• Chapter 13 debtor fails to disclose post-confirmation employment discrimination suit; summary judgment granted due to judicial estoppel. The order confirming the Chapter 13 plan of debtor Jones included a requirement that debtor report any lawsuits “received or receivable” during the term of the plan. Subsequently, debtor filed a charge of employment discrimination, received a right to sue letter, and commenced a state court lawsuit against his former employer, Bob Evans Farms. He did not report the suit to the Chapter 13 trustee. The defendant removed the state court case to federal district court. After the Chapter 13 case was terminated and debtor’s debts were discharged, defendant Bob Evans Farms brought a motion for summary judgment. The court granted the motion, holding that debtor was judicially estopped from pursuing his claims due to non-disclosure in the bankruptcy case. Debtor filed a motion to reopen the Chapter 13 case, filed amended schedules disclosing the pending claims, and asked the district court to reconsider. The district court declined to modify its order.
On appeal, the 8th Circuit applied the three factors from New Hampshire v. Maine, 532 U.S. 742 (2001) to affirm the district court, specifically responding to various arguments made by the National Association of Consumer Bankruptcy Attorneys in its amicus brief. First, it held that debtor took inconsistent positions in his Chapter 13 case and the discrimination case, by representing in the Chapter 13 case that no claims existed. The 8th Circuit noted that a Chapter 13 debtor who fails to timely amend schedules to reflect a post-petition cause of action takes an inconsistent position. Second, the 8th Circuit held that the bankruptcy court, by discharging debtor’s debts, “adopted his position that his discrimination claims did not exist.” Third, the 8th Circuit held that debtor could have obtained an unfair advantage in the bankruptcy case by concealing the claim. The 8th Circuit used a similar analysis when affirming a dismissal based on judicial estoppel for failure to disclose claims in a Chapter 13 case in Van Horn v. Martin, No. 15-1710 (8th Cir. 2/11/16). Jones v. Bob Evans Farms, No. 15-2068 (8th Cir., 1/26/16).
–Patrick C. Summers
DeWitt Mackall Crounse & Moore S.C.
• DWI: No warrant required for chemical test of lawfully obtained blood sample. Respondent was charged with criminal vehicular operation after a two-vehicle accident. After respondent was loaded into an ambulance, police read to her the implied consent advisory, while a detective worked to obtain a search warrant for a blood draw. At the hospital, respondent was given an opportunity to speak with an attorney, and agreed to submit to a blood test. When the detective arrived at the hospital with the search warrant, respondent requested a breath test. A PBT showed a reading of 0.00. Respondent’s blood was drawn, after which respondent told police she was taking Lorazepam and Wellbutrin. The BCA tested respondent’s blood twice, first finding no alcohol, but later finding the presence of a metabolite of THC and Alprazolam, both of which are controlled substances under MN law. Respondent had a valid prescription for Alprazolam.
The district court granted respondent’s motion to suppress the evidence of the presence of drugs in the blood sample, finding that the blood sample was lawfully obtained under the search warrant, and that the testing of the sample for alcohol was lawful, but that the subsequent testing for the presence of drugs was unlawful. The state appealed.
In this case of first impression, the court of appeals holds that, if the state lawfully obtains a blood sample for the purpose of chemical analysis, then a chemical analysis of the sample that does not offend standards of reasonableness is not a separate search requiring a warrant. Schmerber v. California, 384 U.S. 757 (1966), treated the seizure and separate search of the blood as a single event for 4th Amendment purposes. Under Schmerber, any chemical analysis of a lawfully obtained blood sample need only be reasonable. Skinner v. Ry. Labor Execs.’ Ass’n, 489 U.S. 602 (1989), stated that a chemical analysis of a blood sample to obtain physiological data is a “further invasion” of the tested person’s privacy rights. The court of appeals finds this language to be dictum, which concerned testing for medical facts about a person unrelated to the government’s investigation for drugs or alcohol, and points out that the Skinner court’s conclusions regarding alcohol and drug testing of railroad employees to ensure railroad safety have no bearing on the issue presented in this case.
The court of appeals concludes that a person loses an expectation of privacy in the blood sample once the sample has been lawfully removed from the body. As such, a subsequent chemical analysis of the sample is not a distinct 4th Amendment event, and only a standard of reasonableness controls the analysis. Here, the test for controlled substances in respondent’s blood does not raise concerns of reasonableness. Because the sample of respondent’s blood was taken pursuant to a search warrant, the subsequent chemical tests for alcohol and drugs did not violate the 4th Amendment. The district court’s suppression order is reversed. State v. Debra Lee Fawcett, Ct. App. 1/11/2016.
• Restitution: “Loss or harm” incurred by individual whose name and private identifying information is criminally possessed, used, or transferred. Moua was convicted of identity theft after stealing mail that included identifying information relating to 422 individuals. The district court ordered him to pay restitution of $1,000 to each of the 422 individuals, pursuant to the minimum restitution provision of the identity theft statute, Minn. Stat. §609.527, subd. 4(b). Moua challenged the order, arguing that many of the individuals were not direct victims as defined by the identity theft statute. The district court’s order was amended to award restitution only to 14 individuals who sustained out-of-pocket economic losses and one individual who sustained no economic loss, but who spent over 100 hours attempting to clear his/her name, and rejected Moua’s due process challenge to the minimum restitution provision. Both Moua and the state appealed.
The court of appeals finds that the $1,000 minimum restitution obligation does not deny Moua procedural due process, because Moua received notice and had multiple opportunities to challenge the restitution award and the application of the minimum restitution provision, at the plea, sentencing, and restitution hearings. In fact, he succeeded in persuading the district court to limit the number of restitution recipients to 15 individuals.
The court also finds that all individuals whose names and private identifying information were stolen incurred loss or harm as a result of Moua’s conduct, and are entitled to the $1,000 minimum restitution obligation. A direct victim of identity theft is entitled to minimum restitution of $1,000 under Minn. Stat. §609.527, subd. 4(b), and a direct victim is defined as anyone whose identity was transferred, used, or possessed. The identity theft statute does not require a showing of economic loss. Minnesota’s restitution statute defines a victim as any person who “incurs loss or harm as a result of a crime.” Minn. Stat. §611A.01. “Loss” is defined in economic terms, but “harm” is not defined. The plain meaning of “harm” includes any detrimental effects of another’s wrongful actions, and is not limited to measurable economic loss. The court rejects Moua’s argument that, to demonstrate harm, an individual must have already taken remedial steps to protect themselves. A victim of identity theft suffers harm at the moment of the initial theft, which compromises their security and may harm them indefinitely. State v. Chao Moua, Ct. App. 1/25/2016.
• Sentencing: Motion to correct sentence is appropriate where court amends sentence sua sponte. Three months after appellant was sentenced for failure to register, the court amended his sentence sua sponte, adding a 10-year conditional release term based on its finding that appellant was a risk level III offender. Four years later, appellant moved to vacate that new term of his sentence under Minn. R. Crim. P. 27.03, subd. 9, arguing that the conditional release term was not supported by a jury’s finding that he was a level III offender, and he had not waived his Blakely right to a jury determination of this fact. The district court converted the motion to a petition for postconviction relief, and denied it as time-barred.
Held, it was appropriate for appellant to challenge his sentence under Minn. R. Crim. P. 27.03, and the district court’s fact finding that he was a risk-level-III offender violated Appellant’s 6th Amendment right to a jury. A challenge under Rule 27.03 is proper if it challenges a sentence on the grounds that “the sentence is contrary to an applicable statute or other applicable law.” Appellant’s motion sought only to remove a term of his sentence not authorized by law, and does not in any way implicate either his conviction or the procedure leading to his conviction.
State v. Her, 862 N.W.2d 692 (Minn. 2015), made clear that the 6th Amendment right to a jury trial restricts the imposition of a 10-year conditional releases term based upon a defendant’s status as a risk level III offender to those cases where the status is either admitted by the defendant or found by a jury. The district court violated this rule, and the case is remanded for resentencing. Whether a sentencing jury is to be impaneled on remand is left to the district court. Willie Edd Reynolds v. State, Ct. App. 1/25/2016.
• Disorderly conduct: Charge of disorderly conduct – disturbing assembly or meeting does not violate 1st Amendment: Following a disturbance at a city council meeting, at which appellant refused to move her chair after requests from the police chief and public works director, and exchanged comments with a number of city employees, causing the meeting to start late, appellant was charged with disorderly conduct for disturbing a public meeting. The district court denied appellant’s motion to dismiss for lack of probable cause and on 1st Amendment grounds. A jury found appellant guilty, and she appealed, arguing that Minn. Stat. §609.72, subd. 1(2), is both vague and overly broad, in violation of the 1st Amendment.
Minn. Stat. §609.72, subd. 1(2), states that “[w]hoever does any of the following in a public or private place…, knowing, or having reasonable grounds to know that it will, or will tend to, alarm, anger or disturb others or provoke an assault or breach of the peace, is guilty of disorderly conduct…: disturbs an assembly or meeting, not unlawful in its character.” The court of appeals finds that the statue is not unconstitutionally vague. The term “disturb” is not defined by the statute, but is commonly understood to mean “to break up or destroy the tranquility, order, or settled state of.” As such, the statute can be understood as prohibiting conduct that could be expected to interfere with the ability to conduct a meeting. The fact that the statute does not itemize what conduct disturbs a meeting does not render the statute vague.
The court also finds that the statute is not unconstitutionally overbroad. The court notes that there are certainly applications of the statute that will implicate speech and expressive conduct, but the statute imposes reasonable time, place, or manner restrictions. The statute is content-neutral. It protects the ability of government officials to do the work of governing, and is narrowly tailored to serve this significant interest, in that it applies in a very limited context (disturbance of lawful assemblies or meetings), and reaches only conduct that would be expected to interfere with the ability to conduct a meeting and that is intended to cause a disturbance. The statute also leaves open ample other channels of communication, as citizens are free to communicate their dissatisfaction with their government in a variety of ways that do not disturb lawful meetings. State v. Robin Lyne Hensel, Ct. App. 1/25/2016.
EMPLOYMENT & LABOR LAW
• Race discrimination; reverse bias verdict. A jury verdict of racial discrimination in favor of a white police officer who was bypassed for a high-profile position with a police training academy in favor of an African-American woman was upheld on appeal. The 8th Circuit Court of Appeals affirmed the “reverse” bias verdict on grounds that the white claimant suffered an adverse change in working conditions by not being awarded the job. Bonenberger v. St. Louis Metro. Police Dept., 956 F.Supp.2d 1059 (8th Cir. 2016).
• Whistleblowing; statute of limitations extended. Overruling case law and two decades of practice, the Minnesota Supreme Court has expanded the statute of limitations for most whistleblowing claims. It held that the period for bringing claims under Minn. Stat. §181.931, is six years for a claim arising under a statute, Minn. Stat. §541.05, subd. 1(2), rather than two years, as for most employment claims. Ford v. Minneapolis Public Schools, 2016 Minn. App. LEXIS 153 (Minn. App. 2016) (unpublished).
• Retaliation; fee sanction upheld. A $10,000 fee award was upheld against a pro se litigant claiming retaliation under the Minnesota Human Rights Act. The court of appeals ruled that the trial judge correctly determined that the employee was not terminated but voluntarily resigned and imposed the fee sanction. Liu v. Waymouth Farms, Inc., 2016 Minn. App. LEXIS 76(Minn. App. 2016) (unpublished).
• Workers’ compensation; no retaliation. An ex-employee’s suit claiming retaliation discharge because he filed a workers’ compensation claim was rejected. The Minnesota Court of Appeals pointed to his extended absence from work as acceptable grounds for the termination. Anderson v. N. Am. Gear & Forge, 2015 Minn. App. LEXIS 44 (Minn. App. 2015) (unpublished).
• Unemployment compensation; misuse of resources. A clerical employee with the Minnesota appellate courts was denied unemployment compensation benefits because she used court resources to conduct a personal business she operated while at work. The appellate court cited violation of court policy to deny benefits on “misconduct” grounds. Baker v. Minn. State Supreme Court, 2016 Minn. App. LEXIS 35 (Minn. App. 2016) (unpublished).
• Three quitters lose. As usual, a trio of ex-employees lost unemployment claims before the appellate court. Benefits were denied to a quitting employee who claimed a hostile work environment because the employer, a beauty school, had taken appropriate steps to address her concerns. Longtin v. EEG, Inc., 2016 Minn. App. LEXIS 34 (Minn. App. 2016) (unpublished).
An employee who left his job in North Dakota to return to Minnesota to deal with a threat by his spouse to falsely claim he assaulted her was not entitled to benefits because he did not have a “good reason” attributable to the employer to give up his job. Skrzypek v. Doc Holliday’s Roadhouse, 2015 Minn. App. LEXIS 39 (Minn. App. 2016) (unpublished).
An employee who quit because he felt he was unfairly harassed and targeted by his supervisor also lost his claim. An investigation of the employee’s conduct was proper and did not constitute “good reason” for the employee to quit and receive benefits. Griffith v. Minn. Dep’t. of Human Servs., 2015 Minn. App. LEXIS 71 (Minn. App. 2016) (unpublished).
• Unemployment. The Obama administration has proposed new programs for unemployed workers under the president’s budget, which is subject to Congressional approval. Employees who lose their jobs and are entitled to unemployment compensation benefits could receive a maximum of $10,000 over a two-year period to replace up to half of their lost wages when they take a new, lower paying job. The proposal would only apply to employees making less than $50,000 annually who worked for their previous employer for three years, and would not cover employers fired for “misconduct” and those who are ineligible for benefits because they voluntarily resigned without “good reason” caused by their employer and for non-medical reasons.
The new wage supplement is coupled with other unemployment initiatives, such as expanded coverage for part-time and intermittent employees, as well as a requirement that all states provide 26 weeks of benefits, as all states now do, including Minnesota.
• Equal pay. The Obama administration also has extended its efforts to enforce equal pay in laws for women. The Equal Employment Opportunity Commission (EEOC) is requiring employers with 100 or more employees to submit detailed data about compensation practices in order to determine compliance with equal pay laws. The initiative expands a program started by the administration in 2014 requiring federal contractors to provide a breakdown of data regarding compensation and classifications on gender, race, and various protected classifications.
–Marshall H. Tanick
Hellmuth & Johnson, PLLC
• High court stays clean power plan. On 2/9/2016, in a half-page order, the U.S. Supreme Court unexpectedly stayed the EPA’s “Clean Power Plan” (CPP), a set of performance standards aimed at reducing carbon emissions from existing power plants in the U.S. by 32 percent compared to 2005 levels. EPA, Carbon Pollution Emission Guidelines for Existing Stationary Sources: Electric Utility Generating Units, 80 Fed. Reg. 64,662 (10/23/2015). The ruling is a significant blow to the Obama administration’s climate agenda, which significantly relies upon the CPP to further domestic and international pledges to reduce greenhouse gas emissions. The Court’s 5-to-4 order specifies that the stay will remain in effect pending not only a ruling by the U.S. Court of Appeals for the District of Columbia Circuit in the case, but also the disposition of any petitions to the high court to review that ruling. Justices Ginsburg, Breyer, Sotomayor and Kagan opposed granting the stay. West Virginia, et al. v. EPA, et al. (U.S. Supreme Ct. No. 15A773).
• District of Minnesota declines to review State Department pipeline determinations. On 12/9/2015, the United States District Court for the District of Minnesota held that actions of the U.S. State Department taken pursuant to presidential permits were not reviewable by the court under the Administrative Procedures Act (APA), 5 U.S.C §701 et seq. The case concerns two oil pipelines owned and operated by Enbridge, Inc., that cross the United States/Canada border—Line 3, which was constructed in the late 1960s, and Line 67 (also known as the Alberta Clipper Pipeline), which was constructed in the late 2000s following environmental review under the National Environmental Policy Act (NEPA). Because both lines cross the border, they are subject to the president’s inherent constitutional authority concerning foreign relations and operate under “presidential permits” issued by the U.S. Secretary of State exercising delegated power. The State Department issued Line 3’s presidential permit in 1991 and issued Line 67’s permit in 2009.
In 2012, Enbridge applied for an amendment to the presidential permit for Line 67 to increase the permitted carrying capacity of the line by almost 100 percent. The State Department initiated a supplemental environmental impact process for this expansion project, which is still ongoing. Meanwhile, in 2014, the State Department approved Enbridge’s plan to replace a significant portion of Line 3, finding the replacement plan was consistent with the terms of the existing 1991 presidential permit for that pipeline. Also in 2014, the State Department concluded that Enbridge’s proposed interconnections between the two pipelines did not require authorization from the State Department because the connecting pipelines are located outside of the border segments for both lines.
Plaintiffs in the case challenged the State Department’s decisions that it did not need to authorize the interconnecting pipelines and that the Line 3 replacement project was consistent with the 1991 presidential permit. These decisions violated NEPA and NHPA, plaintiffs argued, by: (1) authorizing new, high-capacity pipelines without any NEPA or NHPA compliance; and (2) short-circuiting an ongoing NEPA and NHPA review of the Line 67 Expansion Project. Plaintiffs’ claims of violations of NEPA and NHPA were brought under the APA, which provides for a private right of action and a waiver of sovereign immunity for claims challenging agency action.
In rejecting plaintiffs’ arguments, the court noted the well-settled law that presidential actions are not agency actions that are reviewable under the APA. The court concluded that the State Department’s decisions on the pipelines were presidential in nature, within the scope of the department’s delegated power. Thus, the court held—in accordance with principles of separation of powers—that the determinations were not agency actions subject to judicial review under the APA. The court granted Enbridge’s motion for partial summary judgment. White Earth Nation, et al., v. Kerry, No. 14-4726 (D. Minn. 12/9/2015).
• 8th Circuit upholds Minnesota regional haze plan for EGUs. On 1/21/2016, the U.S. Court of Appeals for the 8th Circuit upheld EPA’s approval of Minnesota’s regional haze plan for five electric-generating units (EGUs) whose emissions affect visibility in Minnesota’s two Class I federal areas: the Boundary Waters Canoe Area Wilderness and Voyageurs National Park. The Clean Air Act sets a national goal of natural visibility in “mandatory class I Federal areas” and requires states to implement “measures as may be necessary” for reasonable progress toward the goal. 42 U.S.C. §7491. For certain major stationary facilities that emit “any air pollutant which may reasonably be anticipated to cause or contribute to any impairment of visibility in [class I Federal areas],” the Act requires the facilities to install and operate the best available retrofit technology (BART). Id. However, the rule allows states to adopt alternatives to BART if the alternative will achieve greater progress toward the goal of natural visibility. In 2012, EPA determined that the Transport Rule—also known as the Cross–State Air Pollution Rule—is “better than BART” in states (including Minnesota) covered by the rule. Regional Haze: Alternatives to Source-Specific Best Available Retrofit Technology (BART) Determinations, 77 Fed. Reg. 33,642, 33,648 (6/7/2012). EPA then approved Minnesota’s plan to use the Transport Rule instead of BART for the five EGUs at issue. Approval and Promulgation of Air Quality Implementation Plans; Minnesota; Regional Haze, 77 Fed.Reg. 34,801, 34,803 (6/12/2012). Various non-governmental organizations challenged the decision to the 8th Circuit, which determined it had jurisdiction pursuant to 42 U.S.C. §7607(b)(1). Applying a deferential “arbitrary and capricious” standard of review, the court determined that EPA had acted within its sphere of expertise and that its decision was supportable on a rational basis. Accordingly, the court denied the petition for review. National Parks Conservation Ass’n v. McCarthy, ___ F.3d ___ (8th Cir. 2016).
• MPCA proposes revised antidegradation rules. On 2/1/2016, the Minnesota Pollution Control Agency (MPCA) placed on public notice proposed amendments to Minnesota’s water quality standards governing nondegradation/antidegradation. The proposed rules would repeal Minnesota’s current “nondegradation” rules in Minn. R. 7050.0185 and 7050.0180 and replace them with a more extensive set of “antidegradation” rules designed to be consistent with federal antidegradation policy set forth in 40 C.F.R. §131.12. Antidegradation is a key component of state water quality standards. It stems from the Clean Water Act’s goal to “restore and maintain the chemical, physical and biological integrity of the Nation’s waters.” Federal antidegradation policy requires states to adopt policies and implementation procedures to ensure that existing uses of waters will be maintained, that lowering of water quality in high quality waters will be allowed only in limited circumstances, and that certain outstanding water resources will be protected.
Whereas Minnesota’s existing nondegradation rules apply to “new or expanded discharges” to waters of the state, the proposed requirements would be triggered upon the issuance of new, reissued, or modified individual NPDES wastewater, industrial stormwater and construction stormwater permits which are reasonably anticipated to result in net increases in loading or other causes of degradation to surface waters. The proposed rules remove a de minimis provision in the current rules that exempts discharges that are not “significant” from certain of the rule’s requirements. The proposed rules also include specific antidegradation procedures and standards relating to 401 certifications, particularly with regard to certification of section 404 permits. Notably, MPCA’s proposed rules do not include any substantial changes to nondegradation requirements set forth in chapter 7052 (Lake Superior Basin) or 7060 (groundwater). MPCA will hold public hearings on the proposed rules on 3/31/2016.
–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.
• Spousal maintenance; spending assets in retirement. A recent unpublished decision from the court of appeals addresses a question that will be raised with increasing frequency as more spousal maintenance obligors retire from employment: To what extent are spousal maintenance obligees expected to fund their retirement by spending down their assets?
Husband brought a motion to terminate his permanent spousal maintenance obligation to wife in connection with his retirement from employment. In analyzing wife’s ongoing need for spousal maintenance, the district court found that she would be able to meet her monthly living expenses through the end of her life expectancy by withdrawing the interest and principal of a defined contribution retirement account that had been awarded to wife as part of the original division of property. For that reason, wife no longer had a need for spousal maintenance and the district court terminated husband’s spousal maintenance obligation.
Wife appealed, arguing that the district court abused its discretion in terminating husband’s spousal maintenance obligation because it forced wife to deplete her property award in order to fund her living expenses. However, wife acknowledged on appeal that she could presently meet her monthly living expenses by spending the investment return on her retirement account which had been generated after the divorce. Wife’s main criticism is that once the investment return was depleted, she would then be forced to spend down the portion of the retirement account that had been awarded to her as property.
The court of appeals agreed with wife that the district court had erred by requiring her to spend down the principal of the retirement account. The district court’s decision was contrary to a long line of cases standing for the proposition that spousal maintenance obligees are not required to spend the principal of their property awards to meet their monthly needs. The court of appeals offered several reasons why it was unreasonable to create an exception to this precedent. First, there was no rational distinction between retirement accounts and other assets. Second, forcing wife to spend the principal of her retirement assets was unfair to wife because husband continued to have income from which to pay spousal maintenance to wife. Third, creating an obligation to spend down retirement assets would make it more difficult for parties to settle the division of property because it would create a disincentive for obligees to agree to be awarded retirement assets. Fourth, creating an exception to the general rule that obligees are not required to spend down property to meet their needs was unwise in this case because it was speculative whether wife would ever actually need to deplete the principal of her retirement account during her lifetime.
The court of appeals stated in its opinion that it was affirming the district court’s termination of spousal maintenance and that it was reversing and remanding for the district court to reserve jurisdiction over spousal maintenance. (This characterization of its holding is puzzling, because the court of appeals agreed with the district court’s conclusion that husband should not be paying any spousal maintenance but it rejected the district court’s termination of spousal maintenance, which is why it remanded for a reservation of spousal maintenance.) Winer v. Winer, A15-0339, 2/8/16 (unpublished).
Henson & Efron PA
• Unaccepted offer of judgment does not moot class claims. Affirming the 9th Circuit, the U.S. Supreme Court held 6-3 that an unaccepted offer of judgment to the plaintiff under Fed. R. Civ. P. 68 does not moot putative class action claims. However, all may not be lost for class action defendants seeking to moot claims, because the majority opinion noted that it was not deciding “whether the result would be different if a defendant deposits the full amount of the plaintiff’s individual claim in an account payable to the plaintiff, and the court then enters judgment for the plaintiff in that amount.” Campbell-Ewald Co. v. Gomez, 136 S. Ct. 663 (2016).
• Voluntary dismissal of claims to permit review of order denying class certification; certiorari granted. The U.S. Supreme Court recently granted certiorari on the question of whether a federal court of appeals has jurisdiction to review an order denying class certification after the named plaintiffs voluntarily dismiss their claims with prejudice in an attempt to create an appealable final judgment. According to the petition for certiorari, five circuits currently bar appeals under these facts while two circuits would allow these appeals.
And while it appears that the 8th Circuit has never addressed this question, it has repeatedly permitted plaintiffs to create appellate jurisdiction by dismissing non-class action claims. Microsoft Corp. v. Baker, 797 F.3d 607 (9th Cir. 2015), cert. granted, ___ S. Ct. ___ (2016).
• Requests for attorney’s fees and costs; multiple orders. In an unpublished opinion, the 8th Circuit vacated and remanded an order granting a reduced award of attorney’s fees in an FLSA action where the district court had failed to calculate a lodestar and had not offered any explanation for reducing the fee award from that lodestar. Jones v. RK Enters. of Blytheville, Inc., ___ Fed. App’x ___ (8th Cir. 2016) (unpublished).
While agreeing with the plaintiff that the defendants had pursued a sanctions motion that was “wholly without merit” and had repeatedly “mischaracteriz[ed] the record,” Judge Nelson denied its request for an award of more than $2.5 million in attorney’s fees as a sanction for defendants’ conduct. Great Lakes Gas Trans. L.P. v. Essar Steel Minnesota LLC, 2016 WL 215269 (D. Minn. 1/19/2016).
Sustaining in part plaintiffs’ objections to the defendant’s bill of costs, Judge Nelson noted that the District of Minnesota Clerk’s Bill of Cost Guide “is persuasive evidence of the law as it exists within the District of Minnesota regarding the billing of costs.” Mountain Mktg. Group, LLC v. Heimerl & Lammers, LLC, 2016 WL 424964 (D. Minn. 2/3/2016).
• Multiple requests for injunctive relief denied. Judge Frank denied the plaintiff’s request for a preliminary injunction in the battle over signage in the vicinity of the new Vikings stadium, finding any monetary damage to the plaintiff to be “speculative,” and that the plaintiff’s delay in seeking injunctive relief “undermine[d]” its claim of irreparable harm. Judge Frank also held that a contractual agreement providing that the plaintiff would be irreparably harmed “d[id] not bind” the Court and “without more, [was] insufficient to establish irreparable harm.” Minnesota Vikings Football Stadium, LLC v. Wells Fargo Bank, N.A., 2016 WL 355070 (D. Minn. 1/28/2016).
Despite finding that the plaintiff had shown a likelihood of success on the merits and that the defendants were likely to “have to write a large check to the plaintiff,” Judge Schiltz denied the plaintiff’s motion for a preliminary injunction in a non-compete and trade secrets case, finding that any injunction was likely to harm one defendant more than it would help the plaintiff. Wells Fargo Ins. Servs. USA, Inc. v. King, 2016 WL 299013 (D. Minn. 1/25/2016).
Judge Frank denied the plaintiff’s second request for a temporary restraining order in a trademark action, finding that it had “failed to identify any facts that [were] materially different than the facts before the Court at the time of its first motion.” Joy Group Oy v. Supreme Brands L.L.C., 2016 WL 410272 (D. Minn. 2/2/2016).
• ADA; lack of standing. Judge Ericksen dismissed the plaintiffs’ ADA claim and related request for injunctive relief premised on allegedly inadequate handicapped parking spaces at a shopping center, where the parking lot deficiencies alleged in the complaint had been cured prior to the commencement of the action. Disability Support Alliance v. Geller Family L.P. III, 2016 WL 424970 (D. Minn. 2/3/2016).
• Motion to compel deposition of former counsel granted. Magistrate Judge Noel granted the defendant’s motion to compel the deposition of counsel for the plaintiff in a previous related action, finding “[t]he fact that certain areas of inquiry of the deposition may implicate the attorney-client or work product privileges, [did] not shield [the attorney] from deposition altogether.” Moldex Metric, Inc. v. 3M Co., 2015 WL 9859754 (D. Minn. 10/28/2015).
• Motion to compel production of documents shown to expert denied. Judge Montgomery overruled objections to an order by Magistrate Judge Brisbois that had denied the plaintiff’s motion to compel the production of documents disclosed to the defendants’ expert witness, agreeing with Magistrate Judge Brisbois that the documents were subject to protection as work product and that privilege had not been waived under the 2010 amendments to Fed. R. Civ. P. 26. Judge Montgomery also rejected the plaintiff’s argument that Magistrate Judge Brisbois had erred in permitting the defendants to produce a redacted version of one document without first reviewing the document in camera. James River Ins. Co. v. Interlachen Propertyowners Ass’n, 2015 WL 9946407 (D. Minn. 12/21/2015), aff’d, 2016 WL 386032 (D. Minn. 2/1/2016).
• Motion for appeal bond granted. Judge Magnuson granted the plaintiffs’ motion to require the posting of an appeal bond sufficient to cover both direct appeal costs and related administrative by objectors to a class action settlement, characterizing two of the objectors as “professional objectors,” and describing a third objector’s appeal as “frivolous.” In Re Target Corp Customer Data Sec. Breach Lit., 2016 WL 259676 (D. Minn. 1/21/2016).
• Multiple violations of Fed. R. Civ. P. 5.2; request for sanctions denied. Judge Montgomery denied the plaintiff’s request for sanctions premised on the defendant’s counsel’s multiple violations of Fed. R. Civ. P. 5.2 in an FDCPA action, acknowledging the “serious privacy concerns” arising from the violations of Rule 5.2, but finding that the attorney’s fees in the case were “already likely to exceed the amount at issue.” Hoch v. Mid-Minnesota Mgmt. Servs. Inc., 2016 WL 386037 (D. Minn. 2/1/2016).
Law Office of Josh Jacobson
• No procedural error for failure to inform petitioner about political asylum or other forms of relief. The 8th Circuit Court of Appeals found that, under the circumstances presented, the immigration judge did not commit a fundamental procedural error by failing to inform the petitioner about political asylum or other possible avenues of relief. There was, as a result, no due process violation. Alva-Arellano v. Lynch, No. 14-2957, slip op. (8th Cir. 2/2/2016). http://media.ca8.uscourts.gov/opndir/16/02/142957P.pdf
• Solicitation of prostitution in Minnesota is a crime of moral turpitude. The 8th Circuit Court of Appeals held that the petitioner’s conviction for soliciting prostitution in violation of Minn. Stat. §609.324, subd. 2 (2006), was a “crime involving moral turpitude” and therefore found the Board of Immigration Appeals did not abuse its discretion when denying the petitioner’s motion to reopen. Gomez-Gutierrez v. Lynch, No. 14-3374, slip op. (8th Cir. 1/29/2016). http://media.ca8.uscourts.gov/opndir/16/01/143374P.pdf
• Dismissal of challenge to USCIS revocation of I-140 for lack of jurisdiction is proper. The 8th Circuit Court of Appeals held that the U.S. District Court (District of Nebraska) did not commit error when finding it lacked jurisdiction to consider whether USCIS failed to comply with disclosure requirements under 8 CFR §103.2(b)(16) at the time it revoked the plaintiff-beneficiary’s I-140 immigrant petition for foreign national worker; that the plaintiff could not, as a result, port his I-140; and, therefore, plaintiff was ineligible to adjust his status to permanent residence. Rajasekaran v. Hazuda, No. 14-3623, slip op. (8th Cir. 1/29/2016). http://media.ca8.uscourts.gov/opndir/16/01/143623P.pdf
• No jurisdiction to review discretionary denial of VAWA petitioner’s applications for permanent residence and waiver of removal. The 8th Circuit Court of Appeals held it lacked jurisdiction under Hailemichael v. Gonzales, 454 F.3d 878 (8th Cir. 2006) to review the Board of Immigration Appeal’s discretionary denial of the self-petitioner’s applications for permanent residence and waiver of removal (fraud waiver) under the Violence Against Women Act (VAWA) while noting at the same time problems with the petitioner’s credibility. Mutie-Timothy v. Lynch, No. 14-3671, slip op. (8th Cir. 1/28/2016). http://media.ca8.uscourts.gov/opndir/16/01/143671P.pdf
• False claim to U.S. citizenship is a non-waivable violation. The 8th Circuit Court of Appeals held the Board of Immigration Appeals’ finding that the petitioner falsely represented himself on a Form I-9 as a U.S. citizen, and not a national, was supported by substantial evidence. “Based on Godfrey’s testimony, his prior false claims of citizenship, and the false claim of citizenship he made after removal proceedings commenced, the BIA’s and IJ’s finding that Godfrey falsely represented himself to be a ‘citizen’ is supported by substantial evidence.” That false claim of U.S. citizenship was a non-waivable violation, thereby eliminating any prospect of obtaining permanent residence. Godfrey v. Lynch, No. 15-1027, slip op. at 8 (8th Cir. 1/22/2016). http://media.ca8.uscourts.gov/opndir/16/01/151027P.pdf
• Claimed social group (“escapee Mexican child laborers”) is not socially distinct for withholding of removal relief. The 8th Circuit Court of Appeals upheld the Board of Immigration Appeals’ denial of the petitioner’s claim for withholding of removal, finding that it correctly concluded the petitioner’s claimed social group, “escapee Mexican child laborers,” was not socially distinct; nor did he “establish that the persecution he suffered was on account of his membership in that group.” Gonzalez Cano v. Lynch, No. 14-3730, slip op. (8th Cir. 1/15/2016). http://media.ca8.uscourts.gov/opndir/16/01/143730P.pdf
• Denial of motion to reopen is appropriate when evidence was previously discoverable. The 8th Circuit Court of Appeals held the Board of Immigration Appeals did not abuse its discretion when it denied the petitioner’s motion to reopen because the petitioner’s newly submitted evidence establishing he had a bona fide marriage was previously discoverable and in fact held by the petitioner himself. Makundi v. Lynch, No. 14-3684, slip op. (8th Cir. 1/8/2016). http://media.ca8.uscourts.gov/opndir/16/01/143684P.pdf
• No objectively reasonable basis for Nicaraguan petitioner’s fear of future persecution. The 8th Circuit Court of Appeals upheld the immigration judge and the Board of Immigration Appeals’ denial of political asylum (and associated relief provided by withholding of removal and the Convention Against Torture) to the Nicaraguan petitioner, finding he failed to establish that his fear of future persecution was objectively reasonable. Castillo-Gutierrez v. Lynch, No. 14-2481, slip op. (8th Cir. 1/5/2016). http://media.ca8.uscourts.gov/opndir/16/01/142481P.pdf
• Asylum application properly denied when petitioner lacked credibility. The 8th Circuit Court of Appeals found both the immigration judge and Board of Immigration Appeals did not commit error when finding that the petitioner lacked credibility with several contradictions and inconsistencies going to the heart of her asylum claim. Fabrication of two key corroborating documents was especially significant. Rodriguez-Mercado v. Lynch, No. 14-3559, slip op. (8th Cir. 12/23/2015). http://media.ca8.uscourts.gov/opndir/15/12/143559P.pdf
• Breach of employment contracts for H-2B temporary workers. The 8th Circuit Court of Appeals reversed the U.S. District Court’s (Eastern District of Arkansas—Little Rock) dismissal of the H-2B temporary workers’ breach of contract and tax fraud claims, finding the complaint “sufficiently alleged that they had employment contracts with Deggeller, the terms of which included the Department of Labor’s prevailing wage. The complaint therefore stated a valid claim that Deggeller breached those contracts by failing to pay the required wage.” Cuellar-Aguilar v. Deggeller Attractions, Inc., No. 15-1219, slip op. at 10 (8th Cir. 12/15/2015). http://media.ca8.uscourts.gov/opndir/15/12/151219P.pdf
• The U.S. Department of Labor’s H-1B investigation was unauthorized. The 8th Circuit Court of Appeals held the Department of Labor’s findings of H-1B temporary worker visa violations and awards against the plaintiff, Greater Missouri Medical Pro-Care Providers, could not stand since they were based on DOL Secretary Thomas Perez’s unauthorized investigation of matters beyond that of the aggrieved-party complainant, Alena Gay Arat. Greater Missouri Medical Pro-Care Providers, Inc. v. Perez, No. 14-3717, slip op. (8th Cir. 12/14/2015). http://media.ca8.uscourts.gov/opndir/15/12/143717P.pdf
• Department of Homeland Security extends TPS designation for Sudan. On 1/25/2016, the Department of Homeland Security extended temporary protected status (TPS) for Sudanese holders of such status from 5/3/2016 to 11/2/2017. According to DHS Secretary Jeh Johnson, such action is warranted “because the conditions in Sudan that prompted the 2013 TPS redesignation continue to be met. Sudan continues to experience ongoing armed conflict and extraordinary and temporary conditions within the country that prevent its nationals from returning to Sudan in safety.” 81 Fed. Reg. 4045-51 (1/25/2016). https://www.gpo.gov/fdsys/pkg/FR-2016-01-25/pdf/2016-01387.pdf
• Department of Homeland Security redesignates and extends TPS for South Sudan. On 1/25/2016, the Department of Homeland Security redesignated South Sudan for temporary protected status (TPS) and extended such status for those currently holding it from 5/3/2016 to 11/2/2017. According to DHS Secretary Jeh Johnson, such action is warranted “because the ongoing armed conflict and extraordinary and temporary conditions that prompted the 2014 TPS redesignation have persisted, and in some cases deteriorated, and would pose a serious threat to the personal safety of South Sudanese nationals if they were required to return to their country.” 81 Fed. Reg. 4051-59 (1/25/2016). https://www.gpo.gov/fdsys/pkg/FR-2016-01-25/pdf/2016-01388.pdf
• Department of Homeland Security issues final rule affecting certain worker visa classifications. On 1/15/2016, the Department of Homeland Security published a final rule announcing changes to programs serving the H-1B1, E-3, and CW-1 nonimmigrant classifications and the EB-1 immigrant classifications. The final rule becomes effective on 2/16/2016. 81 Fed. Reg. 2068-84 (1/15/2016). https://www.gpo.gov/fdsys/pkg/FR-2016-01-15/pdf/2016-00478.pdf
• Customs and Border FAQs on the Visa Waiver Program Improvement and Terrorist Travel Prevention Act. On 12/18/2015, the Visa Waiver Program Improvement and Terrorist Travel Prevention Act of 2015 was signed into law, establishing new travel eligibility requirements and restrictions. https://www.cbp.gov/travel/international-visitors/visa-waiver-program/visa-waiver-program-improvement-and-terrorist-travel-prevention-act-faq
• U.S. Supreme Court grants cert in United States v. Texas. On 1/19/2016, the U.S. Supreme Court granted cert in the case of United States v. Texas (No. 15-674) to address the conflict over President Obama’s 11/20/2014 executive actions (guidance) concerning deferred action for certain foreign nationals. The questions to be addressed are:
1. whether a State that voluntarily provides a subsidy to all aliens with deferred action has Article III standing and a justiciable cause of action under the Administrative Procedure Act (APA), 5 U.S.C. 500 et seq., to challenge the guidance because it will lead to more aliens having deferred action;
2. whether the guidance is arbitrary and capricious or otherwise not in accordance with law;
3. whether the guidance was subject to the APA’s notice-and-comment procedures; and
4. whether the guidance violates the Take Care Clause of the Constitution, Art. II, §3.
–R. Mark Frey
Frey Law Office
• Copyright: Denial of attorney’s fees. A panel for the United States Court of Appeals for the 8th Circuit recently affirmed a ruling from the District Court for the Northern District of Iowa dismissing a lawsuit for copyright infringement and denying defendant’s request for attorney’s fees. Killer Joe Nevada, LLC, sued several “John Doe” defendants alleging copyright infringement of the 2012 motion picture Killer Joe. After subpoenaing internet service providers to identify the users of allegedly infringing internet protocol addresses, defendant Leaverton was identified, and the complaint was amended to name her as a defendant. Leaverton denied the allegations and counterclaimed for a declaratory judgment of non-infringement. Killer Joe Nevada then moved to dismiss the complaint with prejudice and to dismiss Leaverton’s counterclaim. Leaverton opposed the dismissal unless she was awarded attorney’s fees. The district court dismissed the complaint and counterclaim and denied the request for fees. The 8th Circuit held the district court did not abuse its discretion in denying attorney’s fees because the lawsuit was not unreasonable or frivolous; the losing litigant, Killer Joe Nevada, did not have improper motivations in bringing the lawsuit as evidenced by its prompt dismissal of the complaint upon a determination of non-infringement; and there was no clear error of judgment in weighing the factors. Killer Joe Nev., LLC v. Doe, 807 F.3d 908 (8th Cir. 2015).
• Patents: Federal circuit has exclusive appellate jurisdiction. A panel for the United States Court of Appeals for the 8th Circuit recently dismissed an appeal from a decision from the District Court for the District of Nebraska denying plaintiffs partial summary judgment and awarding defendants partial summary judgment. Following a prior settlement of a patent infringement dispute between Joao Bock Transaction Systems, LLC, (JBTS) and ACI Worldwide, Inc. (ACI), JBTS sued Online Resources Corp., a recently acquired subsidiary of ACI, for patent infringement for the alleged infringement that occurred prior to ACI’s acquisition. ACI then sued JBTS for breach of the settlement agreement and for a declaratory judgment of non-infringement or invalidity of the patent in issue. JBTS counterclaimed for breach of the settlement agreement. The cases were then consolidated “for all purposes.” Upon a partial summary judgment in favor of JBTS, ACI appealed the district court’s ruling to the 8th Circuit along with a corresponding cross-appeal to the Court of Appeals for the Federal Circuit. The 8th Circuit dismissed ACI’s appeal because 28 U.S.C. § 1295(a)(1) grants the Federal Circuit “exclusive jurisdiction” over appeals from the final decisions of the district courts arising under, including the assertion of a compulsory counterclaim, any act of Congress related to patents. The 8th Circuit held that appellate jurisdiction of a consolidated case lies exclusively with the Federal Circuit when at least some of the claims arose under United States patent law. In dismissing the appeal, the panel held it was unnecessary to transfer the case to the Federal Circuit because of the co-pending cross-appeal filed by ACI. Online Res. Corp. v. Joao Bock Transaction Sys., 808 F.3d 739 (8th Cir. 2015).
• Patents: Claim construction. Judge Montgomery recently construed the patent claims in a dispute involving the technology to transfer an image onto a colored base, such as a t-shirt, using heat. Plaintiff Jodi Schwendimann asserted seven patents against defendant Arkwright Advanced Coating, Inc. (AACI). AACI counterclaimed by asserting two of its patents against Schwendimann. In arguing for the proper meaning of the primary term in dispute, “white layer,” AACI argued that Schwendimann’s prior responses in an interference proceeding between the parties at the United States Patent and Trademark Office constituted prosecution history estoppel. During prosecution or, in this case, an interference proceeding, a patentee may not disclaim a claim interpretation and then later enforce that interpretation in an infringement action. For prosecution disclaimer to apply, the patentee’s alleged disavowal of claim scope must be clear and unambiguous. The court found there was no disavowal related to the range of melting temperatures or the extent to which the layers mix, but found disavowal of non-melting white layers. The court further construed the term “colored substrate” according to its plain and ordinary meaning, rejecting patentee’s construction that limited the color of the substrate to black, white, or a shade of the two. The court reasoned that a claim construction that gives effect to all terms of the claim is preferred over one that does not and that if patentee had only intended the substrate to be black, white, or a combination of the two, the patentee could have used the claim term “substrate” instead of “colored substrate.” Schwendimann v. Arkwright Advanced Coating, Inc., No. 11-820 ADM/JSM, 2015 U.S. Dist. LEXIS 161671 (D. Minn. 12/2/2015).
Merchant & Gould
PROBATE & TRUST LAW
• Transcripts may serve as alternative to estate closing letters. As previously reported, effective for estate tax returns filed on or after 6/1/2015, the IRS will only issue a closing letter upon request of the taxpayer. The IRS website now indicates that an estate account transcript is a viable substitute to an estate closing letter. On 12/4/2015, the IRS published a new online procedure by which tax professionals may register to obtain estate account transcripts from the Transcript Delivery System (TDS). You must first register for IRS e-Services in order to enroll in TDS. Transaction Code 421 on a transcript means the estate tax return (Form 706) has been accepted as filed or that the examination is complete. The description for Code 421 (“Closed examination of tax return”) will be the same in all instances, regardless of whether the return was accepted as filed or closed upon completion of audit. Requests for transcripts will only be processed if a properly executed Form 2848, Power of Attorney, or Form 8821, Tax Information Authorization, is already on file with the IRS. Transcripts can also be requested by fax or mail using Form 4506-T, Request for Transcript of Return. Requests (whether through TDS or use of Form 4506-T) should not be submitted until at least four months after filing the estate tax return. Practitioners should be aware that certain Treasury Regulations (e.g., §1.645-1 and §20.2056A-2), Revenue Procedures, and Revenue Rulings specifically refer to “closing letters” and these items have not yet been revised to treat a transcript with Code 421 as the functional equivalent of a closing letter. Additional information, including instructions on how to register for TDS and how to complete requests for transcripts using TDS or Form 4506-T, can be found at https://www.irs.gov/irspup/Businesses/Small-Businesses-%26-Self-Employed/Transcripts-in-Lieu-of-Estate-Tax-Closing-Letters%20-%20
• Consistent basis reporting deadline extended to March 31. IRS Notice 2016-19 states that the original 2/29/2016 deadline for filing statements reporting the basis of distributed estate property has been extended to 3/31/2016. Notice 2016-19 advises personal representatives to wait to prepare the statements required under section 6035 until proposed regulations are published, which the IRS expects will occur “very shortly.” Section 6035 was created under H.R. 3236, Surface Transportation and Veterans Health Care Choice Improvement Act of 2015, which was enacted 7/31/2015. The purpose of the law is to ensure consistent basis reporting between estates and beneficiaries who receive estate property. The basis reporting requirements apply only to estates that are required to file a federal estate tax return after 7/31/2015. For these estates, the personal representative must provide a statement to the IRS and beneficiaries regarding the basis of each asset included in the gross estate.
Lindquist & Vennum
• Guaranty mortgage; fraudulent transfer. Husband and wife owned real estate, subject to a mortgage that secured a personal guaranty (the “guaranty mortgage”). The property was otherwise unencumbered. A creditor of husband (the “creditor”) commenced suit against husband for an unpaid debt. Husband and wife subsequently transferred title of the property to a limited liability company owned and directed by wife. Creditor thereafter obtained a monetary judgment against husband. Creditor commenced a declaratory judgment action to declare the transfer of the property void as a fraudulent transfer under Minnesota’s Fraudulent Transfers Act (MUFTA). The district court held that the transfer violated MUFTA and voided the transfer. On appeal, the court of appeals affirmed. Husband and wife argued that the property was not an asset under MUFTA because it was fully encumbered by the guaranty mortgage, and therefore had no value. The court disagreed and held the property was an asset under MUFTA because no claim of default had been made against the guaranty mortgage. A guaranty mortgage compensates the lender in the event of a default on the principal mortgage, and ceases to exist once the principal mortgage is satisfied. The property owners also argued that the transfer of the property was not to an insider under MUFTA. The court of appeals rejected this argument and held that the definition of insider under MUFTA includes spouses and that MUFTA also extends to business organizations. Landmark Community Bank, N.A. v. Klingelhutz, ___ N.W.2d ___, 2016 WL 363521 (Minn. Ct. App. 2016).
• Zoning; legal nonconforming use. Property erected a pylon sign in 1971. In 1997, it entered into a lease giving the tenant the right to use the property and the sign through April 2014. Sometime after 1997, the city enacted an ordinance restricting the use of pylon signs. The parties agreed that the use of the sign constituted a legal nonconforming use because the sign was in use at the time the ordinance was enacted. In November 2012, the tenant moved its retail operations to another location, but it continued to use the property for storage and other business-related purposes for the duration of the lease. In April 2013, the tenant covered the sign, making it blank. On 2/7/2014, the city zoning administrator wrote the owner declaring that the sign had been abandoned since the property had been vacant for more than one year. The committee of adjustments upheld the zoning administrator’s decision and found that the tenant’s cessation of operations constituted a discontinuation of the use of the sign, discontinuance of the use of the sign for one year creates a presumption of abandonment of the sign, and the owner failed to rebut the presumption. The city council affirmed the decision and concluded that the sign was abandoned because there was no business operating at the property for more than a year. The property owner brought a declaratory judgment action and the district court ruled in favor of the city on summary judgment.
On appeal, the court of appeals determined that the facts were undisputed and the interpretation of an existing ordinance is a question of law for the court subject to de novo review. The first issue addressed by the court was determining the starting point for when the sign use was discontinued. The city argued that it started when the tenant ceased retail operations on the property. The owner claimed that it did not discontinue use of the sign at any point, but at a minimum, it could not possibly have been until the tenant covered the sign, making it blank. Using plain and common definition of the word “use,” the court held that the tenant’s change in occupancy of the property did not constitute a discontinuation of the use of the sign; but rather, the covering of the sign in April 2013 was the starting point to which the sign’s use could be considered discontinued. The second issue was whose use, the owner’s or the tenant’s, matters for determining whether a use of the sign has been abandoned. The city drafted its ordinance in the passive voice, resulting in ambiguity concerning whose use matters. While the tenant’s use of the sign may have been abandoned earlier, the owner’s use of the building—to generate revenue—remained unchanged. In construing the ambiguity against the city, the court of appeals held that under the discontinuation provision in the ordinance, a preexisting nonconforming use can only be lost where its nonuse is attributable, at least in part, to the property owner. In this case, the owner’s use of the sign continued until the point in time when it permitted its tenant to cover the sign, or possibly though the end of its tenant’s lease because the owner included the sign in its marketing efforts to attract new tenants. Either way, the use was not discontinued for more than one year and was therefore not abandoned. Meleyco Partnership No. 2 v. City of West St. Paul, ___ N.W.2d ___, 2016 WL 281229 (Minn. Ct. App. 2016).
Beisel & Dunlevy PA
• Tax procedure: Noting its “jurisdiction to determine jurisdiction,” tax court finds it has jurisdiction. The tax court denied the commissioner’s motion to dismiss in a collection due process (CDP) case. The commissioner argued that the court lacked jurisdiction because the taxpayer/petitioner had not filed in a timely fashion. The court disagreed. The court began by noting some ambiguity in the statute, and also recalled the preference for giving its jurisdictional provisions a broad, practical construction rather than a narrow, technical one. Taxpayers have 30 days to appeal a “determination” following a CDP proceeding. The relevant code section (6330(d)) does not specify the means by which the IRS shall notify the taxpayer of such a “determination.” In fact, as the court noted, section 6330(d) does not explicitly require that the taxpayer be notified at all; it simply states that there must be a “determination” and permits the taxpayer to appeal within 30 days after the “determination” has been made. Following the CDP hearing, the IRS sent petitioner, by certified mail, a Notice of Determination Concerning Collection Action(s) denying relief. That notice was mailed on 4/20/2014. That letter, however, was mailed to petitioner at an address that was not his last-known address. The letter was returned as undeliverable to the IRS office in Memphis, Tennessee. Someone from the Memphis office remailed (by regular mail) the 4/20/2014 notice of determination, including the envelope in which it had originally been posted, to petitioner at his Maryland address—the Maryland address was the address that was petitioner’s “last known address.” Petitioner received the notice of determination a few days later and, on 8/22/2014, mailed to the tax court a petition seeking review of the notice. This petition was filed within 30 days of the date on which petitioner actually received the notice, and within 30 days of August 4, 2014, the date on which the notice was remailed to him. The petition was not filed within 30 days of the mis-mailing of the notice. The court, by analogy to its deficiency jurisdiction, held that notice in the CDP context is effective so long as it is actually received by the taxpayer without prejudicial delay, that is, generally in time to file a timely petition in this court. Bongam v. Comm’r, No. 20104-14L, 2016 WL 552938 (T.C. 2/11/2016).
• Issue of first impression: Arizona state court judge not “an official compensated on a fee basis,” so he has to take his unreimbursed employee deductions like the rest of us—below the line. Unreimbursed employee expenses are permitted as deductions, but are required to be taken “below the line” as miscellaneous itemized expenses. There is an exception that permits above-the-line status for unreimbursed employee expenses for certain taxpayers who are “compensated in whole or in part on a fee basis.” Sec. 62(a)(2)(C) (specifying above-the-line status for “the deductions allowed by section 162 which consist of expenses paid or incurred with respect to services performed by an official as an employee of a State or a political subdivision thereof in a position compensated in whole or in part on a fee basis”). A highly regarded Arizona state court judge took the position that his position fell within the parameters of Sec. 62(a)(2)(C) and argued that the unreimbursed expenses he incurred were deductible above the line.
The court summarized the parties’ positions: “The Commissioner wants us to interpret ‘compensated on a fee basis’ to mean something like ‘paid by a member of the public for a service rendered by a judge who receives the fee.’ Judge Jones argues that ‘in a position compensated in whole or in part on a fee basis’ means something like ‘a position funded in whole or in part by fees paid by members of the public for services rendered by judges.’ Neither the Code nor the regulations define what ‘fee basis’ means, and the case law is similarly stubborn in its silence.” The court, after a thorough and wide-ranging analysis that was not unsympathetic to the judge, held that “[n]o portion of Judge Jones’s compensation for his role as a public officer was provided on a fee basis. Rather, he was an employee of the State of Arizona and paid a salary for his work. Thus, his expenses are deductible as unreimbursed employee expenses under section 162 and should be reported as miscellaneous itemized deductions subject to a 2% floor.” Accuracy-related penalties were not imposed. Jones v. Comm’r, No. 27187-12., 2016 WL 537233 (T.C. 2/9/2016).
• Real property taxes: Cost approach appropriate in big box valuation. The market value of a Menard’s home improvement store in Moorhead was disputed for years 2011, 2012, 2013, and 2014. The court found that the assessor’s market value estimate was too high. Each year, the value was estimated at $11,220,000. The court ruled that the values for each year respectively should be decreased to $7,020,500, $7,681,300, $7,331,300, and $7,556,200. The court rejected the appraiser’s use of the market extraction method, because the appraiser used vacant big box stores in applying the method. The method is only reliable when applied to similar properties, and the court found that the other vacant stores were too dissimilar for the test. Although Menard’s opposed the cost approach as being subjective, the court determined that this was the best test for analyzing the value of the property because (1) the property was “‘relatively new construction’” for each year; (2) the income capitalization approach was not reliable; and (3) the comparable sales were doubtful. Menard, Inc. v. Clay Co., No. 14-CV-12-1500, 2016 WL 382891 (Minn. Tax 1/29/2016).
• Tax procedure: Motion to compel granted. In an ongoing case, the court granted Hennepin County’s unopposed motion to complete discovery responses for responses to interrogatories and document requests. Archway Mktg. Servs. v. Hennepin Co., No. 27-CV-12-09900, 2016 WL 324935, at *1 (Minn. Tax 1/13/2016).
• Tax procedure: Taxpayer afforded opportunity to file response to commissioner’s summary judgment motion. Brouillette filed an appeal in January 2015. Rather than file a return and answer, the commissioner filed a motion to dismiss for lack of subject matter jurisdiction, which the commissioner later withdrew. The commissioner then filed a motion for summary judgment, which Brouillette did not dispute. The court ruled that the commissioner’s failure to answer to Brouillette’s original motion harmed Brouillette’s opportunity to reply to the motion, and ordered the commissioner to file and serve a return and answer on Brouillette within 10 days. The court ordered Brouillette to file and serve a response to the county’s motion for summary judgment within 60 days. Brouillette v. Comm’r of Revenue, No. 8805-R, 2016 WL 324941 (Minn. Tax 1/19/2016).
• Real property tax: Discovery permitted. Berry & Co. Inc. challenged the 2012 real estate assessment on property it owns in Wayzata, contesting the value of the property and its highest and best use. Berry served subpoenas on Wayzata’s city manager, the former city planner, and the former commercial assessor (who is now the current residential assessor). The City of Wayzata moved to intervene in the proceedings to make a motion to quash the subpoenas and to seek a protective order for any further discovery from the city and its current or former employees. The city argued the subpoenas were an attempt to harass the city and its employees. The court ruled for Berry & Co., permitting depositions of the three city employees because the depositions fall within the scope and limits of discovery because they were individuals having “‘knowledge or information relating to the subject matter of this lawsuit or the allegations, claims or defenses asserted.’” The court denied both of the city’s motions. Berry & Co. Inc. v. Hennepin Co., No. 27-CV-13-07304, 2016 WL 379249 (Minn. Tax 1/20/2016).
• Four candidates, four tax plans: Snapshots of the currently leading presidential candidates’ tax plans.
Hillary Clinton: Hillary Clinton proposes to provide tax relief to working families and small businesses by increasing the minimum wage and cutting taxes for businesses that share profits with their employees. She plans to close corporate tax loopholes, which she argues will encourage investment in the U.S. Her proposed New College Compact will extend a tax cut of up to $2,500 per student to help ease the costs of college. Clinton also supports closing tax loopholes and expenditures for the wealthy.
Bernie Sanders: Sanders proposes to close tax loopholes and eliminate breaks for the wealthiest Americans. Sanders plans to modify the estate tax for individuals with estates valued at over $3.5 million and couples over $7 million. Through his Corporate Tax Dodging Prevention Act, Sanders hopes to eliminate tax havens, which he considers legalized tax fraud.
Donald Trump: Simplicity is Donald Trump’s goal. He plans to limit the tax code to four brackets, with marginal rates of 0%, 10%, 20% and 25%. A single person earning less than $25,000 or a couple earning less than $50,000 will not pay an income tax. All business taxes will be capped at 15%. Trump will eliminate the estate tax completely. He also claims that he will reduce the loopholes providing tax breaks for the very rich.
Ted Cruz: Cruz proposes the “Cruz Simple Flat Tax,” which he suggests will result in all income groups seeing a double-digit percentage increase in after-tax income. Personal income tax will be reduced to 10% for every bracket.
Mitchell Hamline School of Law
TORTS & INSURANCE
• Statute of limitations: Whistleblower act. Plaintiff employee alleges that she made reports to her supervisors regarding activities she believed to be unethical or illegal shortly before her full-time position was eliminated. Plaintiff filed suit more than two years after she was notified of her termination. The trial court dismissed plaintiff’s claim, holding that plaintiff’s claim was barred by a two-year statute of limitations. The court of appeals reversed and remanded.
The Minnesota Supreme Court affirmed the decision of the court of appeals, holding that a six-year statute of limitations applied to plaintiff’s cause of action. The court reasoned that the two-year statute of limitations found in Minn. Stat. §541.07(1), which references “other tort[s] resulting in personal injury,” applies only to actions that existed at common law. Because Minnesota has recognized a common law cause of action only for discharge arising out of an employee’s refusal to violate the law—rather than simple reporting of illegal conduct—the six-year statute of limitations found in Minn. Stat. §541.05, subd. 1(2) governed plaintiff’s claim. Ford v. Minneapolis Public Schools, No. A13-1072 (Minn. 1/20/2016). http://www.mncourts.gov/mncourtsgov/media/Appellate/Supreme%20Court/Standard%20Opinions/OPA131072-012016.pdf
Bassford Remele, A Professional Association