SMA, LLC v. Chief Indus., Inc.
| Decision Date | 30 March 2020 |
| Docket Number | 3:17-CV-03021-RAL |
| Parties | SMA, LLC, Plaintiff, v. CHIEF INDUSTRIES, INC., and Dyer Construction Company of America, Defendants. |
| Court | U.S. District Court — District of South Dakota |
Daniel B. Shuck, Shuck Law Firm, Sioux City, IA, for Plaintiff.
Douglas A. Abraham, Terra M. Fisher, Michael F. Shaw, May, Adam, Gerdes & Thompson, LLP, Pierre, SD, for Defendant Chief Industries, Inc.
Courtney R. Clayborne, Clayborne, Loos & Sabers, Rapid City, SD, for Defendant Dyer Construction Company of America.
SMA, LLC (SMA) sued Chief Industries, Inc. (Chief Industries) and Dyer Construction Company of America (Dyer Construction) after SMA through its insurance carrier paid $786,635.65 associated with damages to a grain storage facility and its contents. SMA alleges that central support columns designed, manufactured, and supplied by Chief Industries and installed by Dyer Construction failed causing damage at a South Dakota Wheat Growers Association (SDWG) location where SMA had served as general contractor. Doc. 1. Chief Industries filed a motion for summary judgment, Doc. 28, seeking summary judgment on the two counts—one for breach of contract and one for negligence—alleged against Chief Industries. This Court held a motion hearing on March 3, 2020, to hear argument for and against the motion, and now grants in part and denies in part Chief Industries' motion for summary judgment.
SMA is a Minnesota corporation with its principal place of business in Minnesota. Doc. 38 at 1. Chief Industries is a Delaware corporation with is principal place of business in Nebraska. Doc. 38 at 1. Dyer Construction is an Indiana corporation with its principal place of business in Indiana. Doc. 1. There is complete diversity of citizenship with more than $75,000 at issue in the case, and thus federal jurisdiction under 28 U.S.C. § 1332. Doc. 1.
SDWG hired SMA as a general contractor for a project at a SDWG site in Kennebec, South Dakota. Doc. 44 at 1. Part of SMA's contract with SDWG involved the construction of a large grain storage building. Doc. 44 at 1–2. SDWG, as the owner, specified the capacity of grain storage which it desired. Doc. 44 at 1. SMA then laid out different sizes and shapes for the possible storage facility. Doc. 38 at 7; Doc. 44 at 1.
SMA contacted Chief Industries for a quote on the grain storage building, in part because SMA and Chief Industries had done business previously. Doc. 38 at 2. The Chief Industries' website, among other things, stated: Doc. 38 at 9; Doc. 44 at 5–6. An SMA representative shared its sketches of the SDWG facility with a representative of Chief Industries. Doc. 38 at 7–8. SMA itself does not employ engineers but hires engineers as third-party contractors; SMA apparently did so with regard to the foundation, but not the design or erection of, the SDWG grain storage building in Kennebec. Chief Industries has engineers in house, but does not hold itself out as an engineering firm. Chief Industries provided to SMA a preliminary sketch of a Chief Industries design of a grain storage building, together with a quote for the components of the building. Doc. 38 at 8; Doc. 44 at 3. SMA characterizes the building as being "pre-engineered" by Chief Industries, but Chief Industries points to a contract term that specifically states: "Buyer [SMA] acknowledges that Chief is not the architect or engineer of record for Buyer's project." Doc. 32-3 at 9. SMA maintains that it relied on Chief Industries for design of the pre-engineered building, appropriate load calculations, the specific design of the building, the anchor rod drawings, the preliminary drawings, and the final engineered drawings. Doc. 38 at 8–9.
On February 10, 2015, SMA and Chief Industries entered into an Agreement to Purchase where SMA agreed to buy components for the grain storage building for a purchase price of $571,312, plus pay for freight of $22,986 for shipping from Chief Industries' facility in Grand Island, Nebraska, of the approximately 621,669 pounds of building components. Docs. 32-3 at 8, 10; 32-1 at 8, 10. SMA selected Dyer Construction from a list of Chief Industries' approved installers to assemble the components into the grain storage building, and Dyer Construction separately invoiced SMA for its service of assembling the components into the grain storage building.
The Agreement to Purchase between SMA and Chief Industries was written by Chief Industries and has terms favorable to Chief Industries. Doc. 32-1. Paragraph 9 of the Terms and Conditions of the Agreement to Purchase states in relevant part:
Although Chief may furnish drawings to Buyer, Buyer acknowledges that Chief is not the architect or engineer of record for Buyer's project. Buyer shall be solely responsible for: ... (iv) assuring that said load and code requirements comply with the requirements of Buyer's customer and all applicable federal, state and/or local statutes, laws or ordinances and all rules, regulations and codes (including building codes) promulgated, adopted or issued thereunder; ... (vi) assuring that any requirements Buyer may have with respect to the quantities, materials, dimensions and tolerances of the Components ... are accurately set forth in this Agreement ...; and (vii) assuring that all Components manufactured by Chief in conformity therewith are merchantable and are otherwise fit for Buyer's intended purpose or use. Chief's sole responsibility shall be to manufacture the Components in conformity with the written load and code requirements provided to Chief by Buyer; the approved drawings, if any, and otherwise in conformity with this Agreement.
Doc. 32-1 at 9. The Agreement to Purchase in its Terms and Conditions also contains a disclaimer of warranties in Paragraph 11 as follows:
The Components furnished to Buyer pursuant to this Agreement are covered by the Limited Warranties listed in this Agreement. Buyer expressly acknowledges and agrees that: (i) said Limited Warranties are an integral part of this Agreement; (ii) Buyer accepts said Limited Warranties as the sole and only warranties given by Chief to Buyer with respect to the Components; and (iii) said Limited Warranties are reflected in the Purchase Price. EXCEPT AS IS OTHERWISE EXPRESSLY SET FORTH IN THE LIMITED WARRANTIES LISTED IN THIS AGREEMENT, CHIEF MAKES NO OTHER REPRESENTATIONS OR WARRANTIES OF ANY KIND, WHETHER EXPRESS OR IMPLIED, BY OPERATION OF LAW OR OTHERWISE WITH RESPECT TO ANY GOODS OR SERVICES SOLD OR PROVIDED TO THE BUYER PURSUANT TO THIS AGREEMENT, INCLUDING WITHOUT LIMITATION ANY REPRESENTATION OR WARRANTY OF MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OR USE.
The Standard Limited Warranty supplied by Chief Industries and received (although not signed for) by SMA contained a warranty for a period of five years that "[t]he components were free from defects in the composition of material and workmanship and were in accordance with industry standards for such components." Doc. 32-4. However, the Standard Limited Warranty contained in Paragraphs 3, 4, and 5 has the following language:
Doc. 32-4 at 1. Paragraphs 7 and 8 of the Standard Limited Warranty in relevant part provide:
The Terms and Conditions of the Agreement to Purchase between SMA and Chief Industries likewise contain a limitation on liability and damages provision in Paragraph 12 that "CHIEF SHALL NOT, UNDER ANY CIRCUMSTANCES, BE LIABLE TO THE BUYER, THE BUYER'S CUSTOMER OR ANY THIRD PARTY FOR ANY SPECIAL, INDIRECT, INCIDENTAL, CONSEQUENTIAL, LIQUIDATED, OR PUNITIVE DAMAGES." Doc. 32-1 at 10. The Terms and Conditions of the Agreement to Purchase make clear that the Agreement supersedes all prior communication and is governed by Nebraska law. Doc. 32-1 at 10....
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