Jenco, Inc. v. United Fire Group

• Decision Date: 09 July 2003
• Docket Number: No. 22493.,22493.
• Citation: 666 N.W.2d 763,2003 SD 79
• Parties: JENCO, INC. successor to St. Goliard's Investment Co., a South Dakota Corporation, d/b/a Happy Jack's East, Plaintiff and Appellant, v. The UNITED FIRE GROUP, Defendant and Appellee.
• Court: South Dakota Supreme Court

666 N.W.2d 763

2003 SD 79

JENCO, INC. successor to St. Goliard's Investment Co., a South Dakota Corporation, d/b/a Happy Jack's East, Plaintiff and Appellant, v. The UNITED FIRE GROUP, Defendant and Appellee.

No. 22493.

Supreme Court of South Dakota.

Considered on Briefs February 11, 2003.

Reassigned May 12, 2003.

Decided July 9, 2003.

James L. Jeffries, Jeffries Law Office, Rapid City, South Dakota, Attorneys for plaintiff and appellant.

Jennifer K. Trucano, Gunderson, Palmer, Goodsell & Nelson, Rapid City, South Dakota, Attorneys for defendant and appellee.

SABERS, Justice (on reassignment).

[¶ 1.] Jenco Inc. filed a claim against United Fire Group (United Fire) alleging United Fire breached the parties' contract of insurance by failing to pay a claim under an employee dishonesty provision. The trial court dismissed the claim with prejudice for failure to prosecute. We affirm.

FACTS

[¶ 2.] On November 18, 1997, approximately $13,000 in cash was stolen from a casino operated by Jenco. Jenco asserted that a casino employee, Dianne Iverson, was involved with the robbery. Iverson was not charged in the theft, but Jenco terminated her. Jenco filed an insurance claim with United Fire under an employee dishonesty provision. United Fire denied the claim and Jenco filed suit alleging breach of contract. United Fire denied that it breached the contract, and although United Fire asserted in its Answer that there was a reasonable basis for its denial of payment, neither document expressly indicated the basis.

[¶ 3.] Jenco filed its original Complaint on May 29, 1998 and an Amended Complaint on March 17, 1999. United Fire filed an Amended Answer on March 23, 1999. Judge Fitzgerald conducted a status hearing on April 26, 1999 and entered a scheduling order on May 5, 1999. The scheduling order set a deadline to amend pleadings by May 26, 1999, a deadline for discovery of July 26, 1999 and further ordered "[t]hat by August 5, 1999, counsel for plaintiff and counsel for defendant shall mutually agree as to a trial date." Accompanying the scheduling order was a scheduling worksheet which indicated that Judge Fitzgerald wanted the clerk to bring the file to his attention in 90 days. On July 14, 1999, United Fire took the depositions of Iverson, a detective and the casino manager.

[¶ 4.] By letter dated August 5, 1999, Jennifer Trucano, attorney for United Fire, informed Judge Fitzgerald that several discovery issues were still pending. She indicated that another status conference had been scheduled to "discuss possible date revisions and the need for an extension of time to complete discovery." She also indicated that they hoped to be able to set "a reasonable trial date at that time."

[¶ 5.] On August 9, 1999, United Fire filed an offer of judgment of $5,000 plus accrued costs. At the status hearing on August 22, 1999, Judge Fitzgerald ordered Jenco to obtain new counsel because its attorney had a conflict of interest. Although no written order directing substitution of counsel was entered, the parties do not dispute the oral order.

[¶ 6.] On October 5, 1999, United Fire wrote Jenco a letter inquiring whether it had retained substitute counsel. Jenco did not respond. No other action was taken until March 25, 2002, when Jenco requested a scheduling order from the court. On March 26, 2002, United Fire filed a motion to dismiss based on Jenco's failure to prosecute and for disregarding the court's order to obtain substitute counsel. On May 15, 2002, substitute counsel for Jenco filed a notice of appearance. Following a hearing on the motion on May 17, 2002, the trial court dismissed the case with prejudice. Jenco appeals.

ISSUES

1. Whether the trial court abused its discretion in granting United Fire's motion to dismiss with prejudice.

2. Whether the trial court abused its discretion in denying Jenco's motion for reconsideration.

STANDARD OF REVIEW

[¶ 7.] A trial court's dismissal for failure to prosecute is reviewed under an abuse of discretion standard. Devitt v. Hayes, 1996 SD 71, ¶ 7, 551 N.W.2d 298, 300. "We will not reverse a decision if `we believe a judicial mind, in view of the law and the circumstances, could reasonably have reached that conclusion.'" Id. (quoting Rosen's, Inc. v. Juhnke, 513 N.W.2d 575, 576 (S.D.1994) (additional citations omitted)).

[¶ 8.] 1. WHETHER THE TRIAL COURT ABUSED ITS DISCRETION IN GRANTING UNITED FIRE'S MOTION TO DISMISS WITH PREJUDICE.

[¶ 9.] The trial court dismissed Jenco's action under SDCL 15-11-11 and 15-6-41(b) with prejudice. SDCL 15-11-11 provides:

[t]he court may dismiss any civil case for want of prosecution upon written notice to counsel of record where the record reflects that there has been no activity for one year, unless good cause is shown to the contrary. The term "record," for purposes of establishing good cause, shall include, but not by way of limitation, settlement negotiations between the parties or their counsel, formal or informal discovery proceedings, the exchange of any pleadings, and written evidence of agreements between the parties or counsel which justifiably result in delays in prosecution.

Generally, a dismissal under SDCL 15-11-11 is without prejudice to the right to bring the action again.

[¶ 10.] SDCL 15-6-41(b) allows a defendant to move to dismiss a case if the plaintiff fails to prosecute the case, comply with the Rules of Civil Procedure, or comply with any order of the court. SDCL 15-6-41(b) provides in part:

[f]or failure of the plaintiff to prosecute or to comply with this chapter or any order of court, a defendant may move for dismissal of an action or of any claim against him.... Unless the court in its order for dismissal otherwise specifies, a dismissal under this section and any dismissal not provided for in § 15-6-41, other than a dismissal for lack of jurisdiction, or for failure to join a party under § 15-6-19, operates as an adjudication upon the merits.

[¶ 11.] In this case, the trial court dismissed with prejudice under both SDCL 15-11-11 and SDCL 15-6-41(b). The trial court made the following findings in dismissing the case: (1) that no activity had occurred in the matter between September 1999 and March 2002, (2) that no settlement negotiations, no discovery, or exchange of pleadings, or any agreements between parties or counsel justified the delay, and (3) that the defendant was prejudiced by the disappearance of a key witness. The court determined that Jenco had not provided any evidence that would excuse the extended delay and that it could only attribute the delay to negligence or inattention. The court concluded that the plaintiffs inaction and delay were egregious.

[¶ 12.] Jenco attempts to excuse its delay claiming that at least 10 months of the delay was attributable to Judge Fitzgerald's death. Jenco misses the point. In August 1999, Judge Fitzgerald ordered Jenco to obtain new counsel because its attorney had a conflict of interest as a potential witness. Jenco failed to comply, apparently, for two and one-half years. As the trial court noted in its memorandum decision, after the August 1999 order, Jenco took no action until it filed a motion for a scheduling order on March 25, 2002, which motion was "apparently in response to a telephone conversation in which counsel for Defendant indicated that a motion to dismiss would be filed." Substitute counsel for Jenco did not file a notice of appearance until May 2002.

[¶ 13.] In other words, there are two and one-half years of unexplained inactivity.¹ There was no showing that Jenco was unable to obtain substitute counsel and no showing that Judge Fitzgerald's death had any effect on the two and one-half year delay in obtaining counsel.² In fact, there was no showing that Jenco even attempted to do anything whatsoever within that two and one-half year period.

[¶ 14.] Both Jenco and the dissent argue that the defendant was not prejudiced by the delay because the statute of limitations had not yet run. Jenco claims that the suit could have been brought as late as November 17, 2003. Regardless of whether the statute of limitations had run, Jenco has not shown that the trial court abused its discretion in granting the motion to dismiss.

[¶ 15.] First, the statute of limitations is only one factor among many to be considered. Even the authority cited by the dissent in support of this argument notes that "one of the factors a district court may consider" is whether the statute of limitations has run. Modrow v. JP Foodservice, Inc., 656 N.W.2d 389, 397 (Minn.2003) (emphasis supplied). Considerations of fundamental fairness dictate against raising the statute of limitations above other factors. For example, there are statutes of limitation in our Code which extend up to twenty years after filing. See e.g., SDCL 15-2-7 (fifteen year statute of limitation for action to foreclose real estate mortgages); SDCL 15-2-6 (twenty year statute of limitation for actions on state judgments and sealed instruments). The question then becomes why should a medical malpractice case be dismissed for want of prosecution after 2 years while an action on a sealed instrument may linger for up to 20 years? Compare SDCL 15-2-14.1 (statute of limitation for medical malpractice suit); SDCL 15-2-6 (statute of limitation for action on a sealed instrument). Trial courts must also consider other factors including prejudice to the defendant, lack of due diligence by the plaintiff, and judicial economy.

[¶ 16.] Second, the defendant was forced to cope with the expense and difficulties of an unresolved lawsuit for two and one-half years, while Jenco let the lawsuit languish. Therefore, the court could have found financial prejudice despite the fact that the statute of limitations had not yet run.

[¶ 17.] SDCL 15-11-11 allows the trial court to dismiss unless the plaintiff shows good cause for the delay. "Good cause for delay requires `contact with the opposing party and some form of...