City of Spearfish et al v. Duininck, Inc. (MN)
ORDER To Reduce Verdict; granting 89 Motion to Reduce Verdict. Signed by U.S. District Judge Karen E. Schreier on 6/6/2017. (JLS)
UNITED STATES DISTRICT COURT
DISTRICT OF SOUTH DAKOTA
CITY OF SPEARFISH, a South Dakota
Municipal Corporation, and
ELKHORN RIDGE MANAGEMENT,
LLC, a South Dakota Limited Liability
DUININCK, INC., (MN), f/k/a
ORDER TO REDUCE VERDICT
DUININCK BROS., INC., d/b/a DBI,
A Minnesota Corporation,
AMERICAN TECHNICAL SERVICES,
On January 19, 2017, the jury returned a verdict in favor of plaintiffs
City of Spearfish and Elkhorn Ridge Management, LLC, on their breach of
contract claim against defendant and third-party plaintiff, Duininck Inc., and
in favor of Duininck on its negligence claim against American Technical
Services (ATS). On January 23, 2017, Duininck moved to reduce the verdict.
Docket 89. Plaintiffs oppose Duininck’s motion. Docket 90. For the reasons
stated below, the court grants Duininck’s motion.
On June 18, 2007, Spearfish and Elkhorn formed an agreement with
Duininck to construct the Elkhorn Ridge Golf Course in Spearfish, South
Dakota. Under the agreement, Duininck was the general contractor and Wyss
Associates was the landscape architect. ATS was hired to conduct geotechnical
exploration and analysis of the construction area. A pond was constructed as
part of the golf course. After construction of the golf course was completed, the
synthetic liner under the pond leaked several times. As a result of the damages
incurred from the leaking pond, Spearfish and Elkhorn sued Duininck alleging
breach of contract. Duininick then filed a third-party complaint alleging that, if
Duininck breached its contract to Spearfish and Elkhorn, it was the result of
negligence on the part of Wyss and ATS. Before trial, Spearfish and Elkhorn
entered into settlement agreements with ATS for $10,000 and Wyss for
Prior to trial, Wyss and ATS moved for summary judgment. Docket 36;
Docket 37. This court granted summary judgment on behalf of Wyss and
denied summary judgment on behalf of ATS. Docket 58 at 14. This court also
concluded that, because ATS and Wyss entered into settlement agreements
with Spearfish and Elkhorn, Duininck is entitled to a reduction in damages
based either on the amount of the settlement with Wyss and ATS or the
percentage of fault of Wyss and ATS, whichever is greater. Id. at 16-17. On
January 19, 2017, the jury awarded Spearfish and Elkhorn $131,931.54 in
damages on their breach of contract claim against Duininck. Docket 86. On
Duininck’s third-party negligence claim against ATS, the jury found in favor of
Duininck and determined that Duininck was 70 percent liable and ATS was 30
percent liable. Id. Duininck now moves to have the verdict reduced because it
is entitled to contribution from Wyss and ATS. Docket 89. Plaintiffs resist
Whether plaintiffs waived the issue of contribution.
The court must determine whether Spearfish and Elkhorn waived the
issue of contribution by not raising it prior to submitting the verdict to the jury
in a motion for judgment as a matter of law. Rule 50(a)(2) of the Federal Rules
of Civil Procedure states that “[a] motion for judgment as a matter of law may
be made at any time before the case is submitted to the jury. The motion must
specify the judgment sought and the law and facts that entitle the movant to
the judgment.” Fed. R. Civ. Pro. 50(a)(2). The Eighth Circuit has previously held
that an issue that is not raised in a pre-verdict motion under Rule 50 cannot
be preserved or reviewed later. Graham Constr. Servs. Inc. v. Hammer & Steel,
Inc., 755 F.3d 611, 618 (8th Cir. 2014).
Duininck argues that plaintiffs waived the issue by not raising it in their
motion for a judgment as a matter of law. Plaintiffs argue that the issue of
contribution between Duininck, Wyss, and ATS was not previously raised to
the court because there was no reason to raise the issue until now. Docket 96
at 2. This court previously stated in its Memorandum Opinion and Order dated
August 3, 2016, (Docket 58) that comparative fault applies to this case and
that Duininck “is entitled to a reduction in damages for which it is potentially
liable because Wyss and ATS executed settlement agreements and releases.”
See Docket 58 at 15. This court also instructed the jury on contribution and
included a special interrogatory so the jury could assign a percentage of fault
on the verdict form. See Final Jury Instructions Docket 84. Spearfish, Elkhorn,
and ATS were all represented at trial and failed to raise the issue of
contribution until now.
Spearfish, Elkhorn, and ATS failed to ask the court to reconsider its
ruling in its Memorandum Opinion and Order, and they failed to object to the
jury instruction and the verdict form. Finally, and most importantly, they failed
to raise the issue under Rule 50 at the close of evidence. Because Spearfish,
Elkhorn, and ATS failed to object to the court’s previous ruling, the jury
instructions, the verdict form, and failed to raise the issue in its motion for
judgment as a matter of law at the close of evidence, they waived the issue. But
the court will briefly address plaintiffs’ arguments.
Whether Duininck is entitled to contribution from Wyss and ATS.
In South Dakota, joint tortfeasors are defined as “two or more persons
jointly or severally liable in tort for the same injury to person or property,
whether or not judgment has been recovered against all or some of them.”
SDCL § 15-8-11. The South Dakota Supreme Court has held that under
SDCL § 15-8-17 1 “nonsettling defendants were entitled to credit for the greater
SDCL § 15-8-17 provides:
amount of settlement of the settling defendant’s percentage of liability as
ultimately determined, regardless of whether or not the settling defendant was
later determined to be a joint tort-feasor.” Bego v. Gordan, 407 N.W.2d 801,
812-13 (S.D. 1987)(citing Schick v. Rodenburg, 397 N.W.2d 464, 465 (S.D.
1986)). But “that rule assumes that the injured party has a possible remedy
against the settling defendant as a joint tort-feasor.” Bego, 407 N.W.2d at 803.
First, Spearfish and Elkhorn argue that Duininck is not entitled to
contribution from Wyss and ATS because plaintiffs only asserted a claim for
breach of contract against Duininck, and thus, Duininck is not liable in tort
and is not a joint tortfeasor. Plaintiffs rely on Hagemann v. NJS Engineering
Inc., 632 N.W.2d 840, 843-44 (S.D. 2001), as support. In Hagemann, the South
Dakota Supreme Court held that the county could not seek indemnity or
contribution from the injured party’s coworker because the coworker was
immune from suit under the worker’s compensation statute and could not be
considered a tortfeasor under the law. Id. Spearfish and Elkhorn do not
contend that Wyss and ATS are immune from suit so the rationale of
Hagemann is not applicable here.
A release by the injured person of one joint tort-feasor, whether
before or after judgment, does not discharge the other tort-feasors
unless the release so provides; but reduces the claim against the
other tort-feasors in the amount of the consideration paid for the
release, or in any amount or proportion by which the release
provides that the total claim shall be reduced, if greater than the
Second, the court will consider whether Spearfish and Elkhorn had a
claim in tort against Duininck. Contribution is available where there is
common liability to an injured person in tort. Muller v. Gateway Bldg. Sys.,
Inc., 743 F.Supp.2d 1096. To show negligence, “a plaintiff must prove duty,
breach of that duty, proximate and factual causation, and actual injury.”
Fisher Sand & Gravel Co. v. S.D. Dep’t of Transp., 558 N.W.2d 864, 867 (S.D.
1997). Whether or not a duty exists is a question of law. Id. When determining
whether a duty exists, the court asks whether “a relationship exists between
the parties such that the law will impose upon the defendant a legal obligation
of reasonable conduct for the benefit of the plaintiff.” Casillas v. Schubauer,
714 N.W.2d 84, 88 (S.D. 2006)(quoting Estate of Shuck, 577 N.W.2d 584, 586
(S.D. 1998)). Thus, a duty that arises out of a contract may also give rise to tort
liability. Limpert v. Bail, 447 N.W.2d 48, 51 (S.D. 1989); see also Hayward
Baker, Inc. v. Shirttail Gulch Road Dist., Inc., No. 10-592-JLV, 2012 WL
3929211, at *4 (D.S.D. September 10, 2012).
The South Dakota Supreme Court advises trial courts to look to the
Restatement (Second) of Torts § 324A (1965) to determine whether a duty
exists. Kuehl v. Horner (J.W.) Lumber Co., 678 N.W.2d 809, 812 (S.D. 2004).
The Restatement (Second) of Torts § 324A states as follows:
One who undertakes, gratuitously or for consideration, to render
services to another which he should recognize as necessary for the
protection of a third person or his things, is subject to the liability
for physical harm resulting from his failure to exercise reasonable
care to protect his undertaking, if
(a) his failure to exercise reasonable care increases the risk of such
(b) he has undertaken to perform a duty owed by the other to the
third person, or
(c) the harm is suffered because of reliance of the other or the third
person upon the undertaking.
Restatement (Second) of Torts § 324A (1965).
In Hayward Baker, 2012 WL 3929211 at *1, the owner entered into a
contract with a contractor to construct a tie-back anchor block system to
prevent mud slides and slope failure. After the anchor block system allegedly
failed to prevent subsequent slope failures, the contractor sued the owner for
payment and the contractor counterclaimed for negligence. Id. at *2. The
District Court for the District of South Dakota held that the contract
established a relationship requiring the contractor to exercise reasonable care
in the construction of the anchor system and that failure to exercise reasonable
care could give rise to tort liability. Id. at *5. Here, Duininck agreed to provide
services to Spearfish and Elkhorn, and the failure to exercise reasonable care
when performing those services had the potential of increasing the risk of
harm. Thus, Duininck’s contract created a relationship that established a duty,
and Spearfish and Elkhorn had a possible tort claim against Duininck.
Third, the court will consider the impact of Spearfish and Elkhorn’s
decision not to pursue a claim in tort against Duininck and whether that
affects Duininck’s ability to seek contribution. In Burmeister v. Youngstrom,
139 N.W.2d 226, 231 (S.D. 1965), the South Dakota Supreme Court held that
the “right to contribution is determined by whether there is joint or several
liability rather than the presence of joint or concurring negligence. There can
be no right to contribution unless the injured party has a possible remedy
against two or more parties.” Id. In reaching this conclusion, the South Dakota
Supreme Court relied on the Commissioner’s notes to the Uniform
Contribution Among Tortfeasors’ Act, which stated that “ ‘[t]he common liability
of the [t]ortfeasors to suffer adverse judgment at the instance of the injured
person whether or not the injured person elects to impose it.’ And it is further
stated that the Act ‘permits contribution among all tortfeasors whom the
injured party could be held liable jointly and severally for the same damage or
injury.’ ” Id. (quoting Commissioners’ notes to the Uniform Contribution Among
Tortfeasors’ Act)(emphasis added). Thus, Spearfish and Elkhorn’s decision not
to bring a tort claim against Duininck does not affect Duininck’s right to
contribution from joint tortfeasors because contribution is available to all
tortfeasors that “could” be liable.
Fourth, the court must evaluate whether Spearfish and Elkhorn had a
possible remedy in tort against ATS and Wyss. As stated above, a relationship
requiring the exercise of reasonable care establishes a duty, and failure to
exercise that care could give rise to tort liability. See Hayward Baker, 2012 WL
3929211 at *5; Casillas, 714 N.W.2d at 88; Restatement (Second) of Torts
§ 324A (1965). Here, both Wyss and ATS agreed to provide services to Spearfish
and Elkhorn, and the failure to exercise reasonable care when performing
those services had the potential of increasing the risk of harm. Thus, Wyss and
ATS owed a duty to Spearfish and Elkhorn and violation of that duty could give
rise to tort liability, so Spearfish and Elkhorn had a possible remedy against
Wyss and ATS. Because Spearfish and Elkhorn had a possible remedy in tort
against Duininck, a non-settling defendant, and a possible remedy in tort
against Wyss and ATS, settling defendants, Duininck is entitled to contribution
from Wyss and ATS under SDCL § 15-8-17.
Reduction of the verdict.
A release of one joint tortfeasor does not discharge the other joint
tortfeasors, but it does reduce the claim against the other joint tortfeasors by
the consideration paid for the release or the pro rata share of the tortfeasor’s
liability, whichever is greater. SDCL § 15-8-17. The “ultimate verdict against
the nonsettling parties must be reduced by the amount of settlement.” Schick,
397 N.W.2d at 468. Both settlement agreements between the plaintiffs and the
third-party defendants acknowledge that Wyss and ATS are joint tortfeasors or
joint obligors and that the money paid to the plaintiffs would be the pro rata
share of the third-party defendants’ liability. Docket 45-1 ¶6; Docket 45-2 ¶7.
Wyss paid plaintiffs $40,000 in exchange for its settlement agreement
and release. Docket 45-2 ¶ 1. Because Duininck is entitled to contribution from
Wyss and the court previously granted summary judgment in favor of Wyss,
the $131,931.54 award to the plaintiffs will be reduced by $40,000. ATS paid
plaintiffs $10,000 in exchange for its settlement agreement and release. Docket
45-1 ¶ 1. Because the jury found that ATS was 30 percent at fault for plaintiffs’
damages and 30 percent of $131,931.54 is $39,579.46, the verdict will be
reduced by the larger sum. Thus, the verdict of $131,931.54 will be reduced by
$79,579.46 to $52,352.08.
The ruling in Reuben C. Setliff, III, M.D., P.C. v. Stewart, 694 N.W.2d 859
(S.D. 2005), provides the framework for the court to determine the settlement
payments and prejudgment interest. In Setliff, the South Dakota Supreme
Court set out the following steps to calculate prejudgment interest on a
settlement received prior to judgment from a joint tortfeasor:
1. the prejudgment interest is first calculated on the final judgment
without deducting an off-set for amounts paid by a settling joint
2. the plaintiff may then recover from the nonsettling defendants
the prejudgment interest up to the date of settlement on the total
3. the plaintiff may receive prejudgment interest after the date of
settlement from the nonsettling defendants only on the balance of
the total judgment remaining after it is reduced by the settlement
Setliff, 694 N.W.2d at 873.
Elkhorn and Spearfish are entitled to interest on the full amount of the
verdict until payment or settlement by Wyss and ATS. 2 After the date of
settlement, Elkhorn and Spearfish are entitled to interest on the amount of the
verdict as reduced by the settlement amount. The parties agreed that the first
date of interest would be August 20, 2012, because it is the date of Spearfish
and Elkhorn’s last repair invoice. The date of the verdict was January 19,
2017. Docket 85. Both Elkhorn and Wyss executed their settlement agreement
Under SDCL § 54-3-16 the court applies the Category B rate of interest at 10
on October 8, 2015, for $40,000. Elkhorn and ATS executed their settlement
agreement on November 23, 2015, and the jury determined that ATS was 30
percent at fault.
Based on the above framework, the following calculations apply:
August 20, 2012, the date the interest starts, to October 8, 2015, the
date of Wyss’s settlement, is 1144 days. The daily interest on $131,931.51 is
$36.15 per day ($131,931.51/365 = 361.5 x 0.10). The total interest before the
first settlement is $41,355.60 (1144 days x $36.15).
The court then reduces the principal amount by the amount of Wyss’s
settlement. The new principal amount is $91,931.54 ($131,931.51 - $40,000).
October 8, 2015, the date of Wyss’s settlement, to November 23, 2015, the date
of ATS’s settlement, is 46 days. The daily interest on $91,931.54 is $25.19 per
day ($91,931.54/365 = 251.9 x 0.10). The total interest between the two
settlement dates is $1158.74 (46 days x $25.19).
The court then reduces the principal by the amount of ATS’s settlement.
The jury determined that ATS was 30 percent responsible, and 30 percent of
the total verdict is $39,579.46. The principal amount is then reduced to
$52,352.08 ($91,931.54 - $39,579.46). November 23, 2015, to June 6, 2017,
the date of judgment, is 561 days. The daily interest of $52,352.08 is $14.34
per day ($52,352/365 = 143.4 x 0.10). Thus, the total interest between ATS’s
settlement date and the date of judgment is $8044.74 (561 days x $14.34).
The total prejudgment interest is all three amounts added together.
Thus, the total prejudgment interest is $50,559.08 ($41,355.60 + $1158.74 +
IT IS ORDERED that defendant/third-party plaintiff’s motion to reduce
verdict (Docket 89) is granted.
IT IS FURTHER ORDERED that the verdict (Docket 85) will be reduced to
$52,352.08, and the plaintiffs will be awarded $50,559.08 in prejudgment
DATED June 6, 2017.
BY THE COURT:
/s/Karen E. Schreier
KAREN E. SCHREIER
UNITED STATES DISTRICT JUDGE
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