#28401-a-GAS
2018 S.D. 67
IN THE SUPREME COURT
OF THE
STATE OF SOUTH DAKOTA
****
DOMSON, INC., Plaintiff and Appellant,
v.
KADRMAS LEE & JACKSON, INC.
and DAKOTA ENGINEERING, LLC, Defendants and Appellees.
****
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.
****
CONSIDERED ON BRIEFS
ON MAY 21, 2018
OPINION FILED 09/19/18
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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.
1. The contract documents and the parties at times refer to the defendants as
Dakota Engineering/KLJ and at times as independent defendants.
Throughout this opinion, we use the designations employed by the parties
and contract where appropriate.
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[¶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
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“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,
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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.
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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 owed a duty
to Domson.
Standard of Review
[¶10.] Under our well-settled standard of review on appeal from a grant of
summary judgment:
We must determine whether the moving party demonstrated the
absence of any genuine issue of material fact and showed
entitlement to judgment on the merits as a matter of law. The
evidence must be viewed most favorably to the nonmoving party
and reasonable doubts should be resolved against the moving
party. The nonmoving party, however, must present specific
facts showing that a genuine, material issue for trial exists. Our
task on appeal is to determine only whether a genuine issue of
material fact exists and whether the law was correctly applied.
If there exists any basis which supports the ruling of the trial
court, affirmance of a summary judgment is proper.
Brand v. Cty. of Pennington, 2013 S.D. 22, ¶ 7, 827 N.W.2d 871, 874 (quoting
Jacobson v. Leisinger, 2008 S.D. 19, ¶ 24, 746 N.W.2d 739).
Analysis
[¶11.] Domson contends that Dakota Engineering and KLJ could not rely on
Paragraph 9.09 in the standard general conditions contract document to insulate
themselves from liability because they failed to plead Paragraph 9.09 either in
avoidance or as an affirmative defense. Dakota Engineering and KLJ respond that
they asserted Paragraph 9.09 as a defense in their answer by pleading the
affirmative defenses of estoppel and waiver. They also claim that Domson failed to
raise waiver before the circuit court. We agree that Domson waived the issue.
Because Domson failed to assert this argument to the circuit court, we will not
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address it for the first time on appeal. See Rush v. U.S. Bancorp Equip. Finance,
Inc., 2007 S.D. 119, ¶ 8 n.1, 742 N.W.2d 266, 269 n.1.
[¶12.] We combine Domson’s next two issues because both relate to whether
Dakota Engineering and KLJ owed Domson a duty under the circumstances. The
circuit court recognized that under South Dakota law, an engineer can owe a duty to
a contractor despite the lack of contractual privity between the parties. See Mid-
Western Elec., 500 N.W.2d at 253-54. But, here, the contract between the Tribe and
Domson, via Paragraph 9.09, insulated Dakota Engineering/KLJ from liability for
their good-faith acts and failures to act by the authority given to them under the
contract and contract documents. Therefore, although a duty may exist under Mid-
Western Electric, we must examine the effect of Paragraph 9.09.
[¶13.] Domson argues that “the exculpatory clause should be construed as an
indemnity provision that violates statute[,]” citing SDCL 56-3-16, -17. But Domson
did not assert this argument to the circuit court, and further, it exceeds the scope of
this Court’s inquiry on supplemental briefing. We, therefore, decline to address
whether Paragraph 9.09 should be construed as an indemnity provision. For the
same reason, we decline to examine Domson’s claim that Paragraph 9.09 is
unconscionable and its argument in its supplemental brief that the contract
between the Tribe and Domson is a contract of adhesion. See Rush, 2007 S.D. 119,
¶ 8 n.1, 742 N.W.2d at 269 n.1 (The failure to assert an argument below waives it
on appeal.).
[¶14.] Nonetheless, Domson further claims that Paragraph 9.09 “is against
the policy of the law” under SDCL 20-9-1, SDCL 53-9-3, and SDCL 53-9-1. It claims
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that SDCL 20-9-1 and SDCL 53-9-3 evince a public policy forbidding the
enforcement of Paragraph 9.09. It also asserts that Lyndon Property Insurance Co.
v. Duke Levy and Associates, “is persuasive authority on the unenforceability of an
engineer’s exculpatory clause.” 475 F.3d 268 (5th Cir. 2007).
[¶15.] It is well settled that “[a] contract provision contrary to an express
provision of law or to the policy of express law . . . is unlawful.” SDCL 53-9-1. Law
Capital, Inc. v. Kettering, 2013 S.D. 66, ¶ 10, 836 N.W.2d 642, 645. “Public policy is
found in the letter or purpose of a constitutional or statutory provision or scheme, or
in a judicial decision.” Niesent v. Homestake Mining Co., 505 N.W.2d 781, 783 (S.D.
1993). SDCL 20-9-1 provides: “Every person is responsible for injury to the person,
property, or rights of another caused by his willful acts or caused by his want of
ordinary care or skill, subject in the latter cases to the defense of contributory
negligence.” Further, SDCL 53-9-3 provides that “[a]ll contracts which have for
their object, directly or indirectly, to exempt anyone from responsibility for his own
fraud or willful injury to the person or property of another or from violation of law
whether willful or negligent, are against the policy of the law.”
[¶16.] Although SDCL 20-9-1 mandates responsibility for injury caused by
willful acts or want of ordinary care or skill, nothing in this statute prohibits one
party from agreeing by contract to release a third party from liability for ordinary
negligence. See, e.g., Lee v. Beauchene, 337 N.W.2d 827, 829 (S.D. 1983)
(contractual release not prohibited by SDCL 20-9-1). Moreover, although Domson
claims Paragraph 9.09 is contrary to SDCL 53-9-3 because it purports to exempt
Dakota Engineering/KLJ from a “violation of law whether willful or negligent[,]” we
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disagree. Domson’s suit against Dakota Engineering and KLJ alleges professional
negligence, not a willful or negligent violation of law. Accord Holzer v. Dakota
Speedway, Inc., 2000 S.D. 65, ¶ 16, 610 N.W.2d 787, 793 (“releases that are
construed to cover willful negligence or intentional torts are not valid and are
against public policy”).
[¶17.] We next address Domson’s claim that this Court should adopt the view
that exculpatory clauses such as Paragraph 9.09 are unenforceable based on the
reasoning espoused in Lyndon Prop. Ins. Co., 475 F.3d at 268 and Transpower
Constructors v. Grand River Dam Authority, 905 F.2d 1413 (10th Cir. 1990).
Domson contends that Lyndon more aligns with South Dakota public policy as
compared to the cases cited by Dakota Engineering and KLJ. In response, Dakota
Engineering and KLJ claim that “courts are in agreement that not only the very
exculpatory clause at issue here is enforceable, but that exculpatory clauses in
general are enforceable in cases such as the present, in which ordinary negligence is
alleged.” See, e.g., Patriot Contracting, LLC v. Star Ins. Co., No. 15-6634, 2018 WL
1123586 (E.D. La. March 1, 2018); Indiana Dept. of Transp. v. Shelly & Sands, Inc.,
756 N.E.2d 1063 (Ind. Ct. App. 2001); Ric-Man Constr., Inc. v. Neyer, Tiseo & Hindo
Ltd., No. 329159, 2017 WL 188049 (Mich. Ct. App., January 17, 2017); Excel
Constr., Inc. v. HKM Eng’g, Inc., 228 P.3d 40 (Wyo. 2010).
[¶18.] In Lyndon, the Fifth Circuit Court of Appeals examined the
enforceability of exculpatory language similar to that in Paragraph 9.09. 475 F.3d
at 272. A county district had entered into a contract with a utilities contractor for
construction of a sewer system. The county district also entered into a contract with
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an engineer. The engineer, prior to the completion of the project, terminated the
utilities contractor. The contractor’s surety funded the completion of the project but
brought suit against the engineer asserting its right to recover in the shoes of the
county district (not the contractor) under the doctrine of equitable subrogation. The
engineer claimed that a clause in the contract between the county district and the
contractor insulated the engineer from liability to anyone but the county district.
On appeal, the Fifth Circuit Court of Appeals disagreed. It held that “the District
cannot bargain away the engineer’s potential duty to a surety that would step into
the District’s shoes under the doctrine of equitable subrogation.” Id.
[¶19.] Here, however, Domson is not seeking to stand in the shoes of the
Tribe in its suit against Dakota Engineering and KLJ. Moreover, the doctrine of
equitable subrogation is not implicated. Transpower Constructors is likewise
distinguishable. In Transpower Constructors, the court found the exculpatory
clause unenforceable because of ambiguity, not because of public policy. 905 F.2d at
1421.
[¶20.] “[T]his Court has cautioned ever since territorial days” that “‘[t]he
power of courts to declare a contract void for being in contravention of sound public
policy, is a very delicate and undefined power; and, like the power to declare a
statute unconstitutional, should be exercised only in cases free from doubt.’” Law
Capital, 2013 S.D. 66, ¶ 13, 836 N.W.2d at 645 (quoting Sch. Dist. No. 61 v. Collins,
6 Dakota 145, 41 N.W. 466, 468 (1889)). Based on our review of the contract
documents as a whole and in light of Domson’s failure to identify a statutory
provision or scheme or judicial decision from this Court to support its argument
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that Paragraph 9.09 is unlawful, we decline to declare Paragraph 9.09 void under
the circumstances.
[¶21.] This is not to say that every exculpatory clause insulating a third party
from liability for negligence will be enforceable. Nor does today’s decision mean
that we adopt the views expressed by the authorities cited by Dakota
Engineering/KLJ in response to this Court’s request for supplemental briefing.
Rather, Paragraph 9.09 is valid and enforceable in this case because Domson has
not identified that Paragraph 9.09 contravenes sound public policy in this State
under these particular circumstances. The exculpatory language unambiguously
informed Domson that Dakota Engineering/KLJ would be immune from suit in tort
or contract arising out of Dakota Engineering/KLJ’s good-faith acts and failures to
act by the authority given to them under the contract and contract documents.
[¶22.] Although we hold that Paragraph 9.09 is valid and enforceable under
the circumstances, Dakota Engineering and KLJ must still establish entitlement to
the protections afforded by Paragraph 9.09. When the circuit court granted
summary judgment, relying on Paragraph 9.09, it erroneously imposed the initial
burden on Domson to establish bad faith on the part of the engineer. Paragraph
9.09 is an affirmative defense. As the part asserting the defense, Dakota
Engineering and KLJ had the burden of showing that they acted in good faith. See
Klein v. Sanford USD Med. Ctr., 2015 S.D. 95, ¶ 19, 872 N.W.2d 802, 807 (citing
Dakota Indus., Inc. v. Cabela’s.com, Inc., 2009 S.D. 39, ¶¶ 12-13, 766 N.W.2d 510,
513-14). Despite the court’s error, “[i]f there exists any basis which supports the
ruling of the trial court, affirmance of a summary judgment is proper.” Jacobson,
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2008 S.D. 19, ¶ 24, 746 N.W.2d at 745 (quoting Cooper v. James, 2001 S.D. 59, ¶ 6,
627 N.W.2d 784, 787).
[¶23.] As we recognized in Klein, the party asserting the affirmative defense
must establish a prima facie case of good faith. 2015 S.D. 95, ¶ 26, 872 N.W.2d at
810. “A prima facie case is established for summary judgment purposes when there
‘are facts in evidence which if unanswered would justify persons of ordinary reason
and fairness in affirming the question which the plaintiff is bound to maintain.’”
Dakota Indus., Inc., 2009 S.D. 39, ¶ 14, 766 N.W.2d at 514 (quoting Fin-Ag, Inc. v.
Pipestone Livestock Auction Mkt., Inc., 2008 S.D. 48, ¶ 33, 754 N.W.2d 29, 43). Once
a prima facie case of good faith is established, the burden of production shifts to the
resisting party to “identify facts creating a genuine dispute whether” the defendants
acted in good faith. Klein, 2015 S.D. 95, ¶ 26, 872 N.W.2d at 809 (citing Dakota
Indus., Inc., 2009 S.D. 39, ¶ 14, 766 N.W.2d at 514 (quoting SDCL 15-6-56(e))
(noting that one opposing summary judgment “must set forth specific facts showing
that there is a genuine issue for trial”).
[¶24.] Domson alleged that Dakota Engineering and KLJ were negligent in
their interpretation and application of the plans and specifications for the project,
which negligence harmed Domson. In response, Dakota Engineering/KLJ claimed
that their interpretation and application of the project documents met their
professional responsibilities and was appropriate under the circumstances. Dakota
Engineering/KLJ relied on letters sent between Domson and KLJ and on the
deposition testimony of defendant representatives as evidence of Domson’s failures
throughout the project.
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[¶25.] Good faith is not defined in Paragraph 9.09. This Court has defined
“good faith” in the context of immunity statutes, in estate cases, in cases of breach
of contract under the Uniform Commercial Code, and in insurance cases. See Klein,
2015 S.D. 95, ¶ 18, 872 N.W.2d at 806 (immunity case); In re Estate of Klauzer, 2000
S.D. 7, ¶ 35, 604 N.W.2d 474, 482 (estate case); Garrett v. BankWest, Inc., 459
N.W.2d 833, 841 (S.D.1990) (breach of contract claim); Kunkel v. United Sec. Ins.
Co., 84 S.D. 116, 121, 168 N.W.2d 723, 726 (1969) (insurance contract claim).
Although written in the context of general contract terms under the Uniform
Commercial Code, we find helpful the following explanation:
[G]ood faith is an ‘excluder.’ It is a phrase without general
meaning (or meanings) of its own and serves to exclude a wide
range of heterogeneous forms of bad faith. In a particular
context the phrase takes on specific meaning, but usually this is
only by way of contrast with the specific form of bad faith
actually or hypothetically ruled out.
Garrett, 459 N.W.2d at 841 (quoting Summers, Good Faith in General Contract Law
and the Sales Provision of the Uniform Commercial Code, 54 Va. L. Rev. 195, 201
(1968)). This is not to say that good faith simply means the absence of bad faith.
Klein, 2015 S.D. 95, ¶ 19, 872 N.W.2d at 807. Indeed, good faith has been defined to
mean: “honesty in fact concerning conduct or a transaction,” and “[g]ood faith is
distinguished from mere negligence or an honest mistake.” Klauzer, 2000 S.D. 7, ¶
35, 604 N.W.2d at 482 (quoting In re Estate of Watkins, 501 N.W.2d 292, 296 (Neb.
1993)).
[¶26.] Based on our review of the record, Dakota Engineering/KLJ
established a prima facie case of good faith against Domson’s claim of negligent
interpretation and application, implicating the protections under Paragraph 9.09.
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Therefore, as the party resisting summary judgment, Domson was required to
identify a material issue of fact in dispute on the question of Dakota
Engineering/KLJ’s good-faith acts and failures to act. See Klein, 2015 S.D. 95, ¶ 26,
872 N.W.2d at 809 (burden of production shifted to resisting party). Domson
submitted an expert opinion by professional engineer Lawrence Kostaneski.
Kostaneski opined that “KLJ’s engineering services on this project [were] below an
acceptable standard found on several engineering projects generally.” Kostaneski
found fault in Dakota Engineering/KLJ’s failure “to objectively evaluate the
circumstances, determine its impact on cost and/or time, and take the appropriate
action to adjust the bid amount or schedule.” The negligence, according to
Kostaneski, existed because KLJ “chose the wrong field tactic when deciding how to
handle circumstances that clearly could not have been known—or were not
revealed—to bidders.”
[¶27.] Although Domson presented evidence that Dakota Engineering/KLJ
allegedly performed below acceptable engineering standards in administering the
contract, Domson has not identified, in response to Dakota Engineering/KLJ’s
prima facie showing, that a material issue of fact is in dispute on whether Dakota
Engineering/KLJ acts or failures to act lacked good faith. Rather, Domson relies on
general allegations and denials that because Dakota Engineering/KLJ performed
below acceptable standards, their actions necessarily lacked good faith. But a party
may not resist summary judgment with mere denials and allegations. Tolle v. Lev,
2011 S.D. 65, ¶ 22, 804 N.W.2d 440, 446. The circuit court correctly granted Dakota
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Engineering and KLJ summary judgment on Domson’s claims of negligent
interpretation and application.
[¶28.] Domson’s complaint also alleged a cause of action against Dakota
Engineering/KLJ for negligent design. The complaint asserted that “it was readily
foreseeable that Domson, who was bound to follow these documents prepared by the
engineering firm, could be harmed by the engineering firm’s negligent drafting or
interpretation and application of the contract documents.” (Emphasis added.) The
circuit court did not examine whether a material issue of fact existed on this claim
or whether Paragraph 9.09 insulated Dakota Engineering/KLJ from liability. It
summarily dismissed Domson’s entire suit. Nevertheless, “[c]ontract interpretation
is a question of law reviewable de novo.” Black Hills Excavating Servs., Inc. v.
Retail Constr. Servs., Inc., 2016 S.D. 23, ¶ 7, 877 N.W.2d 318, 321 (quoting Vander
Heide v. Boke Ranch, Inc., 2007 S.D. 69, ¶ 17, 736 N.W.2d 824, 831).
[¶29.] The plain language of the exculpatory clause only disclaimed Dakota
Engineer/KLJ from liability in tort and contract for their “authority or
responsibility under this Article 9 or under any other provision of the Contract
Documents [or] 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[.]” When Dakota
Engineering or KLJ designed and drafted the plans and specifications for the
project, Domson and the Tribe had not yet executed the contract. Therefore, Dakota
Engineering/KLJ could not have been exercising authority or responsibility under
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Article 9 or under other provisions of the contract documents as provided in the
contract between the Tribe and Domson.
[¶30.] In Mid-West Electric, we quoted Waldor Pump & Equipment v. Orr-
Schelen-Mayeron & Associates, for the proposition that an engineering firm could
owe a duty to reasonably draft and interpret the project specifications and that it is
foreseeable that a contractor, bound to follow the specifications prepared by the
engineering firm, could be harmed by the firm’s negligence in drafting and
interpreting the specifications. 500 N.W.2d at 254 (quoting 386 N.W.2d 375, 377
(Minn. Ct. App. 1986)). In Mid-West Electric, we instructed circuit “courts to use
the legal concept of foreseeability to determine whether a duty exists.” Id. “The
nature of the professional’s duty, the standard of care imposed, varies in different
circumstances[.] In our view the extent of appellee’s duty may best be defined by
reference to the [foreseeability] of injury consequent upon breach of that duty.” Id.
(quoting A.R. Moyer, Inc. v. Graham, 285 So. 2d 397, 400 (Fla. 1973)).
[¶31.] Here, Dakota Engineering and KLJ do not dispute that they owed
Domson a duty. Nevertheless, they assert that Domson has not identified a
material issue of fact in dispute on the element of breach of that duty. They direct
this Court to Domson’s expert’s letter opinion. In that letter, Kostaneski recognized
that
[n]o set of project documents are perfect, nor are field conditions
exactly as described in those documents. Consequently, projects
have several strategies for adjusting to these changed
conditions. Change orders are a commonly recognized method
for dealing with any condition or circumstance that might arise
and was unforeseen or overlooked at the time of document
preparation.
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[¶32.] In response, Domson argues that errors existed in the project and bid
documents. It quoted excerpts from deposition testimony by Dakota
Engineering/KLJ experts, in which depositions those witnesses purportedly
admitted to the errors. In particular, they admitted that the formal artifact search
had not been completed prior to the bid, which failure Domson claimed caused delay
in completing the project. Domson also relied on its expert’s opinion and on
correspondence between Trig Domson and KLJ that many problems in the design
phase were negligent, including that the documents did not identify an existing
pipe, which omission Domson claimed affected grading.
[¶33.] While Domson’s evidence establishes that errors existed in the project
and bid documents, Domson has not demonstrated a genuine, material issue for
trial concerning whether the existence of errors in a project’s bid documents
constituted a breach of the applicable standard of care for the duty to reasonably
draft project specifications. In fact, although Kostaneski identified errors in the
project documents, he never suggested that design problems violated any standard
of care, let alone the standard of care for architects and engineers. Moreover, he
unequivocally indicated that problems in the design phase were normal and should
have been worked out during the contract administration. He noted that each of
Domson’s “25 separate claims” was based on “events and decisions of KLJ that
occurred during the course of the project.” Although summary judgment is
disfavored in cases of negligence, Domson has not established a material issue of
fact in dispute on the question of breach.
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Conclusion
[¶34.] Domson has not identified that Paragraph 9.09 contravenes sound
public policy under the circumstances, and Paragraph 9.09 unambiguously
insulates Dakota Engineering and KLJ for liability in tort and contract for their
good-faith acts and failures to act under the authority granted to them by the
contract and contract documents. Further, although the court improperly imposed
a burden on Domson to prove bad faith, on this record, Dakota Engineering/KLJ
established a prima facie case of good faith, and Domson has failed to identify a
material issue of fact in dispute on the issue of Dakota Engineering/KLJ’s good-
faith acts and failures to act in the interpretation and application of the contract
documents. Also, Domson has not presented specific facts showing that a genuine,
material issue exists for trial that Dakota Engineering/KLJ’s design and drafting
fell below a professional standard of care. Therefore, we affirm.
[¶35.] GILBERTSON, Chief Justice, and ZINTER and JENSEN, Justices,
concur.
[¶36.] KERN, Justice, concurs in part and dissents in part.
[¶37.] SALTER, Justice, not having been a member of the Court at the time
this action was assigned to the Court, did not participate.
KERN, Justice (concurring in part and dissenting in part).
[¶38.] I join issues 1 and 2 of the majority opinion but dissent on issue 3
wherein the majority affirms the grant of summary judgment on Domson’s claim of
negligent design. Domson established genuine issues of fact sufficient to require a
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jury to determine whether Dakota Engineering/KLJ breached the standard of care
and caused Domson damages due to negligence in designing the project plans.
[¶39.] Summary judgment is proper “if the pleadings, depositions, answers to
interrogatories, and admissions on file, together with the affidavits, if any, show
that there is no genuine issue as to any material fact and that the moving party is
entitled to a judgment as a matter of law.” SDCL 15-6-56(c). “We view the evidence
most favorably to the nonmoving party and resolve all reasonable doubts against the
moving party.” State Auto Ins. Cos. v. B.N.C., 2005 S.D. 89, ¶ 6, 702 N.W.2d 379,
382 (emphasis added). To defeat summary judgment, the nonmoving party must
“show that they will be able to place sufficient evidence in the record at trial to
support findings on all the elements on which they have the burden of proof.”
Foster-Naser v. Aurora Cty., 2016 S.D. 6, ¶ 11, 874 N.W.2d 505, 508. “[M]ere
general allegations and denials which do not set forth specific facts will not prevent
the issuance of a judgment.” Bordeaux v. Shannon Cty. Schs., 2005 S.D. 117, ¶ 14,
707 N.W.2d 123, 127. Nonetheless, “[s]ummary judgment is an extreme remedy,
and is not intended as a substitute for a trial.” Stern Oil Co., Inc. v. Brown, 2012
S.D. 56, ¶ 9, 817 N.W.2d 395, 399.
[¶40.] Here, the majority opinion focuses on a statement made by Domson’s
expert, Larry Kostaneski, that not all “project documents are perfect, nor field
conditions exactly as described in those documents” for the proposition that
Domson’s expert “never suggested that design problems violated any standard of
care, let alone the standard of care for architects and engineers.” See Majority
Opinion ¶¶ 31, 33. For the majority, this suggests that there is no genuine,
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material issue for trial because Domson failed to make a specific assertion that the
project’s design fell below the standard of care. However, that reasoning does not
account for Kostaneski’s opinion that there were problems with “the package
released for the public bid process” which made it “quickly apparent that several
critical issues were going to have a significant impact on both the scope and
schedule of the work.”
[¶41.] Specifically, Kostaneski explained that shortly after the project began,
Dakota Engineering/KLJ informed Domson that a restriction existed with respect to
commencing construction on a 3,000-foot area at the beginning of the project.
Domson learned that, due to an impending artifact study, the area remained
ineligible for development until completion of the survey. No mention of the study
was included in the design plans, and even Dakota Engineering/KLJ’s own expert,
Dennis Micko, agreed that preliminary inspections, reports, and environmental
artifact studies “[n]ormally . . . would have been completed in advance of [the
bidding].” Domson contends that this deficiency caused delay in completing the
project, which resulted in accrual of additional damages under the contract’s
liquated damages provision.
[¶42.] Additionally, Kostaneski noted problems with beginning construction
at the other end of the project. The project’s drafters had incorrectly identified an
existing pipe on the plans, so the construction team decided to delete it. According
to Kostaneski, this decision significantly impaired Domson’s progress. Kostaneski
described the effect on the project stating, “Unfortunately, it also meant that this
end of the project would not have the plan grade. Domson had already graded this
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area to the original plan elevations, which required a significant adjustment to
return it to the field changed elevation. KLJ seemed disinclined to recognize this
unanticipated effort and delay.”
[¶43.] “Summary judgment . . . was never intended to enable parties to evade
jury trials or have the judge weigh evidence in advance of it[] being presented.”
Pierce v. Ford Motor Co., 190 F.2d 910, 915 (4th Cir. 1951). Yet, by declaring that
Domson’s factual assertions are mere general allegations referring to contract
administration and not design, the majority opinion’s conclusion regarding
negligent design of the project plans weighs the evidence presented. We must
instead view the facts in light favorable to Domson and give it the benefit of all
reasonable inferences. See Dakota Pork Indus. v. City of Huron, 2002 S.D. 3, ¶ 5,
638 N.W.2d 884, 885 (“All reasonable inferences drawn from the facts must be
viewed in favor of the non-moving party.”).
[¶44.] Domson presented a sufficient case for negligent design of the project
plans to survive summary judgment. Project design was among the engineering
services KLJ provided Domson, 2 and Dakota Engineering/KLJ admitted that it
owed Domson a duty. Domson’s expert further opined that “KLJ’s engineering
services on this project [were] below an acceptable standard found on civil
engineering projects generally.” This statement regarding the standard of care was
broad enough to include the design errors Kostaneski identified in the project
documents. Disputed issues of fact exist regarding whether: (1) the construction
delay resulting from the incomplete artifact study increased Domson’s damages on
2. The project was designed by KLJ employee Tonya Tordsen.
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the contract; and (2) the error in the project’s plans that misidentified a pipe created
additional damages under the contract by requiring Domson to return the grade to
the “field changed elevation.” Domson “need only present evidence from which a
jury might return a verdict in his favor.” Anderson v. Liberty Lobby, Inc., 477 U.S.
242, 257, 106 S. Ct. 2505, 2514, 91 L. Ed. 2d 202 (1986). This it has done.
Therefore, I respectfully dissent from the majority decision affirming summary
judgment on Domson’s claim of negligent design of the project plans.
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