State by Humphrey v. Alpine Air Products, Inc.

• Decision Date: 21 May 1993
• Docket Number: No. C8-92-740,C8-92-740
• Citation: 500 N.W.2d 788
• Parties: STATE of Minnesota, By Hubert H. HUMPHREY, III, its Attorney General, Respondent, v. ALPINE AIR PRODUCTS, INC., et al., Petitioners, Appellants.
• Court: Minnesota Supreme Court

Page 788

500 N.W.2d 788

STATE of Minnesota, By Hubert H. HUMPHREY, III, its Attorney General, Respondent, v. ALPINE AIR PRODUCTS, INC., et al., Petitioners, Appellants.

No. C8-92-740.

Supreme Court of Minnesota.

May 21, 1993.

Syllabus by the Court

The preponderance of the evidence standard of proof is the proper standard to use in a civil fraud case.

William A. Erhart, Marvin & Erhart, Anoka, for appellants.

Hubert H. Humphrey, III, Atty. Gen., Tracy M. Smith, Sp. Asst. Atty. Gen., St. Paul, for respondent.

Heard, considered and decided by the court en banc.

TOMLJANOVICH, Justice.

In this case we must decide the standard of proof to be applied in consumer fraud litigation. After a bench trial, Alpine Air Products ["Alpine"] and its president, William Converse were found liable for violations of Minnesota's False Statement in Advertising Statute, ¹ Uniform Deceptive Trade Practices Act, ² and Prevention of Consumer Fraud Act. ³ The trial court applied a preponderance of the evidence standard and awarded a civil penalty. The court of appeals affirmed the use of this standard and the constitutionality of the penalty. State by Humphrey v. Alpine Air Products, Inc., 490 N.W.2d 888 (Minn.App.1992). We agree with the lower courts and affirm.

Alpine manufactures portable "air purifiers" marketed on the theory that they emit ozone in order to clean indoor air. Ozone is a highly reactive form of oxygen. At trial, expert witnesses testified that when present above certain levels, ozone may not benefit but rather irritate the respiratory system. The experts testified that ozone may damage cells lining the respiratory system, thus causing chest tightness, chest pain, coughing and reduced lung function.

The level at which ozone may begin to cause adverse health effects was disputed at trial. The trial court, believing the state's experts, found that ozone above .05 parts per million could cause adverse health effects. It is undisputed that Alpine's purifiers are capable of emitting levels of ozone in excess of .05 parts per million. The experts at trial concluded that Alpine's purifiers were capable of emitting ozone in the .20-2.00 ppm range.

The trial court found that petitioners represented that their machines emit only safe levels of ozone--advertisements and promotional literature represented that the ozone emitted by the machine is a harmless "type" of ozone. In a promotional videotape, petitioner Converse represented that "there is absolutely no indication at all that there are any adverse effects of ozone in the levels that Alpine can produce." The trial court found these representations to be false.

Also at issue was whether the operating instructions for the air purifiers were adequate to insure safe levels of ozone. The operating instructions stated that the ozone levels would be similar to those found naturally in unpolluted air--less than .05 ppm. Alpine purifiers, however, have no mechanism for regulating ozone production. Converse testified that Alpine purifiers have a control knob that allows the user to generate increasing amounts of ozone. The machines, however, have no means of measuring the amount of ozone emitted, and the control knob is not calibrated so that the user may set and control ozone levels. Nor do the machines have a shutoff or warning mechanism to avoid excessive levels of ozone.

Alpine advised consumers to set the machines by their sense of smell. In the operating manual, it told consumers to turn up the ozone if they could not smell it. The manual also stated that in the presence of a "severe odor or pollution situation," consumers should set the machine at maximum levels for several hours or until the user could smell the "strong level" of ozone throughout the room. Alpine made representations that as long as the purifiers were operated according to the sense of smell, ozone levels would not exceed .02 to .03 ppm. The state's experts testified that this "smell test" is inadequate to ensure that ozone levels do not become harmful because ozone levels could be harmful without being detectable: Most people cannot smell low levels of ozone and people's sense of smell varies. In addition, competing odors can mask the smell of ozone. In such instances, ozone will remain undetectable until it reaches higher levels.

Using the preponderance of the evidence standard, the trial court found that the appellants had violated the consumer protection statutes. ⁴ The court ordered injunctive relief, including full restitution to customers, civil penalties of $70,000 and awarded $104,165.20 in attorney fees to the state.

I.

In general, the legislature has the power to determine the standard of proof in a statutorily created cause of action. See Steadman v. SEC, 450 U.S. 91, 96 n. 10, 101 S.Ct. 999, 1005 n. 10, 67 L.Ed.2d 69 (1981) (if federal Congress does not indicate standard of proof, resolution of issue is one of legislative intent). When the legislature says nothing about the standard of proof to be used, this is regarded as a signal that the legislature intended the preponderance of the evidence standard. Cf. Grogan v. Garner, 498 U.S. 279, 111 S.Ct. 654, 112 L.Ed.2d 755 (1991) (noting that federal Congress' silence on standard of proof issue is inconsistent with the view that it intended higher standard of proof).

In passing consumer fraud statutes, the legislature clearly intended to make it easier to sue for consumer fraud than it had been to sue for fraud at common law. The legislature's intent is evidenced by the elimination of elements of common law fraud, such as proof of damages or reliance on misrepresentations. See, e.g., Minn.Stat. Sec. 325D.45, subd. 1. We believe this elimination of elements indicates that the legislature intended that the burden of proof in a consumer fraud case would be the preponderance of the evidence standard. We will not impute to the legislature the strange goal of making it easier to sue for consumer fraud by eliminating elements required at common law, while at the same time insisting on a higher standard of proof than that generally used in civil cases. For these reasons, we believe the legislature intended the preponderance of the evidence standard.

Minnesota common law also favors the use of the preponderance of the evidence standard in a civil fraud case. Petitioners argue that because the relief ordered in this case was the equitable remedy of restitution, the clear and convincing standard of proof should apply.

Historically, Minnesota did maintain two separate standards of proof in fraud cases. In a common law case for damages, the plaintiff was required to prove the case by a fair preponderance of the evidence; in cases seeking equitable relief, such as reformation or rescission of a written instrument on the basis of fraud, the standard of proof was the higher clear and convincing standard. Schmeisser v. Albinson, 119 Minn. 428, 432, 138 N.W. 775, 776 (1912). ⁵

In 1926, we firmly rejected this distinction stating:

We do not think there is any difference in the quantum of proof required in an action to recover damages for misrepresentations as to the subject matter of a contract and in a suit to rescind the same contract for the same misrepresentations inducing its making. In both a fair preponderance of the evidence justifies relief.

Mandel v. Brooks, 165 Minn. 490, 491, 206 N.W. 727 (1926). In 1968, we reaffirmed Mandel:

While the post-Mandel cases have not always been consistent, most have abandoned the distinction and have followed the view that a "fair preponderance of the evidence" justifies relief in either a suit for rescission or one for damages based on fraud in the inducement.

Martin v. Guarantee Reserve Life Ins. Co., 279 Minn. 129, 136, 155 N.W.2d 744, 749 (1968).

In 1970, in direct contrast to the holding in Martin, we said, "[f]raud must be proved by clear and convincing evidence, especially where a party seeks to avoid the effects of a written instrument." Weise v. Red Owl Stores, Inc., 286 Minn. 199, 203, 175 N.W.2d 184, 187 (1970). We are inclined to believe that this language was inaccurately used, and not a holding intended to disturb a trend that had been started fifty years before and affirmed two years previously. The authority the Weise court cited for the higher standard of proof was Nelson v. Berkner, 139 Minn. 301, 166 N.W. 347 (1918). Thus Weise cited pre-Mandel precedent and was simply wrong in that regard. In addition, we find it hard to believe that this court intended to overrule cases it did not even mention in its opinion.

Today we reaffirm Martin and Mandel. We overrule Weise to the degree it is inconsistent with those two cases. We hold that unless otherwise indicated by the legislature, the standard of proof in all fraud cases is the preponderance of the evidence standard. The lower courts properly applied the preponderance of the evidence standard. ⁶

II.

Petitioners also argue that the Due Process Clause requires that the standard of proof in a consumer fraud action be the clear and convincing evidence standard. The Supreme Court has read the Due Process Clause to require the higher standard of proof in a small class of cases involving particularly important individual interests. See Santosky v. Kramer, 455 U.S. 745, 102 S.Ct. 1388, 71 L.Ed.2d 599 (1982) (clear and convincing standard is required before parental rights may be terminated); Addington v. Texas, 441 U.S. 418, 432-33, 99 S.Ct. 1804, 1812-13, 60 L.Ed.2d 323 (1979) (higher standard required for involuntary commitment); Woodby v. INS, 385 U.S. 276, 87 S.Ct. 483, 17 L.Ed.2d 362 (1966); (deportation order) Chaunt v. United States, 364 U.S. 350, 81 S.Ct. 147, 5 L.Ed.2d 120 (1960) (revocation of citizenship).

In discussing why the standard of proof should be higher in some cases than in others, the Supreme Court has reasoned that the higher standard of proof expresses an interest for one side's interests over the others....