Current developments in Judicial Law, Legislation, and Executive Action together with a foretaste of Emergent Trends in law and the legal profession for the complete Minnesota lawyer.
• 4th Amendment: Inevitable discovery exception does not apply to statements. Appellant was convicted of first- and second-degree assault following a jury trial. A stabbing victim was discovered at a detoxification facility, but could not initially respond to police questions. He was identified and his address located. Police located drops of blood outside the address, and a trail of blood leading to the front. No one responded to officers’ knocks on the door, and police forcibly entered the residence. Inside, police found three males, including appellant, and blood in a number of areas. After a Miranda warning, Appellant made a number of incriminating statements. The residence was later searched pursuant to a warrant obtained after questioning all three men found inside the house and the victim. The warrant application contained a significant amount of information obtained by police after forcibly entering the residence, including the interviews of the three men found inside. Appellant moved the trial court to suppress evidence obtained during the warrantless search, the search conducted pursuant to the search warrant, and statements made by the three men before the search warrant was executed. Appellant’s testimony at trial was inconsistent with his first statement to police. The trial court initially suppressed appellant’s statements, but then, during trial, admitted his statements as substantive evidence under the inevitable discovery doctrine.
Held, the trial court erred in admitting appellant’s statements as substantive evidence, because the inevitable discovery doctrine does not apply to statements. The court of appeals looks first to the warrantless search of appellant’s residence to determine whether it was unlawful or whether it falls under an exception to the warrant requirement. The emergency aid exception permits police to enter a home without a warrant to render emergency assistance to an injured occupant or to protect one from imminent injury. At the time of the warrantless search, police knew that the stabbing victim was associated with the residence, and that blood was found leading up to the residence. These facts suggest a potential crime occurred, but not that there was an injured occupant in the residence or that an occupant was in danger of imminent injury. The police knew the victim was elsewhere, receiving medical treatment, and were at the residence not as “community caretakers,” but as criminal investigators. In addition, there was no indication that anyone was inside the residence, nor any sign that someone in or near the house was in danger or needed medical treatment. In addition, the police hadn’t received a statement from the victim before the warrantless search, an officer testified that he believed the blood found outside belonged to one person, so they were not concerned about finding another possible victim, and police waited for more officers to arrive before making the warrantless entry into the house.
Because the warrantless search of appellant’s home was unlawful, any evidence obtained from the search, physical or verbal, is inadmissible, unless the evidence falls within an exception to the exclusionary rule. The district court found that appellant’s statements, obtained after the warrantless search, were admissible under the inevitable discovery exception. In Minnesota, this exception has only ever been applied to physical evidence, and the court of appeals concludes that the exception does not apply to verbal evidence obtained as a result of an unlawful search. The court distinguishes between physical evidence—tangible objects that are hard evidence which stay in place, absent their removal, until discovered—and statements, the content of which are speculative. “[W]hile it may be inevitable that the police will question somebody, it is not inevitable that the person will give the same statement under different or even similar circumstances.” The court also points out that there is already a framework in place to determine when illegally obtained confessions are admissible as substantive evidence: the test adopted in State v. Weekes, 268 N.W.2d 705, 708-709 (Minn. 1978), for determining whether a connection between an illegal arrest and a confession is tenuous enough to purge the taint of the illegal arrest.
Because the trial court improperly admitted appellant’s statements as substantive evidence under the inevitable discovery exception, and this error prejudiced appellant, the case is reversed and remanded. State v. Kyle Dean McClain, Ct. App. 5/4/15.
• Post-conviction: Miller does not apply to discretionary imposition of consecutive sentences that are functional equivalent of life without possibility of release. In the mid-1990s appellant, 16 years old at the time of the offenses, was convicted of first-degree murder, attempted first-degree murder, and burglary. He was sentenced to 240 months for attempted murder, 18 months for burglary, and life imprisonment with the possibility of release for murder, the mandatory sentence. The district court exercised its discretion in ordering that each sentence be served consecutively, resulting in an aggregate sentence of at least 74 years.
In May 2014, he filed a motion to correct his sentence, arguing that the Miller v. Alabama, 132 S.Ct. 2455 (2012), rule that mandatory imposition of life imprisonment without the possibility of release for juveniles sentenced as adults violates the 8th Amendment, should apply both to statutory provisions that mandate the imposition of life imprisonment with the possibility of release and to the imposition of consecutive sentences that are the functional equivalent of life imprisonment without the possibility of release. The post-conviction court denied appellant’s motion.
Miller does not apply to a mandatory sentence of life with the possibility of release, as explained in State v. Vang, 847 N.W.2d 248, 262-63 (Minn. 2014), and Ouk v. State, 847 N.W.2d 698, 701 (Minn. 2014). The Supreme Court declines to depart from Vang and Ouk, and also declines to extend Miller to the discretionary imposition of consecutive sentences that may amount to the functional equivalent of life without the possibility of release. The crucial factor in Miller was the statutory provision mandating the imposition of life without the possibility of release. Because the district court has discretion in imposing consecutive sentences, Miller is inapplicable. State v. Jason Ryan Williams, Sup. Ct. 5/6/15.
• Conditional release: Defendant convicted at single hearing for two sex offenses arising out of separate incidents has “prior sex offense conviction” for purpose of lifetime conditional release statute. Appellant pleaded guilty to two counts of criminal sexual conduct (counts one and three of the complaint), which arose from separate incidents with separate victims. The district court accepted his pleas, first as to count one, then as to count three, on the record at a single hearing. The district court found, however, that appellant was not subject to lifetime conditional release, because the two convictions were entered at the same hearing, meaning that appellant did not have a “prior sex offense conviction” to qualify him for lifetime conditional release. The court of appeals affirmed in State v. Nodes, 849 N.W.2d 85 (Minn. App. 2014).
“Prior sex offense conviction,” as used in Minnesota’s lifetime conditional release statute, Minn. Stat. §609.3455, subd. 7(b), requires that the offender be “convicted of committing a sex offense before the offender has been convicted of the present offense, regardless of whether the offender was convicted for the first offense before the commission of the present offense, and the convictions involved separate behavioral incidents.” Minn. Stat. §609.3455, subd. 1(g). A “conviction” occurs when the district court accepts the guilty plea and the acceptance is on the record. Minn. Stat. §609.02, subd. 5. Although appellant’s two convictions occurred in rapid succession, the conviction on count one occurred earlier than the conviction on count three. Appellant’s first conviction, which occurred a moment before the second, when the court announced on the record that appellant was adjudicated “guilty of criminal sexual conduct in the first degree,” was at that point a “prior sex offense.” When the court said, “and also on count three, criminal sexual conduct in the second degree,” count three was the sole “present offense.”
Held, appellant is subject to the lifetime conditional release period under Minn. Stat. §609.3455, subd. 7(b). State v. Carl Lee Nodes, Sup. Ct. 5/6/15.
• Jury instructions: Third-degree criminal sexual conduct; jury must be instructed on statutory definition of “force.” Appellant was charged with third-degree criminal sexual conduct, specifically, using force to accomplish sexual penetration. In its instructions to the jury, the district court did not include the statutory definition of “force.” As the word is used in the criminal sexual conduct statute, “force” has a specific meaning, and is specifically defined. This specific statutory definition differs significantly from the lay definition of “force.” The statutory definition requires proof that a defendant either inflicted, attempted to inflict, or threatened to inflict bodily harm. However, the lay definitions do not reference bodily harm, physical pain, injury, illness, or physical impairment. As such, a jury applying the common understanding of the word “force” to the elements of criminal sexual conduct could find a defendant guilty of the offense without any actual, attempted, or threatened infliction of bodily harm, as the Legislature has required. The district court erred in failing to instruct the jury as to the definition of “force,” but appellant’s conviction is affirmed, because the court of appeals finds that the error was not plain and did not affect appellant’s substantial rights. State v. Brian Kenneth Moore, Ct. App. 5/11/15.
• Burglary: Predicate offense of criminal damage to property within building; offender considered “in building” if any part of his body enters premises. Appellant was convicted of trespass, second-degree burglary, and minor consumption following a jury trial. Appellant, under 21 at the time of the offense, had consumed alcohol and tried to enter his friend’s (V.M.) home, reaching his finger through a hole in the screen to unlock the door, making the hole larger in the process. Appellant went to another friend’s (H.B.) house, eventually making his way inside by climbing on the roof to open a second-floor window. His friend’s mother discovered him when she awoke to him standing over her and grabbing her while she was in bed. On appeal, appellant challenges the sufficiency of the evidence supporting his second-degree burglary conviction. Specifically, appellant argues that the predicate offense of criminal damage to property was completed before he entered V.M.’s home (when he tore the screen door), so a crime was not committed while he was actually inside the building.
Second-degree burglary occurs when a defendant enters a building without consent and with intent to commit a crime, or enters a building without consent and commits a crime while in the building. Appellant was convicted of entering a building without consent and committing a crime therein. The court of appeals concludes that the evidence was sufficient to support appellant’s conviction. The court notes that appellant was “in the building” as soon as his finger entered the small hole in V.M.’s screen door. It was after appellant entered the building in this manner that the damage to property occurred, when appellant made the hole larger. Appellant’s conviction is affirmed. State v. Javier Rodriquez, Ct. App. 5/11/15.
• Restitution: Moving expenses directly linked to psychological trauma caused by crime are compensable. Following his convictions for trespass, second-degree, and minor consumption, the district court ordered appellant to pay restitution for the cost of one of his victim’s moving expenses. At the restitution hearing, the victim testified that she was unable to live in the house following appellant’s break-in, and had to move, because she was terrified that she would find appellant, or someone else, hiding in the house. The victim suffered psychological trauma as a result of appellant’s criminal conduct. Previous cases have held that losses linked to such psychological trauma are proper for restitution. Here, the victim’s moving expenses are directly linked to the psychological trauma she suffered after appellant broke into her house. As such, the district court did not abuse its broad discretion in including the moving expenses in its restitution order. State v. Javier Rodriquez, Ct. App. 5/11/15.
• Juveniles: Waiver of trial rights, admission of facts on which charge is based, and continuance of delinquency proceedings constitute a continuance without adjudication. C.J.H., age 17, was charged in a juvenile court delinquency petition with third-degree criminal sexual conduct, attempted third-degree criminal sexual conduct, and minor consumption. C.J.H. admitted facts to establish a factual basis for proving the charge of attempted third-degree criminal sexual conduct, in exchange for a “continuance for dismissal” on that charge and dismissal of the remaining two charges. The court advised C.J.H. that, if he violated the court’s conditions, C.J.H. was agreeing that a transcript of the factual basis would be used to prove him guilty of the attempted criminal sexual conduct charge. C.J.H. was placed on supervised probation, and the court extended its jurisdiction over the matter until C.J.H.’s 19th birthday.
Approximately seven months later, the state moved to terminate the continuance, claiming that C.J.H. had materially violated the conditions of his probation. Following a hearing, the court terminated the continuance and commenced a hearing on the charge of attempted third-degree criminal sexual conduct, at which the state presented a transcript of C.J.H.’s earlier factual basis and partially corroborative testimony of the 15-year-old victim. The court found the state proved C.J.H.’s guilt beyond a reasonable doubt, adjudicated him delinquent, and ordered a disposition for the remaining time before C.J.H. turned 19. On appeal, C.J.H. argued that the juvenile court’s subject matter jurisdiction expired before he was adjudicated delinquent, because the continuance agreement required his admission of guilt “as if he were receiving a stay of adjudication,” and must be treated as a continuance without adjudication, meaning that the state’s failure to commence a probation revocation proceeding within 180 days of the order resulted in the termination of the court’s jurisdiction.
A continuance for dismissal and a continuance without adjudication are both permitted under the Minnesota Rules of Juvenile Delinquency Procedure. A continuance for dismissal suspends the proceedings for a specified period without a finding that the allegations have been proved, after which the proceeding will be dismissed. The period of suspension may extend to the child’s 19th birthday, and the child may be required to observe additional conditions during the suspension period. On the other hand, a continuance without adjudication requires the court to find that the allegations have been proved, and the period of continuance may not exceed 180 days.
In this case, the continuance agreement combined elements of both types of continuances. Importantly, however, C.J.H. waived his trial rights, made admissions expressly intended to establish a factual basis for the charged offense, and the court found that the admissions did establish a basis for finding that he committed attempted third-degree criminal sexual conduct. The court of appeals finds that C.J.H.’s admissions and waivers were the functional equivalent of a guilty plea, rendering the continuance agreement more in the nature of a continuance without adjudication than a continuance for dismissal. In addition, the juvenile court’s finding that the child gave the court “a factual basis…which supports the [c]ourt finding C.J.H. guilty of [attempted] Criminal Sexual Conduct in the Third Degree” is not significantly different from a finding that a charge had been admitted or proved.
Held, the juvenile court’s continuance of the delinquency proceedings against C.J.H. constituted a continuance without adjudication. Because the court did not commence new proceedings against C.J.H. until more than 250 days after the continuance order, the court did not have jurisdiction to adjudicate C.J.H. delinquent. In the Matter of the Welfare of C.J.H., Ct. App. 5/18/15.
• Sentencing: For consecutive sentences, offenses must be sentenced in order in which they occurred. Following a bench trial, appellant was convicted of first-degree burglary and third-degree criminal sexual conduct. Appellant had entered S.E.’s house without her permission, grabbed S.E. and pushed her against a wall, and then penetrated S.E.’s vagina without her consent. The district court found that because appellant’s burglary conviction was predicated or conditioned upon his completion of the criminal sexual conduct, the criminal sexual conduct conviction should be sentenced first. Appellant was sentenced to 180 months for the criminal sexual conduct, and a consecutive term of 57 months for the burglary, for a total of 237 months (as opposed to 129 months first for the burglary, and 57 months second for the criminal sexual conduct, for a total of 186 months).
Appellant argues on appeal that the district court erred by sentencing him for criminal sexual conduct first, and burglary second, as the burglary occurred prior to the criminal sexual conduct. Generally, burglary is defined in terms of, and complete upon, entry. The portion of the burglary offense that requires that an assault be committed determines the sentence. Therefore, appellant committed burglary as soon as he entered S.E.’s apartment with intent to commit the sexual assault. In addition, as the district court found, S.E. was also assaulted prior to any sexual assault, when appellant grabbed and pushed S.E., causing her to feel “afraid and helpless.” As such, the burglary was also complete once appellant entered the apartment and assaulted S.E.
Held, because appellant committed burglary prior to committing criminal sexual conduct, the district court should have sentenced him on the burglary offense prior to sentencing him on the criminal sexual conduct offense. Reversed and remanded for resentencing. State v. Theodore Pierre Jerry, Ct. App. 5/26/15.
• Defamation: Statute criminalizing defamation is unconstitutionally overbroad. Appellant posted sexually explicit ads on Craigslist purporting to be from his former girlfriend, C.M., and C.M.’s minor daughter, S.M., following an argument with C.M. Multiple men contacted C.M. and S.M. seeking to have sex as a result of the ad. Men also sent S.M. pornographic images. Appellant was charged with two counts of criminal defamation, in violation of Minn. Stat. §609.765, subd. 2. The district court denied appellant’s motion to dismiss on the grounds that the statute was unconstitutionally overbroad and vague, and appellant was convicted on both counts following a stipulated facts trial.
Held, the criminal defamation statute is overbroad because it does not exempt truthful statements from prosecution and, as applied to matters of public concern, does not require the state to prove “actual malice” before imposing liability. Where a law restricts 1st Amendment rights, the state bears the burden of establishing the statute’s constitutionality. A statute is overbroad in its limitations on speech if a substantial amount of protected speech is prohibited or chilled in the process of banning unprotected speech. The overbreadth must be substantial in relation to a statute’s plainly legitimate sweep. The first step in the overbreadth analysis is to construe the challenged statute. Minnesota’s criminal defamation statute encompasses both true and false statements. The statute provides that a violation is justified if “the defamatory matter is true and is communicated with good motives and for justifiable ends.” The requirement that the truth be communicated with good motives and justifiable needs violates 1st Amendment protections because it penalizes protected speech (true statements) in addition to unprotected speech (false statements). With respect to matters of public concern, the criminal defamation statute does not require a showing of actual malice. Without a finding of actual malice, attaching criminal liability to statements of public concern chills free political discussion.
The court of appeals also holds that the criminal defamation statute cannot be narrowly construed to bring it within constitutional limits. To construct the statute in a way to render it constitutional would essentially require the court to rewrite the statute. It would require the court to remove language (“with good motives and for justifiable ends”), add language (to exempt true statements on matters of public concern), and either write in the “actual malice” standard or construe the statute to include this mental state. Removing and adding language to the statute “would constitute a serious invasion of legislative domain.” Appellant’s convictions are reversed. State v. Timothy Robert Turner, Ct. App. 5/26/15.
– Frederic Bruno
– Samantha Foertsch
EMPLOYMENT & LABOR LAW
• Family & Medical Leave Act (FMLA); nurse not eligible. A nurse lost her claim for violation of the Family & Medical Leave Act (FMLA) after she was fired due to a chronic medical condition and claimed that her employer impeded her efforts to seek diagnosis and treatment. Affirming a ruling for the employer, the 8th Circuit Court of Appeals held that the nurse did not show that she had a “serious” health condition that would make her eligible for coverage under the statute, and the employer presented undisputed evidence that she was terminated for performance deficiencies that were not related to any need for ongoing medical care. Dalton v. ManorCare of West Des Moines, 782 F.3d 955 (8th Cir. 2015).
• City administrator’s constitutional claim; no deprivation of post-termination hearing. A city administrator who sued for constitutional violations as well as breach of contract and other claims following his termination six months into a three-year employment contract had his claim properly dismissed on summary judgment. The 8th Circuit held that the city’s refusal to reschedule a hearing following his termination did not constitute a deprivation of due process, and a conspiracy claim was not predicated upon any constitutional violation. Further, the administrator had committed misfeasance, which constituted a cause to terminate his contract. Draper v. City of Festus, 782 F.3d 948 (8th Cir. 2015).
• Retaliation claim dismissed; discharge not pretextual. An employee’s claim for retaliation and discriminatory discharge was rejected because there was no prima facie case of retaliation, even though he was able to make a showing of possible discriminatory discharge. The court of appeals, affirming a decision in Hennepin County District Court, affirmed summary judgment because there was insufficient evidence to prove that the reason given for the discharge was pretextual. McDonal v. SuperValu, Inc., 2015 Minn. App. LEXIS 294 (Minn. Ct. App. 3/30/2015) (unpublished).
• Noncompete agreement; clause upheld but scope limited. An employee who worked in the oil and gas pipe handling industry was able to get the scope of his noncompete agreement limited although its global restriction and five-year term was upheld. The court of appeals ruled that the agreement should be limited to work within that same industry, but was viable on a global basis for a five-year term. The case was remanded to review the reasonableness of a confidentiality provision in the agreement. Yonak v. Hawker Well Works, 2015 Minn. App. LEXIS 304 (Minn. Ct. App. 4/6/2015) (unpublished).
• Qui tam dismissed; no false statements in grant applications. A federal whistleblower qui tam case, brought under the False Claims Act against a media company for allegedly making false statements to secure a grant, was dismissed. Upholding summary judgment, the 8th Circuit Court of Appeals held that the claimant did not raise a genuine issue of material fact to avert dismissal whether the media defendant made false statements in grant applications. Schell v. Bluebird Media, LLC, 2015 U.S. App. LEXIS 8912 (8th Cir. 5/29/2015).
• Union reinstatement; injunction vacated because no irreparable harm. An injunction reinstating a union for production sanitation employees was vacated because the lower court did not adequately determine that the case presented a threat of irreparable harm to the collective bargaining process to warrant injunctive relief. The 8th Circuit held that the trial court abused its discretion in ordering reinstatement and overturned the ruling. McKinney v. Southern Bakeries, LLC Circuit, 2015 U.S. App. LEXIS 8710 (8th Cir. 5/27/2015).
• Unemployment compensation; 15-mile radius makes employee unavailable. An employee who sought to limit her search for new work to a 15-mile radius was an improper restriction that barred her from seeking “suitable” employment and disqualified her from seeking unemployment compensation benefits. The court of appeals held that the employee’s 15-mile radius was a “self imposed restriction,” which is statutorily barred under Minn. Stat. §268.085, subd. 5 and makes her ineligible for benefits. Sandberg v. Zaws, Inc., 2015 Minn. App. LEXIS 287 (Minn. Ct. App. 3/30/2015) (unpublished).
• Unemployment compensation; belligerent employee loses claim. A belligerent employee who had confrontations on three occasions with co-workers was denied unemployment compensation benefits. The appellate court held that it was proper to discuss uncompensated work with supervisors; but the belligerence of the employee in yelling at a co-worker and a manager without decision-making authority due to frustration, constituted disqualifying “misconduct.” Stepnes v. HOM Furniture, Inc., 2015 Minn. App. LEXIS 369 (Minn. Ct. App. 4/20/2015) (unpublished).
• Unemployment compensation; severance paid for use and benefits. An employee who received a separation package, including severance pay, was unsuccessful in arguing that the money he received should not make him temporarily ineligible for unemployment benefits during the time period covered by the severance. The court of appeals held that the entire separation payment was a set-off on unemployment benefits until the amount was exhausted, pursuant to Minn. Stat. §268.085, Subd. 3. Adams v. Select Communication, Inc., 2015 Minn. App. LEXIS 365 (Minn. Ct. App. 4/20/2015) (unpublished).
• State and federal update. The long 2015 session of the Minnesota Legislature, which extended into a special session, did not result in passage of a measure passed by Republicans in the House of Representatives that would have lowered the state minimum wage for tip workers. The measure, which had few DFL backers, was opposed by Gov. Mark Dayton and did not make it through the legislative process.
Another GOP-backed bill in the House to restrict the use of teacher tenure in some lay- offs also did not make it through the legislative process. Opposed by most DFLers, the measure would have removed seniority as the principal criterion in teacher lay-offs at public schools in the state.
At the federal level, Minnesota U.S. Sen. Al Franken has co-authored a bill, known as the Mobility and Vulnerable Employee (MOVE) legislation, which would restrict the use of noncompete clauses in several ways. The bill, which faces an uphill path in the Republican-controlled Senate, would bar noncompete agreements for all low-wage employees, defined as those making less than $15 per hour or $31,200 annually, and it also would require employers to inform all prospective employees if they will be required to sign a noncompete agreement when they are hired.
U.S. Sen. Christopher Murphy, a Connecticut Democrat, is co-sponsoring the bill with the Minnesota Democrat.
– Marshall H. Tanick
Hellmuth & Johnson, PLLC
• District court addresses NEPA issue of first impression in 8th Circuit. The United States District Court for the District of Minnesota addressed an issue of first impression in the 8th Circuit, recognizing, in a 3/6/2015 opinion, a cause of action for injunctive relief under the National Environmental Policy Act of 1969 (NEPA) against a non-federal governmental body—notwithstanding the fact that the NEPA environmental review process for the project at issue was not yet final—where the governmental body’s actions were effectively limiting the options that would be considered during the environmental review process and therefore affecting the citizen group plaintiff’s NEPA rights.
The underlying dispute involved alleged flaws in the environmental review under NEPA and the Minnesota Environmental Policy Act (MEPA) for a proposed a future light rail transit route—the Southwest Light Rail Transit project (SWLRT)—that would connect downtown Minneapolis to the southwestern Twin Cities. In particular, the plaintiff citizen group criticized the environmental review process conducted by the lead state and federal agencies involved, the Federal Transit Authority (FTA) and the Met Council, regarding the design of the SWLRT for the Kenilworth Corridor. The corridor is an area approximately one and one-half miles in length between Cedar Lake and Lake of the Isles in Minneapolis.
The current plan for the SWLRT design in the corridor includes an underground tunnel for the southwest half of the corridor and then an above-ground route for the northeast half. However, the lead agencies did not evaluate a tunnel as an alternative for the corridor in any of the environmental review documents produced between 2009 and 2013, which included a 2012 draft environmental impact statement (DEIS). Nonetheless, in April 2014, the Met Council approved a “Locally Preferred Alternative” (LPA) for the SWLRT design in the corridor that consisted of two long shallow tunnels that would traverse almost the entire corridor.
Of particular concern to the plaintiffs, the Met Council, following its selection of the LPA, commenced the “Municipal Consent Process” under Minn. Stat. §473.3994. The Met Council is required to consult with all municipalities affected by the SWLRT and obtain their prior consent to the proposed project design, following a public hearing. Relevant to this case, the statute requires that an analysis of the proposed project design, including a DEIS, must be available before, at and after each municipality’s public hearing. However, no such DEIS was available at the hearings, in part because none existed; the 2012 DEIS did not evaluate tunnels as part of the solution for the corridor. After negotiations with the city of Minneapolis, the Met Council revised the proposed design for the corridor to the current version—shallow tunnel for the southwest half of the corridor, aboveground route for the northeast half. All six affected municipalities consented to the revised design.
The citizen group filed a summary judgment motion in September 2014, claiming that the defendants violated NEPA and MEPA by moving forward with the municipal consent process on the SWLRT before the completion of a full environmental review. In addition, the group claimed the Met Council violated the municipal consent statutes by failing to have a DEIS at the public hearing that evaluated the current proposed project design. The court ruled on the defendants’ motions to dismiss.
The court first dismissed the citizen group’s NEPA claims against the FTA on the basis of sovereign immunity. NEPA itself provides no private right of action, the court held; plaintiffs must instead bring NEPA claims under the Administrative Procedure Act (APA), which is the only waiver of sovereign immunity for NEPA claims. The citizen group acknowledged that a NEPA claim under the APA was untenable since the FTA had not taken any final agency action (e.g., issuing a record of decision). However, the group argued that a NEPA regulation, 40 CFR §1500.3, provided an independent waiver of sovereign immunity and a cause of action to enforce the alleged procedural violations. The court disagreed—section 1500.3 does not contain the required express language waiving immunity and, in any event, immunity can only be waived by an act of Congress, not an administrative regulation.
Despite the lack of final agency action and the court’s dismissal of the NEPA claim against the FTA, the court nonetheless concluded that the citizen group could proceed with their NEPA claim against the Met Council. The court held—as a matter of first impression in the 8th Circuit—that a limited cause of action exists under NEPA itself (not the APA) against a state actor where a party seeks to preserve federal rights under NEPA pending the outcome of federal procedural review. In this case, the citizen group alleged the Met Council’s actions vis-à-vis the SWLRT were effectively limiting the options that would be considered during the FTA’s ongoing environmental review process and therefore affecting the group’s NEPA rights. This was sufficient, the court held, to state a claim for injunctive relief under NEPA.
As to the citizen group’s state law claims, the court dismissed the MEPA claim against the Met Council for lack of final agency action as required for judicial review under Minn. Stat. §116D.04, subd. 10. However, the court allowed the group’s municipal consent claim to proceed; it concluded that an implied cause of action exists under Minnesota’s municipal consent statutes and that the group’s allegations regarding the Met Council’s failure to have an accurate DEIS available at the municipal public hearings adequately stated a claim. Lakes and Parks Alliance of Minneapolis v. Federal Transit, — F.Supp.3d — (D. Minn. 2015).
• EPA and US Corps finalize Clean Water Act jurisdictional rule. The US Environmental Protection Agency (EPA) and the U.S. Army Corps of Engineers (Corps) jointly published a long-awaited final rule under the Clean Water Act (Act) defining what waters fall under federal jurisdiction and may be subject to NPDES, Section 404, or other permitting programs. 80 Fed. Reg. 37054 (6/29/2015). The Act prohibits discharges from point sources into “navigable waters,” a term the Act unhelpfully defines as “waters of the United States.” 33 U.S.C. §§1311(a), 1342(a), 1362(12)(A). EPA and the Corps regulations have long defined “waters of the United States” (see e.g., 33 CFR §328.3, 40 CFR 230.3(s)), but the precise reach of the rules and the Act itself, particularly over “marginal” waters such as certain intrastate wetlands, has been disputed for decades. Two divided Supreme Court decisions, SWANNC and Rapanos, and several proposed (but never finalized) agency guidance documents only confused the issue, leaving regulated parties and state agencies guessing as to the Act’s jurisdictional scope.
The final rule retains most of the provisions of the April 2014 proposed rule (79 Fed. Reg. 22187); however, the agencies did make some noteworthy changes in response to the over one million comments they received. The agencies’ stated intention with the new definition of “waters of the United States” was to “clarify” the Act’s reach over streams and wetlands in line with the Rapanos “significant nexus” test and to provide greater regulatory clarity. To this end, the rule establishes “bright-line” categories of jurisdictional waters. In addition to waters undisputedly subject to the Act—traditionally navigable waters used in interstate commerce, interstate waters, and the territorial seas—the new rule also makes “tributaries” of, and waters “adjacent” to, traditionally jurisdictional waters presumptively subject to the Act.
Besides these “default” jurisdictional categories, the final rule also makes certain types of waters jurisdictional when, on a case-by-case basis, they are found to have a “significant nexus” to traditionally jurisdictional waters. This part of the final rule represents the most notable change from the proposed rule. Whereas the proposed rule brought within its scope all “other waters” with a significant nexus to traditionally jurisdictional waters, the final rule is more specific. First, it identifies five types of marginal waters that are jurisdictional if they have—individually or in combination with other such waters in the same watershed—a “significant nexus” to traditionally jurisdictional waters: prairie potholes, Carolina & Delmarva bays, pocosins, western vernal pools in California, and Texas coastal prairie wetlands. Second, the final rule provides that any water with a significant nexus to traditionally jurisdictional waters is itself jurisdictional if it is located (a) within the 100-year floodplain of a traditionally jurisdictional water, or (b) within 4,000 feet of a traditionally jurisdictional water, an impoundment, or a tributary.
The agencies maintained the proposed rule’s exceptions to jurisdiction in the final rule but made some notable changes—for example, rewriting the much-discussed ditch exceptions and clarifying the exceptions for water-filled depressions and artificial ponds. The final rule also added exceptions for stormwater control features, water recycling structures, and—to the relief of many—puddles.
• Minnesota Legislature passes historic environmental bill ending MPCA Citizens’ Board. On 6/13/2015, Minnesota Gov. Mark Dayton signed an environment/agricultural bill, hammered out in a special session of the Minnesota Legislature, that included numerous significant, and in some cases historic, provisions affecting environmental law in Minnesota. Dayton had originally vetoed the bill, Senate File 5, but relented in the face of a potential government shutdown. Of particular note, the bill terminated the MPCA Citizens’ Board, an eight-citizen panel created by the Legislature in 1967 to serve as the ultimate decision-making body, instead of the MPCA commissioner, on various important environmental decisions (sec. 114).
Other noteworthy provisions in the environmental/agricultural bill include: (1) production incentives for advance biofuel, renewable chemicals, and biomass thermal (Minn. Stat. §41A); (2) 50-foot new perennial vegetation buffer requirements (subject to various exceptions) applicable to landowners owning property adjacent to public waters (Minn. Stat. §103F.48); (3) a requirement that when MPCA convenes a peer review panel regarding water quality standards, it must provide the names of the panel members and allow opportunities for public comment on the issues before the panel (Minn. Stat. §115.035); (4) a provision extending the solid-waste permitting exemption and permit by rule for ferrous mining operations to nonferrous mining operations (Minn. Stat. §116.07, subd. 4j(e)); (5) limitations on MPCA’s ability to enforce the numeric wild rice water quality standard in Minn. R. 7050.0224, subp. 2 until MPCA amends the rule to identify specific waters to which the standard applies (sec. 136); and (6) a directive to the Board of Water and Soil Resources to study the feasibility of assuming administration of the Clean Water Act section 404 permitting program.
–Jeremy P. Greenhouse
The Environmental law Group, Ltd.
For more information and to view background documents and links associated with these updates, please visit Jeremy’s environmental law blog, Fire on the River, at www.jeremygreenhouse.com.
This legislative session produced numerous changes in family law spanning a wide range of topics. The new legislation is contained within chapters 30, 57, and 71 of the session laws for the 2015 regular legislative session available at https://www.revisor.mn.gov/laws/?view=session&year=2015&type=0. The summary below captures the highlights of the changes.
• Changes to custody statute and best interest factors. The 13 “best interest” factors in subdivision 1 of Minn. Stat. §518.17 and the four additional “joint custody” factors in subdivision 2 were revised and consolidated into 12 factors that are to be considered in all cases, not just cases in which a party seeks joint custody. Although many of the concepts represented by the new factors are familiar, the factors as a group are a significant change, especially because they are accompanied by a variety of instructions the court is to use in applying the factors and deciding custody and parenting time issues. Overall, the changes will entail a more sophisticated analysis focused squarely on determining custody and parenting time based on the needs of the child. The amendments also reflect an expectation that both parents will play a substantial role in parenting a child. Ch. 30, Art. 1, sec. 3, 4.
• Deploying military parents. Minnesota has now adopted the Uniform Deployed Parents Custody and Visitation Act, a comprehensive piece of legislation that provides specific direction on how to handle the difficult issues arising from the deployment of a military parent. In addition to Minnesota, the UDPCVA is in effect in nine states. Ch. 30, Art. 2.
• New “teeth” for enforcing parenting time. Minn. Stat. §518.175, subd. 6 was amended to provide more specific direction to the court in granting compensatory parenting time. If the interference of parenting time was “repeated and intentional,” an award of compensatory parenting time would be mandatory. But if there had already been such a finding, the court would be required to impose one of the statutory remedies in addition to the award of compensatory parenting time. Ch. 30, Art. 1, sec. 7.
• Relief from Gossman v. Gossman. Gossman v. Gossman, 847 N.W.2d 718, 725 (Minn. Ct. App. 2014), held that if the district court has been divested of jurisdiction to modify spousal maintenance by a valid Karon waiver, a subsequent stipulation and order that purports to modify spousal maintenance is void and unenforceable. Minn. Stat. §518.552 was amended to allow parties to “restore the court’s authority or jurisdiction to award or modify maintenance through a binding stipulation.” Ch. 30, Art. 1, sec. 8.
• Interest on family law judgments. Judgments over $50,000 entered in family court actions will no longer be subject to the 10 percent interest rate. All judgments in family court actions will accrue interest at the ordinary judgment interest rate, which is currently 4 percent. Second, a new provision allows courts in family court actions to set a lower interest rate or no interest rate if it finds doing so “is necessary to avoid causing an unfair hardship to the debtor.” This provision changes the holding in Redleaf v. Redleaf, 807 N.W.2d 731, 735 (Minn. Ct. App. 2011), that the court has no discretion with respect to the judgment interest rate and that it must order interest at the rate prescribed by statute. However, this discretion to set a lower rate of interest would not extend to judgments for unpaid child support or spousal maintenance subject to Minn. Stat. §548.091. Ch. 30, Art. 1, sec. 12.
• Improved income disclosure requirements. Minn. Stat. §518A.28(b) was amended to clarify that a party must disclose their “complete” federal tax returns. If a party had not yet filed their return for the preceding year, the party would be required to produce their 1099, W-2, and K-1 forms. Ch. 30, Art. 1, sec. 9.
• Relief from Leifur v. Leifur. Leifur v. Leifur, 820 N.W.2d 40, 43 (Minn. Ct. App. 2012), held that district courts are powerless to approve parties’ agreements to make a modification of spousal maintenance or child support retroactive to a date earlier than the service of the notice of motion and motion. An amendment to Minn. Stat. §518A.39, subd. 2 reverses this prohibition by authorizing the court to set “an alternative effective date” for a modification if “the parties enter into a binding agreement for an alternative effective date.” Ch. 30, Art. 1, sec. 11.
• Standard for addressing dependency exemptions. A new provision to Chapter 518A was added to address the award of dependency exemptions. The initial allocation would be based on four factors and could be modified by showing a substantial change in those factors. Additionally, a parent who wrongfully claims an exemption could be required to compensate the other parent for the loss of the benefit and also could be ordered to pay attorneys’ fees and costs. Whether to condition a party’s right to claim the exemption on compliance with a child support obligation would be optional. Ch. 30, Art. 1, sec. 10.
• New basis for deviation from child support guidelines. Language added to Minn. Stat. §518A.43 establishes income disparity as a new basis for deviating from the child support guidelines in certain circumstances. If a parent has 10-45% parenting time and “a significant disparity of income exists between the parties” such that “an order directing payment of basic support would be detrimental to the parties’ joint child,” the court would be allowed to eliminate the party’s basic support obligation. Ch. 71, Art 1, sec. 78.
• Revisions to potential income. Amendments were made to one of the methods for calculating potential income. Instead of using full-time employment at 150 percent of minimum wage, the amended statute uses 30 hours per week at 100 percent of minimum wage. Ch. 71, Art. 1, sec. 70.
• Modification of medical support. A new subdivision was added to Minn. Stat. §518A.39 that permits modification of medical support without modification of the other components of a support order if there is a substantial increase or decrease in the cost of available health care coverage or if other factors are met. Ch. 71, Art. 1, sec. 72.
• Recognition of parentage. Minn. Stat. §257.75 was amended to allow courts in custody proceedings to make a temporary determination of custody and parenting time during the pendency of the case under Minn. Stat. §518.131. Additionally, the notification provisions of the recognition of parentage form are expanded, including an emphasis that execution of a ROP does not confer any custody or parenting time rights. Ch. 71, Art. 1, sec. 52, 53.
• Credit reporting for child support arrears. A new section added to chapter 518A requires the public authority to report delinquent child support obligors who are more than three months in arrears and not in compliance with a payment plan to a consumer reporting agency. Ch. 71, Art 1, sec. 86.
• Certificates of dissolution. Minn. Stat. §518.148 was amended to require a certificate of dissolution to be prepared in every dissolution proceeding. Also, the content of the certificate was amended to eliminate the need to include children’s names and Social Security numbers. Name changes of any party are to be included.
Ch. 57, sec. 1.
– Jaime Driggs
Henson & Efron PA
• Notice of appeal; appeal information form; issues waived on appeal. Where the appellant sought to appeal several earlier orders by the district court, failed to identify any orders other than the court’s summary judgment order in his notice of appeal, and later argued that his identification of those earlier orders in his appeal information form was sufficient cure for his defective notice of appeal, the 8th Circuit held that the appeal information form could not serve to preserve the unidentified portions of the appeal where the form was not filed within the time limit for a notice of appeal. Schell v. Bluebird Media, LLC, ___ F.3d ___ (8th Cir. 2015).
• Forum-selection clause; motion to transfer; writ of prohibition or mandamus denied. The 8th Circuit denied the plaintiff’s petition seeking a writ of prohibition or mandamus to prevent the transfer of its action to the Southern District of New York based on a forum-selection clause, finding “no clear legal error, no clear error of judgment, and no patently erroneous result.” In Re Union Elec. Co., ___ F.3d ___ (8th Cir. 2015).
• Vacatur; abuse of discretion; explanation required. Where the action became moot after Judge Kyle denied portions of the defendant’s Rule 12(b)(6) motion, both parties asked that the case be dismissed, and the defendant requested that the 12(b)(6) motion be vacated, Judge Kyle granted the motion to dismiss but denied the motion to vacate without explanation, and the defendant appealed the denial of its motion to vacate, the 8th Circuit held that it had jurisdiction to consider the appeal, but that it could not conduct a “meaningful review” of the denial of the motion to vacate under an abuse of discretion standard without knowing the “reason” for the denial of the motion. Accordingly, the case was remanded to allow Judge Kyle to “provide an explanation for [his] decision.” Reid v. BCBSM, Inc., ___ F.3d ___ (8th Cir. 2015).
• Arbitration compelled; stay or dismissal of underlying action. A recent 8th Circuit decision compelling arbitration serves to highlight an ongoing divergence of opinion on the court as to what should happen to the underlying litigation while the arbitration is pending. While the majority found that the district court could stay or dismiss the action pending the outcome of the arbitration, Judge Shepherd, concurring in the result, expressed his belief that “Section 3 of the [FAA] unambiguously directs a district court to stay an action and does not give a district court the discretion to dismiss an action.” Unison Co. v. Juhl Energy Devel. Inc., ___ F.3d ___ (8th Cir. 2015).
• Attorney’s fees; costs; computerized legal research. The 8th Circuit found no abuse of discretion in a district court’s award of attorney’s fees and costs that allowed two attorneys to attend certain depositions; awarded attorney’s fees for travel time at the attorney’s full hourly rate, and permitted reimbursement for expenses related to focus groups and jury consultants.
The 8th Circuit also found no abuse of discretion in the district court’s decision to awarded costs associated with computerized legal research, and it appeared to question the continued vitality of its earlier decisions holding that Westlaw and Lexis costs could not be recovered under fee-shifting statutes. (An earlier summary of the law on this issue can be found in “Recovering Research Costs” (Bench & Bar of Minnesota, May/June 1997)). Ludlow v. BNSF Rwy. Co., ___ F.3d ___ (8th Cir. 2015).
• Deposition of in-house attorney permitted. Determining that Shelton v. Am. Motors Corp., 805 F.2d 1323 (8th Cir. 1986), was “inapplicable” because the plaintiff was not seeking to discover attorney work product, Magistrate Judge Mayeron recently denied a motion for a protective order to prevent the deposition of the defendant’s in-house counsel, finding that the attorney possessed relevant, non-privileged information relating to the plaintiff’s employment discrimination claims. The magistrate judge also found it relevant that the defendant opposed the deposition but reserved the right to call the attorney as a witness at trial. The defendant filed objections to Magistrate Judge Mayeron’s order, but Chief Judge Davis overruled the objections, finding that the order was “neither clearly erroneous or contrary to law.” Oehmke v. Medtronic, Inc., 2015 WL 2242041 (D. Minn. Mar. 26, 2015), aff’d, 2015 WL 2242064 (D. Minn. 5/12/2015).
• Motion to lift PSLRA discovery stay in securities litigation denied. Judge Tunheim denied a motion to lift the PSLRA’s automatic discovery stay to conduct discovery said to be relevant to the plaintiff’s preliminary injunction motion, holding that the plaintiff would not be unduly prejudiced because he could pursue his motion without the discovery, and because other legal remedies would remain available even if the preliminary injunction motion was denied. Lusk v. Life Time Fitness, Inc., 2015 WL 2374205 (D. Minn. 5/18/2015).
• Sanctions and more sanctions. The 8th Circuit affirmed Judge Ericksen’s imposition of sanctions against plaintiff’s counsel under 28 U.S.C. §1927 where the attorney issued subpoenas that purported to require witnesses’ appearance for multiple days at courthouses in other districts in order to appear by video conference in Minnesota. Wagner v. Gallup, Inc., ___ F.3d ___ (8th Cir. 2015).
Finding that the plaintiffs’ claims were “so completely frivolous and without a factual or legal basis that they had to have been brought in bad faith,” Chief Judge Davis imposed sanctions pursuant to Fed. R. Civ. P. 11, 28 U.S.C. §1927 and the court’s inherent powers, ordered the plaintiffs and their counsel to pay defendants’ reasonable attorney’s fees, and ordered the plaintiffs to post an appeal bond of $200,000. Also noteworthy is Chief Judge Davis’s determination that certain defendants complied with Rule 11’s “safe harbor” provision when they served a motion for sanctions without a supporting memorandum. Wolfchild v. Redwood County, 2015 WL 3616058 (D. Minn. 6/9/2015).
– Josh Jacobson
Law Office of Josh Jacobson
• Jurisdiction to review. On 6/15/2015, the United States Supreme Court held the 5th Circuit Court of Appeals committed error by finding it lacked jurisdiction to review the petitioner’s request that the Board of Immigration Appeals equitably toll the 90-day time limit on his motion to reopen as a result of ineffective assistance of counsel. “An alien [sic] ordered to leave the country has a statutory right to file a motion to reopen his removal proceedings… If immigration officials deny that motion, a federal court of appeals has jurisdiction to review their decision… Notwithstanding that rule, the court below declined to take jurisdiction over such an appeal because the motion had been denied as untimely. We hold that was error.” Mata v. Lynch, 575 U.S. ___, ___ (2015). slip op. at http://www.supremecourt.gov/opinions/14pdf/14-185_i4dk.pdf
• No deprivation of due process. On 6/15/2015, the United States Supreme Court overturned the Ninth Circuit Court of Appeals and remanded, holding that the U.S. Department of State, which denied a visa to U.S. citizen Fauzia Din’s husband, did not deprive her of due process. There is, according to the Court, no constitutional right to live in the United States with one’s spouse if the government finds the foreign national spouse to be ineligible for an immigrant visa. “Because Fauzia Din was not ‘deprived of life, liberty, or property’ when the government denied Kanishka Berashk admission to the United States, there is no process due her under the Constitution. To the extent that she received any explanation for the government’s decision, this was more than the due process clause required.” Kerry v. Din, 575 U.S. ___, ___ (2015). slip op. at http://www.supremecourt.gov/opinions/14pdf/13-1402_e29g.pdf
• The sock case: Drug paraphernalia, controlled substances, and 21 U.S.C. §802. On 6/1/2015, the United States Supreme Court found that, for removal purposes, the government must connect an element of an immigrant’s conviction under Kansas state law to a “controlled substance” as delineated in 21 U.S.C. §802. The government failed to do that in this case. “Mellouli’s Kansas conviction for concealing unnamed pills in his sock did not trigger removal…The drug paraphernalia possession law under which he was convicted, related to a controlled substance… But it was immaterial under that law whether the substance was defined in 21 U.S.C. §802. Nor did the state charge, or seek to prove, that Mellouli possessed a substance on the §802 schedules. Federal law (§1227(a)(2)(B)(i), therefore, did not authorize Mellouli’s removal.” Mellouli v. Lynch, 575 U.S. ___, ___ (2015). slip op. at http://www.supremecourt.gov/opinions/14pdf/13-1034_3dq4.pdf
• Physical abuse by relatives does not necessarily rise to the level of persecution. The 8th Circuit Court of Appeals recently held the Board of Immigration Appeals was not required to find that physical abuse inflicted on the petitioner by his aunt, cousin, and a group of his cousin’s friends amounted to persecution, either in isolation or cumulatively. Citing Al Tawm v. Ashcroft, 363 F.3d 740, 743 (8th Cir. 2004), the court observed that “there is no evidence that Barillas-Mendez suffered lasting physical injury, and ‘[t]he mere presence of some physical harm does not require a finding of past persecution.’” Barillas-Mendez v. Lynch, No. 14-1444, slip op. (8th Cir. 6/4/2015) at http://media.ca8.uscourts.gov/opndir/15/06/141444P.pdf
• Lack of jurisdiction to review hardship claim in cancellation of removal case. The 8th Circuit Court of Appeals denied the petition for review, holding it lacked jurisdiction to review the Board of Immigration Appeals’ discretionary denial of the petitioner’s claim of “exceptional and extremely unusual” hardship to his son while he sought the relief of cancellation of removal. “Congress has limited our jurisdiction to review the Attorney General’s denial of discretionary cancellation of removal; we may only review ‘constitutional claims or questions of law.’” 8 U.S.C. §1252(a)(2)(B)(i) and (D). Salas-Caballero v. Lynch, No. 14-2556, slip op. (8th Cir. 5/20/2015) at http://media.ca8.uscourts.gov/opndir/15/05/142556P.pdf
• Discrimination against U.S. workers by U.S. employer. H-2A visa holders are foreign national workers coming to the United States to perform agricultural labor of a temporary or seasonal nature. Part of that process requires certification that the employer has been unsuccessful in locating qualified and eligible domestic workers. That means U.S. workers are not to be discriminated against during the hiring process. As Judge Ellen Thomas noted in her 6/10/2015 decision, “That purpose of the labor certification process was ill-served in this case. To be clear, unlike the labor certification process, nothing in this forum’s governing statute or regulations mandates that a U.S. citizen be afforded any preference over an equally qualified alien [sic] individual… Both the certification process and this forum’s statute are on the same page, however, in mandating that U.S. workers are not to be discriminated against in favor of foreign workers… That is precisely what happened here. Jerry Estopy and Manuel Bortoni, individually and d.b.a. Estopy Farms, are liable for engaging in an immigration-related unfair employment practice in violation of 8 U.S.C. §1324b(a)(1)(B).” U.S.A. v Estopy Farms, 11 OCAHO no. 1252 (2015). slip op. at http://www.justice.gov/opa/file/478436/download
• Temporary protected status extended for Somalia. On 6/1/2015, temporary protected status for Somalia was extended to 3/17/2017. Those Somalis currently holding temporary protected status may register for extension of their TPS status during the 60-day re-registration period running from 6/1/2015 to 7/31/2015. 80 Fed. Reg. 31056-61 (6/1/2015). slip op. at http://www.gpo.gov/fdsys/pkg/FR-2015-06-01/html/2015-13094.htm
– R. Mark Frey
Frey Law Office
• Truth In Lending Act; statute of limitations. Homeowners commenced suit to rescind their mortgage under the Truth in Lending Act (TILA) three years after the loan origination, claiming that the finance amount was understated in the disclosure. The district court ruled that the disclosure was accurate, and therefore, the right to rescission expired three days after origination and the action was time-barred. The 8th Circuit affirmed. At issue was whether the more lenient disclosure of finance charge under 15 USC §1605(f)(2)(A) applied, which allows a variance of one-half of 1 percent, or whether the more strict 15 USC §1635(i)(2) governs, which allows only a variance of $35 less than actual amount. The 8th Circuit held that the more strict statute applies only in response to a foreclosure. In this case, the homeowners sent notice of their intention to rescind before foreclosure, and therefore, the more lenient disclosure statute applies. Because the finance disclosure complied with 15 USC §1605(f)(2)(A) , the homeowners’ right to rescission expired three days after origination and the action was time-barred. Beukes v. GMAC Mortgage, LLC,___ F.3d___ 2015 WL 2237484 (8th Cir. 2015).
• Equitable mortgage; foreclosure reconveyance. Property owners conveyed their property to an entity in exchange for funds used to redeem the property from foreclosure. The property was conveyed to the entity via warranty deed and the parties entered into a contract for deed so the homeowners could repurchase the property. After a payment default, the contract for deed was cancelled. The district court and court of appeals concluded that the conveyance was an equitable mortgage, but that it did not constitute a foreclosure reconveyance under Minn. Stat. §325N.10, subd. 3 because the transaction did not allow the purchaser to acquire title to the property by redeeming the property as a junior lienholder. The court also held that the lender could sell a multi-parcel farm as one parcel where there is evidence that it would be beneficial to the parties and where the owner failed to request or designate separate tracts for individual sale under Minn. Stat. §582.042, subd. 3. Roseland v. Wentzell, 2015 WL 2341602 (Minn. Ct. App. 5/18/2015).
• Easement; exclusive easement. Owner of two contiguous parcels sold Parcel B and intended to grant an easement over Parcel A, but failed to do so. When the owner subsequently sold Parcel A, he reserved an “exclusive easement for ingress, egress and utility purposes…” over Parcel A to himself and then assigned that easement to the owner of Parcel B. Relying on the “exclusive” aspect of the easement, the owner of Parcel B attempted to exclude the new owner of Parcel A from the easement area. The owner of Parcel A commenced suit declaring that they could not be excluded from reasonable use of the easement area and that the owner of Parcel B was using the easement area in excess of the use granted by the easement. The district court granted summary judgment in favor of the owner of Parcel B and held that the term “exclusive easement” was not ambiguous and gave the owners of Parcel B the right to exclude all others, including the owners of Parcel A, from using the easement area. The court of appeals reversed and held that the term “exclusive easement” is ambiguous and could mean exclusive as everyone, or just exclusive as to all others other than the owners of the easement area. The court of appeals remanded the case back to the district court to consider extrinsic evidence and determine the intent of the parties to the easement agreement. Apitz v. Hopkins, — N.W.2d — 2015 WL 2341307 (Minn. Ct. App. 2015).
• Mortgage foreclosure; standing. Homeowner brought suit alleging that the foreclosure of her home was invalid because the assignment of mortgage to a securitized trust violated the terms of the pooling and servicing agreement. The district court dismissed the action and the 8th Circuit affirmed because a mortgagee lacks standing to challenge the foreclosure based on the ground that the foreclosing party violated an agreement to which the mortgagee was not a party. Rogers v. Bank of America, N.A., ___ F. 3d ___ , 2015 WL 3456764 (8th Cir. 2015).
• Sale of real property; listing agreement override clause. Property owner entered into a listing agreement with real estate agent that contained an override clause that required the owner to pay a full commission on any sale within 180 days after the expiration of the listing agreement if the buyer was a person or entity introduced to the property by the agent. The override clause contained a requirement, codified in Minnesota Statutes section 82.66, subd. 1(b)(7), for the listing agent to notify the owner within 72 hours after the expiration of the listing with a list of names of all of the prospects that are protected. The agent did not provide a list of potential candidates within 72 hours after expiration of the listing agreement. However, property owner sent a letter to the agent nearly two months after expiration of the listing agreement agreeing to pay a commission if the property was sold to Pheasants Forever, Inc. The property was sold to Pheasants Forever, Inc. within the 180-day override period. The real estate agent sued the owner for failing to pay a commission. The district court dismissed the suit on summary judgment because the agent failed to provide a protective list to the owner within 72 hours of expiration of the listing agreement and the owner’s letter did not constitute a contract entitling the agent to a commission because it lacked essential terms and there was no consideration. The court of appeals affirmed and held that the protective list requirement set forth in Section 82.66, subd. 1(d)(1), is strictly construed and the agent may not enforce the override clause if it does not provide the list within 72 hours after expiration of the listing agreement. The court of appeals also held that the owner’s letter lacked consideration because the owner’s promise to pay the commission was based solely on past consideration. The court of appeals further stated that promissory or equitable estoppel is not available to the real estate agent because it would defeat the plain language of the statutory requirement. Cityscapes Development, LLC v. Scheffler, ___ N.W.2d ___, 2015 WL 3649307 (Minn. Ct. App. 2015).
– Michael Kreun
Beisel & Dunlevy PA
• Personal income tax: Dormant commerce clause prevents certain double-taxation of state’s residents. In a decision with potentially far-reaching consequences for state revenue departments, the Supreme Court ruled that Maryland’s personal income tax scheme, which taxes income that its residents earn both within and outside the state but does not provide residents with a full credit against the income taxes that they pay to other states, violates the dormant commerce clause. The decision, premised as it was on the dormant commerce clause, drew dissents from Justice Thomas (there is no dormant commerce clause) and Justice Scalia (there ought not be any extension of the dormant commerce clause). Justice Ginsburg also dissented (states are justified in taxing 100 percent of the income of their residents). The decision is notable for its potential impact on states’ treasuries, and also for the continued challenge to discern the parameters of the dormant commerce clause, especially in the state tax setting. The Court is also arguably signaling a limit on the “double-taxation” of residents. Comptroller of Treasury of Maryland v. Wynne, 135 S. Ct. 1787 (2015).
• Personal income tax: Cancellation of debt not income when repayment schedule entered. Forgiven debts constitute income. Determining when a debt is “forgiven” however, can be the trick. Married taxpayers petitioned for a redetermination after the Service determined that a loan related to the husband’s business had been forgiven and therefore constituted taxable income. The court ruled that the couple did not realize cancellation of indebtedness income because credible testimony showed that loan was outstanding and being repaid via payroll deductions and further that the husband didn’t receive Form 1099-C discharging the loan. It was not conclusive, the court continued, that the debtor failed to take collection action before the state limitations period for collection expired, nor was it conclusive that the taxpayer failed to make payments on the loan until the couple’s return was audited. Johnson v. Comm’r, No. 12767-13, 2015 WL 2180652, at *1 (T.C. 5/11/2015).
• Personal income tax: Commuting, even long distances, remains a nondeductible personal expense. Reminding the taxpayer that “deductions are a matter of legislative grace,” the tax court denied a college professor’s claimed deduction for mileage expenses between the taxpayer’s home and the college at which he taught. The taxpayer lived 470 miles from the college; regardless of distance, however, commuting remains a nondeductible personal expenditure. Various other deductions, including gambling losses and various medical and dental expenses, were also disallowed. Renner v. Comm’r, No. 26481-12, 2015 WL 3464885, at *4 (T.C. 6/2/2015).
• Lease income: Matter of first impression. A lessor was required to include a $1 million lease payment in the year it was received, as the year in which an amount of fixed rent was payable and thus fixed in the absence of specific allocation. The taxpayer and commissioner were disputing the impact of Section 467, a provision which, the court noted, was enacted “to prevent lessors and lessees from mismatching the reporting of rental income and expenses.” The section provides, inter alia, “the determination of the amount of the rent under any section 467 rental agreement which accrues during any taxable year shall be made… by allocating rents in accordance with the agreement.” The section further directs the secretary to “prescribe such regulations as may be appropriate to carry out the purposes of this section.” Interpreting the final regulations, the court reasoned that the lease in question did not “specifically allocate” fixed rent to any rental period within the meaning of section 1.467–1(c)(2)(ii)(A), Income Tax Regs. Because, however, the lease provided for a fixed amount of rent payable during the rental period, the amount of rent payable in the tax year at issue had to be allocated to the tax year in which it was received. An accuracy-related penalty was upheld. Stough v. Comm’r, No. 8256-11, 2015 WL 3465168 (T.C. 6/2/2015).
• Flexibility in procedure to claim whistleblower award. A petitioner husband and wife were involved in illegal activity involving the sale of pirated compact discs. The husband was arrested, and he agreed to provide information regarding the structure of various entities his clients used in their illegal activities. The husband provided information to various government agencies, including the IRS. In addition, he devised a plan to lure an officer of one of the entities he suspected of avoiding US taxes into the United States. In a complicated plan involving trips abroad, surreptitious recordings, and a triathlon in the Bahamas, the target ultimately was lured to the United States, the company was indicted, and the target-business entered a guilty plea including a payment of $74 million. At some point during the investigation, the husband and wife were informed of the whistleblower program. They submitted the requisite forms (Form 211). The forms were processed, and the claims denied, presumably on the basis that the forms were not provided to the Whistleblower Office prior to the relevant information being provided to the IRS. The court held that the petitioners were not required as a matter of law to file Forms 211 with the Whistleblower Office before providing information to the IRS to qualify for an award under section 7623(b). The opinion contains an interesting discussion of the purpose and development of the whistleblower program. Whistleblower 21276-13W v. Comm’r, No. 21276-13W, 2015 WL 3465660, at *8 (T.C. 6/2/2015).
• IRS announces additional steps to fight identity theft. The Internal Revenue Service announced it is teaming up with tax preparation and software firms, payroll and tax financial product processors, and state tax administrators to combat identity theft refund fraud. Proposed protections include additional steps to validate taxpayer and tax return information at the time of filing, and contemplate increased information sharing between industry and governments.
• Empowerment zone designation extended for a third time. Empowerment zones are certain urban and rural areas where employers and other taxpayers qualify for special tax incentives. The IRS issued Notice 2015-26 in March to address the relevant provision of the Tax Increase Prevention Act of 2014. The notice provided that any nomination for an empowerment zone in effect on 12/31/2013 will have a new termination date of 12/31/2014, unless the governing state or municipality declined the extension in a notification to the IRS.
– Morgan Holcomb
Hamline University School of Law
TORTS & INSURANCE
• Personal jurisdiction. Plaintiff filed a purported class action against defendant, a company that obtains revenue by connecting consumers seeking short-term loans with lendors. Plaintiff’s complaint alleged that defendant’s website and advertising contained false and misleading statements, and some of the loans received were illegal. As a result, plaintiff sought relief under Minnesota’s consumer protection statutes. Defendant filed a motion to dismiss alleging a lack of personal jurisdiction and failure to join indispensable parties. The district court denied the motion.
The Minnesota Court of Appeals affirmed. With respect to personal jurisdiction, the court held that defendant was subject to specific personal jurisdiction because it actively solicited Minnesota residents by: (1) direct contacts with Minnesota residents by phone, by email, and through its website; and (2) it engaged in a nationwide television advertising campaign that aired commercials in Minnesota. The court also noted that more than 1,000 loan applications had been submitted on the website by Minnesota consumers.
The court also affirmed on the indispensable party issue, holding that the lenders were not indispensable parties. The court reasoned that complete relief could be obtained solely from the defendant. Further, the court noted that “with torts and analogous statutory claims, it is well-established that a plaintiff is not required to join all tortfeasors in a single suit.” Rilley v. MoneyMutual, LLC, No. A14-1307 (Minn. Ct. App. 5/18/2015) http://mn.gov/lawlib/archive/ctappub/2015/opa141307-051815.pdf
• Civil procedure: Deadline to appeal partial judgment improperly certified under Rule 54.02. Plaintiff sued defendant city for breach of contract and violation of the Prompt Payment Act. The district court granted partial summary judgment for defendant on the breach of contract claim, leaving the statutory claim for trial. In its order, the court certified its order as a final judgment under Rule 54.02 without further elaboration. The district court did so even though neither party had requested such certification. After the parties settled the statutory claim, plaintiff filed a notice of appeal related to the grant of summary judgment on its breach of contract claim. The court of appeals dismissed the appeal as untimely because more than 60 days had passed since the district court certified the order.
The Minnesota Supreme Court reversed. The Court first held that the district court abused its discretion in certifying the order under Rule 54.02. In so holding, the Court rejected the argument that the district court abused its discretion by failing to set forth the basis for its certification under Rule 54.02. Nevertheless, the Court found an abuse of discretion because the two claims arose out of one set of facts, and there were no other factors to support a Rule 54.02 certification. Because the district court abused its discretion in certifying the order under Rule 54.02, the Court held that the time for appeal did not begin to run until the district court entered a final judgment. The Court reasoned that this holding best promoted the purpose of Rule 54.02 and the prevention of piecemeal appeals.
Justice Lillehaug filed a dissent that was joined by Justice Stras. The dissent argued that the better rule would be to require an immediate appeal where Rule 54.02 certification was provided, regardless of whether or not the district court abused its discretion, to promote certainty. Contractors Edge, Inc. v. City of Mankato, No. A14-0223 (Minn. 5/20/2015). http://mn.gov/lawlib/archive/supct/2015/OPA140223-052015.pdf
– Jeff Mulder
Bassford Remele, A Professional Association