
however, that a different case would be presented “had the accident occurred
when Weese was driving to a job site from a construction trailer or from a job
site to a construction trailer as part of his work.” Id.; see also id. n.8 (observing
that “when driving is part of the job duties, the employer has a greater
responsibility in making the hiring decision than simply asking the employee
whether she or he possesses a valid driver's license”).
The logic of the Ponticas and Raleigh courts are persuasive here. The
proposed amended complaint alleges that at the time Hillshire hired AFN and
Unlimited Freight, it failed to reasonably investigate AFN’s and Unlimited
Freight’s backgrounds. Amended Complaint at 17, ¶ 45. The proposed
amended complaint also alleges that at the time AFN hired Unlimited Freight,
AFN failed to reasonably investigate the safety record, claims history, and
insurance status of Unlimited Freight. Id. ¶ 43. The proposed amended
complaint further alleges that at the time Unlimited Freight hired Dimitrijevic,
Unlimited Freight failed to reasonably investigate Dimitrijevic’s safety record,
claims history, and insurance status. Id. ¶ 47.
Taken together, Dakota Provisions’ allegations distinguish this case from
the negligent hiring cases that were previously decided by the South Dakota
Supreme Court. The proposed amended complaint pleads sufficient facts to
suggest that at the time AFN, Unlimited Freight, and Dimitrijevic were hired,
Hillshire, AFN, and Unlimited Freight were negligent in their respective hiring
roles. Additionally, the respective employment agreements between Hillshire,
AFN, Unlimited Freight, and Dimitrijevic were made for the purpose of
transporting turkeys from Hillshire’s grower farms in Iowa and South Dakota to
Dakota Provisions’ processing plant in Huron, South Dakota. See Amended
Complaint at 15, ¶¶ 9-17. Thus from the outset the respective hiring
agreements put the defendants into extensive contact with the public because
the contracts required the transportation of turkeys on public roads. That fact
makes this case similar to Ponticas, 331 N.W.2d at 913, and the circumstances
described by the court in Raleigh, 130 P.3d at 1018; id. n.8.
Because a necessary feature of the employment relationships here were
that there would be frequent contact with the public in transporting the
turkeys to Dakota Provisions’ processing plant, Dakota Provisions has
plausibly alleged that Hillshire, AFN, and Unlimited Freight had a duty to
conduct a background check in their respective hiring roles. See Iverson, 801
N.W.2d at 280. Thus, after construing the facts and the reasonable inferences
from those facts as true and in a light most favorable to Dakota Provisions, see
Rochling, 725 F.3d at 930, the court finds that Dakota Provisions has pleaded
sufficient facts to survive a motion to dismiss on its negligent hiring claim and
that the negligent hiring claim is not futile.
3. Count V: Conversion
Count V of the proposed amended complaint alleges that Hillshire, AFN
and Unlimited Freight converted Dakota Provisions’ property, specifically
Dakota Provisions’ live haul trailer and turkey cages. Amended Complaint at
18, ¶¶ 49-52. Because the parties’ responsive pleadings largely cite South
Dakota law to define conversion, the court will analyze Dakota Provisions’
conversion claim using South Dakota law.
“ ‘Conversion is the unauthorized exercise of control or dominion over
personal property in a way that repudiates an owner's right in the property or
in a manner inconsistent with such right.’ ” Christensen v. Quinn, 45 F. Supp.
3d 1043, 1097 (D.S.D. 2014) (quoting First Am. Bank & Trust, N.A. v. Farmers
State Bank of Canton, 756 N.W.2d 19, 31 (S.D. 2008)). “The tort of conversion
does not require the intent to deprive the true owner of his property rights.” W.
Consol. Co-Op v. Pew, 795 N.W.2d 390, 398 (S.D. 2011). “Although South
Dakota specifies a damages calculation for conversion by statute, SDCL 21–3–
3, South Dakota largely follows the Restatement [(Second) of Torts] in defining
the scope of the tort itself.” Christensen, 45 F. Supp. 3d at 1097.
According to the Restatement, courts may consider multiple factors in
determining whether an interference with an individual’s property is serious
enough to require the actor to pay for the full value of a piece of property. See
Restatement (Second) of Torts § 222A(2)(a)-(f) (2016). This is because
determining the seriousness of an interference in possession “is nearly always
a question of degree, and no fixed line can be drawn.” Restatement (Second) of
Torts § 222A, cmt. d.
The South Dakota Supreme Court has long recognized that conversion
can occur in multiple circumstances. See Rapid Sewing Ctr., Inc. v. Sanders,
112 N.W.2d 233, 236 (S.D. 1961). The first circumstance is where the original
possession of the property was wrongful. Id. The other circumstance is where
the original possession of the property was rightful. Id. In this second
circumstance, the possession of the property can become wrongful through “ ‘a
wrongful detention [of the property], or a wrongful use of the property, or the
exercise of an unauthorized dominion over the property.’ ” Id. (quoting Coleman
v. Francis, 129 A. 718, 719 (Conn. 1925)).
When evaluating conversion claims, it is telling that neither South
Dakota case law nor the Restatement (Second) of Torts specify whether a
defendant can only be liable for conversion where the defendant has actual or
physical possession of the property. Thus, it is clear that the focus in an action
for conversion is whether “the actor has exercised such dominion and control
over the chattel, and has so seriously interfered with the other's right to control
it, that in justice he should be required to buy the chattel.” Restatement
(Second) of Torts § 222A, cmt. d.; see also W. Consol. Co-op, 795 N.W.2d at 397
(quoting Poggi v. Scott, 139 P. 815, 816 (Cal. 1914) (“ ‘The foundation for the
action of conversion rests neither in the knowledge nor the intent of the
defendant. It rests upon the unwarranted interference by defendant with the
dominion over the property of the plaintiff from which injury to the latter
results.’ ” (emphasis in original)).
Here, Dakota Provisions alleges that Hillshire, AFN, and Unlimited
Freight all possessed Dakota Provisions’ live haul trailer and turkey cages.
Amended Complaint at 18, ¶¶ 50-51. Dakota Provisions also alleges that while
Hillshire, AFN, and Unlimited Freight originally had rightful possession of
trailer and turkey cages, that possession became wrongful once the trailer and
cages were destroyed. See id. Dakota Provisions further alleges that it is
currently unable to obtain rightful possession of the trailer and cages. Id., ¶ 51.
A reasonable inference from these allegations is that because Hillshire, AFN,
and Unlimited Freight had an agency relationship, they each had the ability to
exercise control or dominion over Dakota Provisions’ property and are each
liable for the conversion of that property. Therefore, the court finds that Dakota
Provisions has pleaded sufficient plausible facts to survive a motion to dismiss
on its conversion claim. Dakota Provisions’ claim for conversion is not futile.
C. The Court Need Not Address Whether Marko Dimitrijevic is
Subject to Personal Jurisdiction.
Defendant Unlimited Freight opposes Dakota Provisions’ motion to
amend the complaint arguing that the proposed amendment is futile because
the court lacks personal jurisdiction over Marko Dimitrijevic. Docket 23.
Dakota Provisions disagrees and argues that Unlimited Freight cannot assert
the personal jurisdiction defense on behalf of Dimitrijevic. See Docket 24 at 1012. The court agrees.
“The personal jurisdiction requirement recognizes and protects an
individual liberty interest. It represents a restriction on judicial power not as a
matter of sovereignty, but as a matter of individual liberty.” Ins. Corp. of Ir., Ltd.
v. Compagnie des Bauxites de Guinee, 456 U.S. 694, 702 (1982). Further, as
the Eighth Circuit has long recognized, the “lack of jurisdiction over the person
. . . is a personal defense which may be waived if not timely asserted or
properly preserved thereafter.” Alger v. Hayes, 452 F.2d 841, 842-43 (8th Cir.
1972); see also Carlson v. Hyundai Motor Co., 164 F.3d 1160, 1163 (8th Cir.
1999) (citing Fed. R. Civ. P. 12(h)(1)) (Defendant waived the defense of lack of
personal jurisdiction by voluntarily appearing before the district court without
raising the defense).
In support of its position that Unlimited Freight has standing to raise a
personal jurisdiction challenge on behalf of Dimitrijevic in response to Dakota
Provisions’ motion to amend its complaint, Unlimited Freight cites Sauer, Inc. v.
Kanzaki Kokyukoki Manufacturing. Co., 853 F. Supp. 1106, 1110 (S.D. Iowa
1994). The situation presented in Sauer, however, is distinguishable from the
situation presented here. First, in Sauer, Kanzaki itself moved to dismiss the
complaint for a lack of personal jurisdiction. Sauer, 853 F. Supp. at 1108.
Second, the defendant that Sauer sought to add through amending its
complaint was a subsidiary of Kanzaki. Id. at 1109. Finally, the court in Sauer,
only considered whether there would be personal jurisdiction over the
subsidiary corporation after the court concluded that the parent corporation
was not subject to personal jurisdiction in Iowa. See id. at 1109-10.
The defense of a lack of personal jurisdiction is a personal defense and
can only be raised by the affected individual. See, e.g., Ins. Corp. of Ir., 456 U.S.
at 702; Alger, 452 F.2d at 842-43. Thus, despite the tenuousness of
Dimitrijevic’s apparent contacts with South Dakota, Dimitrijevic may waive the
defense of lack of personal jurisdiction and consent to suit in South Dakota.
Further, the court declines to rule on the validity of Dimitrijevic’s defense of
lack of personal jurisdiction defense unless and until the defense is properly
presented. Therefore, the court finds that Unlimited Freight’s futility argument
fails and that Dakota Provisions’ motion to amend the complaint is granted.
Motion to Transfer Venue
Hillshire moves to transfer venue to the Northern District of Iowa under
28 U.S.C. § 1391, 28 U.S.C. § 1404(a), and 28 U.S.C. § 1406(a). Docket 4.
Unlimited Freight joins the motion to transfer venue. Docket 11. Dakota
Provisions resists the motion contending (1) that venue in the District of South
Dakota is proper and (2) that the District South Dakota is not an inconvenient
forum for this litigation. Docket 17. The court will first address whether it
should consider the motion to transfer venue under Section 1404(a) or under
Section 1406(a). Then the court will address the merits of the transfer request.
A. Motions to Transfer Venue under 28 U.S.C. § 1404(a) and
under 28 U.S.C. § 1406(a).
A party may request for a court to transfer a case from its current
judicial district to a different judicial district under either 28 U.S.C. § 1404(a)
or § 1406(a). When deciding which of the two venue statutes to invoke,
however, a party must first determine whether venue was laid in a proper
district when the suit was filed. See Van Dusen v. Barrack, 376 U.S. 612, 63334 (1964) (“Although both sections were broadly designed to allow transfer
instead of dismissal, § 1406(a) provides for transfer from forums in which
venue is wrongly or improperly laid, whereas, in contrast, § 1404(a) operates on
the premises that the plaintiff has properly exercised his venue privilege.”).
To determine whether venue is proper in a civil action, courts look to
28 U.S.C. § 1391. Under § 1391(b), venue is proper in three circumstances.
First, venue is proper in a district where “any defendant resides, if all
defendants are residents of the State in which the district is located.” 28 U.S.C.
§ 1391(b)(1). Second, venue is proper in any district where “a substantial part
of the events or omissions giving rise to the claim occurred . . . .” 28 U.S.C.
§ 1391(b)(2). Third, if the suit can be filed in no other district, venue is proper
in any district where “a defendant is subject to personal jurisdiction with
respect to such action.” 28 U.S.C. § 1391(b)(3).
Here, the real dispute—although not raised by any of the defendants—is
whether they are subject to personal jurisdiction in South Dakota. Instead,
Hillshire and Unlimited Freight argue that under 28 U.S.C. § 1391, venue in
South Dakota is improper and that a transfer is warranted under 28 U.S.C.
§ 1404(a) or § 1406(a). Docket 4-1 at 3-4; Docket 22 at 3-6. But determining
whether the defendants are subject to personal jurisdiction in South Dakota
also determines whether the motion to transfer venue would properly be
brought under section 1404(a) or under section 1406(a).
To resolve the venue dispute here, the court need look no further than to
28 U.S.C. § 1391(c), which defines residency for venue purposes. Specifically,
28 U.S.C. § 1391(c)(2), provides the following:
[A]n entity with the capacity to sue and be sued in its common
name under applicable law, whether or not incorporated, shall be
deemed to reside, if a defendant, in any judicial district in which
such a defendant is subject to the court's personal jurisdiction
with respect to the civil action in question . . . .
When Congress amended its venue statutes in 2011, it specifically made
changes regarding the residence of entity defendants. See 14D Charles Alan
Wright & Arthur R. Miller, Federal Practice & Procedure, § 3811.1 (4th ed.)
(hereafter Wright & Miller). As it relates to 28 U.S.C. § 1391(c)(2), those
amendments “change[d] the focus of the personal jurisdiction inquiry. Instead
of assessing whether the corporation is subject to personal jurisdiction ‘at the
time the action is commenced,’ now the inquiry is whether the corporation is
‘subject to personal jurisdiction with respect to the civil action in question.’ ”
Wright & Miller, § 3811.1; see also id. (observing how this “change seems to
expand the definition of residence” for entity defendants).
The current version of 28 U.S.C. § 1391(c)(2) is determinative here.
Because none of the defendants have challenged the court’s personal
jurisdiction over them, each defendant has waived that argument. Fed. R. Civ.
P. 12(h)(1); Carlson, 164 F.3d at 1163. 6 And because the defendants have
consented to personal jurisdiction in South Dakota, they have also consented
to venue in South Dakota as they are “subject to the court's personal
jurisdiction with respect to the civil action in question[.]” 28 U.S.C.
§ 1391(c)(2). 7 Thus, each of the defendants “reside” in South Dakota and are
The court’s decision here would not foreclose Dimitrijevic from challenging
the court’s personal jurisdiction over him should he be served.
Though few courts have addressed the exact issue posed here—whether
under the amended 28 U.S.C. § 1391(c)(2), a party consents to venue in a
district by failing to challenge the court’s personal jurisdiction over the party—
the court’s conclusion is not without support. Wright & Miller, § 3811.1
(“Similarly, if an entity defendant waives its right to object to personal
jurisdiction, it has ipso facto consented to venue under this statute. It is, after
all, ‘subject to personal jurisdiction with respect to the civil action in
question.’ ”); see also Luverne Truck Equip. Inc. v. Worldwide Equip., Inc., 173 F.
Supp. 3d 915, 923 (D.S.D. 2016) (finding that the District of South Dakota was
properly subject to venue in South Dakota under 28 U.S.C. § 1391(b)(1).
Therefore, 28 U.S.C. § 1406(a) does not apply and the court will only consider
Hillshire’s and Unlimited Freight’s venue arguments under 28 U.S.C. § 1404(a).
B. Transfer to Northern District of Iowa is not Appropriate.
Section 1404(a) provides: “For the convenience of parties and witnesses,
in the interest of justice, a district court may transfer any civil action to any
other district or division where it might have been brought or to any district or
division to which all parties have consented.” 28 U.S.C. § 1404(a). “In general,
federal courts give considerable deference to a plaintiff's choice of forum and
thus the party seeking a transfer under section 1404(a) typically bears the
burden of proving that a transfer is warranted.” Terra Int'l, Inc. v. Miss. Chem.
Corp., 119 F.3d 688, 695 (8th Cir.1997). The Eighth Circuit has “declined to
offer an ‘exhaustive list of specific factors to consider’ in making the transfer
decision[.]” In re Apple, Inc., 602 F.3d 909, 912 (8th Cir.2010) (quoting Terra
Int'l, 119 F.3d at 693). Instead, “district courts should weigh any ‘case-specific
factors' relevant to convenience and fairness to determine whether transfer is
warranted.” Id. (citing Stewart Org., Inc. v. Ricoh Corp., 487 U.S. 22, 29 (1988)).
In order to determine whether transfer to the Northern District of Iowa is
appropriate here, the court must analyze both the convenience and interest of
justice factors regarding the proposed transfer. See id. at 916.
a proper venue for the action because the court could exercise personal
jurisdiction over Worldwide under 28 U.S.C. § 1391(c)(2)).
When evaluating convenience considerations, the Eighth Circuit has
utilized a case-by-case approach and considered: (1) the convenience of the
parties; (2) the convenience of key witnesses; (3) the location of documentary
evidence; (4) the location where the relevant conduct occurred; and (5) the
applicability of each state's substantive law. Terra Int’l, 119 F.3d at 696. Courts
typically refuse to change venue when doing so would merely shift the burden
of inconvenience from one party to the other. Id. at 696-97.
Here the parties disagree as to which forum is most convenient. In the
court’s view, factors three and four are neutral. This is because documentary
evidence will likely be located in South Dakota, Iowa, and other forums. And
the relevant conduct allegedly occurred in both South Dakota and Iowa. Thus,
these factors favor neither the plaintiff nor the defendants.
The court views the first factor as weighing in favor of Dakota Provisions
because Dakota Provisions is the only party located in either South Dakota or
Iowa. The fifth factor also weighs in favor of Dakota Provisions. As described
previously, the parties do not appear to dispute that South Dakota law could
govern Dakota Provisions’ vicarious liability, negligent hiring, and conversion
claims. Thus the law of South Dakota governs the majority of the substantive
law at issue.
The most difficult factor to weigh is the second factor focusing on which
forum will be the most convenient for potential witnesses. Hillshire and
Unlimited Freight argue that most of the witnesses will be from Iowa, where the
accident occurred. Dakota Provisions, on the other hand, argues that the
majority of the witnesses will actually be from South Dakota or from non-venue
forums. In Terra, the Eighth Circuit observed that “ ‘[m]erely shifting the
inconvenience from one side to the other, however, obviously is not a
permissible justification for a change of venue.’ ” Terra Int’l, 119 F.3d at 696-97
(quoting Scheidt v. Klein, 956 F.3d 963, 966 (10th Cir. 1992)). Because it
appears that transferring venue here would only shift the inconvenience from
the defendants to Dakota Provisions, the court finds that this factor alone is
not sufficient to overcome Dakota Provisions’ choice of South Dakota as the
forum for this action. 8 See id. at 695 (observing that “federal courts give
considerable deference to the plaintiff’s choice of forum”).
2. Interests of Justice
When evaluating the “interest of justice,” courts should consider:
(1) judicial economy; (2) the plaintiff's choice of forum; (3) the comparative
costs to the parties of litigating in each forum; (4) each party's ability to enforce
a judgment; (5) obstacles to a fair trial; (6) conflict of law issues; and (7) the
advantages of having a local court determine questions of local law. Id. at 696.
Similar to the convenience factors above, many of these factors weigh in
favor of Dakota Provisions. The court views factors two, six, and seven as
weighing in Dakota Provisions’ favor. Dakota Provisions has an interest in
It is presently unclear exactly where the accident occurred in Iowa. If the
accident occurred in Sioux City, Iowa, or in a location near Sioux City, Iowa,
certain witnesses may be within the court’s 100 mile subpoena power. See Fed.
R. Civ. P. 45(c).
South Dakota being the forum to adjudicate its dispute. Further, because the
parties do not seriously dispute the applicability of South Dakota law to the
majority of Dakota Provisions’ claims, there is an interest in having a South
Dakota court determining the applicable law.
Factors one, three, four, and five appear to be neutral. It would make no
difference for these factors whether this suit was heard by this court or by the
Northern District of Iowa. Thus, because both the convenience and interests of
justice factors weigh slightly in favor of Dakota Provisions, the court concludes
that South Dakota is the most convenient forum for this litigation. Hillshire
and Unlimited Freight have failed to meet their burden to prove that a transfer
to the Northern District of Iowa is warranted under 28 U.S.C. § 1404(a). See
Terra Int’l, 119 F.3d at 695.
Dakota Provisions’ amendments to the complaint are not futile and
would survive a motion to dismiss. Defendant Unlimited Freight lacks standing
to raise the defense of lack of personal jurisdiction on behalf of Dimitrijevic and
the proposed amended complaint is not found to be futile on that basis.
Because none of the defendants have challenged the court’s assertion of
personal jurisdiction over them, defendants have waived that argument and
venue is proper before this court. Further, defendants have not overcome
Dakota Provisions’ interest in South Dakota as the forum for this litigation. A
transfer to the Northern District of Iowa under 28 U.S.C. § 1404(a), therefore, is
not warranted. Thus, it is
ORDERED that the Dakota Provisions’ motion to amend the complaint
and add a defendant (Docket 15) is granted.
IT IS FURTHER ORDERED that Hillshire’s motion to dismiss (Docket 4)
and AFN’s motion to dismiss (Docket 9) are denied as moot.
IT IS FURTHER ORDERED that Hillshire’s and Unlimited Freight’s
motion to transfer venue (Docket 4) is denied.
DATED December 27, 2016.
BY THE COURT:
/s/ Karen E. Schreier
KAREN E. SCHREIER
UNITED STATES DISTRICT JUDGE
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