917 N.W.2d 23 (S.D. 2018), 28269, ISG, Corp. v. PLE, Inc.
|Citation:||917 N.W.2d 23, 2018 SD 64|
|Opinion Judge:||KERN, Justice|
|Party Name:||ISG, CORP., Plaintiff and Appellant, v. PLE, INC. and Marc O. Bogue, Defendants and Appellees.|
|Attorney:||JOSHUA D. ZELLMER, Myers Billion, LLP, Sioux Falls, South Dakota, LEON N. PATRICIOS, Zumpano, Patricious & Winkler, P.A., Coral Gables, Florida, Attorneys for plaintiff and appellant. PETER J. BENDORF, Bendorf Law Firm, PLLC, Sioux Falls, South Dakota, PHILLIP O. PETERSON, Peterson, Stuart, Rumpc...|
|Judge Panel:||GILBERTSON, Chief Justice, ZINTER, Justice, RANK, Circuit Court Judge, and SEVERSON, Retired Justice, concur. RANK, Circuit Court Judge, sitting for JENSEN, Justice, disqualified. SALTER, Justice, not having been a member of the Court at the time this action was assigned to the Court, did not par...|
|Case Date:||August 22, 2018|
|Court:||Supreme Court of South Dakota|
CONSIDERED ON BRIEFS FEBRUARY 12, 2018.
[Copyrighted Material Omitted]
APPEAL FROM THE CIRCUIT COURT OF THE FIRST JUDICIAL CIRCUIT UNION COUNTY, SOUTH DAKOTA, THE HONORABLE STEVEN R. JENSEN Judge
JOSHUA D. ZELLMER, Myers Billion, LLP, Sioux Falls, South Dakota, LEON N. PATRICIOS, Zumpano, Patricious & Winkler, P.A., Coral Gables, Florida, Attorneys for plaintiff and appellant.
PETER J. BENDORF, Bendorf Law Firm, PLLC, Sioux Falls, South Dakota, PHILLIP O. PETERSON, Peterson, Stuart, Rumpca & Rasmussen, Beresford, South Dakota, Attorneys for defendants and appellees.
[¶1] International Services Group Corp. (ISG) contracted with Portable Lift Equipment Inc. (PLE) to build two observation platforms for use by law enforcement at an annual festival held in San Juan, Puerto Rico. PLE did not deliver the platforms they agreed to build and instead delivered a used, contractually noncompliant platform. ISG sued PLE and its president for breach of contract and fraud. The case went to trial, and the jury found in favor of ISG, awarding both compensatory and punitive damages. PLE filed a motion for a new trial. The circuit court denied the motion on the issue of liability but granted a new trial on the issue of damages. We reverse and remand.
Facts and Procedural History
[¶2] In fall 2013, the Puerto Rican Police Department (Department) contracted with ISG, a security company, to provide and maintain two tactical observation platforms (TOPs).1 TOPs consist of a pod, which is an enclosed structure capable of holding two to four individuals, raised from a mobile trailer via a scissor lift or stack. The Department needed the TOPs by early January 2014 for use at the annual San Sebastian Street Festival held in San Juan, Puerto Rico. The year prior, a violent altercation occurred resulting in a homicide, prompting law enforcement to enhance security at the event by providing a more visible presence. The contract required that the TOPs be equipped with Level III National Institute of Justice (NIJ)2 ballistics-rated protection. The Department agreed to lease the TOPs for three years for $824,658.94, and the parties later agreed to amend the contract so that the Department could purchase the TOPs. ISGs president, Jesus Roman, testified that the Department agreed to a down payment of $366,490.
[¶3] To fulfill the contract, ISG first attempted to purchase TOPs manufactured by FLIR Systems Inc., an industry leader in the field, but FLIR could not build and ship the TOPs before the festival. Roman, looking for alternatives, discovered PLE while researching online for companies based in the United States. PLE, located in Beresford, South Dakota, sells lift equipment, including TOPs. The company consists of Marc Bogue (Bogue), PLEs president; his wife, Lisa, who works as the office manager; Bogues nephew Steve Bogue (Steve), PLEs engineer; and Craig Stubbe, PLEs general manager. In September 2013, Roman began corresponding with PLE by phone and email. Roman explained that he needed two TOPs by December 31, 2013 for the January 2014
festival. On October 18, 2013, Roman sent PLE a quote from FLIR listing various ballistics-protection options, and Roman testified that he told Bogue that he needed "exactly the same thing that FLIR [could] provide." According to the quote provided by FLIR, the cost for two units would be $379,963.51.
[¶4] On October 26, 2013, Roman visited PLEs factory in Beresford. Roman testified that no one expressed any concerns about building the TOPS or completing the project by the deadline. However, Bogue testified that PLE had never manufactured or sourced any materials with ballistic protection and that he did not know what NIJ Level III stood for when Roman sent PLE the quote from FLIR. Bogue also did not know how much weight ballistic protection would add to the pod. Nevertheless, Bogue did not confer with Steve or Stubbe before sending the quote and did not hire an engineer or ballistics expert to determine whether PLE had the ability to manufacture a TOP with ballistic protection. Although Bogue failed to disclose this information to Roman, he insisted at trial that "there was nothing that would have led [Roman] to believe that we could do Level III ballistic protection at that particular time." Yet Bogue admitted that, at the time of the meeting, he understood the TOPs needed NIJ Level III-rated ballistic protection.
[¶5] Following their meeting, PLE sent Roman an invoice totaling $317,418 and requested a 50% deposit. On October 30, 2013, Roman wired $158,699 to PLE. After receiving ISGs payment, PLE began working on the TOPs. However, in early November 2013, PLE discovered issues pertaining to both lift capacity and pricing. On November 9, 2013, Bogue sent Roman an email outlining possible ways to proceed, including to "stay the course" and build unarmored or lightly armored pods. Three days earlier, Steve sent Bogue an email informing Bogue that the quotes for outsourcing pods "came in too high," requiring that they build the pods themselves, a process that would move the project back to the end of January or sometime in February 2014. Bogue did not disclose this information to Roman. Roman responded on November 11, 2013, agreeing to use two unarmored TOPs until PLE finished the Level III-rated units. That same day, Stubbe privately informed Bogue that the unarmored TOPs would be completed "in late January at [the] earliest" and the armored TOPs "may be 6 months or more."
[¶6] On November 28, 2013, Bogue emailed Roman and explained that although they were "staying the course," "winter storms across the U.S. ha[d] pushed [PLE] back about one week as vendors were unable to produce product for [them]." Bogue advised Roman about a "NIJ 3 unit" available in San Diego, stating that he believed delivery of the California TOP could occur in 30 days. As for the armored TOPs, Bogue stated that manufacturing would have a lead time of eighteen weeks.
[¶7] Roman and Stubbe traveled to San Diego to inspect the TOP, which was dubbed "Eagle Eye." As a result of their inspection, they developed a list of problems with Eagle Eye requiring correction before it could be put into service, including that it only had level NIJ IIIA protection. Roman flew back to Puerto Rico to inform the Department about Eagle Eye and to ask if they would accept it. Stubbe remained in California, tasked with completing the repairs. PLE sent ISG an invoice charging $158,709 for Eagle Eye and $7,000 for shipping from California to Jacksonville, Florida, to stage for transport to Puerto Rico. Roman testified that PLE promised to upgrade Eagle Eye to
NIJ level III protection after its arrival in Puerto Rico.
[¶8] On December 13, 2013, PLE invoiced ISG for $80,699 as a partial payment on the second TOP under construction in Beresford. ISG wired the money to PLE. However, by December 31, PLE had not delivered the PLE-manufactured TOPs to ISG. On that day, Bogue sent Roman an email with deadlines for project milestones, including January 20, 2014, when PLE would "[s]hip Aero Top3 to Puerto Rico or ship Eagle Eye[,]" and February 28 for shipping the second unit.
[¶9] In December 2013, PLE shipped Eagle Eye from Florida to Puerto Rico but it was nonfunctional upon arrival, requiring repairs and upgrading by ISG before it could be used by the police. Roman testified that ISG worked "twenty-four hours [a day] for seven days" to get Eagle Eye ready for the festival. ISG presented evidence that the value of this work would exceed $100,000 if done by outside sources, requiring $25,000 to design a new pod for Eagle Eye and $98,500 to manufacture it.
[¶10] On January 28, 2014, Bogue sent Roman an email explaining that the first of the PLE-manufactured TOPs would be completed around March 15 or "[s]ooner if [the parties came] to a compromise" on ballistics protection. Bogue reiterated the problems PLE had been experiencing with the weight of the pods and proposed that the police simply position portable shields while in the pods cabin. Bogue stated that they would "continue the course" if such a compromise could be reached; however, if not, Bogue believed "[t]he only option [would be] to do a complete new design with a" new stack, requiring an additional fourteen weeks and more money.
[¶11] On February 10, 2014, Stubbe emailed Bogue to inform him that their current lift could not handle an armored pod, regardless of the level of protection it offered. Stubbe recommended that PLE either take the time and expense to build the pod ISG requested or "bow...
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