Introduction and statement of interest - ATRA



NO. A17-0555State of MinnesotaIn Supreme CourtState of Minnesota by its Attorney General, Lori SwansonAppellant/Cross-Respondent,vs.Minnesota School of Business, Inc. d/b/a Minnesota School of Business and Globe University, Inc., d/b/a Globe UniversityRespondents/Cross-Appellants.Brief of Amicus Curiae Minnesota chamber of commerceLORI SWANSONAttorney General, State of MinnesotaAlan Gilbert (#34678)Jason Pleggenkuhle (#391772)Adam Welle (#389951)445 Minnesota Street, Suite 1200Saint Paul, Minnesota 55101-2130Phone: (651) 757-1147Joseph W. Anthony (#2872)Brooke D. Anthony (#387559)Mary L. Knoblauch (#159645)ANTHONY OSTLUND BAER & LOUWAGIE P.A.90 South Seventh Street3600 Wells Fargo CenterMinneapolis, Minnesota 55402Phone: (612) 349-6969Attorneys for Appellant/Cross-RespondentAttorneys for Respondents/Cross-Appellants Mark R. Bradford (#335940)Christine E. Hinrichs (#389963)BASSFORD REMELE, P.A.100 South 5th Street, Suite 1500Minneapolis, MN 55402-1254Phone: 612-333-3000Attorneys for Amicus Curiae Minnesota Chamber of CommerceTABLE OF CONTENTSPage TOC \h \z \t "Heading 1,2,Heading 2,3,Heading 3,4,Heading 4,5,Heading 5,6,Title,1,List Number,3,List Number 2,3" TABLE OF AUTHORITIES PAGEREF _Toc526338264 \h iiintroduction and statement of interest PAGEREF _Toc526338265 \h 1discussion PAGEREF _Toc526338266 \h 2I.The circumstances of this case do not allow for a global causation presumption PAGEREF _Toc526338267 \h 2II.This Court’s decision in Group Health Plan does not allow for a global causation presumption with respect to individual claims PAGEREF _Toc526338268 \h 5Conclusion PAGEREF _Toc526338269 \h 13CERTIFICATE OF COMPLIANCE PAGEREF _Toc526338270 \h 14TABLE OF AUTHORITIESPagePosition cursor hereintroduction and statement of interestThe Minnesota Chamber of Commerce was founded in 1909 and is the State’s largest business-advocacy organization. The Chamber now represents more than 2,300 businesses of all types and sizes in urban, suburban, and rural areas throughout Minnesota. The Chamber’s membership includes small businesses and Fortune 500 companies. The Chamber’s mission is to enhance Minnesota’s business climate and the competitiveness of Minnesota companies. The Chamber is interested in this case because outcome could negatively impact businesses across Minnesota defending claims for damages under the State’s consumer-fraud laws. Specifically, as the court of appeals recognized, the Order for Restitution establishes an unprecedented legal framework under which the traditional burden of proof is flipped: harm to an each individual claimant is presumed based on the mere submission of a claim form, and defendants have the burden to prove to a special master (not a district court judge) a lack of causal nexus between the alleged misrepresentation and the claimant’s individual damages. The Chamber by no means endorses consumer fraud. But a presumption of causation—rebuttable or not—relating to each individual claimant’s alleged money damages is inconsistent with traditional notions of due process. Moreover, while presumptions have historically been employed in other limited circumstances, the circumstances in this case are materially different. The Order for Restitution greatly expands the law and relieves each claimant of his or her traditional burden of proof without any compelling need to do so. This Court should therefore affirm the court of appeals to the extent it reversed the district court’s imposition of global causation presumption. discussionThe circumstances of this case do not allow for a global causation presumption.A “rebuttable presumption is an inference drawn from certain facts that establish a prima facie case, which may be overcome by the introduction of contrary evidence.” Minnesota Energy Res. Corp. v. Comm’r of Revenue, 909 N.W.2d 569, 573 (Minn. 2018); Minn. R. Evid. 301. And while the presumption the district court imposed is theoretically rebuttable, the reality is that the presumption is “coercive: once the basic facts are established, the trier of fact is compelled to find the ultimate fact unless evidence of the nonexistence of the ultimate fact has been introduced.” Joel S. Hjelmaas, Stepping Back from the Thicket: A Proposal for the Treatment of Rebuttable Presumptions and Inferences, 42 Drake L. Rev. 427, 431 (1993). Because presumptions affect traditional burdens of proof, they require careful balancing of competing interests. Often, the Legislature does that balancing and puts presumptions right in a statute. See, e.g., Minn. Stat. § 260C.301, subd. 1(b)(4) (“It is presumed that a parent is palpably unfit to be a party to the parent and child relationship upon a showing that the parent’s parental rights to one or more other children were involuntarily terminated.”); Minn. Stat. §?65B.43, subd. 4 (providing for a rebuttable presumption of ownership when a person’s name appears on a vehicle title). Other rebuttable presumptions may be judicially created in the interest of furthering social policy. See In re Custody of A.L.R., 830 N.W.2d 163 (Minn. App. 2013) (“In custody disputes between parents and nonparents, Minnesota courts have traditionally applied a presumption that the child’s natural parent is entitled to custody of the child.”). Courts have also created rebuttable presumptions to address compelling evidentiary problems, such as where evidence was spoliated and is no longer available, or to give the benefit of a presumption to the party who has no access to the evidence necessary to prove that element of the claim. See, e.g., State Farm Fire & Cas. Co. v. Wicka, 474 N.W.2d 324, 330 (Minn. 1991) (“[T]he law presumes sanity and places the burden of proving incapacity on the party asserting it.”); Flury v Daimler Chrysler Corp., 427 F.3d 939, 943 n.9 (“The law provides that spoliation creates a rebuttable presumption against that the evidence not preserved was unfavorable to the party responsible for the spoliation.”). But whether presumptions are legislatively or judicially created, they universally are based on “logic, judicial economy, social policy, and common sense.” Hjelmass, supra at 431. In this case, there is no compelling or justifiable need for a broad causation presumption of the sort the district court employed. And sustaining it here would essentially judicially amend the consumer-fraud statute the Legislature drafted. The Legislature was explicit in requiring actual proof of damage before a party can benefit from the private-remedy clause. See Minn. Stat. §?325F.69, subd. 1 (providing that fraudulent practices are enjoinable without proof of damage); Minn. Stat. § 8.31, subd. 3a (providing for a private remedy for “any person injured by a violation” of the consumer fraud laws). Given these clear provisions, there is no reason to adopt a common-law rebuttable presumption for each potentially affected consumer in a consumer-fraud action. First, there is no evidentiary hurdle to the Attorney General’s ability to prove individualized damages in a consumer-fraud case. Indeed, unlike other cases where a rebuttable presumption has been used, the Attorney General has better access to the information necessary to prove this element (the allegedly affected consumers) as compared with the evidence needed by a defendant to disprove causation. Second, requiring a defendant to disprove damages unjustifiably flips the burden of proof. The party seeking the monetary recovery is the party who should have the burden to prove the relationship between the improper conduct and the resulting harm. Left undisturbed, the Order for Restitution bears the hallmarks of relief that might be ordered in a class action, but without the prerequisite findings under Rule 23, such as numerosity, commonality, and typicality. See Minn. R. Civ. P. 23.01. And of course, commonality among the alleged victims of fraudulent sales practices is likely absent in most cases because the reasons individuals buy goods and services—including educational opportunities—may differ greatly from one person to another. One cannot simply presume that an individual enrolled in an educational program solely due to allegedly misleading information any more than one can presume that person’s enrollment was due to location, favorable reviews from friends or family, or furthering other educational or career goals. Each of those reasons are legitimate and possible, but only one is actionable. Finally, public policy would not be served by recognizing a rebuttable presumption of damages in a case such as this. The Legislature equipped the Attorney General with broad, tangible power (which was exercised here) to enjoin fraudulent business practices without proof of harm. This expansive power achieves the important policy goal of protecting Minnesotans from exposure to fraudulent or deceptive trade practices. Individual recovery of money damages, however, should yield to traditional burdens of proof. The effect of the district court’s order is to all but guarantee that individual claimants will prevail on the causation issue. Those individuals should have the evidence necessary to support monetary damage claims, and should be put to presenting it in a traditional forum—subject to scrutiny, cross-examination, and appeal rights—to recover. This Court’s decision in Group Health Plan does not allow for a global causation presumption with respect to individual claims. To defend the district court’s imposition of a rebuttable presumption for every student, the Attorney general relies heavily on this Court’s decision in Group Health Plan, Inc. v. Philip Morris Inc., 621 N.W.2d 2 (Minn. 2001). But in Group Health, the Court reiterated that causation is an element of a commercial-misrepresentation claim seeking monetary recovery. And because causation is an element, the claimant has the burden of proof. Id. at 15 (“[T]he HMOs must establish a causal nexus between their alleged damages and the conduct of the defendants alleged to violate the statutes.”). A presumption of causation is improper. The Court’s decision in Group Health also addressed the types of evidence that can be used to prove causation. The Court concluded that, on the particular facts of that case, individualized evidence of reliance by particular consumers was unnecessary; generalized statistical evidence could suffice. But the facts (and claims) presented in Group Health that informed that decision and are very different than those presented here. Importantly, Group Health did not involve claims by the allegedly misled consumers themselves, but by companies whose injuries were the aggregate of many individual consumers’ costs. On those facts, aggregate evidence was sufficient and evidence about each individual consumer was unnecessary. Here, by contrast, the individual consumers themselves intend to seek monetary recovery. Because each claimant must prove that the alleged misstatements caused his or her injury, individualized evidence of causation is necessary.A thorough reading of Group Health reflects this significant distinction. The plaintiffs in Group Health were health maintenance organizations (HMOs) who were suing tobacco companies. Id. at 4. The HMOs claimed the tobacco companies misled consumers about the dangers of smoking, thereby causing members of the public to smoke and increasing the medical costs that the HMOs incurred on behalf of their members. Id. at 4-5. At issue before this Court was whether the HMOs had to prove that their members had relied on the tobacco companies’ false statements, and, if so, what kind of evidence they could use to prove reliance. Id. at 4, 13.This Court first held that “causation remains an element” of “a statutory misrepresentation in sales claim” seeking monetary recovery. Id. at 13. That is because the plain text of Minn. Stat. §?8.31, subd. 3a, “authorizes a damages action only by someone injured by a violation” of the statute. Group Health Plan, 621 N.W.2d at 13. That same provision—which also empowers the court to award money damages to injured persons in an action brought by the attorney general—is at issue in this case. Minn. Stat. §?8.31, subd. 3a. The statutory causation requirement thus applies here.The Court went on to say that “where, as here, the plaintiffs allege that their damages were caused by deceptive, misleading, or fraudulent statements or conduct in violation of the misrepresentation in sales laws, as a practical matter it is not possible that the damages could be caused by a violation without reliance on the statements or conduct alleged to violate the statutes.” Group Health Plan, 621 N.W.2d at 13. As a result, the Court observed, “in a case such as this, it will be necessary to prove reliance on those statements or conduct to satisfy the causation requirement.” Id.Group Health therefore makes clear that a presumption of causation (or a presumption of reliance) is inappropriate in a misrepresentation case. Causation is a required element of the cause of action, and the “elements of the cause of action are the fundamental propositions which plaintiff must prove in order to establish a right of recovery.” Briggs Transp. Co. v. Ranzenberger, 299 Minn. 127, 129 (1974) (emphasis added). Group Health reiterates and affirms that it is the plaintiff’s obligation to prove causation; it is not the defendant’s job to rebut a presumption of causation. See 621 N.W.2d at 13-15. As the court of appeals recognized here, the district court’s order departs from that core holding. The Court in Group Health also considered “how this causation element may be proven.” Id. at 14. The tobacco companies took the position that “causation can only be proven by evidence of reliance by individual consumers of their products.” Id. But the Court held:[I]n cases such as this, where the plaintiffs’ damages are alleged to be caused by a lengthy course of conduct that affected a large number of consumers, the showing of reliance that must be made to prove a causal nexus need not include direct evidence of reliance by individual consumers of defendants’ products. Rather, the causal nexus and its reliance component may be established by other direct or circumstantial evidence.” Id. (emphasis added). The Court thus “reject[ed] the view … that our misrepresentation in sales laws require proof of individual reliance in all actions seeking damages.” Id. (emphasis added).Importantly, this Court was careful to “emphasize that we are addressing here only the requirements for the misrepresentation in sales actions before us. . . . The type of proof required to satisfy the causation-based reliance factor may be different in a case of different scope.” Id. at 15 n.10. Thus, while the Court held that the causation element “has a component of reliance that, in the type of case before the court, may be proven by means other than direct evidence of reliance by individual consumers,” id. at 15 (emphasis added), it nowhere held or implied that individualized evidence would be unnecessary in a materially different type of case.In particular, Group Health does not suggest that individualized evidence is unnecessary in a case like this one, where individual consumers are seeking individual monetary recoveries. On the particular facts of Group Health, the HMO plaintiffs could prove that the tobacco companies’ misstatements caused them losses without submitting individualized evidence of reliance by particular HMO members. Indeed, because an HMO’s losses would be based on the aggregate experience of a very large number of members, it could establish those losses using statistical generalities. The relevant statistics might include the percentage of people who used tobacco products in reliance on the tobacco companies’ misstatements (which might be determined through surveys) and the average medical costs associated with a patient’s use of tobacco (which could be determined by expert testimony). The HMO’s losses would then be the percentage of people who relied on the misstatements, multiplied by the average medical costs associated with smoking, multiplied by the number of people who were members of the HMO. If, for example, 1% of the total population used tobacco in reliance on the misstatements and the average medical costs associated with tobacco use were $1000, then the HMO’s costs would be, on average, $10 per member.But if the medical costs were borne by individuals rather than HMOs, such generalized evidence could not properly be used to show that each individual person lost $10 on account of the tobacco companies’ misstatements. The $10 figure is just an average. After all, most people do not smoke, not everyone who smokes does so in reliance on the alleged misstatements, and among people who do smoke there is substantial variance in the resulting medical costs. Some individuals would have losses much greater than $10, while many would not have been injured by the alleged misstatements at all.Thus, while the generalized statistical evidence discussed above might suffice to establish a plaintiff’s claim in a case like Group Health—where the plaintiff’s losses depend on aggregating an average figure across a large number of people—they would not suffice in a lawsuit brought by an individual smoker. That claimant, like any other person seeking monetary recovery under this State’s consumer-fraud laws, would have the burden of proving that the alleged misstatements caused him harm. It would not be enough to demonstrate harm to some hypothetical “average” person. See Group Health Plan, 621 N.W.2d at 13 (holding that Minn. Stat. §?8.31, subd. 3a, “authorizes a damages action only by someone injured by a violation” of the law). And to do that, he would have to proffer individualized evidence establishing that he used tobacco in reliance on the defendants’ alleged misstatements. Statistical evidence showing that 1% of the population used tobacco in reliance on those misstatements could be used to show the total harm caused to a large number of people, but it would reveal nothing about how much harm the misstatements had caused to the particular claimant—or, indeed, that they had caused him any harm at all.As amicus, the Chamber suggests the Court conclude the facts of this case are analogous to the hypothetical claim by an individual smoker, not to the actual lawsuits brought by HMOs in Group Health Plan. At issue here is whether the district court erred in creating a post-trial claims process for students who did not testify at trial, granting them a presumption that they relied on the Schools’ alleged misstatements about becoming a police or probation officer, and thereby enabling them to circumvent the due-process protections associated with a trial. It appears undisputed that no individualized evidence regarding these non-testifying students was submitted at trial. It follows from that fact alone that causation has not been established with respect to the non-testifying students, and so they cannot demonstrate their right to monetary recovery.It is also true that no generalized evidence of reliance was submitted at trial. For instance, there was no survey evidence that could show what percentage of students in the academic programs at issue here wanted to become police or probation officers, or what percentage of them were under the impression that completing those programs would enable them to do so. Nor was there evidence tending to show that the handful of students who did testify at trial regarding their individual experiences were somehow representative of the entire student population. As the court of appeals concluded, these failures of proof are sufficient on their own to resolve this appeal in favor of the Schools. But the Schools would be entitled to judgment even if such evidence had been introduced at trial. Such generalized evidence simply could not support individualized monetary recoveries by non-testifying students, or a presumption of causation in favor of such students. Even if it had been established, for example, that 20% of students in the programs relied on misstatements about their opportunities to become police or probation officers, that would not be a basis for concluding (or presuming) that any one individual claimant so relied. Such generalized statistics could not demonstrate anything about causation with respect to any particular student. Rather, individualized evidence is necessary to establish causation and justify monetary recovery by any individual claimant.Against all of this, the Attorney General relies heavily on footnotes 9 and 11 of Group Health. Those footnotes, however, merely confirm that decision’s limited scope and inapplicability to this case. Like Group Health itself, the cases that this Court selected to cite in those footnotes did not address individualized recovery by individual consumers. Rather, every one of the cited cases involved a lawsuit brought by one company against a competitor, alleging that the competitor’s misstatements had harmed the plaintiff by confusing consumers and thereby inducing them to buy from the competitor rather than the plaintiff. See Resource Developers, Inc. v. Statue of Liberty-Ellis Island Foundation, Inc., 926 F.2d 134 (2d Cir. 1991) (lawsuit filed by flag retailer claiming that competing flag manufacturer engaged in false advertising); PPX Enterprises, Inc. v. Audiofidelity Enterprises, Inc., 818 F.2d 266 (2d Cir. 1987) (lawsuit filed by company with financial interests in Jimi Hendrix record sales claiming that competitor engaged in deceptive advertising); U-Haul International, Inc. v. Jartran, Inc., 793 F.2d 1034 (9th Cir. 1986) (lawsuit filed by do-it-yourself moving company claiming that competitor engaged in false comparative advertising); LensCrafters, Inc. v. Vision World, Inc., 943 F.?Supp. 1481 (D. Minn. 1996) (lawsuit filed by lens manufacturer claiming that competitor engaged in deceptive advertising); see also Respondent’s Br. at 43-47.Like the HMOs in Group Health, such a corporate plaintiff could establish that the defendant’s misstatements caused it injury by submitting generalized evidence—such as surveys and other statistics—that shows how many consumers were confused and therefore chose to deal with the defendant rather than the plaintiff. The claim in such a case would not depend on evidence of which particular consumers had relied on the alleged misstatements. By contrast, a claim brought by a particular consumer could not stop at showing how many consumers were confused by the misstatements. Rather, such a lawsuit would necessarily turn on individualized evidence, because the consumer claimant would have the burden of showing, as an element of his claim for a monetary remedy, that he himself was “someone injured by a violation.” Group Health Plan, 621 N.W.2d at 13. Merely showing how many consumers were injured, which might be done with generalized evidence, would do nothing to show that any one particular consumer was injured. That could only be done with individualized evidence specific to that claimant.ConclusionIndividual students cannot prove causation without submitting individualized evidence of reliance. Because no such evidence was submitted with respect to the non-testifying students, the court of appeals’ conclusion that those students cannot obtain monetary recoveries should be affirmed. This case simply is not one that justifies a substantial departure from the ordinary burden of proof by imposing a global causation presumption. Bassford RemeleA Professional AssociationDated: October 4, 2018By: Mark R. Bradford (#335940)Christine E. Hinrichs (#389963)100 South 5th Street, Suite 1500Minneapolis, MN 55402-1254Phone:612-333-3000Facsimile:612-333-8829 HYPERLINK "mailto:mbradford@" mbradford@chinrichs@Attorneys for Amicus Curiae Minnesota Chamber of CommerceCERTIFICATE OF COMPLIANCEI hereby certify that this document conforms to the requirements of the applicable rules, is produced with a 13-point, proportionately spaced font, and the length of this document is 3,690 words. This document was prepared using Microsoft Word 2010 software.Bassford RemeleA Professional AssociationDated: October 4, 2018By: Mark R. Bradford (#335940)Christine E. Hinrichs (#389963)100 South 5th Street, Suite 1500Minneapolis, MN 55402-1254Phone:612-333-3000Facsimile:612-333-8829mbradford@chinrichs@Attorneys for Amicus Curiae Minnesota Chamber of Commerce ................
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