Articles Posted in Business Law

The Supreme Court affirmed the decision of the circuit court denying Appellants’ motion to intervene in a partnership dissolution action, holding that Appellants failed to meet the tripartite test necessary for intervention as a matter of right under S.D. Codified Laws 15-6-24(a)(2). Appellants entered into a farm lease/cash rent agreement with Berbos Farms General Partnership. Appellants sued Berbos Farms to recover unpaid cash rent under the lease for the years 2015. During discovery, Appellants learned that Joe and Lisa Berbos, partners in Berbos Farms, had filed a separate action to dissolve Berbos Farms. Seeking to preserve their right to payment of the 2015 cash rent in the event Berbos Farms was dissolved, Appellants move to intervene in the partnership dissolution action. The circuit court denied the motion. The Supreme Court affirmed, holding that because Appellants failed to show that the claim for unpaid cash rent might be impaired by the disposition of the partnership dissolution lawsuit, the circuit court correctly denied the motion to intervene under section 15-6-24(a)(2). View "Berbos v. Berbos" on Justia Law

Delores Gibson and her two sons, Michael and Greg Gibson, created the Gibson Family Limited Partnership (GFLP). Delores served as the general partner, and Michael and Greg were limited partners. Michael filed suit against GFLP, Delores, and Greg, asserting, among other claims, that Delores breached her fiduciary duty by leasing the property to Greg. The jury rejected Michael’s claims. Michael later commenced this action asserting that Delores breached her fiduciary duty to GFLP based on the partnership’s land transactions with Greg. Michael subsequently amended his complaint to also seek equitable relief in the form of dissociation from GFLP for value. The jury returned a verdict against Michael on the fiduciary claim, the only claim relevant to this appeal. The court then denied Michael’s dissociation claim. The Supreme Court affirmed, holding that the circuit court did not err in (1) declining to order dissociation for value; and (2) making certain evidentiary rulings in the jury trial and by refusing to reconsider dissociation based on newly discovered evidence. View "Gibson v. Gibson Family Ltd. P’ship" on Justia Law

Duane Pankratz filed a complaint against Robert Cullum’s estate for breach of an oral promise to transfer corporate stock and for the recovery of corporate debt Robert Cullum allegedly personally guaranteed to pay. The Estate moved for summary judgment, asserting that there was no binding personal guaranty between Pankratz and Cullum and that the statute of limitations barred Pankratz’s claim for shares in Cullum’s corporation. The circuit court granted summary judgment in favor of the Estate. The Supreme Court affirmed, holding (1) the circuit court did not err when it ruled that Cullum’s personal guaranty must be in writing to be enforceable; and (2) the circuit court did not err when it granted summary judgment on Pankratz’s claim that Cullum breached the parties’ oral agreement to transfer corporate stock because Pankratz did not bring his claim within the relevant statute of limitations period. View "In re Estate of Cullum" on Justia Law

The parties in this case were two families of shareholders owning stock in Cosmos of the Black Hills, Inc. Plaintiffs, the minority shareholders, brought an action against Defendants, the majority shareholders, alleging breach of fiduciary loyalty, breach of fiduciary care, minority shareholder oppression, and request for accounting. The fiduciary duty claims were tried to the jury, and the oppression and accounting claims were tried to the circuit court. The jury rendered a verdict in favor of Defendants on the fiduciary duty claims, and the circuit court issued a judgment in favor of Defendants on the remaining claims. Plaintiffs appealed, challenging the jury instructions. The Supreme Court affirmed, holding (1) the circuit court incorrectly instructed the jury that “South Dakota law does not allow a shareholder to use the fiduciary duty concept to rewrite an original deal he or she made with the corporation,” but the error did not prejudice Plaintiffs; (2) the jury instructions, when viewed as a whole, adequately instructed the jury of Defendants’ fiduciary duty of care and loyalty; and (3) the circuit court did not err in rejecting certain proposed jury instructions by Plaintiffs where the instructions merely amplified other instructions and no authority was cited in support of the instructions. View "Schultz v. Scandrett" on Justia Law

Dr. Rueben C. Setliff, III filed a derivative action against several Managers individually and in their capacities as members of the management committee of Black Hills Surgical Physicians, LLC (BHSP), alleging that the Managers breached their fiduciary duties under BHSP’s operating agreement. The circuit court ruled that the dispute was subject to arbitration. The arbitrator ordered that Setliff recover attorney’s fees and costs against the Managers and ruled that the Managers were entitled to be indemnified by BHSP under the operating agreement. The circuit court concluded that the arbitrator did not exceed her authority in making the award of fees and costs and confirmed Setliff’s award. The Supreme Court reversed the circuit court’s order affirming the award, holding that the arbitrator exceeded her powers in awarding Setliff his attorney’s fees and expenses in direct violation of BHSP’s operating agreement. View "Black Hills Surgical Physicians v. Steliff" on Justia Law

After Plaintiff obtained a judgment against Logs Unlimited, Inc., the corporation transferred its assets to Thomas Schramel, Schramel's daughter, and another corporation. Schramel was the sole shareholder, director, and officer of both corporations. Proceeds from the transfer were used to pay some of Logs Unlimited's creditors, but Plaintiff was not among the creditors paid. Plaintiffs sued Logs Unlimited, claiming that it had fraudulently transferred its assets. The circuit court set aside the transfer, concluding that Logs Unlimited fraudulently transferred its assets to prevent satisfaction of Plaintiff's judgment. The Supreme Court affirmed, holding that, upon consideration of the relevant factors, the transfer was fraudulent under S.D. Codified Laws 54-8A-4(a)(1).View "Nielsen v. Logs Unlimited, Inc." on Justia Law

Magellan Pipeline Company, LP appealed a sales tax assessment levied by the state Department of Revenue and Regulation on its additive injection and equipment calibration services. The Hearing Examiner, Department Secretary and trial court all found Magellan's services were non-exempt from tax. Upon review, the Supreme Court concluded that under the plain language of the applicable statute, Magellan's services were exempt from sales tax. View "Magellan Pipeline Co v. Dept. of Revenue & Regulation" on Justia Law

Hutterville Colony, a nonprofit religious corporation, had two opposing factions. Both factions sought exclusive power over Hutterville. Their schism led to two lawsuits, including one faction's suit seeking judicial dissolution of Hutterville. Eventually, the Supreme Court ordered dismissal of the suit, concluding that the circuit court lacked subject matter jurisdiction to order judicial dissolution of Hutterville. This appeal concerned the circuit court's actions following the Court's decision. The Supreme Court affirmed, holding (1) the circuit court did not err when it continued to exercise jurisdiction over Hutterville and its property following remittitur; (2) the circuit court had the authority and duty to wind up the receivership and discharge the receiver; (3) the circuit court did not abuse its discretion in ordering payment of the receiver's fees and expenses from receivership funds and allowing the receiver to use receivership funds to pay the expenses of third parties; (4) the circuit court did err in releasing the receiver from liability, as the receiver's appointment and receivership were valid under state law; and (5) the circuit court did not err in ordering the receiver to return receivership funds to the corporation. View "Wipf v. Hutterville Hutterian Brethren" on Justia Law

At the start of each beekeeping season, Elllingson's Inc. placed its honey bees on the real property of others. After Ellingson's determined it would not longer own bees, it leased to other beekeepers the right to place bees on the property of some of the landowners with whom Ellingson's had been doing business. In 2011, Jim Ammann, a competing beekeeper, sought permission to place his bees on the property of landowners who had previously given Ellingson's permission to place bees. Several landowners subsequently revoked the permission they had given Ellingson's and granted Ammann permission to place his bees on their property. David Ellingson, a principal in Ellingson's, sued Ammann for interference with a business relationship and other causes of action. The circuit court granted summary judgment in favor of Ammann. The Supreme Court affirmed, holding that David had no business interference claim he could assert in his individual capacity, and thus, summary judgment in favor of Ammann was proper. View "Ellingson v. Ammann" on Justia Law

AgFirst Farmers Cooperative (AgFirst) sued Diamond C Dairy (Diamond) for cattle feed allegedly purchased by Diamond. Diamond admitted it owed AgFirst for some of the feed but contended that some shipments could have been sent to a facility in Ft. Dodge, Iowa that was owned by another company. The trial court disallowed this defense by refusing to allow Diamond to withdraw its admissions admitting that the feed had been delivered to its facility. Diamond also contended it did not owe AgFirst for some shipments because Diamond's facility did not have sufficient storage capacity to accommodate those loads of feed. The circuit court rejected this second defense and awarded AgFirst a money judgment. The Supreme Court affirmed in part and reversed in part, holding (1) the circuit court's findings of fact were adequate to support its determination that there was sufficient storage space at Diamond's facility to have accepted AgFirst's deliveries; (2) the record was inadequate to determine whether the award of attorney's fees and expenses to AgFirst was appropriate; and (3) the court applied the wrong test in denying Diamond's request to withdraw admissions relating to the Ft. Dodge defense. Remanded for a new trial on that issue. View "AgFirst Farmers Coop. v. Diamond C Dairy, LLC" on Justia Law