Current developments in Judicial Law, Legislation, and Executive Action together with a foretaste of Emergent Trends in law and the legal profession for the complete Minnesota lawyer.
Commercial & Consumer Law
• Commercially reasonable disposition of collateral. Perhaps no more litigated issue under Uniform Commercial Code Article 9 exists than whether a disposition of collateral by a secured party was, or was not, commercially reasonable. Section 9-610(b) simply states: Every aspect of a disposition of collateral must be commercially reasonable.
The statute in Section 9-627(c) is specific as to what constitutes a commercially reasonable disposition but only in a narrow set of circumstances. On the other hand, Section 9-627(b) generally (but not specifically) tells a secured party what is commercially reasonable in other circumstances. Nonetheless, Section 9-627(b) does provide significant guidance as illustrated in several cases that a secured party ignores or fails to follow at its peril. Section 9-627(b) provides that a disposition is made in a commercially reasonable manner on any recognized market, at the price current in any recognized market at the time of the disposition, or otherwise in conformity with reasonable commercial practices among dealers in the type of property that was the subject of the disposition. The illustrative cases include Highland CDO Opportunity Master Fund, L.P. v. Citibank, N.A., 89 U.C.C. Rep. Serv. 2d 324, 2016 WL 1267781 (S.D.N.Y. 2016) and 395 Lampe, LLC v. Kawish, LLC, 89 U.C.C. Rep. Serv. 2d 460, 2016 WL 1449205 (W.D. Wash. 2016).
In Highland CDO, the court found the disposition of securities to be commercially reasonable, even though the number of bidders arguably was low, because the secured party:
1. hired a third party who had conducted prior auctions and liquidated over $10 billion in assets, including the same type of assets that made up the collateral in the case;
2. advertised the auction in the Wall Street Journal and contacted its own distribution list of more than 150 contacts, which included all recognizable primary and regional dealers and others that had expressed an interest in liquidation auctions; and
3. submitted its own bids, which functioned as an implied reserve price and reduced the debtor’s potential deficiency.
In 395 Lampe, which held the disposition of a one-third interest in a timber company commercially reasonable, the court found a similar pattern to what was done in the Highland CDO case. The secured parties engaged the largest auction marketing firm in the area, which publicly advertised the auction in multiple national and regional outlets and solicited nearly 200 prospective bidders, and the disposition was in conformity with reasonable commercial practices among dealers in timber assets and timber property. The court’s holding found the creditor’s use of a credit bid was reasonable as there was no evidence that credit bidding was prohibited by agreement or commercial practice.
Note how these holdings follow the guidance in UCC Section 9-627(b)(1) and (3). Of course other procedures may be found to be commercially reasonable; the court in 395 Lampe notes that there was no agreement that established standards, or prohibited certain conduct, that was violated. Such an agreement, if reasonable and approved by the debtor, or perhaps other interested parties that might question a disposition, can be useful. See Official Comment 3 to Section 9-627.
In summation, careful attention to stating the means and terms of enforcing a security interest in the security agreement and later in the case of a default can avoid liability for violating the statute (see Sections 9-625, 9-626), as well as the costs, and uncertainty, of litigation.
• The UCC is not alone. The Uniform Commercial Code (UCC) is a broad statute, covering sales of goods, leases of goods, some payment methods, such as checks and wire transfers, both commercial and standby letters of credit, some documents of title, investment securities, and personal property security interests. The UCC also has a somewhat split personality. In one situation it resists implied amendment (UCC §1-104), but in another it clearly states that it may be supplemented. (UCC §1-103(b).) Thus when researching the UCC to render an opinion, to draft a document, or to try a case, it is essential that thought be given to other laws that may be relevant (as well as to any relevant agreement of the parties, usage of trade, or course of performance or dealing. UCC §1-303).
There are numerous examples that establish this need. Some are obvious, like an applicable consumer protection law such as the Truth in Lending Act requiring consumer credit cost disclosure. Other federal laws perhaps are less obvious, as well as raising questions of the extent of preemption. See, e.g., Madden v. Midland Funding, LLC, 786 F.3d 246 (2d Cir. 2015), where the 2nd Circuit denied the assignee of a national bank the right under the National Bank Act to preempt state usury laws. But issues of this kind may arise under state laws as well.
Take, for example, International Union of Operating Engineers, Local Union No. 132 Health and Welfare Fund v. L.A. Pipeline Constr. Co., Inc., 89 U.C.C. Rep. Serv. 2d 862, 2016 WL 2953983 (W. Va. Sup. Ct. of Appeals 2016). A West Virginia statute required a wage bond to be obtained by an employer to guarantee the payment of wages. The bond was required to continue until its termination was approved by the state commissioner of the Division of Labor after the occurrence of certain conditions. W. Va. Code §21-5-14(g) (2012). The employer sought to satisfy this requirement by obtaining what the court described, based on the language in the bond represented by a letter of credit, as a perpetual irrevocable letter of credit. The letter of credit was issued by United Bank.
When the employer failed to fully pay its employees, they sued, got a judgment, and the commissioner of Labor started to act with respect to the letter of credit, of which the commissioner was the beneficiary. The defense of the employer and the bank issuer was that UCC §5-106(d), as enacted in West Virginia, caused the letter of credit to expire five years after the stated date of its issuance or, if none is stated, after the date on which it was issued, and that date had passed.
The court, given the conflict between the statutes, determined the Legislature had provided no exception in the statute regarding the bond and relying on the UCC’s provision that it may be supplemented (§ 1-103(b)), determined the statute requiring the bond was the more specific, and thus controlled.
The result of the case is not surprising, nor is it incorrect. In determining how UCC §1-103(b) should be applied in a particular case as to whether the statute other than the UCC is supplementary or was displaced by the UCC, there is very little guidance aside from the many cases on the matter, which affirm the sparsity of guidance. Thus it is not surprising either, and leads courts to turn to general principles of statutory construction, such as the more specific statute controls. Whether the principle that the latest enactment controls is valid or more problematic, given UCC §1-104, is another issue.
One may ask what the bank issuer was thinking, as UCC §5-106(d) is enacted in all states except Alabama. Arkansas apparently saw a like problem to the one in the case, and added a non-uniform subsection (e) to §5-106, stating, subsection (d) does not apply to letters of credit issued to the Workers’ Compensation Commission. The usual answer to the question of what the issuer was thinking is the bank issuer did not see the conflict due to unfamiliarity with the other statute. That was not the case here, as the issued letter of credit quoted the West Virginia statute, and it is doubtful the bank issuer was likely to risk safety and soundness concerns, the reason behind UCC §5-106(d), on the interpretation that ultimately the UCC would control. Rather the answer, and the answer of how to work in this context with both statutes, appears in the additional language of the issued letter of credit that “The issuing bank further agrees to notify the Commission… prior to the five (5) year anniversary of the issuing date so the commissioner can determine if the wage bond may be terminated pursuant to the [WPCA].” Presumably, inadequate record keeping by the bank—something not unknown in mortgage foreclosure cases—that did not flag the notification agreement, was ultimately the culprit in the case.
Retired G.L. Cross Research Professor, University of Oklahoma
• Criminal procedure: 15-day deadline for new trial motion is claim-processing rule, and amended new trial motion served after deadline may be considered if original motion was timely and amended motion offers satisfactory reasons for raising new issue. Appellant was convicted of 20 offenses, including burglary, kidnapping, false imprisonment, terroristic threats, criminal sexual conduct, and assault, after a jury trial. After the verdict on October 17, appellant made a number of motions, and orally moved for a judgment of acquittal through counsel. On October 20, appellant filed a pro se motion alleging ineffective assistance of counsel, and, on October 29, filed a pro se motion for a new trial. At a hearing on November 10, the court denied the motion for judgment of acquittal, stated appellant’s pro se motions would be addressed at sentencing, and revealed that, just before the verdict was returned, the court received a court file containing a police report that the victim made unsubstantiated allegations of sexual assault against a police officer during a 2006 misdemeanor arrest. On November 20, through counsel, appellant again moved for a new trial, alleging the state committed a Brady violation by not disclosing the police report. A new judge was assigned on December 11 and heard argument on the new trial motion on January 29. The district court denied appellant’s new trial motion as time barred.
A new trial motion must be served within 15 days after a verdict or finding of guilty, and the district court does not have authority to extend this deadline. The state argues that the district court does not have jurisdiction to hear a new trial motion filed after the 15-day deadline. The court of appeals holds that the 15-day deadline for new trial motions is not a jurisdictional rule, but is, instead, a claim-processing rule, so the district court was not divested of jurisdiction to hear appellant’s amended new trial motion filed after the expiration of the 15-day deadline.
The state also argues that the district court lacked discretion to hear appellant’s amended new trial motion, because it was served outside the 15-day window and the state did not waive or forfeit the deadline. Looking to civil procedural rules upon which the criminal new trial rule is based, the court determines that a district court may consider an amended new trial motion served after the expiration of the 15-day deadline if the moving party previously served a timely new trial motion and satisfactory reasons appear for the new grounds raised in the amended motion. Here, appellant filed an initial, timely new trial motion. His amended motion was filed after the 15-day deadline, but provided satisfactory reasons for raising the Brady violation in the amended motion, namely, that appellant did not learn of the potential violation until after the deadline expired, when the district court disclosed information relating to the victim’s 2006 arrest at the November 10 hearing. The court finds that the district court abused its discretion in denying appellant’s amended new trial motion as time barred. Remanded for a hearing on the merits of the amended new trial motion. State v. Armando DeLaCruz, Jr., Ct. App. 8/1/2016.
• Criminal procedure: No good faith requirement under Rule 30.01 for state’s voluntary dismissals of tab charges or complaints. A jury trial was scheduled in respondent’s DWI case for January 23. The state’s only witness failed to appear, but the district court denied the state’s continuance request. The state then dismissed the case under Minn. R. Crim. P. 30.01, after stating its intent to recharge. Two weeks later, the case was refiled. Respondent’s motion for dismissal of the charges was denied. The case proceeded to a stipulated facts trial, after which respondent was found guilty of having an alcohol concentration of 0.08 or more within two hours of driving. On respondent’s appeal of the denial of his motion to dismiss, the court of appeals reversed, concluding that the state’s “dismiss-and-refile tactic,” essentially a “do-it-yourself continuance order,” was an act of bad faith.
First, the Supreme Court rejects the per se rule adopted by the court of appeals, which requires district courts to dismiss charges with prejudice whenever the state has dismissed a case under Rule 30.01 after the denial of a continuance. This per se rule imposes a good faith requirement for dismissals upon the state. The plain language of Rule 30.01 grants the state authority to dismiss a tab charge or complaint without any review by the court. The court distinguishes cases interpreting the portion of Rule 30.01 requiring court approval for the dismissal of indictment and prohibiting bad faith dismissals of indictments by prosecutors. Those cases emphasize the intent behind the requirement that indictment dismissals be approved, which is that the court be able to ensure that a prosecutor has not ignored nor preempted the considered decision of the grand jury without a sufficient factual basis. This same purpose is not relevant to dismissals of complaints and tab charges.
Next, the court determines that the district court did not abuse its discretion when it denied respondent’s motion to dismiss. The court may dismiss a complaint, indictment, or tab charge under Rule 30.02 if “the prosecutor has unnecessarily delayed in bringing the defendant to trial.” The district court found that the prosecutor did not dismiss and refile charges “to obtain an unfair advantage” and “did not blatantly delay” respondent’s trial, as the state learned of its witness’s unavailability the day before trial, the state promptly disclosed the witness’s unavailability, there had been no other continuances in the case, and respondent was promptly retried after charges were refiled. State v. Olson, Sup. Ct. 8/24/2016.
• Child pornography: Separate charges for each distinct pornographic work stored on one computer authorized by Minn. Stat. §617.247. Appellant was charged with seven counts of possession of pornographic works involving minors after police discovered he had downloaded and saved seven pornographic images of seven different minors engaged in sexual conduct on seven different dates. Appellant pleaded guilty to all counts. At sentencing and on appeal, he argued he should be convicted and sentenced for only one count, because all of the images were on one computer and his offenses were part of a single behavioral incident. The district court and court of appeals rejected appellant’s arguments.
Violations of the same statute may be charged multiple times in a single prosecution if the facts underlying each count make up a separate “unit of prosecution.” The statute at issue here, Minn. Stat. §617.247, subd. 4(a), criminalizes the possession of “a pornographic work or a computer disk or computer or other… storage system…, containing a pornographic work, knowing or with reason to know its content and character…” The Supreme Court finds that this provision unambiguously criminalizes both the possession of a pornographic work itself and the possession of a computer storing a pornographic work, giving the state the authority to charge a defendant with either, and, in this case, to charge appellant for possessing seven distinct pornographic works.
The court then determines that the offenses were not part of the same behavioral incident, because, while all seven offenses were committed at the same place, they did not occur at substantially the same time, and were not committed to obtain a single criminal objective. The Court emphasizes that, even if appellant possessed each of the pornographic works to satisfy his sexual urges, “the mere fact that he committed multiple crimes over time for the same criminal objective does not mean he committed those crimes to attain a single criminal objective.” Appellant’s offenses were not in furtherance of, or even incidental to, the successful completion of any of his other offenses. State v. Timothy John Bakken, Sup. Ct. 8/3/2016.
• Juvenile: Miller rule applies retroactively, and appropriate remedy for retroactive cases is as-applied severance and revival. Appellant was convicted of first-degree premeditated murder, committed when he was 17 years old. In 2006, appellant was sentenced to life without the possibility of release (LWOR). Appellant filed a postconviction petition in 2013, raising evidentiary issues and challenging the constitutionality of his sentence under Miller v. Alabama, 132 S.Ct. 2455 (2012). The postconviction court rejected appellant’s evidentiary arguments, and, relying on Chambers v. State, 831 N.W.2d 311 (Minn. 2013), and Roman Nose v. State, 845 N.W.2d 193 (Minn. 2014), found that appellant was not entitled to relief under Miller, because his conviction was final before Miller was announced. Appellant appealed, and, after oral argument was held, the United States Supreme Court issued Montgomery v. Louisiana, 136 S.Ct. 718 (2016), which holds that Miller applies retroactively.
First, the Supreme Court affirms the postconviction court’s evidentiary rulings. Next, based on Montgomery, the court declares the retroactivity analysis in Chambers and Roman Nose overruled, and confirms that the Miller rule applies retroactively to juveniles whose mandatory LWOR sentences became final before Miller was announced. Because appellant was sentenced to LWOR, and the sentencing court did not consider his “youth-related factors,” as required by Miller, his sentence violates the 8th Amendment.
With respect to the proper remedy, the court revisits State v. Ali, 855 N.W.2d 235 (Minn. 2014), in which it determined that the appropriate remedy for a Miller violation was to remand for a resentencing hearing, but declines to decide whether Ali has continued viability after Montgomery. A Miller hearing remedy does not provide adequate relief in a retroactive context for a juvenile sentenced nearly 10 years ago. A fair and meaningful Miller hearing in such cases is not possible, given the limited relevant evidence available after such a long period of time. The appropriate remedy is an “as-applied severance and revival.” The court severs the LWOR sentencing statutes and revives the most recent constitutional statutes, as applied to appellant and any other juvenile offenders who received mandatory LWOR sentences that were final before Miller was announced. In appellant’s case, the most recent constitutional version of the relevant sentencing statutes are from 2004, which require a sentence of life imprisonment with the possibility of release after 30 years. Appellant’s LWOR sentence is vacated, and the case is remanded for the imposition of this new sentence. Prentis Cordell Jackson v. State, Sup. Ct. 8/3/2016.
• Postconviction: Court may raise time limits sua sponte, but must give parties notice and opportunity to be heard. Appellant was convicted of one count of failure to register as a predatory offender in 2007. He filed a postconviction petition in 2014 arguing that his guilty plea was inaccurate. The postconviction court denied the petition as untimely under Minn. Stat. §590.01, subd. 4(c). The court of appeals affirmed. Appellant argues that the postconviction court was required to consider the merits of his petition, because the state forfeited its right to assert the time limitations as an affirmative defense by not raising the untimeliness of appellant’s petition.
Held, a postconviction court may raise the time limitation on its own, so long as parties are afforded notice and opportunity to be heard. The Court has previously held that the time limitation periods in Minn. Stat. §590.01, subd. 4(a) and (c), are not jurisdictional, equating them, instead, to statutes of limitations that could be asserted as affirmative defenses by the state, and noting that the state could forfeit the right to raise the affirmative defense by failing to timely assert that right. Here, however, the question is whether the state’s forfeiture of its right to assert the affirmative defense precludes the postconviction court from exercising its authority to control its docket by considering the applicability of the time limitations on its own motion.
Guided by United States Supreme Court cases addressing an analogous question in the context of federal habeas statutes, Day v. McDonough, 547 U.S. 198 (2006), and Wood v. Milyard, 132 S.Ct. 1826 (2012), the court looks to the purpose of the time limits, which were enacted in response to a dramatic increase in the number of postconviction petitions, and the court’s inherent authority to control its docket. The time limitation provisions also do not preclude the court from raising the time limits on its own motion, and they are different from time limitations in ordinary civil proceedings, because they implicate the ability of the court to control its docket by dismissing frivolous claims.
Procedural due process, however, demands that the court give notice to the parties and afford them the opportunity to be heard on the issue of a petition’s timeliness before the court rules on the issue. Here, the postconviction court failed to give the parties notice and opportunity to be heard, so the matter is reversed and remanded. Lane Francis Weitzel v. State, Sup. Ct. 8/10/2016.
• Restitution: Rules of evidence inapplicable in restitution proceedings, and losses sustained prior to and not caused by the offense may not be included in award. Appellant was charged with aggravated forgery after he filed a quitclaim deed in October 2013 in another’s name to transfer back to himself residential property appellant previously lost in foreclosure. He was convicted after a jury trial, and the court ordered him to pay $25,400 in restitution. After the restitution hearing, at which the victim’s son testified as to the losses incurred by the victim, the court ordered appellant to pay $10,742, which included $2,000 for the victim’s attorney’s fees incurred to cure the title defect caused by the forged deed and $8,742 for the victim’s monthly loan, tax, utility, and insurance payments on the property from August 2013 to February 2014.
First, the court of appeals finds that the district court properly considered hearsay evidence at the restitution hearing, as the rules of evidence do not apply to restitution hearings. Rule 1101(b)(3) does not specifically address restitution hearings, but states that the rules do not apply to sentencing proceedings. The Legislature established restitution as part of a criminal sentence, so a restitution hearing is a type of sentencing proceeding. This interpretation is consistent with federal authority and case law from other states.
Next, the court holds that the district court abused its discretion by awarding restitution for damages not caused by the charged offense. The restitution statute limits a victim’s recovery to losses directly caused by the conduct for which the defendant was convicted. Appellant was charged with committing aggravated forgery on October 28, 2013. Any loss the victim sustained prior to the forged deed filed on that date cannot be said to have been directly caused by the forgery offense. Reversed and remanded with instructions for the district court to reduce the restitution award accordingly. State v. Berry Alan Willis, Ct. App. 8/15/2016.
• Sentencing: Upward departure may be based on any relevant conduct, even if conduct relates to another offense committed during same course of conduct. After appellant pleaded guilty to possession of a firearm by an ineligible person and second-degree assault for shooting a gun six times at another in a park filled with children, the district court imposed an upward durational departure because appellant’s act in firing the gun created a greater-than-normal danger to the safety of other people. On appeal, appellant argued the firing of the gun related only to the assault conviction, and could not be used to support an upward departure on the possession conviction. The court of appeals affirmed.
Held, the plain language of Minn. Stat. §244.10, subd. 5a(b), permits an upward durational departure for any aggravating factor, even if that factor is part of the same course of conduct as another offense. This statutory provision specifically states that it applies notwithstanding Minn. Stat. §609.035 (limiting the punishment a defendant may receive when his criminal conduct constitutes more than one offense) and that an aggravated sentence may be based on “any aggravating factor arising from the same course of conduct.” These portions of subdivision 5a(b) make clear that a district court may consider the entirety of a defendant’s conduct in determining whether he committed the sentenced offense in a manner significantly more serious than that typically involved in the commission of that offense. Affirmed. State v. August Latimothy Fleming, Sup. Ct. 8/17/2016.
• Criminal sexual conduct: “Child” is person who has not yet turned 16. Appellant posted a Craigslist ad, to which a member of the Internet Crimes Against Children Taskforce responded, posing as a 14-year-old girl, “Haley.” Haley and appellant exchanged sexually explicit messages, and eventually agreed to meet at a movie theater. When appellant arrived at the movie theater, he was arrested. He was charged with violating four provisions of the child solicitation statute, Minn. Stat. §§609.352, subd. 2, subd. 2a(1), subd. 2a(2), and subd. 2a(3). After a court trial, appellant was found guilty of all four charges, and he appealed, challenging the sufficiency of the evidence and the effectiveness of his trial counsel.
As part of his sufficiency of the evidence claim, appellant argued that the district court incorrectly interpreted the statutory definition of “child,” specifically that the court’s finding that he reasonably believed he was communicating with a person “under the age of 16” does not establish the statutory requirement that the subject of the communication be a person “15 years of age or younger.” The court of appeals finds that Minn. Stat. §609.352, subd. 1(a)’s definition of “child,” “a person 15 years of age or younger,” is not ambiguous. The only interpretation of this provision that honors its plain and ordinary meaning is that a “child” is a person who has not yet reached his or her 16th birthday. Even if the definition were ambiguous, the legislative history (the statute was amended in 2000 to change the definition of “child” from a person “under the age of 15 years” to a “person 15 years of age or younger”) and the context of the definition (among various other criminal sexual conduct statutes prohibiting conduct involving persons “less than 16 years of age”) supports the court’s interpretation.
Ultimately, the court concludes that the district court properly applied the definition of “child,” the evidence was sufficient to support appellant’s conviction, and appellant did not receive ineffective assistance of counsel. However, appellant’s appeal was pending when State v. Muccio was decided by the court of appeals, which found Minn. Stat. §609.352, subd. 2a(2), to be an unconstitutional content-based regulation of speech. Therefore, appellant’s conviction under Minn. Stat. §609.352, subd. 2a(2), is unconstitutional and must be reversed. His remaining three convictions are affirmed. State v. Ronald David Olson, Ct. App. 8/22/2016.
• Implied consent: Implied consent court not prohibited from considering accuracy of test result over 0.08. After his arrest for DWI, appellant’s driver’s license was revoked for one year and his license plates were impounded, because his blood alcohol concentration was over 0.16. Appellant petitioned for judicial review, challenging the breath test results. Minn. Stat. §169A.53, subd. 3(b), lists the issues that may be considered at an implied consent hearing, two of which are whether the test results indicate an alcohol concentration of 0.08 or more (issue #8) and whether the testing method used was valid and reliable and the test results accurately evaluated (issue #10). The district court concluded that issue #8 restricted part of issue #10, finding that whether a test result was above or below a 0.16 is not an appropriate issue for judicial review. The district court then sustained the driver’s license revocation and license plate impoundment.
The court of appeals finds that the district court’s interpretation of the statute reads additional language into issue #10, changing it to become an issue of whether the testing method used was valid and reliable and whether, for test results of 0.08 or more, the test results were accurately evaluated. This is not permitted, and the plain language of these two statutory provisions specifically provides two defenses: (1) whether there is an alcohol concentration of 0.08 or more, and (2) whether the testing method used was valid and reliable and the test results were accurately evaluated.
Due process is violated when the court denies judicial review of a driver’s license revocation based on blood alcohol concentration of 0.16, while granting review for a revocation based on an alcohol concentration between 0.08 and 0.159. Appellant’s due process rights were violated, because the district court failed to address the issue dispositive of his penalties: whether his alcohol concentration was “twice the legal limit or more as measured at the time or within two hours of the offense.” Reversed and remanded. David Anthony Janssen v. State, Ct. App. 8/22/2016.
• DWI: Facts in warrant and application established probable cause to support search of appellant’s blood, and warrant did not authorize general search of appellant’s blood. Following a car accident causing personal injury to the driver of the vehicle struck by appellant, police reported smelling alcohol on appellant’s breath and she admitted to drinking three beers. Police applied for a warrant to search her blood for “evidence of the crime of criminal vehicular operation/homicide,” setting forth the officer’s belief that appellant was under the influence of alcohol. A warrant was issued, authorizing police to take a blood sample from appellant and test the sample. Test results of appellant’s blood sample showed no alcohol in her blood, but indicated the presence of THC and Alprazolam. Appellant was charged with criminal vehicular operation, specifically operating a motor vehicle in a negligent manner while under the influence of a controlled substance. Appellant moved to suppress evidence of the presence of drugs in her blood, arguing that the warrant application did not provide any basis for the police to test her blood for controlled substances. Her motion was granted by the district court, which found that the blood draw was lawful, but the subsequent testing of her blood for the presence of drugs was unlawful. However, the court of appeals reversed following the state’s pretrial appeal, finding that the appellant did not retain a privacy interest in the contents of her lawfully obtained blood sample.
The Supreme Court finds that the facts alleged in the warrant application and supporting affidavit supported testing appellant’s blood for controlled substances. The warrant authorized the seizure of a blood sample and testing of the sample, but did not specify what type of testing was permitted. The facts alleged in the warrant application gave the issuing judge a substantial basis to conclude there was a fair probability that evidence of intoxicants, whether alcohol or controlled substances, would be found in appellant’s blood, and the issuing judge had sufficient information to conclude that appellant could be under the influence of alcohol and/or controlled substances. It was not unreasonable for the issuing judge to choose not to limit the testing of appellant’s blood to evidence of only one type of intoxicant.
The Court also finds that the search warrant satisfied the 4th Amendment’s particularity requirement, rejecting appellant’s argument that the warrant’s authorization of any kind of “testing” allowed a general search of her blood. The officer who applied for the warrant possessed facts that established probable cause to believe evidence of criminal vehicular operation would be found in appellant’s blood, although he did not know which intoxicant it would be. The warrant also expressly incorporated the warrant application and supporting affidavit, which limited the search of appellant’s blood to “evidence of the crime of criminal vehicular operation/homicide,” which is narrowly limited to the presence of alcohol and/or controlled substances under Minn. Stat. §609.21, subd. 1(2). State v. Debra Lee Fawcett, Sup. Ct. 8/24/2016.
EMPLOYMENT & LABOR LAW
• Race discrimination; no adverse action. An African-American employee’s claims of race discrimination and retaliation after he depleted his medical leave following a reprimand were rejected by the 8th Circuit Court of Appeals. The depletion of his medical leave did not constitute actionable “adverse action.” Jones v. City of St. Louis, 825 F.3d 476 (8th Circ. 6/9/2016).
• Rehabilitation Act; disability claim rejected. Another similar 8th Circuit ruling upheld dismissal of an employee’s claims of disability discrimination. Under the Federal Rehabilitation Act, the employer made reasonable accommodations to minimize the worker’s exposure to noxious fumes and the remediated smells did not create an unfavorable work environment. Dick v. Dickman State University, 826 F.3d 1054 (8th Circ. 6/23/2016).
• FMLA; no discriminatory intent. An employee’s claim of interference under the Family & Medical Leave Act (FMLA) was unsuccessful. Because she voluntarily agreed to work at home and there was no discriminatory intent, the 8th Circuit upheld dismissal of her lawsuit. Massey-Diez v. University of Iowa Community Medical Services, Inc. 826 F.3d 1149 (8th Circ. 6/27/2016).
• Whistleblower claim; federal preemption. A whistleblower claimant also was rebuffed by the 8th Circuit. The claim by a flight paramedic that he was improperly terminated under state law for reporting federal air safety regulations was preempted by the Federal Airlines Deregulation Act. Watson v. Air Methods Corp., 2016 U.S. App. LEXIS 15546 (8th Cir. 8/24/2016).
• Labor contract; no pay raise extensions. Reversing a ruling of the National Labor Relations Board (NLRB), the 8th Circuit held that an employer was not obligated to continue pay raises for employees under an expired collective bargaining agreement. The expiration of the labor contract negated annual pay raises given during its term. The Finley Hospital v. NLRB, 2016 Minn. App. LEXIS 11695 (Minn. Ct. App. 2016) (unpublished).
• Arbitration award; lack of authority. An arbitration lacked authority to decide a management-labor dispute over changes to a prior-contribution program, which led the 8th Circuit to uphold the vacating of the award. But the lower court erred in rescinding a provision in the agreement increasing the employer’s pension contributions because of the employer’s “inattention” to the wording in the draft of that clause. Silgan Containers Corp. v. Sheet Metal Workers, 820 F.3d 366 (8th Cir. 4/15/2016).
• WARN claim; employees prevail on sale. Employees prevailed on a claim of failure to give the required 60-day notice of a plant closure under the Federal Workers Adjustment and Retraining Notification Act (WARN). The 8th Circuit held that the current employer was liable because its acquisition of the business was more than a sale of assets outside the scope of the Act. Day v. Celadon Trucking Service, Inc., 2016 Minn. App. LEXIS 12365 (Minn. Ct. App. 2016) (unpublished).
• Wrongful discharge; mini FLSA violation. An employee may seek damages for being fired for refusing to comply with an employer’s requirement to share tips because the directive violates the Minnesota mini- Fair Labor Standards Act. The Minnesota Court of Appeals held that the employee may seek back pay and other damages for wrongful discharge. Burt v. Rackner, Inc. 882 N.W.2d 627 (8th Circ. 6/27/2016).
• Unpaid wages; lack of documentation. An employee’s claim for unpaid wages and unused accrued time off was rejected by the Minnesota Court of Appeals. The employee failed to provide documentation of her services to warrant payment of a statutory penalty under Minn. Stat. §181.13. Gardner v. Accad Services, 2016 Minn. App. LEXIS 704 (Minn. Ct. App. 2016) (unpublished).
• No rehire claim; agreement upheld. A state employee failed in challenging the state’s refusal to rehire her after she resigned and signed a full and complete settlement agreement. The court of appeals held that the “clear and unambiguous” terms of the agreement did not obligate the state to rehire her, and a claim of an oral assurance that she could be rehired was barred by the parole evidence under Hunt v. State of Minnesota, 2016 Minn. App. LEXIS 646 (Minn. Ct. App. 2016) (unpublished).
• Unemployment compensation; two claims denied. The appellate court upheld denial of a pair of unemployment claims.
A comment about killing a co-worker resulted in disqualification of the claimant’s assertion that he was only joking. Brennan v. Lubrication Techs, 2016 Minn. App. LEXIS 700 (Minn. Ct. App. 2016) (unpublished).
An employee who engaged in a competitive business while employed was not entitled to benefits. Anderson v. YUM Design, LLC, 2016 Minn. App. LEXIS 722 (Minn. Ct. App. 2016) (unpublished).
Marshall H. Tanick
Hellmuth & Johnson, PLLC
• 5th Circuit places temporary stay on EPA regional haze rule. The state of Texas challenged EPA’s final rule, issued earlier in 2016, that was a partial rejection of Texas plans to implement the 1999 federal Regional Haze Rule. The state was joined in the suit by power companies and labor unions arguing that the rule would leave coal-fired power plants unable to operate economically. This would endanger the reliability of the power grid if plants are forced to close. The stay granted by the court was temporary, pending review of the rule on the merits. Texas v. U.S. Environmental Protection Agency, 2016 WL 3878180 (5th Cir. 7/15/2016).
• EPA seeks comment on proposal to expand definition of corrosive waste. The United States Environmental Protection Agency (EPA) is proposing to reject a petition seeking to expand the definition of corrosive waste under the Resource Conservation and Recovery Act (RCRA) hazardous waste regulations. The petition was filed by an environmental non-profit called Public Employees for Environmental Responsibility. The main goal of the petition is to protect workers and the general public from inhalation exposures to concrete dust during manufacturing or handling of cement or during building demolitions. The petition sought to change the definition of corrosive waste in two ways: 1) by lowering the regulatory value for labeling waste as corrosive from pH 12.5 to pH 11.5 and, 2) by adding nonaqueous wastes to the definition.
The EPA decided not to make this change to the RCRA hazardous waste regulations because the materials submitted in support of the petition did not demonstrate a need for the revision. The main argument in support of the petition was that information supporting the regulatory value of pH 11.5 was not adequately considered when the regulation was developed and is now widely used as a threshold for identifying corrosive material. As proof of its corrosivity, the petitioner pointed to the injuries suffered from inhaled dust by the first responders and others at the World Trade Center disaster on September 11, 2001.
The EPA rejected these arguments because where used elsewhere, the pH value is either optional or a rebuttable presumption, which would not work in the RCRA framework. As for the 9/11 dust, it was a more complex mixture than the cement kiln dust and concrete dust at issue here, and the injuries suffered did not appear to include corrosive injuries. The EPA has extended the comment period on this decision, which was originally set to end 6/10/2016, to 12/7/2016. 2016.
• Minnesota sets a precedent in bee protection. Minnesota Gov. Mark Dayton issued an executive order on 8/25/2016 limiting the use of neonicotinoids to situations where the farmer can prove there is “an imminent threat of significant crop loss.” This order is designed to protect bees from the harm shown in lab-based studies to bee populations that can be caused by neonicotinoids. A 15-member committee will be set up to oversee the program. Part of the proposal requires legislative approval to regulate the sale of neonicotinoid-treated seeds. Minnesota is the first agricultural state to take such measures to protect declining bee populations.
Parkway Law LLC
• Standing; multiple decisions. The 8th Circuit issued two recent standing-related decisions of note.
Relying heavily on the Supreme Court’s recent Spokeo decision (Spokeo, Inc. v. Robins, 136 S. Ct. 1540 (2016)), the 8th Circuit affirmed a district court’s dismissal of putative class action claims brought under the Cable Communications Policy Act, finding that the plaintiff had failed to allege any injury in fact. Braitberg v. Charter Commc’ns, Inc., ___ F.3d ___ (8th Cir. 2016).
Disagreeing with Judge Frank and making no mention of Spokeo, the 8th Circuit held that the plaintiff had standing to pursue his putative class action claims for breach of contract and violation of Minn. Stat. §325F.68. However, the 8th Circuit affirmed the dismissal of the action, finding that the complaint failed to state a claim. Concurring and dissenting, Judge Beam would have affirmed the dismissal for lack of standing. Carlsen v. GameStop, Inc., ___ F.3d ___ (8th Cir. 2016).
• Appeal from purported injunction dismissed and petition for writ of mandamus denied. The 8th Circuit rejected the plaintiff’s characterization of a district court order providing for the destruction of documents as an injunction subject to immediate appeal, and also denied the plaintiff’s request for a writ of mandamus, finding that the merits of her claims could be addressed on direct appeal. Auer v. Trans Union, LLC, ___ F.3d ___ (8th Cir. 2016).
• Enforceable settlement not reached where parties failed to agree on non-disparagement clause. The 8th Circuit affirmed a district court’s determination that where the parties agreed on the economic terms of a settlement but failed to agree on the need for a non-disparagement provision, no enforceable settlement had been reached. Schultz v. Verizon Wireless Servs., LLC, ___ F.3d ___ (8th Cir. 2016).
• Refusal to consider new theory advanced for the first time in opposition to summary judgment. The 8th Circuit found no abuse of discretion in a district court’s refusal to consider a theory of liability advanced by the plaintiff for the first time in opposition to the defendant’s summary judgment papers. United States ex rel. Donegan v. Anesthesia Assocs. Of Kansas City, PC, ___ F.3d ___ (8th Cir. 2016).
• Magistrate judge’s denial of motion to amend on grounds of futility may require a report and recommendation. Judge Nelson held that where Magistrate Judge Rau was inclined to deny the plaintiff’s motion to amend his complaint on the grounds of futility, the ruling “should have taken the form of a report and recommendation,” and reviewed the “order” de novo. Munt v. Larson, 2016 WL 4435671 (D. Minn. 8/19/2016).
• Motion to compel granted; investigatory privilege rejected. Affirming an order by Magistrate Judge Bowbeer, Judge Nelson affirmed the grant of a motion to compel the production of a document relating to an ongoing criminal investigation, rejecting the plaintiff’s and an intervening third-party’s argument that the document was protected by an investigatory privilege. State Farm. Mut. Ins. Co. v. Healthcare Chiro. Clinic, Inc., 2016 WL 4718141 (D. Minn. 9/9/2016).
• Motion for discovery of “ordinary” work product granted; substantial need. Judge Nelson sustained the plaintiff’s objections to an order by Magistrate Judge Noel, finding that the meeting notes sought by the plaintiff constituted “ordinary” work product rather than “opinion” work product that could be shielded from discovery, and that the plaintiff had established a “substantial need” for the notes. Rumble v. Fairview Health Servs. d/b/a/ Fairview Southdale Hospital, 2016 WL 4515922 (D. Minn. 8/29/2016).
• Request for order limiting dissemination of orders denied. Chief Judge Tunheim adopted a Report and Recommendation by Magistrate Judge Mayeron which recommended the denial of the plaintiff’s de facto motion for a protective order to prevent the defendant’s dissemination of recently unsealed orders. Magistrate Judge Mayeron had relied on the presumption of a right of access to judicial records and the 1st Amendment in recommending that the plaintiff’s request be denied. Arctic Cat, Inc. v. Sabertooth Motor Group, LLC, 2016 WL 4473466 (D. Minn. 8/1/2016), Report and Recommendation adopted, 2016 WL 4445238 (D. Minn. 8/23/2016).
• Fed. R. Civ. P. 15(c)(1)(C)(ii); John Doe defendants; relation back. Judge Frank authored the latest opinion in the district of Minnesota to hold that amended claims against former John Doe defendants do not relate back for purposes of the statute of limitations. Krekelberg v. Anoka Cty., 2016 WL 4443156 (D. Minn. 8/19/2016).
• “Absurd” motion for sanctions denied. Judge Schiltz denied the defendant’s “absurd” motion for sanctions, and noted that it he “were forced to sanction anyone,” he would sanction the defendant. Bendickson v. Messerli & Kramer, P.A., 2016 WL 4408822 (D. Minn. 8/16/2016).
Law Office of Josh Jacobson
• Residential lease; unlawful exclusion. Prospective tenant visited an apartment that was advertised for rent. The prospective tenant and the landlord reached an oral agreement to rent the premises with a move-in date of a “couple days.” The tenant and landlord subsequently entered into a lease and the tenant paid the landlord a security deposit and the first month’s rent. However, the landlord kept delaying the move-in date. Eventually, the landlord informed the tenant that apartment was no longer for rent and that she was not allowed to move in. The tenant sued the landlord for unlawful exclusion under Minnesota Statutes §504B.375. The housing court referee, the district court, and the court of appeals all held that a person is a “residential tenant” authorized to commence an action under the unlawful exclusion act only if the person actually has taken possession of the rental property and begun residing there before the filing of the petition. Because the term “residential tenant” is defined as a person who is “occupying a dwelling…,” the court of appeals held that the tenant was not a residential tenant because she had not moved into the apartment and did not physically occupy the space, and therefore, was not “occupying” the dwelling.
The Supreme Court reversed and held that a tenant who holds the present legal right to occupy residential real property pursuant to a lease or contract satisfies the definition of “residential tenant” under the unlawful exclusion act. The Supreme Court reasoned that the term “occupying” has a special and technical meaning in the context of a landlord-tenant relationship, which refers to both physical occupancy and to the legal right to occupancy. The Supreme Court also reasoned that an interpretation of “residential tenant” that did not include the legal right to occupy the property was unreasonable because it would conflict with other provision of Chapter 504B. The dissent noted that “occupying” is hardly a technical or legalistic word and that nowhere does the statutory language demonstrate that the Legislature intended a specialized, technical meaning of the word “occupying” that encompasses a tenant’s mere “present legal right” to possess a dwelling, rather than its ordinary meaning, which requires actual possession of the dwelling. Cocchiarella v. Driggs, A14-1876, 2016 WL 4536503 (Minn. 2016).
• “Vapor money” lending; ultra vires contract; usury. Homeowner obtained a mortgage loan and subsequently brought a declaratory judgment action to declare the mortgage void. First, the homeowner claimed that the lender did not advance actual assets, but rather credit, and therefore, the mortgage lacked consideration. The court dismissed this claim as a “vapor money” theory that has been widely rejected by numerous courts as frivolous. Second, the homeowner alleged that the lender’s loan officer did not have authority to execute the loan because it was outside the purpose of the company as stated in the incorporating document. The court dismissed this claim because the homeowner presented no evidence the loan officer acted without authority or that the lender did not have the authority under its charter to enter into mortgage loans. Third, the homeowner alleged that the lender violated state usury laws by charging interest in money it never actually loaned. The court dismissed this claim as it relied on the frivolous “vapor money” theory. The court also dismissed claims for fraud and infliction of emotional distress, as not having pled any facts consistent with those claims. Baker v. CitiMortgage, Inc., 2016 WL 4697334 (D. Minn., 9/7/2016).
Beisel & Dunlevy PA
• State tax on net patient revenue not preempted. Holding that a surcharge imposed on net patient revenue was a “tax,” the Minnesota Supreme Court nonetheless held that the tax was not preempted by federal law because the tax was not “imposed” on the federal programs. Minnesota statute subjects hospitals to a surcharge on net patient revenue. Minn. Stat. §256.9657, subd. 2. The Minnesota statute exempts revenue received from Medicare patients, but does not address revenues received from insurance carriers that participate in the Federal Employee Health Benefits Act (FEHBA) or the TRICARE program. The authorizing statues of both FEHBA and TRICARE provide that “No tax, fee, or other monetary payment may be imposed, directly or indirectly” on carriers or underwriters participating in the program. 5 U.S.C. §8909(f)(1). The hospital group argued that the surcharge was such a “tax” that was impermissibly imposed and therefore should have been preempted by federal law.
After addressing a standing issue, the Court agreed with the Department of Health and Human Services that Minnesota’s surcharge was not preempted. The Court reasoned that for preemption to apply, the challenged surcharge must be a “(1) tax, fee, or other monetary payment, (2) imposed by a state, (3) directly or indirectly on a carrier, (4) with respect to any payment made from the fund.” The Court based its holding on the second prong: “imposed.” The Court held that the challenged statute did not “impose” a tax, fee, or other monetary payment because no part of the statute compelled FEHBA or TRICARE to pay the surcharge. The broad reading of “impose” urged by the hospitals, the court explained, would lead to the unreasonable result of preempting all taxes and fees any time those taxes or fees could be shown to increase the costs of a FEHBA carrier. The Court also expressed its concern that a reading of “impose” that can encompass the voluntary passing on of taxes, fees, and other monetary payments, would result in the state not being able to control which taxes and fees are preempted and which are not because if the hospitals made a voluntary, unilateral choice to pass the full cost of the surcharge to the carriers, the fee would be preempted, but if the hospital made a voluntary, unilateral choice to internalize the cost of the fee by reducing their profit margins, the fee would not be preempted. Such a reading would lead to the “untenable” situation in which a state cannot predict when its laws are preempted. Justices Lillehaug, Hudson, and Chutich did not participate in the case. Acting Justice McBride participated pursuant to Minn. Const. Art. VI, §2, and Minn. State §2.724 (2014). In re Gillette Children’s Specialty Healthcare, No. A14-1462, 2016 WL 4379919 (Minn. 8/17/2016).
• Property tax: “Unit-rule” method permitted if evidentiary conditions satisfied; remanded to tax court for new trial on all issues. Blandin Paper Company challenged property tax assessments on 4,680 parcels of land in four separate counties. The dollar amount in dispute was significant: For the two tax years at issue, the difference between the counties’ assessments and the company’s assessment amounted to approximately $300 million. The Minnesota Supreme Court summarized the “difficult legal question” underpinning the dispute as “whether the unit-rule method of valuation is available in a property tax proceeding.” The “unit-rule method” is more traditionally used in valuing “an operating enterprise located in more than one jurisdiction in which property in an integral part.” For example, the unit-rule might be used as a method of valuation to determine ad valorem taxes on a railroad company. There is no question that the method is appropriate in those types of valuation questions. The Minnesota Supreme Court, however, had “not previously resolved whether the unit-rule method and resulting allocation of the aggregate value can be used in Minnesota property tax proceedings.”
The Court concluded (as did the tax court) that the unit-rule method is permissible in property tax proceedings, but only if certain conditions are satisfied. In particular, the Court held that “appraisal evidence that uses the unit-rule method to determine the fair market value of real property may be admissible in a property tax proceeding, provided that the evidence has foundational reliability and the method used results in a determination of the fair market value of each parcel before the tax court in accordance with [Minnesota statute].” The Court went on to instruct that “[t]he elements of the unit-rule method are unity of ownership, unity of highest and best use, and contiguity of the land. Contiguity of the land, however, may not be required if unity of use is established.” After examining the voluminous record, the court did not find sufficient evidence that these requirements were satisfied. As such, the reviewing court determined that the tax court erred in admitting the evidence, and reversed for a new trial on all issues. Aitkin Co. v. Blandin Paper Co., No. A15-1666, 2016 WL 4382528 (Minn. 8/17/2016).
• St. Paul’s right-of-way assessment is a tax, not a fee; remand necessary. The city of Saint Paul imposes a “right-of-way assessment” (ROW) on nearly all real property owners within its city limits. Proceeds from the ROW are segregated, and used to pay only for right of way maintenance, such as street sweeping and plowing. Two churches challenged the imposition of the ROW on their properties. The churches made several arguments, all premised on the argument that the charge was a tax and not simply an exercise of the city’s police power to regulate. If a tax, the ROW is subject to constitutional limitations on the city’s taxing power; if a fee imposed under the city’s police power, no such restrictions apply. To determine whether a particular charge is a tax (imposed pursuant to taxing power) or fee (imposed pursuant to police power), a reviewing court endeavors to ascertain the city’s true motivation. If the motivation is to raise money, the taxing power is implicated. If the motivation is to regulate, the police power is at play.
In this instance, the Court was persuaded by the language of the city charter and the city’s code provisions as a whole that the city’s true motivation was to raise revenue. The fact that the ROW funds were segregated and used only for certain police-power services did not change the Court’s determination. The question is not to what use the funds are put; instead, as the Court articulated, the crucial question is “what power a city exercises when it collects the funds.” Because the lower courts erred in finding the ROW was a fee, neither court applied the proper legal standard to the churches’ claims. The Court therefore remanded so that the lower court could independently determine whether the amount of an assessment exceeded the special benefits to the property. First Baptist Church of St. Paul v. City of St. Paul, No. A15-0015, 2016 WL 4446310, (Minn. 8/24/2016).
Mitchell Hamline School of Law
Jessica Dahlberg, Grant Thornton
TORTS & INSURANCE
• Civil procedure – dismissal for failure to file under Rule 5.04(a). In March 2013, plaintiff commenced a civil tort action by service only. For more than a year, plaintiff and defendant actively litigated the case by exchanging discovery, agreeing to a stipulation, and negotiating settlement. Plaintiff, however, failed to file the summons and complaint with the court within one year of the enactment of Minn. R. Civ. P. 5.04. After plaintiff did file the complaint, the district court dismissed it with prejudice sua sponte. The district court then denied plaintiff’s motion to vacate the judgment pursuant to Minn. R. Civ. P. 60.02(a), holding that it was inapplicable to dismissals under Rule 5.04, or, in the alternative, that plaintiff failed to establish excusable neglect. The court of appeals reversed and remanded.
The Minnesota Supreme Court affirmed as modified. The Court first held that a motion to vacate under Rule 60.02(a) is available for cases dismissed under Rule 5.04(a). The Court reasoned that while dismissal with prejudice under Rule 5.04 is automatic even without action by the court, Rule 60.02(a)’s broad language applied both to “judgments” and “proceedings.” After rejecting a due process challenge to Rule 5.04(a), the Court went on to hold that relief was available under Rule 60.02(a) only where a movant can establish all four of the Finden factors: “(1) a ‘debatably meritorious claim’; (2) a ‘reasonable excuse’ for the movant’s failure or neglect to act; (3) the movant ‘acted with due diligence’ after learning of the error or omission; and (4) ‘no substantial prejudice will result to the other party’ if relief is granted.” The Court emphasized that a district court’s discretion on such motions is “particularly broad” and will not be set aside absent an abuse of discretion. Nonetheless, the Court reversed and remanded to the district court for consideration of the motion to vacate because the original order contained no analysis to allow appellate review. Gams v. Houghton, No. A14-1747 (Minn. 8/31/2016). http://mn.gov/law-library-stat/archive/supct/2016/OPA141747-083116.pdf