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KM Ag Services, Inc. v. ASI Ag Services, Inc.

United States District Court, D. Nebraska

December 12, 2016

KM AG SERVICES, INC., Plaintiff,
v.
ASI AG SERVICES, INC., a Minnesota Corporation, et al Defendants.

          MEMORANDUM AND ORDER

          John M. Gerrard United States District Judge

         This matter is before the Court on the motion for default judgment (filing 48) filed by the plaintiff, KM Ag Services, Inc. The Court will hold the plaintiff's motion in abeyance pending the submission of additional evidence.

         BACKGROUND

         The plaintiff's operative complaint alleges four theories of recovery arising out of the defendants' alleged failure to properly repair an air seeder. Filing 34. Specifically, the plaintiff alleges that it has a John Deere air seeder, and was contacted by an employee of defendant ASI Ag Services, Inc., who offered to assess the air seeder to see if ASI could retrofit it. Filing 34 at 2. The plaintiff and ASI agreed that the plaintiff would pay ASI $27, 711.00 to retrofit the air seeder, and ASI guaranteed that its parts would operate for 5 years or 30, 000 acres. Filing 34 at 2. But, the plaintiff alleges, ASI's parts and workmanship were deficient. Filing 34 at 2. So, the plaintiff alleges, ASI breached the contract. Filing 34 at 2. And, the plaintiff alleges, ASI breached "the implied duty to perform the work or services skillfully, carefully, diligently, and in a workmanlike manner." Filing 34 at 2. The plaintiff further alleges that ASI was negligent in its work. Filing 34 at 2. And finally, the plaintiff alleges that defendants Dennis DeNio and Adam Burkhardsmeier, owners and/or officers of ASI, were negligent in failing to properly train their employees and sending unqualified employees to do the work. Filing 34 at 1, 3. The plaintiff seeks damages for the money it paid to ASI, the cost of repairing the air seeder, and lost profits from the loss of use of the air seeder.

         DISCUSSION

         When a default judgment is entered, facts alleged in the complaint- except as to damages-may not be later contested. Marshall v. Baggett, 616 F.3d 849, 852 (8th Cir. 2010); Murray v. Lene, 595 F.3d 868, 871 (8th Cir. 2010). It remains for the Court to consider whether the unchallenged facts constitute a legitimate cause of action, since a party in default does not admit mere conclusions of law. Id. Therefore, it is incumbent upon the Court to ensure that the unchallenged facts constitute a legitimate cause of action before entering final judgment. Marshall, 616 F.3d at 852-53. And then, even though the allegations of the plaintiff's complaint are admitted, see id., it is still necessary for the Court to determine the plaintiff's damages based upon the evidence. See, Fed. R. Civ. P. 55(b)(2)(B); Brown v. Kenron Aluminum & Glass Corp., 477 F.2d 526, 531 (8th Cir. 1973).

         So, the task for the Court is, first, to consider the allegations of the complaint to ensure that the plaintiff has stated a legitimate cause of action with respect to each of its claims for relief. Then, the Court must consider whether the plaintiff's damages can be determined based on the evidence that has been presented in support of its motion.

         Claims for Relief

         Under Nebraska law, [1] in order to recover in an action for breach of contract, the plaintiff must plead and prove the existence of a promise, its breach, damage, and compliance with any conditions precedent that activate the defendant's duty. Henriksen v. Gleason, 643 N.W.2d 652, 658 (Neb. 2002). The plaintiff's allegations, as set forth above, clearly set forth the terms of the parties' agreement, and a breach of that agreement by failing to perform the required task. See Id. The plaintiff alleges compliance with the only condition precedent in the agreement: payment of the agreed-upon sum. And the plaintiff alleges it was damaged. The plaintiff's complaint states a claim for breach of contract.

         The plaintiff's second theory of recovery appears to be that ASI breached an implied warranty of workmanlike performance. But any such warranty is an implied term of the contract. See Thurston v. Nelson, 842 N.W.2d 631, 644 (Neb. Ct. App. 2014); see also Pioneer Enterprises, Inc. v. Edens, 345 N.W.2d 16, 18 (Neb. 1984). This claim is coextensive with the breach of contract claim, and need not be considered separately.[2]

         The plaintiff's third theory of recovery is negligent performance of the agreement. But the economic loss doctrine precludes tort remedies where the damages caused were limited to economic losses and where the duty which was allegedly breached arose solely from the contractual relationship between the parties. Lesiak, 808 N.W.2d at 81. The plaintiff, therefore, cannot recover under a negligence theory for the amount it paid to ASI, or the profits it lost as a result of losing use of the air seeder.

         The harder question is the cost of "repairing" the air seeder: damage to "other property"-that is, property other than the property that was sold pursuant to the contract-is not "economic loss." Id. at 83. And it is difficult to tell from the pleadings and evidence to what extent the repairs to the air seeder involved the goods that were sold by ASI, as opposed to damage done to the air seeder itself. But, again, such damages are coextensive with the plaintiff's breach of contract claim. So, the Court need not resolve this issue.

         Finally, the plaintiff's remaining claim is another negligence claim, this time against DeNio and Burkhardsmeier. It is important to resolve this claim because it is the only one directed at DeNio and Burkhardsmeier, as opposed to ASI. And the Court finds that the plaintiff has failed to state a claim.

         The plaintiff's claim is not merely a tort claim, sounding in law: it seeks to pierce ASI's corporate veil. The acts of "negligence" the plaintiff alleges are that DeNio and Burkhardsmeier failed to train their employees, and had unqualified employees performing the agreement-in other words, that they negligently performed their duties as officers or owners of ASI. And generally, a corporation is viewed as a complete and separate entity from its shareholders and officers, who are ...


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