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KDN Management, Inc. v. Winco Foods, LLC

Supreme Court of Idaho

July 30, 2018

KDN MANAGEMENT, INC., a Utah corporation dba KD CONCRETE DESIGN, Plaintiff-Appellant,
v.
WINCO FOODS, LLC, a Delaware limited liability company dba WINCO FOODS; WINCO HOLDINGS, INC., an Idaho corporation; Defendants-Respondents, and ABC CORPORATIONS I-X, GHI LIMITED LIABILITY COMPANIES I-X, XYZ BUSINESS ENTITIES I-X, JOHN AND JANE DOES I-X, Defendants. WINCO FOODS, LLC, a Delaware limited liability company dba WINCO FOODS, Counterclaimant,
v.
KDN MANAGEMENT, INC., a Utah corporation dba KD CONCRETE DESIGN, Counterdefendant. WINCO FOODS, LLC, a Delaware limited liability company dba WINCO FOODS, Plaintiff-Respondent,
v.
KYM D. NELSON, an individual; KD3 FLOORING LLC, a Utah limited liability company; and SEALSOURCE INTERNATIONAL, LLC, a Utah limited liability company, Defendants-Appellants.

          Appeal from the District Court of the Fourth Judicial District of the State of Idaho, Ada County. Hon. Steven Hippler, District Judge.

         The judgment of the district court is affirmed.

          Bennett Tueller Johnson & Deere, Salt Lake City, Utah, for appellant. Daniel K. Brough argued.

          Holland & Hart, LLP, Boise, for respondent. A. Dean Bennett argued.

          BRODY, Justice.

         This appeal involves the district court's denial of a jury trial under Rule 39(b) of the Idaho Rules of Civil Procedure and the decision to pierce the corporate veil. The dispute arises out of a transaction between Kym Nelson, who acted on behalf of KDN Management Inc., ("KDN"), and WinCo, Foods, LLC ("WinCo"), for concrete floor work that KDN performed in several WinCo stores. The district court found that KDN had overcharged WinCo for the work, and awarded WinCo $2, 929, 383.31 in damages, including attorney fees pursuant to Idaho Code section 12-120(3). The district court also held Nelson and two entities associated with her, SealSource International, LLC ("SealSource"), and KD3 Flooring LLC ("KD3"), jointly and severally liable for WinCo's damages. We affirm.

         II. Factual and Procedural Background

         WinCo owns 107 grocery stores which are divided into three geographical divisions. In 2008, Nelson and WinCo's maintenance supervisor for the Portland Division discussed the possibility of KD3 performing concrete floor maintenance and repair work for the Portland Division stores. By January 2010, WinCo and Nelson (using the name "KD Concrete") agreed to the following material terms: "removal and cleaning of current joint material; installation of joint sealant, SL75; price per linear foot at $5; and a five-year labor and material warranty." KD Concrete was to begin work on three test stores in the Portland Division no later than January 2010, and if WinCo was satisfied, KD Concrete would do the work in other stores on the same terms as WinCo needed.

         On February 18, 2010, Nelson incorporated KDN to perform the WinCo contract that had been negotiated. Nelson registered "KD Concrete Design" as an assumed business name of KDN more than two years later. By March 26, 2010, work at the first three WinCo stores was complete. In April or May 2010, John Weber, the Portland Division maintenance supervisor, suggested to Jim Douty, WinCo's maintenance manager for the Boise Division, that he should contact Nelson about having KD Concrete Design do the floor work in some of the Boise Division stores. Douty had no authority to negotiate a new agreement on behalf of WinCo, but he authorized KD Concrete Design to perform work at certain stores in the Boise Division under the same terms as the original contract. In November of 2011, WinCo refused to pay three invoices over concerns that KDN had overcharged WinCo for the work done.

         On October 25, 2012, KDN filed a complaint against WinCo to recover the outstanding balance on the three invoices. WinCo filed counterclaims for breach of contract, breach of implied-in-fact contract, unjust enrichment, and violation of the Idaho Consumer Protection Act, alleging that KDN overstated the work performed in each store and that WinCo had actually overpaid KDN. Upon discovery that KDN was not a registered contractor in Idaho at the time work was performed, WinCo moved for judgment on the pleadings, which the district court granted. WinCo's counterclaims remained.

         On February 7, 2014, WinCo filed a motion for summary judgment on its counterclaim for breach of contract. KDN did not oppose the motion, citing that it had no assets or financial resources to defend against WinCo's claims. On April 1, 2014, WinCo filed a new complaint against Nelson, KDN's sole shareholder, as well as her two other business entities, SealSource and KD3 (collectively, the "Nelson Parties"), alleging fraud, breach of contract, breach of implied-in-fact contract, and violation of the Idaho Consumer Protection Act. The cases were consolidated.

         On November 12, 2014, the parties filed a stipulation for scheduling and planning. The stipulation contained a provision stating that the parties estimated the case would take five days to try and that it was to be tried by a 12 person jury. Subsequently, WinCo filed first and second amended complaints which included allegations pertaining to piercing the corporate veil and alter ego theories. The Nelson Parties' answer to the second amended complaint contained a section titled "RELIANCE UPON JURY TRIAL DEMAND." It stated: "The Nelson Parties hereby rely upon all prior demands for jury trial submitted by any party to this lawsuit." No party had ever filed a pleading requesting a jury trial. Thereafter, WinCo filed an objection to a jury trial, citing that there was no proper demand under Idaho Rule of Civil Procedure 38(a). The Nelson Parties filed a motion for jury trial under Idaho Rule of Civil Procedure 39(b), explaining that they did not know why a jury trial was not demanded but that the parties had all operated under the assumption that it was going to be a jury trial; indeed, the case had been set as a jury trial five times. The district court denied the Rule 39 motion, finding that the equitable issues in the case predominated the issues to be decided.

         While the case was pending, the district court also dealt with serious discovery violations and spoliation issues committed by the Nelson Parties, both in the form of destruction or alteration of evidence and in the form of nonproduction of evidence. As a result of those violations, the district court imposed adverse inferences against the Nelson Parties at trial. After a nine-day bench trial, the district court issued its findings of fact and conclusions of law in favor of WinCo. The Nelson Parties filed a Rule 59 motion for a new trial or altered judgment, which the district court denied. The district court then entered an amended judgment awarding WinCo $2, 929, 383.31 against the Nelson Parties, jointly and severally. The Nelson Parties appealed.

         III. Issues on Appeal

         1. Whether the district court abused its discretion by denying the Nelson Parties' motion for jury trial under Idaho Rule of Civil Procedure 39(b).

         2. Whether the district court erred when it imposed personal ...


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