Pinnacle Great Plains Operating Company, LLC v. Swenson

          MEMORANDUM DECISION AND ORDER

          DAVID C. NYE U.S. DISTRICT COURT JUDGE

         I. INTRODUCTION

         This matter comes before the Court on Plaintiff Pinnacle Great Plains Operating Company, LLC's (“Pinnacle”) Motion to Consolidate Cases (Dkt. 12) and Defendant Kirk Swenson's Motions for Summary Judgment (Dkt. 13) and Partial Dismissal (Dkt. 20). This dispute arose out of Pinnacle's purchase of a 5, 487-acre parcel of agricultural land near Malta, Idaho, known as “Bridge Farms, ” from the Wynn Dewsnup Revocable Trust (“the Trust”). In this case (“Pinnacle II”), Pinnacle claims that Swenson-acting as president of 1 Stop Realty (“1 Stop”), Pinnacle's purported broker for the purchase- misrepresented the quality of the groundwater and soil at Bridge Farms prior to the sale. 1 Stop, the Trust, and Wynn Dewsnup, the Trustee of the Trust, are the defendants in a companion case in this District (“Pinnacle I”).^[1]

         Having reviewed the record and briefs, the Court finds that the facts and legal arguments are adequately presented. Accordingly, in the interest of avoiding further delay, and because the Court finds that the decisional process would not be significantly aided by oral argument, the Court will decide the motion without oral argument. Dist. Idaho Loc. Civ. R. 7.1(d)(2)(ii). For the reasons set forth below, the Court grants the Motion for Partial Dismissal, grants the Motion for Summary Judgment in part, and stays the remainder of the claims until a final judgment has been entered in Pinnacle I.

         II. BACKGROUND

         A. Factual Background

         Pinnacle is an Arkansas limited liability company with a single member, the Arkansas Teacher Retirement System (“ATRS”), an institutional pension fund. Pinnacle owns investment farmland properties on behalf of and for the benefit of the ATRS. Pinnacle contracted with Halderman Farm Management Services (“HFMS”) to acquire and manage investment farmlands on ATRS's behalf. HFMS employs Howard Halderman, David Martin, and Adam Gore.

         Swenson is the president of 1 Stop. 1 Stop has an office in Kasson, Minnesota, where Swenson and 1 Stop's vice president, Wendy Forthun (“Forthun”), reside. 1 Stop also has an office located about 50 miles away in Olivia, Minnesota, where 1 Stop's other vice president, Roger Heller (“Heller”), resides.

         In early 2010, 1 Stop's client, Teays River Investments, LLC (“Teays”), expressed interest in expanding into the northwest United States and sought 1 Stop's services in its search for farmland in which to invest. Shortly thereafter, Heller discovered Bridge Farms and began preparing paperwork on the property to present to Teays.^[2]

         In May of 2010, Heller and Swenson travelled to Idaho to tour Bridge Farms. On May 24, 2010, Heller sent Bridge Farms an email requesting information on, among other things, the economics of growing different kinds of crops at Bridge Farms, rental income, and water and soil quality. Dkt. 16-5. On May 25, 2010, Garrett Dewsnup, Bridge Farms' manager responded via fax with a letter and a collection of documents. Dkt. 16-6. Among these documents was an “irrigation water analysis” from 2009, (id. at 16), and “water analysis results” from 2003, (id. at 17). The 2003 lab results indicated “possible” and “significant” problems with Bridge Farms' water. Id. Heller also spoke with Bridge Farms' crop consultant, Kyle Carpenter, to discuss Bridge Farm's soil and water quality.

         In July of 2010, Swenson gained the impression that Teays did not want to purchase Bridge Farms because it was not large enough. Thereafter, 1 Stop ceased investigating Bridge Farms as a prospect for Teays.

         On December 29, 2010, Halderman emailed Swenson asking for assistance in finding farmland for a client (ATRS) for investment purposes. Pinnacle I, Dkt. 64-2, at 21. On January 17, 2011, Swenson emailed Halderman to inform him about Bridge Farms. Id. at 23.

         In June 2011, Wynn Dewsnup emailed Heller a “lease proposal” for Bridge Farms “presented by” one of its tenants, Grant 4-D Farms. Dkt. 16-12. The proposal stated that the property has “both soil and water borne salt challenges” that require farmers to utilize “sustainable farming practices.” Id. at 7.

         Swenson emailed Halderman again about Bridge Farms on July 20, 2011. Dkt. 16-4. The two men exchanged a few emails over the next few days about Bridge Farms' water. Id. Swenson indicated the water supply was “good” and “very adequate.” Id.

         On July 26, 2011, Forthun sent an email to Halderman, Swenson, and others, with a short summary of information about Bridge Farms and several other documents attached. Dkt. 16-13. The summary indicated the property was currently producing potatoes and sugar beets, had “quality ground water, ” and had “low saline levels” in the “primary soil.” Id. at 4. 1 Stop and HFMS continued to discuss Bridge Farms into August of 2011. Dkt. 16-14. In one email, Swenson asserted the property should be easy to rent because it was “proven beet & potato ground.” Id. at 2.

         Pinnacle entered into a letter of intent in late September 2011 to purchase Bridge Farms. The parties to the sale signed a Real Estate Purchase Agreement on October 14, 2011. At that time, Bridge Farms' wells had already been winterized. Believing that the property did not have water problems, Pinnacle did not require well testing as part of its due diligence. Rather, HFMS employees visited Bridge Farms in November of 2011 and spoke to Wynn Dewsnup about Bridge Farms' water quality. Wynn represented that the Farm had “excellent” irrigation water. Swenson maintains that no one ever asked him or 1 Stop to conduct due diligence for Pinnacle's purchase of Bridge Farms. Dkt. 16-22, at 63.

         The sale of Bridge Farms for $15, 300, 000 formally closed in January of 2012. A few months later, in May of 2012, Pinnacle learned about the water problems at Bridge Farms.

         B. Procedural Background

         On March 5, 2013, Pinnacle filed suit (Pinnacle I) against Wynn Dewsnup and the Trust for breaching its obligation under the Bridge Farms purchase agreement. On October 13, 2014, ten days after receiving responses to its first set of written discovery, Pinnacle moved for leave to amend its complaint to assert fraud claims against Wynn Dewsnup. In November of 2014, Pinnacle deposed Wynn and Garrett Dewsnup and learned that Garrett had given Heller information about Bridge Farms' water and soil quality in 2010. Shortly thereafter, Pinnacle sent a third-party subpoena to 1 Stop, and Swenson responded on behalf of 1 Stop with over 3, 000 pages of materials related to the Bridge Farms sale. On December 12, 2014, Pinnacle moved to add 1 Stop as a defendant.

         On February 23, 2015, the Court granted Pinnacle's pending requests. On February 24, 2015, Pinnacle filed its Second Amended Complaint adding 1 Stop as a defendant and adding fraud claims.^[3]

         Nearly one month later, 1 Stop Realty filed a third-party complaint against Robert Jones Realty, Inc., the Trust's broker during the sale of Bridge Farms. On April 6, 2015, Wynn Dewsnup and the Trust filed their answer to the Second Amended Complaint and filed a cross-claim against 1 Stop. On June 11, 2015, in response to a written discovery request, 1 Stop produced documents related to its work and investigation of Bridge Farms that 1 Stop Realty had collected when it was representing Teays. These disclosures included the 2003 Bridge Farms water analysis lab results, Swenson's personal notes from a 2010 telephone conference with Wynn Dewsnup which acknowledge, among other points, “salts sodium in soils, ” and emails between Heller and Swenson, which revealed that Heller had spoken to an agronomist regarding Bridge Farms' long term sustainability and the salinity of its soils.

         On October 7, 2015, the Court dismissed the third-party complaint against Robert Jones Realty. On November 2, 2015, the Court issued an Amended Case Management Order establishing new deadlines for the completion of factual discovery, expert disclosures, mediation, and dispositive motions, and setting trial for January 25, 2017. On January 7 and 8, 2016, Pinnacle deposed Swenson and Heller. Pinnacle alleges 1 Stop brought to the depositions a file of documents relating to Bridge Farms which contained more evidence of 1 Stop's knowledge of the property's soil and water problems.

         On March 14, 2016, Pinnacle moved to amend its pleadings again, this time to add Swenson to the case. On March 31, 2016, Wynn Dewsnup and the Trust moved to add Swenson and Heller as cross-defendants and assert new claims against them.

         Magistrate Judge Candy Dale took the motions under consideration and, on July 26, 2016, issued a Report and Recommendation, recommending that the Court deny Pinnacle's motion to amend as untimely. Specifically, Judge Dale found, among other things, that Pinnacle had not been diligent in seeking to add Swenson as a party- Pinnacle could have moved to add Swenson as a defendant as early as November of 2014, but it waited until March of 2016. Judge Dale also found adding Swenson would prejudice 1 Stop and Swenson, and would significantly disrupt the deadlines in the current case management order without good cause.

         On February 9, 2017, Judge Edward Lodge adopted the Report and Recommendation and denied the motion for leave to amend. In the meantime, the parties had reached several settlement agreements. In October of 2016, the Court had dismissed with prejudice all cross-claims and causes of action that were or might have been asserted by Wynn Dewsnup or the Trust against 1 Stop in this case; and all cross-claims and causes of action that were or might have been asserted by Pinnacle against Wynn Dewsnup or the Trust. After these dismissals, the only remaining claims were asserted by Pinnacle against 1 Stop.

         Thereafter, Judge Lodge considered 1 Stop's Motion for Summary Judgment. He denied the Motion in March of 2017. The Court then set a jury trial for May 15, 2018. However, the Court vacated this trial date when Judge Lodge transferred the case to the undersigned on August 1, 2017.

         Meanwhile, on October 7, 2016, Pinnacle had filed this case, Pinnacle II, against Swenson in state court in Cassia County, Idaho. This was after Magistrate Judge Dale's Report and Recommendation recommending that Swenson not be added as a party to Pinnacle I but before Judge Lodge adopted that Report and Recommendation. However, Pinnacle did not serve Swenson until February 25, 2017-after Judge Lodge ruled that Pinnacle could not add Swenson to Pinnacle I. Swenson timely removed the case to this Court on March 5, 2017.

         Pinnacle's Complaint asserts five claims for relief against Swenson: (1) violation of Idaho's Real Estate Brokerage Representation Act (“Brokerage Act”), Idaho Code § 54-2082 et seq.; (2) fraud; (3) negligence; (4) breach of ...