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Esanbock v. Weyerhaeuser Co.

United States District Court, D. Minnesota

January 2, 2019

Dennis Esanbock, Barbara Esanbock, Christopher Spinks and Kevin Swehla, on behalf of themselves and all others similarly situated, Plaintiffs,
v.
Weyerhaeuser Company, Defendant.

          E. Michelle Drake and Joseph Hashmall, Berger & Montague, P.C., for Plaintiffs

          Mark Mester, Latham & Watkins LLP, and S. Jamal Faleel, Blackwell Burke PA, for Defendant

          ORDER ON OBJECTIONS TO REPORT & RECOMMENDATION

          SUSAN RICHARD NELSON, UNITED STATES DISTRICT JUDGE

         I. INTRODUCTION

         This matter is before the Court on the Objections [Doc. No. 59] of Defendant Weyerhaeuser Company (“Weyerhaeuser”) to Magistrate Judge David Schultz's July 30, 2018 Report and Recommendation (R&R) [Doc. No. 56]. In the R&R, the magistrate judge recommended that Weyerhaeuser's Motion to Compel Arbitration and Dismiss or Stay the Claims of Plaintiff Kevin Swehla [Doc. No. 34] be denied. Plaintiff Swehla has filed a response [Doc. No. 71] to the Objections.

         Pursuant to statute, this Court reviews de novo any portion of the magistrate judge's opinion to which specific objections are made, and “may accept, reject, or modify, in whole or in part, the findings or recommendations” contained in that opinion. 28 U.S.C. § 636(b)(1)(C); see also Fed. R. Civ. P. 72(b); D. Minn. LR 72.2(b)(3). For the reasons stated herein, the Court overrules Weyerhaeuser's Objections and adopts the R&R.

         II. BACKGROUND

         In August 2017, Plaintiffs filed this products liability putative class action against Defendant Weyerhaeuser. (Compl. ¶¶ 1-2 [Doc. No. 1].) Plaintiffs are homeowners whose homes or properties contain construction joists manufactured by Defendant. (Id.) Plaintiffs allege that the joists are defectively designed and manufactured, specifically with respect to a coating on the joists that contains a formaldehyde-based resin. Plaintiffs contend that the resin “off-gasses” formaldehyde in amounts exceeding acceptable levels, making their homes uninhabitable. (Id. ¶¶ 3-6.) They assert legal claims of breach of express and implied warranty, violation of the Magnuson-Moss Warranty Act, strict liability, negligence, and violations of Minnesota's Unlawful Trade Practices Act and Consumer Fraud Act. (Id. ¶¶ 75-187.)

         In 2017, Named Plaintiff Kevin Swehla was under contract to purchase a home in Carver, Minnesota that was built using the allegedly defective joists. (Id. ¶ 31.) He entered into a contract, the Home Purchase Agreement (“HPA”) [Doc. No. 39-1], with non-party Mattamy. Before Swehla closed on the home, he learned of the alleged joist defect, and brought this suit before the closing date. (Compl. ¶¶ 31-35.)

         The HPA contains two different procedures for resolving disputes: Section 13 governs pre-closing disputes and Section 14 governs post-closing disputes. (HPA §§ 13 & 14.) The dispute resolution provision in Section 13 states that “claims brought prior to [c]losing” are to be heard “by the court with jurisdiction where the property is located.”[1](Id. § 13(b).) The dispute resolution provision in Section 14 states that claims “brought after [c]losing” are subject to arbitration. (Id. § 14(d).)

         The crux of Defendant's immediate dispute hinges upon whether other language in Section 13 is a typographical error or an internal cross reference. Section 13 states that “for any claims brought prior to Closing, the procedures under this Section 14 shall be the exclusive and mandatory means for resolving all disputes.” (Id. § 13) (emphasis in original). Similarly, Section 14 states that “for any claims brought after Closing, or any claims which are subject to the notice requirements of Minnesota Statutes Chapter 327A, the procedures under this Section 15 shall be the exclusive and mandatory means for resolving all disputes and claims . . . .” (Id. § 14) (emphasis in original). Section 15, however, does not concern dispute resolution procedures, but instead addresses disclosures and statutory requirements for things like radon, formaldehyde, methamphetamine production, and so forth. (Id. § 15.)

         Defendant urges a literal reading of the HPA, arguing that it mandates arbitration. Weyerhaeuser thus filed the underlying motion to compel arbitration or stay Swehla's claims. In opposition, Swehla argues that because he brought suit before closing on the home, this is a pre-closing dispute governed by Section 13 of the HPA, which does not compel arbitration.

         In the R&R, the magistrate judge found that the HPA was a valid agreement that extended to third-party beneficiaries such as Weyerhaeuser, based on express language in the HPA regarding parties related to or associated with Mattamy. (R&R at 7-8) (citing HPA §§ 13 & 14). Consequently, he found that Weyerhaeuser was entitled to enforce the provisions of the HPA. (Id.) These findings are not in dispute.

         After thoroughly reviewing the four corners of the HPA, the magistrate judge found that Plaintiff's dispute was a pre-closing dispute, governed by Section 13, for which arbitration was not required. (Id. at 11-24.) He observed that Swehla filed suit on August 11, 2017, ...


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