JOAN N. ERICKSEN, District Judge.
Plaintiff Select Comfort Corporation asserts violations of federal trademark and false advertising statutes, state false advertising statutes, and other state consumer protection statutes against Defendant The Sleep Better Store, LLC (Sleep Better). The parties are competitors in the design, manufacture, and sale of air beds. The case is before the Court on Sleep Better's motion to dismiss counts five through nine of the Complaint: false advertising in violation of the Lanham Act, 15 U.S.C. § 1125(a) (2006); false advertising in violation of the Minnesota False Statement in Advertisement Act (MFSAA), Minn.Stat. § 325F.67 (2010); deceptive trade practices in violation of the Minnesota Uniform Deceptive Trade Practices Act (MUDTPA), Minn.Stat. § 325D.44 (2010); unlawful trade practices in violation of the Minnesota Unlawful Trade Practices Act (MUTPA), Minn.Stat. § 325D.09 (2010); and consumer fraud in violation of the Minnesota Consumer Fraud Act (MCFA), Minn.Stat. § 325F.69 (2010).
When ruling on a motion to dismiss for failure to state a claim pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure, a court must accept the facts alleged in the complaint as true and grant all reasonable inferences in favor of the plaintiff.
The particularity requirement of Rule 9(b) of the Federal Rules of Civil Procedure applies to claims of false advertising, deceptive trade practices, unlawful trade practices, and consumer fraud. See Tuttle v. Lorillard Tobacco Co., 118 F.Supp.2d 954,
BJC Health Sys. v. Columbia Cas. Co., 478 F.3d 908, 917 (8th Cir.2007) (citations omitted); see Drobnak v. Andersen Corp., 561 F.3d 778, 783 (8th Cir.2009).
Sleep Better makes two primary arguments with respect to the dismissal of claims pursuant to Rule 9(b). First, Sleep Better argues that the allegations pleaded by Select Comfort "on information and belief" have not been pleaded with the required particularity. "Allegations pleaded on information and belief usually do not meet Rule 9(b)'s particularity requirement. When the facts constituting the fraud are peculiarly within the opposing party's knowledge, however, such allegations may be pleaded on information and belief." Drobnak, 561 F.3d at 783-84 (citations omitted). Claims pleaded "on information and belief" are sufficient under Rule 9(b) if they are accompanied by a statement of the facts on which the belief is based. Id.
Select Comfort alleges three acts of fraud based on "information and belief." First, Select Comfort alleges that Sleep Better, or an agent or affiliate of Sleep Better, anonymously maintains a website that purports to neutrally "review" mattresses but which, in fact, favors its own products in misleading comparisons to products made and sold by Select Comfort. (Compl. ¶¶ 66-74) The Complaint describes how the website is misleading and biased, alleges that it is anonymously registered, and describes how the "reviews" focus on comparisons between Sleep Better and Select Comfort products but favor the purchase of Sleep Better beds. Second, Select Comfort alleges that Sleep Better falsely claims that its products are made in the United States. (Compl. ¶¶ 75-77) The Complaint states that, based on Select Comfort's extensive corporate knowledge of the supply and manufacture of adjustable firmness air beds, the air chambers are not made in the United States. Third, Select Comfort alleges that Sleep Better phone representatives instruct potential customers to test beds at Select Comfort retail stores but then, after trying the beds and selecting one, to order the same bed online from Sleep Better for a lower price. (Compl. ¶ 42) This assertion is based on "frequent customer statements" to Select Comfort retail personnel. The allegations made on "information and belief" are based on facts either uniquely within Sleep Better's knowledge or based on communications to which Select Comfort was not a party. The Complaint includes facts that support the allegations and alert Sleep Better to the nature of the alleged fraud and the basis of Select Comfort's claims. The Court finds that the Complaint adequately pleads the three allegations
Sleep Better also argues that Select Comfort failed to adequately support its allegation that Sleep Better uses false and unsubstantiated "health-related testimonials" on its website. (Compl. ¶¶ 82-86) According to Sleep Better, it cannot determine from the Complaint "what it is exactly that Plaintiff alleges is misleading" and the Complaint must include an exhaustive list of any allegedly fraudulent statements to comport with Rule 9(b). In the context of health insurance fraud, the Eighth Circuit has held that where a plaintiff alleges a systematic practice of the submission of fraudulent claims over an extended period of time, the plaintiff need not allege the specific details of every fraudulent claim. United States ex rel. Joshi v. St. Luke's Hosp., Inc., 441 F.3d 552, 557 (8th Cir. 2006). Instead, the plaintiff must allege some representative examples of the fraudulent conduct with particularity. Id. In this case, the Complaint identifies an on-going practice of fraud and provides representative examples, quoting from Sleep Better's website. The examples provide a clear sense of the "health-related" testimonials that Select Comfort challenges as deceptive. It is also clear from the Complaint where the allegedly fraudulent statements are made—the Sleep Better website. The examples, combined with an explanation of how the statements are allegedly deceptive and where they are made, provide Sleep Better with sufficient notice to respond specifically to the allegation. See id.; Abels, 259 F.3d at 920 ("The special nature of fraud does not necessitate anything other than notice of the claim; it simply necessitates a higher degree of notice, enabling the defendant to respond specifically, at an early stage of the case, to potentially damaging allegations of immoral and criminal conduct."). Assuming all facts in the Complaint to be true and drawing all reasonable inferences from those facts in Select Comfort's favor, the Court finds that the Complaint contains sufficient allegations to meet Rule 9(b)'s pleading requirements.
In addition to its arguments under Rule 9(b), Sleep Better challenges Select Comfort's ability to bring claims under the MUTPA, the MFSAA, and the MCFA (counts seven, eight, and nine, respectively).
Sleep Better argues that the claims must be dismissed because Select Comfort did not allege any public benefit arising from the claims and because the action is primarily based on private damages arising from trademark infringement, not consumer protection. See, e.g., King v. Reed, LLC, Civ. No. 07-1908 (DWF/RLE), 2008 WL 80630, at *4 (D.Minn. Jan. 8, 2008) (dismissing an MCFA claim because suit was "primarily a products liability and negligence case"); Pecarina v. Tokai Corp., Civ. No. 01-1655 (ADM/AJB), 2002 WL 1023153, at *5 (D.Minn. May 20, 2002) (dismissing an MCFA claim because the "essence" of the lawsuit was personal injury involving allegations of negligence and products liability related to a mass-produced and mass-marketed lighter). Select Comfort argues that it has demonstrated a public benefit because the allegedly false statements were made to the public and the Complaint seeks to enjoin Sleep Better from further false or misleading advertising. Select Comfort relies heavily on Collins v. Minnesota School of Business, Inc., 655 N.W.2d 320, 329-330 (Minn.2003). In Collins, former students of the Minnesota School of Business alleged that the school had made false, misleading, and confusing statements about its sports medicine program. Id. The Minnesota Supreme Court found that the fraud claims benefited the public. Id. The Court clarified that the district court, in finding that plaintiffs had failed to demonstrate a public benefit because only a small number of individuals were injured, had incorrectly focused on the number of people injured by the misrepresentations and misapplied the controlling law "by ignoring the fact that [the Minnesota School of Business] misrepresented the nature of its program to the public at large." Id.
The Court concludes that Select Comfort has not adequately pleaded a public benefit. While Select Comfort's claims of misleading advertising to the general public support its claim that it has alleged a public benefit, see, e.g., Summit Recovery, LLC v. Credit Card Reseller, LLC, Civ No. 08-5273 (DSD/JSM), 2010 WL 1427322, at *5 (D.Minn. Apr. 9, 2010), Select Comfort and Sleep Better are direct competitors and Select Comfort's claims for relief are almost entirely for damages caused by dilution of its trademark and lost profits. Although Select Comfort does seek to enjoin
Select Comfort's argument that it has alleged a public benefit is belied by the Complaint's scant reference to either public harms or the effect of the alleged misrepresentations on the public. The Complaint mentions injury to "the public" only as a basis for seeking injunctive relief. (Compl. ¶ 91) Moreover, the Complaint makes no mention at all of the private attorney general statute, or the public rights that Select Comfort seeks to vindicate in bringing this action. Although the Complaint alleges consumer confusion in connection with the trademark claims, and consumer reliance on Sleep Better's misleading and deceptive statements, the harm complained of is particular to Select Comfort. (Compl. ¶¶ 97-90) If a lawsuit between competitors results in more accurate advertising, the public receives a collateral benefit. But reading Select Comfort's Complaint as a whole, the Court cannot conclude that it pleads a public benefit within the meaning of the Minnesota private attorney general statute. See Ly, 615 N.W.2d at 314 ("[T]he legislature could not have intended to sweep every private dispute based on fraud, and falling within the [M]CFA, into a statute where attorney fees and additional costs and expenses would be awarded, because to do so would substantially alter a fundamental principle of law deeply ingrained in our common law jurisprudence—that each party bears his own attorney fees in the absence of a statutory or contractual exception.").
While the Minnesota Supreme Court in Collins recognized that public rights sufficient to invoke the provisions of the private attorney general statute may be present even when the number of persons injured is small, Collins does not dictate the application of that statute here. In Collins, the type of harm complained of by the individual plaintiffs was the same type of harm inflicted on the public. A merchant competitor is not affected in the same way as the public. Indeed, the Complaint here is quite specific in describing the particular injury allegedly suffered by Select Comfort, and Select Comfort alone. Federal courts are obligated to predict how state law will develop in situations where the law is not clear. This Court does not read Collins as presaging an interpretation of the private attorney general statute that would necessarily impute a triggering public benefit in a merchant to merchant advertising dispute. Cf. Ly, 615 N.W.2d at 311 ("[T]he sweep of the statute can be no broader than the source of its authority—that of the attorney general—whose duties are to protect the public rights in the interest of the state."). Select Comfort can fully vindicate its own rights without recourse to the
Based on the files, records, and proceedings herein, and for the reasons stated above, IT IS ORDERED THAT:
1. Sleep Better's motion to dismiss [Docket No. 6] is GRANTED IN PART and DENIED IN PART.
2. Counts seven through nine on the Complaint are DISMISSED.