CONSIDERED ON BRIEFS JANUARY 8, 2018
APPEAL
FROM THE CIRCUIT COURT OF THE SEVENTH JUDICIAL CIRCUIT
PENNINGTON COUNTY, SOUTH DAKOTA THE HONORABLE CRAIG A.
PFEIFLE Judge
JOHN
K. NOONEY ROBERT J. GALBRAITH of Nooney & Solay, LLP
Rapid City, South Dakota Attorneys for plaintiff and
appellant.
ROGER
A. TELLINGHUISEN MICHAEL V. WHEELER of DeMersseman, Jensen,
Tellinghuisen & Huffman, LLP Rapid City, South Dakota
Attorneys for defendants and appellees.
JENSEN, JUSTICE.
[¶1.]
McKie Ford Lincoln, Inc. (McKie Ford) filed suit against
Scott Hanna and Gateway Automotive, LLC (Gateway) seeking to
enforce a non-competition and disclosure agreement
(Agreement). Hanna and Gateway filed a counterclaim alleging
a cause of action for barratry. The parties filed
cross-motions for summary judgment. The circuit court granted
Hanna and Gateway's motion and denied McKie Ford's
motion. McKie Ford appeals.
Background
[¶2.]
Scott Hanna was hired as a sales manager for McKie Ford in
June of 2009. On June 18, 2009, as part of his employment,
Hanna signed the Agreement, which included a covenant not to
compete, stating in pertinent part:
On termination of my employment, for any cause whatsoever, I
will not engage to work for any individual, firm, or entity
engaged in the same or similar business or be a principal,
member, or owner of any entity who is engaged in the same or
similar line of business within 200 miles of the city limits
of Rapid City for a period of one year subsequent to such
termination, not to include any period of violation or period
of time required for litigation to enforce the covenants.
[¶3.]
On February 1, 2013, Hanna approached Mark McKie (McKie) to
resign his position. Hanna told McKie he was leaving McKie
Ford to sell cars, trucks, SUVs, campers, RVs, boats, and
other recreational vehicles at another location in Rapid
City. In March of 2013, Hanna and Adam Ray began operating
Gateway Autoplex, LLC (Gateway Autoplex) in Rapid City. Ray
was an employee of Granite Buick GMC (Granite Buick) and had
also signed a non-compete agreement.
[¶4.]
On April 4, 2013, in response to the operation of Gateway
Autoplex, McKie Ford sued Hanna seeking injunctive relief to
enforce the covenant not to compete against Hanna. Granite
Buick sued Ray seeking to enforce the covenant not to compete
against Ray. The two cases were consolidated. Hanna and Ray
each asserted affirmative defenses to the enforcement of the
covenants not to compete, including estoppel, waiver, and
fraudulent inducement. The circuit court bifurcated the
proceedings to allow the jury to make fact determinations on
the affirmative defenses raised by Hanna and Ray. A jury
found for Hanna and Ray on several of their defenses to the
enforcement of the covenants not to compete. The circuit
court treated the jury's determination as binding and
entered an order denying injunctive relief against both Hanna
and Ray. Granite Buick and McKie Ford appealed, asserting
they did not consent to a trial by jury on the equitable
issues. In Granite Buick GMC, Inc. v. Ray
(Granite I), 2014 S.D. 78, ¶ 16, 856 N.W.2d
799, 805, this Court reversed and remanded for the circuit
court to make findings of fact and conclusions of law on the
claims and defenses for injunctive relief.
[¶5.]
On remand, the circuit court found in favor of Hanna and Ray
and denied injunctive relief. Granite Buick and McKie Ford
appealed. In Granite Buick GMC, Inc. v. Ray
(Granite II), 2015 S.D. 93, ¶ 13, 872 N.W.2d
810, 816, we affirmed the circuit court's determination
that McKie Ford had waived its right to enforce Hanna's
covenant not to compete. The case was remitted by the Court
on December 30, 2015.
[¶6.]
On July 24, 2015, Hanna became an owner in
Gateway[1] in Pierre. Gateway began operating in
August of 2015, selling both new and used automobiles,
including new Ford and Lincoln models. McKie Ford also sold
new Ford and Lincoln models. Gateway is located within 200
miles of McKie Ford in Rapid City. In August 2015, McKie Ford
filed this action against Hanna and Gateway in an attempt to
enforce the Agreement.
[¶7.]
The circuit court heard the parties' cross-motions for
summary judgment on February 4, 2016. The court granted the
motion for summary judgment filed by Hanna and Gateway and
denied McKie Ford's motion. The court determined that the
tolling provision in the Agreement did not extend the one
year term of the non-compete because McKie Ford was
unsuccessful in the other litigation and because the
non-compete could not be enforced beyond the two year limit
in SDCL 53-9-11. On April 18, 2017, the circuit court entered
a final dismissal of Hanna and Gateway's counterclaim
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