Buetow v. A.L.S. Enters., Inc.

• Decision Date: 17 August 2012
• Docket Number: Civ. No. 07–3970 (RHK/JJK).
• Citation: 888 F.Supp.2d 956
• Parties: Mike BUETOW, et al., Plaintiffs, v. A.L.S. ENTERPRISES, INC., et al., Defendants.
• Court: U.S. District Court — District of Minnesota

888 F.Supp.2d 956

Mike BUETOW, et al., Plaintiffs,

v.A.L.S. ENTERPRISES, INC., et al., Defendants.

Civ. No. 07–3970 (RHK/JJK).

United States District Court,

D. Minnesota.

Aug. 17, 2012.

Renae D. Steiner, Heins Mills & Olson, P.L.C., Thomas J. Leach, III, Merchant & Gould, PC, Minneapolis, MN, for Plaintiffs.

Naikang Tsao, Theresa A. Andre, Foley & Lardner LLP, Madison, WI, John D. Sear, Bowman and Brooke LLP, Minneapolis, MN, for Defendants A.L.S. Enterprises, Inc., and Gander Mountain Company.

James K. Langdon, Dorsey & Whitney LLP, Minneapolis, MN, Michael C. Mahoney, Mahoney Anderson LLC, Wayzata, MN, for Defendants Cabela's Incorporation and Cabela's Wholesale, Inc.

MEMORANDUM OPINION AND ORDER

RICHARD H. KYLE, Senior District Judge.

This matter is before the Court on Defendants' Motion to Dismiss (Doc. No. 405). For the reasons that follow, the Motion will be granted.

This case has suffered through a long and somewhat tortured history, as set forth in the Court's prior Orders in this action and in the related cases previously comprising the In re Activated Carbon–Based Hunting Clothing Marketing and Sales Practices multidistrict litigation, MDL. No. 09–2059. Familiarity with the prior proceedings is presumed.¹

After reversing this Court's injunction restraining the use of certain advertising by Defendants, the Eighth Circuit held that all of Plaintiffs' claims for equitable relief must be dismissed with prejudice. Buetow v. A.L.S. Enters., Inc., 650 F.3d 1178, 1187 (8th Cir.2011). What remained were claims for damages due to Defendants' purportedly unlawful conduct under the Minnesota Consumer Fraud Act (“CFA”) and the Minnesota Unfair Trade Practices Act (“UTPA”). Those claims were remanded to this Court for evaluation under “the standards prescribed by the Supreme Court of Minnesota in ... Ly v. Nystrom, 615 N.W.2d 302, 313–14 (Minn.2000).” Id.

Defendants now seek dismissal of Plaintiffs' remaining claims based on Ly, which addressed the scope of the Minnesota Private Attorney General statute, Minn.Stat. § 8.31, subd. 3a (the “Private AG statute”). The statute vests the Attorney General with “broad statutory authority” to “investigate violations of law regarding unlawful business practices” in this state, and it grants private persons “injured by a violation” of those laws the right to “bring a civil action and recover damages, together with costs and disbursements, including ... reasonable attorney's fees.” 615 N.W.2d at 310 (quoting Minn.Stat. § 8.31, subd. 1, 3). By authorizing private actions for consumer fraud, the statute “eliminate[s] financial barriers to the vindication of a plaintiff's rights [and] provide[s] incentive for counsel to act as private attorney general.” Id. at 311 (citation omitted). Because such an action derives from authority granted to the Attorney General to act on behalf of all Minnesotans, however, Ly recognized that a plaintiff asserting such a claim must “demonstrate that [his] cause of action benefits the public.” Id. at 314. In other words, “the sweep of the statute can be no broader than the source of its authority—that of the attorney general—whose duties are to protect public rights in the interest of the state.” Id. at 313 (emphasis in original).

The plaintiff in Ly alleged that the defendant had violated the CFA in certain misrepresentations regarding the performance of his restaurant, which the plaintiff had been negotiating to purchase. Because the CFA contains no private enforcement mechanism, the plaintiff brought his claim via the Private AG statute. The Minnesota Supreme Court held that the plaintiff could not show his claim served a public benefit, as he “was defrauded in a single one-on-one transaction in which the fraudulent misrepresentation, while evincing reprehensible conduct, was made only to [him]. A successful prosecution of his fraud claim does not advance state interests and enforcement has no public benefit, and [it] is not a claim that could be considered to be within the duties and responsibilities of the attorney general to investigate and enjoin.” Id. at 314.

Pointing to Ly, Defendants argue that at this juncture a public benefit no longer exists vis-a-vis Plaintiffs' claims. They contend that this action has devolved into a series of small claims for nominal damages that will not vindicate any public interest, but rather “simply provide an exclusive remedy to” Plaintiffs and, hence, should be dismissed. (Def. Mem. at 12.) The Court agrees.

At the outset, the Court notes that it must evaluate Plaintiffs' claims as they stand today, not as they were originally pleaded. This is because the public-benefit requirement does not implicate standing, which is typically measured at the time a lawsuit is commenced and generally cannot be lost by subsequent events. Rather, public benefit is a necessary element of a plaintiff's cause of action under the Private AG statute. See, e.g., Ly, 615 N.W.2d at 314 & n. 25;Workers' Comp. Reinsurance Ass'n v. Wells Fargo Bank, N.A., No. A11–1260, 2012 WL 1253094, at *11 (Minn.Ct.App. Apr. 16, 2012); Collins v. Minn. Sch. of Bus., Inc., 636 N.W.2d 816, 821 (Minn.Ct.App.2001) (“[An] essential element is whether [the] cause of action was [for] a public benefit.”) (emphasis added), aff'd,655 N.W.2d 320 (Minn.2003).² Notably, Plaintiffs do not argue to the contrary. (See Mem. in Opp'n at 10 (“Minnesota ... courts do not apply the public benefit test as a standing test.”).) ³

The Court also rejects Plaintiffs' argument that they need not show a public benefit in order to bring their UTPA claim. It is true, as Plaintiffs note, that the UTPA, unlike the CFA, expressly authorizes a private cause of action for damages. SeeMinn.Stat. § 325D.15. But that does not aid Plaintiffs here, because they have elected to pursue their remedies not under the UTPA, but rather under the Private AG statute. ( See Sear Decl. Ex. A.) And this makes eminent sense, because while the UTPA allows for the recovery of damages, it does not provide any mechanism for an award of attorneys' fees. In other words, Plaintiffs have opted to proceed under the Private AG statute because it affords them the only avenue to recover fees in this case. See Select Comfort Corp. v. Sleep Better Store, LLC, 796 F.Supp.2d 981, 985 n. 5 (D.Minn.2011) (Ericksen, J.) (analyzing UTPA claim for public benefit under Private AG statute despite availability of damages under UTPA, since plaintiff had made clear that the claim was brought via Private AG statute).

What is left to be answered, then, is whether Plaintiffs' claims satisfy the public-benefit test at this juncture. Minnesota courts have not “definitively delineate[d] what factors are necessary to establish a public benefit,” Workers' Comp. Reinsurance, 2012 WL 1253094, at *11;accord, e.g., Tuttle v. Lorillard Tobacco Co., Civ. No. 99–1550, 2003 WL 1571584, at *5 (D.Minn. Mar. 3, 2003) (Magnuson, J.) (noting that Ly did not set forth a standard to answer the question), and cases construing the public-benefit requirement are not easily reconciled.⁴ Pointing to Collins, Plaintiffs argue that they satisfy the public-benefit test here because Defendants' allegedly misleading advertisements were distributed to the public at large. ( See Mem. in Opp'n at 13 (arguing that the Minnesota Supreme Court “made clear ... that the public benefit requirement is satisfied where the defendant made misrepresentations to the public at large and engaged in transactions with a broad section of the public”) (internal quotation marks omitted).)

Yet, the Court does not agree that cases interpreting the Private AG statute can be easily distilled into a “public versus non-public” test. Nor does the Court believe that such a test comports with the statute's purpose. Notably, several decisions from this Court and Minnesota state courts have concluded that a public benefit was lacking despite allegedly false or misleading statements being made to the public. For example, in Baker v. Best Buy Stores, LP, 812 N.W.2d 177 (Minn.Ct.App.2012), the plaintiffs—on behalf of themselves and similarly situated consumers—asserted that the defendant, through “public advertising,” had falsely represented the length of coverage provided under service contracts it sold in its stores. Despite widespread dissemination of the “false” advertising, and despite the plaintiffs seeking to act on behalf of a class, the Minnesota Court of Appeals affirmed the dismissal of the plaintiffs' claims under the Private AG statute, as they could not show “how their action benefits the public.” Id. at 183.⁵Pecarina v. Tokai Corp., Civ. No. 01–1655, 2002 WL 1023153, at *5 (D.Minn. May 20, 2002) (Montgomery, J.), reached the same conclusion, in the process specifically rejecting the argument Plaintiffs make here, namely, “proof of a transaction between a large manufacturer ... and members of the consuming public, and ... fraud and false advertising perpetrated on the consuming public, [necessarily] bring[ ] [a] case within the Private AG” statute.

A hypothetical also demonstrates the problem with Plaintiffs' argument. Assume, for example, that a product manufacturer advertised its product to the public at large and an individual, relying on that advertisement, purchased the product. Assume further that the individual, contending that the advertisement was false, later brought an action on his own behalf to recover the difference between the price he paid and the product's actual worth, a small sum. It is difficult to conceive how such an action would benefit the public, despite the manufacturer's advertisement being broadly disseminated.

The foregoing demonstrates why courts addressing the public-benefit issue do not focus solely (or even substantially) on the size of the audience receiving an alleged misrepresentation, but rather hone in on “the relief sought by” the plaintiff. Overen v. Hasbro, Inc., Civ. No. 07–1430, 2007 WL 2695792, at *3 (D.Minn. Sept. 12,...