941 N.W.2d 791
S.D.2020Background
- Brant Lake Sanitary District (a public entity) hired Schmitz Kalda & Associates (SKA) to engineer a wastewater collection Project and awarded installation to Excel Underground; Granite Re issued a performance bond and Excel owners executed an indemnity to Granite.
- The Project suffered delays from difficult terrain, late supplies, switching from directional boring to open trenching (Spawn’s Addition), and disputed hydraulic pressure-testing standards; Excel requested an extension which the District denied.
- The District terminated Excel’s contract in January 2014, declared an emergency, and later hired Dakota Road Builders (DRB) to finish the work; Excel sued the District and the cases were consolidated; the District also sued Granite on the bond and later filed a third‑party complaint against SKA.
- Pretrial rulings: the court dismissed the District’s liquidated-damages claim (Excel had been terminated), granted SKA summary judgment on the District’s third‑party claim (District largely failed to oppose), and denied the District’s belated summary judgment motion against Excel.
- At trial the court (over objection) instructed the jury that SKA was the District’s agent and instructed on the public‑emergency exception to bidding (relevant to duty to mitigate); the jury awarded Excel contract damages totaling $1,569,691.81 (plus interest), rejected the District’s claims, and the District’s post‑trial relief was denied.
Issues
| Issue | District's Argument | Excel/Granite's Argument | Held |
|---|---|---|---|
| Whether District could recover liquidated damages after terminating Excel | Contract provides both liquidated and compensatory damages; Subsurfco should be relaxed to allow both | Subsurfco bars liquidated damages once owner terminates and seeks cost of completion | Court declined to revisit Subsurfco; dismissal harmless because jury found for Excel on merits |
| Whether SKA summary judgment (third‑party) bound Excel such that District’s claims vs Excel should be resolved | SKA facts were undisputed; District timely sought summary judgment against Excel by reference and oral request | SKA’s motion addressed only third‑party claim; Excel was not a party to that motion and need not respond | Court refused to extend SKA ruling to Excel; SD rules don’t bind non‑parties; District’s belated motion was untimely |
| Whether instructing jury that SKA was District’s agent was erroneous and prejudicial | SKA was an independent contractor in some documents; agency instruction injected tort/vicarious‑liability concepts not pled | Evidence showed SKA acted as District’s contract representative; instructions overall were contract‑focused | Agency instruction was erroneous in wording but not prejudicial; jury verdict rests on contract claims and evidence of SKA’s representative authority |
| Whether evidence and instruction on emergency bidding/mitigation were admissible | Emergency procurement issue was irrelevant; Excel’s expert conceded DRB contract was fair; evidence invited jury prejudice | District delayed declaring emergency and took months to hire DRB; timeliness and reasonableness of mitigation are relevant to damages | Evidence and emergency‑procurement instruction were relevant to mitigation; admission and instruction were within court’s discretion |
| Whether evidence supported jury award (unpaid items, retainage, lost profits) | Lost profits too remote/speculative; some claimed items not contractually recoverable | Excel presented payment applications, retainage undisputed by District’s accountant, bond/bid logs, and CPA lost‑profit analysis tying impairment to District’s bond claim | Jury verdict supported by substantial evidence; lost‑profit award reasonable and not excessive; motions for JNOV/new trial denied |
Key Cases Cited
- Subsurfco, Inc. v. B-Y Water Dist., 337 N.W.2d 448 (S.D. 1983) (when owner terminates and recovers cost of completion, liquidated damages are not recoverable)
- Weitz Co. v. MacKenzie House, LLC, 665 F.3d 970 (8th Cir. 2012) (discusses jurisdictions allowing liquidated damages after termination)
- Precision Erecting, Inc. v. M & I Marshall & Ilsley Bank, G.A.P., Inc., 592 N.W.2d 5 (Wis. Ct. App. 1998) (permitting, in limited circumstances, summary judgment effects on non‑moving parties when fundamentally fair)
- Stern Oil Co., Inc. v. Brown, 908 N.W.2d 144 (S.D. 2018) (standards for contract damages; foreseeability and reasonable certainty for lost profits)
- Denny Const., Inc. v. City & Cty. of Denver ex rel. Bd. of Water Comm’rs, 199 P.3d 742 (Colo. 2009) (lost profits from impaired bonding capacity may be recoverable if proven with reasonable certainty)
- Arcon Constr. Co. v. S.D. Cement Plant Comm’n, 349 N.W.2d 407 (S.D. 1984) (recognition of lost profits awards against public entities when proven)
- ISG, Corp. v. PLE, Inc., 917 N.W.2d 23 (S.D. 2018) (deference to jury verdicts; reversal for damages only in extreme cases)
- Cameron v. Osler, 930 N.W.2d 661 (S.D. 2019) (respondeat superior and vicarious‑liability principles)