Lawsuit Alleges Former Member of South Dakota Development Firm “Wrongfully Diverted” Business to Competitors

Northeast Radio SD News - Watertown, SD - A prominent South Dakota economic development and consulting firm has filed an extensive lawsuit against a former employee and member, alleging a multi-year scheme to siphon off clients and proprietary information for personal gain.

The complaint, filed February 19, 2026, in the Third Judicial Circuit of Codington County, pits A1 Development Solutions, LLC against Kyle Peters, his company Bad River Development, LLC, Josh Teigen, and 1776 Group, LLC. A1 Development is seeking compensatory and punitive damages for what it describes as a systematic breach of fiduciary and contractual duties.

Allegations of “Side-Deals” and Client Poaching

The core of the lawsuit centers on Kyle Peters, who joined A1 Development as an employee in 2021, then transitioned to an independent contractor and, eventually, to a member through his company, Bad River Development. A1 Development alleges that while Peters was representing the firm, he was simultaneously negotiating “side-deals” and referring business to himself and outside competitors.

The 30-page complaint details 11 specific instances, referred to as Clients A through K, in which Peters allegedly diverted opportunities to them. Among the most serious allegations:

·        Client A: A1 Development claims Peters asked the firm to forgive a $12,000 receivable for this client under the guise of negotiating a new contract. Instead, Bad River Development allegedly signed a direct contract with the client two months later for the same services. Peters also allegedly assisted Client A with a potential land purchase valued at over $170 million for a data center project without disclosing the opportunity to A1 Development.

·        Client D: Peters reportedly advised A1 Development to reduce this client’s bill by half, claiming they could not pay. The lawsuit alleges Peters then referred the client to his own entity, 1776 Group, to provide the same services.

·        Client G: While A1 Development was actively trying to sell incentive consulting services to this existing customer, Peters allegedly introduced the client’s CEO to a competitor. He reportedly told A1 Development the client already had a relationship with that competitor, concealing his own role in the introduction.

Breach of Operating Agreement

A1 Development asserts that these actions violated the firm’s First Amended and Restated Operating Agreement, which became effective in January 2024. Under this agreement, members are strictly prohibited from competing with the company or withdrawing without a “Special Supermajority Vote.”

The complaint states that in October 2025, Peters attempted to withdraw Bad River Development from the firm. However, A1 Development claims no such vote ever occurred, making the withdrawal “null and void” under the company’s rules.

Broad Claims and Legal Recourse

The lawsuit includes ten separate counts against the defendants, including:

·        Breach of Contract and Fiduciary Duty: Alleging Peters and Bad River failed to act in the best interests of A1 Development.

·        Tortious Interference: Claiming the defendants intentionally disrupted A1 Development’s valid business relationships.

·        Fraudulent Misrepresentation and Concealment: Asserting that Peters made false statements regarding client bills, travel expenses, and his relationship with competitors to deceive the firm.

·        Conspiracy: Alleging the defendants worked together to misappropriate business opportunities.

A1 Development is also asking the court to “pierce the corporate veil,” which would make Kyle Peters personally liable for Bad River Development’s actions and debts.

Jason R. Sutton of the Boyce Law Firm in Sioux Falls represents the plaintiff. As of the filing date, the defendants have not yet filed a formal response to the allegations in court.