S.D. Wheat Growers Ass'n v. Chief Indus., Inc.

• Decision Date: 28 August 2018
• Docket Number: 1:14-CV-01008-CBK
• Citation: 337 F.Supp.3d 891
• Parties: SOUTH DAKOTA WHEAT GROWERS ASSOCIATION; Plaintiff, v. CHIEF INDUSTRIES, INC.; Gateway Building Systems, Inc.; and Heyer Engineering, P.C., Defendants.
• Court: U.S. District Court — District of South Dakota

337 F.Supp.3d 891

SOUTH DAKOTA WHEAT GROWERS ASSOCIATION; Plaintiff,

v.CHIEF INDUSTRIES, INC.; Gateway Building Systems, Inc.; and Heyer Engineering, P.C., Defendants.

1:14-CV-01008-CBK

United States District Court, D. South Dakota, Northern Division.

Signed August 28, 2018

Jack H. Hieb, Zachary W. Peterson, Richardson, Wyly, Wise, Sauck, Hieb LLP, Aberdeen, SD, Keith A. Hanson, Pro Hac Vice, Mark J. Hanson, Pro Hac Vice, Keith A. Hanson Law Firm LLC, Hopkins, MN, for Plaintiff.

Michael F. Shaw, Douglas A. Abraham, May, Adam, Gerdes & Thompson, LLP, Pierre, SD, Douglas M. Deibert, Cadwell, Sanford, Deibert & Garry, LLP, Sioux Falls, SD, Timothy R. Murphy, Pro Hac Vice; Cara C. Passaro, Pro Hac Vice; Stich, Angell, Kreidler & Unke, PA, Douglas J. McIntyre, Pro Hac Vice; Thomas H. Priebe, Pro Hac Vice; Foley & Mansfield, PLLP, Minneapolis, MN, Reed A. Rasmussen, Siegel, Barnett & Schutz, Aberdeen, SD, for Defendants.

ORDER

CHARLES B. KORNMANN, United States District Judge

BACKGROUND

On April 7, 2014, plaintiff South Dakota Wheat Growers Association ("SDWG") filed suit in state court against Chief Industries, Inc. ("Chief") and Gateway Building Systems, Inc. ("Gateway") to recover damages incurred by SDWG as a result of the failure of a Chief Industries Big Bin at SDWG's Mellette, South Dakota, facility on January 5-6, 2013. Chief properly removed the claim to this court on May 6, 2014. On November 16, 2015, SDWG moved to add claims against Heyer Engineering, P.C. ("Heyer") to its complaint, which this court granted on January 7, 2016. Following the completion of discovery on August 1, 2017, defendants moved for summary judgment and SDWG moved for sanctions against Heyer.

SDWG's claims arise out of a series of events that occurred following the erection of the Chief Big Bin at its Mellette, South Dakota, site. Chief manufactured the Big Bin, which Gateway, as a Chief distributor, erected. Gateway was also responsible for installing the foundation for the Big Bin, which Heyer designed. Shortly after the substantial completion of construction of the Big Bin in January of 2000, cracks were discovered in the stem wall of the bin at the interface with the south loader door frame. Large plates were designed by Heyer and installed by Gateway to address the cracks. The wall above the loader door then tilted inwards, wrinkling, in May of 2000. In November of 2000 and April of 2001 the Big Bin's roof partially collapsed and was repaired. In December of 2001, a tear occurred on the east side of the loader door on the inside of the door frame, followed by a tear on the west side of the loader door on the outside of the door frame in April of 2002. In April of 2003, a tear again appeared on the east side of the loader door on the outside of the door frame. Each tear was repaired. However, SDWG states that another tear occurred at the east door jamb on January 5-6, 2013, resulting in the ultimate collapse of the bin. SDWG claims damages resulting from the tear and other defects which damages are $3,598,789.95.

SDWG alleges that Chief made representations that the Big Bin would have a snow-wind load of 30-90 pounds per square foot ("PSF") and that the Big Bin could be built on 3000 pounds per square inch ("PSI") soil without concern for differential settlement. SDWG also alleges that Gateway and Heyer did not correctly install rebar in the concrete foundation of the Big Bin and that repairs were improperly made. The parties do not dispute that the conditions of sale include a provision that "the equipment is sold by the dealer only with the standard warranty of the manufacturer, if any... [t]here are no other warranties expressed, implied, or statutory, upon which said equipment is sold or erected." Chief's Standard Limited Grain Bin Warranty states "that the components manufactured by Chief Industries, Inc., were, on the date of delivery to you, free from defects in the composition of material, Chief workmanship, and design." The warranty "is applicable under normal use and service to defects which become evident within a period of five (5) years from the date of delivery of [the] Chief Grain Bin."

SDWG brought claims against Chief for negligence in designing the Big Bin; for willful, wanton and gross negligence in its representations of the Big Bin's snow and wind loads and required soil rating, as well as for inadequate design and execution of repairs; for fraudulently misrepresenting that the Big Bin was structurally sufficient for the Mellette, South Dakota, site; for statutory deceit, negligent misrepresentation and deceptive trade practices for the same alleged misrepresentations; strict products liability for the design and manufacture of the Big Bin; post-sale duty to warn; breach of contract for design and repair deficiencies; breach of express warranty; and equitable estoppel in light of SDWG's alleged agreement not to sue following promises purportedly made regarding the repairs to the Big Bin.

SDWG brought claims against Gateway for negligence and willful, wanton, and gross negligence in constructing and repairing the Big Bin; for fraudulent misrepresentation, fraudulent concealment, statutory deceit, and negligent misrepresentation in connection with the Big Bin's snow and wind loads and the failure to install rebar under the loader door; deceptive trade practices for Gateway's failure to inform SDWG of the Big Bin's actual snow and wind load capacity; strict products liability with respect to Gateway's construction of the concrete stem wall, foundation, footings, pilings and stem wall plates for the Big Bin; breach of contract for failure to properly design and repair the concrete and rebar; breach of express warranty and implied warranties of merchantability and fitness for a particular purpose; and equitable estoppel.

SDWG also brought claims against Heyer for negligence and professional negligence for the design of the Big Bin foundation, aeration tunnels, and failure to properly calculate the hoop tension in the stem wall of the Big Bin for purposes of the plate repair; for breach of contract for Heyer's failure to properly design the Big Bin foundation; and for fraudulent concealment by aiding and abetting for failing to inform SDWG and Chief that the rebar was not constructed under the loader door. SDWG also brought a claim against Heyer seeking sanctions in light of Heyer's alleged spoliation of documents related to this dispute.

Chief moved for summary judgment, arguing that SDWG's claims are barred by the statute of repose and various statutes of limitations; that tort claims are barred by the economic loss doctrine; and that the express warranty claim is barred by the Statute of Frauds. Gateway similarly moved for summary judgment, arguing that SDWG's breach of contract and implied warranty claims are barred by the statute of limitations; that SDWG's tort claims are barred by the economic loss doctrine; that SDWG's negligence, strict products liability, breach of implied warranty, breach of contract, fraudulent concealment, fraudulent misrepresentation, negligent misrepresentation, statutory deceit, deceptive trade practices, and willful, wanton, and gross negligence claims are barred under the statute of repose; and that the negligent misrepresentation, equitable estoppel and breach of express warranty claims fail as a matter of law. Heyer also moved for summary judgment, stating that plaintiff's claims are time-barred by the statute of repose and that SDWG's claims for fraudulent concealment by aiding and abetting fail as a matter of law.

This court will first address whether plaintiff's claims are barred by the economic loss doctrine, the statute of repose, or statute of limitations before determining whether sanctions for spoliation are appropriate.

DECISION

I. Standard of Review

The purpose of summary judgment is to determine whether there is a "genuine issue for trial" with regard to a claim or defense or "part of each claim or defense." Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986) ; Fed. R. Civ. P. 56(a). Summary judgment should be granted only where there is "no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). If facts are disputed, "[o]nly disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). The moving party bears the burden of showing that the material facts in the case are undisputed and "inferences to be drawn from the underlying facts ... must be viewed in the light most favorable to the party opposing the motion." Celotex Corp. v. Catrett, 477 U.S. 317, 322-23, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986) ; United States v. Diebold, Inc., 369 U.S. 654, 655, 82 S.Ct. 993, 8 L.Ed.2d 176 (1962) (per curiam). However, a nonmoving party "may not rest on mere allegations or denials" and "must do more than show that there is some metaphysical doubt as to the material facts." Anderson at 256, 106 S.Ct. 2505 ; and Matsushita at 587, 106 S.Ct. 1348. In sum, an issue of fact is genuine if, based upon the evidence in the record, a reasonable jury could return a verdict for the nonmoving party. Anderson at 248, 106 S.Ct. 2505.

II. South Dakota Law Governs Substantive Issues

Neither the warranty provided by Chief nor the purchase orders provided by Gateway identify the applicable law governing those instruments. The current dispute is before this court on the basis of diversity of citizenship. With the exception of venue transfers, "[a] federal court sitting in diversity ordinarily must follow the choice-of-law rules of the State in which it sits." See, e.g. , Atlantic Marine Const. Co., Inc. v. U.S. Dist. Court for Western Dist. of Texas, 571 U.S. 49, 134 S.Ct. 568, 582, 187 L.Ed.2d 487 (2013) (internal...