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Dream Finders Homes LLC v. Weyerhaeuser NR Co.

2021 COA 143. No. 20CA0002. Contracts—Warranty—Negligence—Negligent Misrepresentation—Fraudulent Concealment—Economic Loss Rule—Colorado Consumer Protection Act.

December 2, 2021


Defendant Weyerhaeuser NR Company (Weyerhaeuser) designs, manufactures, sells, and distributes engineered lumber products, including joists with a fire-resistant coating used in home construction. Plaintiffs Dream Finders Homes LLC (Homes) and DFH Mandarin, LLC (Mandarin) are separate legal entities and subsidiaries of Dream Finders Holdings, LLC. Homes is a homebuilder and contractor and purchases housing materials, and Mandarin sells the houses that Homes builds. Universal Forest Products, Inc. is a retailer that sells construction materials, including products manufactured by Weyerhaeuser, to home builders in Colorado through its affiliate Universal Forest Products Lafayette, LLC (collectively, UFP.)

UFP purchased joists from Weyerhaeuser under a distribution agreement. For each joists order that UFP placed with Weyerhaeuser, Weyerhaeuser sent UFP a confirmation that incorporated by reference Weyerhaeuser’s standard terms of sales. UFP entered into a general terms agreement with Homes under which Homes purchased Weyerhaeuser’s Generation 2 joists from UFP. Weyerhaeuser provided at least two warranties for its joists: a general warranty for all its products, which was included in the distribution agreement and in Weyerhaeuser’s standard terms of sales, and a stand-alone warranty (collectively, warranty). In December 2016, Weyerhaeuser sent UFP a description of, and announced it was transitioning to, Generation 4 (G4) joists with a new fire-resistant coating that included formaldehyde-based resin. Homes began purchasing Weyerhaeuser’s G4 joists from UFP in January 2017.

Three months later, Weyerhaeuser began receiving complaints about the odor from the G4 joists, and in July 2017 it announced it would cover the costs to either remediate or replace affected joists. Weyerhaeuser completed the remediation work at its cost. The parties do not dispute that Weyerhaeuser paid all remediation costs for Homes. Despite Weyerhaeuser’s completion of the remediation work, plaintiffs filed suit against Weyerhaeuser alleging (1) breach of express warranty, (2) breach of the implied warranty of merchantability, (3) negligence, (4) negligent failure to warn, (5) negligence per se, (6) strict product liability, (7) violation of the Colorado Consumer Protection Act (CCPA), (8) negligent misrepresentation, and (9) fraudulent concealment. Weyerhaeuser filed a counterclaim for unjust enrichment against plaintiffs, asserting that it was entitled to reimbursement of any sums it paid plaintiffs in excess of the cost it incurred to remediate the G4 joists in the houses that Homes built. The trial court granted Weyerhaeuser’s motion for a directed verdict on plaintiffs’ warranty and negligence per se claims. Plaintiffs later voluntarily dismissed their strict product liability claim.

In a special verdict form, the jury found in favor of plaintiffs on their negligence, negligent misrepresentation, and fraudulent concealment claims but found in favor of Weyerhaeuser on plaintiffs’ CCPA claim. The trial court entered judgment for $3 million to Homes and $11.65 million to Mandarin on their negligence, negligent misrepresentation, and fraudulent concealment claims, and it entered judgment in their favor on the unjust enrichment counterclaim. It found in favor of Weyerhaeuser on the CCPA, breach of express warranty, breach of implied warranty of merchantability, and negligence per se claims.

On appeal, Weyerhaeuser contended that the economic loss rule barred plaintiffs’ negligence, negligent misrepresentation, and fraudulent concealment claims. Here, plaintiffs received the remedy specified in the warranty and sought to recover through their claims categories of damages expressly excluded under the terms of the warranty they received from Weyerhaeuser, so these claims were barred by the economic loss rule.

On cross-appeal, plaintiffs asserted that if the economic loss rule applies to their negligence, negligent misrepresentation, and fraudulent concealment claims, the trial court erred by directing a verdict in favor of Weyerhaeuser on their warranty claims. Because Weyerhaeuser fully remediated the G4 joists at its own expense pursuant to the warranty, the trial court did not err by granting Weyerhaeuser’s directed verdict on plaintiffs’ warranty claims.

Plaintiffs also asserted that the trial court erred by denying their motion for judgment notwithstanding the verdict on their CCPA claim. Although the economic loss rule does not bar plaintiffs’ CCPA claim, the trial court did not err by denying the motion because the evidence supported a finding that plaintiffs failed to prove that Weyerhaeuser’s alleged misrepresentations significantly impacted the public.

The judgment entered against Weyerhaeuser on plaintiffs’ claims for negligence, negligent misrepresentation, and fraudulent concealment was reversed. The judgment entered against plaintiffs on their CCPA claim was affirmed. The order denying plaintiffs’ motion for a directed verdict on their warranty claims was affirmed. The case was remanded with instructions to dismiss plaintiffs’ claims for negligence, negligent misrepresentation, and fraudulent concealment with prejudice and for further proceedings consistent with this opinion.

Official Colorado Court of Appeals proceedings can be found at the Colorado Court of Appeals website.

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