Summary
analyzing a "public benefit" claim by considering whether a claim for private relief would have the impact discussed in Collins
Summary of this case from ADT SECURITY SERVICES, INC. v. SWENSONOpinion
Civil File No. 02-1776 (PAM/RLE)
November 21, 2003
MEMORANDUM AND ORDER
This matter is before the Court on Defendant's two separate Motions for Partial Summary Judgment. For the reasons that follow, the Court denies the Motions in part and grants the Motions in part.
BACKGROUND
This case arises from the sale of a farm implement manufactured by Defendant Case Corporation ("Case"). Plaintiffs Loren, Deb, and Ron Zutz own and operate a family farm in northwestern Minnesota. In April 1998, they signed a rental agreement with the option to purchase a Concord Air Drill from Evergreen Implement Company ("Evergreen"), a farm equipment dealer located in Warren, Minnesota. At the time of the events giving rise to this lawsuit, Evergreen was licensed to sell Case equipment. Plaintiffs allege that both the dealer and the promotional materials for the air drill warranted that the air drill was appropriate for use on fields treated with pre-emergent herbicides. Plaintiffs exercised their option to purchase the air drill in July 1998.
In 1998, Plaintiffs applied pre-emergent herbicides to their fields as usual. They then planted almost 1800 acres of soybeans and more than 600 acres of sunflowers using the Concord Air Drill When the plants began to grow, however, Plaintiffs noticed that one row contained healthy plants but a lot of weeds, while the next row contained no weeds and unhealthy plants. Plaintiffs' yield for both crops on the acreage in which they used the Concord Air Drill was significantly less than the yield in previous years. Plaintiffs hired an agronomist to study the problem and contacted Case. Plaintiffs' experience with poor yields in fields using the Concord Air Drill was repeated in 1999. In the winter of 2000, Plaintiffs traded in their original Concord Air Drill for a larger model. However, using this model resulted in similar poor yields during the 2000 growing season. Plaintiffs contend that it was not until their agronomist performed dye tests on the air drill in 2000 that they discovered that the air drill was responsible for the poor yields.
Although neither party explains exactly how the Concord Air Drill works, it apparently mixes soil, seed, fertilizer, and herbicide before depositing the seed into the field. Plaintiffs contend that the disk levelers that trail the air drill to smooth the soil after the seed is planted did not work correctly, resulting in the mis-distribution of soil that had been previously treated with pre-emergent herbicide. Thus, while some rows received sufficient fertilizer but insufficient herbicide, other rows received too much fertilizer but the right amount of herbicide. Plaintiffs complained to Case, and Plaintiffs contend that Case acknowledged that other farmers had experienced similar problems with the air drill. Case did not offer to replace or fix the air drill, however, and Plaintiffs ultimately purchased another piece of equipment, a harrow packer, to change the way the air drill distributed the soil. Plaintiffs' use of the harrow packer with the air drill resulted in normal yields.
Plaintiffs brought this suit in June 2002. In their Complaint, they raise claims for breach of express warranty, breach of implied warranty of fitness for a particular purpose, breach of implied warranty of merchantability, fraud and negligent misrepresentation, and a violation of the Minnesota Prevention of Consumer Fraud Act ("CFA"), Minn. Stat. § 325F.69. Case's first Motion for Partial Summary Judgment seeks to dismiss Plaintiffs' fraud claim and seeks summary judgment against the CFA claim. Case's second Motion for Partial Summary Judgment seeks summary judgment against Plaintiffs' breach of warranty claims.
DISCUSSION
A. Standards of Review
1. Motion to Dismiss
For the purposes of a motion to dismiss, the Court takes all facts alleged in the Complaint as true. See Westcott v. Omaha. 901 F.2d 1486, 1488 (8th Cir. 1990). The Court must construe the allegations in the Complaint and all reasonable inferences arising from the Complaint favorably to Plaintiffs. Morton v. Becker. 793 F.2d 185, 187 (8th Cir. 1986). A motion to dismiss will be granted only if "it appears beyond doubt that the Plaintiff can prove no set of facts which would entitle him to relief." Id.: see also Conley v. Gibsoa 355 U.S. 41, 45-46 (1957).
2. Motion for Summary Judgment
Rule 56(c) provides that such a motion for summary judgment shall be granted only if "there is no genuine issue as to any material feet and . . . the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). When considering a motion for summary judgment, the Court must view the evidence and the inferences that may be reasonably drawn from the evidence in the light most favorable to the non-moving party. Enter. Bank v. Magna Bank. 92 F.3d 740, 747 (8th Cir. 1996).
The burden of demonstrating that there are no genuine issues of material fact rests on the moving party. Celotex Corp. v. Catrett. 477 U.S. 317, 323 (1986). If the moving party has carried its burden, the non-moving party must demonstrate the existence of specific facts in the record that create a genuine issue for trial. Anderson v. Liberty Lobby. Inc., 477 U.S. 242, 256 (1986); Krenik v. County of LeSueur, 47 F.3d 953, 957 (8th Cir. 1995).
A. First Motion for Partial Summary Judgment
Case's first Motion is both a Motion to Dismiss under Rule 12(b)(6) and a Motion for Partial Summary Judgment under Rule 56. Case contends that Plaintiffs' fraud claim does not sufficiently set out the elements of a fraud claim and is not pled with the particularity required by Rule 9(b). Case asserts that if the fraud claim is dismissed, the negligent misrepresentation claim likewise fails, although Case offers no support for this proposition. Case also argues that Plaintiffs' CFA claim is not brought for the public benefit and pursuant to the Minnesota Supreme Court's ruling in Ly v. Nystrom. 615 N.W.2d 302 (Minn. 2000), must be dismissed At the hearing, Case for the first time argued that even if Plaintiffs' fraud claim survives, the negligent misrepresentation claim is barred by Minnesota law.
1. Fraud
Count IV of the Complaint alleges that statements by Case and by Case's authorized dealer that the Concord Air Drill was compatible with pre-emergent herbicide treatments constituted fraud. In order to prove fraud, Plaintiffs must establish that Case or its representative made a false representation or omission of a material fact with knowledge of the falsity of the representation and with the intent to induce reliance, that the representation or omission in fact induced reliance, and that Plaintiffs were damaged.Specialized Tours. Inc. v. Hagea 392 N.W.2d 520, 532 (Minn. 1986). Case asserts that Plaintiffs have not sufficiently pled the elements of a fraud claim and have not pled the alleged fraud with sufficient particularity.
The Complaint sets forth the statements on which Plaintiffs base their fraud claim. First, Plaintiffs contend that at the time they purchased the air drill, Case's authorized dealer "represented and warranted that application of pre-emergent herbicides was compatible with use of the Concord Air Drill for seeding." (Compl. ¶ 9.) Plaintiffs also quote from Case's promotional materials: "seed and/or fertilizer are distributed uniformly across the air till drill by the manifold system."(Id. ¶ 10.) Another representative of Case allegedly told Loren Zutz that there would be "'no problem' in applying pre-emergent herbicide prior to using the [air drill] for seeding." (Id ¶ 11.)
Although Plaintiffs are undoubtedly required to plead fraud with more particularity than that required for other claims, Plaintiffs' Complaint sufficiently sets out the elements of the fraud claim. Indeed, although Case argues that Plaintiffs have failed to plead every element of their fraud claim, Case offers no support for this argument and does not point to any portion of the Complaint to illustrate the alleged deficiencies. Case's Motion on this point is denied.
2. Consumer Fraud Act
Case contends that Plaintiffs' claim under the CFA must be dismissed because it is not brought for the public benefit. The Minnesota Supreme Court has held that, because an individual may bring an action for violations of the CFA only through the Private Attorney General Statute, Minn. Stat. § 8.31, individuals pressing CFA claims must demonstrate that those claims benefit the public. Ly, 615 N.W.2d at 314. Case argues that because Plaintiffs' CFA claim arises out of a one-on-one transaction, Plaintiffs cannot show a public benefit and their CFA claim must be dismissed. See also Pecarina v. Tokai Corp., No. 01-1655, 2002 WL 1023153 (D. Minn. May 20, 2002) (Montgomery, J.) (dismissing CFA claims for failure to demonstrate public benefit in products liability action against cigarette lighter manufacturer).
In response, Plaintiffs contend that their CFA claim is more akin to the claim brought in Collins v. Minnesota School of Business. Inc., 655 N.W.2d 320 (Minn. 2003). In that case, a group of students sued their school for alleged misrepresentations made in advertising to the public. The Minnesota Supreme Court determined that the Collins plaintiffs had demonstrated that the suit would benefit the public. Id. at 320.
This case falls between the facts of Ly and the facts of Collins. Plaintiffs' claim involves a product that is still on the market, unlike the products in Pecarina and Behrens v. United Vaccines. Inc., 228 F. Supp.2d 965 (D. Minn. 2002) (Erickson, M.J.). Plaintiffs' claim does not arise out of advertising to the general public, as did the claims in Collins. However, as Plaintiffs point out, some of the statements alleged to violate the CFA are found in promotional materials for the air drill, and thus are publicly available.
To determine whether a lawsuit is brought for the public benefit the Court must examine not only the form of the alleged misrepresentation, but also the relief sought by the plaintiff. See Tutfle v. Lorillard Tobacco Co., Civ. No. 99-1550, 2003 WL 1571584, *6-7 (D. Minn. Mar. 3, 2003) (Magnuson, J.). Here, as in Tutfle. Plaintiffs seek only compensatory damages. Where recovery is sought for the exclusive benefit of the plaintiff, there is no public benefit. Therefore, under the holding in Ly. summary judgment is appropriate on Plaintiffs' CFA claim.
3. Negligent Misrepresentation
Finally, as noted above, Case contends that Plaintiffs' claim for negligent misrepresentation fails as a matter of law. According to Case, Minnesota law bars tort claims that arise out of commercial transactions, with the exception of claims for intentional or reckless misrepresentation. In support of this argument, Case cites sections 604.10 and 604.101 of the Minnesota Statutes.
Section 604.10 codifies Minnesota's economic loss doctrine. This section provides that a buyer of goods may recover in tort as well as contract for economic loss that is due to damage to property other than the goods. Id § 604.10(a). This section does not support Case's argument. However, in 2000, the Minnesota legislature amended the economic loss doctrine to provide that "[a] buyer may not bring a common law misrepresentation claim against a seller relating to the goods sold or leased unless the misrepresentation was made intentionally or recklessly." Id § 604.101, subd. 4. Plaintiffs' negligent misrepresentation claim must be dismissed
B. Second Motion for Partial Summary Judgment
Case's second Motion asks the Court to grant summary judgment against Plaintiffs' three breach of warranty claims. Case contends that Plaintiffs' warranty claims are barred by the four-year statute of limitations and by the express warranties contained in Case's warranty, which specifically disclaimed any implied warranties of fitness for a particular purpose or merchantability and excluded liability for consequential damages. Moreover, Case argues that the parol evidence rule bars Plaintiffs' claims to the extent that those claims are based on oral representations that contradict the clear warranties in Case's warranty. Finally, Case asserts that Plaintiffs are estopped from claiming damages because they continued to use the air drill after they knew that it was not performing properly.
Plaintiffs deny ever receiving any of Case's warranties. There is no dispute that the documents Plaintiffs signed at the time of the purchase were not Case documents but rather were John Deere documents. These documents purported to limit express and implied warranties, but did so on behalf of John Deere and its affiliates. Case is not a John Deere affiliate. However, Plaintiffs made several repair claims under Case's warranties and therefore Plaintiffs were aware of the existence of warranties.
1. Statute of Limitations
Minnesota's four-year statute of limitations for breach of contract governs this action. Minn. Stat. § 336.2-725(1). A claim for breach of warranty accrues at the time of the tender of delivery. Id. § 336.2-725(2). Case contends that tender of delivery of the Concord Air Drill was in April 1998, when Plaintiffs rented the air drill from Evergreen. Plaintiffs argue that their cause of action for breach of warranty did not accrue until July 1998, the date of the purchase agreement for the air drill. If the cause of action accrued in April 1998, Plaintiffs' claims are untimely because Plaintiffs did not file this lawsuit until June 2002.
The statute of limitations argument turns on whether the rental agreement actually constituted a purchase for the purposes of the Uniform Commercial Code ("UCC"), thus triggering the UCC's statute of limitations. In the rental agreement, Plaintiffs agreed to a rental payment of $12,000, with the option to purchase the air drill for an additional payment of approximately $73,000. The agreement specifically provided that the initial rental payment would be applied to the purchase price, should Plaintiffs exercise the option to purchase. Moreover, Loren Zutz testified that he decided to first lease the air drill rather than purchase it because of tax issues. The Evergreen salesman also testified that Plaintiffs always intended to purchase the air drill, and that he prepared a purchase order at the same time as he prepared the rental agreement.
The Court must look beyond the manner in which the parties characterize the transaction to determine their "real intention." Nat'l Car Locomotive Builder v. Cyclone Steam Snow-Plow Co., 51 N.W. 657, 658 (Minn. 1892). That intention is evidenced not only by the written agreement itself but also by oral evidence. Id. In National Car, the court refused to adopt the defendant's characterization of the transaction as a lease, because the totality of the evidence showed that the parties used a lease transaction solely to enable the defendant to avoid its obligations under a separate contract. Id. The court found that the lease was in fact a sale and that the defendant could not avoid its obligations under the separate contract. Id.
Here, as in National Car, the name the parties put on the transaction is not controlling. Although the agreement Plaintiffs signed in April 1998 was a rental agreement, Plaintiffs admit that they intended to purchase the air drill at that time and only used the lease mechanism to obtain tax advantages. (L. Zutz Dep. (Haws Aff. Ex. 4) at 227 ("Basically there [were] some tax advantages"), 230 ("We rented this machine with the intention to buy, okay?").) It was clearly Plaintiffs' intent in April 1998 to purchase the air drill. The Court finds that the "real intention" of the parties was that the April 1998 transaction was a sale of the air drill. The statute of limitations began to run on that day, and Plaintiffs' claims for breaches of warranty are therefore untimely.
CONCLUSION
Plaintiffs have pled their claim for fraud with sufficient particularity and Case's Motion to Dismiss the fraud claim is denied. Plaintiffs failed to show that their Consumer Fraud Act claim was for the public benefit and that claim must be dismissed. Plaintiffs' negligent misrepresentation claim fails as a matter of law, and the breach of warranty claims are barred by the statute of limitations.
Accordingly, IT IS HEREBY ORDERED that:
1. Defendant's first Motion for Partial Summary Judgment (Clerk Doc. No. 9) is GRANTED in part and DENIED in part; and
2. Defendant's second Motion for Partial Summary Judgment (Clerk Doc. No. 21) is GRANTED.