Minnesota Supreme Court finds EPA pollution regulation clear on its face, declines deference to state and federal agency interpretation. A dispute over pollution from a cattle feeding operation provided an opportunity for the Minnesota Supreme Court to revisit the issue of judicial deference to state agency regulatory interpretations. Under federal and state administrative law principles, courts generally defer to reasonable agency interpretations of ambiguous regulations. This principle is reflected in cases like Auer v. Robbins, 519 U.S. 452 (1997) and In re Annandale, 731 N.W.2d 502 (Minn. 2007). Recently, this doctrine has come under fire from jurists, including Justice Antonin Scalia, who argue that deference to an agency’s interpretation of its own ambiguous regulations creates a perverse incentive for agencies to write ambiguous regulations. In this case, the Minnesota Supreme Court declined an invitation to abandon deference altogether. But it did emphasize judicial primacy over the threshold question of whether a regulation is ambiguous.
The case involved disagreement over whether federal clean water regulations required a Pope County farming operation called Reichmann Land and Cattle LLP (Reichmann) to obtain a pollution permit for a facility that grows crops in the summer and feeds cattle in the winter. Minnesota Pollution Control Agency (MPCA) officials concerned about manure runoff to a nearby stream contended that the winter feeding operation was an “animal feeding operation” under National Pollution Discharge Elimination System (NPDES) regulations and therefore required an NPDES permit. Reichmann disagreed, and pointed to the federal regulation, which on its face seems to exclude operations that feed animals on land where crops are grown.
Under the regulation, a feeding operation requires a permit if animals are fed for 45 days or more per year and if vegetation or post-harvest residues (which can mitigate runoff) “are not sustained in the normal growing season over any portion of the lot or facility.” Both Reichmann and the MPCA agreed that the cattle were on the property for 45 days per year. But Reichmann contended that the plain language of the regulation exempted its winter feeding operation because crops were “sustained” during “normal growing season” between spring planting and fall harvest (when cattle were absent).
In contrast, the MPCA argued that the phrase “sustained in the normal growing season,” should be interpreted in the context of the whole regulation’s concern with whether vegetation is present to mitigate pollution when animals are present. The agency pointed to a 2nd Circuit opinion addressing the regulation, which explained that vegetation “is helpful in absorbing and reducing the amount of pollution” from feedlot animals. The agency also cited a bulletin published by the Environmental Protection Agency—the federal agency that authored the regulation—stating that “the ‘no vegetation’ criterion… is meant to be evaluated when the animals are confined” and “use of a winter feedlot to grow crops during periods of the year when animals are not confined would not exclude the feedlot from meeting the definition.”
The Court unanimously rejected the MPCA’s (and by extension, the EPA’s) interpretation of the regulation. The Court set aside the 2nd Circuit’s opinion and the EPA’s interpretive bulletin, stating that it would “not consider external sources to answer the threshold question of whether the regulation is ambiguous.” The court further observed that the EPA interpretive bulletin relied upon by MPCA came out only after the EPA had backed away from a proposal to formally amend the regulation in a way that would have required permits for winter feeding operations. The court stated, “[T]he EPA’s unsuccessful attempt to amend [the regulation] counsels against MPCA’s interpretation because it implies that the regulation, as currently written, does not extend to winter feeding facilities.” As for the bulletin itself, the court observed that it was merely interpretive and did not have the force of law. The court therefore agreed with Reichmann that the language of the regulation was clear: So long as crops were grown during the regular spring-to-fall growing season, a winter operation is not an “animal feeding operation” within the definition of the regulation even if vegetation was not present to mitigate pollution when the animals are actually present.
Although the Court held that an NPDES permit was not required, it did go on to uphold the MPCA’s alternative determination that a similar “state disposal system” (SDS) permit was required under state law. Like the NPDES regulation, the SDS statute contains a “vegetation exemption;” unlike the regulation, however, the SDS law’s exemption is narrower and did not exempt Reichmann’s operation, according to the court. In re Reichmann Land and Cattle, LLP, 867 N.W.2d 502 (Minn. 2015).
– Mehmet K. Konar-Steenberg
Mitchell Hamline School of Law
• Debtor’s alienable share of trust is property of estate. In a recent case, the debtor argued that a Chapter 7 trustee should be required to abandon funds received from a spendthrift trust created by the debtor’s mother. Debtor and the trustee agreed that the trust included a valid spendthrift provision, but disagreed whether it applied to debtor’s interest in the trust. The BAP noted that state law determines the nature of a debtor’s interest in property, and that federal law determines whether a debtor’s interest is property of a bankruptcy estate. The BAP cited Minnesota state law to define a spendthrift trust as one “in which the power of alienation has been suspended.” Van Dyke v. First Nat’l Bank, 46 N.W.2d 667, 670 (Minn. 1951). It noted that 11 U.S.C. §541(c)(2) excludes spendthrift trusts from an estate. The BAP focused on the specific language of the spendthrift provision in the trust, which stated that any principal distributable to a beneficiary by reason of reaching a specified age is fully alienable. The BAP noted that the trust provided for distributions to beneficiaries who had attained the age of twenty-one. Noting that the Debtor was over the age of twenty-one on the day she filed her bankruptcy petition, the BAP affirmed the decision of the bankruptcy court that debtor’s fully alienable share of the trust was part of the bankruptcy estate. In re Linda Thompson, No. 15-6012 (8th Cir. BAP, 12/2/2015).
• Certificate of credit counseling. A creditor challenged the denial of his motion to dismiss a Chapter 13. The debtor had filed a certificate certifying that she had received the credit counsel required under the Code. The creditor argued that such a certificate was insufficient, and that the debtor was required to sign the statement of credit counsel under the penalty of perjury. The BAP affirmed the decision of the bankruptcy court, noting that 11 U.S.C. §109(h) and 11 U.S.C. § 521(b)(1) required only that a debtor receive credit counsel from an approved budget and credit counseling agency within a specified time frame, and that the debtor then file a certificate from that agency. In re Patricia A. Segraves, No. 15-6021 (8th Cir. BAP, 11/30/2015).
– Patrick C. Summers
DeWitt Mackall Crounse & Moore S.C.
• Child pornography: Each individual image stored on a computer drive is a separate pornographic work. Appellant pleaded guilty to seven counts of possession of child pornography, admitting that, on seven distinct dates, he received, downloaded, and viewed on his home computer seven separate images depicting seven different children. The district court rejected appellant’s arguments that double jeopardy and Minn. Stat. §609.04 prohibit his convictions on seven counts involving the continuous possession of a single computer, and that his punishment should be limited because the offenses arose from a single behavioral incident, and ultimately sentenced appellant on all seven counts.
The court of appeals finds that Minn. Stat. §609.04 is inapplicable. This statute limits a conviction to either the crime charged or an included offense, but each of the seven counts of possession of child pornography involved images downloaded separately at different times. No charge is a lesser degree of any other, nor does proof of any charge necessarily prove any other.
Next, the court holds that the district court was correct in finding that appellant’s possession of seven individual images constituted separate behavioral incidents. First, each digital image stored on appellant’s computer drive is a separate pornographic work. Appellant argues that he committed a single continuing offense—possessing a computer containing child pornography, and, therefore, seven convictions for this single offense violates double jeopardy. The court points out that the child pornography statute prohibits the possession of either a “pornographic work” or “a computer… containing a pornographic work.” Minn. Stat. §617.247, subd. 4(a). Here, appellant was charged with multiple counts for distinct pornographic works stored on a single computer drive, not the possession of a computer drive containing child pornography, charges which are permissible under the statute. Further, each digital image file was a “visual depiction” and a “computer-generated image,” both of which fall within the definition of “pornographic work.” Minn. Stat. §617.246, subd. 1(f)(2)(i). As such, each image was a separate “work.”
Second, in considering an argument that multiple offenses arose from a single behavioral incident, the court considers the factors of unity of time and place and whether the defendant is motivated by a single criminal objective. The court notes that each individual child pornography image file was downloaded on distinctly different dates with a broad criminal objective. Appellant’s offenses share a unity of place—his computer—but each image was downloaded on different dates over a seven-month period. Under prior case law, a criminal objective that is too broad may not meet the single-criminal-objective factor. The court finds that appellant’s goal of collecting child pornography for personal sexual gratification is too broad to be a single criminal goal. Therefore, appellant’s actions amounted to separate behavioral incidents and his multiple sentences do not violate the double jeopardy protections in Minn. Stat. §609.035. State v. Timothy John Bakken, Ct. App. 11/9/15.
• Assault: Whether gunshot wound creates “high probability of death” determined at time it is known what path bullet took and what body parts were hit. After a jury trial, appellant was convicted of first- and second-degree assault, and unlawful possession of a firearm, after appellant shot E.G. in the lower back after an argument. Prior to being transported to the hospital, E.G. was panicky and in pain, but able to walk, talk, and breathe, and was not bleeding excessively. Both paramedics and emergency room doctors treated E.G.’s injuries as life threatening. A CT scan showed that the bullet travelled through eight inches of tissue in E.G.’s abdomen, and a doctor testified that, if the bullet had traveled the same distance in other directions, it could have hit critical body parts. The bullet was removed and E.G. was discharged the following day.
Among other issues on appeal, appellant argued that the state failed to prove beyond a reasonable doubt that E.G. suffered great bodily harm, because her injuries were not life-threatening. First-degree assault requires “great bodily harm” to the victim, which is defined, in part, as “bodily injury which creates a high probability of death.” Minn. Stat. §609.02, subd. 8. The court of appeals rejects the state’s argument that firing a bullet into E.G.’s torso inflicted bodily injury that created “a high probability of death,” citing State v. Gerald, 486 N.W.2d 799 (Minn. App. 1992). In Gerald, the court held that the injury itself must be life-threatening, and the possibility that a lesser injury could have been more serious is insufficient.
Held, whether an intrusive gunshot wound is life-threatening is determined when the path of the bullet and the body parts hit are known. Here, the CT scan revealed that the bullet traveled in a straight line without hitting any of E.G.’s critical body parts. Thus, E.G.’s injuries were not, in fact, life-threatening, despite paramedics and doctors treating her injuries as such.
The court also rejects the state’s argument that E.G.’s injuries fall under the “other serious bodily harm” portion of the definition of “great bodily harm.” This term is not defined by statute, but case law requires that the court consider the totality of the victim’s injuries in determining whether an injury constitutes “other serious bodily harm.” The bullet traveled through eight inches of E.G.’s abdomen, but it did not hit any critical body parts, E.G. was able to talk, breathe, and walk when paramedics arrived, the bullet was removed after a relatively simple procedure, and she was released from the hospital the next day. E.G. did not testify, so there is no evidence as to the extent of her pain and/or any permanent scarring. Under these circumstances, the court declines to find that E.G.’s injuries amount to “other serious bodily harm.”
Because the state failed to prove that E.G.’s injuries satisfy the statutory definition of great bodily harm, the evidence is insufficient to sustain appellant’s conviction for first-degree assault. State v. Quintin Deshun Dye, Ct. App. 11/30/15.
– Frederic Bruno
– Samantha Foertsch
EMPLOYMENT & LABOR LAW
• PCA unionization; state law upheld. The Minnesota statute permitting personal care attendants (PCAs) to unionize was upheld by the 8th Circuit Court of Appeals. Affirming a ruling of U.S. District Court Chief Judge Michael Davis, the appellate court rejected a challenge to Minn. Stat. §179A.54 & §256B.0711 by a group including people whose family members are cared for by PCAs due to their disabilities. It held that the measure does not violate existing contractual rights of people whose care is funded by Medicaid payments, a decision that the challengers intend to appeal to the U.S. Supreme Court. Greene v. Dayton, 2015 Minn. App. LEXIS 20948 (Minn. App. 2015) (unpublished).
• Age discrimination; not replaced by younger employee. A claim of age discrimination by a discharged employee failed because he was not replaced by a younger worker performing same or similar duties. The Minnesota Court of Appeals affirmed summary judgment for the employer in the absence of a prima facie case. Eggerichs v. Auto Club Services, 2015 Minn. App. LEXIS 1085 (Minn. App. 2015) (unpublished).
• Worker’s compensation; no-fault barred. A global release as part of a workers compensation settlement barred a subsequent claim for no-fault automobile insurance benefits arising out of a work-related vehicle accident. The Minnesota Court of Appeals affirmed the rare vacating by the Hennepin County District Court of a no-fault ruling favoring the claimant. State Farm Ins. Co. v. Wuorenma, 2015 Minn. App. LEXIS 1047 (Minn. App. 2015) (unpublished).
• Unemployment compensation; severance payments. Severance payments constitute an offset from unemployment compensation benefits. The Court of Appeals held that a lump sum severance payment equivalent to six weeks of pay is credited against unemployment eligibility for that period under Minn. Stat. §268.085, subd. 3(b). Menyweather v. Fedtech, Inc., 2015 Minn. App. LEXIS 89 (Minn. App. 2015).
• Unemployment compensation; credibility determination upheld. A ruling that an applicant was disqualified for unemployment compensation was upheld despite a contention that the employer fabricated allegations against her. The appellate court held that determination of credibility was exclusively within the discretion of the unemployment law judge (ULJ). Pletcher v. River Hill Assisted Living, Inc., 2015 Minn. App. LEXIS 1120 (Minn. App. 2015) (unpublished).
• Unemployment compensation; failure to contact supervisor when absent. An employee who failed to follow a request to call the supervisor to discuss an absence was denied unemployment benefits. The appellate court held that not complying with the supervisor’s directive constituted disqualifying “misconduct.” Saaidi v. Morgan Food Enterprises of Rochester, 2015 Minn. App. LEXIS 1100 (Minn. App. 2015) (unpublished).
Though we usually look forward in this space, as this is the last column of 2015, it is opportune to look back at a half-dozen of the most notable workplace cases of the past year.
At the federal level, the 8th Circuit Court of Appeals spent a lot of its time dealing with overtime this summer, concurrently overturning a pair of large verdicts for employees in the meat packing industry in Nebraska under the Fair Labor Standards Act because the claimants did not comply with the procedures for collective actions, a form of FLSA class actions in Acosta v. Tyson Foods, Inc., 800 F.3d 468 (8th Cir. 2015) ($18.7 million set aside); Gomez v. Tyson Foods, Inc., 799 F.3d 1192 (8th Cir. 2015) ($4.9 million verdict reversed). Meanwhile the U.S. Supreme Court heard arguments last month on a similar decision by the Eighth Circuit in Bouaphakeo v. Tyson Foods, Inc.,, 135 S.Ct. 381 (8th Cir. 2015) which upheld a $5.8 million overtime judgment for food processing workers in Iowa. A decision from the High Court is expected in 2016.
The Minnesota Supreme Court began the year by deciding a trio of unusual cases. In Nichols v. Secretary of State, 858 N.W.2d 773 (Minn. 2015), it rejected a claim by the Secretary of State of immunity from a lawsuit alleging wrongful firing of an employee allegedly induced by false representations in violation of Minn. Stat. §181.64-65. In Nelson v. Schlener, 859 N.W.2d 288 (Minn. 2015), it held that a determination by the Department of Human Services not to indemnify an employee for wrongfully accessing private data of individuals was not an “agency” decision subject to judicial review. In Sysdyne Corp. v. Rousslang, 860 N.W.2d 347 (Minn. 2015), it ruled that a company that hired an employee subject to a noncompete agreement with a competitor was not liable for tortious interference with contract because it “reasonably relied” in good faith upon the advice of outside counsel who incorrectly told the client that the noncompete agreement was probably “unenforceable” because of overbreadth.
– Marshall H. Tanick
Hellmuth & Johnson, PLLC
• 8th Circuit Reverses CERCLA “arranger” decision, citing factual issues regarding seller’s intent. On 12/10/2015, the U.S. Court of Appeals for the 8th Circuit reversed a district court decision that had found, on a motion for summary judgment, that an Iowa company “arranged” for disposal of PCBs under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) when it sold buildings to another party. The case involved Dico’s sale of buildings in Des Moines, IA, that contained PCBs. Pursuant to an EPA order, Dico had cleaned up the buildings but they still contained PCBs encapsulated in insulation materials. Without notifying EPA, Dico sold the buildings to Southern Iowa Mechanical (SIM). SIM dismantled the buildings and disposed of all materials—including the PCB-containing insulation—except for the buildings’ steel beams, which SIM retained at its place of business. Once EPA learned of the sale and disposal of Dico’s buildings, it ordered Dico to retrieve and properly dispose of the building materials. EPA claimed, and the district court agreed, that because Dico knew SIM was planning to dismantle the buildings following the sale and retain only the steel beams, no reasonable factfinder could conclude Dico did not intend to dispose of the remaining PCBs by selling the buildings. Accordingly, Dico was liable for the cleanup expenses as one who “arranged… for disposal” of hazardous substances under CERCLA section 107(b)(3).
On appeal, a three-judge panel of the 8th Circuit held that the key issue was Dico’s intent in selling the buildings—whether Dico actually intended to sell them or was simply getting rid of responsibilities for the PCBs. The court concluded that the district court had improperly conflated Dico’s knowledge of SIM’s intended dismantling of the buildings with a per se intent to dispose of the PCB-containing building materials through the sale. This approach, the court determined, was precluded by the Supreme Court’s opinion in Burlington N. & Santa Fe Ry. Co. v. United States, 556 U.S. 599 (2009), which called for a fact-specific inquiry in situations where “an entity who has some knowledge of the buyers planned disposal or whose motives for the sale of a hazardous substance are less than clear.” The 8th Circuit cited approvingly factors used by other federal courts to determine a seller’s intent, including the intent of the parties to the contract with regard to disposal, the value of the materials sold, the usefulness of the materials in the condition in which they were sold, and the state of the product at the time of transferal. Applying these factors, the court concluded that significant factual issues remained regarding Dico’s intent in selling the buildings and, as such, summary judgment was inappropriate.
Notably the court addressed for the first time the so-called “Useful Product Defense,” which holds that a seller may be subject to CERCLA arranger liability only if the hazardous material in question constitutes “waste” rather than a useful product. In rejecting this bright-line approach, the court stated that like knowledge of eventual disposal, the usefulness of a product is “an important but not dispositive factor to consider in determining the seller’s intent.” U.S. v. Dico, Inc., ___F.3d ___(2015).
• EPA revises CERCLA comfort/status letter policy. On 8/25/2015, the EPA issued a memorandum setting forth its revised Superfund comfort/status letter policy, as well as three updated model Superfund comfort/status letters for parties interested in acquiring contaminated, potentially contaminated, and formerly contaminated properties for reuse and redevelopment. Comfort/status letters are one means EPA uses to address concerns regarding properties that may present CERCLA cleanup and liability issues. The letters are purely informational; they do not provide any EPA assurance against enforcement action. However, by summarizing information contained in the EPA’s files regarding contamination and cleanup at the property, the letters can help interested parties make informed decisions regarding potential CERCLA liability. In addition, EPA’s policy indicates that the agency’s comfort/status letters may suggest property-specific reasonable steps a party may take at the property to achieve or maintain liability protections under the bona fide prospective purchaser (BFPP) provision of CERCLA (42 U.S.C. §9601(40)), a key concern of potential brownfield developers following a 2013 4th Circuit decision holding that owner failed to establish BFPP exemption from liability. See PCS Nitrogen Inc. v. Ashley II of Charleston LLC, 714 F.3d 161 (4th Cir. 2013) cert. denied, 134 S. Ct. 514 (2013).
• Supreme Court to review 8th Circuit Water Act jurisdiction case. On 12/11/2015, the U.S. Supreme Court granted a petition for a writ of certiorari to review a Clean Water Act (CWA) decision by the U.S. Court of Appeals for the 8th Circuit, Hawkes Co., Inc. v. U.S. Army Corps of Engineers, 782 F.3d 994 (8th Cir. 2015). The 8th Circuit’s 4/10/2015 decision unanimously held that CWA jurisdictional determinations (JDs)—determinations of whether a water body is subject to federal jurisdiction under the CWA—issued by EPA or the Army Corps of Engineers can be challenged in court even before agency enforcement actions based on the JDs. The decision created a split with the U.S. Court of Appeals for the 5th Circuit, which, in July 2014, held that JDs are not judicially reviewable. Belle Co., L.L.C. v. U.S. Army Corps of Engineers, 761 F.3d 383 (5th Cir. 2014).
– 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.
• No waiver of appeal right despite ambiguous notice of appeal. Where the plaintiff’s Section 1983 claim was dismissed, the plaintiff filed an amended complaint that expressly reserved its right to appeal that dismissal, the district eventually dismissed the plaintiff’s remaining claims, and the plaintiff’s subsequent notice of appeal identified only the latter dismissal order, the 8th Circuit rejected defendants’ argument that the plaintiff had waived any right to appeal the dismissal of the Section 1983 claim, relying on the “policy of liberal construction of notices of appeal where intent is apparent and there is no prejudice to the adverse party,” and the plaintiff’s express reservation of its appeal rights in its amended complaint. Spectra Comm’ns. Group, LLC v. City of Cameron, ___ F.3d ___ (8th Cir. 2015).
• No abuse of discretion in denial of defendant’s request for attorney’s fees in copyright case. The 8th Circuit found no abuse of discretion in a district court’s denial of a defendant’s request for attorney’s fees in a copyright case, rejecting the defendant’s arguments that her financial status and “the importance of the questions in litigation” were factors that the district court should have considered when weighing the defendant’s fee request. Killer Joe Nevada, LLC v. Does 1-20, ___ F.3d ___ (8th Cir. 2015).
• Claim preclusion barred second action; Minnesota law. Applying Minnesota law and rejecting the plaintiff’s argument that the Minnesota courts had not provided him a “full and fair opportunity to litigate,” the 8th Circuit affirmed Judge Ericksen’s dismissal of the plaintiff’s claims on claim preclusion grounds where those claims arose “from the same set of factual circumstances” as the plaintiff’s previous state court claims. Scheffler v. Minn. Dept. of Human Services, ___ F.3d ___ (8th Cir. 2015).
• Multiple requests for stay pending appeal denied. Applying the well-established four-part test governing requests for stays pending appeal, Judge Frank denied the defendants’ request for a stay in the long-running Minnesota sex offender litigation, rejecting each of the defendants’ arguments regarding their likelihood of success on appeal, and finding that the plaintiffs would be irreparably harmed if a stay was entered. Karsjens v. Jesson, 2015 WL 7432333 (D. Minn. 11/23/2015).
Similarly, Chief Judge Tunheim rejected the defendant’s request for a stay under the same four-part test, and also rejected the argument that the defendant’s interlocutory appeal as of right divested the district court of jurisdiction over the action. McLeod v. General Mills, Inc., 2015 WL 7428548 (D. Minn. 11/20/2015).
• Order denying motion to update patent infringement claims affirmed; no good cause for delay. Overruling objections to an order by Magistrate Judge Brisbois, Judge Montgomery found that the plaintiff was not diligent, and therefore had failed to establish the good cause required to support its motion to update its infringement and non-infringement claim charts in a patent case, where that request was made more than two years after the information was available to the plaintiff, nearly a year after the parties submitted a joint claim construction statement and four months after a claim construction hearing was held. Bombardier Recreational Prods. Inc. v. Arctic Cat, Inc., 2015 WL 8082522 (D. Minn. 12/7/2015).
• Motion to remand granted; related request for attorney’s fees denied. Judge Doty granted the plaintiff’s motion to remand following the dismissal of her only federal claim, and denied the defendant’s related request for attorney’s fees and costs. Fagnan v. Target Corp., 2015 WL 6872460 (D. Minn. 11/9/2015).
• “Percentage-of-the-benefit” attorney’s fee award to class counsel in TCPA litigation. Rejecting the defendant’s challenge to use of the “percentage-of-the-benefit” method, Judge Ericksen awarded class counsel $2.8 million in fees in a class action that resulted in a settlement valued at a minimum of $10 million. In Re Life Time Fitness, Inc. TCPA Litig., 2015 WL 7737335 (D. Minn. 12/1/2015).
• Objections to costs sustained in part, overruled in part. Where the defendant challenged a number of categories of costs sought by the plaintiff, Judge Kyle sustained the defendant’s objections to the plaintiff’s attempt to tax a second copy of the trial transcript and the expense for expediting certain deposition transcripts, but overruled the defendant’s other objections, including an objection relating to the costs associated with both transcribing and videotaping certain depositions. St. Jude Med. S.C., Inc. v. Hanson, 2015 WL 7069650 (D. Minn. 11/13/2015).
– Josh Jacobson
Law Office of Josh Jacobson
• Lack of jurisdiction to review Board of Immigration Appeals’ discretionary decision. The 8th Circuit Court of Appeals found that it lacked jurisdiction to review the Board of Immigration Appeals’ affirmance of the immigration judge’s discretionary decision to deny the petitioners’ applications for waiver of inadmissibility. It also found that the board did not err when it denied the petitioners’ motions to remand on the grounds that the evidence submitted was not previously unavailable and credible nor sufficient to establish prima facie eligibility for asylum. Njie v. Lynch, No. 14-2858, slip op. (8th Cir. 12/11/2015). http://media.ca8.uscourts.gov/opndir/15/12/142858P.pdf
• Conviction for pointing a firearm is a crime of violence; lack of good moral character for naturalization purposes. The 8th Circuit Court of Appeals upheld the U.S. District Court’s (Eastern District of Missouri) finding that the petitioner was unable to establish “good moral character” for naturalization purposes given that he had been convicted of committing an aggravated felony (pointing firearm at another person) years earlier in violation of South Carolina Code §16-23-410. “[V]iolation of § 16-23-410 is categorically a crime of violence under [18 U.S.C.] § 16(a) and constitutes an aggravated felony under [8 U.S.C.] §1101(a)(43)(F).” Reyes-Soto v. Lynch, No. 14-3797, slip op. (8th Cir. 12/10/2015). http://media.ca8.uscourts.gov/opndir/15/12/143797P.pdf
• Failure to meet continuous physical presence requirement. The 8th Circuit Court of Appeals held that substantial evidence supported the Board of Immigration Appeals’ determination that the petitioner failed to meet the continuous physical presence required for the form of relief known as cancellation of removal. By failing to meet that requirement, the petitioner was ineligible for cancellation of removal. Torres-Balderas v. Lynch, No. 14-3030, slip op. (8th Cir. 12/8/2015). http://media.ca8.uscourts.gov/opndir/15/12/143030P.pdf
• Lack of jurisdiction in matters of discretion. The 8th Circuit Court of Appeals upheld the U.S. District Court’s (Nebraska) decision that it lacked jurisdiction to consider whether USCIS failed to comply with the disclosure requirements under 8 CFR §103.2(b)(16) when it revoked the plaintiff-beneficiary’s I-140 immigrant worker petition. Citing Abdelwahab v. Frazier, 578 F.3d 817, 821 (8th Cir. 2009), it observed, “[I]f the statute specifies that the decision is wholly discretionary, regulations or agency practice will not make the decision reviewable.” Rajasekaran v. Hazuda, No. 14-3623, slip op. (8th Cir. 12/1/2015). http://media.ca8.uscourts.gov/opndir/15/12/143623P.pdf
• Failure to comply with immigration judge’s request; petitioner waived application for relief. The 8th Circuit Court of Appeals upheld the immigration judge’s determination that the petitioner had waived his application for permanent residence by failing to comply with the court’s request that he meet certain requirements for that application (i.e., pay a filing fee, get his fingerprints taken, submit an affidavit of support, and bring his wife to testify at his next hearing). It further found that the immigration judge had not committed error when denying the petitioner’s request for a continuance since he had been given ample notice of those requirements and previously been given several continuances. Choge v. Lynch, No. 14-2924, slip op. (8th Cir. 11/18/2015). http://media.ca8.uscourts.gov/opndir/15/11/142924P.pdf
• Lack of jurisdiction to review immigration judge’s treatment of evidence. The 8th Circuit Court of Appeals held that the non-permanent resident petitioner’s claim amounted to a challenge of how the immigration judge and Board of Immigration Appeals weighed the evidence in support of his application for cancellation of removal. “Lemuz-Hernandez essentially seeks a finding that gives greater weight to the evidence of extreme violence and crime in Honduras and the psychological effect that environment would have on his children. This challenge to the agency’s weighing of the evidence in support of Lemuz-Hernadez’s claim for cancellation of removal is outside our jurisdiction to review.” The petition for review was dismissed for lack of jurisdiction. Lemuz-Hernandez v. Lynch, No. 14-3873, slip op. (8th Cir. 11/2/2015). http://media.ca8.uscourts.gov/opndir/15/11/143873P.pdf
• Fact Sheet: Refugee security screening. On 12/3/2015, U.S. Citizenship and Immigration Services released a Fact Sheet outlining the Refugee security screening process, involving the United Nations High Commissioner for Refugees (UNHCR) as well as U.S. Departments of State and Homeland Security. The process includes background and biographic checks at several points as well as interview(s). http://www.uscis.gov/sites/default/files/USCIS/Refugee,%20Asylum,%20and%20Int’l%20Ops/Refugee_Security_Screening_Fact_Sheet.pdf
• Department of Justice and McDonald’s settle immigration-related discrimination claim. On 11/19/2015, the Department of Justice announced a settlement with McDonald’s USA LLC and its corporate affiliates and subsidiaries over allegations that the company discriminated against immigrant employees of its restaurants. The department’s Office of Special Counsel for Immigration-Related Unfair Employment Practices found the company required permanent residents to show a new permanent resident card when their original one expired, notwithstanding the fact that this is prohibited by law.
“Employers cannot hold lawful permanent residents to a higher standard by placing additional documentary burdens upon them during the employment eligibility verification process,” said Principal Deputy Assistant Attorney General Vanita Gupta, head of the Civil Rights Division. “Requiring unnecessary documentation of individuals based on their citizenship or immigration status is discriminatory, and the Department of Justice will not hesitate to enforce the law and protect the rights of work-authorized immigrants. We commend McDonald’s for its cooperation throughout this investigation and for committing to compensate its current and former employees who lost wages due to these practices.”
McDonald’s agreed to a fine of $355,000, 20 months of monitoring, and employee training devoted to the anti-discrimination provision of the Immigration and Nationality Act. http://www.justice.gov/opa/pr/justice-department-settles-immigration-related-discrimination-claim-against-mcdonald-s
• Foreign countries identified for participation in H-2A and H-2B nonimmigrant worker program. On 11/18/2015, the Secretary of Homeland Security, in consultation with the Secretary of State, identified the countries whose nationals are eligible to participate in the H-2A and H-2B nonimmigrant worker programs in the United States, effective 1/18/2016. Factors considered when making this determination include: (1) the country’s cooperation with respect to issuance of travel documents for citizens, subjects, nationals, and residents of that country who are subject to a final order of removal; (2) the number of final and unexecuted orders of removal against citizens, subjects, nationals, and residents of that country; (3) the number of orders of removal executed against citizens, subjects, nationals, and residents of that country; and (4) such other factors as may serve the U.S. interest. H-2A workers typically fill “seasonal and temporary agricultural jobs for which U.S. workers are not available” and H-2B nonimmigrant workers typically fill “temporary non-agricultural jobs for which U.S. workers are not available.” 80 Fed. Reg. 72079-81 (11/18/2015). https://www.gpo.gov/fdsys/pkg/FR-2015-11-18/html/2015-29373.htm
• Terrorist designation revoked for Libyan Islamic Fighting Group. On 12/9/2015, Secretary of State John Kerry announced the revocation of the terrorist organization designation for the Libyan Islamic Fighting Group (LIFG) pursuant to Section 219 of the Immigration and Nationality Act (8 U.S.C. §1189). 80 Fed. Reg. 76611 (12/9/2015). https://www.gpo.gov/fdsys/pkg/FR-2015-12-09/pdf/2015-31038.pdf
– R. Mark Frey
Frey Law Office
• Trademark: Abandonment and likelihood of confusion. Krueger Law Firm, a personal injury law firm and licensee of the service mark 1-800-INJURED, filed suit against law firm Heimerl & Lammers (H&L) alleging that H&L infringed its mark through the use of the telephone number 612-INJURED and the website www.612injured.com. Both parties moved for summary judgment on the issue of likelihood of confusion. H&L also sought summary judgment on the issue that the 1-800-INJURED mark is invalid as abandoned. Subsequent to the summary judgment hearing, H&L sought permission to supplement its summary judgment record with an expert report that would refute plaintiff’s expert on the issue of likelihood of confusion. The court ultimately found that the H&L failed to timely file the expert report as required under FRCP 6(b)(1).
In the Opinion and Order, the court found that H&L was precluded from arguing that the mark was invalid as abandoned. H&L argued that the issue of abandonment must still be considered because validity is an element of plaintiff’s infringement claim and H&L challenged the mark’s validity in its answer. The court was not convinced. The court viewed H&L’s argument as simply an attempt to re-characterize an affirmative defense. Affirmative defenses must be pled or they are deemed waived. Denying allegations in an answer is not equivalent to pleading an affirmative defense. Thus, H&L’s motion was denied.
On the issue of likelihood of confusion, the court looked to the 8th Circuit and its six-factor test. Likelihood of confusion is determined by (1) strength of mark; (2) similarity between the marks; (3) the degree to which the products compete; (4) the alleged infringer’s intent to “pass off” its goods as those of the owner; (5) incidents of actual confusion; and (6) the type of product, its cost, and conditions of purchase. The balance of factors tilted in favor of the plaintiff. The court found that 1-800-INJURED is a strong mark, analogizing its conceptual strength to 1-800-Contacts. The court also found that the parties offered competing services, H&L intended to pass of its marks as being associated with the plaintiff’s mark, clients that call the telephone number are likely to exercise a lesser degree of care, and that plaintiff’s consumer survey provided evidence of actual confusion. Notably, substantial weight was given to the survey and H&L did not contest the methodology of the survey. Despite the balance of factors weighing in favor of plaintiff, the court declared the evidence not sufficiently conclusive so as to find a likelihood of confusion as a matter of law. Thus, both plaintiff and defendant’s motion for summary judgment were denied. Mt. Mktg. Group, LLC v. Heimerl & Lammers, LLC, 2015 U.S. Dist. LEXIS 127420 (D. Minn. 9/23/2015).
– Tony Zeuli
– Tchao Thao
Merchant & Gould
• Encroachment; diminution-in-value damages; conveyance damages; injunctive relief. A building encroached upon a neighboring parcel, which once had common ownership. The parties stipulated that the encroachment constituted a trespass. After an advisory jury trial, the district court found that the encroached-upon strip of land and setbacks totaled 5,985 square feet and 7 percent of the encroached-upon parcel. The owner of the encroached-upon parcel requested removal of the encroachments. In the alternative, the parties agreed that a conveyance would be preferable to the grant of an easement. The district court denied removal of the encroachment, ordered a conveyance of the encroached-upon property, and granted a monetary judgment for diminution-in-value damages, lost rent, mortgage interest, property taxes, and maintenance expenses, pre-judgment interest, and ordered the owner of the encroaching parcel to pay the administrative expenses to change the boundary line between the parcels. The district court denied conveyancing damages, as awarded by the advisory jury, as a double-recovery. Both parties appealed. As to the appeal from the owner of the encroached-upon property, the court of appeals reversed and remanded to the district court and held that the owner was entitled to conveyancing damages and that awarding conveyancing damages as well as diminution-in-value damages was not a double recovery. The court of appeals reasoned that diminution-in-value damages compensate for the loss of value to the encroached-upon parcel for the loss of the encroachment area, while conveyancing damages compensates the owner for the forced divestment of fee title to the land. The court of appeals affirmed the district court’s calculation of diminution-in-value damages and held that it would only review the methodology of that award on a de novo basis, but would review the application of that methodology on a clearly erroneous standard. Because the district court’s application was based on an expert appraiser report and was not clearly erroneous, the court of appeals affirmed the district court’s diminution-in-value award. The court of appeals remanded the district court’s decision to deny injunctive relief given the conveyancing damages that must be awarded. The court of appeals reversed the damages award for lost rental value because it constituted a double recovery and was included in the diminution-in-value award. In re Minnwest Bank Litigation Concerning Real Property, ____ N.W.2d ____, 2015 WL 7941203 (Minn. Ct. App. 2015).
• Zoning; conditional use permit. Property owner of rural land zoned as agricultural sought a conditional use permit to operate a diesel repair business on his property. The work on the vehicles was done in a shop on the property, but customers would park their vehicles outside the shop before and after they were worked upon. The township’s ordinance prohibited the outside storage of “supplies, equipment or maintenance items, all work and work related items.” An objecting property owner claimed that vehicles stored on the property constituted work-related “equipment.” The township board heard evidence, conducted a site inspection, and ultimately granted the application. The township board interpreted the zoning ordinance to mean that vehicles parked on the property before or after they were worked on by the property owner were not business-related “equipment” but instead, were governed by a more specific ordinance on vehicle storage. The neighbor also objected to the application because the business was not agricultural. The township found that the business related to agriculture because it served the agricultural community by providing mechanical services for farm implements. The objecting neighbor appealed. The court of appeals affirmed the approval of the conditional use permit. The court of appeals noted that characterizing parked vehicles before or after they are worked upon would create an unworkable situation where there would a technical violation each and every time a customer entered and exited the shop. The court of appeals also found the township board’s reasoning that the business supported the agricultural community to be a sufficient legal basis for its decision and not unreasonable, arbitrary, or capricious. Hortian v. Fischer, 2015 WL 7941116 (Minn. Ct. App. 2015).
– Michael Kreun
Beisel & Dunlevy PA
• Primer on procedure over an $82,000 deduction. In a pair of orders issued on the same day, the Minnesota Tax Court granted in part and denied in part appellants’ motion to strike and denied the commissioner’s motion to strike. In a case involving a dispute over the proper amount of a casualty loss deduction, both appellants and the commissioner filed motions for summary judgment and motions to strike. Appellants moved to strike portions of the commissioner’s motion for summary judgment, attacking four statements by the commissioner: (1) using a computer printout from a real estate website to establish the sales price of the subject property; (2) references to the listing and sales price in the motion; (3) the amount spent on repairs to the subject property; and (4) use of the word “windfall” in the motion. The court granted appellants’ motion to strike the use of the printout on hearsay grounds as well as references to the listing price. The court, however, took judicial notice of the sales price, and thus denied the motion to strike references to the sales price. Appellants failed to meet their burden for statement three, and the court held that use of the word “windfall” was merely an argument, and nothing more. Meanwhile, the commissioner moved to strike appellants’ entire reply brief to her motion for summary judgment, arguing it was “including new legal and/or factual matters” that were not raised by her response to appellants’ motion for summary judgment. The court ruled that appellants’ reply brief was appropriate because it was being used both to oppose the commissioner’s motion and to support their own. Additionally, use of an expert was considered appropriate, as the commissioner’s motion challenged the competency of appellants’ appraisal. Mandel v. Comm’r., No. 8787-R 2015 WL 7736187 at *1 (T.C. Nov. 19, 2015) and Mandel v. Comm’r., No. 8787-R 2015 WL 7736566 (T.C. 11/19/2015).
• Million dollar overvaluation leads to discussion of service’s Section 6751(b)(1) obligations. A taxpaying couple, though a disregarded entity, donated a conservation easement to a conservation trust. The service disputed the value of the donation, and after the issuance of the notice of deficiency, petitioner and respondent stipulated and agreed that the value of the conservation easement was $80,000 at the time of petitioners’ donation, rather than the petitioners’ reported value of $1,418,500. The parties further agreed that the difference in value was a gross valuation misstatement per section 6662(h)(2)(A)(i) and that petitioners could not invoke a reasonable cause defense against the gross valuation misstatement penalties under section 6662(h) but that petitioners had satisfied the reasonable cause defense requirements for substantial valuation misstatement penalties under section 6662(a) and (b)(3). Where the disagreement arose, however, was in the timing aspects of section 6751(b). The Code prohibits the imposition of a penalty “unless the initial determination of such assessment is personally approved (in writing) by the immediate supervisor of the individual making such determination.” (IRC 6751(b)(1) emphasis added). Taxpayers argued that the examiner did not make an “initial determination” of the 40% penalties because the examination report calculated the penalty adjustments at 20% (not at the 40% imposed). The tax court rejected the taxpayers’ argument. Instead, the court found that because the examiner included a discussion of the propriety of the imposition of the 40% penalty, the Service had met its obligations pursuant to 6751(b). Taxpayers were liable for approximately the assessed penalties. Legg v. Comm’r, No. 594-14, 2015 WL 8155431, at *3 (T.C. 12/7/2015).
• Business deductions to small business owner denied in an opinion that reads like a Tax I law school exam. A taxpaying couple owned a small business, which operated as a partnership for tax purposes. The small business paid numerous personal expenses for the couple and in many cases those expenses were claimed as deductions. For example, expenses related to construction of the couple’s personal residence were paid by the company but were not included in the taxpayer’s income, and the company purchased and claimed depreciation on a Can-Am Spyder Roadster used by taxpayer husband for both personal and business use. The court took notice that the taxpayer husband was a “hard worker [who] devoted most of his time to the family roofing business.” “There is no doubt,” the Court continued, “that [taxpaying husband] is entitled to benefit from his hard work. However, there is also no doubt that it was [his] choice to structure the payments in question in a certain manner. He must now face the tax consequences of his choice.” The consequences included denial of a significant number of claimed business deductions, inclusion in taxpaying couple’s income of disguised dividends, and assessment of accuracy-related penalties under Section 6662(a). Schank v. Comm’r, T.C.M. 2015-235 (T.C. 2015).
• Rare taxpayer victory in Midco case. “Midco” is shorthand for a transaction in which, as described by the court, “Someone sells an interest in a corporation for a good price; the corporation doesn’t pay its taxes; and the Internal Revenue Service (IRS) goes after the former shareholder for the taxes.” “Midco” references the “middle company” or the “intermediary” on which these transactions rely. In a Midco case, the courts are asked to determine whether someone other than the taxpayer should be on the hook for the taxpayer’s liability. The tax court in this recent case hypothesized that “[m]any taxpayers have prevailed at the trial court, but many of those taxpayers have seen their victories turned to defeat on appeal. The IRS has likewise prevailed at the trial court, and its victories have uniformly survived appeal. Rarest of all is the taxpayer victory that survives appeal.” A combination of “unique facts and evidentiary holes,” however, led to a taxpayer victory in the instant case. Persuasive to the court: Taxpayers “took steps to ensure that the IRS was paid what it was due, even if those steps were ultimately unsuccessful.” The IRS was unable to establish direct transferee liability, was also unable to prove that there was a fraudulent transfer at each step along the way, and was unable to prove that the purchasers of the company were insolvent or approaching insolvency at any relevant time. Indeed, the commissioner failed to prove that the taxpayer company was insolvent. These evidentiary holes mandated a finding for the taxpayers. Alterman v. Comm’r of Internal Revenue, T.C.M. (RIA) 2015-231 (T.C. 2015).
• Tax controversy brings Our Federalism into focus at high court. The Supreme Court heard oral argument in a state v. state controversy centered on whether California’s Franchise Tax Board can be held liable by a Nevada State Court for alleged fraud committed during audit of a taxpayer. A Nevada resident successfully sued the Franchise Board in Nevada state court in a tort action. The Nevada resident was awarded nearly $400 million in compensatory and punitive damages. California argued it did not have to pay the judgment, citing its sovereign immunity. Although the underlying acts involved the Franchise Tax Board, the case presented a fundamental question of state sovereignty and what has been termed “our federalism.” The questions presented to the Court: (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. Franchise Tax Board of California v. Hyatt, 335 wP.3d 125 (2014), cert. granted, 135 S. Ct. 2940 (2015).
• Law professor sues service after denial of tax deduction for IVF and surrogacy costs. Certain medical expenses, not otherwise reimbursed, are deductible under Section 213. In particular, the section provides a deduction for expenses related to “the diagnosis, cure, mitigation, treatment, or prevention of disease, or for the purpose of affecting any structure or function of the body.” Under this Section, deductions have been permitted for expenses related to birth control, abortion, vasectomy, and fertility-related expenses. Media reports indicate that in a recent case, a Stetson University law professor and his partner claimed deductions for expenses related to the birth of their twin sons. The sons were born through IVF and gestational surrogacy, and the couple faced medical bills of over $100,000. The Service denied the deduction, presumably basing the denial on the lack of a medical diagnosis of infertility.
– Morgan Holcomb
Mitchell Hamline School of Law
TORTS & INSURANCE
• Statute of limitations; defective construction. Defendant general contractor and defendant subcontractors constructed a building for plaintiff. During construction in 2009, a leak was noticed at one of the windows. The general contractor contacted one of the subcontractors multiple times and additional work was performed to remedy the leak. A certificate of occupancy was issued in January 2010 and construction was substantially completed in May 2010.
In August 2010, plaintiff again noticed water by the same window. After investigating further, plaintiff discovery several water intrusion issues. Plaintiff filed suit in 2012 seeking damages for construction defects. Defendants moved for summary judgment based on the statute of limitations for improvements to real property contained in Minn. Stat. §541.051, subd. 1(a). The district court granted summary judgment in favor of defendants. The court of appeals affirmed.
The Minnesota Supreme Court affirmed in part, reversed in part, and remanded. The Court rejected plaintiff’s argument that the statute of limitations could not begin to run until the construction was substantially completed. The Court affirmed the legal determination made by the lower courts that, under Minn. Stat. §541.051, subd. 1(a), the statute of limitations begins to run when the plaintiff discovered or should have discovered the injury even if construction is still ongoing. The Court, however, reversed the grant of summary judgment because it found that a genuine issue of material fact existed as to when the plaintiff knew or should have known of the injury given the attempts to repair the issue in 2009. 328 Barry Ave., LLC v. Nolan Props. Group, LLC, No. A14-0724 (Minn. 10/28/2015). http://mn.gov/lawlib/archive/supct/2015/OPA140724-112515.pdf
– Jeff Mulder
Bassford Remele, A Professional Association