I just want to add my solution:
I use german umlauts like ö, ü, ä and got the same error.
@Jarek Zmudzinski just told you how it works, but here is mine:
Add this code to the top of your Controller: # encoding: UTF-8
(for example to use flash message with umlauts)
example of my Controller:
# encoding: UTF-8
class UserController < ApplicationController
Now you can use ö, ä ,ü, ß, "", etc.