Opinion ID: 900571
Heading Depth: 1
Heading Rank: 2

Heading: standard of review

Text: [¶ 10.] Our standard of review for summary judgment is settled and briefly is `whether a genuine issue of material fact exists and whether the law was correctly applied.' Manuel v. Wilka, 2000 SD 61, ¶ 17, 610 N.W.2d 458, 462 (quoting Parmely v. Hildebrand, 1999 SD 157, ¶ 7, 603 N.W.2d 713, 715-16 (citations omitted)). [¶ 11.] 1. WHETHER THE TRIAL COURT ERRED IN GRANTING SUMMARY JUDGMENT AGAINST SETLIFF ON HIS CLAIMS AGAINST AKINS AND STEWART.
[¶ 12.] The trial court held that no employment contract existed between Setliff and Akins, and therefore no breach could have occurred. This was error. SDCL 53-1-3 provides that [a] contract is either express or implied. An express contract is one, the terms of which are stated in words. An implied contract is one, the existence and terms of which are manifested by conduct. We defined an implied contract in Weller v. Spring Creek Resort, Inc., 477 N.W.2d 839, 841 (S.D. 1991): `A contract is implied in fact where the intention as to it is not manifested by direct or explicit words by the parties, but is to be gathered by implication or proper deduction from the conduct of the parties, language used, or acts done by them, or other pertinent circumstances attending the transaction.' (quoting Mahan v. Mahan, 80 S.D. 211, 215, 121 N.W.2d 367, 369 (1963)). [¶ 13.] In determining whether an implied contract exists, this court held that [t]he pertinent inquiry is whether the facts and circumstances properly evaluated permit an inference that services were rendered in expectance by one of receiving and the other of making compensation. Mahan, 80 S.D. at 215, 121 N.W.2d at 369. Clearly, this is the situation here. Furthermore, the `facts are viewed objectively and if a party voluntarily indulges in conduct reasonably indicating assent he may be bound even though his conduct does not truly express the state of his mind.' Weller, 477 N.W.2d at 841 (quoting Federal Land Bank of Omaha v. Houck, 68 S.D. 449, 463, 4 N.W.2d 213, 219-20 (1942)). Therefore, we must closely examine the course of conduct between the parties. The `[c]onduct' can be both acts and words. By its very nature, an implicit agreement is not as detailed as a written agreement formally negotiated. In re Estate of Regennitter, 1999 SD 26, ¶ 12, 589 N.W.2d 920, 924 (quoting Jurrens v. Lorenz Mfg. Co., 1998 SD 49, ¶ 9, 578 N.W.2d 151, 154 (quoting Mathews v. Twin City Const. Co., Inc., 357 N.W.2d 500, 507 (S.D.1984))). We look to the totality of the parties' conduct to learn whether an implied contract can be found. Id. (citations omitted). See also Lien v. McGladrey & Pullen, 509 N.W.2d 421, 423-24 (S.D.1993) (providing that an implied contract is inferred from the conduct of the parties). [¶ 14.] Here, the totality of the parties' conduct reasonably indicates assent that the parties intended to be bound by the terms of an implied contract. Akins began working at the Setliff Clinic on April 21, 1997 and delivered a copy of his resignation letter to Setliff on February 17, 1998. During those ten months, specific terms of employment existed, under which Akins received: an annual salary, a comprehensive benefits package, malpractice insurance, reimbursement for moving expenses, permission to use Setliff's airplane for personal purposes and a leased 1997 Ford Expedition. These terms were indicated in the notes Setliff took during employment negotiations with Akins. That there may be disputed claims of additional terms is immaterial to summary judgment and simply a matter for the jury to determine in due course. These parties not only negotiated in good faith, but they obviously reached an agreement and an intention to contract; otherwise, Akins would not have reported to work at the Setliff Clinic on April 21, 1997. Once there is an agreement on the terms of the contract, `a contract is formed even though [the parties] intend to adopt a formal document with additional terms at a later date.' Kroupa v. Kroupa, 1998 SD 4, ¶ 39, 574 N.W.2d 208, 214 (Konenkamp, Justice, concurring in part and concurring in result) (citations omitted). Even when parties change their minds between the time of oral agreement ... and when it is to be reduced to writing, the [contract] is nonetheless binding. Id. ¶ 40. Obviously, an implied contract can be inferred from the circumstances presented here. See St. John's First Lutheran Church v. Storsteen, 77 S.D. 33, 37, 84 N.W.2d 725, 727 (1957) (stating that the distinction between express and implied contracts is the way in which mutual assent is manifested.). [¶ 15.] More compelling, however, is the admission made by Akins in his answer and counterclaim: in April 1997 [Akins] became an employee of [Setliff] and that some of the terms alleged in IV and VI were terms of the employment contract between [Setliff] and Dr. Akins. See Simons v. Kidd, 73 S.D. 306, 309, 42 N.W.2d 307, 308 (1950) (stating that no evidence is required to establish a fact conceded by [the] answer.). The basis of Akins' counterclaim is that Setliff breached the existing employment contract. Therefore, because both parties agreed in their pleadings that an employment contract existed, there is an unmistakable intention by both sides to be bound by an employment contract. Therefore, it is nonsensical to conclude that there was no meeting of the minds between the parties to contract. See In re Estate of Eberle, 505 N.W.2d 767, 770 (S.D.1993) (providing that a contract is enforceable when it is possible to ascertain the full meaning with reasonable certainty; ... absolute certainty is not required. (citations omitted)). [¶ 16.] This issue is wholly inappropriate for summary disposal.
[¶ 17.] Pursuant to South Dakota law, all employees have a statutory duty of loyalty: [a]n employee who has any business to transact on his own account, similar to that entrusted to him by his employer, must always give the latter the preference. SDCL 60-2-13. Whether an employee's actions constitute a breach of this duty is a question of fact to be determined by a jury. Rehabilitation Specialists, Inc. v. Koering, 404 N.W.2d 301, 305 (Minn.Ct.App.1987). [¶ 18.] While the lack of resistance may be material, the standard of review is whether genuine issues of material fact exist within the record. [¶ 19.] In reviewing these types of cases in other jurisdictions, it is obvious that they are extremely fact-sensitive. It is clear, however, that the employee owes a duty of loyalty to the employer, and the employee must not, while employed, act contrary to the employer's interests. Equally clear is the proposition that the employee is entitled to make arrangements for some new employment by a competitor and should be given some latitude in this regard. See Restatement (Second) of Agency § 393 cmt. e (1957) (providing that [e]ven before the termination of the agency, [the employee] is entitled to make arrangements to compete,... however, [he is not] entitled to solicit customers for such rival business before the end of his employment [or] do other similar acts in direct competition with the employer's business.). Therefore, while employees may lay plans and take limited steps to begin competing with their employers, employees who go too far risk violating their duty of loyalty. We acknowledge, as others have, that `the line separating mere preparation from active competition may be difficult to discern in some cases.' Jet Courier Service, Inc. v. Mulei, 771 P.2d 486, 493 (Colo.1989) (recognizing the competing policy considerations of honesty and fair dealing on the one hand and free and vigorous economic competition on the other) (quoting Maryland Metals, Inc. v. Metzner, 282 Md. 31, 382 A.2d 564, 569 n.3 (1978)). At any rate, it is clearly a jury question. [¶ 20.] Obviously, `[i]t is the nature of [the employee's] preparations which is significant' in determining whether a breach has occurred. Id. (quoting Bancroft-Whitney Co. v. Glen, 64 Cal.2d 327, 49 Cal.Rptr. 825, 411 P.2d 921, 935 (1966)). In Bushman v. Pure Plant Food Intern., Ltd., 330 N.W.2d 762, 763-64 (S.D.1983), this court was presented with a similar fact situation. The parties had an employment relationship, but did not have a written agreement setting forth the duration or a non-competition clause. The three employees, while employed for employer, discussed the formation of a competing business and solicited interest, from employer's customers and employees, in their new business venture. In upholding the jury award to employer for breach of duty of loyalty, this court stated: Although SDCL 60-2-13 does not flatly prohibit employees from pursuing their own interests, it does require an employee to prioritize. An employee must prefer his employer's business interests to his own. Id. at 764 (emphasis added). We also examined a Rhode Island case, which held that pretermination solicitation of an employer's customers is a breach of loyalty to the employer. Id. at 765 (citing Rego Displays, Inc. v. Fournier, 119 R.I. 469, 379 A.2d 1098 (R.I.1977) (other citations omitted)). [¶ 21.] Here, Setliff alleges that Akins breached his duty of loyalty by:
2. Conducting business activities on his own account while in the employ of Setliff, and with the knowledge acquired from Setliff worked to establish his own medical clinic in competition with Setliff; 3. Appropriating and taking advantage of business opportunities that rightfully belonged to Setliff; 4. Secretly communicating with, soliciting and/or hiring employees of Setliff while still employed by Setliff; and 5. Secretly communicating with or soliciting patients of Setliff while still employed with Setliff. (emphasis added). [¶ 22.] At the time of Akins' deposition, Great Plains employed three assistants, two of which were previously employed at the Setliff Clinic. Akins testified that he told at least one of the assistants that he could not legally offer her a job, but that he was leaving an opening in his practice. [4] He also testified that fifteen percent of his clientele consisted of Setliff Clinic patients. See A & L Scientific Corp. v. Latmore, 265 A.D.2d 355, 696 N.Y.S.2d 495, 496 (1999) (stating that `[a]n employee may solicit an employer's customers only when the employment relationship has been terminated.' (quotations omitted)). This evidence was presented to the trial court which, without explanation, granted summary judgment. However, whether Akins went too far in preparing to compete with Setliff and whether he solicited Setliff Clinic employees and customers are questions of fact. See Paint Brush Corp. v. Neu, 1999 SD 120, ¶ 34, 599 N.W.2d 384, 393 (determining that a question of fact existed whether the employee breached his duty of loyalty); Rehabilitation Specialists, Inc., 404 N.W.2d at 305 (stating that [w]hether an employee's actions constituted a breach of h[is] duty of loyalty is a question of fact to be determined based on all the circumstances of the case.).
[¶ 23.] Setliff brought an unfair competition claim to recover damages allegedly caused by Akins' unexpected notice of his intention to leave the Setliff Clinic and to start his own competing business. [¶ 24.] The tort of unfair competition does not have specific elements. Instead, it describes a general category of torts which courts recognize for the protection of commercial interests. Id. at 305-06 (citations omitted). Therefore, damages for unfair competition results from satisfying the elements of an underlying tort. See United Wild Rice, Inc. v. Nelson, 313 N.W.2d 628, 632 (Minn.1982) (providing that tortious interference with contract or improper use of trade secrets can be the basis for a claim for unfair competition). [¶ 25.] An employee's breach of his duty of loyalty may constitute unfair competition. Rehabilitation Specialists, 404 N.W.2d at 306 (citing Sanitary Farm Dairies, Inc. v. Wolf, 261 Minn. 166, 112 N.W.2d 42, 49 (1961) (characterizing defendant's conduct in soliciting his employer's customers and failing to give sufficient notice of his intention to quit as unfair competition); Loxtercamp, Inc. v. Belgrade Co-op Ass'n., 368 N.W.2d 299, 301 (Minn.Ct.App.1985) (stating that plaintiff would normally be entitled to such relief as would mitigate the consequences of [defendant's] unfair competition, i.e., the solicitation of several customers prior to his resignation.)). Because genuine issues of material fact exist whether Akins breached his duty of loyalty to Setliff resulting in unfair competition, the granting of summary judgment on unfair competition must also be reversed and remanded.
[¶ 26.] Setliff sued for recovery of a $7,000 loan to Akins. Setliff argues that he had an implied contract with Akins for repayment of this loan. [¶ 27.] It is indisputable that a promissory note was not entered into between these parties. However, as previously stated, an implied contract may be inferred from the parties' conduct and the surrounding circumstances. Jurrens, 1998 SD 49, ¶ 9, 578 N.W.2d at 154 (citation omitted). The existence of an implied contract, as well as its terms, are questions of fact to be determined by a jury. Id. (citations omitted). Even if there were no implied contract, Akins would be liable to Setliff on quantum meruit for $7,000. [¶ 28.] In order to create a contract, four elements must exist: (1) the parties must be capable of contracting; (2) they must consent; (3) the purpose for contracting must be lawful; and (4) there must be sufficient cause or consideration. SDCL 53-1-2. An implied contract must satisfy all four of these elements, however, additional elements are not imposed on implied contracts just because they are not in writing. See Phegley v. Phegley, 629 N.E.2d 280, 282 (Ind.Ct.App.1994) (upholding the trial court's finding that a loan for $80,000 existed on an implied contract theory); Cole v. Cole, 517 N.E.2d 1248, 1250 (Ind.Ct.App.1988) (providing that where there is no express contract, the right to recover may rest upon implied contract or implied promise to pay, which may be inferred from the parties' conduct, situation, or relationship and enforced by law). [¶ 29.] Setliff argues that this money was loaned to Akins and Akins argues that it was a gift. The essential elements of a gift are intent, delivery and acceptance. Meyer v. South Dakota Dep't of Social Services, 1998 SD 62, ¶ 12, 581 N.W.2d 151, 155 (citations omitted). No intent to make a gift is present here. In determining whether a transaction is a loan or a gift, the trial court may take into consideration the relationship of the parties and an individual's need for the loan. Saum v. Moenter, 101 Ohio App.3d 48, 654 N.E.2d 1333, 1335 (1995) (citations omitted). Additionally, it can deliberate `whether in view of their relations a loan might be made without being evidenced by a note and any other incidents that would enable one to infer that the transaction constituted a loan[.]' Id. (quotation omitted). [¶ 30.] In viewing the facts in a light most favorable to Setliff, no one can seriously claim that he possessed the requisite donative intent to gift $7,000 to Akins. Obviously, this presents a question of fact. This is elementary! Therefore, this issue is reversed and remanded.
[¶ 31.] Setliff sued both Akins and Stewart for civil conspiracy. The trial court concluded that because there was no employment contract, Setliff's cause of action against Akins for civil conspiracy fails. [¶ 32.] In order to establish a prima facie case of civil conspiracy, a plaintiff must prove: (1) two or more persons; (2) an object to be accomplished; (3) a meeting of the minds on the object or course of action to be taken; (4) the commission of one or more unlawful overt acts; and (5) damages as the proximate result of the conspiracy. In re TMJ Implants Prods. Liab. Litigation, 113 F.3d 1484, 1498 (8th Cir.1997) (citations omitted). This is not an independent cause of action, but is `sustainable only after the underlying tort claim has been established.' [5] Hanten v. School District of Riverview Gardens, 183 F.3d 799, 809 (8th Cir.1999) (quoting K & S Partnership v. Continental Bank, 952 F.2d 971, 980 (8th Cir.1991)). [¶ 33.] Clearly, a jury could determine that Akins breached his duty of loyalty. If so, this finding would satisfy the unlawful act element of the civil conspiracy definition[.] Jet Courier, 771 P.2d at 502, and is also reversed.
[¶ 34.] Setliff sued both Akins and Stewart for interference with business relations. Summary judgment was granted to both Akins and Stewart. Although Setliff did not appeal the granting of summary judgment to Akins, he did appeal the summary judgment to Stewart. [¶ 35.] The elements for this cause of action are: (1) the existence of a valid business relationship or expectancy; (2) knowledge by the interferer of the relationship or expectancy; (3) an intentional and unjustified act of interference on the part of the interferer; (4) proof that the interference cause[d] the harm sustained; and (5) damage to the party whose relationship or expectancy was disrupted. Hayes v. Northern Hills General Hosp., 1999 SD 28, ¶ 18, 590 N.W.2d 243, 248 (citations omitted). Notably, none of these elements require the existence of an express employment contract. [6] In fact, we stated that `[f]or this tort to occur, the business relationship ... need not be cemented by written or verbal contract and,... it need not be intended that there be a contract.' Id. ¶ 17 (quoting 45 Am.Jur.2d Interference § 50 (1969)). [¶ 36.] `One is liable for commission of this tort [if he] interferes with business relations of another, both existing and prospective, by inducing a third person not to enter into or continue a business relation with another or by preventing a third person from continuing a business relation with another.' Id. ¶ 22 (emphasis added) (quoting Northern Plumbing & Heating, Inc. v. Henderson Bros., Inc., 83 Mich.App. 84, 268 N.W.2d 296, 299 (1978)). Thus, a valid business relationship or expectancy must exist with a third party. Landstrom, 1997 SD 25, ¶ 75, 561 N.W.2d at 16. In other words, there must be a `triangle'  a plaintiff, an identifiable third party who wished to deal with the plaintiff, and the defendant who interfered with the plaintiff and the third party. Id. [¶ 37.] Here, a business relationship existed between the plaintiff (Setliff) and the third party (Akins). As previously discussed, an implied contract can be inferred from the parties' conduct and the surrounding circumstances. However, one does not need to conclude that a contract, express or implied, existed because their business relationship of employer and employee is sufficient to satisfy the first element. See Hayes, 1999 SD 28, ¶ 17, 590 N.W.2d at 248 (stating that `the business relationship ... need not be cemented by written or verbal contract and, ... it need not be intended that there be a contract.' (quotation omitted)). [¶ 38.] Second, Stewart was employed as an independent consultant for Setliff at the time Akins was hired. In fact, he was responsible for securing a written employment agreement between Setliff and Akins. Obviously, Stewart was aware of the business relationship between Setliff and Akins. [¶ 39.] Third, Setliff claims that Stewart intentionally and unjustifiably interfered with this relationship by persuading Akins that Setliff Clinic was not a suitable employer and that Setliff somehow lacked sufficient moral character to be worthy of Akins' employment. He further claims that Stewart encouraged Akins to leave the Setliff Clinic and start his own practice. In fact, the record reveals that Stewart leased office space to Akins, became the principal stockholder of Akins' company, Great Plains Clinic, and even secured a lucrative consulting agreement with Great Plains Clinic. [¶ 40.] Fourth, Setliff claims that there was no indication that Akins would have left his Clinic had it not been for the actions of Stewart. Although Akins testified that he was unhappy at the Setliff Clinic long before he left, there are genuine issues of material fact concerning his leaving and the timing of his leaving. [¶ 41.] Finally, Setliff claims that, as a result of Akins unexpected resignation, his level of patient care was jeopardized because his physician staff was reduced by half. He also contends that the good will of the Setliff Clinic has been tarnished because of the inconvenience caused to his patients. [¶ 42.] Clearly, sufficient evidence exists to establish genuine issues of material fact: (1) whether Stewart intentionally interfered with Akins' employment at the Setliff Clinic; (2) whether Akins would have resigned absent Stewart's interference; (3) whether Setliff experienced economic damage from Akins' resignation; and (4) the extent thereof. Therefore, this issue is reversed and remanded. [¶ 43.] 2. DID THE TRIAL COURT ERR IN DENYING SETLIFF'S MOTION FOR SUMMARY JUDGMENT ON AKINS' LIBEL CLAIM. [¶ 44.] Under SDCL 20-11-2, defamation consists of either libel or slander. Guilford v. Northwestern Pub. Serv., 1998 SD 71, ¶ 7, 581 N.W.2d 178, 180. Under South Dakota law, both libel and slander are defined as `unprivileged' communications. Kieser v. Southeast Properties, 1997 SD 87, ¶ 13, 566 N.W.2d 833, 837 (citing SDCL 20-11-3, -4). Privilege may always be raised as a defense in a defamation action. Id. (citing Sparagon v. Native Am. Publishers, Inc., 1996 SD 3, ¶ 25, 542 N.W.2d 125, 132). A privileged communication is statutorily defined as a communication made in one of the following ways: (1) In the proper discharge of an official duty; (2) In any legislative or judicial proceeding, or in any other official proceeding authorized by law; (3) In a communication, without malice, to a person interested therein, by one who is also interested, or by one who stands in such relation to the person interested as to afford a reasonable ground for supposing the motive for the communication innocent, or who is requested by the person interested to give the information; (4) By a fair and true report, without malice, of a judicial, legislative, or other public official proceeding or of anything said in the course thereof. In the cases provided for in subdivisions (3) and (4) of this section, malice is not inferred from the communication or publication. Id. (quoting SDCL 20-11-5). There are two types of privileges under SDCL 20-11-5. See Bego v. Gordon, 407 N.W.2d 801, 811 (S.D.1987); Hackworth v. Larson, 83 S.D. 674, 683, 165 N.W.2d 705, 709 (1969). Subsections (1) and (2) are considered absolute, unconditional privileges. See Hackworth, 83 S.D. at 683, 165 N.W.2d at 709. Additionally, subsections (3) and (4) are considered conditional, qualified privileges and may be lost if the speaker publishes the statement when he either (a) in fact does not believe it to be true, or (b) has no reasonable grounds to believe it to be true. See Bego, 407 N.W.2d at 811. [¶ 45.] In the present case, Akins filed a counterclaim against Setliff for libel [7] based upon alleged defamatory statements written by Setliff in a letter [8] to patients of Clinic; therefore, Akins has the burden of proving that Setliff made a false and unprivileged publication. See Miessner v. All Dakota Ins. Associates, Inc., 515 N.W.2d 198, 203-04 (S.D.1994) (citing SDCL 20-11-3, -4). The trial court denied summary judgment because issues of fact existed on the defamation claim in the letter. [¶ 46.] Setliff contends that no defamation was committed based upon qualified and conditional privilege under SDCL 20-11-5(3). He argues that he believed, in good faith and with good reason, that Setliff Clinic's patients had a right to know of Akins' departure, and Setliff never entertained serious doubt as to the truth of the letter's content. In support of his argument, Setliff cites Tibke and Restatement (Second) of Torts § 596. Under the Restatement section, the common interest privilege applies where persons having a common interest in a particular matter correctly or reasonably believe that there is information that another sharing the common interest is entitled to know. Tibke, 479 N.W.2d at 905 (citing Restatement (Second) Torts § 596). [¶ 47.] In addressing conditional privileges under SDCL 20-11-5, we have previously noted: An occasion makes a publication conditionally privileged if the circumstances lead any one of several persons having a common interest in a particular subject matter correctly or reasonably to believe that there is information that another sharing the common interest is entitled to know. Kieser, 1997 SD 87, ¶ 14, 566 N.W.2d at 837. This court has also stated that [t]he privilege created by SDCL 20-11-5(3) is a qualified privilege in that a `communication is only privileged if it is made without malice.' Id. Under the statute, `[m]alice cannot be presumed; the party bearing this burden of proof must establish that there was a reckless disregard for the truth on the part of the accused. ' Ruple v. Weinaug, 328 N.W.2d 857, 860 (S.D. 1983) (emphasis added). `The real test of whether a defendant's conduct is reckless so as to constitute actual malice is whether he in fact entertained serious doubts as to the truth of his publications.' Kieser, 1997 SD 87, ¶ 15, 566 N.W.2d at 838. [¶ 48.] This record reveals conflicting evidence as to whether a privilege exists and whether Setliff exceeded any privilege by mailing his letter to all patients of Setliff's clinic and by the receipt of the letter by two doctors practicing in Idaho and Missouri. Additionally, conflicting evidence exists in this case as to whether Setliff published the letter with a reckless disregard for the truth. A review of the record reveals that it is undisputed that Akins provided a letter of resignation to Setliff identifying the reasons for his departure. The record also reveals that the letter from Akins to Setliff was not read by Setliff. [9] Thus, Setliff's own deposition raises genuine issues of material fact as to whether his refusal to read the letter and subsequent mailing of a letter to his patients without reading Akins' letter constituted a reckless disregard for the truth. The trial court did not err in denying summary judgment on this issue. [¶ 49.] 3. WHETHER THE TRIAL COURT ERRED IN GRANTING SUMMARY JUDGMENT AGAINST AKINS ON HIS CLAIM FOR BREACH OF EMPLOYMENT CONTRACT. [¶ 50.] As determined in Issue 1(A), [t]he existence and governing terms of any implied contract present questions of fact to be decided by a jury. Jurrens, 1998 SD 49, ¶ 9, 578 N.W.2d 151, 154 (citations omitted). Therefore, the trial court clearly erred in granting summary judgment against Akins on his claim for breach of employment contract and this issue must also be reversed and remanded. [¶ 51.] We affirm Issue 2 and reverse and remand Issues 1 and 3. [¶ 52.] MILLER, Chief Justice, and KONENKAMP, Justice, concur.