Soltesz v. Rushmore Plaza Civic Center

Filing 52

ORDER adopting 46 Report and Recommendation; overruling 47 Objection to Report and Recommendation; overruling 49 Objection to Report and Recommendation; denying 13 Motion for Partial Summary Judgment. Signed by U. S. District Judge Jeffrey L. Viken on 3/26/12. (SB)

UNITED STATES DISTRICT COURT
DISTRICT OF SOUTH DAKOTA
WESTERN DIVISION
KYLE SOLTESZ, d/b/a, TOP DOG
ENTERPRISES,
Plaintiff,
vs.
RUSHMORE PLAZA CIVIC
CENTER, a political subdivision of
the City of Rapid City, and
CITY OF RAPID CITY, a political
subdivision of the State of South
Dakota,
Defendants.

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CIV. 11-5012-JLV

ORDER DENYING PARTIES’
OBJECTIONS AND
ADOPTING REPORT AND
RECOMMENDATION

INTRODUCTION
Plaintiff Kyle Soltesz, d/b/a Top Dog Enterprises, filed a complaint
against defendants alleging a violation of his constitutional rights under
42 U.S.C. § 1983 and state law claims for breach of contract, conversion,
and tortious interference with business relations. (Docket 1). Defendants
filed their answer and counterclaim generally denying plaintiff’s claims and
asserting their own claims for breach of contract, failure to restore premises,
fraud and deceit, rescission, and exemplary damages. (Docket 8). Plaintiff
moved for partial summary judgment as to defendants’ liability for breach of
lease, failure to follow proper South Dakota procedure for eviction, seizure of
plaintiff’s property, and conversion. (Docket 13). The court referred the

motions to Magistrate Judge Veronica L. Duffy for a report and
recommendation pursuant to 28 U.S.C. § 636(b)(1)(B). (Docket 45).
On February 6, 2012, Magistrate Judge Duffy filed a report and
recommendation concluding the court should deny plaintiff’s motion for
partial summary judgment. (Docket 46). Plaintiff and defendants timely
filed objections. (Dockets 47 & 49). The court reviews de novo those
portions of the report and recommendation which are the subject of
objections. Thompson v. Nix, 897 F.2d 356, 357-58 (8th Cir. 1990);
28 U.S.C. § 636(b)(1). The court may then “accept, reject, or modify, in
whole or in part, the findings or recommendations made by the magistrate
judge.” 28 U.S.C. § 636(b)(1)(C).
For the reasons stated below, the parties’ objections are overruled and
the report and recommendation of the magistrate judge is adopted in its
entirety.
DISCUSSION
A.

MAGISTRATE JUDGE’S FINDINGS OF FACT
Neither party objected to the magistrate judge’s findings of fact. See

Dockets 47 & 49. The magistrate judge’s findings of fact are adopted by
the court in accordance with 28 U.S.C. § 636(b)(1)(C).
B.

MAGISTRATE JUDGE’S CONCLUSIONS OF LAW
Plaintiff’s objections to the magistrate judge’s conclusions of law and

recommendations are summarized as:

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1.

Whether an alleged material breach by plaintiff
prevents the court from concluding as a matter of
law defendants breached the lease;

2.

Whether an alleged material breach by plaintiff
prevents the court from concluding as a matter of
law defendants are liable for conversion;

3.

Whether defendants held any interest in plaintiff’s
equipment and inventory so as to require a
balancing of the interests of the parties;

4.

Whether defendants’ conduct was pursuant to
official authority so as to make the City of Rapid
City [“City”] liable under 42 U.S.C. § 1983; and

5.

Whether a post-deprivation remedy existed.

(Docket 47).
Defendants’ objection to the magistrate judge’s conclusions of law and
recommendation is summarized as: Whether the magistrate judge’s
conclusion the contract was a lease improperly invades the province of the
jury. (Docket 49).
Because plaintiff’s objections are premised on the magistrate judge’s
conclusion that the agreement between the parties is a lease and
defendants’ objection is premised on that conclusion of law, the court will
first address defendants’ objection and then address each of plaintiff’s
objections separately.

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DEFENDANT’S OBJECTION
1.

WHETHER THE MAGISTRATE JUDGE’S CONCLUSION THE
CONTRACT WAS A LEASE IMPROPERLY INVADES THE
PROVINCE OF THE JURY.

The contract in question is an agreement captioned “Rushmore Plaza
Civic Center Concessionaire Contract” (“Concessionaire Contract”). (Docket
1-1). The magistrate judge found the agreement is a valid contract. (Docket
46 at p. 9). Defendants agree with this conclusion of law. (Docket 49 at p.
3).
Plaintiff asserted the Concessionaire Contract is a lease. (Docket 1 at
¶ 8). Defendants’ answer acknowledged that Exhibit A attached to the
complaint “is a copy of the Concession Contract and affirmatively alleges
that the Lease speaks for itself.” (Docket 8 at ¶ 8). Defendants’ answer
identified the Concessionaire Contract as a “Lease” or “lease” three times.
Id at ¶¶ 8, 10 & 18. Defendants’ answers to plaintiff’s interrogatories
acknowledge the following:
1.

Defendants’ employees in conjunction with the City Attorney’s
Office drafted the Concessionaire Contract. (Docket 16-4 p. 2 at
4(a)]; and

2.

The Concessionaire Contract was a lease (acknowledged
through defendants’ failure to identify the “nature of the
agreement” if it was not a lease). Id. at 4(e).

It was not until defendants’ response to plaintiff’s statement of
undisputed facts in support of plaintiff’s motion for partial summary

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judgment that defendants objected to the use of the term “lease.” (Docket
25 at ¶¶ 2, 3, 4, 6, & 7). In resistence to plaintiff’s motion for partial
summary judgment, defendants argued “Plaintiff was a licensee, not a
tenant under the law, irrespective of the language or verbiage used between
the parties . . . .” (Docket 26 at p. 6).
“[A] party cannot avoid summary judgment by contradicting his own
earlier testimony.” Prosser v. Ross, 70 F.3d 1005, 1008 (8th Cir. 1995)
(citing Wilson v. Westinghouse Electric Corp., 838 F.2d 286, 289 (8th Cir.
1988) (citing Camfield Tires, Inc., v. Michelin Tire Corp., 719 F.2d 1361,
1365-66 (8th Cir. 1983) (“A party should not be allowed to create issues of
credibility by contradicting his own earlier testimony.”)). The court must be
“mindful of [its] obligation to credit all of the evidence that favors the
nonmovant, . . . but [the court is] not aware of any duty on [its] part to
prune a witness’s testimony so as to create a triable issue when the witness
flatly contradicts himself in other parts of his testimony.” Prosser, 70 F.3d
at 1009 (referencing Anderson v. Liberty Lobby, 477 U.S. 242, 255 (1986)).
The Concessionaire Contract uses the term “Lessee” a total of fifty-one
times in the five-page agreement. (Docket 1-1). Drafted by defendants’ staff
with the assistance of the Office of the City Attorney, the Concessionaire
Contract does not once use the terms “license” or “licensee.”

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The court finds the report and recommendation is an accurate and
thorough analysis of applicable case law. The court further finds Magistrate
Judge Duffy’s legal conclusion the Concessionaire Contract is a “lease”
under South Dakota law is well-reasoned. The court concludes as a matter
of law the Concessionaire Contract is a “lease” under South Dakota law.
Defendants’ objection is overruled.
PLAINTIFF’S OBJECTIONS
1.

WHETHER AN ALLEGED MATERIAL BREACH BY PLAINTIFF
PREVENTS THE COURT FROM CONCLUDING AS A MATTER
OF LAW THE DEFENDANTS BREACHED THE LEASE.

Plaintiff’s objection is the magistrate judge “overlooked the existence
of the City’s Counterclaim. (Doc. 8).” (Docket 47 at p. 4). By this oversight,
plaintiff claims “even if Soltesz materially breached the lease, his conduct
would not eliminate the need for the Defendants to foreclose his interest in
the leasehold. The Magistrate Judge appears to have confused liability for
breach of a lease with the remedy for the breach.” Id. at p. 5.
The magistrate judge did not overlook the City’s counterclaim.
(Docket 46 at pp. 10-11). The court agrees with the conclusion of the report
and recommendation that if plaintiff first engaged in a material breach of
the lease, the City is then excused from further performance as the parties’
obligations under the lease are terminated. FB & I Bldg. Products, Inc. v.
Superior Truss & Components, 2007 SD 13, ¶ 15, 727 N.W.2d 474, 478 (“It

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is well established that a material breach of a contract excuses the
non-breaching party from further performance.”). “A material breach of
contract allows the aggrieved party to cancel the contract and recover
damages for the breach. . . . However, if the breach is not material, the
aggrieved party may not cancel the contract but may recover damages for
the nonmaterial breach.” Miller v. Mills Construction, Inc., 352 F.3d 1166,
1171-72 (8th Cir. 2003) (citing 23 Richard A. Lord, Williston on Contracts
§ 63:3 (4th ed. 2002)).
“Whether a party’s conduct constitutes a material breach of contract
is a question of fact.” Icehouse, Inc. v. Geissler, 2001 SD 134, ¶ 21, 636
N.W.2d 459, 465 (citing Thunderstik Lodge, Inc. v. Reuer, 1998 SD 110,
¶ 25, 585 N.W.2d 819, 825). “Materiality is a question of fact for the jury
. . . .” Lafarge North America, Inc., v. Discovery Group L.L.C., 574 F.3d 973,
982 (8th Cir. 2009).
It remains for a jury to decide whether plaintiff first committed a
material breach of the lease. If the answer to that question is “yes,” the
defendants are relieved of any obligation to give plaintiff “45-days notice
prior to terminating the [lease].” (Docket 46 at p. 10).
Plaintiff’s objection is overruled.

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2.

WHETHER AN ALLEGED MATERIAL BREACH BY PLAINTIFF
PREVENTS THE COURT FROM CONCLUDING AS A MATTER
OF LAW THE DEFENDANTS ARE LIABLE FOR CONVERSION.

Plaintiff objects to the magistrate judge’s conclusion there should be a
balancing of interest test performed to determine if a seizure of property or
leasehold interests occurred. (Docket 47 at pp. 5-7). The magistrate judge
concluded:
Mr. Soltesz’s property was clearly seized within the meaning of the
Fourth Amendment. At a minimum, the Civic Center seized both
the leasehold interest and Mr. Soltesz’s equipment and inventory
between February 3, 2011, the date he was served with the notice
of trespass, and February 8, 2011, the date the Civic Center sent
written notice of its intent to terminate the lease.
(Docket 46 at p. 28). The court must take this statement in context. First,
“the question remains whether the ‘lessee’ was ‘Top Dog’ or Mr. Soltesz
personally.” Id. at p. 11. Second, “[e]ven without the formalities of a written
business agreement, at a minimum Mr. Soltesz and his mother would be
common law partners in the business known as ‘Top Dog.’ ” Id. Finally, the
court believes the ambiguity as to who was the real lessee in interest as to
the leasehold–Mr. Soltesz personally or Top Dog–is important under Fed. R.
Civ. P. 17(a)(1)(F).
Until a jury decides whether Top Dog is a partnership between Mr.
Soltesz and his mother or a sole proprietorship owned exclusively by Mr.
Soltesz, the dispute about whose property was or may have been converted
by the defendants’ conduct cannot be resolved. If the lessee of the
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Concessionaire Contract is a partnership, Mr. Soltesz’s mother must be
joined as a real party in interest. Rule 17(a)(3). Until this issue is resolved,
the court is unwilling to enter judgment as a matter of law that a conversion
occurred.
Plaintiff’s objection is overruled.
3.

WHETHER DEFENDANTS HELD ANY INTEREST IN
PLAINTIFF’S EQUIPMENT AND INVENTORY SO AS TO
REQUIRE A BALANCING OF THE INTERESTS OF THE
PARTIES.

Plaintiff’s objection is “that the Defendants had no interest whatsoever
in Soltesz’ equipment and inventory, and therefore there are no compelling
interests to balance.” (Docket 47 at p. 8).
“The Fourth Amendment, made applicable to the States by the
Fourteenth, provides in pertinent part that the ‘right of the people to be
secure in their persons, houses, papers, and effects, against unreasonable
searches and seizures, shall not be violated. . . .’ ” Soldal v. Cook County,
Illinois, 506 U.S. 56, 61 (1992) (citing Ker v. California, 374 U.S. 23, 30
(1963)). “A seizure of property . . . occurs when there is some meaningful
interference with an individual’s possessory interests in that property.” Id.
(internal citation and quotation marks omitted). “Whether the Amendment
was in fact violated . . . requires determining if the seizure was reasonable.”
Id. at 61-62.

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While plaintiff now argues defendants had no competing interest to
balance against plaintiff’s right of possession, the record before the
magistrate judge was not properly developed. “The court’s ability to analyze
the Fourth Amendment balancing test is hampered by the parties’ failure to
address the test and to inform the court of relevant facts. . . . it is [plaintiff’s
obligation] as the movant . . . to demonstrate his entitlement to judgment as
a matter of law on defendants’ liability on his Fourth Amendment claim.
This, he has failed to do.” (Docket 46 at p. 33). The court agrees with the
conclusion and recommendation of the magistrate judge.
Plaintiff’s objection is overruled.
4.

WHETHER DEFENDANTS’ CONDUCT WAS PURSUANT TO
OFFICIAL AUTHORITY SO AS TO MAKE THE CITY OF
RAPID CITY LIABLE UNDER 42 U.S.C. § 1983.

Plaintiff’s objection to the report and recommendation is premised on
his argument the “Defendants did not deny that their action was taken
pursuant to official authority.” (Docket 47 at p. 9). Plaintiff’s complaint
alleges “Defendant Rapid City acted by and through its subsidiary Civic
Center and ratified and reaffirmed its conduct.” (Docket 1 at ¶ 18).
Defendants’ answer to the complaint asserted “Defendants deny each and
every allegation contained within Plaintiff’s Complaint except those which
are specifically or qualifiedly admitted. . . . [and] [a]s it concerns paragraph
18, Defendant, City of Rapid City alleges that the Rushmore Plaza Civic

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Center is a statutory entity created under South Dakota law and denies that
it is a ‘subsidiary’ as alleged in paragraph 18.” (Docket 8 at ¶¶ 1 & 12). The
court finds defendants denied Rushmore Plaza Civic Center was acting
pursuant to an official authority or directive of the City of Rapid City.
Defendants’ answer was an adequate response to plaintiff’s complaint and
places the burden on plaintiff to show he is entitled to summary judgment.
Fed. R. Civ. P. 56(a) (a movant is entitled to “summary judgment if the
movant shows that there is no genuine dispute as to any material fact and
the movant is entitled to judgment as a matter of law.”).
Municipal liability under 42 U.S.C. § 1983 only lies “where
. . . the action that is alleged to be unconstitutional implements or executes
a policy statement, ordinance, regulation, or decision officially adopted and
promulgated by that [local government entity’s] officers.” Monell v. New
York City Dept. of Social Services, 436 U.S. 658, 690 (1978). To hold the
City of Rapid City liable for any conduct of the Rushmore Plaza Civic Center,
or its employees, the burden of proof rests with plaintiff. “[A] local
government may not be sued under § 1983 for an injury inflicted solely by
its employees or agents. Instead, it is when execution of a government's
policy or custom, whether made by its lawmakers or by those whose edicts
or acts may fairly be said to represent official policy, inflicts the injury that
the government as an entity is responsible under § 1983.” Id. at 694.

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Plaintiff “has not shown that the Civic Center was acting pursuant to
official municipal policy or custom.” (Docket 46 at p. 49). Plaintiff “never
address[ed] the standard for municipal liability under § 1983. He never
cite[d] . . . to any evidence that the City of Rapid City had, as an official
policy or custom, the practice of evicting commercial tenants . . . without
resort to South Dakota statutory eviction procedures.” Id.
Plaintiff’s objection is overruled.
5.

WHETHER A POST-DEPRIVATION REMEDY EXISTED.

Plaintiff objects that “there was no post-deprivation hearing at all.”
(Docket 47 at p. 11). Plaintiff argues “Defendants withheld Sotesz’ personal
property until they preserved their legal position by filing a Counterclaim in
this case . . . and never restored Soltesz’ leasehold to him.” Id.
In analyzing plaintiff’s due process rights, the report and
recommendation “note[d] that there is ambiguity about the reason why Mr.
Soltesz/Top Dog did not remove its equipment until May.” (Docket 46 at p.
46). “Defendants suggest that Mr. Soltesz left his property at the leasehold
premises because it was convenient for him while he was exploring the
possibility of transfer of the equipment and leasehold to a third party.” Id.
This creates a question of fact as to whether a post-deprivation
hearing was necessary or appropriate. If the convenience of the lessee
caused the inventory and equipment to remain in the Civic Center and not a
“seizure” by defendants, no hearing was required. Questions of fact exist
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which support the magistrate judge’s recommendation to deny plaintiff’s
motion for partial summary judgment on the due process claim. Id. at p.
48.
Plaintiff’s objection is overruled.
ORDER
Based on the above analysis, it is hereby
ORDERED that plaintiff’s objections (Docket 47) are overruled.
IT IS FURTHER ORDERED that defendant’s objection (Docket 49) is
overruled.
IT IS FURTHER ORDERED that the report and recommendation
(Docket 46) is adopted.
IT IS FURTHER ORDERED that plaintiff’s motion for partial summary
judgment (Docket 13) is denied.
Dated March 26, 2012.
BY THE COURT:
/s/ Jeffrey L. Viken
JEFFREY L. VIKEN
UNITED STATES DISTRICT JUDGE

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