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O'Neill Farms, Inc. v. Reinert

March 10, 2010

O'NEILL FARMS, INC., PLAINTIFF AND APPELLANT,
v.
TODD REINERT D/B/A ROCKIN' R FARMS, DEFENDANT AND APPELLEE.



APPEAL FROM THE CIRCUIT COURT OF THE SIXTH JUDICIAL CIRCUIT TODD COUNTY, SOUTH DAKOTA HONORABLE KATHLEEN F. TRANDAHL Judge.

The opinion of the court was delivered by: Severson, Justice

CONSIDERED ON BRIEFS ON JANUARY 11, 2010

[¶1.] Tony O'Neill, a South Dakota resident and vice president of O'Neill Farms, Inc. (O'Neill Farms), commenced this breach of contract action against Todd Reinert in Todd County, South Dakota. The suit was based on disputes arising from a written agreement under which O'Neill Farms, a South Dakota corporation, leased to Reinert a 2007 John Deere combine. Reinert contacted O'Neill in response to a "combine for lease" advertisement and, after negotiations, signed a lease agreement that included a forum-selection clause. The clause stated: "if any legal action is taken it will be in Todd Co. SD[.]" Despite this clause, Reinert, a resident of Texas, filed a motion to dismiss for lack of personal jurisdiction. The circuit court granted this motion and dismissed O'Neill Farms' action. The circuit court concluded: (1) the forum-selection clause was unreasonable, and therefore, unenforceable; and, (2) because the forum-selection clause was unreasonable, imposing personal jurisdiction on Reinert would violate due process. O'Neill Farms appeals.

FACTS AND BACKGROUND

[¶2.] O'Neill Farms is a South Dakota corporation that farms in Bennett County and Todd County, South Dakota, and also leases farm equipment to farmers and commercial harvesters. Tony O'Neill is the vice president and registered agent of the corporation. The farming operation is near the Nebraska/South Dakota border, and the mailing address of O'Neill Farms and Tony O'Neill is HC 77 Box 33A, Cody, Nebraska, 69211. As part of O'Neill Farms' combine rental business, it places advertisements in the High Plains Journal, a farm magazine published in Dodge City, Kansas. Todd Reinert, who had previously leased from O'Neill, read an advertisement in the Journal and contacted O'Neill at the South Dakota phone number listed.

[¶3.] Without assistance of counsel, O'Neill drafted a two-page combine lease. The lease was written on O'Neill Cattle Company, Inc. letterhead. O'Neill Cattle Company is also a South Dakota company, but is a separate corporation from O'Neill Farms. The letterhead for O'Neill Cattle Company included the Cody, Nebraska, address and the same South Dakota phone number as the advertisement. The letterhead also included a fax number with the South Dakota area code. Neither party challenges the existence or validity of the lease between O'Neill Farms and Reinert. The lease also included a forum-selection clause. The parties conceded that they have transacted business before and that the prior lease was similar. It is undisputed that the parties conducted conversations over the phone with Reinert initiating at least two of the conversations. As a result of these negotiations, at least one term of the lease was amended.

[¶4.] On August 10, 2007, O'Neill signed the lease and sent it to Reinert. On August 19, O'Neill shipped the combine from South Dakota to Ness City, Kansas, where it remained until Reinert signed the lease and paid the rent. Reinert signed the lease in Texas on September 15, 2007. Once O'Neill received payment, the combine was shipped from Ness City, Kansas, to Dumas, Texas. Various problems arose with the combine, and disputes developed regarding each party's responsibilities under the lease. Ultimately, O'Neill sent a truck to transport the combine back to South Dakota. O'Neill Farms subsequently served a summons and complaint on Reinert in Texas for breach of the lease claiming non-payment of numerous obligations. Reinert responded with an answer and counterclaim also alleging breach of contract.

[¶5.] On December 9, 2008, Reinert filed a SDCL 15-6-12(b)(2) motion to dismiss for lack of personal jurisdiction and submitted an affidavit in support. The circuit court conducted a review of the record and issued a memorandum decision on May 15, 2009, granting Reinert's motion. The circuit court concluded that the forum-selection clause was unreasonable, and therefore, unenforceable. Based upon its decision that the forum-selection clause was unreasonable, the circuit court also decided that "to impose personal jurisdiction on Defendant would necessarily deprive Defendant of fair play and substantial justice" and would "run afoul" of Reinert's due process guarantee under the Fourteenth Amendment. O'Neill Farms appeals the circuit court's ruling. We reverse.

ISSUES

[¶6.] We restate the issues:

1. Whether the circuit court erred in concluding Reinert made a strong showing that the forum-selection clause was unreasonable under the circumstances.

2. Whether the circuit court erred in concluding that imposing in personam jurisdiction on Reinert would deprive him of fair play and substantial justice.

STANDARD OF REVIEW

[¶7.] "'We review issues regarding a court's jurisdiction as questions of law under the de novo standard of review.'" Daktronics, Inc. v. LBW Tech Co. Inc., 2007 SD 80, ¶2, 737 NW2d 413, 416 (quoting Grajczyk v. Tasca, 2006 SD 55, ¶8, 717 NW2d 624, 627). In Guthmiller v. Deloitte & Touche, LLP, we ...


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