#27804-a-SLZ

2016 S.D. 95

IN THE SUPREME COURT

OF THE

STATE OF SOUTH DAKOTA

* * * *

TOTAL AUCTIONS AND REAL

ESTATE, LLC, a South Dakota Limited

Liability Company, ANDREW HARR 

and JASON BORMANN, Plaintiffs and Appellants,

v.

SOUTH DAKOTA DEPARTMENT OF

REVENUE & REGULATION, SOUTH 

DAKOTA DEPARTMENT OF MOTOR

VEHICLES, PEGGY LAURENZ, individually

and in her official capacity as an employee

and Director of the South Dakota Department

of Motor Vehicles, and RONALD RYSAVY, 

individually and in his official capacity as an

employee and agent of the South Dakota

Department of Motor Vehicles, Defendants and Appellees.

* * * *

APPEAL FROM THE CIRCUIT COURT OF

THE SECOND JUDICIAL CIRCUIT

LINCOLN COUNTY, SOUTH DAKOTA

* * * *

THE HONORABLE JOHN SOGN

Judge

* * * *

CASEY W. FIDELER

CHRISTOPHER L. FIDELER of

Christopherson, Anderson, 

 Paulson & Fideler, LLP

Sioux Falls, South Dakota Attorneys for plaintiffs 

and appellants. 

* * * *

ARGUED ON 

NOVEMBER 8, 2016

OPINION FILED 12/14/16
JAMES E. MOORE 

JOEL E. ENGEL III of

Woods Fuller Shultz & Smith, PC

Sioux Falls, South Dakota Attorneys for defendants 

and appellees.
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ZINTER, Justice

[¶1.] Total Auctions and Real Estate, LLC (Total Auctions) planned to 

conduct automobile auctions in Lincoln County. Part of its business plan included 

the sale of vehicles consigned from automobile dealers not located in Lincoln 

County. A Division of Motor Vehicles dealer agent advised Total Auctions on how to 

comply with the applicable law. After incurring expenses setting up its business, 

Total Auctions was informed by a Division supervisor that state law prohibited 

auctioning vehicles consigned from dealers outside Lincoln County. Total Auctions 

and its members sued the Division agent, the Division, its director, and the 

Department of Revenue and Regulation on theories of negligence and negligent 

supervision. The circuit court dismissed the complaint for failure to state a claim 

upon which relief could be granted. We affirm.

Facts and Procedural History

[¶2.] Because this is an appeal from a dismissal for failure to state a claim, 

we restate the facts alleged in the complaint. Total Auctions is a South Dakota 

limited liability company with its principal place of business in Lincoln County. It 

is a licensed automobile dealer that intended to hold automobile auctions that 

would be open to the public. 

[¶3.] The members of Total Auctions—Andrew Harr and Jason Borman

(hereafter collectively referred to as “Total Auctions”)—met with Ronald Rysavy on 

July 11, 2014, to discuss Total Auctions’ business plan. Rysavy was a “dealer agent” 

employed by the South Dakota Division of Motor Vehicles (DMV), a division of the 

South Dakota Department of Revenue and Regulation (DRR). According to the 
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complaint, dealer agents are “responsible for answering dealer business questions, 

providing training and instruction on compliance and procedures, enforcing laws 

and regulations, investigating complaints and violations, and conducting 

inspections.” 

[¶4.] Total Auctions informed Rysavy that it intended to auction vehicles 

consigned from dealers outside Lincoln County. Rysavy provided forms required by 

the DMV to complete vehicle consignments and advised Total Auctions on 

compliance with South Dakota law. He also instructed a dealer outside Lincoln 

County regarding the necessary consignment paperwork for the auctions. The 

complaint alleged that “it was [Rysavy’s] professional opinion that Total Auctions’ 

business complied with South Dakota law.” Total Auctions followed Rysavy’s 

instructions and began preparing for its first auction. It also met with Rysavy on 

additional occasions, including at the location of the auction, to ensure Total 

Auctions was in compliance with the law. However, Rysavy failed to inform Total 

Auctions that state law did not permit it to auction vehicles consigned from dealers 

outside Lincoln County, the county of Total Auctions’ place of business. 

[¶5.] The day before the first auction, Rysavy informed Total Auctions for 

the first time that there was a problem with the out-of-county consignments. Peggy 

Laurenz, the Director of the DMV, informed Total Auctions that under South 

Dakota law, it could not sell vehicles from dealers outside Lincoln County. Director 

Laurenz allowed the noncompliant auction to proceed but indicated that such sales 
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would be prohibited in any future auction.1 Total Auctions alleged that because it 

could not sell vehicles from dealers outside Lincoln County, its inventory for future 

auctions “was drastically reduced,” causing substantial damages and the failure of 

the business.

[¶6.] Total Auctions subsequently sued the DRR, the DMV, Director 

Laurenz, and Rysavy (Defendants). Count I of the complaint alleged negligence, 

claiming that Rysavy breached a “duty to follow the established Department of 

Motor Vehicles Protocols before issuing an opinion on the application of South 

Dakota law to Total Auctions’ business.” Count II alleged negligent supervision, 

claiming that Director Laurenz failed to adequately supervise Rysavy to ensure that 

he followed DMV protocols and provided accurate information regarding compliance 

with South Dakota law. Both claims incorporated allegations in the complaint 

claiming that Rysavy had given erroneous advice on the law.

[¶7.] Defendants moved to dismiss the complaint for failure to state a claim 

upon which relief could be granted. See SDCL 15-6-12(b)(5). Relying on this 

Court’s decision in Meyer v. Santema, 1997 S.D. 21, ¶ 13, 559 N.W.2d 251, 255, the 

circuit court ruled that the alleged negligent conduct was predicated on a

nonactionable misrepresentation of law, and it dismissed all claims. Total Auctions 

appeals.2

 

1. Total Auctions claimed that 34 of the 114 vehicles in its inventory for the first 

auction were consigned from dealers outside Lincoln County.

2. Total Auctions briefed the issue of sovereign immunity in the circuit court 

and in this appeal, but the defendants did not. The circuit court declined to 

rule on the issue because it was not raised by the defendants’ motion to 

(continued . . .)
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Decision

[¶8.] We review the dismissal of a complaint for failure to state a claim de 

novo. Nooney v. StubHub, Inc., 2015 S.D. 102, ¶ 9, 873 N.W.2d 497, 499. “We . . . 

accept the material allegations as true and construe them in a light most favorable 

to the pleader to determine whether the allegations allow relief.” Sisney v. Best 

Inc., 2008 S.D. 70, ¶ 8, 754 N.W.2d 804, 809. “A complaint need only contain a 

short plain statement of the claim showing the pleader is entitled to relief and a 

demand for judgment for the relief to which the pleader deems himself entitled.” 

Nooney, 2015 S.D. 102, ¶ 9, 873 N.W.2d at 499 (citing SDCL 15-6-8(a); Gruhlke v. 

Sioux Empire Fed. Credit Union, Inc., 2008 S.D. 89, ¶ 17, 756 N.W.2d 399, 409). 

Detailed factual allegations are not required, but the complaint “must contain more 

than labels and conclusions and a formulaic recitation of the elements of a cause of 

action.” Id. (citing Gruhlke, 2008 S.D. 89, ¶ 17, 756 N.W.2d at 409). Ultimately, 

“where the allegations show on the face of the complaint there is some insuperable 

bar to relief, dismissal under Rule 12(b)(5) is appropriate.” Sisney v. State, 

2008 S.D. 71, ¶ 8, 754 N.W.2d 639, 643.

[¶9.] Total Auctions first argues that the circuit court erred in 

characterizing its negligence claim as one for negligent misrepresentation. It 

concedes that it does not have a valid claim for negligent misrepresentation because 

________________________

(. . . continued)

dismiss. We do not consider the sovereign immunity issue for the same 

reason.
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misrepresentations of law are generally not actionable.3 See Meyer, 1997 S.D. 21, 

¶ 13, 559 N.W.2d at 255. It contends, however, that the complaint states a valid 

claim for other negligent acts. Specifically, it contends that its complaint pleaded 

facts sufficient to state a claim that Rysavy owed Total Auctions a duty to follow 

established DMV protocols before issuing an opinion on compliance with South 

Dakota law; that Rysavy breached that duty; and that Rysavy’s breach caused Total 

Auctions’ damages. 

[¶10.] Total Auctions correctly points out that negligence and negligent 

misrepresentation are separate claims. Although these torts have different 

elements,4 and although ordinary negligence does not require a negligent 

misrepresentation, the circuit court correctly noted that the underlying factual 

premise for the negligence claim here is negligent misrepresentation. All of Total 

Auctions’ theories are ultimately premised on the claim that its damages were 

caused by Rysavy’s failure to give correct advice about the law; i.e. that the law 

prohibited Total Auctions’ sale of vehicles consigned from dealers outside Lincoln 

County. Total Auctions may not, in resisting the motion to dismiss, simply ignore 

 

3. Neither party disputes that incorrect legal advice was given. We express no 

opinion on the matter.

4. A negligence claim requires a plaintiff to show “duty, breach of that duty, 

proximate and factual causation, and actual injury.” Johnson v. Hayman & 

Assocs., Inc., 2015 S.D. 63, ¶ 13, 867 N.W.2d 698, 702. Negligent 

misrepresentation requires a plaintiff to show that “one party makes (1) a 

misrepresentation, (2) without reasonable grounds for believing the 

statement to be true, (3) with the intent to induce a particular action by 

another party, and the other party (4) changes position with actual and 

justifiable reliance on the statement, and (5) suffers damage as a result.” 

Fisher v. Kahler, 2002 S.D. 30, ¶ 10, 641 N.W.2d 122, 126-27.
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its central pleaded fact that “Rysavy never addressed and failed to discuss, mention, 

express any concern, raise any issues, or in any way indicate to Total Auctions that 

obtaining consignments from dealers outside of Lincoln County was not permissible 

and prohibited under South Dakota law.”

[¶11.] Total Auctions, however, insists that its complaint should not be 

dismissed because the pleaded negligent conduct (failure to follow established 

protocols before giving an opinion) is not the same as a negligent misrepresentation 

of law. But, as just explained, the negligent misrepresentation of law is also a

central pleaded fact of causation in the failure to follow protocol claim. Total 

Auctions concedes the point in its brief. It argues that “Rysavy was required, at a 

minimum, to [use the protocols to] verify that the guidance, direction, and 

instruction he provided to Total Auctions was researched, accurate, [and] verified.” 

Appellant’s Brief 19 (emphasis added). Thus, the only reasonable inference to be 

drawn from the pleaded facts is that Total Auctions’ complaint for negligence, no 

matter what duty was allegedly breached, is ultimately premised on the claim that 

its damages were caused by the misrepresentation of law.

[¶12.] In sum, Total Auctions’ claim for negligence is premised on the 

allegation that a misrepresentation of law caused its damages. Total Auctions

cannot avoid that fact by relabeling the name of its claim. Because

misrepresentations of law are not actionable, Meyer, 1997 S.D. 21, ¶ 13, 559 N.W.2d 

at 255, “the allegations show on the face of the complaint there is some insuperable 

bar to relief, [and] dismissal under Rule 12(b)(5) is appropriate.” See Sisney v. 

State, 2008 S.D. 71, ¶ 8, 754 N.W.2d at 643.
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[¶13.] Total Auctions also argues that its complaint states a claim for 

professional negligence.5 However, the only difference between negligence and 

professional negligence is the nature of the duty. See Johnson v. Hayman & 

Assocs., Inc., 2015 S.D. 63, ¶¶ 13, 22-23, 867 N.W.2d 698, 702, 705. And as 

explained above, Total Auctions’ central underlying allegation is that its damages 

were caused by a nonactionable misrepresentation of law. Therefore, the complaint 

also fails to state a claim for professional negligence.6

[¶14.] Finally, Total Auctions argues that its complaint states an 

independent claim for negligent supervision by Director Laurenz. However, this 

claim is also premised on providing incorrect advice concerning South Dakota law. 

Total Auctions pleaded that Director Laurenz failed to adequately supervise Rysavy 

to ensure that he followed DMV protocols and that “the laws of South Dakota were 

correctly applied” to Total Auctions’ business. (Emphasis added.)

[¶15.] Moreover, “negligent supervision [requires] that the employer failed to 

exercise reasonable care in supervising (managing, directing, or overseeing) its 

employees so as to prevent harm to other employees or third persons.” Iverson v. 

NPC Int’l, Inc., 2011 S.D. 40, ¶ 23, 801 N.W.2d 275, 282 (emphasis added). Failing 

 

5. Total Auctions did not plead but did argue before the circuit court and on 

appeal that its complaint also supports a claim for professional negligence. 

6. Professional negligence claims are typically asserted against professionals 

such as physicians, accountants, and attorneys. Total Auctions cites no 

authority supporting its claim that a government-motor-vehicle-licensing 

agent is such a professional. Additionally, this claim is simply a recast 

negligent misrepresentation claim. Therefore, we do not address the parties’ 

arguments whether a dealer-agent is a “professional” for purposes of 

professional negligence. 
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to “prevent harm” necessarily assumes an underlying wrong; i.e. the commission of 

a tort by an employee. Thus, a negligent supervision claim requires that an 

employee commit an underlying tort. Schoff v. Combined Ins. Co. of Am., 

604 N.W.2d 43, 53 (Iowa 1999) (“[A]n employer cannot be held liable for negligent 

supervision . . . where the conduct that proper supervision and training would have 

avoided is not actionable against the employee.”); Schieffer v. Catholic Archdiocese 

of Omaha, 508 N.W.2d 907, 913 (Neb. 1993) (“[A]n underlying requirement in 

actions for negligent supervision . . . is that the employee is individually liable for a 

tort or guilty of a claimed wrong against a third person . . . .”). Because Total 

Auctions’ complaint fails to state an actionable tort claim against Rysavy, it also 

fails to state a claim against Director Laurenz for negligent supervision.7

[¶16.] The central pleaded fact underlying all of Total Auctions’ claims is the 

allegation that Rysavy gave incorrect legal advice, which caused Total Auctions’ 

damages. No matter what tort is asserted, Total Auctions’ claimed damages were 

caused by Rysavy’s alleged misrepresentation of law. Because that fact creates an 

insuperable bar to relief on all claims, we affirm.

 

7. Total Auctions also argues that the complaint states a claim against Rysavy’s 

employer under a respondeat superior theory. However, respondeat superior 

is simply a means of imposing vicarious liability on an employer for an 

employee’s torts committed within the scope of employment; it is not an 

independent tort claim against an employer. See Bernie v. Catholic Diocese of 

Sioux Falls, 2012 S.D. 63, ¶ 8, 821 N.W.2d 232, 237 (quoting Bass v. Happy 

Rest, Inc., 507 N.W.2d 317, 320 (S.D. 1993)) (“Respondeat superior is ‘a legal 

fiction designed to bypass impecunious individual tortfeasors for the deep 

pocket of a vicarious tortfeasor.’”); see also Rehm v. Lenz, 1996 S.D. 51, ¶ 21, 

547 N.W.2d 560, 566 (noting an employer may be vicariously liable for 

“negligent acts of their employees under a respondeat superior theory” as 

well as directly liable for the independent tort of negligent supervision).
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[¶17.] GILBERTSON, Chief Justice, SEVERSON and KERN, Justices, and 

KONENKAMP, Retired Justice, concur.

[¶18.] KONENKAMP, Retired Justice, sitting for WILBUR, Justice, 

disqualified.