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Black Hills Surgical Physicians, LLC v. Setliff

Supreme Court of South Dakota

September 24, 2014

BLACK HILLS SURGICAL PHYSICIANS, LLC, Plaintiff and Appellant,
v.
REUBEN C. SETLIFF, III, Defendant and Appellee

Considered on Briefs February 18, 2014

APPEAL FROM THE CIRCUIT COURT OF THE SEVENTH JUDICIAL CIRCUIT PENNINGTON COUNTY, SOUTH DAKOTA. THE HONORABLE CRAIG A. PFEIFLE, Judge.

STEPHEN C. HOFFMAN, HEATHER LAMMERS BOGARD, JESS M. PEKARSKI of Costello Porter Hill Heisterkamp, Bushnell & Carpenter, LLP, Rapid City, South Dakota, Attorneys for plaintiff and appellant.

MICHAEL C. LOOS of Clayborne, Loos, & Sabers, LLP, Rapid City, South Dakota, Attorneys for Larry Teuber, MD.

KENT R. CUTLER, KIMBERLY R. WASSINK, JOSEPH M. DYLLA of Cutler & Donahoe, LLP, Sioux Falls, South Dakota, Attorneys for defendant and appellee.

KONENKAMP, Justice. GILBERTSON, Chief Justice, and ZINTER, SEVERSON, and WILBUR, Justices, concur.

OPINION

Page 408

KONENKAMP, Justice

[¶1] In this appeal seeking to vacate an arbitration award, we examine whether the arbitrator exceeded her powers.

Background

[¶2] In May 2012, Dr. Rueben C. Setliff, III, brought suit in circuit court

Page 409

against Drs. Larry Teuber, Pat Tlustos, Jim Shea, Jim Scherrer, Lew Papendick, and Jay Hammerquist (Managers) individually and in their capacities as members of the management committee of Black Hills Surgical Physicians, LLC (BHSP).[1] Setliff cast his claim as a derivative action under SDCL chapter 47-34A (2012).[2] He alleged that the Managers breached their fiduciary duties under BHSP's Operating Agreement. He sought reimbursement of his expenses and attorney's fees, removal and replacement of the Managers, redemption of Teuber's membership interests, and an award of damages to BHSP, including repayment to BHSP of certain distributions to Teuber.

[¶3] Relying on the provisions of the Operating Agreement, BHSP applied to the circuit court to compel Setliff to arbitrate his claims. The Operating Agreement provides, in part, that " [a]ny dispute or difference arising between a Member and [BHSP] whether as a result of this Agreement or otherwise, shall be subject to binding arbitration." BHSP asserted that as a derivative action against the Managers, Setliff was the " Company" and the Managers were the " Member," and, therefore, the suit was between " a Member" and BHSP.

[¶4] The circuit court ruled that the dispute was subject to arbitration. Setliff then filed his claim against the Managers with the American Arbitration Association. BHSP brought a counterclaim requesting that Setliff be expelled from the company. The parties stipulated that no record of the arbitration proceeding would be made. An attorney was selected as the arbitrator, who in accordance with a requirement in the ...


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