When the statute underlying the plaintiffs' cause of action provides that attorney fees are awardable as part of costs and disbursements, attorney fees may be included in the costs and disbursements allowed by the court under a Rule 68 offer unless the parties to the offer explicitly agree otherwise.
When a Rule 68 offer of judgment encompasses multiple claims that include both statutory claims authorizing an award of attorney fees and common law claims not authorizing an award of attorney fees, the claimant is entitled to seek reimbursement for reasonable attorney fees.
Plaintiffs demonstrated that their claims for false advertising and consumer fraud benefited the public because defendant made misrepresentations to the public at large.
The opinion of the court was delivered by: Anderson, Paul H., Justice
Office of Appellate Courts Court of Appeals Anderson, Paul H., J.
Heard, considered, and decided by the court en banc.
Respondents Angela Collins and 17 other former students of the Minnesota School of Business's (MSB) Sports Medicine Technician program brought both common law and statutory claims against MSB. They alleged that MSB made false, misleading, and confusing statements about its sports medicine program. Four days before trial, respondents accepted MSB's Rule 68 offer of judgment for $200,000 "together with any costs and disbursements allowed by the District Court." Respondents subsequently applied to the district court for costs and disbursements, including attorney fees, under the private attorney general statute, Minn. Stat. § 8.31. The court awarded respondents $7,088.75 in costs and disbursements, but denied any attorney fees on the ground that respondents' claims did not benefit the public. The court of appeals reversed and awarded attorney fees concluding that (1) the offer of judgment was enforceable, (2) respondents qualified as prevailing parties under the private attorney general statute, and (3) respondents' claims benefited the public. We affirm and remand.
The Minnesota School of Business is a private post-high school educational institution offering one and two-year programs in the fields of business, medicine, and computers. It offers its programs to the general public and as of 1998, it had a total enrollment of over 1,200 students. As required by Minn. Stat. § 141.25, subd. 1 (2002), MSB was licensed by the Minnesota Higher Education Service Office (HESO). In 1995, MSB launched its Sports Medicine Technician program. The program was approved by HESO. MSB publicized the program by airing a television advertisement that depicted an aerobics class, a whirlpool, a person on a treadmill, and a person receiving treatment. The advertisement announced that, "[i]n today's active society the need for qualified sports medicine technicians continues to grow rapidly." MSB also made numerous sales and informational presentations to prospective students and provided students with a "Career Opportunities" sheet, listing jobs for which students might qualify after completing the program.
In the spring of 1996, students learned that the Career Opportunities sheet listed jobs that did not exist and that a "sports medicine technician" was not a position or title commonly recognized in the sports medicine field. Students then complained to MSB. In its response to student complaints, MSB maintained that it never intended the Career Opportunities sheet to correspond with formal job titles; rather, it was intended to represent, describe, and identify the types of activities students would be qualified to perform after completing the program.
In the spring and summer of 1997, MSB revised its curriculum. HESO approved the curriculum changes. After implementing the curriculum changes, MSB decided to change the name of its program to "Health and Exercise Sciences." In a letter to HESO, MSB's director of medical education requested approval for the name change and explained the change by stating that "[the new] name more closely reflects the content of the revised curriculum without the myriad difficulties associated with the current name." HESO approved the name change.
At about the same time, in February 1997, respondents commenced this action. They brought both common law and statutory claims. The common law claims included fraud, negligent misrepresentation, and breach of contract. The statutory claims alleged violations of the deceptive trade practices statute, Minn. Stat. § 325D.44 (2002), the false statement in advertising statute, Minn. Stat. § 325F.67 (2002), and the prevention of consumer fraud act, Minn. Stat. § 325F.68-.70 (2002). In March 1998, respondents amended their complaint by adding three additional plaintiffs.
MSB answered, asserting that the action was an educational malpractice claim, which is not recognized in Minnesota. MSB also counterclaimed against two respondents alleging interference with contractual relations and prospective business relationships. Both sides made summary judgment motions. Respondents moved for summary judgment on the three statutory claims and to dismiss MSB's counterclaims. They also moved to add a claim for punitive damages. MSB moved to dismiss all of respondents' claims primarily on the basis that the action was for educational malpractice.
Addressing respondents' motion for summary judgment on the statutory claims, the district court found that a genuine issue of fact existed as to whether the television advertisement and the Career Opportunities sheet were sufficiently misleading to allow for recovery, and denied the motion. The court also denied MSB's motion for summary judgment and respondents' motion for punitive damages. MSB voluntarily withdrew the counterclaim against one respondent, and the court granted the other respondent's motion to dismiss the counterclaim against her.
On October 27, 2000, MSB made a $90,000 offer of judgment under the provisions of Minn. R. Civ. P. 68. Respondents' trial counsel asserts that during a telephone conversation he told MSB's counsel that "based on the language of the offer, I believed Plaintiffs had the right to request an award of attorney fees as part of the costs and disbursements to be added to the amount of the offer." On October 31, MSB increased the offer to $150,000. Respondents countered with a $355,000 offer. Then, on November 1, five days before trial was to commence, MSB made its final Rule 68 offer. The offer of judgment provided in relevant part "judgment to be entered in favor of Plaintiffs and against Defendant in the sum of Two Hundred Thousand and no hundredths Dollars ($200,000.00) together with any cost and disbursements allowed by the District Court." In an affidavit, MSB's counsel asserted that when he ...