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Pinnacle Great Plains Operating Co., LLC v. Wynn Dewsnup Revocable Trust

United States District Court, D. Idaho

February 9, 2017

PINNACLE GREAT PLAINS OPERATING COMPANY, LLC, an Arkansas Limited Liability Company, Plaintiff,
v.
WYNN DEWSNUP REVOCABLE TRUST; WYNN DEWSNUP, in his individual capacity and as trustee of the Wynn Dewsnup Revocable Trust; 1 STOP REALTY, INC., and DOES INDIVIDUAL/ENTITIES I through XX, Defendants. WYNN DEWSNUP REVOCABLE TRUST; and WYNN DEWSNUP, in his individual capacity and as trustee of the Wynn Dewsnup Revocable Trust, Cross-Claimants,
v.
1 STOP REALTY, INC., Cross-Defendant.

          ORDER ON REPORT AND RECOMMENDATION

          Edward J. Lodge, United States District Judge

         The United States Magistrate Judge Candy W. Dale issued a Report and Recommendation (Report) in this matter. Dkt.75. Pursuant to 28 U.S.C. § 636(b)(1), the parties had fourteen days in which to file written objections to the Report. Plaintiff Pinnacle Great Plains Operating Compnay, LLC filed its objection to the Report on August 10, 2016. Dkt. 76. Defendant and Cross Claimant Wynn Dewsnup, individually and as trustee of the Wynn Dewsnup Revocable Trust (collectively referred to as “Dewsnup”) joined Pinnacle's objection. Dkt. 77. Defendant 1 Stop Realty, Inc. filed a response to the objections of Pinnacle and Dewsnup. Dkt. 78 and 79.

         STANDARD OF REVIEW

         Pursuant to 28 U.S.C. § 636(b)(1)(C), this Court “may accept, reject, or modify, in whole or in part, the findings and recommendations made by the magistrate judge." Where the parties object to a report and recommendation, this Court “shall make a de novo determination of those portions of the report which objection is made." Id. Where, however, no objections are filed the district court need not conduct a de novo review. In United States v. Reyna-Tapia, 328 F.3d 1114, 1121 (9th Cir. 2003), the court interpreted the requirements of 28 U.S.C. 636(b)(1)(C):

The statute [28 U.S.C. §636(b)(1)(C)] makes it clear that the district judge must review the magistrate judge's findings and recommendations de novo if objection is made, but not otherwise. As the Peretz Court instructed, “to the extent de novo review is required to satisfy Article III concerns, it need not be exercised unless requested by the parties." Peretz, 501 U.S. at 939 (internal citation omitted). Neither the Constitution nor the statute requires a district judge to review, de novo, findings and recommendations that the parties themselves accept as correct. See Ciapponi, 77 F.3d at 1251 (“Absent an objection or request for review by the defendant, the district court was not required to engage in any more formal review of the plea proceeding."); see also Peretz, 501 U.S. at 937-39 (clarifying that de novo review not required for Article III purposes unless requested by the parties) . . . .

See also Wang v. Masaitis, 416 F.3d 993, 1000 & n.13 (9th Cir. 2005). Furthermore, to the extent that no objections are made, arguments to the contrary are waived. See Fed. R. Civ. P. 72; 28 U.S.C. § 636(b)(1) (objections are waived if they are not filed within fourteen days of service of the Report and Recommendation). “When no timely objection is filed, the Court need only satisfy itself that there is no clear error on the face of the record in order to accept the recommendation." Advisory Committee Notes to Fed.R.Civ.P. 72 (citing Campbell v. United States Dist. Court, 501 F.2d 196, 206 (9th Cir.1974)).

         In this case, objections were filed to portions of the Report, so the Court is required to conduct a de novo determination of the objected portions of the Report. The Court finds the objections of Dewsnup are moot as Dewsnup settled the claims by Pinnacle and 1 Stop Realty. Dkts. 83-86.

         FACTUAL BACKGROUND

         The Court adopts the factual and procedural background set forth by Judge Dale (with slight modifications) to begin its analysis of the objections to the Report This litigation arises from Dewsnup's October 2011 sale to Pinnacle of a 5, 487-acre parcel of agricultural land near Malta, Idaho, known as “Bridge Farm.” Specifically, Pinnacle claims Dewsnup and Pinnacle's purported broker, 1 Stop Realty, misrepresented the quality of the groundwater supply for Bridge Farm's irrigation system.

         Critical to resolution of the pending motions to amend is determining when 1 Stop Realty's officers, Swenson and Heller, became aware of the alleged problems with the quality of Bridge Farm's groundwater supply and when, through the process of discovery, Pinnacle became aware of Swenson's and Heller's knowledge of Bridge Farm's water quality issues. To better understand the parties' arguments, the Court will explain briefly the basic structure of 1 Stop Realty, how 1 Stop Realty learned about the Bridge Farm property, and 1 Stop Realty's relationship history with Pinnacle leading up to the Bridge Farm sale.

         I. 1 Stop Realty

         1 Stop Realty is a Minnesota corporation that sells and purchases agricultural property. (Dkt. 62-2 at 8.) 1 Stop Realty's officers include President Kirk Swenson, and Vice President Roger Heller.[1] In addition to its officers, 1 Stop Realty employs an office manager, an assistant, and a website technician. It has also three sales associates who work as independent contractors. 1 Stop Realty operates out of two locations. The main office is located in Kasson, Minnesota, and the other office is located in Olivia, Minnesota. Swenson works from the Kasson office; Heller works out of the Olivia office.

         II. 1 Stop Realty's Introduction to Bridge Farm

         In early 2010, 1 Stop Realty's client, Teays River Investments, LLC, [2] expressed interest in expanding into the northwest United States and sought 1 Stop Realty's services in its search for farmland in which to invest. (Dkt. 62-2 at 20.) Heller discovered Bridge Farm and began preparing paperwork on the property to present to Teays.

         In May of 2010, Heller and Swenson travelled to Idaho to tour Bridge Farm. Afterward, Swenson sent an email to Teays informing them that he had visited Bridge Farm, and recommending moving forward by submitting a letter of intent to the Dewsnups. (Dkt. 64-2 at 16.) In the email, Swenson stated, among other things: Bridge Farm “has really good water with inexpensive pumping cost….Nice deal, good water.” Id. Despite making this statement in his email, Swenson clarified during his recent deposition that, at the time he sent the email, 1 Stop Realty had not yet investigated Bridge Farm's water quality. (Dkt. 62-2 at 23.)

         Throughout 2010, 1 Stop Realty continued to collect more information on Bridge Farm for Teays. In late May of 2010, Garrett Dewsnup[3] emailed Pat Kelgen, Heller's assistant, five pages of Bridge Farm water analysis lab results from the year 2003. (Dkt. 64-2 at 2-7.) Kelgen forwarded the results to Heller who then forwarded them to Swenson. The lab results indicate “possible” and “significant” problems with Bridge Farm's water. Id. Swenson explained during his recent deposition that he and Heller discussed the 2003 lab results in 2010, and concluded that, given the out-dated nature of the reports, Bridge Farm's water quality would need to be re-tested during the due-diligence period prior to Teays' purchase of the farm. (Dkt. 62-2 at 56.)

         Around this same time period, Heller had been in communication with Dewsnup's agronomist, Kyle Carpenter, who had worked on Bridge Farm for several years, to discuss Bridge Farm's soil and water quality. On June 28, 2010, Heller emailed Swenson to inform him about his discussion with Carpenter. Heller reported:

Most of the soils are Genola which is Class IIe irrigated and a good one. Some of the others take more careful management as per the ...

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