Ly v. Nystrom

Kim Nystrom (defendant) owned a restaurant in Minnesota. Nystrom offered to sell the restaurant to Hoang Minh Ly (plaintiff). To convince Ly to buy the restaurant, Nystrom told Ly that the restaurant was successful and had monthly revenues of around $7,000. Ly purchased the restaurant business for $90,000, making a down payment and financing the balance with a business loan from Nystrom. Ly also agreed to pay rent to Nystrom for the building in which the restaurant was located. The restaurant never made a profit, and Ly was unable to make payments to Nystrom. Ly filed a lawsuit against Nystrom in state court, alleging that Nystrom had violated the Minnesota Consumer Fraud Act—one of the state’s unfair or deceptive acts or practices statutes—by misleading Ly about the value of the restaurant. Ly argued that the restaurant was worth $65,000 at the time of his purchase, making his damages—the difference between the actual value of the restaurant and what he paid for it—$25,000. Ly also sought costs and attorney’s fees against Nystrom under the Minnesota Private Attorney General Statute, which provided that any person who was injured by a violation of a law whose enforcement was entrusted to the state attorney general and successfully enforced the law could receive costs and attorney’s fees. Because the Consumer Fraud Act could be enforced by private citizens or the state attorney general, Ly believed he was entitled to costs and attorney’s fees. The district court held that Nystrom had defrauded Ly under common-law fraud. The court of appeals affirmed the district court, holding that Ly was not a consumer under the Consumer Fraud Act because that act did not apply to one-on-one business transactions. The court also held that the Private Attorney General Statute did not apply. Ly appealed.