#27408-aff in pt, rev in pt-SLZ

2015 S.D. 102

                            IN THE SUPREME COURT
                                    OF THE
                           STATE OF SOUTH DAKOTA

                                       ****
JOHN K. NOONEY and
KIMBERLY NOONEY,                              Plaintiffs and Appellants,

      v.

STUBHUB, INC.,
a Delaware Corporation,                       Defendant and Appellee.


                                       ****

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

                                       ****

                      THE HONORABLE WALLY EKLUND
                                 Judge

                                       ****

ROBERT J. GALBRAITH of
Nooney & Solay, LLP
Rapid City, South Dakota                      Attorneys for plaintiffs
                                              and appellants.


JEFFERY D. COLLINS
DANA VAN BEEK PALMER of
Lynn, Jackson, Shultz & Lebrun, P.C.
Rapid City, South Dakota                      Attorneys for defendant
                                              and appellee.

                                       ****

                                              CONSIDERED ON BRIEFS
                                              ON NOVEMBER 30, 2015

                                              OPINION FILED 12/30/15
#27408

ZINTER, Justice

[¶1.]        John and Kimberly Nooney sued StubHub Inc. after tickets they

purchased from StubHub for a concert were not honored at the event. In granting

StubHub’s motion to dismiss for failure to state a claim, the circuit court considered

a document that was not attached to the complaint. On appeal, Nooneys argue that

the court erred in considering the document without converting the motion to

dismiss to a motion for summary judgment. Nooneys also argue that the court

erred in dismissing the complaint on the merits. We affirm the court’s

consideration of the document because it was referenced in the complaint, but we

reverse the court’s dismissal on the merits.

                            Facts and Procedural History

[¶2.]        In June 2014, Nooneys purchased tickets from StubHub for a concert

in Colorado. The day of the concert, they traveled to the concert venue and

presented their tickets. The tickets were invalid, and Nooneys were denied access

to the concert. On October 21, 2014, they commenced this action for breach of

contract and fraudulent inducement.

[¶3.]        Nooneys’ complaint alleged StubHub made representations that the

tickets would allow access to the concert. In the event that the tickets were invalid,

Nooneys pleaded that the StubHub “FanProtect Guarantee” represented that

StubHub would provide comparable replacement tickets. Nooneys pleaded that

after being denied access to the event, StubHub informed them that StubHub would

not honor the FanProtect Guarantee.




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[¶4.]        StubHub moved to dismiss under SDCL 15-6-12(b)(5), arguing that

Nooneys’ complaint failed to state a claim upon which relief could be granted. In

support of the motion, StubHub submitted an affidavit of a StubHub employee. The

affidavit included four exhibits: (1) screen shots of a StubHub registration page and

a user agreement link, (2) a copy of a 2010 user agreement that was in effect when

John Nooney initially registered with StubHub, (3) a copy of a 2014 user agreement

that was in effect when John Nooney purchased the tickets for the concert, and (4) a

screen shot of the StubHub FanProtect Guarantee.

[¶5.]        Nooneys responded with an affidavit and brief. After a hearing, the

circuit court granted the motion. The court’s memorandum decision reflects that

the court relied solely on the complaint and the StubHub FanProtect Guarantee.

[¶6.]        Nooneys’ appeal presents two questions. First, a procedural

question—whether the court erred in considering the FanProtect Guarantee without

treating the motion to dismiss as a motion for summary judgment. Second, a

substantive question—whether Nooneys’ complaint failed to state a claim upon

which relief could be granted.

                                      Decision

[¶7.]        A court may not consider documents “outside” the pleadings when

ruling on a motion to dismiss for failure to state a claim. SDCL 15-6-12(b)(5). If

“matters outside the pleadings are presented to and not excluded by the court, the

motion shall be treated as one for summary judgment.” Id.

[¶8.]        In this case, the FanProtect Guarantee was not “outside” of the

pleadings. Nooneys effectively incorporated the FanProtect Guarantee in their


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complaint by referencing it twice and pleading that their claims were based on

representations made in that guarantee. See Tellabs, Inc. v. Makor Issues & Rights,

Ltd., 551 U.S. 308, 322, 127 S. Ct. 2499, 2509, 168 L. Ed. 2d 179 (2007) (explaining

that it is proper for a court to consider documents incorporated by reference in a

motion to dismiss for failure to state a claim); 5B Wright & Miller § 1357 (3d ed.

2004 & Supp. 2007) (same).1 Because the FanProtect Guarantee was not “outside”

the pleadings, the court did not err in considering the FanProtect Guarantee in

deciding StubHub’s motion to dismiss.

[¶9.]         The second question—whether Nooneys’ complaint failed to state a

claim upon which relief could be granted—is a question of law we review de novo.

See Wells Fargo Bank, N.A. v. Fonder, 2015 S.D. 66, ¶ 6, 868 N.W.2d 409, 412. 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. SDCL 15-6-8(a); Gruhlke v. Sioux Empire Fed.

Credit Union, Inc., 2008 S.D. 89, ¶ 17, 756 N.W.2d 399, 409. Although a complaint

need not have detailed factual allegations, it must contain more than labels and

conclusions and a formulaic recitation of the elements of a cause of action. Gruhlke,

2008 S.D. 89, ¶ 17, 756 N.W.2d at 409. “The rules ‘contemplate a statement of

circumstances, occurrences and events in support of the claim presented.’” Id.

(quoting Sisney v. Best, 2008 S.D. 70, ¶ 7, 754 N.W.2d 804, 808).


1.      “Though federal interpretations of federal civil and appellate procedural rules
        are not binding on us in an interpretation of like rules in our State’s courts, it
        is appropriate to ‘turn to the federal court decisions for guidance in their
        application and interpretation.’” Sander v. Geib, Elston, Frost Prof’l Ass’n,
        506 N.W.2d 107, 122 (S.D. 1993) (citation omitted).

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#27408

[¶10.]        The circuit court dismissed Nooneys’ complaint based on the court’s

interpretation of the FanProtect Guarantee. The court explained that the guarantee

provided that in the event the tickets were invalid, StubHub would either find

replacement tickets or offer a refund. Emphasizing that these representations were

alternatives, the court dismissed the case because Nooneys failed to allege that

StubHub both failed to find replacement tickets and failed to refund the ticket

price.

[¶11.]        In rendering its decision, the court relied on the FanProtect Guarantee

“summary,” which indicated that ticket replacement and refunds were

alternatives.2 The court, however, overlooked the actual language of the guarantee

that followed the summary. The actual language expressly stated that in the event

tickets were invalid, StubHub would first attempt to find replacement tickets, and if

that was unsuccessful, it would then provide a refund. The guarantee provided:

              If the tickets you ordered are invalid and not honored by the
              venue, call us at 1.866.STUBHUB (1.866.788.2482) from the
              venue and StubHub will attempt to locate replacement tickets for
              you. If StubHub cannot locate replacement tickets, upon
              confirmation that the tickets were invalid for entry, StubHub will




2.       The summary provided:
                     Summary of StubHub guarantee to Buyers:
                 •   You will get your tickets in time for the event
                 •   Your tickets will be valid for entry
              If any of these things do not occur, we will find you comparable
              or better tickets to the event, or offer you a refund

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#27408

              provide you with a refund for the cost of the tickets, including
              service fees and shipping and handling charges.

(Emphasis added.)

[¶12.]        Fairly read, Nooneys’ complaint pleaded that StubHub skipped the

first step—an “attempt to locate replacement tickets.” As Nooneys’ counsel

specifically argued at the hearing, Nooneys pleaded that StubHub did not follow

this first step:

              first we’ll try to find you replacement tickets, and if we cannot
              find you replacement tickets, then we’ll give you a refund. Well,
              StubHub has skipped a step, Your Honor. They have not
              suggested and there’s no evidence, nor can we get there until
              there is discovery, that any efforts were taken to find
              replacement tickets.

[¶13.]        Considering the actual language of the guarantee, Nooneys’ pleaded

facts constitute a statement of circumstances, occurrences and events that would

support claims of breach of contract and fraudulent inducement. Nooneys pleaded

that after they were denied access to the concert, StubHub informed them that

StubHub would not honor the FanProtect Guarantee, which required StubHub to

attempt to find replacement tickets. As a result, Nooneys pleaded that they were

denied access to the concert and suffered damages. The failure to make any

attempt to find replacement tickets, if proven to be true, could constitute a breach of

contract. See Gul v. Ctr. for Family Med., 2009 S.D. 12, ¶ 10, 762 N.W.2d 629, 633

(stating the “elements that must be met in a breach of contract claim are: (1) an

enforceable promise; (2) a breach of the promise; and (3) resulting damage.”). With

respect to fraudulent inducement, Nooneys pleaded that StubHub knew the

representations embodied in the FanProtect Guarantee were untrue or recklessly

made; that those representations were made to entice the Nooneys to purchase
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tickets; and that the representations enticed Nooneys into purchasing the tickets to

their detriment. These pleaded facts, if found to be true, may support a claim for

fraudulent inducement. See Law Capital, Inc. v. Kettering, 2013 S.D. 66, ¶ 15, 836

N.W.2d 642, 646 (“Fraudulent inducement entails willfully deceiving persons to act

to their disadvantage.”); see also SDCL 20-10-1 to -2(2) (defining deceit and the

relevant acts constituting deceit).

[¶14.]       We conclude that the circuit court properly considered the guarantee

without treating the motion as a motion for summary judgment. We also conclude

that the Nooneys’ complaint states a claim upon which relief could be granted. The

circuit court’s contrary decision was not based on the actual language of the

guarantee. We affirm in part and reverse in part.

[¶15.]       GILBERTSON, Chief Justice, and SEVERSON, WILBUR, and KERN,

Justices, concur.




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