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Vermillion Area Chamber of Commerce and Development Co. v. Eagle Creek Software Services Inc.

United States District Court, D. South Dakota, Southern Division

May 13, 2016

VERMILLION AREA CHAMBER OF COMMERCE AND DEVELOPMENT COMPANY, Plaintiff,
v.
EAGLE CREEK SOFTWARE SERVICES, INC., a Minnesota Corporation, KEN BEHRENDT, KEVIN BURKHART, BOB DILLON, and LAURA BEHRENDT, Defendants.

          MEMORANDUM OPINION AND ORDER

          KAREN E. SCHREIER, UNITED STATES DISTRICT JUDGE.

         Plaintiff, Vermillion Area Chamber of Commerce and Development Company (VCDC), moves for an order remanding the case to Clay County Circuit Court, in the First Judicial District. Docket 6. VCDC also moves to strike portions of an affidavit filed by one of defendants' attorneys, Michael E. Obermueller. Docket 17. Defendants resist the motions. For the following reasons, the motions are denied.

         BACKGROUND

         VCDC is a non-profit corporation that operates in Vermillion, South Dakota. Eagle Creek is a technology company, and its principal place of business is located in Eden Prairie, Minnesota. Ken Behrendt, Laura Behrendt, Kevin Burkhart, and Bob Dillon are Minnesota residents and shareholders of Eagle Creek.

         The dispute stems from negotiations among VCDC, Eagle Creek, and the State of South Dakota through the Governor's Office of Economic Development (GOED). While specific details are not before the court, the negotiations considered an arrangement where Eagle Creek would expand its South Dakota business operations into Vermillion, South Dakota, in exchange for certain monetary benefits to aid in the expansion. The parties also agreed that VCDC would construct a building that it would lease to Eagle Creek. On June 13, 2013, VCDC and Eagle Creek signed a written agreement memorializing the terms of the lease.

         VCDC initiated this action against Eagle Creek in state court on October 27, 2014, by serving the summons and complaint on CT Corporation System in Pierre, South Dakota. CT Corporation was the registered agent for Eagle Creek at the time. The complaint alleged claims for breach of contract and detrimental reliance. Due to communication errors between Eagle Creek and CT Corporation, Eagle Creek did not receive actual notice of the lawsuit from CT Corporation. Instead, an Eagle Creek employee noticed a newspaper article that was published on December 8, 2014, that indicated VCDC had moved for default judgment against Eagle Creek.

         After Eagle Creek successfully obtained additional time to respond to the complaint from the state court, the parties conducted discovery. Both parties submitted and responded to requests for admissions, production of documents, and interrogatories. The parties also deposed multiple people. VCDC deposed three Eagle Creek representatives: Kurt Egertson, Ken Behrendt, and Jeff Brusseau. Eagle Creek deposed four VCDC representatives: Nate Welch, Paul Preister, Sheila Gestring, and Steve Howe. Eagle Creek also deposed five GOED representatives.

         Both parties also sought final adjudication of the lawsuit through motions for summary judgment. VCDC filed a motion for summary judgment on May 11, 2015. Eagle Creek filed a motion for summary judgment on September 14, 2015. Approximately one week prior to the hearing scheduled to address both motions for summary judgment, the parties entered into a stipulation that allowed VCDC to amend its complaint. VCDC filed its amended complaint on October 5, 2015.

         The amended complaint added as named defendants the four shareholders of Eagle Creek: Ken Behrendt, Laura Behrendt, Kevin Burkhart, and Bob Dillon. In addition to the original causes of action, the amended complaint alleged claims of fraud and deceit and sought to pierce the corporate veil to subject the shareholders to personal liability. On October 13, 2015, the individual shareholders, with written consent from Eagle Creek, filed notice of removal of the action to this court pursuant to 28 U.S.C. §§ 1441(a) and 1446. Defendants relied upon diversity of citizenship as the basis for this court's jurisdiction under 28 U.S.C. § 1332. VCDC moves to remand the case to Clay County Circuit Court in the First Judicial District of South Dakota.

         STANDARD OF REVIEW

         The party invoking federal jurisdiction bears the burden of establishing that all the prerequisites for jurisdiction are satisfied. Hatridge v. Aetna Cas. & Sur. Co., 415 F.2d 809, 814 (8th Cir. 1969). “Federal courts are to ‘resolve all doubts about federal jurisdiction in favor of remand' ” because removal statutes are construed strictly. Dahl v. R.J. Reynolds Tobacco Co., 478 F.3d 965, 968 (8th Cir. 2007).

         DISCUSSION

         I. Motion to Strike.

         VCDC moves to strike portions of an affidavit that Attorney Obermueller filed in support of defendants' opposition to the motion to remand. VCDC asserts that the affidavit is “replete with inadmissible hearsay, legal conclusions, speculation, conjecture, and statements lacking personal knowledge of which the affiant is not qualified to testify.” Docket 17 at 2. VCDC relies upon Federal Rule ...


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