Opinion
Case No. 1:18-CV-00127
2020-05-28
Shawn and Kari STAAL, Plaintiffs, v. SCHERPING ENTERPRISES, INC., David Scherping, Windsor Window Company d/b/a Windsor Windows & Doors, and PFB Custom Homes Group, LLC d/b/a Precision Log Homes, d/b/a/ M.T.N. Design, d/b/a Precision Log & Timber Homes, Defendants.
Bradley Neuman Wiederholt, Bakke Grinolds Wiederholt, Bismarck, ND, for Plaintiffs. John C. Hughes, Meagher & Geer, P.L.L.P., Minneapolis, MN, for Defendants.
Bradley Neuman Wiederholt, Bakke Grinolds Wiederholt, Bismarck, ND, for Plaintiffs.
John C. Hughes, Meagher & Geer, P.L.L.P., Minneapolis, MN, for Defendants.
ORDER GRANTING MOTION FOR PARTIAL SUMMARY JUDGMENT AS TO COUNT IX, UNLAWFUL SALES AND ADVERTISING PRACTICES
Daniel M. Traynor, District Judge [¶1] THIS MATTER comes before the Court on the Motion for Partial Summary Judgment made by Defendants, Scherping Enterprises, Inc., and David Scherping (collectively "Scherping"), on February 17, 2020. Doc. No. 34. Plaintiffs oppose the Motion through a responsive brief filed on March 23, 2020. Doc. No. 48. Defendants submitted a reply brief on April 6, 2020. Doc. No. 52. For the reasons explained herein, the Defendants' Motion for Partial Summary Judgment is GRANTED .
JURISDICTION AND INTRODUCTION
[¶2] This action involves multiple state law claims for relief arising out of the alleged defective design and construction of a home for Plaintiffs, Shawn and Kari Staal (collectively "Staal"), in Watford City, North Dakota. Doc. No. 1-2. The case was removed from McKenzie County District Court, State of North Dakota, to the United States District Court on June 13, 2018. Doc. No. 1. This Court has jurisdiction over Plaintiffs' claims pursuant to 28 U.S.C. § 1332(a) because the matter is between citizens of different States and the amount in controversy exceeds $75,000. Doc. No. 1-2.
[¶3] Scherping provided the construction and general contracting services to build a timber frame home for the Staals. Doc. No. 1-2, ¶¶2, 8-12. The Staals allege the home has experienced leaking and infiltration of water, air and frost involving the home's 87 windows, and further claim the problems with the windows have caused other damage to the doors, timber frame beams, sheetrock, trim work, paint, hard surface flooring and carpet of the home. Id. at ¶¶19-20. The Complaint asserts multiple claims against three defendants: the designer of the home, PFB Custom Homes Group, LLC ("PFB Custom Homes"), the window manufacturer, Windsor Window Company ("Windsor Window"), and Scherping, the builder and general contractor.
PFB Custom Homes was dismissed from the case on December 12, 2018 based on a forum selection clause in its agreement with the Staals. Doc. No. 24.
Windsor Window was dismissed by stipulation of the parties on March 24, 2020. Doc. No. 51.
[¶4] Specifically, as against Scherping, the Complaint alleges claims of Negligence, Breach of Contract, Breach of Express and Implied Warranties, Unlawful Sales and Advertising Practices, and Unjust Enrichment. See generally Doc. No. 1-2. Scherping seeks summary judgment only as to Count IX, the statutory claim for Unlawful Sales and Advertising Practices in violation of N.D.C.C. ch. 51-15. Doc. No. 34. Trial is scheduled to commence September 14, 2020.
FACTUAL BACKGROUND
[¶5] The facts are viewed in the light most favorable to Plaintiffs, the non-movant, in a motion for summary judgment. Krosch v. JLG Indus., Inc., 590 F. Supp.2d 1169, 1173 (D.N.D. 2008). A full recitation of the facts is unnecessary for purposes of the instant Motion for Partial Summary Judgment as to the single claim for Unlawful Sales and Advertising Practices in violation of N.D.C.C. ch. 51-15.
[¶6] In brief, the Staals purchased a custom log home package from PFB Custom Homes that included drawings for the design of the home. Doc. No. 36-1, pp. 14-15 (Interrog. Ans. Nos. 11, 12). PFB Custom Homes recommended Scherping to construct the home to the Staals. Id. at p. 15 (Interrog. Ans. No. 12). Before hiring him, the Staals met with Scherping in Kalispell, Montana. Id. At the meeting in June 2014, Scherping "held himself out prior to the formation of the written contract as a general contractor who would be able to build Plaintiffs' custom home in a good and workmanlike manner and was competent to serve as the general contractor." Id. The Staals entered a construction contract with Scherping as a result of this meeting. Id. Multiple construction defects and deficiencies have become apparent since the home was completed. See id. (Interrog. Ans. Nos. 13, 14).
[¶7] The Staals did not perform any research regarding Scherping before hiring him. Doc. No. 36-2, pp. 57-58. During their meeting in June 2014, Scherping explained his background and experience building homes for PFB Custom Homes. Id. at p. 58. Kari Staal testified there was nothing Scherping said about himself during the meeting that she later found out not to be true. Id. at pp. 58-59, 64, 66-67. When asked whether Scherping made any misrepresentations or lied to him, Shawn Staal testified that on "numerous occasions he told me, ‘You have to open a window to close a door,’ meaning the house is going to be so tight," and this was not accurate because of the air leaks, water leaks, and frost penetration. Doc. No. 36-3, pp. 32-33.
DISCUSSION
I. STANDARDS FOR SUMMARY JUDGMENT
[¶8] The Court will grant summary judgment "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) ; see also Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). "An issue is ‘genuine’ if the evidence is sufficient to persuade a reasonable jury to return a verdict for the nonmoving party." Schilf v. Eli Lilly & Co., 687 F.3d 947, 948 (8th Cir. 2012) (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986) ). "A fact is material if it ‘might affect the outcome of the suit.’ " Dick v. Dickinson State Univ., 826 F.3d 1054, 1061 (8th Cir. 2016) (quoting Anderson, 477 U.S. at 248, 106 S.Ct. 2505 ). Courts must afford "the nonmoving party the benefit of all reasonable inferences which may be drawn without resorting to speculation." TCF Nat'l Bank v. Mkt. Intelligence, Inc., 812 F.3d 701, 707 (8th Cir. 2016) (quoting Johnson v. Securitas Sec. Servs. USA, Inc., 769 F.3d 605, 611 (8th Cir. 2014) ). "At summary judgment, the court's function is not to weigh the evidence and determine the truth of the matter itself, but to determine whether there is a genuine issue for trial." Nunn v. Noodles & Co., 674 F.3d 910, 914 (8th Cir. 2012) (citing Anderson, 477 U.S. at 249, 106 S.Ct. 2505 ).
[¶9] The basic inquiry for purposes of summary judgment is whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law. Diesel Machinery, Inc. v. B.R. Lee Indus., Inc., 418 F.3d 820, 832 (8th Cir. 2005). If the movant demonstrates the absence of a genuine issue of material fact, "[t]he nonmovant ‘must do more than simply show that there is some metaphysical doubt as to the material facts,’ and must come forward with ‘specific facts showing that there is a genuine issue for trial.’ " Torgerson v. City of Rochester, 643 F.3d 1031, 1042 (8th Cir. 2011) (en banc) (quoting Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586-87, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986) ). "Where the record taken as a whole could not lead a rational trier of fact to find for the nonmoving party, there is no genuine issue for trial." Id.
II. UNLAWFUL SALES OR ADVERTISING CLAIM
[¶10] North Dakota's Unlawful Sales or Advertising Practices Act ("Unlawful Sales Practices Act" or "Act") makes it unlawful for a person to use or employ certain prohibited practices in connection with the sale or advertisement of any merchandise regardless of whether the prohibited practice in fact misleads or deceives another. N.D.C.C. § 51-15-02. Specifically, it is unlawful to act, use, or employ "any deceptive act or practice, fraud, false pretense, false promise, or misrepresentation, with the intent that others rely thereon" in the sales or advertising of merchandise. Id. The term "advertisement" is defined to include oral statements made to induce a person to enter into an obligation involving any "merchandise," and "merchandise" is broadly defined to include services. Id. § 51-15-01(1), (3). The North Dakota Attorney General is authorized to enforce the Act. Id. §§ 51-15-04 (investigation), 51-15-05 (subpoena powers and hearings), 51-15-06 (failure to comply), 51-15-07 (remedies and injunctions). Additionally, a private right of action exists for relief against any person who has acquired money or property in violation of the Act. Id. § 51-15-09.
[¶11] It is well established that the Unlawful Sales Practices Act is remedial in nature and must be liberally construed to effectuate its purpose. State ex rel. Spaeth v. Eddy Furniture Co., 386 N.W.2d 901, 903 (N.D. 1986). A preponderance of the evidence standard applies to establish a violation of the Act, not a more exacting standard. Id. (rejecting higher "clear and convincing evidence" standard of proof). The Unlawful Sales Practices Act is not limited solely to "consumer" transactions and relief may be sought by "any person against any person who has acquired any moneys or property by means of any practice declared to be unlawful" by the Act. N.D.C.C. § 51-15-09 ; Jorgenson v. Agway, Inc., 2001 ND 104, ¶8, 627 N.W.2d 391 (applying Act to commercial farmer that purchased seeds for use in cultivating a crop for subsequent sale); Ackre v. Chapman & Chapman, 2010 ND 167, ¶23, 788 N.W.2d 344 (allowing action by an attorney against a competitor firm for alleged unlawful practices if such practices caused threatened or actual injury to attorney's legal rights and interests).
[¶12] In support of his summary judgment argument as to the Unlawful Sales Practices Act claim, Scherping argues there is no evidence Scherping made any false, fraudulent or misleading statements to induce the Staals to hire him to build their home. Doc. No. 35, p. 7. Even if his oral statements to the Staals during their meeting in Kalispell prior to executing the construction contract could be construed as an advertisement, Scherping asserts such statements must be of a material past or present fact aimed at inducing the Staals to enter the contract and must go beyond opinions, predictions of future events, mere sales talk, and puffery. Doc. No. 35, p.8; Doc. No. 52, p. 5.
[¶13] In opposing Scherping's Motion, the Staals have not relied upon any allegations of actual fraud or false statements to support their claim. Instead, they argue a negligent misrepresentation is sufficient to establish a violation of the Act. Doc. No. 48, p. 10. In rebuttal, Scherping contends negligent misrepresentations are not actionable because the Act is specifically directed to conduct that is deceptive, fraudulent, and false. Doc. No. 52, pp. 3-4.
[¶14] Negligent misrepresentation to induce a party to enter a contract is a recognized cause of action under North Dakota law. See N.D.C.C. § 9-03-08(2) ; Bourgois v. Montana-Dakota Utilities Co., 466 N.W.2d 813, 818 (N.D. 1991). Indeed, the Staals specifically alleged a negligent misrepresentation claim against PFB Custom Homes and Windsor Windows, but not against Scherping. Doc. Nos. 1-2, ¶¶39-44, ¶¶45-50. The Staals now seek to broaden the scope of the Unlawful Sales Practices Act to include negligent misrepresentations although the express text of the statute refers only to misrepresentations. See N.D.C.C. § 51-15-02.
[¶15] The North Dakota Supreme Court has not determined whether an Unlawful Sales Practices Act claim includes a negligent misrepresentation made in connection with the sale or advertisement of any merchandise or applies only to intentional false and fraudulent conduct. Some courts have held that unintentional or negligent statements may be sufficient to prove liability under similar consumer fraud acts. See e.g., 301 Clifton Place L.L.C. v. 301 Clifton Place Condo. Ass'n, 783 N.W.2d 551, 563 (Minn. Ct. App. 2010) (noting that liability under the Minnesota Consumer Fraud Act does not require the false statements be intentional); Williams Ford, Inc. v. Hartford Courant Co., 232 Conn. 559, 657 A.2d 212 (1995) (holding state consumer fraud act was not violated where alleged violator acted only negligently and trier of fact determined that injured party was contributorily negligent). The Court need not decide this unresolved issue of state law because the Staals' eight examples of purported negligent misrepresentations by Scherping fail to raise a genuine issue of material fact to support their claim for violation of the Act.
[¶16] In Dahl v. Messmer, 2006 ND 166, ¶15, 719 N.W.2d 341, the North Dakota Supreme Court summarized some of the principles distinguishing "dealer talk" and "puffery" from actionable misrepresentations. Generally, statements of value and predictions of future events fall within the class of statements whose truth or falsity cannot be precisely determined and therefore are not actionable. Id. "General expressions of opinion by a seller, commendatory of the thing he is selling, are not actionable even though not entirely true." Id. "Hence, statements of opinion, as, for example, expressions by the seller commending the thing he is selling, have been held not actionable even though they are false." Id. Such expressions come within what is generally referred to as "puffing" and are considered mere dealer's talk. Id.
[¶17] In Gershman v. Engelstad, 160 N.W.2d 80 (1968), the North Dakota Supreme Court held statements of a building contractor regarding the qualities of an apartment building held out for sale were not actionable but instead constituted indefinite generalities of opinion. Id. at 86. Plaintiff relied on statements by the builder that "It's the best building in Grand Forks;" "you are going to purchase the best;" "that the plaintiffs had ‘nothing to worry about, ... I built this for myself;’ " "I watched everything that went on;" "I built it with the best;" and "that the building was represented as ‘the best.’ " Id. The court concluded these were mere expressions of opinion commending the apartment building the contractor was selling, and not false representations of material facts, even though the statements may not have been entirely true. Id.
[¶18] The Eighth Circuit Court of Appeals and district courts within this circuit have held statements that amount to puffery, boasting, subjective statements of superiority, or expressions of opinion do not state claims under similar statutory deceptive sales and false adverting acts, like North Dakota's Unlawful Sales Practices Act. See American Italian Pasta Co. v. New World Pasta Co., 371 F.3d 387 (8th Cir. 2004) (holding under the Lanham Act that puffery, which consisted of exaggerated statements of bluster or boast, or vague or highly subjective claims of product superiority, is not actionable as false advertising); United Indus. Corp. v. Clorox Co., 140 F.3d 1175 (8th Cir. 1998) (noting puffery is not actionable as false advertising under Lanham Act); Knotts v. Nissan North America, Inc., 346 F.Supp.3d 1310 (D. Minn. 2018) (noting puffery, such as exaggerated blustering or boasting and vague, subjective statements of superiority, do not constitute false statement under the Minnesota False Statement in Advertising Act).
[¶19] With this background, the Court now turns to the eight examples the Staals rely upon to support their Unlawful Sales Practices Act claim.
[¶20] First, the Staals claim Scherping prepared an informational sheet about his abilities and experience that was given to PFB Custom Homes to be provided to customers like the Staals, and that certain representations in the sheet were not accurate. Doc. No. 48, pp.10-11; Doc. No. 49-2.
a. For instance, Scherping was identified as a "Partner Builder with Precision Craft Log and Timber Homes," but no legal partnership existed and Scherping did not work for them. Doc. No. 48, p. 11.
b. Also, the information sheet states Scherping had worked at "virtually every level and phase of custom home building and construction from hands-on work, including concrete, framing and finish work to general contracting and project management work, including design, estimating, subcontractor administration and post-project wrap up," but Scherping could not elaborate on his prior "design experience" during his deposition. Id.
c. And, the information sheet discusses David Scherping's personal credentials, not that of his company, nor of his father who was onsite to run the project early on. Id.
[¶21] Plaintiffs' first allegation arising from the information sheet fails for a variety of reasons. For example, the Staals do not claim to have seen the information sheet or relied upon it when deciding to hire Scherping to construct their home. The Act applies to statements made "with intent that others rely" on the information in connection with a sale. N.D.C.C. § 51-15-02. Next, whether Scherping had a legal partnership with PFB Custom Homes is not material and has no bearing on his capabilities or experience. Moreover, though not a legal partnership, the record supports Scherping had built approximately 60 homes for PFB Custom Homes before building the Staals' home. Doc. No. 36-4, pp. 23-24. Additionally, Plaintiffs' argument that Scherping did not have design experience is also immaterial and irrelevant because PFB Custom Homes was hired to design the Staals' home, not Scherping. Finally, the significance of the information sheet addressing Scherping's personal experience rather than his company's is not apparent, and Plaintiffs do not elaborate on the point. The Complaint alleges Scherping is the sole shareholder and owner of the company; as such, it is difficult to discern how describing Scherping's personal experience would be improper. Doc. No. 1-2, ¶2. In sum, none of the alleged deficiencies in Scherping's information sheet support the Staals' allegations of a deceptive act or practice, fraud, false pretense, false promise, or misrepresentation in connection with an Unlawful Sales Practices Act claim.
[¶22] Second, the Staals rely on the General Contract agreement Scherping signed binding himself and his company to construct the Staals' home according to the plans prepared by PFB Custom Homes. Doc. No. 48, p. 11. The Staals do not explain how entering the contract was allegedly deceptive, fraudulent, or involved a negligent misrepresentation. Id. There is no allegation Scherping did not intend to perform under the contract, and the Staals' home was in fact constructed. Whether the home was defectively constructed is a separate matter. Simply entering a contract to construct a home in accordance with the plans and constructing it badly, does not amount to a deceptive act, fraud or misrepresentation without more.
[¶23] Third, the Staals claim Scherping told them he could build the home as specified in the plans, that it was not the most complex, and not the largest home he had built. Doc. No. 48, p. 11. These statements do not support a negligent misrepresentation but are like other statements courts have found unactionable as sales talk, puffing, and general expressions commendatory of Scherping's construction ability. See Dahl, 2006 ND 166, ¶15, 719 N.W.2d 341. Moreover, Scherping did in fact build the house and whether there were some deviations from the plans or other defects in construction will be sorted out in the Staals' claims for negligence, breach of contract, and breach of warranties. Such statements are not actionable as violations of the Act.
[¶24] Fourth, the Staals allege Scherping led them to believe he would be present to perform hands-on construction but was absent for periods of time and during some critical phases. Again, it is difficult to discern how such a statement without more amounts to even a negligent misrepresentation. Scherping was present during the construction, albeit not every day. There is no allegation that Scherping promised to be onsite every day, that he had no intention of keeping such promise, or that the Staals relied on such promise in entering the construction contract.
[¶25] Fifth, the Staals claim Scherping led them to believe he would have reliable labor present during the project, but his employees were not there at times, and the Staals were billed for their labor in full. This evidence may support the Staals' claims for breach of contract, but without more it does not show Scherping made intentional or negligent misrepresentations for purposes of the Unlawful Sales Practices Act claim.
[¶26] Sixth, the Staals allege Scherping told them he had previously built other similar and larger homes, but he had not actually built a home specifically like theirs and had only installed Windsor Windows on one other occasion. Doc. No. 38, p. 12. Again, the Court concludes such statements are not actionable. These are general expressions commendatory of Scherping's construction ability and amount to nonactionable sales talk or puffing. Dahl, 2006 ND 166 at ¶15, 719 N.W.2d 341. Also, the record supports Scherping had built about 60 homes for PFB Custom Homes prior to the Staals'. Doc. No. 36-4, pp. 23-24. There is no evidence that Scherping's statements were objectively false and instead such statements are more in the nature of expressions of opinion, which are unactionable and not false representations of material fact. See Gershman, 160 N.W.2d at 86 (expressions that the building was "the best" and was built with the "best construction, the best labor" were not actionable).
[¶27] Seventh, Scherping told the Staals their home would hold up to the North Dakota winds; and Eighth, Scherping told them their home would be "air-tight," both of which turned out to be false because the home continues to leak air, dirt, and moisture. Doc. No. 48, p. 12. Again, such statements are nothing more than a general expression commendatory of Scherping's construction ability and amounts to a nonactionable future prediction regarding the nature of the home he intended to build. Dahl, 2006 ND 166 at ¶15, 719 N.W.2d 341 (noting that statements of value and predictions of future events fall within the class of statements whose truth or falsity cannot be precisely determined and which are not actionable as a misrepresentation of fact).
[¶28] The evidence presented by Plaintiffs in opposition to Scherping's Motion for Partial Summary Judgment fails to establish a genuine issue of material fact that Scherping made or used any deceptive act or practice, fraud, false pretense, false promise or misrepresentation with the intent that the Staals rely on such falsity in hiring him to construct their home. Even were the Court to conclude that negligent misrepresentation is sufficient to support a violation of the Unlawful Sales Practices Act, the statements the Staals rely upon to avoid summary judgment fall into the category of unactionable expressions of opinion, future events, boasting, and puffery and others are simply immaterial or irrelevant as discussed above.
CONCLUSION
[¶29] For the reasons explained above, Defendants' Motion for Partial Summary Judgment is GRANTED . Doc. No. 34. Count IX, Unlawful Sales and Advertising Practices, of the Complaint is dismissed with prejudice.
[¶30] IT IS SO ORDERED.