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Domson, Inc. v. Kadrmas Lee & Jackson, Inc.

Supreme Court of South Dakota

September 19, 2018

DOMSON, INC., Plaintiff and Appellant,
v.
KADRMAS LEE & JACKSON, INC. and DAKOTA ENGINEERING, LLC, Defendants and Appellees.

          CONSIDERED ON BRIEFS ON MAY 21, 2018

          APPEAL FROM THE CIRCUIT COURT OF THE SEVENTH JUDICIAL CIRCUIT PENNINGTON COUNTY, SOUTH DAKOTA THE HONORABLE HEIDI L. LINNGREN Judge

          RONALD G. SCHMIDT of Gunderson, Palmer, Nelson & Ashmore, LLP Rapid City, South Dakota Attorneys for appellant.

          MICHAEL L. LUCE DANA VAN BEEK PALMER of Lynn, Jackson, Shultz & Lebrun, P.C. Sioux Falls, South Dakota Attorneys for defendants and appellees.

          SEVERSON, RETIRED JUSTICE.

         [¶1.] Domson, Inc. brought suit against Dakota Engineering and Kadrmas, Lee and Jackson (KLJ) for professional negligence.[1] Dakota Engineering and KLJ moved for summary judgment. During the hearing, Dakota Engineering/KLJ asserted that a clause in the contract between Domson and the Oglala Sioux Tribe insulated them from liability for negligence to Domson. The circuit court agreed and separately granted Dakota Engineering and KLJ summary judgment. Domson appeals. We requested supplemental briefing from the parties on the enforceability of exculpatory clauses insulating a third party from claims of negligent design and negligent administration and interpretation of a contract. We affirm.

         Background

         [¶2.] The Oglala Sioux Tribe hired Dakota Engineering/KLJ to design a road reconstruction project on the Pine Ridge Indian Reservation. On March 21, 2012, the Tribe advertised the project for bids. Prospective bidders could inspect the contract documents, including the drawings and project manual. It is unclear whether Dakota Engineering or KLJ prepared the bid documents, including the project manual, the proposal to bidders, plans, specifications, estimates, and amendments for the project. However, the record reveals that the manual and documents relevant to the request for bids were signed and sealed in March 2012 by Tonya Tordsen of KLJ.

          [¶3.] It is undisputed that Domson obtained the bid documents and submitted a bid on the project. The public bid opening revealed Domson as the apparent low bidder. KLJ informed Domson that Domson had been awarded the bid. On July 5, 2012, Domson and the Tribe executed a contract for the project. The contract between Domson and the Tribe designated Dakota Engineering/KLJ as the "Engineer" and the Tribe's representative. The contract provided that "Engineer assumes all duties and responsibilities, and has the rights and authority assigned to Engineer in the Contract Documents in connection with the completion of the Work in accordance with the Contract Documents." KLJ had the duty to administer the contract for the Tribe, including the processing of applications for payment by Domson. Change orders and payments needed approval from the Tribe.

         [¶4.] It is undisputed that Domson did not substantially complete the project in the time required under the contract. KLJ, as the Tribe's representative, assessed Domson $103, 950 in liquidated damages. In January 2015, Domson brought suit against Dakota Engineering and KLJ, alleging professional negligence. Domson asserted that "Dakota Engineering/KLJ owed a duty to Domson to reasonably draft, interpret, and apply the project's contract documents." Domson alleged that "Dakota Engineering/KLJ were negligent in their design, interpretation, and application of the plans and specifications[.]" According to Domson, Dakota Engineering/KLJ's negligence in designing and administering the contract caused Domson approximately $1, 138, 027.28 in damages.

         [¶5.] Dakota Engineering and KLJ filed a joint answer. Dakota Engineering denied that it was a proper defendant because Dakota Engineering's "only involvement was initial design work[.]" Dakota Engineering/ KLJ asserted that Domson's alleged damages arose out of its contract with the Tribe. Dakota Engineering and KLJ filed a joint motion for summary judgment. They again indicated that Dakota Engineering was only involved in the design work and did not administer the contract. Dakota Engineering/KLJ also highlighted Paragraph 9.09 of the standard general conditions contract document. That paragraph provides:

Neither Engineer's authority or responsibility under this Article 9 or under any other provision of the Contract Documents nor any decision made by Engineer in good faith either to exercise or not exercise such authority or responsibility or the undertaking, exercise, or performance of any authority or responsibility by Engineer shall create, impose, or give rise to any duty in contract, tort, or otherwise owed by Engineer to Contractor, or any Subcontractor, any Supplier, any other individual or entity, or to any surety for or employee or agent of any of them.

(Emphasis added.)

         [¶6.] Domson did not submit "a separate, short, and concise statement of the material facts as to which" it contended a genuine issue existed as required by SDCL 15-6-56(c)(2). Instead, it submitted a brief in opposition to the motion for summary judgment. But the brief did not "respond to each numbered paragraph in the moving party's statement with a separately numbered response and appropriate citations to the record." See id. Rather, Domson's brief grouped arguments together with general responses. Domson's brief also did not cite to the record. Nevertheless, in the brief, Domson referred the circuit court to Mid-Western Electric, Inc. v. DeWild Grant Reckert & Associates, Co., as authority for recognizing that Dakota Engineering/KLJ owed a duty to Domson to reasonably draft, interpret, and apply the project's contract documents. 500 N.W.2d 250 (S.D. 1993). Domson asserted generally that issues of material fact existed on the question of breach of that duty.

         [¶7.] The circuit court issued a memorandum decision. The court granted summary judgment on all claims against Dakota Engineering. It concluded that Dakota Engineering was not an appropriate party in the lawsuit. The court also granted summary judgment on all claims against KLJ. Although Domson did not comply with SDCL 15-6-56(c)(2), the court gave Domson "the benefit of the doubt with what [it had] submitted" in response to the motion for summary judgment. After considering Domson's submissions, the court concluded that Domson offered mere general allegations and denials. The court also interpreted Paragraph 9.09 to insulate KLJ from liability to Domson for negligence, absent a claim by Domson that KLJ acted in bad faith.

         [¶8.] In response to the court's decision, Domson filed a motion and brief in support requesting the circuit court reconsider its decision granting summary judgment. It asserted that Paragraph 9.09 was unlawful under SDCL 53-9-3. Domson then filed a supplemental brief in support of its motion for reconsideration. It restated its position that because KLJ owed it a duty, a jury must determine whether KLJ breached that duty. The court denied Domson's motion to reconsider.

         [¶9.] Domson appeals and asserts the following issues, which we restate as follows:

1. Whether summary judgment was improper because defendants failed to plead Paragraph 9.09 as an affirmative defense.
2. Whether the circuit court erred when it granted summary judgment based on Paragraph 9.09 of the standard general conditions contract document.
3. Whether the circuit court erred when it granted summary judgment despite that defendants admitted they ...

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