Emery et al v. PJH Companies, Inc. et al

Filing 55

MEMORANDUM OPINION AND ORDER denying as moot 32 Motion to Amend Complaint; granting in part and denying in part 43 Motion to Substitute Revised Amended Complaint; granting 27 and 30 Motion to Amend Answer; withdrawing 26 Scheduling Order. Signed by U.S. District Judge Lawrence L. Piersol on 7/10/2019. (DJP)

UNITED STATES DISTRICT COURT
DISTRICT OF SOUTH DAKOTA
SOUTHERN DIVISION

WILSON D. EMERY,as Personal

CrV. 18-5035

Representative for the Estate of Roger Louis
Emery, and DARIUS E. EMERY,as Personal
Representative for the Estate of Selena Loretta-

Lynn Medicine Eagle,

MEMORANDUM OPINION AND ORDER
GRANTING IN PART AND DENYING IN
PART MOTIONS TO AMEND

Plaintiffs,
vs.

PJH COMPANIES,INC., JAMES G. RICKERT
and PETER HAGEN,
Defendants.

There are several motions currently pending before the Court that have been briefed by the
parties in this ease. For the following reasons. Defendants' Motion to Amend Answer to Assert a

Third-Party Complaint and Counter-Claim and Motion to Modify Scheduling Order, Docs. 27, 30,
are granted and Plaintiffs' Motion to Substitute Proposed Amended Complaint, Doe.43,is granted
in part and denied in part. The Court will address Defendant, PJH Companies, Inc.'s Motion for
Summary Judgment, Doe. 39, in a separate memorandum opinion and order.
FACTS

This case arises from a motor vehicle accident that resulted in the deaths of Roger Emery
and his four-year-old granddaughter, Selena Medicine Eagle. Doe. 1. On October 3, 2017, Roger
Emery and Selena Medicine Eagle were attempting to cross an intersection in Mission, South

Dakota, from Marge Lane while heading south on the western side of the intersection. Doe. 1,
7, 11, 13, 14. Both Roger Emery and Selena Medicine Eagle were struck and killed by a 2013
GMC 3500 pickup driven by defendant James G. Riekert("Riekert") pulling a gooseneck flatbed
trailer transporting a skid steer. Doc. 1,

7, 16, 17. The intersection was under construction at

the time ofthe accident. Doc. 1, If 12.
On May 25, 2018, plaintiff Wilson D. Emery, as Personal Representative for the Estate of
Roger Louis Emery, and plaintiff Darius E. Emery, as Personal Representative for the Estate of

Selena Loretta-Lynn Medicine Eagle, (collectively, "Plaintiffs") filed a Complaint against

Defendants PJH Companies, Inc., Riekert, and Peter Hagen ("Hagen"), the owner of PJH
Companies, Inc.,(collectively, "Defendants"). In their initial complaint. Plaintiffs alleged claims
of wrongful death and sprvival against Defendants. Doe. 1. It is alleged that defendant Riekert

failed to come to a complete stop, failed to yield, and/or failed to keep a proper lookout before
proceeding into the subject intersection. Doc. 1, t 15. It is further alleged that Riekert was an
employee ofPJH Companies,Inc. md was engaged in the course ofemployment at the time ofthe
accident. Doe. 1, If 10.
Pending before the Court are Defendants' Motions to Amend Answer to Assert a Third-

Party Complaint and Counter-Claim and Motion to Modify Scheduling Order, Doc. 27, 30;
Plaintiffs' Motion to Amend/Correct Complaint, Doc. 32; Plaintiffs' Motion to Substitute

Proposed Amended Complaint, Doe. 43; and Defendant, PJH Companies, Ine.'s Motion for
Summary Judgment,Doc. 39. In this Order,the Court will address Defendants' Motions to Amend

Answer to Assert a Third- Party Complaint and Counter-Claim and Motion to Modify Scheduling
Order- Plaintiffs' Motion to Amend Complaint; and Plaintiffs' Motion to Substitute Proposed
Amended Complaint. The Court will address Defendant, PJH Companies, Ine.'s Motion for
Summary Judgment in a separate memorandum opinion and order.
LEGAL STANDARD

"The Federal Rules of Civil Procedure liberally permit amendments to pleadings." Dennis
V. Dillard Dep't Stores, Inc., 207 F.3d 523, 525 (8th Cir. 2000); see also Fed. R. Civ, P. 15(a)(2)
("The court should freely give leave when justice so requires."). A timely motion to amend

pleadings should normally be granted under Rule 15(a) absent good reasons to the contrary. Popp
Telcom v. American Sharecom, Inc., 210 F.3d 928, 943 (8th Cir. 2000). A district court

appropriately denies the motion to amend if "there are compelling reasons such as undue delay,
bad faith, or dilatory motive, repeated failure to cure deficiencies by amendments previously
allowed, undue prejudice to the non-moving party, or futility of the amendment." Moses.Com
Securities, Inc.y. Comprehensive Software Sys., Inc.,406 F.3d 1052,1065(8th Cir. 2005)(intemal
quotation marks and citation omitted).
I.

Motion to Amend Answer to Assert a Third-Party Complaint and Counterclaim
and Motion to Modify Scheduling Order

On March 29, 2019, Rickert filed a Motion to Amend Answer to Assert a Third-Party
Complaint and Counter-Claim and Motion to Modify Scheduling Order. Doc. 27. Defendants
PJH Companies,Inc. and Hagen havejoined Rickert's Motion to Amend Answer to Assert a Third-

Party Complaint and Counter-CIaim and Motion to Modify Scheduling Order. Doc. 30. In support
of their motions. Defendants state that during the course of discovery, they discovered that the
subject intersection did not have any signage to instruct pedestrians to cross on the east or the west

side of the intersection when walking south on Marge Lane, as were the decedents Roger Emery
and Selena Medicine Eagle, and further, that there were no pavement markings indicating a
crosswalk on either the east or west side ofthe intersection. Bogard Aff, Ex. C. Defendants state

that there was only a sign facing to east/west traffic that stated, "Pedestrian Crosswalk." Bogard
Aff., Ex. C. In addition. Defendants discovered that Anderson Contractors was the general
contractor for the road project at the subject intersection and that Traffic Solutions was in charge
of putting together the plan for traffic control for the project. Bogard Aff, Ex. D.
As a result of these newly discovered facts. Defendants state that Anderson Contractors

and Traffic Solutions should be parties to the action. Doc. 28 at 3. In Defendants' proposed ThirdParty Complaint, they alleged that Anderson Contractors, Inc. had a duty to act as a reasonable

and prudent contractor in providing for the safety ofthe public during the construction project and

that their breach of that duty resulted in the deaths of Roger Emery and Selena Medicine Eagle.
Doc. 29-9 (Rickert); Doc. 31-1 (PJH Companies, Inc. and Hagen). Defendants allege further that

if recovery is allowed against any or all of the defendants for the alleged negligence of Traffic

Solutions and Anderson Contractors, Inc., that they are entitled to indemnification or, alternatively,
contribution. Doc. 29-9; Doc. 31-1.

In addition. Defendants have moved to assert a counterclaim against the estate of Roger

Emery for contribution and for contributory negligence. Doc. 29-10, 31-2. In support of their
motion. Defendants allege that Roger Emery was not using reasonable care in leading Selena
Medicine Eagle across the intersection because he was carrying her while walking across the
subject intersection on the western side when the eastern side of the intersection had been

designated as the area for pedestrians to cross. Doc. 29-10, 31-2.

Plaintiffs do not oppose Defendants' motions to amend their answer to add a third-party
complaint against Anderson Contractors and Traffic Solutions and to assert a counterclaim against

the Estate ofRoger Emery. Docs. 35, 36. Plaintiffs furthermore do not oppose Defendants' motion
to set new deadlines once Traffic Solutions, Inc. and Anderson Contractors, Inc. have been added

as parties so long as all deadlines, including the Plaintiffs' expert designation deadline, are reset
since the Plaintiffs' expert designations may be affected by the amendments and/or addition of
new parties. Docs. 35, 36.

II.

Plaintiffs Motion to Substitute Proposed Amended Complaint
On April 1, 2019, Plaintiffs moved to amend their eomplaint within the time for

amendment detailed by the Court in its Second Amended Rule 16 Scheduling Order("Amended
Complaint"). Does. 26, 32. Therein, Plaintiffs moved to assert two new claims against
Defendants. Docs. 32. Specifically, Plaintiffs moved to add a claim against defendants PJH
Companies, Inc. and Hagen for negligent hiring, supervision, and retention, and for willful and

wanton hiring, supervision, and retention. Doc. 32-1. Plaintiffs also added a prayer for punitive
damages. Plaintiffs filed a brief in support of their motion to amend complaint stating the factual
basis for their proposed additional claims. Doc. 33.

On April 22, 2019, Defendants PJH Companies, Inc. and Hagen filed their memorandum

opposing Plaintiffs' motion to amend complaint. Doc. 28. Therein, they argue that the Court

should deny Plaintiffs the right to amend their complaint to add a prayer for punitive damages on
the basis offutility because Plaintiffs have "failed to state a claim for punitive damages upon which
relief can be granted." Doc. 38 at 5. Specifically, Defendants state that there is no legal basis for
a claim for willful and wanton hiring, supervision, and retention^ and that Plaintiffs have failed to

allege any facts to support that PJH Companies, Inc. and Hagen acted with the actual or presumed
malice that they state is necessary to recover punitive damages under South Dakota law.
"Denial of a motion for leave to amend on the basis offutility 'means the district court has
reached the legal conclusion that the amended complaint could not withstand a motion to dismiss

under Rule 12(b)(6) of the Federal Rules of Civil Procedure.'" Zutz v. Nelson, 601 F.3d 842, 850

(8th Cir. 2010)(quoting Cornelia I. Crowel GST Trust v. Possis Med., Inc., 519 F.3d 778,782(8th

Cir. 2008)). A complaint states a claim upon which relief may be granted if it contains sufficient
^ Defendants' assertion is incorrect, in South Dakota, courts recognize causes of action for negiigence and for
gross negligence which is considered to be synonymous with the phrase "wiiifui and wanton misconduct." See

Fischer v. City ofSioux Falls, 919 N.W.2d 211, 214(S.D. 2018)(citing Granflaten v. Rohde, 283 N.W. 153,155 (S.D.
1938)).

factual matter, accepted at true to "state a claim to relief that is plausible on its face." Bell Atl.

Corp. V. Twombly, 550 U.S. 544, 570(2007). To state a claim for relief, a complaint must plead
more than "legal conclusions" and "[t]hreadbare recitals ofa cause of action's elements, supported

by mere conclusory statements." Ashcroft v. Iqhal, 556 U.S. 662,678(2009)(citing Twombly,550
U.S. at 555). A plaintiff must demonstrate a plausible claim for relief, that "allows the court to

draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. at 618.
"[WJhere the well-pleaded facts do not permit the court to infer more than the mere possibility of
misconduct, the complaint has alleged—^but it has not 'show[n]'—'that the pleader is entitled to

relief.'" Id. at 679 (citing Fed. R. Civ. P. 8(a)(2)). Determining whether a complaint states a
plausible claim for reliefis "a context-specific task that requires the reviewing court to draw on its
judicial experience and common sense." Id. (citation omitted).
A. Willful and Wanton Hiring, Supervision, and Retention & Punitive Damages
To be clear, "punitive damages are a form of relief and not a 'claim' that is subject to a
Rule 12(b)(6) motion to dismiss." See Benedetto v. Delta Air Lines, Inc., 917 F.Supp.2d 976,984
(D.S.D. 2013)(citing Sec. Nat'l Bank ofSioux City v. Abbott Labs., Civ. No. 11-4017, 2012 WL
327 863, at *21 (N.D. Iowa Feb. 1, 2012)("[PJunitive damages are not a cause of action, and as

such, so long as there are surviving claims, they are not subject to a motion to dismiss.")).
Therefore, the Court must examine whether Plaintiffs have stated an underlying claim for relief to
support their prayer for punitive damages. See Berry v. Time Ins. Co., 798 F.Supp.2d 1015, 1022
(D.S.D. 2011). In other words, the Court must examine whether the facts in Plaintiffs' proposed
Revised Amended Complaint, if accepted as true, state a claim for willful and wanton hiring,
supervision, and retention that is plausible on its face.

On May 1, 2019, Plaintiffs moved to substitute a Revised Amended Complaint in place of

the proposed Amended Complaint. Doc. 43. In their proposed Revised Amended Complaint,
Plaintiffs include various factual allegations in support of Counts 3 and 4 alleging negligent and

willful and wanton, hiring, supervision, and retention. Doc.43. Specifically, Plaintiffs allege that
defendants PJH Companies, Inc. and/or Hagen:
(i)

[Hjired Defendant Rickert to operate a commercial motor vehicle, and
subsequently allowed him to operate a commercial motor vehicle, despite
knowing that he did not possess a CDL as required by law;

(ii)

[H]ired Defendant Riekert to operate a commereial motor vehiele, and
subsequently allowed him to operate a eommereial motor vehiele, without
requiring him to complete any application for employment as required by
law;

(iii)

[HJired Defendant Riekert to operate a commercial motor vehicle, and
subsequently allowed him to operate a commercial motor vehiele, without

conducting an independent investigation of his safety performance history
with Department of Transportation regulated employers during the
preceding three years as required by law;
(iv) /[HJired Defendant Riekert to operate a commercial motor vehicle, and
subsequently allowed him to operate a commercial motor vehicle, without
requiring him to provide a list ofviolations or certificate as required by law;
and

(v)

After hiring Defendant Riekert, they did not maintain a proper driver
qualification file concerning Defendant Ricker as required by law.

Plaintiffs allege that defendants PJH Companies, Inc. and/or Hagen "elected to wholly disregard
numerous federal regulations and instead proceeded to have[] Riekert operate a commereial motor

vehicle with virtually no knowledge of his training and ability to safely do so.^" Doe. 43-1,^ 43.
Plaintiffs further allege that defendants PJH Companies, Inc. and Hagen did not provide Riekert
any training regarding the proper operation of commereial motor vehicles. Doc. 43-1,142.
Plaintiffs agree with Defendants' contention that actual or presumed malice is necessary to
recover for punitive damages under South Dakota law. However, Plaintiffs argue that they have

^ Plaintiffs aiiege in their proposed Revised Amended Compiaintthat defendant PJH Companies and Hagen's
conduct was:

wiilful, wanton, and reckiess, and they knew, or shouid have known,that injury was iikeiy to occur
when they hired Defendant Riekert and aiiowed him to operate a commercial motor vehicle
hauling materiais and equipment to, from, and among various states in the Midwest given:(i) that
Defendant Riekert did not possess a CDL; (ii) that Defendant Riekert had previously failed the test
to secure a CDL on more than one occasion; (iii) that they did not provide him with any training
regarding the operation of a commerciai motor vehicie; and (iv) that they knew virtuaiiy nothing
about his background or suitabiiity to operate a commerciai motor vehicie since they did not
require him to complete an application for employment, did not conduct an independent
investigation of his safety performance history with the Department of Transportation reguiated
empioyers during the preceding three years, did not require him to provide a list of vioiations or
certificate, and did not maintain a driver qualification fiie concerning him.
Doc. 43-1, U 43.

stated a claim to relief for punitive damages because a jury may reasonably infer from the facts

alleged in their proposed Revised Amended Complaint that PJH Companies, Inc. and/or Hagen
acted with malice because, Plaintiffs contend, their actions involved "willful and wanton

misconduct that indicates a reckless disregard for one's rights." Doc. 44, at 4(quoting Flockhart
V. Wyant, 467 N.W.2d 473,478(S.D. 1991)(citation omitted)).

Plaintiffs are correct in stating that presumed legal malice may be inferred when the

defendant acts willfully or wantonly to the injury ofanother. See Dahl v. Sittner, 474 N.W.2d 897,
900 (S.D. 1991). Willful and wanton misconduct is behavior that demonstrates the defendant

"consciously realized that his conduct would in all probability, as distinguished from possibility,
produce the precise result which it did produce and would bring harm to the plaintiff." Flockhart,
A61 N.W.2d at 478 (quoting Tranby v. Brodock, 348 N.W.2d 458, 461 (S.D. 1984)); Fischer v,
City ofSioux Falls,919 N.W.2d 211,215-16(S.D. 2018)("'[Cjourts have often said that reckless,
willful[,] or wanton misconduct. . . entails a mental element. The defendant must know or have

reason to know of the risk and must in addition proceed without concern for the safety of others. .
. .' [A] plaintiff alleging willful or wanton misconduct must prove a substantial probability of

serious physical harm.")(quoting Dan B. Dobbs et ah, The Law ofTorts § 140(2d ed.)(2018)).
In Flockert v. Wyant, 467 N.W.2d 473 (S.D. 1991), the South Dakota Supreme Court
reviewed the imposition of punitive damages against an intoxicated driver who caused a collision

on the interstate. The defendant had been drinking the night before as well as the day of the
accident. Id. at 474. Before leaving Wall, South Dakota, on a trip to Rapid City, the defendant
consumed two to three beers. Id. The defendant drank more beer during the fifty-mile drive to
Rapid City and also drank beer at a bar in New Underwood, a town roughly thirty-five miles west
of Rapid City. Id. The defendant eventually lost control of her vehicle on the interstate, went
through the median, and struck the plaintiffs ear. Id. When the accident occurred, the defendant
had alcohol with her in the ear and her blood alcohol level was determined to be .30%. Id.

The defendant had five previous alcohol related offenses dating back to 1972. Id. She had
been through numerous alcohol treatment programs and had seen movies, attended classes, and

listened to the lectures pertaining to the hazards of drinking and driving. Id. Despite the
correctional programs, DUl citations and legal fines, the defendant continued to drive while
drinking. Id. Considering all of these factors, the Court found that the defendant "must have

known, with substantial certainty, the danger which her conduct engendered." Id. at 478.

In Brewer v. Mattern, 182 N.W.2d 327 (S.D. 1970), the South Dakota Supreme Court
examined whether a driver's negligent conduct constituted willful and wanton misconduct for

purposes determining liability under the South Dakota guest statute. The Court stated that the

"defendant's mental attitude is established not by what he said nor even by what he may actually
have thought, but rather by the attitude that an ordinarily prudent person would have had under all
the attending circumstances." Id. at 362. The Court noted that:

[t]he driver who actually thinks that he can safely give his passengers a 'thrill ride',
or who actually thinks that he can engage in 'drag racing' without endangering his
guests, or who actually thinks that because of his driving experiences he can safely
disregard warnings and warning signs in obviously hazardous circumstances,
cannot escape liability under the guest statute by establishing that in so doing he
did not think that this conduct would probably (as distinguished from possibly)
produce the precise result that it did produce and would bring harm to his guests.
Id.

Applying that standard to the facts of the case, the Court concluded that a jury question
existed as to whether the defendant engaged in willful and wanton misconduct. Id. at 363. The
Court found that the defendant:

on a dark and rainy night, was driving on a sloshy, gravel detour road with which
he was unfamiliar. He disregarded and ignored the warnings of a guest who was
familiar with the road, disregarded the warning signs and the red flags[on the road]
and operated his car at the speed of at least twice the posted speed limit.

Id. The Court stated that under the totality of the circumstances as they existed the night of the
accident, ajury could reasonably find that the defendant engaged in willful and wanton misconduct
and affirmed the trial court's order denying defendant's motion for judgment notwithstanding the
verdict and motion for new trial.

JnFriedlv. Ford Motor Co., Civ. Civ. No.03-4198,2005 WL 2044552, at *6(D.S.D. Aug.
24, 2005)(J. Schrier), a court concluded that a reasonable jury could find that defendant, Ford

Motor Company,knew that its vehicles could suddenly accelerate and cause accidents like the one
that injured the plaintiff and denied plaintiff's motion for summary judgment on the issue of

whether a reasonable jury could find that the defendant acted with malice to justify an award of
punitive damages.

Fluth V. Schoenfelder Constr., Inc., 917 N.W.2d 524 (S.D. 2018)involved a lawsuit by a
homeowner against the owner of a neighboring lot and eontraetor for damages eaused by water
penetrating her basement. The Court found that ajury question existed as to whether the defendant

owner engaged in willful and wanton misconduct sufficient to support discovery on the issue of

punitive damages. Id. at 534. The defendant owner had been informed by the city after an
explosion on the property that the waterline accessing the property needed to he shut off by a
licensed plumber at either the street-curb valve or at the water main beneath the street. Id. at 526.

Instead, the broken water pipe had been crimped shut and approximately a year later, leakage from

the pipe resulted in water damages to the adjacent property belonging to the plaintiff. Id. The
Court concluded that questions of fact existed as to what the owner knew regarding the broken

water pipe on his property; regarding the amount of water that was leaking from the pipe for nearly
a year after it was temporarily crimped shut; and the likelihood that the water would cause injury
to others. Id. at 534.

Accepting the facts pleaded hy Plaintiffs as true for purposes of this motion, the Court

concludes that Plaintiffs have stated a claim to relief against defendant PJH Companies, Inc. for

willful and wanton hiring, supervision, and retention. Plaintiffs have alleged that PJH Companies,
Inc. did not require Rickert to complete an application of employment and did not conduct and

independent investigation into Riekert's motor vehicle safety performance. Further, Plaintiffs
have alleged that PJH Companies, Inc. knew that Rickert did not possess a commercial driver's
license, that Rickert had failed the commercial driver's license exam on more than one occasion,
and that PJH Companies, Inc. did not provide Rickert any training regarding the proper operation

of a commercial motor vehicle. Employing an individual to drive a GMC pickup hauling a loaded
gooseneck flat-bed trailer who does not possess a commercial driver's license, and who apparently
received no training, is conduct that alleges a claim that amounts to reckless disregard for the safety
of others. How else is an employer to know that the public is safe from its employees driving
heavy equipment on public highways other than by checking driving safety records and seeing that
the employee has an appropriate commercial license? Here, in fact, the employee had allegedly
failed to pass the commercial driver's license exam.

For these reasons. Plaintiffs' motion to amend their complaint to add a claim for willful
and wanton hiring, supervision, and retention as alleged in Count 4 of the proposed Revised
Amended Complaint and to add a punitive damages prayer for relief is granted. Whether or not

Plaintiffs' claim for willful and wanton hiring, supervision, and retention will survive summary
judgment or directed verdict are separate questions.

B. Plaintiffs' Proposed Claims in Counts 3 and 4 against Hagen Individually
It appears that Plaintiffs are putting forth two separate grounds for imposing individual
liability upon Hagen for the alleged negligent hiring, supervision, and retention of Ricket. In their

proposed Revised Amended Complaint, Plaintiffs allege that Hagen had an independent duty to
hire and select competent drivers and also a duty to train, supervise and control such individuals.
Plaintiffs allege that Hagen breached such legal duty by failing to exercise reasonable care in the
hiring of Rickert or, in the alternative, by hiring Rickert despite having actual or constructive
knowledge that he lacked the requisite training, experience, and competence. Doc. 43-1. In their
reply briefin support oftheir motion to amend complaint and motion to substitute revised amended

complaint. Plaintiffs also argue that while under South Dakota law, a shareholder or a corporation
is generally not personally liable for the acts or debts ofthe corporation, there is evidence that PJH
Companies, Inc. was acting as Hagen's alter ego and argue that as a result, the Court is justified in
piercing the corporate veil to hold Hagen individually liable for the alleged negligence in this case.
Defendants PJH Companies, Inc. and Hagen argue that Counts 3 and 4 in Plaintiffs'

proposed Amended Complaint alleging negligent, as well as willful and wanton hiring, retention,
and supervision, fail to state a claim to relief against Hagen individually. Plaintiffs contend that
under South Dakota law, Hagen, as the owner ofPJH Companies,Inc., cannot be held individually
liable for the alleged negligent actions of PJH Companies, Inc. Doc. 38 at 9 (citing § SDCL 47lA-622) ("[N]o shareholder of a corporation is personally liable for the acts or debts of the

corporation except that a shareholder may become personally liable by reason ofthe shareholder's
own acts or conduct."). Accordingly, Defendants oppose Plaintiffs' Motion to Amend Complaint
on the basis of futility to the extent Counts 3 and 4 seek relief from Hagen individually.
A. Does Hagen Have an Independent Duty to Exercise Reasonable Care in Hiring,
Supervising and Retaining Employees?

Plaintiffs allege that Hagen had an independent duty to hire and select competent drivers

and also a duty to train, supervise and control such individuals. Plaintiffs allege that Hagen
breached such legal duty by failing to exercise reasonable care in the hiring of Rickert or, in the

alternative, by hiring Rickert despite having actual or constructive knowledge that he lacked the
requisite training, experience, and competence. Doc. 43-1.

10

Hagen contends that the duty to hire and supervise is a duty that belongs to PJH Companies,
Inc., not to Hagen individually as the owner ofPJH Companies, Inc. In support oftheir argument.

Plaintiffs cite to Kirlin v. Halverson, 758 N.W.2d 436 (S.D. 2008). There, an employee of a
corporation providing heating, ventilation and air eonditioning services, the corporation, and the

corporate owner and manager were sued in a civil action for an assault committed by the employee
during the scope of his employment. Id. at 443. Plaintiffs sought to hold the corporation and the
owner and manager of the corporation vicariously liable for the employee's actions and also

alleged claims ofnegligent hiring, training, and supervision against the corporation and the owner.
Id. at 452-454.

The South Dakota Supreme Court affirmed the trial court's decision granting summary
judgment in favor of the individual owner. Id. at 455. The Court stated that respondeat superior
liability and liability for the duty of care which encompassed the plaintiffs' claims for negligent
hiring, retention, training, and supervision, pass to the corporation and not to the individual owner

of the corporation. Id. The Court held that "[a]s its agent, any negligent actions taken by the
individual owner in his capacity as [the employee defendant's] supervisor are the negligent acts of
the [corporation]." Id.

In South Dakota, the existence of a legal duty is a question of law. Grynberg v. Citation
Oil & Gas Corp., 573 N.W.2d 493, 501 (S.D. 1997).

In this case, Hagen, as servant or agent of PJH Companies, Inc. is liable for acts or

omissions causing injury to third persons "whenever, under the circumstances, he owes a duty of
care in regard to such matters to such third persons." Lambert v. Jones, 98 S.W.2d 752, 759(Mo.
1936);see also SDCL § 20-9-1 ("Every person is responsible for injury to the person, property, or

rights of another caused by his willful acts or caused by his want of ordinary care or skill . .. .").
"In order to find actionable negligence, there must be a duty on the part ofthe defendant to protect
the plaintiff from injiuy, a failure to perform that duty, and injury to the plaintiff resulting from
such failure." Blumbardt v. Hartung, 283 N.W.2d 229, 231-32(S.D. 1979).

Courts, including the South Dakota Supreme Court, have held in the context of analyzing
individual liability under workmen's compensation statutes, that a servant or agent ofa corporation
"cannot be held personally liable for conduct or conditions falling within the ambit of

responsibility of the corporate employer," but only for injuries caused by the agent's personal
negligence. Wilson v. Hasvold, 194 N.W.2d 251, 293 (S.D. 1972), superseded by statute, SDCL
11

§ 62-3-2, as recognized in Canal Ins. Co. v. Abraham, 598 N.W.2d 512, 517 n.9 (S.D. 1999);
Blumhardt v. Hartung, 283 N.W.2d 229 (S.D. 1979), superseded by statute, SDCL § 62-3-2, as
recognized in Canallns. Co. v. Abraham,598 N.W.2d 512,517 n.9(S.D. 1999)^; Hansen v. Ritter,

375 S.W.3d 201, 214 (Mo. Ct. App. 2012); Athas v. Hill, 458 A.2d 859, 865-66 (Md. Ct. App.
1983). In Blumhardt v. Hartung, the South Dakota Supreme Court found that a company foreman
working at the job site where an employee was injured could not be held individually liable for
failing to exercise reasonable care in providing for a safe workplace. 283 N.W.2d at 232-33. The
Court stated that the duty to provide for a safe workplace was not a personal duty belonging to the
foreman, but rather a duty that belonged to the company. Id. The Court distinguished Wilson v.
Hasvold, 194 N.W.2d 251 (S.D. 1972) wherein it had allowed a claim of negligence proceed
against the president and controlling stockholder of a corporation. Id. at 232. The Court noted

that in Wilson,the defendant had a personal responsibility to exercise ordinary care in the operation
ofthe tractor which injured the plaintiff. Blumhardt, 283 N.W.2d at 232.

In determining whether an individual acting in his capacity as agent of a corporation owes
an independent duty of care to third persons, the Court finds instructive Lambert v. Jones wherein

the Missouri Supreme Court held that "[an agent or servant] would be liable whenever he is guilty
ofsuch negligence as would create a liability to another person ifno relation ofmaster and servant

or principal and agent existed between him and someone else." 98 S.W.2d 752, 759(Mo. 1936)
(emphasis added). In other words, an agent's "independent duties owed to fellow employees do
not include the duty to perform the employer's non-delegable duties, as those duties necessarily
derive from, and are not independent of, the master-servant relationship." Hansen v. Ritter, 375
S.W.3d 201, 214(S.D. 2012).

The duty to exercise reasonable care in the hiring, supervision, and retention of employees
belongs to the employer, not to an agent of the employer. This conclusion explains the South
Dakota Supreme Court's holding in Kirlin wherein it granted summaryjudgment on the plaintiffs'
claims for negligent hiring, supervision and retention alleged against the individual owner of the
corporation on the basis that such duties of care belonged to the corporation only. The South
® The Court notes that SDCL § 62-3-2 was amended and no longer may an employee under the Workmen's
Compensation Act be liable for money damages resulting from his or her negligence, but only resulting from
intentional torts committed by the employee., See SDCL § 62-3-2. Despite that, the Court finds that the reasoning

in these cases gives the Court insight into how the South Dakota Supreme Court wouid analyze whether an agent
of a corporation has an independent duty to third persons to exercise reasonabie care in the hiring, supervision,
and retention of employees.
12

Dakota Supreme Court's opinion accords with those of other courts that have held that the duty to
exercise reasonable care in the hiring, supervision, and retention of employees belongs to the
corporate employer and not to an agent ofthe employer. See Hill v. Madison Cty School Bd., 947
F.Supp.2d 1320, 1343 (N.D. Ala. 2013)("[T]he torts of negligent or wanton hiring, retention,
training, or supervision of an 'incompetent' employee runs only against the employer, not
supervisory co-employees ofthe 'incompetent' employee."); Duran v. Warner, Civ.'No. 07-5994,
2013 WL 4483518, at 8 (D.N.J. Aug. 20, 2013)(citing Di Cosala v. Kay, 450 A.2d 508, 515-16

(N.J. 1982)(stating that under New Jersey law, a negligent supervision claim is cognizable against
an employer through the principles of agency and vicarious liability and is not cognizable against
individual supervisors in their personal capacity)).

Here, Plaintiffs allege that Rickert was acting in the scope of his employment with PJH
Companies, Inc. at the time of the accident and that Hagen is the principal owner of PJH
Companies, Inc. The duty to exercise reasonable care in the hiring, supervision, and retention of
employees belongs to PJH Companies, Inc., not to Hagen individually.
B. Piercing the Corporate Veil

Plaintiffs also seem to argue that the Court should pierce the corporate veil to hold Hagen
individually liable for the alleged negligent acts ofPJH Companies, Inc. Plaintiffs argue that PJH
Companies, Inc. is the alter ego of Hagen because there was an intermingling of assets between

Hagen and PJH Companies, Inc. In their proposed Revised Amended Complaint, Plaintiffs allege
that the CMC truck driven by Rickert that struck and killed Roger Emery and Selena Medicine
Eagle was titled in Hagen's name. Plaintiffs state in their reply briefthat Hagen gave his personal
credit card to Rickert to purchase supplies for PJH Companies,Inc. and that Rickert testified in his

deposition that he did not know whether he had been hired by Hagen or by PJH Companies, Inc.

"[T]he doctrine of'piercing the corporate veil' is . .. equitable in nature and is used by the
courts to disregard the distinction between a corporation and its shareholders to prevent fraud or
injustice." Kansas Gas &Elec. Co. v. Ross, 521 N.W.2d 107, 112(S.D. 1994).
The general rule which has emerged is that a corporation will be looked upon as a
legal entity separate and distinct from its shareholders, officers and directors unless

and until sufficient reason to the contrary appears, but when the notion of a legal
entity is used to defeat public convenience,justify wrong, protect fraud, or defend
crime, then sufficient reason will exist to pierce the corporate veil.
Id.

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In this diversity action, whether to pierce the corporate veil "is a legal determination that,

in our circuit, is governed by state law." Stoebner v. Lingenfelter, 115 F.3d 576, 579 (8th Cir.
1997). In deciding whether the corporate veil will be pierced. South Dakota courts apply a twopart test: (1) was there such unity of interest and ownership that the separate personalities of the
corporation and its shareholders, officers or directors are indistinct or non-existent; and (2) would

adherence to the fiction of separate corporate existence sanction fi-aud, promote injustice or
inequitable consequences or lead to an evasion oflegal obligations. Kansas Gas & Elec. Co., 521

N.W.2d at 112. Factors the South Dakota Supreme Court has used in determining whether the

first prong is met are: (1) undercapitalization; (2) failure to observe corporate formalities; (3)
absence of corporate records; and (4)payment by the corporation of individual obligations. Id. at
112-13. If these factors are present in sufficient number and/or degree, the first prong is met and
the eourt will then consider the second prong. JJ. at 113.
"[T]he showing in equity necessary to satisfy the second prong must flow from the misuse

of the corporate form." Id. (quoting Greater Kansas City Roofing, 2 F.3d 1047, 1052-53 (10th
Cir. 1993)). "The doctrine of alter ego fasten liability on the individual who uses a corporation to

conduct his or her own personal business ...." Id. at 117(quoting 1 Charles R.P. Keating & Gail
O'Gradney, Fletcher Cyclopedia of the Law ofPrivate Corporations § 41.10 at 615 (perm. ed.
1990)).

The Court finds that Plaintiffs have alleged insufficient facts to state a claim for piercing
the corporate veil. See Superior Homes, L.L.C. v. Comardelle, Civ. No. 12-4126, 2013 WL

6146051, at *4(D.S.D. Nov. 21, 2013)(J. Schrier)(dismissing claims against member of limited

liability company because the plaintifffailed to allege facts supporting piercing the corporate veil).
While Hagen may have permitted PJH Companies, Inc. and its agents/employees to use some of
his personal assets to conduct business of behalf of PJH Companies, Inc., Plaintiffs have not
alleged sufficiently the above factors to warrant piercing the corporate veil and imposing personal
liability upon Hagen as shareholder/owner ofPJH Companies, Inc.

Accordingly, it is hereby ORDERED:

1) Defendants' Motion to Amend Answer to Assert Third-Party Complaint and Counter
claim and Motion to Modify Scheduling Order, Docs. 27, 30, are GRANTED; and

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2) Plaintiffs' Motion to Substitute Revised Amended Complaint, Doc. 43, is GRANTED
IN PART AND DENIED IN PART;Plaintiffs' Motion to Substitute Revised Amended

Complaint to add a claim for negligent hiring, supervision, and retention as stated in

Count 3 and to add a claim for willfiil and wanton hiring, supervision, and retention as
stated in Count 4 is granted as to defendant PJH Companies, Inc., but is denied as to
defendant Peter Hagen; and

3) Plaintiffs' punitive damages prayer for relief may proceed as to defendant PJH
Companies, Inc.; and

4) Plaintiffs' first Motion to Amend Complaint, Doc. 32,is DENIED as being moot; and
5) In accordance with Local Rule 15.1, Plaintiffs shall have seven(7)days from the date
ofthis Order to file a clean original ofthe Revised Amended Complaint in accordance
with the Courts' Memorandum Opinion and Order; and

6) The parties shall comply with the Federal Rules of Civil Procedure in filing their
responses to the amended pleadings; and

7) Within fourteen (14) days after all parties have noticed their appearances, the parties

shall submit a new proposal for scheduling and the current scheduling order. Doc. 26,
is withdrawn.

XI

Dated this \0 day of July. 2019.
BY THE COURT:

iwrence L. Piersol

ATTEST:

United States District Judge

MATTHEW W.THIELEN,CLERK

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