Teresa Ann Thompson, individually and as Special Administer of the Estate of Winfield Thompson, Sr., Deceased; Winfield Thompson; Melissa Prochnow, as Special Administrator/Personal Representative of the Estate of Nicholas Helgeson; Jamie Helgeson, as Special Administrator/Personal Representative of the Estate of Nicholas Helgeson; Nicholas Helgeson v. William P. Harrie; Nilles Law Firm, also known as Nilles, Selbo & Harrie LTD; Nodak Insurance Company, formerly known as Nodak Mutual Insurance Company of Fargo; Nodak Mutual Group, Inc., a Mutual Holding Company; N.I. Holdings, Inc., an Intermediate Stockholding Company
No. 22-1058
United States Court of Appeals For the Eighth Circuit
February 3, 2023
Submitted: November 17, 2022
Appeal from United States District Court for the District of South Dakota - Southern
Before BENTON and ERICKSON, Circuit Judges, and BUESCHER,1 District Judge.
Teresa Ann Thompson, individually and as special administrator of the Estate of
I. BACKGROUND
On November 6, 2009, Winfield Thompson, Sr., died as the result of injuries he sustained in a car accident in Roberts County, South Dakota. Winfield was a passenger in a vehicle that collided with a vehicle owned by Patrick Nelson and driven by Nicholas Helgeson. Helgeson, a North Dakota resident, was insured under an automobile policy issued to his parents by Nodak Insurance Company (“Nodak“). Thompson commenced a personal injury and wrongful death action in South Dakota state court against Helgeson, alleging Helgeson‘s failure to exercise reasonable care in the operation of a motor vehicle was the proximate and direct cause of the accident that injured and ultimately killed her father. Thompson sought compensatory, special, and general damages on behalf of Winfield as well as damages on behalf of herself, Winfield‘s heirs, and the Estate of Winfield Thompson, Sr. Nodak hired William Harrie, who was licensed in North Dakota, to defend Helgeson in the wrongful death action.
The wrongful death action was put on hold when Nodak initiated a declaratory judgment action, seeking a determination on whether its policy covered Helgeson. After the court resolved the coverage dispute and determined Nodak was obligated to provide coverage, Thompson‘s attorney sent a written settlement demand to Harrie. When Harrie failed to respond, Thompson‘s attorney wrote again, this time demanding a formal answer to the wrongful death complaint within thirty days. When no answer was filed, Thompson moved for entry of default judgment.
After receiving the motion for entry of default judgment, Harrie signed and filed an answer on Helgeson‘s behalf. Although Harrie‘s partner, Mark Hanson, who is licensed in South Dakota, was listed on the pleading, only Harrie signed the document. The court denied the motion for entry of default judgment. About a year and a half later, Thompson discovered Harrie was neither licensed in South Dakota nor admitted pro hac vice and filed a renewed motion to quash the answer. Harrie promptly moved for pro hac vice admission, which the court denied. The court then quashed Harrie‘s answer and entered default judgment.
Nodak then hired an attorney located in Sioux Falls, South Dakota, who unsuccessfully moved to set aside the default judgment. Helgeson died prior to trial and his estate was substituted as the defendant in the wrongful death action. The action proceeded to trial solely on the issue of damages. The jury awarded $127,219.60 to Thompson. The court entered an amended judgment in favor of Thompson in the total amount of $160,684.12, which consisted of the jury award; $24,131.86 in prejudgment interest; $5,857.50 in attorney‘s fees and taxes; and $3,475.16 in taxable costs and disbursements.
Following the assignment, Thompson again sued the law firm and Nodak in state court, alleging legal malpractice, breach of contract, bad faith, failure to pay benefits, and punitive damages. After removal to federal court, the law firm moved to dismiss the legal malpractice and punitive damages claims. The district court granted the motion, predicting the South Dakota Supreme Court would likely hold that legal malpractice claims are not assignable. The parties resolved the remaining claims and cross-claims involving Nodak, and the district court dismissed these claims. Thompson appeals.
II. ANALYSIS
We review de novo the district court‘s decision granting a motion to dismiss for failure to state a claim under
In the legal malpractice context, South Dakota has a strict privity rule, requiring as a threshold matter the existence of an attorney-client relationship. Chem-Age Indus., Inc. v. Glover, 652 N.W.2d 756, 769 (S.D. 2002). The reasoning for the greater protection is based on the confidential nature of the relationship that requires the utmost trust and confidence. Id. at 770. The South Dakota Supreme Court has explained that any possible exception to the strict privity rule: (1) “should not expose attorneys to unlimited litigation brought by anyone who might conceivably derive some indirect benefit from the performance of attorneys,” and (2) “should have limited application in adversarial proceedings because the rules of ethics require that lawyers represent their clients zealously within the bounds of the law and that lawyers ordinarily not represent or act for conflicting interests.” Id. at 769.
While the South Dakota Supreme Court has yet to address whether a legal malpractice claim is assignable, it has prohibited the assignment of personal injury claims. A. Unruh Chiropractic Clinic v. De Smet Ins. Co. of S.D., 782 N.W.2d 367, 370 (S.D. 2010) (reasoning that if personal injury claims were assignable, it “would disturb the peace of society, lead to corrupt practices, and prevent the remedial process of law“). Because the assignment of a
Thompson‘s reliance on Kobbeman v. Oleson, 574 N.W.2d 633 (S.D. 1998), is misplaced because the relationship between an insurance agent and insured is not rooted in the level of confidentiality and trust present in the attorney-client relationship. Given South Dakota‘s express comments about the sanctity of the attorney-client relationship and the parameters that must be met before invading that relationship, we can find no support for Thompson‘s invitation to adopt a case-by-case approach related to the assignment of legal malpractice claims.
Thompson also asserts the district court erred when it dismissed her fraud and deceit claims against the law firm. To the extent Thompson intended to state a claim for fraud or deceit claim, no such claim actually appears in the amended complaint—especially in light of South Dakota‘s requirement that fraud and deceit be pled with particularity. See Sisney v. Best Inc., 754 N.W.2d 804, 812 (S.D. 2008);
III. CONCLUSION
We affirm the judgment of the district court.