Judicial selection, resolving the budget deficit, providing for victims of the I-35W bridge collapse, and requiring insurers to handle claims in “good faith” were among the key issues before the legislature this session, but lawmakers enacted multiple other initiatives of interest to lawyers in multiple areas of law.
The Legislature began the 2008 session with an ambitious list of priorities that included job growth, transportation funding, health care reform, and property tax relief but confronted with a near billion-dollar deficit. The session ended with the governor and legislative leaders agreeing that progress, albeit sometimes minor, had been made in all of these areas. Despite their agreement on many issues, the DFL-controlled legislature and Republican governor continued to often find themselves at odds leading Gov. Pawlenty to veto part or all of 34 bills in 2008—the most for a single session since records have been kept.
For most lawyers, four issues dominated the 2008 session: judicial selection, court funding, I-35W bridge-victims’ compensation, and “good faith” insurance.
One of the top issues for attorneys this session was judicial selection. The release of the Quie Commission Report on Judicial Selection served as a catalyst for a legislative review on judicial elections. The report recommended a constitutional amendment to replace the current system of judicial elections. The new system would require the governor’s appointments to come from a merit selection commission and a performance evaluation commission that would evaluate judges who would then stand unopposed in a retention election.
Despite testimony from former governors, former Supreme Court justices, and a former vice president, these bills failed to move out of committee. Testimony was also offered on the commission’s minority report, which differed from the majority’s recommendations in that it called for a performance evaluation commission to recommend reappointment or removal of the judge or justice, rather than retention elections.
Over the course of the session, the MSBA supported an amended version of the Quie Commission bill after changes were made to the composition and process of the evaluation commission elements of the bill.
The principal challenge of the 2008 session was reaching a budget deal to resolve a billion-dollar deficit. Unfortunately, resolution of the issue meant budget cuts for the courts. Gov. Pawlenty proposed cuts which would have resulted in an approximately 4 percent reduction for the Supreme Court ($1.265 million) (as well as another $516,000 from Civil Legal Services), an approximately 3 percent cut for both the Court of Appeals and the district courts ($282,000 and $7.039 million, respectively), and a 2 percent reduction for the Board of Public Defense ($2.781 million).
After testimony from the courts, public defenders, legal aid, and the MSBA, the courts’ cuts were scaled back, but the result was still significant reductions.
In the end, the governor and legislature agreed on a budget where the courts will face the following annual funding cuts starting next year:
Supreme Court: $831,000 (approximately 2.5%)
Civil Legal Services: $120,000
Court of Appeals: $250,000 (approximately 2.5%)
District Courts: $2.8 million (approximately 1%)
Board of Public Defense: $1.491 million (approximately 1%)
(See Chapter 363 (H.F. 1812/S.F. 3813).
I-35W Bridge Collapse
While there was broad agreement on the need for compensation, the principal sticking point of the legislation was whether the liability caps should be removed. In the end, legislation passed and was signed into law as Chapter 288.
Under Chapter 288, the chief justice of the Supreme Court will establish a special master panel to consider claims, make offers of settlements, and enter into settlement agreements with survivors on behalf of the state. Victims will be entitled to damage awards of up to $400,000 to be paid out of a $24 million fund. Victims may also qualify for supplemental payments for uncovered medical costs and wage losses from a separate $12.6 million supplemental fund. A survivor who accepts an offer of settlement from the panel must agree in writing to release the state, and every municipality of the state, from liabilities arising from the catastrophe and cooperate with the state in pursuing claims the state may have against any other party. A survivor who elects not to settle with the state may elect to proceed with its claim in district court.
Chapter 288 became effective May 9, 2008, with increase in the statutory liability cap made retroactive to August 1, 2007. Bridge claimants must file by October 15, 2008, and offers from the panel must be made by February 28, 2009.
“Good Faith” Insurance Bill
Under this legislation, which would require insurers to act in good faith in handling insurance claims, an insurer’s failure to act in good faith would result in costs and damages, as well as possible attorneys fees and costs being awarded against it. Based on a conference committee compromise, the bill was passed and signed into law as Chapter 208.
Under the law, the injured insured may be awarded damages equal to an amount equal to one-half of the proceeds awarded that are in excess of the amount offered by the insurer at least ten days before the trial begins or $250,000, whichever is less. In addition, an aggrieved insured may be awarded reasonable attorneys fees, not to exceed $100,000.
Chapter 208 is effective August 1, 2008, and applies to causes of action for conduct that occurs on or after that date.
MSBA Legislative Agenda
Real Property Law – Chapter 341:
The Real Property Law Section proposed three legislative changes to be enacted during the 2008 session: (1) a creation of a transfer on death deed; (2) clarification of acknowledgments made in a representative capacity; and (3) application of the common law doctrine of practical location to register land. These three proposals were combined and introduced as Senate File2795 and House File 3134.
Although the transfer on death deed and practical location provisions received much discussion in both the House and Senate, the only significant change to the language first proposed was an amendment to protect the priority of medical assistance liens on property subject to the transfer on death deed.
Under the transfer on death deed, the deed would expressly state that it is only effective on the date of death of one or more of the grantor owners, and is subject to the survivorship provisions and requirements of probate law. The transfer on death deed must also comply with other applicable Minnesota laws. The statutes does provide for rules regarding clearing public assistance claims and liens, and recording obligations. The property transferred under the transfer on death deed is subject to any mortgage or security interests existing at the date of death and may not be revoked by will. The transfer on death deed provision is effective on August 1, 2008, and applies to conveyances recorded on or after that date, regardless of their date of execution.
The section on practical location is effective on August 1, 2008, and applies to land whenever registered. The sections governing acknowledgments became effective May 19, 2008, and apply to documents acknowledged before, on, or after that date.
Probate Law – Chapter 341:
Like the Real Property Law Section, the Probate and Trust Law Section had three legislative proposals: (1) changing the share of a surviving spouse of a decedent who made a premarital will from elective to an intestate share; (2) extending the homestead exemption to homesteads passing in trust; and (3) clarifying the creditor sections of the probate code. In the end, the Probate and Trust Law Section bill was amended into House File 3420 which became Chapter 341. Effective Date: August 1, 2008.
Family Law – Chapter 315:
Although the Family Law Section initially recommended three legislative changes during the early part of the session, it decided to concentrate its effort on a single proposal, i.e., eliminating the requirement that a Social Security number appear on a marriage dissolution petition. The Family Law Section’s proposal, like the Real Property Law and Probate and Trust Law sections’ proposals, was eventually amended into a larger bill. In the case of the Family Law proposal, it became a section of Chapter 315 (S.F. 3235/H.F. 3553), the Omnibus Data Practices bill. In its final form, the proposal was amended to provide that while the Social Security number would not be required on a petition for dissolution of marriage or legal separation involving child support or spousal maintenance, the petition would have to be accompanied by a separate document that contains the Social Security numbers of the petitioner and respondent and that document would be maintained in a portion of the court file or records not accessible to the general public. Effective Date: August 1, 2008.
Business Law – Chapter 233:
The Business Law Section proposed multiple technical amendments to the Business Corporation Act, Limited Liability Company Act, and Uniform Limited Partnership Act of 2001, as well as a separate amendment to permit the formation of a nonprofit limited liability company for any lawful purpose, including both nonprofit purposes and non-business purposes. The proposals were adopted and enacted as Chapter 233. The provision of the bill receiving the most attention was the section regarding the formation of nonprofit limited liability companies; and, specifically, the need for clarification regarding the tax treatment of these entities. The original legislation was amended to expressly provide that “the status of a non-profit limited liability company under the proposed legislation is not determinative of its tax treatment.” To further protect against unintended consequences, the change is effective for limited liability companies formed on or after January 1, 2009. Effective Date: August 1, 2008.
Chapter 188 (H.F. 1499/S.F. 1406), enacts the Uniform Prudent Management of Institutional Funds Act recommended by the National Conference of Commissioners on Uniform State Laws. The act deals with the management and investment standards for entities holding funds for charitable purposes. Effective Date: August 1, 2008.
Chapter 203 (S.F. 3397/H.F. 3543) makes numerous changes regarding the filing of documents with the secretary of state, including changes regulating foreign cooperatives and allowing foreign limited liability partnerships to use alternative names under certain circumstances, and eliminating contest-of-name filings. Effective Date: Various.
Chapter 256 (S.F. 3174/H.F. 3306) modifies the Minnesota Securities Act which regulates the registrations, filings, and fees of securities offerings. Effective Date: May 2, 2008.
Chapter 312 (S.F. 2379/H.F. 2789) amends Minn. Stat. §117.51 governing reestablishment costs limits in eminent domain cases to require reimbursement for eligible business reestablishment costs up to a maximum of $50,000 for both federally funded projects and state-funded projects. Effective Date: Retroactive to January 16, 2007.
Chapter 333 (S.F. 2390/H.F. 3146) modifies the requirements regarding the collection and use of Social Security numbers. Specifically, Chapter 333 provides that Minnesota law does not prevent the collection, use, or release of a Social Security number as authorized or permitted, rather than required, by state or federal law. The chapter also clarifies that the restriction on the sale of Social Security numbers does not prohibit the transfer or disclosure of a Social Security number to a third party if the release of the number is incidental to a larger transaction, and necessary to identify the individual in order to accomplish a legitimate business purpose. Effective Date: July 1, 2008.
Chapter 185 (H.F. 117/S.F. 181) amends Minnesota’s “long-arm” statute to permit personal jurisdiction over foreign corporations and nonresident individuals in defamation and privacy suits. Effective Date: August 1, 2008, and applies to causes of action arising on or after that date.
Chapter 322 (H.F. 3574/S.F. 3291) modifies the application and enforcement of the State Building Code to provide that code enforcement is required of any municipality with an ordinance that has adopted the code in effect as of January 1, 2008, except municipalities with a population of less than 2,500 located outside of the seven-county metropolitan area. Effective Date: August 1, 2008.
Chapter 174 (S.F. 2910/H.F. 3517) provides that the court shall order expungement of an eviction record in cases where the tenant was holding over possession of a property that was subject to a contract-for-deed cancellation or mortgage foreclosure under certain circumstances. Effective Date: August 1, 2008.
Chapter 215 (S.F. 2915/H.F. 3478) permits claims for punitive damages for violations of the Human Rights Act to $25,000. Effective Date: August 1, 2008.
Chapter 218 (S.F. 2399/H.F. 2627) makes changes to the public nuisance law, including specifying that only one occurrence of certain behaviors now constitutes a nuisance; and changing the burden of proof to provide that each element of the contact must be established by a preponderance of the evidence rather than the current “clear and convincing evidence” standard. Effective Date: Applies to crimes committed on or after August 1, 2008.
Chapter 299 (H.F. 2996/S.F. 2790) provides for changes in public law, including authorizing the judicial branch to accept electronic payments and collect convenience fees on credit card payments; giving the Board of Public Defense and district court greater flexibility in the use of their appropriations and establishing a working group to review, assess, and make recommendations regarding the modifications and application of controlled substance laws; allowing persons facing civil commitment to be confined in correctional facilities while the petition is being adjudicated; modifying registration requirements for predatory offenders; and removing a sunset of the law governing Internet access to Bureau of Criminal Apprehension data. Effective Date: Various.
Chapter 302 (S.F. 3441/H.F. 3850) provides that a domestic abuse advocate may not be compelled to disclose any opinion or information received from or about the victim without the consent of the victim unless ordered by the court. Effective Date: August 1, 2008.
Chapter 316 (S.F. 3492/H.F. 1625) extends the duration of orders for protection and restraining orders after multiple violations or continued threats. Comparable changes were made to the statutes governing harassment restraining orders. Effective Date: July 1, 2008.
Chapter 299 (H.F. 2996/S.F. 2790), the Omnibus Public Safety Policy Bill, includes language creating a joint physical custody study group. The state court administrator shall convene a study group of 12 members to consider the impact that a presumption of joint physical custody would have in Minnesota. The evaluation must consider the positive and negative impact on parents and children of adopting a presumption of joint physical custody, the fiscal impact of adopting this presumption, and the experiences of other states that have adopted a presumption of joint physical custody. The state court administrator shall report to the legislature on the evaluation of presumption of joint physical custody, the experiences of other states, and recommendations made by the study group no later than January 15, 2009.
Chapter 329 (S.F. 2965/H.F. 3448) (Vetoed) set forth with specificity requirements for gestational carrier agreements, detailing the rights and obligations of each of the parties. Chapter 329 was vetoed by the governor who stated that “[a]lthough I agree that certain legal parameters may be needed, this bill raises some significant ethical and public policy issues that have not been adequately addressed.”
Chapter 330 (S.F. 3193/H.F. 3371) (Vetoed) would have permitted adopted persons older than 19 to have access to copies their original birth certificate if there was no Affidavit of Nondisclosure on file. Gov. Pawlenty vetoed Chapter 330 stating that “this bill would remove the right to confidentiality that was previously promised to birth parents who placed a child for adoption.”
Chapter 361 (H.F. 3376/S.F. 3170) establishes the Interstate Compact for the Placement of Children and makes changes to permit adult adoption; i.e., adoption of a person at least 18 years of age. The Interstate Compact becomes effective upon legislative enactment of the Compact by no less than 35 states. The adult adoption provisions are effective August 1, 2008.
Chapter 201 (S.F. 3070/H.F. 3457) authorizes the use of debit or credit cards to withdraw funds from custodial trust accounts. Effective Date: August 1, 2008.
Chapter 196 (H.F. 3357/S.F. 3208) makes a number of changes to Chapter 414, which governs municipal boundary adjustments. Most notably, Chapter 196 inserts the chief administrative law judge in place of the planning director or Office of Strategic and Long Range Planning as the party responsible for municipal boundary adjustments. In addition, the chapter makes a number of changes in the adjustment process, including the use of subpoenas and various meeting and notice requirements. Effective Date: April 18, 2008.
Chapter 207 (S.F. 3622/H.F. 3646) increases the threshold amounts that apply to the various types of municipal contracts, specifically: increasing the threshold amount for sealed bids from $50,000 to $100,000; the contract amounts for direct negotiation from $10,000–$50,000 to $25,000–$100,000; and the maximum amount for open market solicitations from $10,000 to $25,000. Effective Date: August 1, 2008.
Chapter 335 (H.F. 3367/S.F. 3120) makes two changes in the Open Meeting Law, first providing that all closed meetings, except those closed as permitted by the attorney/client privilege, must be electronically recorded and those recordings preserved for at least three years after the date of the meeting. The chapter also provides that the court shall award reasonable attorneys fees to a prevailing plaintiff who has brought an action under the Open Meeting Law if the public body was the subject of a prior written opinion and the court finds that the public body did not act in conformity with that opinion. Effective Date: August 1, 2008.
Real Property Law:
Chapter 177 (S.F. 2908/H.F. 3476) provides for notices to tenants in the foreclosure of leased property. Effective Date: August 1, 2008.
Chapter 178 (S.F. 2918/H.F. 3474) allows for a five-week redemption period in cases where property has been abandoned, specifying that a party’s failure to appear at a hearing is conclusive evidence of its abandonment of the property. Effective for hearings conducted on or after April 5, 2008.
Chapter 225 (S.F. 2936/H.F. 3129) modifies the requirements for filing a registered land survey. Effective Date: August 1, 2008.
Chapter 238 (H.F. 3516/S.F. 2914) specifies data required in foreclosure notices and mandates study of an electronic foreclosure data reporting system. Chapter 238 also incorporates the Minnesota Real Property Electronic Act, which creates an eight-member Electronic Real Estate Recording Commission, including a representative from the Real Property Law Section of the MSBA. The commission will adopt standards for recording electronic documents. The Minnesota Real Property Electronic Recording Act article is effective July 1, 2008.
Chapter 240 (S.F. 3214/H.F. 3774) clarifies that the Minnesota Residential Mortgage Originator and Servicer Licensing Act applies to mortgage loans on residential real property regardless whether the owner occupies the property. Effective Date: August 1, 2008.
Chapter 241 (S.F. 3154/H.F. 3839) clarifies what information a residential mortgage originator may use to verify a borrower’s ability to repay a mortgage. Effective Date: August 1, 2008.
Chapter 273 (H.F. 3477/S.F. 2917) modifies lending practices and default regulation related to manufactured housing consistent with other foreclosure provisions. Effective Date: August 1, 2008.
Chapter 276 (S.F. 2881/H.F. 3236) makes a number of changes to the regulations governing contracts for deed and mortgage lending. Effective Date: The usury sections are effective January 1, 2009. The ability to repay provision is effective May 9, 2008. The remedies sections are effective for any action filed on or after May 9, 2008.
Chapter 331 (H.F. 4223/S.F. 3857) provides for interim uses in zoning and modifies registrars’ fees for common interest communities. Chapter 331 also provides that the city of Minneapolis may impose a dedication fee on new commercial industrial development for public purposes, including trails. Effective Date: The interim zoning section is effective May 17, 2008. The dedication fee section is effective upon the Minneapolis Parks and Recreation Board and the Minneapolis City Council’s compliance with Minn. Stat. §645.021.
Chapter 341 (H.F. 3420/S.F. 3239) includes, in addition to the MSBA’s Real Property and Probate and Trust Law Sections’ bills discussed above, language revising the procedures and fees charged by county registrars of title registering supplemental declarations of common interest communities. Chapter 341 also incorporates legislation modifying mortgage foreclosure proceedings and providing for foreclosure prevention counseling. Generally effective August 1, 2008, and apply to actions taken or conducted on or after that date.
Chapter 347 (S.F. 3594/H.F. 3888) provides that a closing agent shall not make disbursements out of an escrow, security deposit, settlement, or closing account unless the funds received from the lender are collected funds or qualified loan funds. Effective Date: August 1, 2008.
Chapter 154 (H.F. 3201/S.F. 2935), the Omnibus Tax Bill, was an amended version of the 2007 tax bill vetoed by Gov. Pawlenty during the 2007 Legislative Session. Chapter 154 contains numerous changes to property, income, sales, and special taxes, as well as provisions regarding economic development, public finance, and aids to local government. More specifically, Chapter 154 contains several provisions which may be of particular interest to practitioners.
In the property tax area, Chapter 154 amends the “60-Day” rule to clarify the specific information that is required to be given to a county assessor when a petitioner contests the valuation of income-producing property. This section is effective for petitions filed beginning July 1, 2008. In addition, the chapter contains a provision that increases from $200,000 to $500,000 the total market value necessary for commercial/industrial property to be eligible to enter into a confession of judgment. This section became effective March 8, 2008.
Under the income tax section, the chapter provides that amounts associated with a violation of law and paid to a government entity or to a specified nongovernment entity are not deductible business expenses, whether characterized as fines, penalties, damages, restitution, legal fees, or expenses. These payments are not deductible when paid under a criminal or civil court order, administrative action, plea agreement, or settlement agreement. This section is effective for taxable years beginning after December 31, 2007, and for fines, fees, and penalties assessed after March 8, 2008.
In the area of estate taxes, the chapter clarifies that while the commissioner of revenue is authorized to determine the value of property for estate tax purposes, values agreed to by the IRS govern where the IRS appraises the value or proposes a change in the value reported by the estate. This section is effective retroactively for estates of decedents dying after December 31, 2006.
Additional changes were made to the tax-increment-financing (TIF) provisions, including a modification of the blight test in TIF redevelopment districts, as well as in renewal and renovation districts. These sections are effective for districts for which the request for certification is made after June 30, 2008.
The chapter also makes changes in the areas of income, property, and special taxes, including new penalties for failure to provide identification numbers of shareholders, partners, and tax preparers, and a requirement that by no later than January 1, 2009, the commissioner of revenue shall develop a handbook detailing procedures, responsibilities, and requirements for county boards of appeal and equalization. The provisions for incorrect taxpayer identification numbers are effective for returns filed after December 31, 2008, and the section on negligent property tax refund claims is effective for property tax claims filed after June 30, 2008.
Chapter 366 (H.F. 3149/S.F. 2869), the Omnibus Tax Bill II, includes several significant statewide provisions, specifically: placing levy limits on local governments for cities with a population over 2,500 and all counties; modifying the definition and taxing of foreign or operating corporations; and providing new taxing and TIF authority to finance Phase II of the Mall of America.
The property tax area has two noteworthy provisions. First, the chapter requires that the commissioner of revenue must review the assessment practices in a taxing jurisdiction if requested in writing by a qualifying number of property owners in that taxing jurisdiction. The request must be signed by the greater of: 10 percent of the registered voters who voted in the last general election or five property owners, and must identify the city, town, or county and describe why a review is sought for that taxing jurisdiction. The commissioner must conduct the review in a reasonable amount of time and report the findings to the affected county, city council, or town board, and the property owner designated to receive the report. This section became effective May 30, 2008.
Second, the chapter provides language calling for assessment of properties of purely public charities to facilitate a review by the 2009 Legislature of the property tax exemption for property of nonprofit organizations. The commissioner shall report the findings to the tax committees by February 1, 2009.
In the interim, an assessor may not change the current practices or policies used generally in assessing property of institutions of purely public charities. An assessor may not change the assessment of the taxable status of an existing property of an organization of purely public charity, unless the change is made as a result of a change in ownership, occupancy or use of the facility, or to correct an error. For currently taxable properties, the assessor may change the estimated market value of the property. This section is effective for the 2008 assessment, taxes payable in 2009.
The bill also includes reauthorization of the mortgage and deed tax in Hennepin and Ramsey counties through 2012.
Editor’s Note: Portions of this report were taken from documents prepared by the Minnesota Legislature, the Minnesota Legislature website, and staff of the Senate, the House, and the office of the Revisor of Statutes. This report is not legal advice. You must read each chapter for its specific terms.