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Bench & Bar of Minnesota is the official publication of the Minnesota State Bar Association.

Notes & Trends – November 2015

CRIMINAL LAW
JUDICIAL LAW

• Sentencing: Aggravated sentence supported by any aggravating factor arising from same course of conduct. Appellant pleaded guilty to possession of a firearm by an ineligible person and second-degree assault after firing a gun six times in response to being cut with a knife during a dispute on a basketball court, when a number of adults and children were present. The district court granted appellant’s request for a downward dispositional departure and the state’s request for an upward durational departure, and sentenced appellant on the firearm-possession charge to 90 months stayed for eight years, and a concurrent 36 months stayed for eight years on the assault charge. The district court based its durational departure on the “unique seriousness” of the offense. Appellant argues on appeal that the district court erred by imposing an upward durational departure for the firearm-possession conviction.

Held, the upward durational departure is warranted under Minn. Stat. §244.10, subd. 5a(b), and case law. Minn. Stat. §244.10, subd. 5a(b), provides that “when a court sentences an offender for a felony conviction, the court may order an aggravated sentence beyond the range specified in the sentencing guidelines grid based on any aggravating factor arising from the same course of conduct.” (Emphasis added.) Appellant argues that this statute allows departure based only on overlapping factors arising from the same course of conduct in cases involving uncharged and unsentenced offenses, not in cases where multiple offenses were sentenced. However, the court of appeals cites State v. Edwards, 744 N.W.2d 596, 606-07 (Minn. 2009), in which the Supreme Court held that “when a defendant is convicted of several offenses involving multiple victims arising out of a single behavioral incident, a sentencing court may use ‘overlapping’ facts of those offenses as the basis for an upward departure, provided that those facts show that the defendant committed the offense being sentenced in a particularly serious way.”

Here, the district court ordered an aggravated sentence because the firearm-possession offense created a greater-than-normal danger to the safety of other people, and the record supports this finding. Appellant’s firearm-possession offense and the greater-than-normal danger arose from the same course of conduct. Thus, the departure ground relied on by the district court is permissible under Minn. Stat. §244.10, subd. 5a(b). State v. August Latimothy Fleming, Ct. App. 9/8/2015.

Sentencing: Departure based on repeat offender aggravating factor requires proof of facts distinct from those needed to determine general offense severity. When A.C. attempted to enter her car in a parking ramp, video surveillance, physical evidence, and eyewitnesses established that appellant came up behind her and put a large knife to her throat. After A.C. struggled, appellant stabbed her in the abdomen, causing a 10-inch-deep wound, which caused severe blood loss and required emergency surgery. After a jury trial, appellant was convicted of first-degree assault. The district court imposed an upward durational departure, specifically stating that the length of the departure was “based upon… the particular cruelty that [appellant] demonstrated toward this victim, the gratuitous nature of [the] physical assault, the extensive nature of her injuries which suggests to the court that [appellant’s] conduct was at the outer limits of first degree assault, falling very short of murder.” The court of appeals affirmed.

A first-degree assault conviction requires proof that the offender inflicted great bodily harm on the victim. The repeat aggravating factor also requires that the victim suffer injury. Thus, appellant argues that the repeat aggravating factor cannot be applied to his conviction because that factor duplicates an element of his first-degree assault conviction. The legislature has the power to fix the punishment for criminal conduct, and has established that one of the factors upon which a district court may depart is where “the current conviction is for… an offense in which the victim was otherwise injured and there is a prior felony conviction for a criminal sexual conduct offense.” Minn. Stat. §244.10, subd. 5a(a)(3). However, the Supreme Court has previously held that facts considered by the legislature in determining the severity of the offense being sentenced cannot also serve as a basis for departure, and that using a prior conviction to calculate a defendant’s criminal history score, and then using that same conviction as a ground for departure would effectively count a single conviction twice, which is contrary to the spirit and intent of the Sentencing Guidelines. State v. Peterson, 329 N.W.2d 58, 60 (Minn. 1983); State v. Blanche, 696 N.W.2d 351, 378-79 (Minn. 2005); State v. Erickson, 313 N.W.2d 16, 18 (Minn. 1981).

Held, “[a]pplication of the repeat offender aggravating factor when injury to the victim is an element of the current offense does not contravene the general sentencing principles articulated in our cases because the Legislature did not consider a recidivism-based fact in determining the severity of the sentence for Appellant’s offense at conviction.” The repeat aggravating factor includes facts other than those needed to prove the offense of conviction. True, in this case, both require injury to the victim, but the repeat offender aggravating factor requires more—a prior conviction of an offense involving victim injury or criminal sexual conduct. The court of appeals and appellant’s conviction are affirmed. State v. Robert John Meyers, Sup. Ct. 9/30/2015.

• Firearms: BB gun considered a “firearm.” Appellant was convicted of possession of a firearm by an ineligible person, under Minn. Stat. §609.165, subd. 1b(a), after a jury trial. The complaint alleged he was ineligible to possess a firearm due to a prior drug conviction and his possession of a BB gun. At trial, the district court instructed the jury that “[a] BB gun is a firearm under Minnesota law.” Appellant appealed his conviction, arguing that a BB gun is not a “firearm” within the meaning of Minn. Stat. §609.165, subd. 1b(a).

Held, a BB gun is a “firearm” under Minn. Stat. §609.165, subd. 1b(a). This section provides that “[a]ny person who has been convicted of a crime of violence, as defined in section 624.712, subdivision 5, and who ships, transports, possesses, or receives a firearm, commits a felony…,” but does not define “firearm.” Appellant argues that the dictionary definitions of “firearm” require a weapon to utilize explosive force to be considered a firearm, and that a BB gun is not a firearm because it does not utilize explosive force. Minnesota’s appellate courts, however, have interpreted the term “firearm” as used in other sections of Chapter 609 to include a BB gun. Importantly, in State v. Fleming, 724 N.W.2d 537, 540 (Minn. App. 2004), the court of appeals held that the term “firearm” in Minn. Stat. §624.713, subd. 1(b), which is a possession offense substantively identical to the possession offense in this case, includes BB guns.

The court of appeals points out that, although the legislature defined “firearm” in other sections of Chapter 609 to exclude BB guns, those definitions are limited to their respective statutory sections, and that these more narrow definitions demonstrate the legislature’s ability to limit the definition of “firearm,” which it chose not to do by failing to define “firearm” in Minn. Stat. §609.165, subd. 1b(a). The legislature has also failed to amend Chapter 609 to include a comprehensive definition of “firearm” that excludes BB guns, despite the opportunity to do so. Appellant’s conviction is affirmed. State v. David Lee Haywood, Ct. App. 9/28/2015.

– Frederic Bruno

– Samantha Foertsch

Bruno Law

EMPLOYMENT & LABOR LAW
JUDICIAL LAW

• Overtime compensation; two claims denied. The 8th Circuit Court of Appeals rejected a pair of huge overtime wage verdicts under the Fair Labor Standards Act (FLSA) due to failure of the plaintiff to file written consents of other claimants to proceed as a collective action, as required under Rule 29 U.S.C. §216.(b).

A verdict of nearly $5 million was reversed in a case over “donning-and-doffing” required work apparel for failure to submit signed consents other than the named plaintiff and a parallel claim under the state wage payment law also was rejected. Gomez v. Tyson Foods, Inc., 799 F.3d 1192 (8th Cir. 2015).

Similarly, an overtime verdict in excess of $18 million was overturned because a timely consent was not filed before expiration of the two-year statute of limitations and a state law claim faltered due to insufficient evidence of an agreement by the employer to pay the overtime wages. Acosta v. Tyson Foods, Inc., 2015 U.S. App. LEXIS 17300 (Minn. Ct. App. 2015).

• At-will employment; $1 million judgment for doctor reversed. A judgment in favor of a doctor in excess of $1 million against his partners in a medical clinic was reversed because he was an at-will employee who could not sue for wrongful termination under state law. The 8th Circuit, in a decision written by Judge James Loken of Minnesota, held that there was no basis for a claim of “public policy” to overcome the at-will employment rule that bars most wrongful discharge claims unless there is some statutory breach of contract or statutory violation. Hagen v. Siouxland Obstetrics & Gynecology, 799 F.3d 1192 8th Cir. (2015).

• Overtime compensation; claim fails because too “conclusory.” Another overtime compensation claim was rejected by the 8th Circuit Court of Appeals because the complaint was “too conclusory.” The court also upheld denial of a motion to amend the complaint after judgment had been entered against the plaintiffs because they “inexcusably delayed the request to amend.” Ash v. Anderson Merchandisers, 799 F.3d 957 8th Cir. (2015).

• Drivers deemed independent contractors; judgment reversed. A group of FedEx drivers lost their claim for unpaid overtime because they were independent contractors rather than employees. The 8th Circuit, reversing a ruling for the drivers, held that they were not entitled to sue because they could be hired to do other jobs, which made them independent contractors, not employees. Gray v. FedEx Ground Package System, Inc., 799 F.3d 995 8th Cir. (2015).

• FMLA; maternity leave claim upheld; discrimination. A Minnesota account executive achieved partial reversal of the dismissal of her lawsuit after she was first demoted and then discharged following a maternity leave. The 8th Circuit, in a decision written by Judge Diane Murphy of Minnesota, held that a claim under the Family & Medical Leave Act (FMLA) for failure to restore the woman to the same or similar position was actionable, but a claim of discrimination was properly dismissed. Brown v. Diversified Distrib. Sys., LLC, 2015 Minn. App. LEXIS 15770 (Minn. Ct. App. 2015).

• Age, whistleblower work comp claims; dismissal upheld. Dismissal by the St. Louis County District Court of a multi-pronged wrongful discharge claim based on age discrimination, whistleblowing and violation of the workers compensation law was affirmed by the Minnesota Court of Appeals. The claimant failed to establish a prima facie case of age discrimination and likewise failed to establish that there was an available position for which he was qualified after a workforce injury limited his ability to do strenuous work. Kirk v. State, 2015 Minn. App. LEXIS 916 (Minn. App. 2015)(unpublished).

• Unemployment compensation; attorney entitled to benefits. An attorney was entitled to receive unemployment compensation benefits because he was an employee, rather than an independent contractor, according to the Minnesota Court of Appeals. Upholding a decision of the Department of Employment & Economic Development (DEED), it held that there was an employer-employee relationship with the law firm that he worked for, which entitled him to receive unemployment compensation after he was terminated. Glasser v. Butler Liberty Law, 2015 Minn. App. LEXIS 838 (Minn. Ct. App. 2015)(unpublished).

• Unemployment compensation; physicality precludes claim. An applicant for unemployment benefits lost her claim following a physical encounter with her boss. The court of appeals held that the employee’s conduct in grabbing and twisting her supervisor’s arm, together with her submission of emails to upper management, despite warnings not to do so, constituted a disqualifying “misconduct.” Blomker v. U.S. Fed. Employees, 2015 Minn. App. LEXIS 841 (Minn. Ct. App. 2015)(unpublished).

• Unemployment compensation; failure to attend disciplinary meeting. An employee who refused to attend a disciplinary meeting was denied unemployment compensation benefits. The appellate court ruled that the employee’s failure to attend the meeting constituted disqualifying misconduct, coupled with disrespectful remarks to supervisorial personnel on multiple occasions. Musa v. My Brothers’ Keeper, 2015 Minn. App. LEXIS 842 (Minn. Ct. App. 2015)(unpublished).

• Unemployment compensation; failure to report earnings. An applicant who under-reported earnings while claiming unemployment compensation was denied benefits on grounds of fraud. The court of appeals held that the claimant did not have a “good faith” belief that he should not report his earnings, which constituted disqualifying fraud. Hern v. Massage Retreat & Spa, 2015 Minn. App. LEXIS 837 (Minn. Ct. App. 2015)(unpublished).

• Unemployment compensation; quitting employee not entitled to benefits. An employee who quit his job as a truck driver for a company was denied unemployment compensation benefits. The appellate court rejected his claim that he was forced to drive an unsafe vehicle, which did not constitute “good reason” to quit and be entitled to benefits. Benson v. Universal Truck Services, LLC, 2015 Minn. App. LEXIS 855 (Minn. Ct. App. 2015)(unpublished).

• Unemployment compensation; retail worker’s misconduct. An employee of a retail store who used a store warranty to obtain goods for herself was not entitled to unemployment benefits. The appellate court ruled that the employee committed disqualifying misconduct. Montgomery v. AT&T Mobility Servs., LLC, 2015 Minn. App. LEXIS 962 (Minn. App. 2015)(unpublished).

LOOKING AHEAD

The Minnesota Supreme Court will rule soon on two important workplace-related cases argued in early October. In J.O. Donovan, Inc. v. MNDOT, No. A14-0863 A14-1021, it will consider the applicability of the state prevailing wage act, Minn. Stat. §177.41.44 to the hauling and delivery of asphalt cement materials for refineries to the facilities of the prime construction of two construction projects.

In Dennis v. Salvation Army, No. A15-0715, the court will examine the scope of the provision of the workers compensation law in deciding whether an employee who was injured when he slipped and fell on the street on a smoking break outside the work site is covered by the law. The lower courts held that the Act applied under the “street risk” doctrine, trumping the “personal comfort” exclusion for activities not covered by the Act.

–Marshall H. Tanick

Hellmuth & Johnson, PLLC

ENVIRONMENTAL LAW
JUDICIAL LAW

• Minnesota Court of Appeals reverses PUC, requires EIS prior to pipeline certificate of need. The Minnesota Court of Appeals held that an environmental impact statement (EIS) must be completed before the Minnesota Public Utilities Commission (PUC) could grant a certificate of need for an oil pipeline project. The proposed project is a 612-mile pipeline to transport crude oil from Tioga, North Dakota to terminals in Clearbrook, Minnesota and Superior, Wisconsin. The project proponent, North Dakota Pipeline Company LLC (NDPC), filed applications for a certificate of need and a pipeline routing permit for the pipeline. Traditionally, the PUC has conducted pipeline certificate of need and routing permit proceedings jointly. Environmental review for such projects is completed prior to the completion of these proceedings pursuant to a requirement in the routing permit rules. See Minn. R. 7852.1500 (mandating an environmental analysis that the PUC has determined complies with the requirements of the Minnesota Environmental Policy Act (MEPA)). However, due to the complexity of this particular project, the PUC deviated from its usual practice and chose to conduct the certificate of need proceedings prior to the routing permit proceedings. The PUC also decided that the full MEPA-compliant environmental review under part 7852.1500 would not occur until after the PUC had made its final decision on the certificate of need.

Relators Friends of the Headwaters challenged the PUC’s decision, arguing that making the final decision on the certificate of need prior to completing environmental review violated MEPA. The court agreed. Under MEPA, if an environmental assessment worksheet or EIS is required for a project—all parties agreed that environmental review was required for the pipeline; they just disagreed on when it must occur—a final governmental decision may not be made to “grant a permit, approve a project, or begin a project” until an EIS has been completed or found unnecessary. Minn. Stat. §116D.04, subd. 2b. Because the relevant definition of “permit” includes “certificates,” Minn. R. 4410.0200, subp. 58, the court quickly concluded that the PUC could not make a final decision to grant the certificate of need until environmental review for the project was complete. The court also cited MEPA’s exhortation that environmental review “shall be prepared as early as practical,” Minn. Stat. §116D.04, subd. 2a, as well Robertson v. Methow Valley Citizens Council, 490 U.S. 332, 349 (1989) (explaining that early-stage environmental review under the analogous National Environmental Policy Act ensures that “important [environmental] effects will not be overlooked or underestimated only to be discovered after resources have been committed or the die otherwise cast”). In re N. Dakota Pipeline Co. LLC, A15-0016, ____ N.W.2d____ (Minn. Ct. App. 9/14/2015).

Minnesota Court of Appeals upholds MPCA river and stream eutrophication standards. The Minnesota Court of Appeals declared valid water quality standards adopted by the Minnesota Pollution Control Agency (MPCA) to limit eutrophication—the over-enrichment of waters with nutrients, which stimulates excessive growth of aquatic plants—in rivers and streams. The Minnesota Environmental Science and Economic Review Board (MESERB) and other petitioners brought a declaratory judgment action in the court of appeals alleging that MPCA failed to comply with statutory rulemaking procedures by not responding in a meaningful way to the petitioners’ comments during the rulemaking process. In particular, petitioners argued that the MPCA relied on outdated studies or failed to make the studies it relied on part of the public record.

The court agreed with the petitioners that state agencies such as MPCA have an affirmative duty—explicit under federal law, implicit under the Minnesota Administrative Procedure Act—to respond to public comments received in rulemaking proceedings, stating the main reasons for the agency’s decision and explaining why the agency reached the decision it did. However, in this case, the court held MPCA had satisfied this duty and adequately responded to the petitioners’ comments. The court noted that MPCA had responded to all of the written comments received after each public hearing, and had included in its responses citations to the documents or sources that provided the basis for MPCA’s position. Regarding the petitioners’ allegation that MPCA relied upon outdated or secret data, the court declined to “second-guess the MPCA’s use of or reliance on its chosen scientific or technical sources,” stating that agency decisions, including rulemakings, enjoy “a presumption of correctness” and that courts “should defer to an agency’s expertise and special knowledge.” Minnesota Envtl. Sci. & Econ. Review Bd. v. Minnesota Pollution Control Agency, ___ N.W.2d ___, A14-1694 (Minn. Ct. App. 8/10/2015).

ADMINISTRATIVE ACTION

• EPA finalizes new ozone standard. On 10/1/2015, the U.S. Environmental Protection Agency (EPA) finalized a new, more stringent national ambient air quality standard (NAAQS) for ground-level ozone of 70 parts per billion (ppb). Ozone, the main component of smog, is not emitted directly into the air but results when emissions of precursors, such as nitrogen oxides, volatile organic compounds, carbon monoxide and methane, “cook” in the sun. Typical sources of these emissions include electric utilities and motor vehicle exhaust. Ozone causes or aggravates a variety of respiratory conditions, such as asthma, emphysema and bronchitis. The federal Clean Air Act requires EPA to adopt primary and secondary NAAQS for six “criteria” pollutants, including ozone, and revise the standards every five years. 42 U.S.C. 7409. Primary standards must be sufficient to protect public health from the risks of ozone in the ambient air, and secondary standards must be sufficient to protect “public welfare”—e.g., trees, plants and ecosystems. EPA’s current primary and secondary standards for ozone are both 75 ppb.

EPA’s November 2014 proposed rule suggested reducing the standards to between 65 to 70 ppb and requested comments on reducing the standard to as low as 60 ppb, a level that would have put some urban areas of Minnesota into “nonattainment” under the Clean Air Act New Source Review program. However, EPA decided to set the revised primary and secondary standards at the upper end of the proposed range—70 ppb. The agency also retained the standards’ indicators (O3), forms (fourth-highest daily maximum, averaged across three consecutive years) and averaging times (eight hours). In promulgating the final rule, EPA stated that clinical studies and risk and exposure analyses made clear that a standard of 70 ppb will protect public health and “essentially eliminate exposures that have been shown to cause adverse health effects, protecting 99.5 percent of children from even single exposures to ozone at 70 ppb.” The new standard takes effect 60 days after publication in the Federal Register. National Ambient Air Quality Standards for Ozone, _____ Fed. Reg. ____.

– 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

FEDERAL PRACTICE
JUDICIAL LAW

• Cert. grant on issue relating to diversity jurisdiction and trusts. With the opening of the new United States Supreme Court term, the Court granted certiorari in a case that raises the issue of whether the citizenship of a trust for purposes of diversity jurisdiction is based on the citizenship of the trustees, the trust beneficiaries, or some combination thereof.  There is a deep split among the lower courts on this issue. ConAgra Foods, Inc. v. Americold Logistics, LLC, 776 F.3d 1175 (10th Cir.), cert. granted, ___ S. Ct. ___ (2015).

• Appeal dismissed as untimely despite timely post-judgment motions. Where the plaintiff lost on summary judgment, filed a motion to enlarge her time to file a Fed. R. Civ. P. 60(b) motion 29 days after judgment was entered against her, the motion to enlarge was granted, the plaintiff filed her Rule 60(b) motion and later filed a notice of appeal, and the plaintiff’s Rule 60(b) motion was ultimately denied, the 8th Circuit granted the defendants’ motion to dismiss the appeal in an unpublished opinion, noting that under Fed. R. App. P. 4(a)(4)(A)(vi), the filing of a Rule 60(b) motion extends the time to file an appeal only if the Rule 60 motion is filed within 28 days after judgment is entered. Ratliff v. City of Shannon Hills, 2015 WL 5827466 (8th Cir. 10/7/2015).

• District court’s application of res judicata was harmless error. Where the district court applied res judicata to bar the plaintiff’s claims based on a not yet final judgment, but that judgment became final before the plaintiff’s appeal was heard, the 8th Circuit found that any premature application of res judicata was harmless for purposes of Fed. R. Civ. P. 61. Hubbard v. Federated Mutual Ins. Co., 799 F.3d 1224 (8th Cir. 2015).

• Chief Judge Tunheim “reminds” litigants of limits on appeals from orders by magistrate judges. A seemingly routine opinion and order by Chief Judge Tunheim affirming a discovery order by Magistrate Judge Keyes included a lengthy footnote in which he “reminded” the parties (and, by implication, other litigants), that appeals from a magistrate judge’s order or report and recommendation “are not merely a chance to rehash the same arguments,” and should be limited to situations where litigants “have a good faith belief that the magistrate judge has committed clear error or reach[ed] a result that is contrary to law.”  Chief Judge Tunheim also noted that on motions “where magistrate judges have considerable discretion,” including discovery matters, he expects objecting parties to present “specific arguments and support for the position that the magistrate judge erred as a matter of law,” instead of simply repeating the facts presented to the magistrate judge “and asking for the opposite outcome.”

While it is impossible to know with any measure of certainty what drove Chief Judge Tunheim to include this lengthy footnote in a seemingly routine opinion and order, it is reasonable to assume that the footnote was intended for a broader audience than just the litigants in that case, and was intended to serve as an important reminder for counsel in future cases. Webb v. Ethicon Endo-Surgery, Inc., 2015 WL 5568022 (D. Minn. 9/22/2015).

• Significant sanctions imposed. Judge Davis imposed more than $281,900 in Rule 11 sanctions jointly and severally against the plaintiffs and their counsel, denying the plaintiffs’ request to stay the sanctions proceedings pending their appeal on the merits, and rejecting plaintiffs’ and their counsel’s request that sanctions be reduced based on their alleged inability to pay. Wolfchild v. Redwood County, 14-cv-1597 (MJD/FLN) (D. Minn. 9/25/2015).

• Fed. R. Civ. P. 41(a)(2) motion denied; absence of “proper explanation.” Judge Kyle took the relatively rare step of denying a plaintiff’s motion to dismiss without prejudice under Fed. R. Civ. P. 41(a)(2), finding that while the defendants would not be prejudiced if the plaintiff’s motion was granted, the plaintiff had not offered the required “proper explanation” for the proposed dismissal, and that there was “no doubt” that the plaintiff was engaged in “improper” forum shopping. Mehle v. Trinity Highway Prods., LLC, 2015 WL 5567115 (D. Minn. 9/11/2015).

• NFLPA’S Rule 60(b) motion denied. In the long-running dispute between the NFL and the NFLPA, Judge Davis denied the players union’s Fed. R. Civ. P. 60(b) motion, which sought to vacate a prior settlement, finding that the NFL had not misled the union regarding the effect of the settlement agreement, and that any claims relating to possible discovery misconduct by the NFL were waived when the union elected to settle before discovery closed, particularly in light of the fact that the union had considered filing a motion to compel but took a “calculated risk” in electing to settle without bringing that motion. White v. National Football League, 2015 WL 5229386 (D. Minn. 9/8/2015).

• Motion to dismiss or transfer denied; forum selection clause; endorsement. Where an insurance policy contained a New York forum selection clause and an endorsement that required the insurer to “submit to the jurisdiction of any court of competent jurisdiction,” Judge Kyle found that the language of the endorsement amended the underlying policy, and “unambiguously” permitted the insured to pursue its action in the District of Minnesota. Judge Kyle also noted continuing “uncertainty” as to whether a forum selection clause can be enforced by use of a Fed. R. Civ. P. 12(b)(6) motion. Rembrandt Enters., Inc. v. Illinois Union Ins. Co., 2015 WL 5450182 (D. Minn. 9/16/2015).

• Undisclosed witness barred from testifying at trial. Rejecting “trial by ambush,” Judge Magnuson granted the defendant’s motion in limine to exclude the trial testimony of one of its employees, finding that the plaintiff had never disclosed the employee as a witness, and that the fact that the defendant may have known of the employee’s potentially relevant testimony was “not dispositive.” Loos v. BNSF Rwy. Co., 2015 WL 5165327 (D. Minn. 9/3/2015).

• Computerized legal research expenses again awarded. While the 8th Circuit has never formally rejected its prior decisions that preclude the award of computerized legal research expenses as a component of an award of attorney’s fees, the flat-out prohibition on the award of those expenses continues to weaken. Most recently, Judge Montgomery awarded legal research expenses as part of an award of attorney’s fees in a patent case. Icon Health & Fitness, Inc. v. Octane Fitness, LLC, 2015 WL 5122905 (D. Minn. 9/1/2015).

– Josh Jacobson

Law Office of Josh Jacobson

IMMIGRATION LAW
JUDICIAL LAW

• Lack of credibility with inconsistent reports of persecution. The 8th Circuit Court of Appeals held that the immigration judge and Board of Immigration Appeals did not commit error by finding the petitioner’s reports of persecution were not supported by the record. Their adverse credibility findings were based on substantial evidence and supported by specific, cogent reasons—all fatal to his claims for asylum, withholding of removal, and CAT relief. Furthermore, there was no error when the board rejected the petitioner’s claim of ineffective assistance of counsel since there is no 5th Amendment right to effective assistance of counsel in a removal proceeding. Nor, for that matter, had the petitioner showed how his counsel’s performance prejudiced him with the adverse credibility findings. Singh v. Lynch, No. 15-1285, slip op. (8th Cir. 10/14/2015). http://media.ca8.uscourts.gov/opndir/15/10/151285P.pdf

• No due process violation with failure to timely assert right to merits hearing. The 8th Circuit Court of Appeals held that the petitioner forfeited his right to a merits hearing on the charge of falsely representing himself as a U.S. citizen in violation of INA §237(a)(3)(D) by his failure to timely assert that right. “Here, Muiruri requested the immigration judge to follow a certain course; the judge did so and Muiruri did not object. Because Muiruri forfeited his right to a hearing, his due process, statutory, and regulatory violation arguments fail.” Muiruri v. Lynch, No. 15-1099, slip op. (8th Cir. 10/14/2015). http://media.ca8.uscourts.gov/opndir/15/10/151099P.pdf

• Conviction for unauthorized use of SNAP food stamps is an aggravated felony. The 8th Circuit Court of Appeals upheld the Board of Immigration Appeals’ finding that the petitioner’s conviction under 7 U.S.C. § 2024(b)(1) for knowing unauthorized use of SNAP food stamp benefits categorically involved fraud or deceit as construed by 8 U.S.C. §1101(a)(43)(M), and was thus an aggravated felony. As a result, the petitioner was subject to removal. Mowlana v. Lynch, No. 14-1320, slip op. (8th Cir. 9/30/2015). http://media.ca8.uscourts.gov/opndir/15/09/141320P.pdf

• No judicial review of sua sponte motions to reopen. The 8th Circuit Court of Appeals held that it lacked jurisdiction to review the Board of Immigration Appeals’ denial of the petitioner’s motion to reopen because he requested that it reopen his proceedings sua sponte pursuant to 8 C.F.R. §1003.2(a). “Because the decision to reopen sua sponte under §1003.2(a) is explicitly left to the BIA’s discretion, with ‘no meaningful standard’ against which to judge the exercise of that discretion, we—like ten of our sister circuits—have held that we lack jurisdiction to review the denial of a motion asking the BIA to exercise its §1003.2(a) discretion and reopen a removal proceeding sua sponte.” The court may only review a denial of a statutory motion to reopen. Shoyombo v. Lynch, No. 14-2649, slip op. (8th Cir. 8/28/2015). http://media.ca8.uscourts.gov/opndir/15/08/142649P.pdf

• No permanent residence with a false claim to U.S. citizenship on a Form I-9. The 8th Circuit Court of Appeals upheld the Board of Immigration Appeals’ determination that the petitioner made a false claim to U.S. citizenship on a Form I-9 when applying for a job in 2009. The petitioner was, as a result, inadmissible and ineligible for adjustment of status to permanent residence. Etenyi v. Lynch, No. 14-3397, slip op. (8th Cir. 8/21/2015). http://media.ca8.uscourts.gov/opndir/15/08/143397P.pdf

ADMINISTRATIVE ACTION

• E-Verify transaction records will be deleted from the system on 1/1/2016. On 10/1/2015, U.S. Citizenship and Immigration Services announced that, effective 1/1/2016, E-Verify records more than 10 years old will be deleted from the system. As of that date, access to cases created prior to 12/31/2005 will no longer be available. Employers who wish to have a record of a case over 10 years old are encouraged to download the new Historic Records Report before 12/31/2015. E-Verify records more than 10 years old will be deleted annually with employers receiving notification when they may download a new Historic Records Report. http://www.uscis.gov/sites/default/files/USCIS/Verification/E-Verify/E-Verify_Native_Documents/Fact-Sheet-E-Verify-NARA.pdf

• Temporary protected status extended for Haiti. After recent consultations with several federal agencies about conditions in Haiti following the major earthquake occurring there on 1/21/2010, Secretary of Homeland Security Jeh Johnson has extended Haiti’s designation for temporary protected status for an additional 18 months, from 1/23/2016 through 7/22/2017. Current TPS Haiti beneficiaries are required to re-register within a 60-day period, 8/25/2015 through 10/26/2015. The secretary is authorized to designate a foreign state for TPS if (s)he finds that it is “experiencing extraordinary and temporary conditions that prevent its nationals from returning in safety and that permitting such aliens [sic] to remain temporarily in the United States is not contrary to the national interest.” 80 Fed. Reg. 51582-88 (8/25/2015). http://www.gpo.gov/fdsys/pkg/FR-2015-08-25/html/2015-21006.htm

• Temporary protected status designated for nationals of Yemen. Secretary of Homeland Security Jeh Johnson announced his designation of Yemen for temporary protected status for 18 months, running from 9/3/2015 to 3/3/2017. Eligibility for TPS is based on Yemeni nationals’ ability to prove both their continuous physical presence and continuous residence in the United States since 9/3/2015. The registration period commenced on 9/3/2015 and will run through 3/1/2016. In announcing his designation, Secretary Johnson noted that “Yemen is experiencing widespread conflict and a resulting severe humanitarian emergency, and requiring Yemeni nationals in the United States to return to Yemen would pose a serious threat to their present safety.” 80 Fed. Reg. 53319-23 (9/3/2015). http://www.gpo.gov/fdsys/pkg/FR-2015-09-03/html/2015-21881.htm

Terrorist designation revoked for Revolutionary Organization 17 November. U.S. Secretary of State John Kerry announced the revocation of the terrorist organization designation for Revolutionary Organization 17 November (also known as Epanastatiki Organosi 17 Noemvri and 17 Novembert) pursuant to Section 219 of the Immigration and Nationality Act (8 U.S.C. §1189). 80 Fed. Reg. 53382 (9/3/2015). http://www.gpo.gov/fdsys/pkg/FR-2015-09-03/html/2015-21930.htm 

• Increased refugee admissions for 2016. On 9/29/2015, and in accordance with Section 207 of the Immigration and Nationality Act (8 U.S.C. §1157), President Obama issued Determination No. 2015-14 increasing the number of FY 2016 refugee admissions to 85,000. The increase from the previous year’s 70,000 is justified by “humanitarian concerns” or “in the national interest.” The breakdown for refugee numbers by geographical area is Africa (25,000), East Asia (13,000), Europe and Central Asia (4,000), Latin America/Caribbean (3,000), Near East/South Asia (34,000), and Unallocated Reserve (6,000). The unallocated reserve will be apportioned as needed. Additionally, President Obama determined that the following persons may also, if otherwise qualified, be considered refugees for admission: Persons in Cuba; Persons in Eurasia and the Baltics; Persons in Iraq; Persons in Honduras, Guatemala, and El Salvador; and in exceptional circumstances, persons identified as such by a U.S. Embassy in any location in the world. 80 Fed. Reg. 62433-34 (10/16/2015). http://www.gpo.gov/fdsys/pkg/FR-2015-10-16/html/2015-26493.htm

– R. Mark Frey

Frey Law Office

REAL PROPERTY
JUDICIAL LAW

• Statute of frauds; part performance. Son sold his farm to his parents to help him pay off his debt. His parents obtained a mortgage to fund the purchase of the property. He alleged that the purchase price was about half of the property’s value, and that he had an oral agreement with his father that he would get the property back once his parents paid off their mortgage on the property. After the sale, son leased the property back from his father and continued to farm the land. Father used rents to make the mortgage payments. Son also made payments on the mortgage to pay down the principal and eventually paid off the mortgage balance. By the time the mortgage was paid off, father was incapacitated. After his parents died, son sued his parents’ estates alleging the oral agreement and claim to the property. After trial, the district court granted Judgment as a Matter of Law (“JMOL”) in favor of the estates, concluding, in part, that the alleged oral agreement violated the statute of frauds and that the equitable doctrine of part performance was unavailable to son. The district court held that the son would not be irreparably injured as a result of the payments made after the alleged oral contract. Instead, the district court awarded equitable damages for unjust enrichment in the amount that son paid toward his parents’ mortgage. Son appealed. The court of appeals, in a divided opinion, reversed and remanded. The court of appeals found that the district court, in its part performance analysis, relied only on evidence that occurred after the sale of the property and did not rely on the claims of detrimental reliance in transferring the property in the first instance. The court of appeals concluded there was no explanation in the record for why son would have sold the property at approximately half of its value but for the alleged oral contract. The court of appeals remanded back to the district court to consider the totality of son’s detrimental reliance argument. Christie v. Estate of Christie, 2015 WL 5825096 (Minn. Ct. App. 2015).

– Michael Kreun

Beisel & Dunlevy PA

TAX
JUDICIAL LAW

Tax in the Act: 8th Circuit, 1st Federal Circuit to enjoin ACA’s contraceptive coverage mandate. The Affordable Care Act (ACA) requires insurers as well as companies that self-insure to provide contraceptive coverage. Two nonprofit religious organizations that offered self-insured health plans sought an injunction against the Department of Health and Human Services (HHS) challenging the contraceptive mandate and the accommodation process for religious employers as a violation of the Religious Freedom Restoration Act (RFRA) and the Free Exercise Clause of the 1st Amendment. The lower court granted the preliminary injunction, and the 8th Circuit affirmed. The court held that the accommodation process required for organizations to be exempted from ACA contraceptive mandate substantially burdened free exercise of their religious beliefs in violation of RFRA, and that accommodation process was not the least restrictive means available to further government’s interest in ensuring equal access to contraceptives. Although the 8th Circuit is the first circuit court to enjoin the ACA’s contraceptive coverage, litigation surrounding the contraception mandate is proceeding in several circuit courts. This litigation follows the Supreme Court’s decision in Burwell v. Hobby Lobby, 573 US ___, 134 S. Ct. 2751 (2014), in which the Court held that the RFRA prohibited the government from enforcing ACA and its implementing regulations that required closely held corporations to provide health-insurance coverage for methods of contraception that violated the sincerely held religious beliefs of the companies’ owners. The 8th Circuit decision creates a circuit split. E.g., Little Sisters of the Poor Home for the Aged, Denver, Colo. v. Burwell, 794 F.3d 1151 (10th Cir. 2015) (holding that regulatory scheme for accommodating organizations’ objections to ACA’s contraception mandate did not violate RFRA or the Free Exercise Clause or Establishment Clause).

Nonbusiness bad debt must be wholly worthless to deduct. Section 166 allows taxpayers to deduct any debt that becomes worthless within the taxable year. To be entitled to a deduction, the taxpayer must show a bona fide debt based on a debtor-creditor relationship. So-called “nonbusiness bad debt” is deductible, but only as a short-term capital loss, and only when the debt is shown to be totally worthless. In this memorandum opinion, the court was not persuaded that the taxpayer had met his burden of establishing that he was in the business of lending, despite evidence that the taxpayer had made a loan of nearly a million dollars. The court relied on a facts and circumstances test to make its determination. Factors weighing against the taxpayer included: the relatively small number of loans he made (only 12 over six years); the fact that he lent money to people he was acquainted with; the absence of typical lending practices such as credit checks, verifying collateral value, and keeping track of loan balances; that he did not publicly hold himself out as being in the lending business and finally that he did not keep adequate business records. The taxpayer testified that, “I really follow this motto. You can’t make an immoral man moral with a contract or the vice vers[a] is also true.” The tax court responded, though not in so many words, that you can’t make a nonbusiness bad debt into a business bad debt though the vice versa might be true. Cooper v. Comm’r., No. 6789-13, 2015 WL 5729593, at *1 (T.C. 9/28/2015).

Taxpayers failed to establish new domicile and penalized for intent to evade Minnesota income tax. The Cliffords failed to rebut the presumption that he remained domiciled in Minnesota during 2009 and 2011. Additionally, the Cliffords, through their actions and representations, had the intent to evade or defeat payment of their Minnesota state income taxes, thus subjecting them to an additional 50 percent penalty. Under Minnesota case law, once an individual has established a Minnesota domicile, it is presumed to continue until another domicile is established. The Minnesota Tax Court provided a thorough analysis of the 26 factor test in Minn. R. 8001.0300, subp. 3 to determine that the Cliffords were still Minnesota residents for the year at issue. The court considered statements made to a variety of sources, including but not limited to law enforcement officers, insurers, educational institutions, sales of Minnesota property, and for unemployment benefits. The court found that some factors were consistent with the Cliffords’ intent to change their domicile to Texas, but found that there was more evidence to support the Cliffords’ failing to establish a new domicile in Texas. Further, the court found that Mr. Clifford had a “pattern of claiming whatever financially benefit[ted] him at the time” and held that commissioner’s assessment of a fraud-based penalty under Minn. Stat. §289A.60, subd. 6 was appropriate. Clifford v. Comm’r, 2015 WL 5332074 (Minn. T.C. 9/8/2015).

Summary judgment granted. In a recent case, the commissioner’s unopposed motion for summary judgment was granted by the court. The taxpayer failed to overcome the presumption that the commissioner’s order denying his business expense deductions was correct; the taxpayer failed to substantiate his expenses during the course of a two-and-a-half-year audit and appeals process. Law v. Comm’r, 2015 WL 5772978 (Minn. T.C. 9/25/2015).

Court grants attorney fees and costs to appellant. The court granted Dahmes’ motion for attorney fees, holding that the motion was timely, eligible, and substantially justified. The court held that the proper date of the final judgment was the judgment on May 28, not the Order for Judgment on May 13, which included a 15-day stay for any post-trial motions. No post-trial motions were filed, and thus the final judgment was the May 28 judgment, not the Order for Judgment on May 13. Because the court held that the commissioner’s position in the litigation over the attorney fees was not “substantially justified,” it also granted costs and disbursements to appellant, as required under MEAJA. Dahmes Stainless, Inc. v. Comm’r, 2015 WL 5793705 (Minn. T.C. 10/1/2015).

Would-be whistleblowers one step closer to recovery. A group of three taxpayers submitted a whistleblower claim to the IRS; the trio presumably hoped for an award, pursuant to Section 7623, which provides that in certain circumstances, whistleblowers are entitled to up to 30 percent of the tax proceeds collected as a result of their whistleblowing. “[E]ntitlement to an award turns on two issues: first, whether there was a collection of proceeds, and, second, whether that collection was attributable in some way to the information that petitioners provided.” In this dispute, the commissioner denied an award to the purported whistleblowers, and the whistle-blowers sought discovery in hopes to establish their entitlement to the award. Applying Tax Court Rule 70, the court, Judge Halpern, determined that the whistleblowers were entitled to discovery. The information they sought was relevant—a low bar, per Halpern—and the court rejected the commissioner’s argument that the court’s scope of review should be limited to the “administrative record.” The petitioners were entitled to discovery, but it remains to be seen whether they will be entitled to a recovery. Whistleblower One 10683-13W v. Comm’r, No. 10683-13W, 2015 WL 5729753 (T.C. 9/16/2015).

LOOKING AHEAD

• Mark your calendar: Franchise Tax Board of California v. Hyatt set for oral argument. The United States Supreme Court set December 7 as the date for argument in the dispute between the California revenue department and disgruntled state tax (non)payer Gilbert P. Hyatt. The issues presented: (1) Whether Nevada may refuse to extend to sister states haled into Nevada courts the same immunities Nevada enjoys in those courts; and (2) whether Nevada v. Hall, 440 U.S. 410 (1979), which permits a sovereign state to be haled into the courts of another State without its consent, should be overruled. Although the tax issues take a backseat to the federalism concerns, the dispute began when Mr. Hyatt sued the California Franchise Tax Board in Nevada state court, alleging that the board committed various intentional torts in conducting its audits. Mr. Hyatt prevailed in Nevada state court, initially winning $490 million in damages (the damages were reduced on appeal).

Ireland announces new, lower tax rate for “knowledge development box” companies. Companies such as Apple and Google stand to benefit from a new, lower tax rate of 6.25 percent announced by the Irish government. Ireland’s corporate tax rate of 12.5 percent is already one of the lowest in the developed world. The newly announced lower rate will apply to certain revenue pegged to companies’ patents and other intellectual property.

Minnesota Revenue reminds you that Minnesota will tax your ride. The Minnesota Department of Revenue has reminded Minnesota residents that motor vehicles they purchase, including recreational vehicles, must be registered in Minnesota and are subject to the state’s 6.5 percent motor vehicle sales tax. This rule applies regardless of where the vehicle was purchased. Since 2010, when the department launched a project in collaboration with the various law enforcement and licensing agencies, the department has collected just over $1 million in taxes, penalties, and interest. The department noted that it has successfully combatted a growing trend of motor vehicle sales tax evasion, especially in the purchase of recreational vehicles (RVs). Minnesota residents would set up shell corporations in Montana (in these cases, limited liability companies, LLCs) in an attempt to evade paying sales tax on high-end recreational vehicles. They would purchase and register the RVs in Montana, evading Minnesota taxes.

– Morgan Holcomb

Hamline University School of Law

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