Pinnacle Great Plains Operating Company, LLC v. Swenson
MEMORANDUM DECISION AND ORDER. IT IS ORDERED: Defendant's Motion to Dismiss 20 is GRANTED. Plaintiffs Count III (negligence) is DISMISSED WITH PREJUDICE. Defendant's Motion for Summary Judgment 13 is GRANTED IN PART and DENIED IN PART . Plaintiffs Count I (violation of Idahos Real Estate Brokerage Representation Act), Count IV (breach of contract) and Count V (breach of the implied covenant of good faith and fair dealing) are DISMISSED WITH PREJUDICE. Plaintiff's Motion to Consolidate 12 is DENIED. This case is HEREBY STAYED until the Court enters a final judgment in 4:13-cv-106-DCN. Signed by Judge David C. Nye. (caused to be mailed to non Registered Participants at the addresses listed on the Notice of Electronic Filing (NEF) by (st)
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF IDAHO
PINNACLE GREAT PLAINS
OPERATING COMPANY, LLC,
Case No. 1:17-cv-00120-DCN
MEMORANDUM DECISION AND
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
The case number for the companion case is 4:13-cv-106-DCN. Judge Edward Lodge
transferred Pinnacle I to the undersigned on August 1, 2017. Id., Dkt. 96.
MEMORANDUM DECISION AND ORDER– PAGE 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.
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
MEMORANDUM DECISION AND ORDER– PAGE 2
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 parties presented background information about Teays in Pinnacle I. See 4:13-cv-106, Dkt.
90, at 4-5 (citing Dkt. 62-2, at 20).
MEMORANDUM DECISION AND ORDER– PAGE 3
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. 164. 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
MEMORANDUM DECISION AND ORDER– PAGE 4
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
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,
The Second Amended Complaint asserted six causes of action. Pinnacle asserted the first
three—(1) breach of contract; (2) breach of the covenants of good faith and fair dealing; and (3)
fraudulent inducement—against the Trust and Wynn Dewsnup. Pinnacle asserts the final three—
(4) violation of Idaho’s Real Estate Brokerage Representation Act; (5) negligence per se; and (6)
fraud—against 1 Stop.
MEMORANDUM DECISION AND ORDER– PAGE 5
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
MEMORANDUM DECISION AND ORDER– PAGE 6
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
MEMORANDUM DECISION AND ORDER– PAGE 7
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 contract; and (5) breach of the
implied covenant of good faith and fair dealing.
On June 14, 2017, Pinnacle filed the pending Motion to consolidate this case with
Pinnacle I. Two days later, Swenson filed the pending Motion for Summary Judgment.
Finally, on August 11, 2017, Swenson filed a Motion for Partial Dismissal, in which he
asked the Court to dismiss Pinnacle’s negligence claim. Pinnacle has indicated that it
does not oppose this Motion for Partial Dismissal. The negligence claim is, therefore, no
longer at issue in this case.
III. LEGAL STANDARDS
Summary judgment is proper “if the movant shows that there is no genuine dispute
as to any material fact and the movant is entitled to judgment as a matter of law.” Fed. R.
Civ. P. 56(a). This Court’s role at summary judgment is not “to weigh the evidence and
determine the truth of the matter but to determine whether there is a genuine issue for
trial.” Zetwick v. Cty. of Yolo, 850 F.3d 436, 441 (9th Cir. 2017) (citation omitted). In
considering a motion for summary judgment, this Court must “view the facts in the
non-moving party’s favor.” Id. To defeat a motion for summary judgment, the respondent
need only present evidence upon which “a reasonable juror drawing all inferences in
favor of the respondent could return a verdict in [his or her] favor.” Id. (citation omitted).
MEMORANDUM DECISION AND ORDER– PAGE 8
Accordingly, this Court must enter summary judgment if a party “fails to make a showing
sufficient to establish the existence of an element essential to that party’s case, and on
which that party will bear the burden of proof at trial.” Celotex Corp. v. Catrett, 477 U.S.
317, 322 (1986). The respondent cannot simply rely on an unsworn affidavit or the
pleadings to defeat a motion for summary judgment; rather the respondent must set forth
the “specific facts,” supported by evidence, with “reasonable particularity” that preclude
summary judgment. Far Out Productions, Inc. v. Oskar, 247 F.3d 986, 997 (9th Cir.
Federal Rule of Civil Procedure 42(a) provides that “[w]hen actions involving a
common question of law or fact are pending before the court, it may order a joint hearing
or trial of any or all the matters in issue in the actions; it may order all the actions
consolidated; and it may make such orders concerning proceedings therein as may tend to
avoid unnecessary costs or delay.” “Rule 42(a) sets forth no situations in which
consolidation must be granted.” United States v. Parkinson, No. CIV-98-340-E-BLW,
2000 WL 1902246, at *1 (D. Idaho Oct. 25, 2000). Rather, “[t]he district court has broad
discretion under this rule to consolidate cases pending in the same district.” Investors
Research Co. v. United States Dist. Ct. for Cent. Dist. of Cal., 877 F.2d 777 (9th Cir.
1989). In determining whether to consolidate two cases, “the Court must ‘weigh[ ] the
saving of time and effort consolidation would produce against any inconvenience, delay
or expense that it would cause.’” W. Watersheds Project v. Lueders, No. 1:13-CV-00261EJL, 2014 WL 12611291, at *1 (D. Idaho Mar. 13, 2014) (quoting Single Chip Systems
Corp. v. Intermec IP Corp., 495 F.Supp.2d 1052, 1057 (S.D. Cal. 2007)).
MEMORANDUM DECISION AND ORDER– PAGE 9
Swenson argues summary judgment is proper for three reasons: (A) Pinnacle’s
claims against Swenson are time-barred by the applicable statute of limitations; (B)
Pinnacle is barred by the doctrine of claim preclusion from bringing claims that were
raised or could have been raised in Pinnacle I; and (C) Pinnacle’s claims against
Swenson are duplicative of the claims Pinnacle asserts against 1 Stop in Pinnacle I and
should be dismissed. The Court addresses each of these arguments in turn.
A. Whether Pinnacle’s Claims Against Swenson Are Time-Barred
There are three main claims left at issue in this case: (1) fraud; (2) violation of the
Brokerage Act; and (3) breach of contract. The Court addresses the statute of limitations
for the fraud claim first, and then address the remaining claims together.
“The statute of limitation for fraud is three years.” Nerco Minerals Co. v.
Morrison Knudsen Corp., 90 P.3d 894, 900 (2004) (citing Idaho Code § 5–218). A claim
for fraud “accrues upon discovery by the aggrieved party of facts constituting fraud.” Id.
(citing I.C. § 5–218(4)). The date of discovery is generally “a fact question for the jury
unless there is no evidence creating a question of fact.” Id. (citing DBSI/TRI v. Bender,
948 P.2d 151, 162 (1997)). However, the Court will infer actual knowledge of the fraud
“if the aggrieved party could have discovered the fraud by reasonable diligence, although
the Court will hesitate to infer such knowledge.” Id. (citing 948 P.2d at 162).
Pinnacle filed this suit against Swenson on October 7, 2016. Thus, any claim that
accrued prior to October 7, 2013, is time-barred.
MEMORANDUM DECISION AND ORDER– PAGE 10
Swenson argues the claim is time-barred because Pinnacle should have learned
about the basis for its fraud claim in May of 2012 when it first became aware of Bridge
Farms’ water and soil problems. Swenson explains that, at that time, Pinnacle knew 1
Stop had not raised the issue of water and soil quality prior to the sale and it could have
questioned 1 Stop, Swenson, and Wynn Dewsnup to determine whether Swenson knew
about the water and soil issues and, if so, whether they withheld that information from
Pinnacle. Moreover, in November of 2012, Dewsnup told Pinnacle that he had provided
Pinnacle with information about Bridge Farms’ water quality prior to the sale. Swenson
argues that had Pinnacle investigated that statement, it would have discovered Dewsnup
was referring to information Dewsnup had given to Swenson.
Pinnacle argues that, at the earliest, it learned of Swenson’s fraudulent
withholding of information in November of 2014, when it deposed Garrett Dewsnup.
Pinnacle asserts that it considered Swenson a trusted agent and had no inkling that
Swenson concealed information from it and would later deny acting as its broker. Finally,
Pinnacle maintains that Swenson’s argument, that he would have freely disclosed his
fraudulent activity had Pinnacle simply asked in 2012, is fallacious.
Both sides have presented meritorious arguments. At this time, it is not the Court’s
job to determine which version of events is more plausible. Pinnacle has carried its
burden of setting forth sufficient facts upon which a jury could find its fraud claim is not
time-barred. Accordingly, the Court finds the date of accrual is a dispute of fact that must
be determined by a jury.
MEMORANDUM DECISION AND ORDER– PAGE 11
2. Brokerage Act Claim and Breach of Contract Claims
In addressing the remaining claims, the Court first must determine what statute of
limitations applies. Swenson asserts that, under Idaho Code § 5-218(1), a three-year
statute of limitations applies to the Brokerage Act claim because the Act itself does not
provide for a statute of limitations. Pinnacle does not challenge this assertion; however,
the Court questions whether it is accurate. The Idaho Supreme Court, in Sumpter v.
Holland Realty, Inc., applied the four-year statute of limitations period provided for in
Idaho Code § 5-224 to the plaintiffs’ claims that the defendant violated certain
contractual duties that the Brokerage Act also imposed on the defendant. 93 P.3d 680,
684–85 (Idaho 2004). Significantly, the Sumpter court found the claim sounded in tort,
not contract, because the plaintiffs could have maintained their claim “without the
contract by virtue of a statutory or common law duty.” Id. at 685. In other words, the
Sumpter court applied a four-year statute of limitations to a claim that a defendant had
violated duties imposed by the Brokerage Act. The Court finds Sumpter equivalent to the
Swenson also asserts that the contract claim is controlled by the three-year statute
of limitations provided by Idaho Code § 5-218(1) because the contract claim is, in
substance, really another claim for violation of the Brokerage Act, not a contract claim.
Pinnacle summarily asserts that the four-year statute of limitations, applicable to claims
arising out of oral contracts under Idaho Code § 5-217, applies to the contract claim, but
does not directly address Swenson’s arguments. The Court agrees with Swenson’s
characterization of the contract claims, but, again finds Sumpter applicable. Like in
MEMORANDUM DECISION AND ORDER– PAGE 12
Sumpter, the duties Pinnacle alleges Swenson breached are independently imposed by the
Brokerage Act. See 93 P.3d at 684–85. The Court, therefore, finds the four-year statute of
limitations provided for in Idaho Code § 5-224 applicable to both the Brokerage Act
claim and the contract claims. Applying a four-year statute of limitations, these claims
are time-barred if they accrued prior to October of 2012.
The Court next faces the question of when these claims accrued. A breach of
contract claim accrues when the defendant breaches the contract. Spence v. Howell, 890
P.2d 714, 721 (1995). Pinnacle asserts that Swenson entered into a contract with it to act
as its real estate broker and that Swenson breached this contract by, among other things,
failing to disclose information to Pinnacle about Bridge Farms’ soil and water quality.
Thus, at the latest, the alleged breach occurred when the sale closed in January of 2012.
This claim is thus time-barred as it occurred prior to October of 2012.
It is not as clear when a claim for violation of the Brokerage Act accrues.
However, the Court finds Jones v. Runft, Leroy, Coffin & Matthews, Chartered,
informative. 873 P.2d 861, 867 (1994). There, the Idaho Supreme Court considered when
a tort action for breach of an “assumed duty” accrued. Id. The court explained that “[t]his
analysis focuses upon the acts complained of and does not require an analysis of when
the plaintiff discovered either the acts complained of or the damage resulting from those
acts.” Id. Nevertheless, because a plaintiff must prove damages to succeed on a tort
claim, the claim does not accrue until “some damage has occurred.” Id. (quoting Stephens
v. Stearns, 678 P.2d 41, 46 (1984)). Pinnacle alleges that Swenson violated the Brokerage
Act by, among other things, failing to disclose adverse material facts that he knew or
MEMORANDUM DECISION AND ORDER– PAGE 13
should have known about Bridge Farms’ water and soil quality, disclosing its internal
pricing strategy to Dewsnup, and failing to notify Pinnacle that it should have a
professional assess Bridge Farms’ water. All of these alleged violations occurred prior to
the closing of the sale in January of 2012. However, Pinnacle did not incur damages
immediately. Pinnacle first realized it was suffering damages in May of 2012 when it
discovered that the salt in Bridge Farms’ irrigation water was killing crops on the
property. The Court finds that “some damage occurred,” at the latest, in May of 2012.
Applying a four-year statute of limitations, this claim is also time-barred.
Nevertheless, Pinnacle argues that equitable estoppel bars Swenson’s statute of
limitations argument. The Idaho “Supreme Court has held that a defendant may be
estopped to assert the statute of limitation as a defense if his statements or conduct
induced the plaintiff to refrain from prosecuting his action during the statutory limitation
period.” Zumwalt v. Stephan, Balleisen & Slavin, 748 P.2d 406, 409 (Idaho Ct. App.
1987). There are four elements of equitable estoppel:
(1) a false representation or concealment of a material fact with actual or
constructive knowledge of the truth, (2) the party asserting estoppel did not
know or could not discover the truth, (3) the false representation or
concealment was made with the intent that it be relied upon and (4) the person
to whom the representation was made or from whom the facts were
concealed, relied and acted upon the representation or concealment to his
Theriault v. A.H. Robins Co., 698 P.2d 365, 369 (Idaho 1985) (citation omitted). Pinnacle
argues that Swenson should be estopped from presenting a statute of limitations defense
because he intentionally concealed evidence. In November of 2014, Pinnacle issued a
third-party subpoena to 1 Stop. Swenson responded on behalf of 1 Stop with over 3,000
MEMORANDUM DECISION AND ORDER– PAGE 14
pages of documentation on November 26, 2014. Apparently, Swenson did not provide all
of the documents in 1 Stop’s possession that showed Swenson and 1 Stop had knowledge
of the water and soil quality at Bridge Farms. Specifically, Swenson failed to provide the
documentation 1 Stop had gathered while investigating Bridge Farms for Teays. Swenson
later provided these documents in June of 2015. Swenson asserts that, at most, the failure
to provide the documents in November of 2014 was inadvertent. 1 Stop maintains
separate files for each entity it works with, not each property it investigates. Accordingly,
in November of 2014, when Pinnacle asked for documents related to Pinnacle’s purchase
of Bridge Farms, Swenson only searched 1 Stop’s records for documents related to
Pinnacle, not related to Bridge Farms.
Again, both parties have provided viable versions of the facts. At first it appears
that summary judgment is inappropriate because Pinnacle has raised a material issue of
fact “as to whether [Swenson] should be equitably estopped from raising the statute of
limitations as a defense.” Id. at 370. However, upon closer examination, Pinnacle has not
sufficiently argued that Swenson’s conduct “dissuaded [it] from prosecuting his or her
cause of action during the statutory period.” Id. at 369 (emphasis added). Even assuming
Swenson concealed information between November 2014 and June 2015, Pinnacle would
have discovered the basis for its Brokerage Act and contract claims in June of 2015,
seven months before the contract claims expired and eleven months before the Brokerage
Act claim expired. Thus, Pinnacle’s “delay in filing suit was [not] attributable to”
Swenson’s alleged six-month concealment of relevant documents. See Zumwalt v.
Stephan, Balleisen & Slavin, 748 P.2d 406, 410 (Idaho Ct. App. 1987). Moreover, the
MEMORANDUM DECISION AND ORDER– PAGE 15
doctrine of equitable estoppel does not toll the statute of limitations during the alleged
In sum, the Court finds the Brokerage Act claims and contract claims are barred
by the statute of limitations and Swenson is not estopped from asserting the statute of
limitations as a defense. The Court, therefore, grants summary judgment in favor of
Swenson on these claims. Pinnacle’s fraud claim is the only remaining claim at issue.
B. Whether Pinnacle’s Fraud Claim is Barred by the Doctrine of Claim Preclusion
Swenson next argues that Pinnacle’s claims are barred by the doctrine of claim
preclusion. “Claim preclusion treats a judgment, once rendered, as the full measure of
relief to be accorded between the same parties on the same claim or cause of action.”
Pragovich v. I.R.S., No. MC08-6422-S-EJL, 2009 WL 73774, at *3 (D. Idaho Jan. 8,
2009) (quoting Robi v. Five Platters, Inc., 838 F.2d 318, 321 (9th Cir. 1988)). When
asserted by a defendant, claim preclusion can “bar[ ] all grounds for recovery which
could have been asserted, whether they were or not, in a prior suit between the same
parties (or their privies) on the same cause of action.” Id. (quoting Ross v. Int’l Bhd. of
Elec. Workers, 634 F.2d 453, 457 (9th Cir. 1980)). Claim preclusion applies when there
is: “(1) an identity of claims; (2) a final judgment on the merits; and (3) identity or privity
between parties.” Stewart v. U.S. Bancorp, 297 F.3d 953, 956 (9th Cir. 2002).
Pinnacle I is still pending. Thus, there is not an obvious “final judgment on the
merits” that might bar Pinnacle’s fraud claim. Nevertheless, Swenson argues that Judge
Lodge’s decision denying Pinnacle leave to amend its complaint in Pinnacle I to add
Swenson as a defendant was “a final judgment on the merits.”
MEMORANDUM DECISION AND ORDER– PAGE 16
As an initial matter, Swenson has failed to cite binding authority in support of this
assertion. The Court agrees that, where a plaintiff seeks to add additional claims against
an existing defendant and the court denies leave to amend, claim preclusion applies to
those additional claims. See N. Assur. Co. of Am. v. Square D Co., 201 F.3d 84, 88 (2d
Cir. 2000). However, “the actual decision denying leave to amend is irrelevant to the
claim preclusion analysis.” Id. Rather, “the bar is based on the requirement that the
plaintiff must bring all claims at once against the same defendant relating to the same
transaction or event.” Id. Thus, where a plaintiff seeks to add claims against a new
defendant and the court denies leave to amend, claim preclusion may not apply. Id. Here,
Pinnacle has asserted new claims against a new defendant; therefore, denial of leave to
amend to add Swenson as a defendant in Pinnacle I did not automatically trigger claim
preclusion. Moreover, the Court finds that a claim-splitting or duplicative litigation
defense is more appropriate where, as here, there has not been a clear final judgment on
the merits. See Long v. TRW Vehicle Safety Sys., Inc., No. CV-09-2209-PHX-DGC, 2010
WL 729465, at *5 (D. Ariz. Feb. 26, 2010). Accordingly, the Court turns to Swenson’s
C. Whether Pinnacle II is Duplicative of Pinnacle I
“Plaintiffs generally have ‘no right to maintain two separate actions involving the
same subject matter at the same time in the same court and against the same defendant.’”
Adams v. California Dep’t of Health Servs., 487 F.3d 684, 688 (9th Cir. 2007) (citation
omitted). If a later-filed action is duplicative of an earlier filed action, the Court may, in
its discretion “[a]fter weighing the equities of the case,” “dismiss a duplicative later-filed
MEMORANDUM DECISION AND ORDER– PAGE 17
action, . . . stay that action pending resolution of the previously filed action, . . . enjoin the
parties from proceeding with it, or . . . consolidate both actions.” Id.
In Adams, the Ninth Circuit explained that, in determining whether a second action
is duplicative of a previously filed action, courts should examine (1) whether the causes
of action and relief sought are the same in both cases and (2) whether “the parties or
privies to the action” are the same. Id. at 689. This test draws on “the test for claim
preclusion,” id. at 688, but it is not identical to that test.
Under the first prong of this two-part test, the court considers four criteria to
determine whether the causes of action are the same:
(1) whether rights or interests established in the prior judgment would be
destroyed or impaired by prosecution of the second action; (2) whether
substantially the same evidence is presented in the two actions; (3) whether
the two suits involve infringement of the same right; and (4) whether the two
suits arise out of the same transactional nucleus of facts.
Id. at 689 (quoting Costantini v. Trans World Airlines, 681 F.2d 1199, 1201–02 (9th Cir.
1982). “The last of these criteria is the most important.” Id. (quoting Constantini, 681
F.2d at 1202).
In addressing the second prong, the Adams court utilized the “virtual
representation” test to determine whether the parties or privies were the same. Id. at 691.
“The necessary elements of virtual representation are an identity of interests and adequate
representation. Additional features of a virtual representation relationship include ‘a close
relationship, substantial participation, and tactical maneuvering.’” Id. (citation omitted).
Pinnacle argues that the “virtual representation” test is no longer good law after
the Supreme Court’s decision in Taylor v. Sturgell, 553 U.S. 880 (2008). In Taylor, the
MEMORANDUM DECISION AND ORDER– PAGE 18
Supreme Court addressed whether claim preclusion barred a successive Freedom of
Information Act lawsuit, filed by a different plaintiff seeking the same document as a
prior plaintiff. The Court disapproved of the “virtual representation” test the D.C. Circuit
had applied to determine whether the parties were sufficiently related such that the person
who was not a party to the first suit could be precluded from having a full and fair
opportunity to litigate his claims at a later date. Id. at 904. In its place, the Court outlined
six categories of exceptions to the general rule forbidding nonparty preclusion. Id. at
893-94 & n.6. First, a “person who agrees to be bound by the determination of issues in
an action between others is bound . . . .” Id. at 893. Second, certain “pre-existing
substantive legal relationships between the person to be bound and a party to the
judgment” will bind certain non-parties. Id. at 894 (internal quotations omitted). Third,
“in certain limited circumstances, a nonparty may be bound by a judgment [if] she was
adequately represented by someone with the same interests who was a party to the suit.”
Id. (internal quotation omitted). Fourth, “a nonparty is bound by a judgment if she
assumed control over the litigation in which the judgment was rendered.” Id. (internal
quotation omitted). Fifth, “a party bound by a judgment may not avoid its preclusive
force by relitigating through a proxy.” Id. Sixth, “in certain circumstances, a special
statutory scheme may expressly foreclose successive litigation by nonlitigants . . . if the
scheme is otherwise consistent with due process.” Id. (alteration in original)
The Court agrees with Swenson that Taylor addressed a different scenario than
that at issue in Adams and at issue here. In Taylor, two different plaintiffs tried to bring
the same claim against the same defendant at different times. Here, as in Adams, the same
MEMORANDUM DECISION AND ORDER– PAGE 19
plaintiff brought the same claims against two different defendants. Therefore, while the
Court acknowledges Taylor disapproved of the virtual representation test, the Court does
not find that the six category “framework” the Taylor Court announced should
necessarily apply to this case as the cases involve substantially different interests.
Nevertheless, in the absence of guiding case law, the Court will examine both in
assessing the second prong of the claim-splitting test.
1. Same Causes of Action
The Court first examines whether the causes of action in Pinnacle’s two suits are
the same. The Court finds that they are. First, and most importantly, both suits arise out
of the same transactional nucleus of facts. Both suits arise from the sale of Bridge Farms
and recite identical facts. In Pinnacle I, Pinnacle asserts that 1 Stop acted as its real estate
broker for the sale and breached its duty to disclose to Pinnacle adverse material facts
about the property which 1 Stop actually knew or should have known. In Pinnacle II,
Pinnacle asserts that Swenson, acting as president of 1 Stop, acted as its real estate broker
for the sale and breached his duty to disclose to Pinnacle adverse material facts about the
property which he knew or should have known. Second, the parties will present the same
evidence in the two actions to prove the same allegations that the parties have made in
both cases. Pinnacle has not identified any evidence that it will present in Pinnacle II that
it will not also present in Pinnacle I. Third, both actions involve the infringement of the
same rights. In both cases, Pinnacle asserts fraud claims and asks for actual damages.
The only criteria Pinnacle substantively challenges is the first criteria: whether
rights or interests established in the first case would be destroyed or impaired by
MEMORANDUM DECISION AND ORDER– PAGE 20
prosecution of the second action. Pinnacle insists that in order for this criteria to be
satisfied there must be a final judgment in Pinnacle I. The Court disagrees. If that were
accurate, the claim-splitting test would be repetitive of the claim preclusion test. Instead,
“in the claim-splitting context, the appropriate inquiry is whether, assuming that the first
suit were already final, the second suit could be precluded pursuant to claim preclusion.”
Hartsel Springs Ranch of Colo., Inc. v. Bluegreen Corp., 296 F.3d 982, 987 n.1 (10th Cir.
2002) (emphasis added) (quoted in Adams, 487 F.3d at 689); see also Single Chip Sys.
Corp. v. Intermec IP Corp., 495 F. Supp. 2d 1052, 1059 (S.D. Cal. 2007) (explaining that
claim splitting is not synonymous with claim preclusion in that claim splitting does not
require a final judgment on the merits). The Court finds this criterion is satisfied because,
if both cases were to proceed to trial, the two juries could reach inconsistent results. For
example, the jury in Pinnacle I could find 1 Stop did not act fraudulently, while the jury
in Pinnacle II could find Swenson, acting as president of 1 Stop, did act fraudulently.
Because all four relevant criteria are satisfied, the Court finds the same causes of
action are present in both actions.
2. Same Parties or Privies
As stated above, the Court will look at both the virtual representation test applied
in Adams and the six-exception framework applied in Taylor to determine if the same
parties or privies are present in both Pinnacle I and Pinnacle II.
a. Virtual Representation Test
An “identity of interests and adequate representation are necessary to . . . a
finding” that a defendant in a first-filed action virtually represents a defendant in a
MEMORANDUM DECISION AND ORDER– PAGE 21
second-filed action. Kourtis v. Cameron, 419 F.3d 989, 996 (9th Cir. 2005). Under the
virtual representation test, the Court also looks at whether the defendants in both actions
have a close relationship and whether the defendant in the second-filed action
participated substantially in the first action. Id. (quoting Irwin v. Mascott, 370 F.3d 924,
930 (9th Cir. 2004)). “In Irwin, for example, [the Ninth Circuit] concluded that a
corporation was the virtual representative of its senior corporate officer. In so holding,
[the Ninth Circuit] emphasized that the officer was intimately involved in the earlier
litigation and that there was ‘no assertion that [the officer’s] interests diverged’ from the
corporation’s.” Id. at 996–97 (quoting Irwin, 370 F.3d at 930–31). Similarly here, the two
defendants have a close relationship, Swenson has been involved substantially in
Pinnacle I (by providing documents during discovery and participating in depositions),
and no one has asserted that Swenson’s interests diverge from 1 Stop’s. Therefore, 1
Stop, a company, is the virtual representative of Swenson, the president of 1 Stop.
Pinnacle asserts that the two parties do not have the same interests because both
Swenson and 1 Stop can be independently liable for fraud. It is true that a corporate
officer “who personally participates in a tort,” such as fraud, “is personally liable to the
victim, even though the corporation might also be vicariously liable.” Forbush v.
Sagecrest Multi Family Prop. Owners’ Ass’n, Inc., 162 Idaho 317, 396 P.3d 1199, 1214
(2017) (quoting Eliopulos v. Knox, 848 P.2d 984, 988 (Idaho Ct. App. 1992)). However,
the virtual representation test does not ask the Court to look at whether the two
defendants can be independently liable. Rather, the test directs the Court to look at
whether the two defendants’ interests conflict or align. 1 Stop has maintained that its
MEMORANDUM DECISION AND ORDER– PAGE 22
employees did not act fraudulently; thus, “[n]o conflicts central to the issues in this
litigation exist between” Swenson and 1 Stop. See Adams, 487 F.3d at 692. Therefore, the
Court finds the virtual representation test has been satisfied.
b. Taylor Exceptions
Second, under the framework outlined in Taylor, one of six exceptions must apply
for the Court to find the same parties or privies are present in both Pinnacle I and
Pinnacle II. Of the six exceptions, two might possibly apply to Swenson. First, two
parties can be in privity based on a “pre-existing substantive legal relationships between
the person to be bound and a party to the judgment.” Id. at 894 (internal quotations marks
omitted). “Qualifying relationships include, but are not limited to, preceding and
succeeding owners of property, bailee and bailor, and assignee and assignor.” Id. Second,
a nonparty may be in privity with a party for purposes of the claim-splitting test if “she
was adequately represented by someone with the same interests who was a party to the
suit.” Id. (internal quotation marks omitted). Examples include, a proper class action
representative, a trustee, a guardian, or other fiduciary. Id. The Court finds that the
relationship between 1 Stop and Sweson establishes privity under both exceptions.
The Ninth Circuit has long acknowledged that a president or other officer with
enough control of a corporation can have sufficient commonality of interests with the
corporation to establish privity. W. Radio Servs. Co., Inc. v. Glickman, 123 F.3d 1189,
1196 (9th Cir. 1997) (finding privity existed between a corporation and its president
where the president was “deeply involved and fully informed” with respect to corporate
affairs); In re Gottheiner, 703 F.2d 1136, 1140 (9th Cir. 1983). 1 Stop is a small
MEMORANDUM DECISION AND ORDER– PAGE 23
corporation with just a few employees. However, it is not clear from the record whether
Swenson, as president, has sufficient control over 1 Stop to create this type of privity.
More importantly, however, the Ninth Circuit has also recognized that a principalagent relationship establishes privity, especially where the principal is vicariously liable
for the torts of its agents. See Spector v. El Ranco, Inc., 263 F.2d 143, 145 (9th Cir. 1959)
(“Where, as here, the relations between two parties are analogous to that of principal and
agent, the rule is that a judgment in favor of either, in an action brought by a third party,
rendered upon a ground equally applicable to both, is to be accepted as conclusive against
the plaintiff’s right of action against the other.”); Davis Wright & Jones v. Nat’l Union
Fire Ins. Co. of Pittsburgh, Pa., 709 F. Supp. 196, 202 (W.D. Wash. 1989), aff’d 897
F.2d 1021 (9th Cir. 1990); Restatement (Second) of Judgments § 51 (1982). In fact, the
Ninth Circuit has equated the principal-agent relationship to that of “landlord and tenant,
. . . master and servant, [and] bailor and bailee” in discussing privity and res judicata. See
Hurley v. S. Cal. Edison Co., 183 F.2d 125, 135 (9th Cir. 1950). Thus, the Court finds a
principal-agent relationship is the type of “pre-existing substantive legal relationship”
Taylor recognized as establishing privity. 553 U.S. at 894. The Court also notes that the
Taylor court acknowledged the controlling effect of a principal-agent relationship, even if
it did not specifically list the type of principal-agent relationship at issue here as an
exception. See id. at 895. (“[P]reclusion is appropriate when a nonparty later brings suit
as an agent for a party[, the principal,] who is bound by a judgment.”).
It is undisputed that 1 Stop and Swenson have a principal-agent relationship and
that 1 Stop will be vicariously liable for any fraud committed by Swenson while acting in
MEMORANDUM DECISION AND ORDER– PAGE 24
his capacity as president of 1 Stop. Significantly, Pinnacle has not alleged that Swenson
committed fraud outside of his capacity as president of 1 Stop. Accordingly, the Court
concludes that 1 Stop and Swenson are in privity under both the virtual representation test
and the exceptions framework laid out in Taylor.
As both prongs of the claim-splitting test are satisfied, the Court next addresses
whether to dismiss Pinnacle II, to stay that action pending resolution of Pinnacle I, or to
consolidate both actions. Adams, 487 F.3d at 688.
The Court hesitates to consolidate Pinnacle I and Pinnacle II after Judge Lodge
denied Pinnacle leave to add Swenson as a defendant. The Court acknowledges that the
Court’s previous concerns about postponing a set trial date are not as pressing as the trial
date in Pinnacle I has been vacated. However, the Court’s other concerns are still present.
Pinnacle could have added Swenson as a defendant much earlier and Swenson will be at
a disadvantage if he is added to Pinnacle I at this late stage in the litigation. Moreover,
the Court finds the request to consolidate is really Pinnacle’s “attempt to avoid the
consequences of [its] own delay and to circumvent the . . . court’s denial of [the]
untimely motion for leave to amend” in Pinnacle I. See id. Accordingly, the Court finds
consolidation is inappropriate and denies Pinnacle’s motion to consolidate.
Nevertheless, the Court acknowledges that Swenson may be independently liable
for fraud. In order to avoid conflicting jury verdicts, the Court finds it appropriate to stay
Pinnacle II until a final judgment has been reached in Pinnacle I.
MEMORANDUM DECISION AND ORDER– PAGE 25
IT IS ORDERED:
1. Defendant’s Motion to Dismiss (Dkt. 20) is GRANTED. Plaintiff’s Count III
(negligence) is DISMISSED WITH PREJUDICE.
2. Defendant’s Motion for Summary Judgment (Dkt. 13) is GRANTED IN PART
and DENIED IN PART. Plaintiff’s Count I (violation of Idaho’s Real Estate
Brokerage Representation Act), Count IV (breach of contract) and Count V
(breach of the implied covenant of good faith and fair dealing) are DISMISSED
3. Plaintiff’s Motion to Consolidate (Dkt. 12) is DENIED.
4. This case is HEREBY STAYED until the Court enters a final judgment in 4:13cv-106-DCN.
DATED: October 26, 2017
David C. Nye
U.S. District Court Judge
MEMORANDUM DECISION AND ORDER– PAGE 26
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