Bear Shield et al v. Kumho Tire U.S.A., Inc.

Filing 97

ORDER for further briefing in regard to KTCI's motion to dismiss, Doc. 79. Signed by US Magistrate Judge Veronica L. Duffy on 4/17/2020. (CG)

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UNITED STATES DISTRICT COURT
DISTRICT OF SOUTH DAKOTA
WESTERN DIVISION
BRIGITTE JAHNER, as personal
representative of THE ESTATE OF
ROBERT BEAR SHIELD; JERRY BEAR
SHIELD, SR.; JERRY BEAR
SHIELD, JR.; JAYDEE SPOTTED ELK;
AMERICAN ZURICH INSURANCE
COMPANY; AND HEAVY
CONSTRUCTORS INC.;

5:18-CV-05036-JLV

ORDER FOR FURTHER BRIEFING

Plaintiffs,
vs.
KUMHO TIRE U.S.A., INC.; KUMHO
TIRE MERGER SUBSIDIARY, INC.;
KUMHO TIRE CO. INC.; KUMHO TIRE
(VIETNAM) CO., LTD.;
Defendants.
INTRODUCTION
This matter is before the court on the amended complaint of plaintiffs
American Zurich Insurance Company and Heavy Constructors, Inc. (collectively
“Heavy”). See Docket No. 12 in 5:19-cv-5044.1 Jurisdiction is premised on the
diverse citizenship of the parties and an amount in controversy exceeding

Heavy originally filed its complaint as a separate matter in American Zurich
Ins. Co. v. Kumho, 5:19-cv-5044 (D.S.D.). That case was ordered consolidated
with Bear Shield v. Kumho, 5:18-cv-5036 (D.S.D.) on July 30, 2019, because
both cases involved actions for damages from an allegedly defective tire arising
out of the same motor vehicle accident. The original plaintiffs in the Bear
Shield case are not involved in the currently pending motion that is the subject
of this opinion. Following the consolidation order, all pleadings are now being
filed in 5:18-cv-5036. All references to docket numbers in this opinion are to
the consolidated case number unless otherwise noted.
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$75,000. Id. at p.4, ¶ 16. Now pending is a motion by defendant Kumho Tire
Co., Inc. (“KTCI”) seeking its dismissal from this lawsuit on the basis that the
statute of limitations has run, there is no personal jurisdiction over this
defendant, and there is no cognizable claim under the Magnuson-Moss Act.
See Docket No. 79. This motion was referred to this magistrate judge for a
recommended disposition pursuant to 28 U.S.C. § 636(b)(1)(B) and the October
16, 2014, standing order of the Honorable Jeffrey L. Viken, United States
District Judge.
FACTS
The motor vehicle accident giving rise to the claims in this lawsuit
occurred June 22, 2016. The state law claims asserted herein are governed by
a three-year statute of limitations. See SDCL § 15-2-12.2. The statute of
limitations in this matter ran on June 22, 2019.
Heavy filed its initial complaint in this court on June 17, 2019. See
American Zurich Ins. Co. v. Kumho, 4:19-cv-5044 Docket No. 1 (D.S.D.). That
original complaint named KTCI as a defendant and alleged it was the parent
corporation for codefendant Kumho Tire U.S.A., Inc. (“KTUSA”). The original
complaint alleged that KTCI designed, manufactured, sold, distributed, and
supplied motor vehicle tires in the United States and South Dakota. Id. at
pp. 1-2, ¶ 4.
No evidence appears in the record regarding whether Heavy ever served
KTCI with the summons and original complaint in this case. No evidence

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appears in the record regarding whether KTCI had actual notice of Heavy’s
complaint if it was not actually served on KTCI.
KTUSA was served with the original complaint on June 24, 2019. Id. at
Docket No. 4. KTUSA thereafter filed an answer on July 15, 2019, denying that
KTCI manufactured the accident tire. Id. at Docket No. 9.
Thereafter, Heavy filed an amended complaint on July 26, 2019, in which
it added defendant Kumho Tire (Vietnam) Co., Ltd. (“Kumho Vietnam”) and
alleged that Kumho Vietnam manufactured the accident tire. Id. at Docket
No. 12 at p. 2, ¶ 6. Despite alleging that Kumho Vietnam manufactured the
tire involved in the accident at the heart of this case, Heavy continued to also
allege that KTCI manufactured the accident tire. Id. at pp. 1-2, ¶ 4.
No proof of service of process of the amended complaint appears in the
record regarding service on KTCI. KTCI alleges, without citing to any authority
or providing any documentation, that it was served with Heavy’s amended
complaint on January 29, 2020. See Docket No. 80 at pp. 8, 24.
On February 19, 2020, KTCI filed a notice that Heavy had granted it an
extension of time to file an answer. See Docket No. 73. In lieu of filing an
answer, KTCI then filed the instant motion to dismiss pursuant to FED. R. CIV.
P. 12. See Docket No. 79.
DISCUSSION
In diversity actions pending in federal court, the general rule is that
federal rules of procedure apply, but state substantive rules apply. Hanna v.
Plumer, 380 U.S. 460 (1965). However, where application of a federal
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procedural rule would serve to affect a party’s substantive rights, the state
procedural rule must be applied. Walker v. Armco, 446 U.S. 740, 752-53
(1980). The court believes that, under these principals, the South Dakota rules
for commencing a court action must apply rather than federal rules.
Under FED. R. CIV. P. 3, an action is commenced by filing the complaint.
If an action is filed before the statute of limitations runs, then the action is
timely so long as service of the complaint and summons is completed within
the 90 days set forth by FED. R. CIV. P. 4(m).
Not so under South Dakota law. Under South Dakota law, a suit is
commenced by service upon the defendant. SDCL § 15-2-30. One can obtain
a 60-day extension of the statute of limitations by placing the summons and
complaint in the hands of a sheriff or other officer of the county within the
limitations period. SDCL § 15-2-31. In such a case, the action is still deemed
timely if the sheriff or county officer served the summons and complaint within
60 days after the same have been placed in their hands. Id.
Here, because Heavy filed its complaint mere days before the running of
the statute of limitations, the court finds the application of Rule 3 would affect
the substantive rights of the parties. Had Heavy filed in state court, it would
have been required to actually serve KTCI with the summons and complaint
before the running of the limitations period, or place the summons and
complaint in the hands of the sheriff within the limitations period and then
ensure the sheriff actually served KTCI within 60 days.

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Numerous cases have held that, under the fact pattern presented here,
the state rule for commencement of a cause of action applies rather than the
federal rule where the running of the statute of limitations is affected. See
Walker, 446 U.S. at 752-53; Brossart v. Janke, 859 F.3d 616, 628 (8th Cir.
2017); Larsen v. Mayo Medical Ctr., 218 F.3d 863, 867-68 (8th Cir. 2000);
Fischer v. Iowa Mold Tooling Co., Inc., 690 F.2d 155, 156-58 (8th Cir. 1982).
As the Eighth Circuit has said, “Walker v. Armco Steel has laid to rest the
notion that Rule 3 can ever be used to toll a state statute of limitations in a
diversity case arising under state law.” Fischer, 690 F.2d at 157.
It appears that KTCI’s statute of limitations argument may be
meritorious, but the court is stymied in the application of the above law to the
facts presented because certain crucial facts are unclear. Was KTCI ever
served with the original summons and complaint? When exactly was KTCI
served with the amended complaint? When was the summons and amended
complaint placed into the hands of a process server for purposes of serving
KTCI?
Heavy, in its response to KTCI’s motion, raises two arguments which are
problematic in their own way. The South Dakota statute provides in pertinent
part, “[a]n action is commenced as to each defendant when the summons is
served on him, or on a codefendant who is . . . otherwise united in interest with
him.” Heavy asserts that service upon KTUSA is effectively also service upon
KTCI because the two are “united in interest.” However, Heavy cites no law to

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that effect and only notes in a footnote that both entities are represented by the
same lawyers. Law by anecdote does not suffice here.
The only law the court has been able to find applying this “united in
interest” language from the South Dakota statute cuts against Heavy’s
assertion. In Spiska Engineering, Inc. v. SPM Thermo-Shield, Inc., 798 N.W.2d
683, 684-85 (S.D. 2011), Spiska sued SPM on a breach of contract claim and
obtained a judgment against SPM. SPM was wholly owned by an individual
named Joseph Raver, who was SPM’s sole shareholder, president and CEO.
Raver was not a party to the contract action. Id. at 685. A receiver was
appointed to liquidate SPM’s assets to satisfy the judgment and, when Raver
was served with notice of the sale, he filed an objection. Id. The circuit court
overruled the objection and Raver appealed, arguing that the court never had
jurisdiction over him. Id. The Supreme Court of South Dakota agreed. The
court held the circuit court did not acquire personal jurisdiction over Raver
simply by serving SPM with service of process. Id. at 690.
Although Spiska is not completely on point here, the issue being whether
service on a defendant who is “united in interest” with an unnamed party can
be subject to the court’s personal jurisdiction when he makes a voluntary
appearance before the court, nonetheless, it is instructive. A corporation
wholly owned by a sole individual who also occupies all officer positions within
the corporation can hardly be said to have lacked notice of the proceedings
against the corporation. Yet Heavy argues KTCI should be deemed to have
been timely served because it had notice of the proceedings.
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In In re Briggs, 898 N.W.2d 465, 467-68 (S.D. 2017), a deceased mother
had created a trust under which her son, Thomas, was disinherited, and her
daughter, Judith, was the sole beneficiary and also trustee of the trust.
Thomas was given notice of his mother’s death, the existence of the trust and
he was advised of the 60-day limitations period for contesting the trust. Id.
Approximately two years later, he brought suit to contest the trust alleging his
mother had lacked capacity and asserting Judith unduly influenced his mom.
Id. at 468. Trying to get around the 60-day limitations period, Thomas argued
his claim against Judith for breach of fiduciary duty should be subject to a
three-year statute of limitations. Id. at 471. The court rejected this argument,
noting he sued his sister on the theory that, in her role as caretaker of their
mother, Judith had unduly influenced the mom. Id. The court rejected this
argument because Thomas had sued Judith only in her capacity as the trustee,
not in her individual capacity. Id. Thus, in Briggs, the court refused to extend
the statute of limitations for the same person—Judith—in her different
capacities. This certainly cuts against Heavy’s argument that service on
KTUSA, a separate corporate entity from KTCI, should serve as service on KTCI
for statute of limitations purposes.
Heavy makes the second argument that, under FED. R. CIV. P. 15(c) the
amendment should relate back to the original complaint. In this regard, Heavy
asserts KTCI had “actual notice” of the complaint. Again, though, Heavy
provides the court with no citation to any support for this assertion. In
addition, Heavy argues that KTCI knew or should have known that but for a
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mistake about the proper identity of the party, the party would have been
named. But this argument flies in the face of the facts: KTCI was named as a
defendant in the original complaint, it just was never apparently served with
the original summons and complaint. Rule 15(c) applies when a defendant is
not named in the original complaint and later is named in an amendment. In
fact, although Heavy says it was “mistaken” about which entity actually
manufactured and designed the accident tire, the statement about KTCI’s role
for purposes of this lawsuit is identical in both the original complaint and the
amended complaint. See 5:19-cv-5044 at Docket No. 1, ¶ 4, and Docket
No. 12, ¶ 4. The court is unconvinced that a party’s naming of a defendant
and failing to serve that defendant—when service is required in order to toll the
statute of limitations—can be excused by later amending the complaint and
then (untimely) serving that amended complaint.
The only law Heavy cites in support of its Rule 15(c) argument is the rule
itself and Orsorio v. Minneapolis Hotel Acquisition Group, LLC, 335 F. Supp.
3d 1141 (D. Minn. 2018). In Orsorio, a plaintiff sued the hotel he had
previously been employed at and had been fired from. Id. at 1142-43. In
between the time the plaintiff was fired and the time he sued, the hotel had
changed hands, so he sued the successor owner. Id. But, it turned out that
the previous owner, plaintiff’s actual employer, had retained all liabilities. Id.
So plaintiff amended his complaint two days after the statute of limitations had
run and named his former employer as the defendant. Id. He argued the

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amendment related back because, but for a mistake, he would have named the
right defendant and the court agreed. Id. at 1144-46.
Here, Heavy did name KTCI in its original complaint, it just failed to
serve KTCI with the summons and the original complaint. That is a significant
difference from Orsorio—here, there was no mistaken omission of the
defendant from the original complaint. There was simply an omission of
another defendant, Kumho Vietnam. Also, while in Orsorio the proper
defendant was served within two days of the running of the statute of
limitations, here KTCI was not apparently served until January, 2020. It is
easy for a court to presume there is no prejudice where the missing of the
statute of limitations is a matter of two days. It is less easy to make such a
presumption where the lapse is seven months.
CONCLUSION
Because so much of the factual predicate and the law is unaddressed by
the parties regarding the statute of limitations issue, the court gives the parties
this opportunity to address the issues, factual and legal, outlined by the court
above. Each party, should they wish to, may file a supplemental brief
addressing the issues raised by the court. Briefs must be on file no later than
close of business (5:00 p.m. Central Daylight Time) on Friday, May 1, 2020.
DATED this 17th day of April, 2020.
BY THE COURT:

VERONICA L. DUFFY
United States Magistrate Judge
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