MacH v. Connors

#29719-aff in pt & rev in pt-PJD
2022 S.D. 48

IN THE SUPREME COURT
OF THE
STATE OF SOUTH DAKOTA

****

RONITA MACH and
WAGS N’ WHISKERS WEST, LLC, Plaintiffs and Appellants,

v.

TONI CONNORS, Defendant and Appellee.

****

APPEAL FROM THE CIRCUIT COURT OF
THE SECOND JUDICIAL CIRCUIT
LINCOLN COUNTY, SOUTH DAKOTA

****

THE HONORABLE JOHN R. PEKAS
Judge

****

PATRICK J. GLOVER of
Meierhenry Sargent, LLP
Sioux Falls, South Dakota Attorneys for plaintiffs
and appellants.

JEFFREY L. BRATKIEWICZ of
Bangs, McCullen, Butler, Foye
& Simmons, LLP
Sioux Falls, South Dakota

SARAH E. BARON HOUY of
Bangs, McCullen, Butler, Foye
& Simmons, LLP
Rapid City, South Dakota Attorneys for defendant
and appellee.

****

CONSIDERED ON BRIEFS
MARCH 21, 2022
OPINION FILED 08/10/22
#29719

DEVANEY, Justice

[¶1.] A limited liability company and one of its members, Ronita Mach,

brought suit against Toni Connors, who is also a member of the company. The

complaint alleges claims for breach of fiduciary duty, breach of the duty of loyalty,

breach of the duty of care, conversion, and unjust enrichment related to conduct

allegedly occurring in connection with the ownership and operation of a pet

grooming and bathing business. The circuit court dismissed the complaint for

failure to state a claim upon which relief can be granted. The plaintiffs appeal. We

affirm in part, reverse in part, and remand.

Factual and Procedural Background

[¶2.] Ronita Mach started a business in Sioux Falls in 1999 providing pet

grooming and bathing services, and in 2012, the business, Wags N’ Whiskers, LLC

(Wags), was registered as a South Dakota limited liability company. Her sister,

Toni Connors, similarly operated a pet grooming and bathing business in

Watertown named Dirty Dog Spa.

[¶3.] Connors and her husband moved to Sioux Falls in 2016, and according

to Mach, Connors expressed an interest in going into business with her. On

September 12, 2016, Connors and Mach started Wags N’ Whiskers West, LLC

(Wags West). Mach’s complaint asserts that Wags West “was an expansion of

[Wags] and provided the way for [Mach and Connors] to go into business together.”

Wags West leased commercial property on South Louise Avenue in Sioux Falls and

operated out of that leased location until the end of 2017.

-1-
#29719

[¶4.] In her briefs to the circuit court and to this Court, Mach represents

that she and Connors “experienced issues between themselves throughout the

venture and by the end of 2017, the venture ended.” Mach further alleges in the

complaint that Connors took over the lease for the South Louise Avenue property at

the start of 2018 and began operating Dirty Dog Spa out of the Wags West location.

On January 11, 2018, Dirty Dog Spa, LLC registered as a South Dakota limited

liability company, and on February 7, 2018, Connors dissociated from Wags West.

Approximately one year later, on January 16, 2019, Wags West was

administratively dissolved as a South Dakota limited liability company.

[¶5.] On February 28, 2020, Mach and Wags West brought suit against

Connors. In the complaint, they allege that “[b]ased on information and belief,”

Connors “used assets of [Wags West] to pay for personal expenses while she was a

member of the company.” They also allege in the complaint that “[b]ased on

information and belief,” Connors “used customer information of [Wags] and/or

[Wags West] for her new entity, Dirty Dog Spa, LLC.” Mach and Wags West assert

claims for breach of duty of loyalty, breach of duty of care, conversion, and unjust

enrichment. 1

1. Mach and Wags West also separately asserted, in count one, a general claim
for breach of fiduciary duty. However, before the circuit court and in their
brief on appeal to this Court, they acknowledge that pursuant to SDCL 47-
34A-409(a), the only fiduciary duties a member owes to a member-managed
company and its other members are the duties of loyalty and care imposed
under subsections (b) and (c). Besides these two duties, Mach and Wags West
have not alleged in their complaint that Connors owed them any other
fiduciary duties.
-2-
#29719

[¶6.] Connors filed a motion to dismiss the complaint pursuant to SDCL 15-

6-12(b)(5), alleging that it fails to state a claim upon which relief can be granted.

Five days before the hearing scheduled on Connors’s motion, Mach and Wags West

filed a motion for leave to file an amended complaint which added Wags as a

plaintiff and Dirty Dog Spa, LLC as a defendant. The proposed amended complaint

also consolidated counts 1 to 3 into one count and included more detailed factual

allegations.

[¶7.] At the beginning of the hearing, the circuit court noted that the

hearing pertained to both the motion to dismiss and the motion for leave to file an

amended complaint. The court first took arguments on the motion to dismiss and

issued an oral ruling granting the motion to dismiss. The court did not rule on

Mach and Wags West’s motion to amend their complaint, and they did not request a

ruling on this motion at the hearing or any time thereafter. The circuit court issued

an order dismissing the complaint in its entirety without prejudice.

[¶8.] Mach and Wags West appeal, asserting the circuit court erred in

granting Connors’s motion to dismiss.

Standard of Review

[¶9.] “A motion to dismiss for failure to state a claim pursuant to SDCL 15-

6-12(b)(5) tests the legal sufficiency of the pleading.” Wells Fargo Bank v. Fonder,

2015 S.D. 66, ¶ 6, 868 N.W.2d 409, 412. The legal sufficiency of a pleading “is a

question of law[.]” Nooney v. StubHub, Inc., 2015 S.D. 102, ¶ 9, 873 N.W.2d 497,

499. Therefore, we review de novo whether Mach and Wags West’s complaint fails

-3-
#29719

to state a claim upon which relief could be granted. See id.; Sisney v. Best Inc.

(Sisney I), 2008 S.D. 70, ¶ 8, 754 N.W.2d 804, 809.

Analysis and Decision

[¶10.] Mach and Wags West focus their opening brief on the case the circuit

court relied on in its oral ruling—Phillips v. TDI Lakota Holdings LLC, No. 10-CV-

782, 2011 WL 13225282 (E.D. Pa. 2011). In Phillips, the federal district court

dismissed the plaintiff’s complaint because the defendant’s limited liability

company did not have the capacity to be sued after being dissolved, having its

business wound up, and its legal existence terminated. Id. at **2, 5. The circuit

court reasoned from Phillips that Mach and Wags West’s suit could not be

maintained because Wags West had been dissolved. But being dissolved does not

mean Wags West, as a legal entity, has been terminated. Under SDCL 47-34A-802,

“a limited liability company continues after dissolution only for the purpose of

winding up its business.” In fact, the court in Phillips recognized that a company

may prosecute and defend actions while being dissolved but not yet terminated. Id.

at *5. In her appellate brief, Connors has agreed with Mach and Wags West’s

contention that the court’s reliance on Phillips to dismiss the complaint was

improper.

[¶11.] However, “[e]ven if the circuit court provided the wrong authority at

the [ ] hearing,” the court’s ruling “‘may still be upheld if it reached the right result

for the wrong reason.’” Pfuhl v. Pfuhl, 2014 S.D. 25, ¶ 7, 846 N.W.2d 778, 780

(quoting Sommervold v. Grevlos, 518 N.W.2d 733, 740 (S.D. 1994)). Connors

advances several arguments to support that dismissal of the complaint in its

-4-
#29719

entirety was proper regardless of the circuit court’s erroneous reliance on Phillips.

Connors asserted these same arguments before the circuit court and both parties

briefed these arguments on appeal. We therefore address each argument to

determine whether the dismissal was proper.

A. Whether Mach can bring a direct action against
Connors.

[¶12.] Connors contends that Mach cannot bring a direct action against her

because Mach’s claims relate to injuries purportedly sustained by Wags West, not

Mach. Under SDCL 47-34A-1101:

(a) Subject to subsection (b), a member may maintain a direct
action against another member, a manager, or the limited
liability company to enforce the member’s rights and otherwise
protect the member’s interests, including rights and interests
under the operating agreement or this chapter or arising
independently of the membership relationship.

(b) A member maintaining a direct action under this section
must plead an actual or threatened injury that is not solely the
result of an injury suffered or threatened to be suffered by the
limited liability company.

(Emphasis added.) In response, Mach alleges that she suffered an actual injury

because Connors used Wags’s (Mach’s other limited liability company started in

2012) and Wags West’s customer information for Connors’s operation of Dirty Dog

Spa, LLC. Mach further asserts that because she “is the sole owner of Wags[,] and

Wags West no longer operates, [Mach] is the one to suffer the injury by [Connors’s]

use of the customer information.”

[¶13.] Neither of Mach’s contentions on appeal nor her allegations in the

complaint support that she can maintain this direct action against Connors.

Assuming Wags owns the customer information referenced by Mach, Connors’s

-5-
#29719

alleged use of that information would result in injury to Wags, and Wags is not a

named plaintiff in this action. And although Mach claims to be the sole owner of

Wags, she is not, in her individual capacity, a proper party to prosecute an action

against Connors for injuries purportedly suffered by Wags (or for her injuries as a

member owner stemming solely from Wags’s injuries). As SDCL 47-34A-201

provides, “[a] limited liability company is a legal entity distinct from its members”

and “[a] member of a limited liability company is not a proper party to proceedings

by or against a limited liability company.”

[¶14.] Mach also cannot maintain this direct action against Connors to

vindicate Connors’s alleged use of Wags West’s customer information or, as

referenced in Mach’s complaint, Connors’s use of Wags West’s assets for payment of

her personal expenses. Any injury stemming from such conduct to Mach would

result solely from the “injury suffered or threatened to be suffered by” Wags West.

[¶15.] Nevertheless, Mach asserts that a member may bring an action

against another member “without any limitations[,]” citing both SDCL 47-34A-410

and -1101(b). However, neither statute applies here. SDCL 47-34A-410 allows such

an action to enforce: “(1) [t]he member’s rights under the operating agreement; (2)

[t]he member’s rights under [chapter 47-34A]; and (3) [t]he rights and otherwise

protect the interests of the member, including rights and interests arising

independently of the member’s relationship to the company.” The first subsection is

not implicated because Mach has not identified an operating agreement for Wags

West. The second would incorporate the duties owed by one member to another as

set forth in SDCL 47-34A-409. But importantly, SDCL 47-34A-409 provides that

-6-
#29719

such duties are subject to the provisions in SDCL 47-34A-1101(b) that expressly

limit the grounds upon which a member may bring a direct action against another

member. Finally, while the third subsection refers more generally to rights and

interests of the member, the language is repeated verbatim in SDCL 47-34A-

1101(a), which, like SDCL 47-34A-409, incorporates the limitation set forth in

SDCL 47-34A-1101(b) that “[a] member maintaining a direct action under this

section must plead an actual or threatened injury that is not solely the result of an

injury suffered or threatened to be suffered by the limited liability company.”

[¶16.] Because Mach has not pled that she suffered “an actual or threatened

injury that is not solely the result of an injury suffered or threatened to be suffered

by [Wags West]” as required under SDCL 47-34A-1101, Mach’s complaint was

properly dismissed in as much as it asserts a direct action against Connors by Mach

for Connors’s alleged use of Wags West’s assets and Wags’s or Wags West’s

customer information.

B. Whether Wags West can pursue this action against
Connors when the complaint does not allege that
Wags West is in the process of winding up the
company’s business.

[¶17.] Connors notes that Wags West was administratively dissolved in

January 2019 and acknowledges that a dissolved limited liability company can

prosecute actions as part of winding up the company’s business. However, Connors

asserts that this particular suit could not be instituted because Wags West did not

allege in its complaint, “or even affirmatively represent,” that it “was engaged in the

winding up process.” Connors directs this Court to SDCL 47-34A-802(a), which

provides that “a limited liability company continues after dissolution only for the

-7-
#29719

purpose of winding up its business.” According to Connors, this law makes “clear

that Wags West could only commence a lawsuit as part of the process of winding up

the operations and affairs of the business.”

[¶18.] Besides quoting the language of SDCL 47-34A-802(a), Connors

identifies no additional authority to support her claim that the complaint must

contain a specific allegation that Wags West is currently engaged in the winding up

process. Notably, nothing in the statute or statutory scheme requires that the

winding up process commence at a particular time or that a company must make an

affirmative declaration that the winding up process has begun before it can

prosecute an action relating to the company’s property. Under SDCL 47-34A-810(c),

“[a] company administratively dissolved continues its existence but may carry on

only business necessary to wind up and liquidate its business and affairs under

§ 47-34A-802[.]” The type of actions that may be taken during this process are

identified in SDCL 47-34A-803(c): “[a] person winding up a limited liability

company’s business may . . . preserve the company’s business or property as a going

concern for a reasonable time, [and] prosecute . . . actions and proceedings[.]” 2

Because Wags West instituted this suit while it had been administratively dissolved

2. SDCL 47-34A-803(c) provides in full:

A person winding up a limited liability company’s business may
preserve the company’s business or property as a going concern for a
reasonable time, prosecute and defend actions and proceedings,
whether civil, criminal, or administrative, settle and close the
company’s business, dispose of and transfer the company’s property,
discharge the company’s liabilities, distribute the assets of the
company pursuant to § 47-34A-806, settle disputes by mediation or
arbitration, and perform other necessary acts.
-8-
#29719

but not yet terminated as a legal entity, Wags West could institute this action

against Connors.

C. Whether the complaint fails to state a claim upon
which relief can be granted to Wags West.

[¶19.] It is well settled that “[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.” Nooney, 2015

S.D. 102, ¶ 9, 873 N.W.2d at 499; see SDCL 15-6-8(a). We “accept the material

allegations as true and construe them in a light most favorable to the pleader to

determine whether the allegations allow relief.” Sisney, 2008 S.D. 70, ¶ 8, 754

N.W.2d at 809. Further, “a complaint need not have detailed factual allegations[.]”

Nooney, 2015 S.D. 102, ¶ 9, 873 N.W.2d at 499. However, the complaint “must

contain more than labels and conclusions and a formulaic recitation of the elements

of a cause of action.” Id. “These rules contemplate a ‘statement of circumstances,

occurrences and events in support of the claim presented.’” Sisney, 2008 S.D. 70,

¶ 13, 754 N.W.2d at 810 (citation omitted).

[¶20.] Before we examine the sufficiency of the allegations in the complaint,

we address Connors’s argument that Wags West’s complaint fails as a matter of law

because certain allegations are couched in terms of being “upon information and

belief.” According to Connors, when the circumstances establish that the facts are

solely within the knowledge of the opposing party, “[a]llegations prefaced or couched

in terms of only being ‘upon information and belief’ are insufficient to withstand

dismissal unless an explanation for the basis of this belief is set forth[.]” She directs

-9-
#29719

this Court to two cases to support her argument, but neither case supports

dismissal of Wags West’s complaint here.

[¶21.] In the first case, this Court—in 1931—held that “[a] statement upon

information, without alleging that it is also based upon the pleader’s belief is

insufficient, and must be eliminated from consideration when a pleading is

challenged by demurrer.” N. Fin. Corp. v. Midwest Com. Credit Co., 59 S.D. 282,

239 N.W. 242, 244 (1931). Initially, we note that Northern Finance was decided

under the prior version of the statute governing the general rules of pleading. See

id. (citing Section 2361, Rev. Code 1919). The current pleading practice rules only

require “[a] short and plain statement of the claim[.]” SDCL 15-6-8(a). “Thus,

under modern pleading practice, pleadings need only reflect the nature of the claim

asserted and the relief requested.” Sazama v. State ex rel. Muilenberg, 2007 S.D.

17, ¶ 13, 729 N.W.2d 335, 341. In any event, Wags West’s complaint alleges that

“upon information and belief” Connors used Wags West’s assets for personal use

and used Wags West’s customer information for Dirty Dog Spa, LLC. Therefore,

unlike in Northern Finance, Wags West’s allegations were stated to be based both

upon Wags West’s information and belief, and not simply “upon information.”

[¶22.] The second case—Pope v. Federal Home Loan Mortgage Corp.—simply

stands for the proposition that alleging something “upon information and belief” is

insufficient if the allegation does not rise above speculation. See 561 Fed. Appx.

569, 573 (8th Cir. 2014). In Pope, the plaintiff challenged a foreclosure of its

property, claiming on “information and belief” that there was an unrecorded

assignment of the mortgage by Wells Fargo to the defendant. Id. Noting that this

-10-
#29719

sole allegation was the basis of the claim, the court held that it was insufficient

because the plaintiffs “provide[d] no facts that would lead to the plausible inference

that an unrecorded assignment does exist.” Id. Similarly, we must determine

whether the allegations based upon information and belief in Wags West’s

complaint here are “enough to raise a right to relief beyond the speculative level” on

each of the causes of action alleged. See Sisney, 2008 S.D. 70, ¶ 7, 764 N.W.2d at

808 (citation omitted).

i. Breach of the duty of loyalty

[¶23.] In its complaint related to this claim, Wags West asserts that Connors

“breached her duty of loyalty to [Wags West] by competing directly against [the

company] and by diverting customer information from [the company] for her

benefit.” In response, Connors contends that the claim fails as a matter of law

“because the record establishes that Wags West, through the deliberate choice of

Ms. Mach, did not provide pet grooming services or actively engage in business after

December 31, 2017[,]” and therefore, Connors could not have competed against

Wags West when she opened Dirty Dog Spa, LLC on January 1, 2018. 3 Connors

3. Wags West asserts that Connors’s contention that “Wags West ceased all
operations as of December 31, 2017” is untrue. As support, Wags West
directs this Court to a post on a joint social media account for Wags and Wags
West that, in Wags West’s view, shows only that it announced that the Wags
West location will be changing to Dirty Dog Spa, LLC on January 1, 2018, not
that Wags West was ceasing to operate. Wags West also refers to a social
media post from Dirty Dog Spa, LLC’s account indicating that Connors began
operating her business prior to December 31, 2017. These social media posts
are matters outside the pleadings and may not be considered when reviewing
the motion to dismiss. See Nooney, 2015 S.D. 102, ¶ 7, 873 N.W.2d at 499
(“[a] court may not consider documents ‘outside’ the pleadings when ruling on
a motion to dismiss for failure to state a claim”).
-11-
#29719

also asserts that because Wags West voluntarily closed and was no longer providing

services, there were no customers for her to divert from Wags West. Finally,

Connors claims that Wags West’s complaint fails because it alleges no injury or

harm “that can be clearly traced to an improper act or omission by Ms. Connors.”

[¶24.] Under SDCL 47-34A-409(b):

A member’s duty of loyalty to a member-managed company and
its other members is limited to the following:
(1) To account to the company and to hold as trustee for it
any property, profit, or benefit derived by the member in
the conduct or winding up of the company’s business or
derived from a use by the member of the company’s
property, including the appropriation of a company’s
opportunity;
(2) To refrain from dealing with the company in the
conduct or winding up of the company’s business as or on
behalf of a party having an interest adverse to the
company; and
(3) To refrain from competing with the company in the
conduct of the company’s business before the dissolution
of the company.

[¶25.] Accepting Wags West’s allegations in the complaint as true, Connors

began operating Dirty Dog Spa, LLC prior to Wags West being administratively

dissolved. It is thus plausible that she may have violated her duty not to operate a

company in the conduct of Wags West’s business before Wags West’s dissolution.

See SDCL 47-34A-409(b)(3). It is also plausible from the allegations in the

complaint that Connors may have failed to “hold as a trustee” for Wags West the

company’s property—its customer information—by using this information for her

benefit. See SDCL 47-34A-409(b)(1). Finally, although Wags West did not identify

a specific injury, the fact of injury is apparent from the allegations themselves.

Because the contentions in the complaint constitute statements of “circumstances,

-12-
#29719

occurrences, and events[,]” see Sisney, 2008 S.D. 70, ¶ 13, 754 N.W.2d at 810

(citation omitted), that could establish the elements of a breach of the duty of

loyalty claim, this cause of action was improperly dismissed.

ii. Breach of the duty of care

[¶26.] Under SDCL 47-34A-409(c), “[a] member’s duty of care to a member-

managed company and its other members in the conduct of and winding up of the

company’s business is limited to refraining from engaging in grossly negligent or

reckless conduct, intentional misconduct, or a knowing violation of law.” Wags

West’s complaint asserts that “[Connors] breached her duty of care by competing

directly against [Wags West] and by diverting customer information from [Wags

West] for her benefit.”

[¶27.] In response, Connors advances the same arguments she asserted in

opposition to Wags West’s breach of the duty of loyalty claim—that Wags West was

not in competition with Dirty Dog Spa, LLC because Wags West had stopped

providing services before Dirty Dog Spa, LLC began operating, and therefore, Wags

West did not have customers which Connors could divert. However, just as with the

previous cause of action, Wags West’s allegations in the complaint related to the

breach of the duty of care claim are sufficient to survive a motion to dismiss under

SDCL 15-6-12(b)(5).

[¶28.] In particular, as alleged in the complaint, Connors began operating a

company that provides the exact same services as Wags West before Wags West

wound up its business. Further, the complaint alleges that Connors began

operating this company, Dirty Dog Spa, LLC, out of the same leased commercial

-13-
#29719

space in which Wags West had been operating since Connors and Mach formed the

company in 2016. Therefore, it can be reasonably inferred that Dirty Dog Spa, LLC

began servicing Wags West customers.

[¶29.] As this Court said in Sisney, “review is conducted ‘on the assumption

that all the allegations in the complaint are true (even if doubtful in fact)[.]’” 2008

S.D. 70, ¶ 18, 754 N.W.2d at 812 (alteration in original) (citation omitted). Because

Wags West alleged facts sufficient to support a plausible claim that Connors

engaged in intentional conduct (directly competing against Wags West and wrongly

taking customer information for her new company) and thereby breached her duty

of care and caused injury to Wags West, this cause of action was also improperly

dismissed.

iii. Conversion

[¶30.] “Conversion is the unauthorized exercise of control or dominion over

personal property in a way that repudiates an owner’s right in the property or in a

manner inconsistent with such right.” Chem-Age Indus., Inc. v. Glover, 2002 S.D.

122, ¶ 20, 652 N.W.2d 756, 766. To prove conversion, the plaintiff must show that

the:

(1) [plaintiff] owned or had a possessory interest in the property;
(2) [plaintiff’s] interest in the property was greater than the
[defendant’s]; (3) [defendant] exercised dominion or control over
or seriously interfered with [plaintiff’s] interest in the property;
and (4) such conduct deprived [plaintiff] of its interest in the
property.

Western Consolidated Co-op v. Pew, 2011 S.D. 9, ¶ 22, 795 N.W.2d 390, 397

(alteration in original) (quoting First Am. Bank & Trust, N.A. v. Farmers State

Bank of Canton, 2008 S.D. 83, ¶ 38, 756 N.W.2d 19, 31).

-14-
#29719

[¶31.] In its complaint, Wags West asserts that it “had owned or had a

possessory interest in [the company’s] assets and customer list”; its interest was

greater than Connors’s; Connors “exercised dominion or control over or seriously

interfered with [Wags West’s] interest” in the assets and customer list; and

Connors’s conduct deprived Wags West of its interest in the assets and customer

list. 4

[¶32.] A fair reading of Wags West’s complaint reveals sufficient allegations

that are not purely speculative to support a claim of conversion. In particular, the

complaint alleges that Connors and Mach formed Wags West in 2016 as an

expansion of her existing business so that Connors could go into business with her.

They leased a commercial space on South Louise Avenue for the new company to

operate, and it can be inferred from the pleadings that Connors was the one

operating the pet grooming business at this location. It can be further inferred that

Wags West possessed assets to operate its business at this location.

[¶33.] The complaint alleges that Connors began operating Dirty Dog Spa,

LLC in the same location on South Louise Avenue from which Wags West had been

operating. When Connors started operating as Dirty Dog Spa, LLC, Wags West had

not been administratively dissolved and had not wound up its business affairs.

Thus, it can be plausibly inferred that Wags West still had assets that could be

wrongly converted, including its customer list and that Connors, in operating Dirty

4. The complaint also refers to Connors’s use of customer information from
Wags (Mach’s original business which is still in operation). Although Mach
asserted in her brief to the circuit court that Wags had shared this customer
information with Wags West, Wags was not named as a plaintiff in the
complaint at issue.
-15-
#29719

Dog Spa, LLC, exercised dominion and control over Wags West’s assets and

deprived Wags West of its interest in the property.

[¶34.] Finally, the injury that would result to Wags West from Connors’s

misuse of the company’s assets and exercise of control over the customer list is

apparent from the allegations themselves. Therefore, if, as Wags West alleges,

Connors wrongfully used the company’s assets to pay for her personal expenses and

converted the customer list for the benefit of her new company, such conduct, if

proved, could constitute conversion, and the cause of action was improperly

dismissed.

iv. Unjust enrichment

[¶35.] “Unjust enrichment occurs ‘when one confers a benefit upon another

who accepts or acquiesces in that benefit, making it inequitable to retain that

benefit without paying.’” Hofeldt v. Mehling, 2003 S.D. 25, ¶ 15, 658 N.W.2d 783,

788 (citation omitted). To prove unjust enrichment, Wags West must establish that

Connors received a benefit, she was aware she was receiving a benefit, and that it

would be inequitable to allow her to retain the benefit without reimbursing Wags

West. See id. Wags West’s complaint alleges Connors received a benefit from her

use of its assets and customer list and was “cognizant of the benefit she received[.]”

The complaint also alleges that “[i]t would be unconscionable for [Connors] to enjoy

the benefits of [Wags West’s] assets and customer list without paying [Wags West]

for the same” and Connors would thus be unjustly enriched. Contrary to Connors’s

-16-
#29719

assertion, Wags West has adequately alleged facts that could establish the elements

necessary for a claim of unjust enrichment. 5

v. Punitive damages

[¶36.] Wags West’s complaint contains a separate cause of action for punitive

damages. While “[t]here is no independent cause of action for punitive damages[,]”

see O’Neill v. O’Neill, 2016 S.D. 15, ¶ 25, 876 N.W.2d 486, 496, punitive damages

may be sought in conjunction with an intentional tort such as conversion. See

Chem-Age, 2002 S.D. 122, ¶ 19 n.5, 652 N.W.2d at 766 n.5 (providing that a

conversion claim “may give rise to punitive damages”). Because Wags West’s

conversion claim was sufficiently pled, she could also request punitive damages.

See Olson-Roti v. Kilcoin, 2002 S.D. 131, ¶ 28, 653 N.W.2d 254, 260 (providing that

punitive damages may be pursued when supported by a cause of action).

D. Whether the motion for leave to file an amended
complaint should have been granted.

[¶37.] Mach and Wags West assert for the first time in their reply brief to

this Court that the circuit court should have granted their motion for leave to file an

amended complaint. The issue is not one noticed on appeal by Mach and Wags

West. Further, a review of the record reveals that Mach and Wags West did not

5. In Paweltzki v. Paweltzki, we noted that the initial question when
considering an unjust enrichment claim is “whether, as a matter of law, [a
party can] seek the equitable remedy of unjust enrichment when [there is]
available to them an adequate remedy at law” for the same alleged
wrongdoing. 2021 S.D. 52, ¶ 40, 964 N.W.2d 756, 769. Whether Wags West
has adequate remedies at law to address Connors’s alleged misuse of its
corporate assets via its conversion and statutory claims such that it cannot
proceed in equity via its claim for unjust enrichment was not raised before
the circuit court or on appeal. Therefore, we leave that question for another
day.
-17-
#29719

request that the circuit court rule on their motion after the circuit court ruled on

Connors’s motion to dismiss. We have repeatedly said that “[a] party may not raise

an issue for the first time on appeal, especially in a reply brief when the other party

does not have the opportunity to answer.” Ellingson v. Ammann, 2013 S.D. 32, ¶

10, 830 N.W.2d 99, 102 (quoting Agee v. Agee, 1996 S.D. 85, ¶ 21 n.4, 551 N.W.2d

804, 807 n.4); Am. Legion Home Assoc. v. Pennington Cnty., 2018 S.D. 72, ¶ 41 n.4,

919 N.W.2d 346, 355 n.4. Therefore, we decline to address this argument.

[¶38.] Affirmed in part and reversed in part and remanded for further

proceedings.

[¶39.] JENSEN, Chief Justice, and KERN and MYREN, Justices, concur.

[¶40.] SALTER, Justice, deeming himself disqualified, did not participate.

-18-