## Facts

- Seven plaintiffs of modest means, with little education and no chinchilla-ranching experience, saw defendant’s television advertisements in late 1966 and early 1967.
- The advertisements promoted chinchilla ranching as easy and low-effort and represented that purchasers could earn substantial income, including “five-figure” earnings.
- The advertisements and follow-up sales presentations also represented that there was a strong market for chinchilla fur and that the defendant would provide a buy-back or ready market for animals or pelts.
- After viewing the advertisements, defendant’s salesmen visited each plaintiff’s home, repeated the profitability and ease claims, and reassured plaintiffs about their facilities and expected results.
- Each plaintiff purchased from the defendant a “breeding set” (one male and six females) for about $2,150 or more, plus cages, feed, pumice, and other supplies.
- Plaintiffs were unable to achieve the represented profits; some made no sales.
- Evidence showed the animals and resulting fur were of poor quality and difficult or impossible to market at the prices implied by defendant’s promotions.
- The promised market support and buy-back arrangements did not exist as represented, leaving plaintiffs with substantial losses and ongoing maintenance costs.

## Issues

1. Whether defendant’s promotional claims about ease, profitability, animal quality, and market/buy-back support were actionable misrepresentations of fact or non-actionable sales opinion (“puffing”).
2. Whether plaintiffs justifiably relied on defendant’s representations given their lack of sophistication and inability to verify specialized claims.
3. Whether the misrepresentations were material and caused plaintiffs’ economic losses so as to warrant fraud remedies.

## Decision

- The court, sitting in diversity, found for the plaintiffs after a bench trial.
- The court held that defendant’s advertising and sales representations went beyond puffery and constituted actionable fraudulent misrepresentations.
- The court found the representations material to the transactions and accepted evidence that plaintiffs relied on them in deciding to purchase.
- The court concluded plaintiffs’ reliance was justifiable in light of their inexperience and dependence on defendant’s claimed knowledge and assurances.
- Judgment was entered awarding fraud-based relief, including remedies consistent with compensating plaintiffs’ losses and undoing the effects of the fraudulent inducement.

## Legal Principles

- Fraud liability arises when a party makes material misrepresentations of fact, knowing they are false or with reckless disregard for truth, intending reliance; the other party reasonably relies and suffers damages.
- Specific factual assurances about profitability, quality, and an available market or buy-back support are more likely to be treated as actionable fact statements than as non-actionable sales talk.
- Reasonableness of reliance is assessed in context, including the audience’s sophistication and whether the subject matter is specialized and difficult for the buyer to verify independently.
- Materiality and causation are established where the challenged representations go to the economic purpose of the deal and the buyer would not have entered the transaction absent the misstatements.

## Conclusion

The court held that the defendant’s concrete income and market assurances in a chinchilla “business opportunity” scheme were fraudulent misrepresentations, that the unsophisticated plaintiffs justifiably relied on them, and that plaintiffs were entitled to fraud remedies for losses caused by the inducement.


Fischer v. Division W. Chinchilla Ranch, 310 F. Supp. 424 (D. Minn. 1970)