This opinion will be unpublished and
may not be cited except as provided by
Minn. Stat. § 480A.08, subd. 3 (2004).
STATE OF MINNESOTA
IN COURT OF APPEALS
Pharmaceuticals, Inc., et al.,
Filed September 26, 2006
Affirmed in part, reversed in part, and remanded
File No. C9-04-7261
Daniel E. Gustafson, Jason S.
Kilene, Amanda M. Martin, Gustafson Gluek PLLC, 650 Northstar East, 608 Second
Avenue South, Minneapolis, MN 55402-1937; and
Michael W. Sobol (pro hac vice),
Leiff, Cabraser, Heimann & Bernstein, LLP, Embarcadero Center West, 275
Battery Street, 30th Floor, San Francisco, CA 94111-3339 (for appellant)
Michael A. Lindsay, Surya Saxena,
Dorsey & Whitney LLP, 50 South Sixth Street, Suite 1500, Minneapolis, MN
Phillip A. Bradley (pro hac vice),
McKenna Long & Aldridge LLP, 303 Peachtree Street N.E., Suite 5300,
Atlanta, GA 30308-3265 (for respondents)
Considered and decided by Ross,
Presiding Judge; Shumaker, Judge; and Wright, Judge.
U N P U B L I S H E D O P I N I O N
This case concerns alleged misrepresentation in the
sale of a pharmaceutical product. Judith
Yarrington appeals the dismissal of her action against respondent Solvay
Pharmaceuticals, Inc., and respondent Solvay America, Inc. Yarrington argues that the district court
erred by dismissing her claims against Solvay America for lack of personal
jurisdiction and by dismissing her claims against Solvay Pharmaceuticals for
failure to state a claim on which relief can be granted. We affirm in part, reverse in part, and
Solvay Pharmaceuticals manufactures and markets prescription drugs,
including Estratest and half-strength Estratest H.S. (collectively referred to
as Estratest). Estratest is a
combination of estrogen and androgen prescribed to manage moderate to severe
vasomotor symptoms associated with menopause.
Solvay Pharmaceuticals has manufactured and marketed Estratest since
1964. The Food and Drug Administration
has never approved Estratest as safe and effective, or suitable for marketing,
distribution, or sale to the public.
Solvay Pharmaceuticals is
incorporated in Georgia. Its principal place of business is in Georgia, but it maintains an office in Baudette, Minnesota. Solvay Pharmaceuticals is a wholly owned
subsidiary of respondent Solvay America
(collectively referred to as Solvay), which is incorporated in Delaware and has its principal place of business in Texas.
March 2004, Judith Yarrington filed a class-action complaint in Dakota County
district court against Solvay alleging negligent misrepresentation, fraud,
breach of express and implied warranties, and violations of several of Minnesota’s consumer-fraud
statutes. Yarrington alleges that the FDA
has not approved the prescription of Estratest.
She claims that a physician prescribed Estratest to her in January 2004
and that its ingestion caused her to suffer from several non-life-threatening
health disorders. On behalf of herself
and others similarly situated, Yarrington sought an injunction directing Solvay
to conduct a national media campaign to inform purported class members and
physicians that Estratest is not FDA approved, to pay compensatory damages in
excess of $50,000, and to pay disgorgement of Solvay’s profits from the sale of
Estratest, with restitution. Solvay
removed the case to federal district court, which remanded the case to Minnesota district court
for lack of federal subject-matter jurisdiction.
then moved for dismissal on the basis that the Minnesota district court lacked personal
jurisdiction. Solvay Pharmaceuticals
also moved for dismissal, arguing that Yarrington failed to state a claim upon
which relief can be granted and failed to plead her claims of fraud with
sufficient particularity. Yarrington
argued that Minnesota has derivative
jurisdiction over Solvay America
and that Solvay Pharmaceuticals’ motion to dismiss is without merit.
The district court found that
“Solvay America and Solvay
Pharmaceuticals are separate entities and are not so intertwined as to create
sufficient contacts between Solvay America
and Minnesota,” and it granted Solvay America’s
motion to dismiss for lack of personal jurisdiction. It dismissed six of Yarrington’s eight claims—the
fraud-based claims—for failure to plead with sufficient particularity to
satisfy the pleading requirements of the Minnesota Rules of Civil
Procedure. The district court noted that
Yarrington’s complaint failed to identify any specific fraudulent statement or
omission, failed to allege when or where either defendant made any fraudulent statement,
and failed to allege that she or her physician ever saw or relied upon any
alleged misrepresentation regarding FDA approval. The district court dismissed Yarrington’s
warranty claims because Yarrington did not provide notice to Solvay to satisfy
a prerequisite for suit and because Yarrington failed to plead facts that
establish the existence of a warranty.
Yarrington’s appeal from the dismissal of her claims follows.
D E C I S I O N
Lack of Personal Jurisdiction
first challenges the district court’s dismissal of her claims against Solvay America for lack of personal jurisdiction over
Solvay America. Whether personal
jurisdiction exists is a question of law, which we review de novo. Juelich v. Yamazaki Mazak Optonics Corp., 682 N.W.2d 565, 569 (Minn. 2004). To establish personal jurisdiction, a
plaintiff has the burden to prove that a defendant has sufficient contacts with
the forum state. Id.at 570.
When considering a pretrial jurisdiction challenge, the district court
assumes that the plaintiff’s allegations and supporting evidence are true. Id. The plaintiff need only make a prima facie
showing of jurisdiction to survive a motion to dismiss for lack of personal
jurisdiction. Hardrives, Inc. v. City
of LaCrosse, 307 Minn.
290, 296, 240 N.W.2d 814, 818 (1976).
complaint alleges that the “Defendants . . . purposefully availed
themselves of the privilege of conducting activities within the State of Minnesota and, in fact,
maintain regular and continuous business contacts within the State.” Accepting these allegations as true, we
conclude that Yarrington’s complaint presents a prima facie showing of jurisdiction
sufficient to survive Solvay America’s
motion to dismiss.
district court did not limit its consideration to the facts alleged in the
complaint. Solvay America
supported its motion to dismiss for lack of personal jurisdiction with an
affidavit from its vice president and general counsel, Edwin Buckingham. The Buckingham affidavit tends to demonstrate
that Solvay America lacks sufficient contacts with
Minnesota to establish personal jurisdiction and that Solvay Pharmaceuticals is
not “an instrumentality or alter-ego” of Solvay America. See Zimmerman v. Am. Inter-Ins. Exch., 386 N.W.2d 825, 828 (Minn.
App. 1986) (noting that a nonresident corporation may be subject to personal jurisdiction
by virtue of the contacts of a subsidiary corporation if the two corporations
are “organized and operated so that one corporation is an instrumentality or
alter-ego of the other corporation”), review
denied (Minn. July 31, 1986).
Yarrington attempted to counter the Buckingham affidavit by
requesting that the district court allow jurisdictional discovery, contending
that factual weaknesses in the affidavit could be exposed on cross examination
and through unspecified other discovery.
The district court denied Yarrington’s request for jurisdictional discovery. It nevertheless based its dismissal of
Yarrington’s claims against Solvay America for lack of personal
jurisdiction on factual findings that depend entirely on the assertions in the
We agree with Yarrington that the district court should
have allowed her to conduct jurisdictional discovery of facts relevant to the
court’s jurisdiction over Solvay America. On a rule 12.02 motion to dismiss for lack of
personal jurisdiction, the district court may look beyond the complaint and
consider other facts in evidence. See Hardrives, 307
Minn. at 293,
240 N.W.2d at 816 (noting that a plaintiff need only make a prima facie case
through the complaint and other supporting evidence). The decision to grant jurisdictional discovery is
within the district court’s broad discretion. Behm v. John Nuveen & Co., 555
N.W.2d 301, 305 (Minn.
App. 1996). As this court has expressed,
however, “[j]urisdictional discovery generally is permitted
before a court rules on a motion to dismiss for lack of personal jurisdiction.” Id.
Solvay America criticizes Yarrington’s failure to carry her burden to prove
sufficient contacts with the state to justify the court’s exercise of personal
jurisdiction. But Solvay America’s contention that the “evidence clearly establishes
that Solvay America does not have sufficient minimum contacts with Minnesota” would be much
more persuasive had Yarrington not been denied the
opportunity to collect relevant jurisdictional evidence through discovery
before dismissal. Solvay America
is generally correct that jurisdictional discovery is unnecessary if the
discovery is unlikely to lead to evidence establishing personal
jurisdiction. See id. at 305. But Solvay America’s
reliance on Behm for the proposition
that jurisdictional discovery is unnecessary here is not well founded. In Behm,
we saw no abuse of discretion in the district court’s tacit denial of a
plaintiff’s request to supplement the record in support of personal
jurisdiction. Id. But in that case, the district court and this
court concluded that supplementing the record would have been materially
unproductive only after each court reviewed the proposed supplemental
information and determined that the information could not prove the requisite
minimum contacts for personal jurisdiction.
Id. Here, Yarrington is not challenging the
district court’s refusal to consider evidence; she challenges its refusal to
allow the discovery of evidence. Because
the district court considered and relied exclusively on information that Solvay
America supplied to rebut the jurisdictional allegations in the complaint, we
conclude that it should have allowed Yarrington limited discovery to provide
support for those allegations. At the
very least, Yarrington should have been allowed an opportunity to depose
Buckingham to test the veracity of his affidavit. Solvay America’s contention that there are
insufficient facts to connect it to the state as it regards Yarrington’s cause of action may ultimately prove to
be accurate. The district court abused
its discretion, however, by resolving this factual dispute against Yarrington’s
jurisdictional allegations based on Solvay America’s factual representations
while foreclosing jurisdictional discovery. We therefore reverse the district
court’s dismissal of Yarrington’s claims against Solvay America and
remand for jurisdictional discovery as limited at the discretion of the
Failure to State a Claim
argues that the district court erred by dismissing her lawsuit for failure to
state a claim upon which relief can be granted.
We review the dismissal de novo to consider
whether the complaint sets forth a legally sufficient claim for relief. Barton v. Moore, 558 N.W.2d 746, 749 (Minn. 1997). We must accept the allegations in the
pleadings as true and draw all inferences in favor of Yarrington as the
non-moving party. Bodah v. Lakeville Motor Express, Inc., 663 N.W.2d 550, 553 (Minn. 2003).
Yarrington raised, and the district court dismissed, several
claims arising out of Solvay’s alleged misrepresentations and fraud. “In all averments of fraud or mistake, the
circumstances constituting fraud or mistake shall be stated with
particularity.” Minn. R. Civ. P. 9.02. Recitation of the elements of fraud
without specific factual allegations is insufficient. Stubblefield
v. Gruenberg, 426 N.W.2d 912, 914 (Minn.
App. 1988). Failure to plead fraud with
sufficient particularity justifies dismissal of the claim. See Westgor
v. Grimm, 318 N.W.2d 56, 58 (Minn.
district court applied this heightened pleading requirement to Yarrington’s
common-law fraud, negligent misrepresentation, and statutory consumer-fraud
claims. Yarrington’s complaint alleges
several specific representations by Solvay about Estratest. It alleges that Solvay made representations
that Estratest is “indicated” for the management of vasomotor symptoms
associated with menopause and that this information was included in the
Physician’s Desk Reference (PDR) and on various websites, including
Solvay’s. The complaint specifically
asserts that the information Solvay provided the PDR “deceives physicians and
consumers into believing that Estratest is an FDA approved drug.” Yarrington
identifies only one, alleged actual misrepresentation by Solvay concerning Estratest’s
FDA approval status. She alleges that
Solvay checked a box on a Department of Defense form indicating that Estratest
is FDA approved. Although her 104-paragraph
complaint otherwise lacks allegations of fraudulent statements by Solvay, it
does make these specific allegations of misrepresentation, and we conclude that
Yarrington alleged the circumstances constituting fraud with sufficient
particularity to satisfy the heightened pleading requirement in rule 9.02.
it does not follow from the satisfaction of the heightened pleading requirement
in rule 9.02 that Yarrington stated claims for which relief can be
granted. On careful review of her
complaint, we conclude that four of Yarrington’s eight claims should have
survived Solvay’s motion to dismiss.
first consider Yarrington’s two common-law
misrepresentation claims. The
elements of common-law fraud are (1) a false representation of a material fact;
(2) knowledge by the person making the representation of its falsity; (3)
an intention that another person act on the false representation or
circumstances justifying reliance on the false representation; (4) reliance in
fact on the false representation; and (5) damages attributable to the false
representation. In re Strid, 487 N.W.2d 891, 893–94 (Minn. 1992).
Negligent misrepresentation requires the same proof as fraud, minus scienter.
v. Olson, 387 N.W.2d 168, 173 (Minn.
1986). Both common-law fraud and
negligent misrepresentation require that a plaintiff prove reliance on the allegedly
false representation. Strid, 487 N.W.2d at 894; Florenzano, 387 N.W.2d at 174 n.4. Yarrington’s complaint does not allege that
she or her doctor relied on any representation by Solvay. Because Yarrington failed to allege reliance
on Solvay’s allegedly false representations, we conclude that Yarrington failed
to state a common-law fraud or negligent-misrepresentation claim upon which
relief can be granted. The district
court did not err by dismissing these two claims.
next turn to Yarrington’s statutory consumer-fraud claims. Yarrington’s complaint alleges consumer
fraud, in violation of Minn. Stat. § 325F.69 (2002); unlawful trade
practices, in violation of Minn. Stat. § 325D.09 (2002); deceptive trade
practices, in violation of Minn. Stat. § 325D.44 (2002); and false
statement in advertising, in violation of Minn. Stat. § 325F.67
(2002). These four claims require
Yarrington to show that Solvay made a false representation, misled, or caused
confusion in its marketing of Estratest.
See Minn. Stat. §§ 325D.09, .44, 325F.67,
passed the consumer-fraud statutes to “make it easier to sue for consumer fraud
than it had been to sue for fraud at common law.” State
by Humphrey v. Alpine Air Prods., Inc., 500 N.W.2d 788, 790 (Minn. 1993). It did so by eliminating the common-law requirement
that a plaintiff show reliance on an alleged misrepresentation. Id. It is, therefore, not necessary to plead individual
consumer reliance on an alleged misrepresentation in a complaint of violations
consumer-fraud statutes. See Group Health Plan, Inc. v. Philip Morris
Inc., 621 N.W.2d 2, 12-13 (Minn.
a plaintiff need not plead reliance in a statutory consumer-fraud claim, “causation remains an element of such a claim.” Id. at
13. Yarrington’s allegation that
“information provided by [Solvay] that is published in the PDR deceives
physicians and consumers into believing that Estratest is an FDA approved drug,”
coupled with the allegation that this deception causes the drug’s prescription,
sufficiently alleges causation. These
allegations, along with other similar causal references throughout her
complaint, satisfy the pleading requirement for her statutory consumer-fraud
claims. Our determination does not
address the merit of these allegations; but because Yarrington did not fail to
state consumer-fraud claims upon which relief can be granted, we conclude that
the district court erred by dismissing these claims at this preliminary stage.
next address the district court’s dismissal of Yarrington’s express- and
implied-warranty claims. The district
court also dismissed these two claims for failure to state a claim upon which
relief can be granted. Yarrington’s complaint alleges that by falsely representing
Estratest to be FDA approved, Solvay made warranties that Estratest is safe,
effective, and suitable for sale.
The district court determined that Yarrington’s warranty claims fail
because she did not give Solvay the required notice of the alleged warranty breaches,
because Yarrington did not allege that Solvay made specific claims or promises
about Estratest being FDA approved, and because Yarrington did not allege any
facts establishing a link between the alleged nonconformity and her damages. We agree with the district court’s decision to
dismiss Yarrington’s warranty claims.
To succeed on a claim of breach of warranty, a plaintiff must prove
(1) the existence of a warranty; (2) breach
of the warranty; and (3) causation of damages. Duxbury
v. Spex Feeds, Inc., 681 N.W.2d 380,
393 (Minn. App. 2004) (citing Peterson v. Bendix Home Sys., Inc., 318 N.W.2d 50, 52–53 (Minn. 1982)), review
Aug. 25, 2004). When a seller makes “[a]ny
affirmation of fact or promise” about a product to a purchaser, an express
warranty arises that the product will conform to that promise. Minn.
Stat. § 336.2‑313(1)(a) (2004).
An implied warranty of merchantability arises automatically when a
seller is in the business of furnishing a product to the consumer; the implied
warranty provides that the product is fit for its ordinary
and intended use. Id.,§ 336.2‑314(1), (2)(c) (2004). But notice must generally precede a
successful warranty-breach claim: Minnesota
law requires that a buyer who discovers a breach of warranty “must within a
reasonable time after the buyer discovers or should have discovered any breach
notify the seller of [the] breach or be barred from any remedy.” Id. § 336.2‑607(3)(a)
does not allege that she ever gave notice to Solvay or to any direct seller of
Estratest that Solvay was falsely representing Estratest as having FDA approval
and was unsuitable for use. She argues instead
that notice is unnecessary because Solvay was aware that Estratest did not have
FDA approval. See Church of the Nativity v. Watpro, Inc., 491 N.W.2d 1, 5 (Minn. 1992), overruled
on other grounds by Ly v. Nystrom, 615 N.W.2d 302, 314 n.25
(Minn. 2000). But Yarrington’s warranty claims are not
based on Estratest not being approved by the FDA but on Solvay’s alleged
promise that Estratest is FDA approved and on Solvay’s marketing of Estratest
as being fit for sale and for the indicated uses. Solvay’s knowledge that Estratest lacked FDA
approval has no bearing on whether Solvay promised that Estratest was FDA
approved or whether Estratest is allegedly not fit for its indicated uses. We are not persuaded by Yarrington’s contention
that she need not provide notice of the alleged warranty breaches.
complaint also fails to allege that Solvay made an affirmation
of fact or a promise about Estratest’s FDA approval to her or her doctor. She has therefore failed to allege
facts establishing the existence of an express warranty. See Minn. Stat. § 336.2‑313(1)(a). Additionally, Yarrington’s complaint
does not allege that Estratest is unfit for its indicated uses, except to claim
that the lack of FDA approval establishes lack of fitness. Because fitness for an intended use does not
depend on FDA approval, Yarrington has failed to allege facts establishing the
existence of an implied warranty. See id. § 336.2‑314(1), (2)(c). We
conclude that the district court did not err by dismissing Yarrington’s claims
for breach of express and implied warranty.
Affirmed in part, reversed in part, and