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Important Win for Consumers at the Minnesota Supreme Court

Yesterday, in a win for consumer rights activists, the Minnesota Supreme Court unanimously ruled that incurring attorney’s fees qualifies as an “injury” and establishes standing under the Minnesota Consumer Fraud Act, Minn. Stat. § 325F.69. Nichols Kaster applauds this ruling, which is consistent with an amicus brief that the firm filed on behalf of the National Association of Consumer Advocates.

The facts and history of the case are set forth in the Court’s opinion.  In summary, Plaintiff Daniel Engstrom alleged that Defendant Whitebirch, Inc. (“Whitebirch”) created a fraudulent deed that conveyed Mr. Engstrom’s mother’s interest in a timeshare in Brainerd to Mr. Engstrom. Upon his mother’s death, Mr. Engstrom began receiving bills from Whitebirch for supposed past due maintenance fees on the timeshare that Whitebirch claimed Mr. Engstrom now owned.

Mr. Engstrom did not believe he owned the timeshare and hired an attorney to investigate the validity of Whitebirch’s demands. That investigation uncovered what Mr. Engstrom alleges are hundreds of fraudulent deeds conveyed by Whitebirch to consumers across the state, including the deed conveyed to him. Mr. Engstrom sued Whitebirch in district court, alleging that Whitebirch violated the Minnesota Consumer Fraud Act by (1) engaging in a pattern and practice of fraud by creating fake titles to trick timeshare owners’ heirs into paying fees they do not owe; and (2) creating the appearance of clean title, allowing Whitebirch to bypass decedents’ estates and resell the interests in the timeshare.

Whitebirch filed a motion in district court for judgment on the pleadings, arguing that Mr. Engstrom had not been injured and lacked standing to bring his claims. The district court agreed, noting that Mr. Engstrom did not pay any money to Whitebirch, and dismissed the Complaint for failure to state a claim. Mr. Engstrom appealed, arguing that he suffered an injury because he hired an attorney to investigate the matter. The court of appeals affirmed the district court, agreeing that Mr. Engstrom had not sufficiently plead an injury to establish standing without paying any money to Whitebirch.

In a unanimous opinion, the Minnesota Supreme Court disagreed with the lower courts. It held that Mr. Engstrom suffered a loss in hiring an attorney to investigate the alleged fraud and thus suffered an injury under the statute and has standing to bring the action.

Whitebirch argued that attorney’s fees incurred for investigating a case cannot constitute an injury because Mr. Engstrom would be awarded attorney’s fees should he win the case. But the Court explicitly rejected this. The Court reversed the court of appeals and remanded the case to district court for further proceedings.

Nichols Kaster attorneys Kai Richter and Chloe O’Neill submitted an amicus brief in support of Mr. Whitebirch on behalf of the National Association of Consumer Advocates.

Nichols Kaster