Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca8-18-03017/USCOURTS-ca8-18-03017-0/pdf.json

Parties Involved:
Ambassador Press, Inc.
Appellant
Durst Image Technology U.S., LLC
Appellee

Document Text:

United States Court of Appeals

For the Eighth Circuit

___________________________

No. 18-3017

___________________________

Ambassador Press, Inc.

lllllllllllllllllllllPlaintiff - Appellant

v.

Durst Image Technology U.S., LLC

lllllllllllllllllllllDefendant - Appellee

 ____________

Appeal from United States District Court

for the District of Minnesota - St. Paul

 ____________

 Submitted: October 15, 2019

Filed: February 5, 2020

____________

Before SMITH, Chief Judge, GRUENDER and BENTON, Circuit Judges. 

____________

BENTON, Circuit Judge.

Ambassador Press, Inc., a commercial printing company, purchased a printing

press, the Rho 1012, from Durst Image Technology U.S., LLC. Four years later,

Ambassador sued Durst for fraud, alleging the 1012 did not have the speed or

Appellate Case: 18-3017 Page: 1 Date Filed: 02/05/2020 Entry ID: 4878118
durability Durst represented at the time of purchase. The district court1

granted

Durst’smotion to dismiss. Ambassador appeals. Having jurisdiction under 28 U.S.C.

§ 1291, this court affirms. 

I. 

In 2013, Ambassador expressed interest in buying a commercial-grade Rho

1012 printer from Durst. The companies emailed about the characteristics of the

1012, including its speed, and the frequency and costs of replacing its 64 print heads

(each costing $12,990). 

As to speed, Durst’s Sales Manager emailed Ambassador that the 1012 would

be at least 50% faster than a competitor HP model and that “the 1012 is the fastest 12

picoliter 1000 dpi printer on the market.” Durst forwarded a chart of specific levels

of print output in square feet per hour. Durst delivered to Ambassador a written list

of expected output. Ambassador employees visited Durst’s headquarters(in Austria)

to see the printer and print heads, where Durst repeated many of the representations

about speed. 

As to durability, the Sales Manager emailed Ambassador that Durst’s

information about North American printers showed a “low failure rate of heads out

of warranty.” The Sales Manager noted that he had incomplete information for those

still in warranty, and no information about those sold overseas. He added that the

“worst case scenario I could find” was one unit that required six print-head

replacements at the end of two years. In another email, the Sales Manager informed

Ambassador that Durst had “some customers with many years of operation without

head replacement and others with minor but varying degrees of head replacements

1The Honorable Joan N. Ericksen, United States District Judge for the District

of Minnesota.

-2-

Appellate Case: 18-3017 Page: 2 Date Filed: 02/05/2020 Entry ID: 4878118
mostly due to preventative maintenance procedures and in some cases poor operator

practices.” During the trip to Austria, the Sales Manager and other Durst employees

represented that although Durst’s print heads were substantially more expensive than

others on the market, Ambassador should not worry because the print-heads were of

the highest quality, rarely fail, and rarely require replacement. 

At a Durst trade booth, an Ambassador employee “spent some time with the

tech on the machine,” emailing the Sales Manager that the printer had “[b]eautiful

print quality!” Soon after, Ambassador purchased the 1012, a service plan, and a

two-year warranty. Ambassador alleges that the 1012 never functioned as promised

in terms of speed or print-head durability. 

Four years after the purchase, Ambassador sued Durst in state court alleging

common law and consumer fraud. Durstremoved the case to federal court and moved

to dismiss the complaint. The district court dismissed the consumer fraud claim but

allowed an amended complaint for common law fraud. The amended complaint

reasserted the common law fraud claim. Durst moved to dismissit. The district court

dismissed for two reasons. First, the amended complaint failed to set forth plausible

allegations of fraud, and second, Ambassador failed to allege detrimental reliance

with particularity. Ambassador Press, Inc. v. Durst Image Tech. U.S., LLC, 2018

WL 3975117 at *4 ( D. Minn. Aug. 20, 2018).

II.

This court reviews de novo a dismissal for failure to state a claim, accepting

astrue the allegationsin the complaint and drawing all reasonable inferencesin favor

of the nonmoving party. Star City Sch. Dist. v. ACI Bldg. Sys., LLC, 844 F.3d 1011,

1016 (8th Cir. 2017). To withstand a motion to dismiss, a complaint must set forth

“enough facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp.

v. Twombly, 550 U.S. 544, 570 (2007). A claim is plausible when “the plaintiff

-3-

Appellate Case: 18-3017 Page: 3 Date Filed: 02/05/2020 Entry ID: 4878118
pleads factual content that allows the court to draw the reasonable inference that the

defendant isliable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678

(2009). “Where a complaint pleads facts that are ‘merely consistent with’ a

defendant’s liability, it ‘stops short of the line between possibility and plausibility.’” 

Id. quoting Twombly, 550 U.S. at 557. In a diversity suit, this court applies “federal

pleading standards. . . to the state substantive law to determine if a complaint makes

out a claim under state law.” Karnatcheva v. JPMorgan Chase Bank, N.A., 704

F.3d 545, 548 (8th Cir. 2013). 

In Minnesota, a fraudulent misrepresentation claim requires that a plaintiff

plead: 

(1) there was a false representation by a party of a past or

existing material fact susceptible of knowledge; (2) made

with knowledge of the falsity of the representation or made

as of the party’s own knowledge without knowing whether

is wastrue or false; (3) with the intention to induce another

to act in reliance thereon; (4) that the representation caused

the other party to act in reliance thereon; and (5) that the

party suffer[ed] pecuniary damage as a result of the

reliance. 

Trooien v. Mansour, 608 F.3d 1020, 1028 (8th Cir. 2010) citing Hoyt Props., Inc.

v. Prod. Res. Group, LLC, 736 N.W.2d 313, 318 (Minn. 2007). 

A complaint alleging fraud “must state with particularity the circumstances

constituting fraud or mistake.” Fed. R. Civ. P. 9(b). The complaint must plead “such

matters asthe time, place and contents of false representations, as well asthe identity

of the person making the misrepresentation and what was obtained or given up

thereby.” Shaller Tel. Co. v. Golden Sky Sys. Inc., 298 F.3d 736, 746 (8th Cir.

2002). The complaint must plead the “who, what, where, when, and how” of the

alleged fraud. United States ex rel. Joshi v. St. Luke’s Hosp., Inc., 441 F.3d 552,

-4-

Appellate Case: 18-3017 Page: 4 Date Filed: 02/05/2020 Entry ID: 4878118
556 (8th Cir. 2006). “Conclusory allegations that a defendant’s conduct was

fraudulent and deceptive are not sufficient to satisfy the Rule.” Schaller, 298 F.3d

at 746.

“Allegations pleaded on information and belief usually do not meetRule 9(b)’s

particularity requirement.” Drobnak v. Andersen Corp., 561 F.3d 778, 783 (8th Cir.

2009). “When the facts constituting the fraud are peculiarly within the opposing

party’s knowledge, however, such allegations may be pleaded on information and

belief.” Id. at 783-84. “If the plaintiff’s allegations of fraud are . . . based only on

information and belief, the complaint must set forth the source of the information and

the reasons for the belief.” Munro v. Lucy Activewear, Inc., 899 F.3d 585, 590 (8th

Cir. 2018).

Ambassador argues that their complaint is like the complaint in Johnson v.

Bobcat Co., 175 F. Supp. 3d 1130, 1135 (D. Minn. 2016). Plaintiff there bought a

Bobcat loader, alleging as a fraudulent misrepresentation: “top speed was not 12.3

mph as advertised, but rather, approximately half of that.” Bobcat, 175 F. Supp. 3d

at 1135. This allegation withstood the motion to dismiss because the plaintiff alleged

“specific mile-per-hour parameters” and provided the defendant with “more than

enough information to adequately respond and prepare a defense, which isthe critical

inquiry under Rule 9(b).” Id. at 1146.

In Bobcat, the plaintiff outlined at length the factual basis for each allegation

and how the model was incapable of meeting publicly-advertised metrics, including

the specific ways plaintiff tested and discovered that the representations were false. 

Complaint at 8-14, Johnson, 175 F. Supp. 3d 1130 (0:15-CV-02097). True,

Ambassador did allege the time, place and contents of the statements made about the

1012, but Ambassador did not allege any particular facts that the statements were

false to “allow[]the court to draw the reasonable inference that the defendant isliable

for the misconduct alleged.” Iqbal, 556 U.S. at 678. Ambassador does provide some

expected speeds with particularity, but, unlike in Bobcat, only makes the vague

-5-

Appellate Case: 18-3017 Page: 5 Date Filed: 02/05/2020 Entry ID: 4878118
assertion that the printer never reached it, with no factual information about actual

speeds reached. 

Ambassador discussestwo other Minnesota district court cases about pleading

fraud with sufficient particularity. Both dealt with defective consumer products that

allegedly did not perform as represented. See Podpeskar v. Makita U.S.A. Inc., 247

F.Supp. 3d 1001, 1010 (D. Minn. 2017); City of Wyoming v. Procter & Gamble Co.,

210 F. Supp. 3d 1137, 1154 (D. Minn 2016). In the lengthy amended complaint in

Podpeskar, plaintiff specifically alleged the features that made the company’s

batteries defective and how the alleged defect caused the batteriesto have less battery

life than advertised. Complaint at 4-5, Podpeskar, 247 F. Supp. 3d 1001

(0:15-CV-03914). Plaintiffs attached complaints from Amazon.com reviews

spanningmultiple years, effectively detailing the source of the information,the reason

for their belief that the defect existed, and defendant’s notice of these inadequacies

while continuing to represent that the batteries were defect-free. Id. at 9-12. The

district court ruled that the complaint clearly apprised defendant of the acts relied on

in support of the alleged claims. Podpeskar, 247 F. Supp. 3d at 1011. 

In City of Wyoming, the court ruled “Plaintiffs have thoroughly pleaded facts

about each Defendant’s alleged misrepresentations in marketing their products as

‘flushable’ when the wipes were allegedly not flushable,” and “Plaintiffs also plainly

allege that Defendants’ representations that their products are in fact flushable are

false.” City of Wyoming, 210 F. Supp. 3d. at 1154. Plaintiffs attached the

advertisements for the wipes, which said they break apart after flushing and are safe

for sewers and septic systems. Id. at 1147-49. Plaintiffs also attached pictures of the

still intact wipes clogging the city’s wastewater treatment facilities. Complaint at 16-

18, 27, City of Wyoming, 210 F. Supp. 3d 1137 (0:15-CV-02101). Unlike the

plaintiffs in Podpeskar and City of Wyoming, Ambassador does not set forth any

facts, beyond general descriptions of its own experience, to support its allegations

about the 1012's alleged inadequacies, or that Durst knew its representations about

the 1012 were false. 

-6-

Appellate Case: 18-3017 Page: 6 Date Filed: 02/05/2020 Entry ID: 4878118
A closer case on the factsis Drobnak v. Andersen Corp., 561 F.3d 778 (8th Cir.

2009). Plaintiffs there alleged four counts of fraud, pleading, on information and

belief, that their windows were not filled with inert gas, as Andersen represented at

the time of purchase. Drobnak, 561 F.3d at 784. This court held: “No facts were

pleaded to support this broad allegation, and the plaintiffs did not identify the facts

on which the belief was founded.” Id. This court determined that pleading on

information and belief was inappropriate because plaintiffs possessed the windows,

with sole access to the factual underpinnings for the conclusion that their windows

were not filled with the gas. Id. Further, this courtsaid that “plaintiffsfailed to plead

facts to support the ‘what’: that the products they own did not contain inert gas,”

instead making sweeping allegations. Id.

Ambassador alleges, on information and belief, that Durst knew, when it made

its representations, that “the Rho 1012 was experiencing significant print head

problems,” and that it knew “the Rho 1012 was experiencing significant speed

problems.” Ambassador alleges the representations made in support of the 1012's

speed and durability must be false based on its experience with the 1012. For

example, Ambassador alleges that in the four years since the purchase, they replaced

54 print heads. Ambassador argues that this number of replacements over four years

is excessive when compared with the historical performance data Durst provided

(although Durst provided print-head replacement data only for 1012 models after two

years). Ambassador also alleges that the 1012 “never functioned or achieved the

speeds as promised.” As in Drobnak, no additional facts were pleaded in support of

these broad allegations. 

Most instructive is Munro v. Lucy Activewear, Inc., 899 F.3d 585 (8th Cir.

2018). Plaintiff there pleaded, on information and belief, that intentional false

misrepresentations were made. The plaintiff “relie[d] on the phrase ‘on information

and belief’ to allege that [defendant]intentionally provided false promises.” Munro,

899 F.3d at 590. Plaintiff argued that defendant’s broken promises were proof it

-7-

Appellate Case: 18-3017 Page: 7 Date Filed: 02/05/2020 Entry ID: 4878118
never intended to keep the promises. Id. This court disagreed, noting that plaintiff’s

complaint did not “set forth any supporting facts showing that [defendant] intended

to defraud [plaintiff ]when the promises were made.” Id. at 590-91. Thus, plaintiff

did not adequately allege fraud under Minnesota law. Id.

As in Munro, Ambassador’s complaint does not set forth any supporting facts

showing that Durst intended to defraud them when the promises were made. All

Ambassador alleges is, on information and belief, that Durst knew of the problems

when it sold the printer. Ambassador alleges Durst told them, four years after the

purchase, that Durst had replaced fewer print heads than were actually replaced. 

They allege, on information and belief, that Durst lied about the number of

replacements to conceal the extent of the fraud. Instead of pleading facts that

plausibly show Durst knew its representations were false at the time of the purchase,

Ambassador’s allegations only indicate its experience did not align with its

expectations. 

The district court correctly determined that Ambassador did not plausibly

allege common law fraud. 

III.

Ambassador argues that the district court erred when it ruled that detrimental

reliance was not pleaded with sufficient particularity. Parties alleging fraud must

plead reliance with “sufficient particularity to state a plausible claim of justifiable

reliance.” OmegaGenesis Corp. v. Mayo Found. For Med. Educ. & Research, 851

F.3d 800, 805 (8th Cir. 2017). Conclusory allegations that a plaintiff detrimentally

relied on defendants’ representations are not sufficient factual matter to state a claim

of relief plausible on itsface. See Cox v. Mortgage Elec. Registration Sys., Inc., 685

F.3d 663, 673 (8th Cir. 2012). 

-8-

Appellate Case: 18-3017 Page: 8 Date Filed: 02/05/2020 Entry ID: 4878118
The only allegation in the complaint about reliance is the assertion that

“Ambassador would not have purchased the Printer, the Service Plan, or the two-year

warranty, but for the Fraudulent Misrepresentations.” Asin Cox, this is a conclusory

allegation. Ambassador pleads no other facts in support of Ambassador’sreliance as

a result of the allegedly fraudulent misrepresentations. 

Ambassador relies on consumer fraud cases to argue that a purchase

sufficiently proves reliance on the representations of a seller. Minnesota courts,

however, explain that “[r]eliance in fraud cases is generally evaluated in the context

of the aggrieved party’s intelligence, experience, and opportunity to investigate the

facts at issue. Valspar Refinish, Inc. v. Gaylord’s,Inc., 764 N.W.2d 359, 369 (Minn.

2009). “When a party conducts an independent factual investigation before it enters

into a commercial transaction, that party cannot later claim that it reasonably relied

on the alleged misrepresentation. Id.

As in Valspar, Ambassador and Durst are sophisticated commercial entities. 

Ambassador visited Durst’s facility, watched the printers operate, and viewed the

manufacture and testing of print heads. Ambassador representatives visited a Durst

sales booth and saw a demonstration of the machine, noting that they were happy with

the performance. Ambassador made an independent factual investigation before 

entering the transaction. Ambassador cannot assert,with only conclusory allegations,

that it reasonably relied on the alleged misrepresentations.

The district court properly determined that reliance was not pleaded with

particularity and properly granted the motion to dismiss.

* * * * * * *

The judgment is affirmed.

______________________________

-9-

Appellate Case: 18-3017 Page: 9 Date Filed: 02/05/2020 Entry ID: 4878118