Court Opinion

ID: 4313817
Source: CourtListenerOpinion
Date Created: 2018-09-20 13:21:33.372276+00
Date Added: 2024-06-11T13:27:41.160594
License: Public Domain

#28401-a-GAS
2018 S.D. 67

                         IN THE SUPREME COURT
                                 OF THE
                        STATE OF SOUTH DAKOTA

                                ****

DOMSON, INC.,                            Plaintiff and Appellant,

     v.

KADRMAS LEE & JACKSON, INC.
and DAKOTA ENGINEERING, LLC,             Defendants and Appellees.

                                ****

                 APPEAL FROM THE CIRCUIT COURT OF
                   THE SEVENTH JUDICIAL CIRCUIT
                 PENNINGTON COUNTY, SOUTH DAKOTA

                                ****

                  THE HONORABLE HEIDI L. LINNGREN
                              Judge

                                ****

RONALD G. SCHMIDT of
Gunderson, Palmer, Nelson
 & Ashmore, LLP
Rapid City, South Dakota                 Attorneys for appellant.

MICHAEL L. LUCE
DANA VAN BEEK PALMER of
Lynn, Jackson, Shultz
 & Lebrun, P.C.
Sioux Falls, South Dakota                Attorneys for defendants and
                                         appellees.

                                ****

                                         CONSIDERED ON BRIEFS
                                         ON MAY 21, 2018
                                         OPINION FILED 09/19/18
#28401

SEVERSON, Retired Justice

[¶1.]         Domson, Inc. brought suit against Dakota Engineering and Kadrmas,

Lee and Jackson (KLJ) for professional negligence. 1 Dakota Engineering and KLJ

moved for summary judgment. During the hearing, Dakota Engineering/KLJ

asserted that a clause in the contract between Domson and the Oglala Sioux Tribe

insulated them from liability for negligence to Domson. The circuit court agreed

and separately granted Dakota Engineering and KLJ summary judgment. Domson

appeals. We requested supplemental briefing from the parties on the enforceability

of exculpatory clauses insulating a third party from claims of negligent design and

negligent administration and interpretation of a contract. We affirm.

                                    Background

[¶2.]         The Oglala Sioux Tribe hired Dakota Engineering/KLJ to design a

road reconstruction project on the Pine Ridge Indian Reservation. On March 21,

2012, the Tribe advertised the project for bids. Prospective bidders could inspect

the contract documents, including the drawings and project manual. It is unclear

whether Dakota Engineering or KLJ prepared the bid documents, including the

project manual, the proposal to bidders, plans, specifications, estimates, and

amendments for the project. However, the record reveals that the manual and

documents relevant to the request for bids were signed and sealed in March 2012 by

Tonya Tordsen of KLJ.

1.      The contract documents and the parties at times refer to the defendants as
        Dakota Engineering/KLJ and at times as independent defendants.
        Throughout this opinion, we use the designations employed by the parties
        and contract where appropriate.
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[¶3.]        It is undisputed that Domson obtained the bid documents and

submitted a bid on the project. The public bid opening revealed Domson as the

apparent low bidder. KLJ informed Domson that Domson had been awarded the

bid. On July 5, 2012, Domson and the Tribe executed a contract for the project.

The contract between Domson and the Tribe designated Dakota Engineering/KLJ

as the “Engineer” and the Tribe’s representative. The contract provided that

“Engineer assumes all duties and responsibilities, and has the rights and authority

assigned to Engineer in the Contract Documents in connection with the completion

of the Work in accordance with the Contract Documents.” KLJ had the duty to

administer the contract for the Tribe, including the processing of applications for

payment by Domson. Change orders and payments needed approval from the Tribe.

[¶4.]        It is undisputed that Domson did not substantially complete the

project in the time required under the contract. KLJ, as the Tribe’s representative,

assessed Domson $103,950 in liquidated damages. In January 2015, Domson

brought suit against Dakota Engineering and KLJ, alleging professional negligence.

Domson asserted that “Dakota Engineering/KLJ owed a duty to Domson to

reasonably draft, interpret, and apply the project’s contract documents.” Domson

alleged that “Dakota Engineering/KLJ were negligent in their design,

interpretation, and application of the plans and specifications[.]” According to

Domson, Dakota Engineering/KLJ’s negligence in designing and administering the

contract caused Domson approximately $1,138,027.28 in damages.

[¶5.]        Dakota Engineering and KLJ filed a joint answer. Dakota

Engineering denied that it was a proper defendant because Dakota Engineering’s

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“only involvement was initial design work[.]” Dakota Engineering/ KLJ asserted

that Domson’s alleged damages arose out of its contract with the Tribe. Dakota

Engineering and KLJ filed a joint motion for summary judgment. They again

indicated that Dakota Engineering was only involved in the design work and did

not administer the contract. Dakota Engineering/KLJ also highlighted Paragraph

9.09 of the standard general conditions contract document. That paragraph

provides:

             Neither Engineer’s authority or responsibility under this Article
             9 or under any other provision of the Contract Documents nor
             any decision made by Engineer in good faith either to exercise or
             not exercise such authority or responsibility or the undertaking,
             exercise, or performance of any authority or responsibility by
             Engineer shall create, impose, or give rise to any duty in
             contract, tort, or otherwise owed by Engineer to Contractor, or
             any Subcontractor, any Supplier, any other individual or entity,
             or to any surety for or employee or agent of any of them.

(Emphasis added.)

[¶6.]        Domson did not submit “a separate, short, and concise statement of the

material facts as to which” it contended a genuine issue existed as required by

SDCL 15-6-56(c)(2). Instead, it submitted a brief in opposition to the motion for

summary judgment. But the brief did not “respond to each numbered paragraph in

the moving party’s statement with a separately numbered response and appropriate

citations to the record.” See id. Rather, Domson’s brief grouped arguments together

with general responses. Domson’s brief also did not cite to the record.

Nevertheless, in the brief, Domson referred the circuit court to Mid-Western

Electric, Inc. v. DeWild Grant Reckert & Associates, Co., as authority for recognizing

that Dakota Engineering/KLJ owed a duty to Domson to reasonably draft, interpret,

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and apply the project’s contract documents. 500 N.W.2d 250 (S.D. 1993). Domson

asserted generally that issues of material fact existed on the question of breach of

that duty.

[¶7.]        The circuit court issued a memorandum decision. The court granted

summary judgment on all claims against Dakota Engineering. It concluded that

Dakota Engineering was not an appropriate party in the lawsuit. The court also

granted summary judgment on all claims against KLJ. Although Domson did not

comply with SDCL 15-6-56(c)(2), the court gave Domson “the benefit of the doubt

with what [it had] submitted” in response to the motion for summary judgment.

After considering Domson’s submissions, the court concluded that Domson offered

mere general allegations and denials. The court also interpreted Paragraph 9.09 to

insulate KLJ from liability to Domson for negligence, absent a claim by Domson

that KLJ acted in bad faith.

[¶8.]        In response to the court’s decision, Domson filed a motion and brief in

support requesting the circuit court reconsider its decision granting summary

judgment. It asserted that Paragraph 9.09 was unlawful under SDCL 53-9-3.

Domson then filed a supplemental brief in support of its motion for reconsideration.

It restated its position that because KLJ owed it a duty, a jury must determine

whether KLJ breached that duty. The court denied Domson’s motion to reconsider.

[¶9.]        Domson appeals and asserts the following issues, which we restate as

follows:

             1. Whether summary judgment was improper because
                defendants failed to plead Paragraph 9.09 as an affirmative
                defense.

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             2. Whether the circuit court erred when it granted summary
                judgment based on Paragraph 9.09 of the standard general
                conditions contract document.

             3. Whether the circuit court erred when it granted summary
                judgment despite that defendants admitted they owed a duty
                to Domson.
                              Standard of Review

[¶10.]       Under our well-settled standard of review on appeal from a grant of

summary judgment:

             We must determine whether the moving party demonstrated the
             absence of any genuine issue of material fact and showed
             entitlement to judgment on the merits as a matter of law. The
             evidence must be viewed most favorably to the nonmoving party
             and reasonable doubts should be resolved against the moving
             party. The nonmoving party, however, must present specific
             facts showing that a genuine, material issue for trial exists. Our
             task on appeal is to determine only whether a genuine issue of
             material fact exists and whether the law was correctly applied.
             If there exists any basis which supports the ruling of the trial
             court, affirmance of a summary judgment is proper.

Brand v. Cty. of Pennington, 2013 S.D. 22, ¶ 7, 827 N.W.2d 871, 874 (quoting

Jacobson v. Leisinger, 2008 S.D. 19, ¶ 24, 746 N.W.2d 739).

                                     Analysis

[¶11.]       Domson contends that Dakota Engineering and KLJ could not rely on

Paragraph 9.09 in the standard general conditions contract document to insulate

themselves from liability because they failed to plead Paragraph 9.09 either in

avoidance or as an affirmative defense. Dakota Engineering and KLJ respond that

they asserted Paragraph 9.09 as a defense in their answer by pleading the

affirmative defenses of estoppel and waiver. They also claim that Domson failed to

raise waiver before the circuit court. We agree that Domson waived the issue.

Because Domson failed to assert this argument to the circuit court, we will not

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address it for the first time on appeal. See Rush v. U.S. Bancorp Equip. Finance,

Inc., 2007 S.D. 119, ¶ 8 n.1, 742 N.W.2d 266, 269 n.1.

[¶12.]         We combine Domson’s next two issues because both relate to whether

Dakota Engineering and KLJ owed Domson a duty under the circumstances. The

circuit court recognized that under South Dakota law, an engineer can owe a duty to

a contractor despite the lack of contractual privity between the parties. See Mid-

Western Elec., 500 N.W.2d at 253-54. But, here, the contract between the Tribe and

Domson, via Paragraph 9.09, insulated Dakota Engineering/KLJ from liability for

their good-faith acts and failures to act by the authority given to them under the

contract and contract documents. Therefore, although a duty may exist under Mid-

Western Electric, we must examine the effect of Paragraph 9.09.

[¶13.]         Domson argues that “the exculpatory clause should be construed as an

indemnity provision that violates statute[,]” citing SDCL 56-3-16, -17. But Domson

did not assert this argument to the circuit court, and further, it exceeds the scope of

this Court’s inquiry on supplemental briefing. We, therefore, decline to address

whether Paragraph 9.09 should be construed as an indemnity provision. For the

same reason, we decline to examine Domson’s claim that Paragraph 9.09 is

unconscionable and its argument in its supplemental brief that the contract

between the Tribe and Domson is a contract of adhesion. See Rush, 2007 S.D. 119,

¶ 8 n.1, 742 N.W.2d at 269 n.1 (The failure to assert an argument below waives it

on appeal.).

[¶14.]         Nonetheless, Domson further claims that Paragraph 9.09 “is against

the policy of the law” under SDCL 20-9-1, SDCL 53-9-3, and SDCL 53-9-1. It claims

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that SDCL 20-9-1 and SDCL 53-9-3 evince a public policy forbidding the

enforcement of Paragraph 9.09. It also asserts that Lyndon Property Insurance Co.

v. Duke Levy and Associates, “is persuasive authority on the unenforceability of an

engineer’s exculpatory clause.” 475 F.3d 268 (5th Cir. 2007).

[¶15.]       It is well settled that “[a] contract provision contrary to an express

provision of law or to the policy of express law . . . is unlawful.” SDCL 53-9-1. Law

Capital, Inc. v. Kettering, 2013 S.D. 66, ¶ 10, 836 N.W.2d 642, 645. “Public policy is

found in the letter or purpose of a constitutional or statutory provision or scheme, or

in a judicial decision.” Niesent v. Homestake Mining Co., 505 N.W.2d 781, 783 (S.D.

1993). SDCL 20-9-1 provides: “Every person is responsible for injury to the person,

property, or rights of another caused by his willful acts or caused by his want of

ordinary care or skill, subject in the latter cases to the defense of contributory

negligence.” Further, SDCL 53-9-3 provides that “[a]ll contracts which have for

their object, directly or indirectly, to exempt anyone from responsibility for his own

fraud or willful injury to the person or property of another or from violation of law

whether willful or negligent, are against the policy of the law.”

[¶16.]       Although SDCL 20-9-1 mandates responsibility for injury caused by

willful acts or want of ordinary care or skill, nothing in this statute prohibits one

party from agreeing by contract to release a third party from liability for ordinary

negligence. See, e.g., Lee v. Beauchene, 337 N.W.2d 827, 829 (S.D. 1983)

(contractual release not prohibited by SDCL 20-9-1). Moreover, although Domson

claims Paragraph 9.09 is contrary to SDCL 53-9-3 because it purports to exempt

Dakota Engineering/KLJ from a “violation of law whether willful or negligent[,]” we

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disagree. Domson’s suit against Dakota Engineering and KLJ alleges professional

negligence, not a willful or negligent violation of law. Accord Holzer v. Dakota

Speedway, Inc., 2000 S.D. 65, ¶ 16, 610 N.W.2d 787, 793 (“releases that are

construed to cover willful negligence or intentional torts are not valid and are

against public policy”).

[¶17.]       We next address Domson’s claim that this Court should adopt the view

that exculpatory clauses such as Paragraph 9.09 are unenforceable based on the

reasoning espoused in Lyndon Prop. Ins. Co., 475 F.3d at 268 and Transpower

Constructors v. Grand River Dam Authority, 905 F.2d 1413 (10th Cir. 1990).

Domson contends that Lyndon more aligns with South Dakota public policy as

compared to the cases cited by Dakota Engineering and KLJ. In response, Dakota

Engineering and KLJ claim that “courts are in agreement that not only the very

exculpatory clause at issue here is enforceable, but that exculpatory clauses in

general are enforceable in cases such as the present, in which ordinary negligence is

alleged.” See, e.g., Patriot Contracting, LLC v. Star Ins. Co., No. 15-6634, 2018 WL

1123586 (E.D. La. March 1, 2018); Indiana Dept. of Transp. v. Shelly & Sands, Inc.,

756 N.E.2d 1063 (Ind. Ct. App. 2001); Ric-Man Constr., Inc. v. Neyer, Tiseo & Hindo

Ltd., No. 329159, 2017 WL 188049 (Mich. Ct. App., January 17, 2017); Excel

Constr., Inc. v. HKM Eng’g, Inc., 228 P.3d 40 (Wyo. 2010).

[¶18.]       In Lyndon, the Fifth Circuit Court of Appeals examined the

enforceability of exculpatory language similar to that in Paragraph 9.09. 475 F.3d

at 272. A county district had entered into a contract with a utilities contractor for

construction of a sewer system. The county district also entered into a contract with

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an engineer. The engineer, prior to the completion of the project, terminated the

utilities contractor. The contractor’s surety funded the completion of the project but

brought suit against the engineer asserting its right to recover in the shoes of the

county district (not the contractor) under the doctrine of equitable subrogation. The

engineer claimed that a clause in the contract between the county district and the

contractor insulated the engineer from liability to anyone but the county district.

On appeal, the Fifth Circuit Court of Appeals disagreed. It held that “the District

cannot bargain away the engineer’s potential duty to a surety that would step into

the District’s shoes under the doctrine of equitable subrogation.” Id.

[¶19.]       Here, however, Domson is not seeking to stand in the shoes of the

Tribe in its suit against Dakota Engineering and KLJ. Moreover, the doctrine of

equitable subrogation is not implicated. Transpower Constructors is likewise

distinguishable. In Transpower Constructors, the court found the exculpatory

clause unenforceable because of ambiguity, not because of public policy. 905 F.2d at

1421.

[¶20.]       “[T]his Court has cautioned ever since territorial days” that “‘[t]he

power of courts to declare a contract void for being in contravention of sound public

policy, is a very delicate and undefined power; and, like the power to declare a

statute unconstitutional, should be exercised only in cases free from doubt.’” Law

Capital, 2013 S.D. 66, ¶ 13, 836 N.W.2d at 645 (quoting Sch. Dist. No. 61 v. Collins,

6 Dakota 145, 41 N.W. 466, 468 (1889)). Based on our review of the contract

documents as a whole and in light of Domson’s failure to identify a statutory

provision or scheme or judicial decision from this Court to support its argument

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that Paragraph 9.09 is unlawful, we decline to declare Paragraph 9.09 void under

the circumstances.

[¶21.]       This is not to say that every exculpatory clause insulating a third party

from liability for negligence will be enforceable. Nor does today’s decision mean

that we adopt the views expressed by the authorities cited by Dakota

Engineering/KLJ in response to this Court’s request for supplemental briefing.

Rather, Paragraph 9.09 is valid and enforceable in this case because Domson has

not identified that Paragraph 9.09 contravenes sound public policy in this State

under these particular circumstances. The exculpatory language unambiguously

informed Domson that Dakota Engineering/KLJ would be immune from suit in tort

or contract arising out of Dakota Engineering/KLJ’s good-faith acts and failures to

act by the authority given to them under the contract and contract documents.

[¶22.]       Although we hold that Paragraph 9.09 is valid and enforceable under

the circumstances, Dakota Engineering and KLJ must still establish entitlement to

the protections afforded by Paragraph 9.09. When the circuit court granted

summary judgment, relying on Paragraph 9.09, it erroneously imposed the initial

burden on Domson to establish bad faith on the part of the engineer. Paragraph

9.09 is an affirmative defense. As the part asserting the defense, Dakota

Engineering and KLJ had the burden of showing that they acted in good faith. See

Klein v. Sanford USD Med. Ctr., 2015 S.D. 95, ¶ 19, 872 N.W.2d 802, 807 (citing

Dakota Indus., Inc. v. Cabela’s.com, Inc., 2009 S.D. 39, ¶¶ 12-13, 766 N.W.2d 510,

513-14). Despite the court’s error, “[i]f there exists any basis which supports the

ruling of the trial court, affirmance of a summary judgment is proper.” Jacobson,

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2008 S.D. 19, ¶ 24, 746 N.W.2d at 745 (quoting Cooper v. James, 2001 S.D. 59, ¶ 6,

627 N.W.2d 784, 787).

[¶23.]       As we recognized in Klein, the party asserting the affirmative defense

must establish a prima facie case of good faith. 2015 S.D. 95, ¶ 26, 872 N.W.2d at

810. “A prima facie case is established for summary judgment purposes when there

‘are facts in evidence which if unanswered would justify persons of ordinary reason

and fairness in affirming the question which the plaintiff is bound to maintain.’”

Dakota Indus., Inc., 2009 S.D. 39, ¶ 14, 766 N.W.2d at 514 (quoting Fin-Ag, Inc. v.

Pipestone Livestock Auction Mkt., Inc., 2008 S.D. 48, ¶ 33, 754 N.W.2d 29, 43). Once

a prima facie case of good faith is established, the burden of production shifts to the

resisting party to “identify facts creating a genuine dispute whether” the defendants

acted in good faith. Klein, 2015 S.D. 95, ¶ 26, 872 N.W.2d at 809 (citing Dakota

Indus., Inc., 2009 S.D. 39, ¶ 14, 766 N.W.2d at 514 (quoting SDCL 15-6-56(e))

(noting that one opposing summary judgment “must set forth specific facts showing

that there is a genuine issue for trial”).

[¶24.]       Domson alleged that Dakota Engineering and KLJ were negligent in

their interpretation and application of the plans and specifications for the project,

which negligence harmed Domson. In response, Dakota Engineering/KLJ claimed

that their interpretation and application of the project documents met their

professional responsibilities and was appropriate under the circumstances. Dakota

Engineering/KLJ relied on letters sent between Domson and KLJ and on the

deposition testimony of defendant representatives as evidence of Domson’s failures

throughout the project.

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[¶25.]       Good faith is not defined in Paragraph 9.09. This Court has defined

“good faith” in the context of immunity statutes, in estate cases, in cases of breach

of contract under the Uniform Commercial Code, and in insurance cases. See Klein,

2015 S.D. 95, ¶ 18, 872 N.W.2d at 806 (immunity case); In re Estate of Klauzer, 2000

S.D. 7, ¶ 35, 604 N.W.2d 474, 482 (estate case); Garrett v. BankWest, Inc., 459

N.W.2d 833, 841 (S.D.1990) (breach of contract claim); Kunkel v. United Sec. Ins.

Co., 84 S.D. 116, 121, 168 N.W.2d 723, 726 (1969) (insurance contract claim).

Although written in the context of general contract terms under the Uniform

Commercial Code, we find helpful the following explanation:

             [G]ood faith is an ‘excluder.’ It is a phrase without general
             meaning (or meanings) of its own and serves to exclude a wide
             range of heterogeneous forms of bad faith. In a particular
             context the phrase takes on specific meaning, but usually this is
             only by way of contrast with the specific form of bad faith
             actually or hypothetically ruled out.

Garrett, 459 N.W.2d at 841 (quoting Summers, Good Faith in General Contract Law

and the Sales Provision of the Uniform Commercial Code, 54 Va. L. Rev. 195, 201

(1968)). This is not to say that good faith simply means the absence of bad faith.

Klein, 2015 S.D. 95, ¶ 19, 872 N.W.2d at 807. Indeed, good faith has been defined to

mean: “honesty in fact concerning conduct or a transaction,” and “[g]ood faith is

distinguished from mere negligence or an honest mistake.” Klauzer, 2000 S.D. 7, ¶

35, 604 N.W.2d at 482 (quoting In re Estate of Watkins, 501 N.W.2d 292, 296 (Neb.

1993)).

[¶26.]       Based on our review of the record, Dakota Engineering/KLJ

established a prima facie case of good faith against Domson’s claim of negligent

interpretation and application, implicating the protections under Paragraph 9.09.

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Therefore, as the party resisting summary judgment, Domson was required to

identify a material issue of fact in dispute on the question of Dakota

Engineering/KLJ’s good-faith acts and failures to act. See Klein, 2015 S.D. 95, ¶ 26,

872 N.W.2d at 809 (burden of production shifted to resisting party). Domson

submitted an expert opinion by professional engineer Lawrence Kostaneski.

Kostaneski opined that “KLJ’s engineering services on this project [were] below an

acceptable standard found on several engineering projects generally.” Kostaneski

found fault in Dakota Engineering/KLJ’s failure “to objectively evaluate the

circumstances, determine its impact on cost and/or time, and take the appropriate

action to adjust the bid amount or schedule.” The negligence, according to

Kostaneski, existed because KLJ “chose the wrong field tactic when deciding how to

handle circumstances that clearly could not have been known—or were not

revealed—to bidders.”

[¶27.]       Although Domson presented evidence that Dakota Engineering/KLJ

allegedly performed below acceptable engineering standards in administering the

contract, Domson has not identified, in response to Dakota Engineering/KLJ’s

prima facie showing, that a material issue of fact is in dispute on whether Dakota

Engineering/KLJ acts or failures to act lacked good faith. Rather, Domson relies on

general allegations and denials that because Dakota Engineering/KLJ performed

below acceptable standards, their actions necessarily lacked good faith. But a party

may not resist summary judgment with mere denials and allegations. Tolle v. Lev,

2011 S.D. 65, ¶ 22, 804 N.W.2d 440, 446. The circuit court correctly granted Dakota

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Engineering and KLJ summary judgment on Domson’s claims of negligent

interpretation and application.

[¶28.]       Domson’s complaint also alleged a cause of action against Dakota

Engineering/KLJ for negligent design. The complaint asserted that “it was readily

foreseeable that Domson, who was bound to follow these documents prepared by the

engineering firm, could be harmed by the engineering firm’s negligent drafting or

interpretation and application of the contract documents.” (Emphasis added.) The

circuit court did not examine whether a material issue of fact existed on this claim

or whether Paragraph 9.09 insulated Dakota Engineering/KLJ from liability. It

summarily dismissed Domson’s entire suit. Nevertheless, “[c]ontract interpretation

is a question of law reviewable de novo.” Black Hills Excavating Servs., Inc. v.

Retail Constr. Servs., Inc., 2016 S.D. 23, ¶ 7, 877 N.W.2d 318, 321 (quoting Vander

Heide v. Boke Ranch, Inc., 2007 S.D. 69, ¶ 17, 736 N.W.2d 824, 831).

[¶29.]       The plain language of the exculpatory clause only disclaimed Dakota

Engineer/KLJ from liability in tort and contract for their “authority or

responsibility under this Article 9 or under any other provision of the Contract

Documents [or] any decision made by Engineer in good faith either to exercise or not

exercise such authority or responsibility or the undertaking, exercise, or

performance of any authority or responsibility by Engineer[.]” When Dakota

Engineering or KLJ designed and drafted the plans and specifications for the

project, Domson and the Tribe had not yet executed the contract. Therefore, Dakota

Engineering/KLJ could not have been exercising authority or responsibility under

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Article 9 or under other provisions of the contract documents as provided in the

contract between the Tribe and Domson.

[¶30.]       In Mid-West Electric, we quoted Waldor Pump & Equipment v. Orr-

Schelen-Mayeron & Associates, for the proposition that an engineering firm could

owe a duty to reasonably draft and interpret the project specifications and that it is

foreseeable that a contractor, bound to follow the specifications prepared by the

engineering firm, could be harmed by the firm’s negligence in drafting and

interpreting the specifications. 500 N.W.2d at 254 (quoting 386 N.W.2d 375, 377

(Minn. Ct. App. 1986)). In Mid-West Electric, we instructed circuit “courts to use

the legal concept of foreseeability to determine whether a duty exists.” Id. “The

nature of the professional’s duty, the standard of care imposed, varies in different

circumstances[.] In our view the extent of appellee’s duty may best be defined by

reference to the [foreseeability] of injury consequent upon breach of that duty.” Id.

(quoting A.R. Moyer, Inc. v. Graham, 285 So. 2d 397, 400 (Fla. 1973)).

[¶31.]       Here, Dakota Engineering and KLJ do not dispute that they owed

Domson a duty. Nevertheless, they assert that Domson has not identified a

material issue of fact in dispute on the element of breach of that duty. They direct

this Court to Domson’s expert’s letter opinion. In that letter, Kostaneski recognized

that

             [n]o set of project documents are perfect, nor are field conditions
             exactly as described in those documents. Consequently, projects
             have several strategies for adjusting to these changed
             conditions. Change orders are a commonly recognized method
             for dealing with any condition or circumstance that might arise
             and was unforeseen or overlooked at the time of document
             preparation.

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[¶32.]       In response, Domson argues that errors existed in the project and bid

documents. It quoted excerpts from deposition testimony by Dakota

Engineering/KLJ experts, in which depositions those witnesses purportedly

admitted to the errors. In particular, they admitted that the formal artifact search

had not been completed prior to the bid, which failure Domson claimed caused delay

in completing the project. Domson also relied on its expert’s opinion and on

correspondence between Trig Domson and KLJ that many problems in the design

phase were negligent, including that the documents did not identify an existing

pipe, which omission Domson claimed affected grading.

[¶33.]       While Domson’s evidence establishes that errors existed in the project

and bid documents, Domson has not demonstrated a genuine, material issue for

trial concerning whether the existence of errors in a project’s bid documents

constituted a breach of the applicable standard of care for the duty to reasonably

draft project specifications. In fact, although Kostaneski identified errors in the

project documents, he never suggested that design problems violated any standard

of care, let alone the standard of care for architects and engineers. Moreover, he

unequivocally indicated that problems in the design phase were normal and should

have been worked out during the contract administration. He noted that each of

Domson’s “25 separate claims” was based on “events and decisions of KLJ that

occurred during the course of the project.” Although summary judgment is

disfavored in cases of negligence, Domson has not established a material issue of

fact in dispute on the question of breach.

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                                     Conclusion

[¶34.]       Domson has not identified that Paragraph 9.09 contravenes sound

public policy under the circumstances, and Paragraph 9.09 unambiguously

insulates Dakota Engineering and KLJ for liability in tort and contract for their

good-faith acts and failures to act under the authority granted to them by the

contract and contract documents. Further, although the court improperly imposed

a burden on Domson to prove bad faith, on this record, Dakota Engineering/KLJ

established a prima facie case of good faith, and Domson has failed to identify a

material issue of fact in dispute on the issue of Dakota Engineering/KLJ’s good-

faith acts and failures to act in the interpretation and application of the contract

documents. Also, Domson has not presented specific facts showing that a genuine,

material issue exists for trial that Dakota Engineering/KLJ’s design and drafting

fell below a professional standard of care. Therefore, we affirm.

[¶35.]       GILBERTSON, Chief Justice, and ZINTER and JENSEN, Justices,

concur.

[¶36.]       KERN, Justice, concurs in part and dissents in part.

[¶37.]       SALTER, Justice, not having been a member of the Court at the time

this action was assigned to the Court, did not participate.

KERN, Justice (concurring in part and dissenting in part).

[¶38.]       I join issues 1 and 2 of the majority opinion but dissent on issue 3

wherein the majority affirms the grant of summary judgment on Domson’s claim of

negligent design. Domson established genuine issues of fact sufficient to require a

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jury to determine whether Dakota Engineering/KLJ breached the standard of care

and caused Domson damages due to negligence in designing the project plans.

[¶39.]       Summary judgment is proper “if the pleadings, depositions, answers to

interrogatories, and admissions on file, together with the affidavits, if any, show

that there is no genuine issue as to any material fact and that the moving party is

entitled to a judgment as a matter of law.” SDCL 15-6-56(c). “We view the evidence

most favorably to the nonmoving party and resolve all reasonable doubts against the

moving party.” State Auto Ins. Cos. v. B.N.C., 2005 S.D. 89, ¶ 6, 702 N.W.2d 379,

382 (emphasis added). To defeat summary judgment, the nonmoving party must

“show that they will be able to place sufficient evidence in the record at trial to

support findings on all the elements on which they have the burden of proof.”

Foster-Naser v. Aurora Cty., 2016 S.D. 6, ¶ 11, 874 N.W.2d 505, 508. “[M]ere

general allegations and denials which do not set forth specific facts will not prevent

the issuance of a judgment.” Bordeaux v. Shannon Cty. Schs., 2005 S.D. 117, ¶ 14,

707 N.W.2d 123, 127. Nonetheless, “[s]ummary judgment is an extreme remedy,

and is not intended as a substitute for a trial.” Stern Oil Co., Inc. v. Brown, 2012

S.D. 56, ¶ 9, 817 N.W.2d 395, 399.

[¶40.]       Here, the majority opinion focuses on a statement made by Domson’s

expert, Larry Kostaneski, that not all “project documents are perfect, nor field

conditions exactly as described in those documents” for the proposition that

Domson’s expert “never suggested that design problems violated any standard of

care, let alone the standard of care for architects and engineers.” See Majority

Opinion ¶¶ 31, 33. For the majority, this suggests that there is no genuine,

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material issue for trial because Domson failed to make a specific assertion that the

project’s design fell below the standard of care. However, that reasoning does not

account for Kostaneski’s opinion that there were problems with “the package

released for the public bid process” which made it “quickly apparent that several

critical issues were going to have a significant impact on both the scope and

schedule of the work.”

[¶41.]       Specifically, Kostaneski explained that shortly after the project began,

Dakota Engineering/KLJ informed Domson that a restriction existed with respect to

commencing construction on a 3,000-foot area at the beginning of the project.

Domson learned that, due to an impending artifact study, the area remained

ineligible for development until completion of the survey. No mention of the study

was included in the design plans, and even Dakota Engineering/KLJ’s own expert,

Dennis Micko, agreed that preliminary inspections, reports, and environmental

artifact studies “[n]ormally . . . would have been completed in advance of [the

bidding].” Domson contends that this deficiency caused delay in completing the

project, which resulted in accrual of additional damages under the contract’s

liquated damages provision.

[¶42.]       Additionally, Kostaneski noted problems with beginning construction

at the other end of the project. The project’s drafters had incorrectly identified an

existing pipe on the plans, so the construction team decided to delete it. According

to Kostaneski, this decision significantly impaired Domson’s progress. Kostaneski

described the effect on the project stating, “Unfortunately, it also meant that this

end of the project would not have the plan grade. Domson had already graded this

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area to the original plan elevations, which required a significant adjustment to

return it to the field changed elevation. KLJ seemed disinclined to recognize this

unanticipated effort and delay.”

[¶43.]         “Summary judgment . . . was never intended to enable parties to evade

jury trials or have the judge weigh evidence in advance of it[] being presented.”

Pierce v. Ford Motor Co., 190 F.2d 910, 915 (4th Cir. 1951). Yet, by declaring that

Domson’s factual assertions are mere general allegations referring to contract

administration and not design, the majority opinion’s conclusion regarding

negligent design of the project plans weighs the evidence presented. We must

instead view the facts in light favorable to Domson and give it the benefit of all

reasonable inferences. See Dakota Pork Indus. v. City of Huron, 2002 S.D. 3, ¶ 5,

638 N.W.2d 884, 885 (“All reasonable inferences drawn from the facts must be

viewed in favor of the non-moving party.”).

[¶44.]         Domson presented a sufficient case for negligent design of the project

plans to survive summary judgment. Project design was among the engineering

services KLJ provided Domson, 2 and Dakota Engineering/KLJ admitted that it

owed Domson a duty. Domson’s expert further opined that “KLJ’s engineering

services on this project [were] below an acceptable standard found on civil

engineering projects generally.” This statement regarding the standard of care was

broad enough to include the design errors Kostaneski identified in the project

documents. Disputed issues of fact exist regarding whether: (1) the construction

delay resulting from the incomplete artifact study increased Domson’s damages on

2.       The project was designed by KLJ employee Tonya Tordsen.
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the contract; and (2) the error in the project’s plans that misidentified a pipe created

additional damages under the contract by requiring Domson to return the grade to

the “field changed elevation.” Domson “need only present evidence from which a

jury might return a verdict in his favor.” Anderson v. Liberty Lobby, Inc., 477 U.S.

242, 257, 106 S. Ct. 2505, 2514, 91 L. Ed. 2d 202 (1986). This it has done.

Therefore, I respectfully dissent from the majority decision affirming summary

judgment on Domson’s claim of negligent design of the project plans.

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