Total Auctions & Real Estate, LLC v. South Dakota Department of Revenue & Regulation
2016 SD 95
S.D.2016Background
- Total Auctions, an LLC based in Lincoln County, planned public auto auctions including vehicles consigned from dealers located outside Lincoln County.
- Ronald Rysavy, a DMV dealer agent, advised Total Auctions on required forms and compliance; Total Auctions relied on his guidance and prepared for auctions.
- On the eve of the first auction, a DMV supervisor and the DMV Director informed Total Auctions that state law prohibited auctioning vehicles consigned from out-of-county dealers; the first auction proceeded but future out-of-county sales were barred.
- Total Auctions alleged it suffered substantial damages and business failure due to lost inventory and sued Rysavy, the DMV, the DMV Director, and the Department (claims: negligence, negligent supervision, professional negligence, and vicarious liability).
- The circuit court dismissed for failure to state a claim, concluding the factual predicate was an impermissible misrepresentation of law; the Supreme Court reviewed de novo and affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether plaintiff stated an actionable negligence claim based on agent's advice about law | Rysavy negligently breached duties (failed to follow DMV protocols) when advising Total Auctions, causing damages | Advice was a misstatement of law, and misrepresentations of law are not actionable; no viable negligence claim | Dismissed — negligence claim premised on nonactionable legal misrepresentation |
| Whether plaintiff could reframe claim as professional negligence | Agent had a professional duty to verify legal guidance; thus professional negligence claim viable | Even if professional, underlying allegation remains misrepresentation of law and is nonactionable | Dismissed — professional negligence fails for same reason |
| Whether negligent supervision claim against DMV Director stated a claim | Director failed to supervise Rysavy to ensure correct application of law, causing harm | Negligent supervision requires an underlying actionable tort by employee; none exists here | Dismissed — supervision claim depends on employee liability which is absent |
| Whether vicarious liability/respondeat superior can save the suit | Employer can be liable for employee torts under respondeat superior | Respondeat superior is not an independent tort; it requires an underlying employee tort | Dismissed — no underlying actionable tort, so no vicarious liability relief |
Key Cases Cited
- Meyer v. Santema, 559 N.W.2d 251 (S.D. 1997) (misrepresentations of law generally not actionable)
- Nooney v. StubHub, Inc., 873 N.W.2d 497 (S.D. 2015) (standard of review and pleadings under Rule 12)
- Sisney v. Best Inc., 754 N.W.2d 804 (S.D. 2008) (pleading standards; dismissal where insuperable bar appears)
- Johnson v. Hayman & Assocs., Inc., 867 N.W.2d 698 (S.D. 2015) (elements of negligence and professional-duty discussion)
- Fisher v. Kahler, 641 N.W.2d 122 (S.D. 2002) (elements of negligent misrepresentation)
- Gruhlke v. Sioux Empire Fed. Credit Union, Inc., 756 N.W.2d 399 (S.D. 2008) (pleading requirements)
- Bernie v. Catholic Diocese of Sioux Falls, 821 N.W.2d 232 (S.D. 2012) (respondeat superior is vicarious liability mechanism)
- Rehm v. Lenz, 547 N.W.2d 560 (S.D. 1996) (discussing vicarious liability and employer liability)