Nooney v. StubHub, Inc. , 2015 S.D. LEXIS 186 ( 2015 )

#27408-aff in pt, rev in pt-SLZ
2015 S.D. 102
IN THE SUPREME COURT
OF THE
STATE OF SOUTH DAKOTA
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JOHN K. NOONEY and
KIMBERLY NOONEY, Plaintiffs and Appellants,
v.
STUBHUB, INC.,
a Delaware Corporation, Defendant and Appellee.
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APPEAL FROM THE CIRCUIT COURT OF
THE SEVENTH JUDICIAL CIRCUIT
PENNINGTON COUNTY, SOUTH DAKOTA
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THE HONORABLE WALLY EKLUND
Judge
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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
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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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[¶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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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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