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Koch v. Tracy

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

July 12, 2016

STEVEN KOCH, Plaintiff,
v.
KEN TRACY, individually and in his official capacity; and CITY OF MITCHELL, Defendants.

          ORDER GRANTING DEFENDANTS' MOTION FOR SUMMARY JUDGMENT

          KAREN E. SCHREIER UNITED STATES DISTRICT JUDGE

         Defendants, Ken Tracy and the city of Mitchell, move jointly for summary judgment. Plaintiff, Steven Koch, resists the motion. For the following reasons, the court grants the motion for summary judgment.

         BACKGROUND

         The facts, viewed in the light most favorable to Koch, the non-moving party, are as follows:

         The city of Mitchell is a municipality in Davison County, South Dakota. Koch is a resident of Mitchell. Tracy is a resident of Mitchell, and he served as the mayor of Mitchell during the time relevant here.

         Mitchell is home to what is commonly advertised as "The World's Only Corn Palace." The Corn Palace is a venue that hosts a variety of concerts, sporting events, and other exhibits. It is also a popular tourist destination. Administration of the Corn Palace is overseen by the Corn Palace director.

         The Corn Palace director is an appointed position within Mitchell's government. It is also a highly visible position within the community. In 2014, Mitchell's then-current Corn Palace director resigned after a state audit revealed that he mishandled the Corn Palace's finances. His resignation and the circumstances surrounding it generated negative publicity toward Mitchell. Koch applied for the position in June 2014 after Mitchell began advertising to fill the vacancy. He filled out Mitchell's standard job application form. Koch was interviewed on October 3, 2014.

         The interview went well for Koch, and he received a phone call from Tracy on October 9. Tracy asked if Koch was still interested in the Corn Palace director position. Koch stated that he was. Koch and Tracy arranged a time to meet in person to discuss details about the position. They met a week later on October 15. Koch and Tracy discussed various aspects of the job, such as the salary, benefits, a potential start date, and whether Koch got along with other Mitchell employees. Regarding a start date, Koch informed Tracy that the earliest he could start was on October 31 because Koch needed to give his current employer two weeks' notice. Koch and Tracy did not establish a firm start date at the meeting, but Tracy wanted to fill the position as soon as possible. Tracy verbally offered the position to Koch, and Koch accepted it. According to Koch's recollection, Tracy also informed him that "the City council vote would be a formality" with respect to Koch's approval for the position. Docket 21-1 at 20.

         Koch turned in his two weeks' notice the following day. Koch testified that at the time he turned in his two weeks' notice that he understood that his employment as Corn Palace director was conditioned on a background check, a drug screening, and a physical examination. Docket 21-1 at 24. He submitted the applicable paperwork for those procedures. Koch then spoke with Mitchell personnel on October 17 and confirmed that his first day would be October 31. Id.

         Koch spoke with Tracy again on October 20. Tracy informed Koch that some issues had arisen related to Koch's background check. Tracy asked if he could meet with Koch. Koch and Tracy arranged a meeting for later that week in Tracy's office. Tracy said that he was concerned about a 2002 misdemeanor conviction for petty theft that was on Koch's record. Tracy asked if Koch could explain what happened. Koch explained that the offense arose during his employment with his father's company called Upper Midwest Ag Products. The business was having money problems, and it could not secure a loan. Koch said that he agreed to co-sign a loan for his father, but the business ended up in bankruptcy. Koch explained that he was caught up in a criminal investigation because of the bankruptcy and due to his signature on the loan. Although Koch was originally charged with four felonies, he pleaded guilty to one count of misdemeanor petty theft. Koch and his father were ordered to pay restitution to four victims. In response, Tracy thanked Koch for his candor and said that he would still recommend Koch for the Corn Palace director position. Tracy then gave Koch a tour of the Mitchell offices and introduced him as the next Corn Palace director to some of the Mitchell personnel. Docket 21-1 at 33.

         Koch received another phone call from Mitchell personnel on October 29. He was informed that a reporter from the Mitchell Daily Republic-the local newspaper-wanted to interview him about the Corn Palace director position. Koch spoke briefly with the reporter. Tracy was also interviewed. An article appeared in the Daily Republic the following morning discussing the interviews and the Corn Palace director position.

         On October 31, Koch reported for his first day of work. Koch was informed approximately twenty minutes after he arrived that Tracy would like to meet with him. Tracy stated that he recently became aware of additional facts surrounding Koch's misdemeanor conviction. For example, Tracy learned from others that Koch and his father used down payments that they had received from customers to pay outstanding bills. Tracy also asked Koch if there were alleged to be fourteen victims rather than four. Koch disputed that number. He believed that there were only four victims due to the number of charges originally brought against him. Tracy told Koch that he needed to trust his personnel and that he had lost confidence in Koch. Koch asked for an opportunity to prove himself through a probationary or trial period. Tracy refused and told Koch that "he wasn't going to recommend [him]" for the Corn Palace director position. Docket 21-1 at 36. Tracy also told Koch that it would be in his own best interest to withdraw his name from consideration for the position so that Koch could control the public's perception of what occurred.

         Mitchell issued a press release later that day. The press release states in its entirety that "Mayor Ken Tracy has announced that Steve Koch has withdrawn his name for consideration as the Corn Palace Director. The search for a new Corn Palace director will begin immediately." Docket 21-1 at 89. An email was sent from Tracy's office to the Mitchell city council also announcing that Koch had withdrawn his name. Tracy stated during a radio interview that same day that Koch had withdrawn his name from consideration for the position. Tracy said that he was unsure why Koch made his decision. The Daily Republic and several other South Dakota news outlets reported on Koch's purported withdrawal.

         Koch called Tracy on November 1. Koch asked if he could appear at the next city council meeting. Tracy declined. Koch called Jeff Smith, a council member, the next day. Koch asked Smith about appearing on the council's agenda. Smith responded that Koch's request could only be facilitated by Tracy and that Tracy had not placed Koch on the agenda.

         Koch filed suit in this court on May 29, 2015. Docket 1. He alleged five claims for relief: (1) a § 1983 claim against Mitchell; (2) a breach of contract claim against Mitchell and Tracy; (3) an intentional interference with contractual relations claim against Tracy in his individual capacity; (4) a defamation claim against Mitchell and Tracy; and (5) an intentional infliction of emotional distress claim against Tracy. Tracy and Mitchell move for summary judgment on all of Koch's claims.

         LEGAL STANDARD

         Summary judgment on all or part of a claim is appropriate when the movant "shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(a); see also In re Craig, 144 F.3d 593, 595 (8th Cir. 1998). The moving party can meet its burden by presenting evidence that there is no dispute of material fact or that the nonmoving party has not presented evidence to support an element of its case on which it bears the ultimate burden of proof. Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986). Once the moving party has met this burden, "[t]he nonmoving party may not ‘rest on mere allegations or denials, but must demonstrate on the record the existence of specific facts which create a genuine issue for trial.' " Mosley v. City of Northwoods, Mo., 415 F.3d 908, 910 (8th Cir. 2005) (quoting Krenik v. Cty. of Le Sueur, 47 F.3d 953, 957 (8th Cir. 1995)). "Further, ‘the mere existence of some alleged factual dispute between the parties is not sufficient by itself to deny summary judgment. . . . Instead, the dispute must be outcome determinative under prevailing law.' " Id. (quoting Get Away Club, Inc. v. Coleman, 969 F.2d 664, 666 (8th Cir. 1992)). The facts, and inferences drawn from those facts, are "viewed in the light most favorable to the party opposing the motion" for summary judgment. Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986) (quoting United States v. Diebold, Inc., 369 U.S. 654, 655 (1962)).

         DISCUSSION

         I. Background

         Mitchell is administered as an aldermanic form of government. Mitchell, S.D., Code § 1-5-1.[1] Its governing body consists of an elected mayor and a common city council. Id. A Mitchell ordinance designates several government offices as "Appointive Officers And Positions." Mitchell, S.D., Code § 1-6-1(A). The "director of the Corn Palace" is among the appointed positions listed. See id. South Dakota law provides that

Such officers as needed and provided for by ordinance shall be appointed. Each appointive officer of a municipality governed by a mayor and common council shall be appointed by the mayor with the approval of the council . . . Such officers shall be appointed annually or at intervals determined by the governing body.

SDCL 9-14-3; see also Mitchell, S.D., Code § 1-6-1(B)(2) ("Each appointive officer shall be appointed by the mayor with the approval of the city council[.]").

         A Mitchell ordinance also provides that "[e]ach appointive officer shall be appointed by the mayor with the approval of the city council for a term of office of one year[, ]" but "[a]ny appointive officer may be removed from office and employment with the city as provided by the laws of the state." Mitchell, S.D., Code § 1-6-1(B)(2). Mitchell's employee policy manual likewise explains that "the City shall have the ability to terminate appointed employees pursuant to applicable state statutory law." Docket 21-1 at 85. South Dakota law prescribes the removal process as follows:

In an aldermanic-governed municipality, the mayor, except as otherwise provided, may remove from office any officer appointed by the mayor, if the mayor believes that the interests of the municipality demand such removal.

         SDCL § 9-14-13. This statute vests the mayor with considerable discretion to remove appointed officials. The South Dakota Supreme Court has held that

The statute before us lacks both [a showing of cause for removal and an opportunity to be heard]. No opportunity to be heard is given, and it is enough if the mayor thinks there is sufficient cause. It may or may not exist, except in his imagination, but his conclusion is final.

State ex rel. Dickson v. Williams, 60 N.W. 410, 413 (S.D. 1894); see also Kierstead v. City of Rapid City, 248 N.W.2d 363, 366 (S.D. 1976). More directly, the Court has explained that appointed officials in aldermanic municipalities are at will employees. Finck v. City of Tea, 443 N.W.2d 632, 634 (S.D. 1989) (citing SDCL § 9-14-13 and noting that "[t]he Legislature has not seen fit to depart from [at will] status" regarding appointive officials).[2]

         II. Defamation

         Koch argues that Tracy issued several defamatory communications in print and by spoken word to the press and Mitchell city council.[3] Those statements represented that Koch chose to withdraw his name from consideration for the Corn Palace director position and that Tracy was unsure why Koch did so.[4] Tracy and Mitchell argue that the statements were either privileged or, if not privileged, that no defamatory statement was made.

         A. Privilege

         Defamation is either libel or slander. SDCL 20-11-2; see also SDCL 20-11-3 (defining libel) and SDCL 20-11-4 (defining slander). Libel and slander are each defined as "unprivileged" communications. Pawlovich v. Linke, 688 N.W.2d 218, 221 (S.D. 2004). "Therefore, a defamation action may not survive if the alleged defamatory communication was privileged." Id. (citing Peterson v. City of Mitchell, 499 N.W.2d 911, 915 (S.D. 1993)). South Dakota law defines several "communications which are considered ‘privileged' and therefore outside the scope of the definitions of libel or slander." Peterson, 499 N.W.2d at 915. The statute provides:

         A privileged communication is one made:

(1) In the proper discharge of an official duty;
(2) In any legislative or judicial proceeding, or in any other official proceeding authorized by law;
(3) In a communication, without malice, to a person interested therein, by one who is also interested, or by one who stands in such relation to the person interested as to afford a reasonable ground for supposing the motive for the communication innocent, or who ...

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