## Facts

- Burnell and Mary Olesen owned and operated Little Philly’s Café in Hurley, South Dakota, from the mid-1980s until 1998.
- The Town (City) of Hurley owned and operated the Hurley Municipal Bar. The bar served alcohol; the Olesens’ café did not.
- The municipal bar and Little Philly’s Café were the only two competing food-service establishments in Hurley.
- Before 1995, the municipal bar’s food offerings were limited to snack-type items.
- In 1995, the City began serving full-course meals at the municipal bar, including items such as steaks, salads, potatoes, and hot sandwiches.
- On April 28, 1998, the Olesens sued the City, alleging the City’s restaurant operation was beyond municipal authority (ultra vires) and unfairly competed with their café.
- The circuit court granted the Olesens partial summary judgment on March 25, 2000, ruling that, as a matter of law, the City’s restaurant operation was ultra vires; damages were left for trial.
- The City was insured by EMC Insurance Company when the suit was filed, and EMC initially provided a defense.
- After extended delay in the case, the matter was set for a jury trial on damages in April 2003.
- Three weeks before trial, on March 10, 2003, the City moved for summary judgment for the first time on sovereign immunity grounds, arguing it lacked liability insurance coverage for the claim.
- The circuit court denied the City’s immunity-based summary judgment motion and later the case proceeded to a damages trial, resulting in a verdict for the Olesens.

## Issues

1. Whether the City was entitled to summary judgment on sovereign immunity under SDCL ch. 21-32A based on an asserted lack of liability insurance coverage (and therefore no statutory waiver).
2. Whether the City’s operation of full-course meal service at its municipal bar was beyond the City’s statutory authority and therefore ultra vires as a matter of law.

## Decision

- The Supreme Court of South Dakota affirmed.
- The City was not entitled to summary judgment on sovereign immunity because the record did not establish, as a matter of law, the absence or scope of liability insurance coverage relevant to waiver under SDCL ch. 21-32A.
- The circuit court correctly granted partial summary judgment that the City’s operation of a full-scale restaurant at the municipal bar was ultra vires.

## Legal Principles

- A municipality has only those powers granted by the Legislature in express terms, together with those necessarily implied from the express grants; doubtful authority is resolved against the municipality.
- Statutory authority to operate a municipal bar and sell alcoholic beverages does not automatically include authority to run a separate, competing restaurant business; extensive meal service can exceed what is merely incidental to the authorized municipal enterprise.
- Under SDCL 21-32A-1 and 21-32A-3, a public entity’s immunity is waived only to the extent it has liability insurance coverage for the claim.
- A public entity seeking summary judgment based on sovereign immunity must present competent evidence establishing how immunity applies and whether insurance does (or does not) waive it; an incomplete record on insurance coverage defeats summary judgment.

## Conclusion

The South Dakota Supreme Court affirmed the denial of the City’s late sovereign-immunity summary judgment motion because the City failed to establish the scope or absence of liability insurance coverage governing waiver under SDCL ch. 21-32A, and it affirmed partial summary judgment for the Olesens because the City’s full-course meal service at its municipal bar was beyond municipal authority and therefore ultra vires.


Olesen v. Town (City) of Hurley, 2004 S.D. 136, 691 N.W.2d 324 (2004)