United States District Court, D. South Dakota, Central Division
OPINION AND ORDER DENYING MOTION TO DISMISS
ROBERTO A. LANGE UNITED STATES DISTRICT JUDGE
Shepherd Seed Company, LLC (Shepherd Seed) sued Defendant
Pioneer Hi-Bred International, Inc. (Pioneer) for breach of
contract, claiming that Pioneer owes it bonus payments for
selling Pioneer's soybean seed. Doc. 8. Pioneer moved to
dismiss Shepherd Seed's amended complaint, arguing that
the statute of frauds made the alleged contract
unenforceable. Doc. 9. Because Shepherd Seed has adequately
pleaded an exception to the statute of frauds, Pioneer's
motion to dismiss is denied.
2010, Scott Johnson, a Pioneer representative, began
recruiting Steve Shepherd and his sons Caleb and Shane
(collectively "the Shepherds") to sell Pioneer
soybean seed in bulk. Doc. 8 at ¶¶ 5, 7. Selling
Pioneer soybean seed in bulk required building a costly bulk
system, but Pioneer's ProBulk System Sales program
allowed bulk seed sales representatives to receive bonuses of
$2.50 from Pioneer for every unit of bulk sales, up to 75% of
the construction or purchase price of the bulk system,
excluding concrete and electricity costs. Doc. 8 at
¶¶ 7-8. During an event Pioneer hosted in
Chamberlain, South Dakota, in the fall of 2010, Pioneer's
representatives introduced the Shepherds to the ProBulk
System Sales program and persuaded them to sell Pioneer's
seed in bulk. Doc. 8 at ¶¶ 7-8. Sometime during or
shortly after the event in Chamberlain, the Shepherds, as
officers of Shepherd Seed, executed a written ProBulk System
Sales Representative Agreement (Agreement) provided by
Pioneer. Doc. 8 at ¶ 9. Shepherd Seed alleges that this
Agreement constituted a written contract between the parties
embodying the terms of the ProBulk System Sales program,
namely that bulk seed sales representatives would receive the
bonus payments discussed above. Doc. 8 at ¶9. Shepherd
Seed provided the executed Agreement to Johnson, who in turn
submitted the Agreement to Pioneer. Doc. 8 at ¶ 10.
on Pioneer's representations in the Agreement and at the
Chamberlain event, Shepherd Seed constructed a bulk system
consisting of five bins, a seed treater and treater building,
pumps, computer systems, and the other necessary components.
Doc. 8 at ¶ 11. Shepherd Seed began selling
Pioneer's seed in bulk out of its bulk system in 2011 and
continued doing so through August 2016. Doc. 8 at ¶ 15.
As part of the Agreement and the ProBulk System Sales
program, Pioneer placed its logo on Shepherd Seed's bins
and buildings at Shepherd Seed's expense. Doc. 8 at
¶ 14. Shepherd Seed expanded its bulk system in 2013 and
submitted its costs of construction to Pioneer. Doc. 8 at
¶ 16. Shepherd Seed alleges that it was incentivized to
expand when it did because the Shepherds understood that
while Pioneer would be discontinuing the ProBulk System Sales
program, bulk systems existing before that time would be
grandfathered into the program. Doc. 8 at ¶ 16.
to Shepherd Seed, Pioneer has refused to pay Shepherd Seed
any of the bonuses promised under the ProBulk System Sales
program and the parties' Agreement. Doc. 8 at ¶ 18.
When Shepherd Seed inquired about the unpaid bonus payments,
Pioneer initially claimed that the payments were included in
the periodic commission payments Shepherd Seed received. Doc.
8 at ¶ 19. Pioneer later claimed that no bonus payments
were made because Shepherd Seed did not enter into an
agreement with Pioneer to participate in the ProBulk System
Sales program until 2015. Doc. 8 at ¶ 20.
Seed filed an amended complaint against Pioneer in March
2018. Doc. 8. Count I of the amended complaint asserted a
claim for breach of contract, alleging that Pioneer had
violated the Agreement by failing to pay Shepherd Seed
bonuses for selling Pioneer's soybean seed in bulk. Doc.
8 at ¶¶ 21-25. Count II of the amended complaint
asserted a claim for breach of the implied covenant of good
faith and fair dealing, alleging that Pioneer had violated
the implied covenant by falsely claiming that the bonus
payments had been made as part of Shepherd Seed's
commission payments and by denying that Shepherd Seed was a
participant in the ProBulk System Sales program. Doc. 8 at
¶¶ 26-31. Pioneer moved to dismiss the amended
complaint for failure to state a claim under Rule 12(b)(6) of
the Federal Rules of Civil Procedure. Doc. 9.
Standard for a Motion to Dismiss under Rule 12(b)(6)
motion to dismiss under Rule 12(b)(6), courts must accept a
plaintiffs factual allegations as true and construe all
inferences in the plaintiffs favor, but need not accept a
plaintiffs legal conclusions. Retro Television Network.
Inc. v. Luken Commc'ns, LLC, 696 F.3d 766, 768-69
(8th Cir. 2012). To survive a motion to dismiss for failure
to state a claim, a complaint must contain "a short and
plain statement of the claim showing that the pleader is
entitled to relief." Fed.R.Civ.P. 8(a)(2). Although
detailed factual allegations are unnecessary, the plaintiff
must plead enough facts to "state a claim to relief that
is plausible on its face." Ashcroft v. Iqbal
556 U.S. 662, 678 (2009) (quoting Bell Atlantic Corp. v.
Twombly. 550 U.S. 544, 570 (2007)). A claim is plausible
on its face "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., "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 556 (quoting Scheuer v.
Rhodes, 416 U.S. 232, 236 (i974)). Still,
"conclusory statements" and "naked
assertion[s] devoid of further factual enhancement" do
not satisfy the plausibility standard. Iqbal,
556U.S.at678 (alteration in original) (citation and internal
Breach of Contract Claim
motion to dismiss Shepherd Seed's breach of contract
claim turns on South Dakota's statute of frauds. Under
that statute, an "agreement that by its terms is not to
be performed within a year from the making thereof is
unenforceable unless the agreement is reduced to writing and
signed by the party to be charged. SDCL § 53-8-2(1). The
purpose of the statute of frauds "is to remove
uncertainty by providing written evidence of an enforceable
obligation, " but the statute cannot itself be used to
perpetrate a fraud. Biegler v. Kraft. 924 F.Supp.2d
1074, 1084 (D.S.D. 2013) (quoting Jacobson v.
Gulbransen. 623 N.W.2d 84, 90 (S.D. 2001)). Thus, for
instance, a party could not "accept the benefits of a
contract that the statute of frauds requires to be in
writing, and then invoke the statute to avoid payment."
Lampert Lumber Co. v. Pexa, 184 N.W. 207, 208 (S.D.
1921). To avoid such injustices, South Dakota recognizes
certain exceptions to the statute of frauds.
Jacobson. 623 N.W.2d at 90-91. The question here is
whether one of these exceptions applies. Pioneer argues that
Shepherd Seed fails to state a claim for breach of contract
because although Shepherd Seed alleges a multi-year
agreement, it fails to allege the existence of a written
contract signed by Pioneer. Pioneer evidently did not
countersign the Agreement it had Shepherd Seed sign. Shepherd
Seed does not contend that its Agreement with Pioneer could
have been performed within one year such that the statute of
frauds does not apply. Instead, Shepherd Seed argues that the
doctrine of promissory estoppel removes the Agreement from
the statute of frauds.
estoppel is a "recognized exception" to South
Dakota's statute of frauds. Biegler, 924
F.Supp.2d at 1086. The Supreme Court of South Dakota has
provided two similar but slightly different tests for
promissory estoppel. In some cases, the Supreme Court of
South Dakota has identified the elements of promissory
estoppel as "a promise which the promissor should
reasonably expect to induce action or forbearance on the part
of the promisee or a third person and which does induce such
action or forbearance." Jacobson, 623 N.W.2d at
91 (alteration and internal marks omitted) (quoting Scott
v. Hyde, 440 N.W.2d 528, 531 (S.D. 1989)). Such a
promise becomes binding "if injustice can be avoided
only by enforcement of the promise." Id.
(internal marks omitted). In other cases, however, the
Supreme Court of South Dakota has stated that promissory
estoppel requires: 1) a promise; 2) that the detriment
suffered in reliance on the promise was substantial in an
economic sense; 3) that the loss to the promisee was
foreseeable by the promissor; and 4) that the promisee acted
reasonably in justifiable reliance on the promise made.
Durkee v. Van Well 654 N.W.2d 807, 815 (S.D. 2002),
abrogated on other grounds by Mundhenke v. Holm, 787
N.W.2d 302 (S.D. 2010).
Seed has adequately pleaded promissory estoppel under both
tests. According to the amended complaint, Pioneer promised
Shepherd Seed bonus payments in exchange for Shepherd Seed
selling Pioneer's soybean seed in bulk. Doc. 8 at
¶¶ 5-9. Taking Shepherd Seed's factual
allegations as true and construing all inferences in its
favor, Pioneer should have expected that its promise would
induce Shepherd Seed to enter into the Agreement and build a
bulk system, particularly when Pioneer promised to pay
bonuses amounting to up to 75% of the construction price of
the bulk system (excluding concrete and electricity costs)
and Shepherd Seed signed a contract to that effect. Doc. 8 at
¶¶ 8-10. Pioneer's promise induced Shepherd
Seed to build a costly bulk system, which consisted of five
bins, a seed treater and treater buildings, pumps, and a
computer system. Doc. 8 at ¶¶ 7, 11. Although
Pioneer argues that Shepherd Seed's reliance on
Pioneer's alleged promise was unreasonable, Shepherd Seed
has alleged that Pioneer recruited Shepherd Seed to sell its
product, invited Shepherd Seed to the event in Chamberlain,
and provided Shepherd Seed with a contract setting forth the
terms of the promise, which Shepherd Seed then signed and
returned to Pioneer. Doc. 8 at ¶¶ 5, 7-10. These
allegations make it plausible that Shepherd Seed had a
reasonable basis for relying on Pioneer's promise. In