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Dakota Provisions, LLC v. The Hillshire Brands Co.

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

December 27, 2016

DAKOTA PROVISIONS, LLC, Plaintiff,
v.
THE HILLSHIRE BRANDS COMPANY, UNLIMITED FREIGHT, INC., and AFN, LLC, Defendants.

          MEMORANDUM OPINION AND ORDER

          KAREN E. SCHREIER, UNITED STATES DISTRICT JUDGE

         Defendant The Hillshire Brands Company moves for an order to dismiss the complaint for failure to state a claim or, alternatively, moves to transfer venue to the Northern District of Iowa. Docket 4. Defendant Unlimited Freight, Inc., joins Hillshire's motion to transfer venue. Docket 11. Defendant AFN, LLC, moves to dismiss the complaint for failure to state a claim. Docket 9. Plaintiff, Dakota Provisions, LLC, resists these motions and requests leave to amend its complaint and add Marko Dimitrijevic, an individual, as a defendant. Docket 15.

         For the following reasons, the court grants Dakota Provisions' motion to amend, denies the motions to dismiss, and denies the motion to transfer venue to the Northern District of Iowa.

         BACKGROUND

         The facts as alleged in the proposed amended complaint[1] are as follows:

         Hillshire suffered an explosion and fire at its processing facility located near Storm Lake, Iowa. As a result of this fire, Hillshire contacted Dakota Provisions to inquire as to whether Dakota Provisions could process turkeys for Hillshire. Dakota Provisions' turkey processing plant is located in Huron, South Dakota. Although Dakota Provisions generally only allows its member growers to utilize its facilities, it agreed to allow Hillshire to process turkeys at its plant.

         Under the agreement, Hillshire was responsible for arranging transportation to deliver live turkeys from Hillshire's grower farms in Iowa and South Dakota to Dakota Provisions' processing plant. Due to patented technology and specialized equipment located at Dakota Provisions' processing plant, Hillshire also agreed to transport the live turkeys in a specially sized trailer with custom-built cages that conformed to the processing plant's requirements. Hillshire hired AFN to work as a brokerage company and to arrange for transportation of the live turkeys. AFN hired Unlimited Freight as a motor carrier to transport the turkeys to the processing plant on behalf of Hillshire. Unlimited Freight hired Marko Dimitrijevic as its driver.

         To haul Hillshire's turkeys to the Huron, South Dakota, processing plant, Dimitrijevic used a vehicle and specially sized trailer owned by Dakota Provision. Then, on or about April 12, 2014, at or near Sioux City, Iowa, Dimitrijevic was involved in an accident while speeding around a curve.[2] The crash resulted in the destruction of the live haul trailer and the 60 specially designed cages, each of which contained a live turkey at the time of the crash. Dakota Provisions' trailer also suffered significant damages. Dakota Provisions seeks damages totaling $108, 468.48 plus interest.

         Dakota Provisions, LLC, instituted this action in Beadle County, South Dakota in May 2016. Docket 1. The complaint was served on Hillshire on June 8, 2016. Hillshire removed the case with AFN's consent to this court under 28 U.S.C. § 1441, based on diversity of jurisdiction under 28 U.S.C. § 1332. Id. Unlimited Freight filed its answer to the complaint (Docket 5) and consented to removal on July 11, 2016. Docket 6. Dakota Provisions sought leave to amend its complaint to add additional counts and a new defendant on August 12, 2016. Docket 15.

         DISCUSSION

         I. Motion to Amend the Complaint

         Dakota Provisions moves to amend its complaint to make the following changes: (1) add counts of vicarious liability/agency, negligent hiring, conversion, and joint and several liability against Hillshire, AFN, and Unlimited Freight; (2) add Marko Dimitrijevic as an individual defendant; and (3) add counts of negligence and negligence per se against Dimitrijevic. Docket 15. Defendants AFN and Hillshire oppose the motion and argue that the proposed amendments are futile because the amendments fail to state a claim.[3] See Docket 19; Docket 21. Defendant Unlimited Freight also opposes the motion but argues that the proposed amendment is futile because the court lacks personal jurisdiction over Dimitrijevic. Docket 23. As explained further below, the court will only consider defendants' arguments as to futility for Counts III, IV, and V of the proposed amended complaint.

         A. Legal Standard

         The purpose of pleading under the federal rules “is to facilitate a proper decision on the merits.” Foman v. Davis, 371 U.S. 178, 181-82 (1962) (rejecting the approach that, under the federal rules, “pleading is a game of skill in which one misstep by counsel may be decisive to the outcome”) (internal quotations omitted). Federal Rule of Civil Procedure 15(a) furthers this purpose by declaring that “[t]he Court should freely give leave [to amend] when justice so requires.” Fed.R.Civ.P. 15(a)(2). “[T]his mandate is to be heeded.” Foman, 371 U.S. at 182.

         “The Eighth Circuit Court of Appeals takes a ‘liberal viewpoint towards leave to amend' and leave ‘should normally be granted absent good reason for a denial.' ”Libertarian Party of S.D. v. Krebs, 312 F.R.D. 523, 525 (D.S.D. 2016) (quoting Popp Telcomm. v. Am. Sharecom, Inc., 210 F.3d 928, 943 (8th Cir. 2000)). Leave to amend should be denied only if evidence exists such as “undue delay, bad faith, or dilatory motive on the part of the movant, repeated failure to cure deficiencies by amendments previously allowed, undue prejudice to the opposing party by virtue of allowance of the amendment, [or] futility of the amendment.” Roberson v. Hayti Police Dep't, 241 F.3d 992, 995 (8th Cir. 2001) (citing Foman, 371 U.S. at 182). “Likelihood of success on the new claim or defenses is not a consideration for denying leave to amend unless the claim is clearly frivolous.” Becker v. Univ. of Neb., 191 F.3d 904, 908 (8th Cir. 1999) (citing Gamma-10 Plastics, Inc. v. Am. President Lines, Ltd., 32 F.3d 1244, 1256 (8th Cir. 1994)).

         B. The Proposed Amended Complaint is Not Futile.

         “[I]t is common practice for a party to seek leave to amend in response to a motion to dismiss.” Ireland v. Anderson, 2014 WL 3732014, at *2 (D.N.D. July 25, 2014) (citing Jameson v. State Farm Mut. Auto. Ins. Co., 871 F.Supp.2d 862, 869 (W.D.Mo. May 14, 2012)). In fact, the Eighth Circuit Court of Appeals has stated that a “motion to amend a complaint may moot a pending motion to dismiss.” Pure Country, Inc. v. Sigma Chi Fraternity, 312 F.3d 952, 956 (8th Cir. 2002); see also Janis v. Nelson, 2009 WL 4505933 (D.S.D. Nov. 24, 2009) (holding that the motion to dismiss was rendered moot after plaintiff filed an amended complaint). “An amendment is futile if ‘the amended complaint could not withstand a motion to dismiss under Rule 12(b)(6) of the Federal Rules of Civil Procedure.' ” Libertarian Party, 312 F.R.D. at 525 (quoting Zutz v. Nelson, 601 F.3d 842, 850 (8th Cir. 2010)).

         “To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, ‘to state a claim to relief that is plausible on its face.' ” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. “The plausibility standard is not akin to a ‘probability requirement, ' but it asks for more than a sheer possibility that a defendant has acted unlawfully.” Id. In this analysis, the court assumes that all facts asserted in the complaint are true and construes all reasonable inferences from those facts in a light most favorable to the complainant. Rochling v. Dep't of Veterans Affairs, 725 F.3d 927, 930 (8th Cir. 2013). A well-pleaded complaint should survive a motion to dismiss “even if it strikes a savvy judge that actual proof of those facts is improbable, and that a recovery is very remote and unlikely.” Twombly, 550 U.S. at 555-56 (internal quotations omitted); accord Johnson v. City of Shelby, 135 S.Ct. 346, 346 (2014) (per curiam) (“Federal pleading rules call for ‘a short and plain statement of the claim showing that the pleader is entitled to relief, ' Fed.R.Civ.P. 8(a)(2); they do not countenance dismissal of a complaint for imperfect statement of the legal theory supporting the claim asserted.”).

         1. Count III: Vicarious Liability

         Because this case is before the court on diversity jurisdiction, this court must look to state substantive law to define the general scope of an agency relationship and contours of vicarious liability. Gasperini v. Ctr. for Humanities, Inc., 518 U.S. 415, 427 (1996) (“Under the Erie doctrine, federal courts sitting in diversity apply state substantive law and federal procedural law.”). The parties presently do not dispute which state's laws should govern Dakota Provisions' vicarious liability claim, and the result appears to be the same under South Dakota and Iowa law. Therefore, the court will analyze the claim using South Dakota agency law.

         “Agency is a creature of state law and, in South Dakota, is governed by both statutory and common law.” Babinski Props. v. Union Ins. Co., 833 F.Supp.2d 1145, 1150 (D.S.D. 2011). South Dakota defines an agency relationship as “the representation of one called the principal by another called the agent in dealing with third persons.” SDCL § 59-1-1. “An agency relationship is either actual or ostensible.” Kasselder v. Kapperman, 316 N.W.2d 628, 630 (S.D.1982). The party claiming that an agency relationship exists has the burden to prove the existence of the relationship. Id. To determine whether an agency relationship exists, the court examines “the relations of the parties as they exist under their agreement or acts.” Id.

         “Actual agency exists when a principal and agent expressly agree to enter into an agency relationship.” A.P. & Sons Constr. v. Johnson, 657 N.W.2d 292, 297 (S.D. 2003); see also SDCL § 59-1-4 (“Agency is actual when the principal appoints the agent.”). To demonstrate the existence of an actual agency relationship, a party must show the following elements: “(1) manifestation by the principal that the agent shall act for him, (2) the agent's acceptance of the undertaking, and (3) the understanding of the parties that the principal is to be in control of the undertaking.” A.P. & Sons, 657 N.W.2d at 297. Where an actual agency relationship exists, the principal may be held liable for the agent's negligent or wrongful acts. See Kasselder, 316 N.W.2d at 630 (concluding that the principal was liable for the acts of its agent).

         Ostensible agency occurs “when by conduct or want of ordinary care the principal causes a third person to believe another, who is not actually appointed, to be his agent.” SDCL § 59-1-5; A.P. & Sons, 657 N.W.2d at 297. To establish the existence of an ostensible agency relationship, the evidence should indicate that the principal, by its representations or actions, caused a third party to believe that a person was its agent. Kasselder, 316 N.W.2d at 630 (citations omitted) (“Ostensible agency for which a principal may be held liable must be traceable to the principal and cannot be established solely by the acts, declarations or conduct of an agent.”). Where an ostensible agency relationship exists, “the principal is bound by the acts of his agent to only those persons who have ‘in good faith, and without negligence, incurred a liability or parted with value upon the faith thereof.' ” Dahl v. Sittner, 429 N.W.2d 458, 462 (S.D. 1988) (quoting SDCL § 59-6-3).

         Under South Dakota law, “[a] principal is responsible to third persons for the negligence of his agent in the transaction of the business of the agency, including wrongful acts committed by such agent in and as part of the transaction of such business; and for his willful omission to fulfill the obligation of the principal.” SDCL § 59-6-9. Further, “[t]he ancient doctrine of respondeat superior is well established as ‘holding an employer or principal liable for the employee's or agent's wrongful acts committed within the scope of the employment or agency.' ” Kirlin v. Halverson, 758 N.W.2d 436, 444 (S.D. 2008) (quoting Respondeat Superior, Black's Law Dictionary (8th ed. 2004)). For situations involving subagents, the South Dakota State Legislature has determined that because “[a] subagent, lawfully appointed, represents the principal in like manner with the original agent; and the original agent is not responsible to third persons for acts of the subagent.” SDCL § 59-3-16. But see Fanset v. Garden City State Bank, 123 N.W. 686, 688 (S.D. 1909) (stating that “where an agent has authority to employ subagents, [the agent] will not be liable for the acts or omissions of the subagent, unless in the appointment of such subagent [the agent] is guilty of fraud or negligence, or co-operates with the subagent in such acts or omissions”).

         Here, the proposed amended complaint plausibly alleges that an agency relationship existed between Hillshire, AFN, and Unlimited Freight. See, e.g., Amended Complaint at 17, ¶¶ 38-39. This agency relationship could be either actual or ostensible. The agency relationship could be actual in that the proposed amended complaint alleges that Hillshire was required to use Dakota Provisions' vehicle, trailer, and cages to haul the turkeys to the processing plant and that the vehicle, trailer, and cages were picked up and actually used. See Amended Complaint at 15, ¶¶ 11-17. One inference from these allegations, is that a long-standing relationship existed between Hillshire, AFN, and Unlimited Freight, and that the parties had a contract that allowed Unlimited Freight and AFN to use the equipment on Hillshire's behalf. Another inference is that Hillshire entered into an emergency agreement with AFN and Unlimited Freight that gave them the actual authority to use Dakota Provisions' equipment on Hillshire's behalf.

         The agency relationship between Hillshire, AFN, and Unlimited Freight could also be ostensible. The proposed amended complaint alleges that AFN and Unlimited Freight used Dakota Provisions' equipment to transport turkeys on Hillshire's behalf. See Amended Complaint at 15, ΒΆ 17. Thus, it would be reasonable for Dakota Provisions to believe that Hillshire was holding out AFN ...


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