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

Notes & Trends – November 2016

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.

BANKRUPTCY
JUDICIAL LAW

Daily “pay to stay” charge assessed by Dakota County Sheriff is not subject to the 11 U.S.C. § 523(a)(7) exception and is dischargeable. As authorized by Minnesota law, the Dakota County Sheriff’s Office (DCSO) charges convicted inmates a $25 daily fee to partially offset the room and board expenses incurred by the DCSO, a so-called “pay to stay” charge. Debtor Milan was incarcerated for 179 days by the DCSO following certain criminal convictions. Milan filed a Chapter 7 bankruptcy case, and included these charges as non-priority unsecured debt. The DCSO commenced an adversary action, seeking to have the $3,504.77 debt (incarceration costs) excepted from discharge under 11 U.S.C. §523(a)(7). On cross motions for summary judgment, the bankruptcy court ruled in favor of the debtor. The BAP noted that the incarceration costs were not explicitly identified as a fine, penalty or forfeiture under Section 523(a)(7), were not ordered by the criminal court, nor were they a condition of debtor’s sentence. The BAP stated that to be excepted from discharge, a debt must be “penal in nature” and serve a punitive or rehabilitative goal, which may be demonstrated through use of statutory or regulatory language showing an intent to punish. The BAP held that the incarceration costs were inconsistent with a fine or penalty, as they were assessed at the discretion of the correction agency, and could be waived if the incarceration costs would constitute an undue hardship on an inmate or the inmate’s family. The BAP found that the clear intent of the incarceration costs was pecuniary in nature. Thus, the BAP affirmed the decision of the bankruptcy court and held that the incarceration costs were subject to discharge. In Re Milan, No. 16-6012 (8th Cir. BAP, 9/22/2016).

Bankruptcy Appellate Panel affirms decision in adversary case involving breach of discharge injunction, noting that record on appeal did not include trial exhibits or transcript of verbal order. Debtors prevailed in an adversary action against defendant for violating the discharge injunction. The bankruptcy court awarded debtors damages of $1,000, and attorney fees and costs totaling $1,500. Debtors appealed the award, asserting that the bankruptcy court erred by failing to award all the attorney fees claimed, or punitive damages. The BAP affirmed the decision of the bankruptcy court, noting that it was unable to review the bankruptcy court’s findings of fact or conclusions of law as the record on appeal did not include any trial exhibits or the transcript of the bankruptcy court’s verbal order that was referenced repeatedly by the debtors in their appeal brief. Practice tip: This decision reinforces the importance of a complete record on appeal. In re Huonder, No. 16-6011 (8th Cir. BAP, 9/29/2016).

Patrick C. Summers

DeWitt Mackall Crounse & Moore S.C.

 

CRIMINAL LAW
JUDICIAL LAW

DWI: DFE is hazardous substance. On three separate occasions, appellant was arrested for operating a motor vehicle under the influence of a hazardous substance. On each occasion, chemical tests were positive for 1,1-difluoroethane (DFE), a chemical found in gas duster, canisters of which police found in appellant’s vehicle each time she was arrested. Appellant was ultimately convicted, after the district court determined that DFE is a “hazardous substance” as defined by Minn. Stat. §169A.03, subd. 9.

Held, DFE is a hazardous substance under Minn. Stat. Ch. 169A. A “hazardous substance” is “any chemical or chemical compound that is listed as a hazardous substance in rules adopted under chapter 182 (occupational safety and health).” DFE is not included in the list of hazardous substances included in those rules. However, the rules recognize that the list is incomplete, and provide a definition of “hazardous substance” to be used in determining whether substances not included in the list should be considered “hazardous.” Minn. R. 5206.0100, subp. 7.

A BCA forensic scientist testified before the district court that DFE is flammable, can cause injury if inhaled, and, when stored in a canister, is pressurized. The cans found in appellant’s car themselves described the chemical as “compressed gas,” potentially fatal, flammable, and potentially injury-causing if the chemical comes into contact with skin. These characteristics fall squarely within rule 5206.0100, subp. 7’s definition of “hazardous substance.” This conclusion is consistent with other jurisdictions that have similarly found DFE to be a drug or intoxicating compound for DWI purposes. State v. Chantel Lynn Carson, Ct. App. 9/6/2016.

Frederic Bruno & Samantha Foertsch
Bruno Law

 

EMPLOYMENT & LABOR LAW
JUDICIAL LAW

Overtime pay; two claims rejected. The 8th Circuit rejected a pair of overtime compensation claims under the Fair Labor Standards Act, 29 U.S.C. §201, et seq.

Truck drivers are not covered for overtime compensation due to an exemption in the Motor Carrier Act for those who have a “reasonable expectation” of interstate driving, even if they did not do so. Alexander v. Tuttle & Tuttle Trucking, 2016 Minn. App. LEXIS 15321 (Minn. App. 8/21/2016) (unpublished).

Production plant employees cannot receive overtime pay for time spent “donning and doffing” employer-required apparel and protective gear before and after their work shifts. The “custom and practice” of not compensating them for that time under an expired collective bargaining agreement carried over to an “implied-in-fact” agreement for continuity of terms after the contract concluded. Jackson v. Old EPT, 2016 Minn. App. LEXIS 15416 (8/23/2016) (unpublished).

• Sex harassment; no qualified immunity for university. The University of Minnesota is not entitled to qualified immunity in a sexual harassment and hostile environment lawsuit brought by a graduate researcher. The 8th Circuit Court of Appeals upheld a ruling by U.S. District Court Judge John Tunheim in Minnesota denying immunity. Jenkins v. University of Minnesota, 2016 Minn. App. LEXIS 17761 (Minn. App. 9/18/2016) (unpublished).

Age discrimination; reduction-in-force. A Minnesota pharmacist who sued for age discrimination after he was terminated and not rehired was denied relief. The 8th Circuit affirmed a lower court ruling by U.S. District Court Judge Richard Kyle in Minnesota, holding that the company’s deviation from its guidelines for a Reduction-In-Force (RIF) did not warrant an inference of determination because the company’s practice was “consistent” and the pharmacist was terminated due to loss of business and not rehired because of the unprofessional way he reacted to the discharge. Noreen v. PharMerica Corp., 2016 Minn. App. LEXIS 15238 (8/19/2016) (unpublished).

Workplace defamation; privilege for high-level personnel. A deputy state commissioner is entitled to absolute immunity for a defamation claim brought by a terminated state employee. The Minnesota Supreme Court upheld dismissal of the claim against the deputy in the Department of Human Services for making disparaging statements about the terminated employee, but allowed the case to proceed against a state hospital administrator who may raise a lesser claim of qualified privilege that can be overcome by proving common law ill will or malice. Harlow v. State, 883 N.W.2d 561 (8/10/2016).

Workers compensation; assigned-risk plan not liable. A general contractor’s claim that a workers’ compensation assigned-risk plan provider covered a claim against it was rejected. The Minnesota Court of Appeals affirmed the lower court ruling that under the terms of the assigned-risk plan policy, the worker’s compensation carrier for the subcontractor was effectively canceled before the date the employee suffered an injury, which precluded liability on the part of the assigned-risk plan. Minn. Workers’ Comp. Assigned Risk Plan v Reyes, 2016 Minn. App. LEXIS 823 (Minn. App. 8/22/2016) (unpublished).

Unemployment compensation; denial for assaulting boss. A housekeeper at a care facility was denied unemployment compensation benefits because she was terminated for assaulting the nursing director. The appellate court upheld a ruling of “disqualifying misconduct,” but remanded the case for determination whether the misbehavior constituted “aggravated misconduct,” which would extend the time period for ineligibility from benefits. Barrett v. Jourdain/Perpich Extended Care Facility, Inc., 2016 Minn. App. LEXIS 820 (Minn. App. 8/22/2016) (unpublished).

Unemployment compensation; relocating not “good reason.” An employee who claimed ineligibility for unemployment compensation benefits because he quit after his complaints about unsafe working conditions were not adequately investigated, was denied unemployment benefits. The appellate court ruled that the evidence showed that the real reason the employee quit was because he was relocating, which did not constitute a “good reason” to warrant quitting and being eligible for unemployment benefits. Paulzine v. Charter Communications, LLC, 2016 Minn. App. LEXIS 900 (Minn. App. 9/12/2016) (unpublished).

Unemployment compensation; quit determination upheld. An employee who quit her job at a group home for disabled adults was not entitled to unemployment compensation benefits despite her claim of adverse working conditions. The court of appeals upheld denial of benefits because the claimant did not give the employer an opportunity to address her concerns. Ostman v. Range Center, Inc., 2016 Minn. App. LEXIS 933 (Minn. App. 10/3/2016) (unpublished).

ADMINISTRATIVE ACTION

TAs can unionize. The National Labor Relations Board ruled that graduate teaching assistants (TAs) at private colleges and universities are entitled to unionize. Reversing its own decision a dozen years ago, the board’s determination could affect many TAs at the institutions of higher learning in Minnesota, especially the University of Minnesota, where past attempts to organize unions have faltered, although adjunct teachers did manage to unionize earlier this year at Hamline University. Columbia University, 02-RC-143102 (NLRB) 8/23/2016.

 Marshall H. Tanick

 Hellmuth & Johnson, PLLC

 

FAMILY LAW
JUDICIAL LAW

Appealability of order where attorneys’ fees unresolved. In a published special term opinion, the court of appeals held that an order which does not fully adjudicate a motion for conduct-based attorneys’ fees is not final and appealable.

The wife brought a post-decree motion to enforce an indemnity provision contained in the parties’ stipulated dissolution decree. The husband opposed the wife’s motion and the wife asked for an award of conduct-based attorneys’ fees. The district court granted the wife’s motion, including her request for fees, but directed the wife to file an application for such fees. The husband appealed from the order before the district court had completed its adjudication of wife’s claim for fees.

The court of appeals questioned the finality of the order in light of the unresolved claim for conduct-based fees and directed the parties to submit informal memoranda. The husband argued that the order was appealable because the pending motion for fees was a collateral issue. The wife asserted that the order was not appealable because the claim for fees involved facts that were separate from her motion to enforce the decree.

The court of appeals discussed at length its holding in Phillips v. LaPlante, 823 N.W.2d 903 (Minn. Ct. App. 2012), that a post-decree order that does not fully determine a claim for need-based attorneys’ fees under Minn. Stat. §518.14, subd. 1 is not final and appealable because it is a separate claim that does not depend upon whether the claimant was the prevailing party in the action for which the fees were sought. Reasoning that a party who prevailed on the merits could nonetheless be ordered to pay conduct-based fees for engaging in conduct that unreasonably contributed to the length or expense of the proceeding, the court of appeals held that claims for conduct-based fees, like claims for need-based fees, are separate and independent from the underlying litigation in which such claims are brought.

Thus, the court of appeals dismissed the appeal because it was taken from a non-final order since the district court had not yet determined the amount of the conduct-based fee award. Baertsch v. Baertsch, A16-1279 (Minn. Ct.
App. 2016).

Jaime Driggs

Henson & Efron PA 

 

FEDERAL PRACTICE
JUDICIAL LAW

Grants of certiorari on multiple procedural issues. A new Supreme Court term resulted in grants of certiorari on multiple procedural issues.

The Court will address whether courts are required to tailor inherent power sanctions to the harm directly caused by sanctionable misconduct when the court does not afford sanctioned parties to protections of criminal due process. Goodyear Tire & Rubber Co. v. Haeger, 813 F.3d 1233 (9th Cir.), cert. granted, ___ S. Ct. ___ (2016).

A second cert. petition asks whether a district court’s decision to quash or enforce an EEOC subpoena should be reviewed de novo or for abuse of discretion. McLane Co. v. EEOC, 804 F.3d 1051 (9th Cir. 2015), cert. granted, ___ S. Ct. ___ (2016).

Finally, in a case arising out of post-9/11 domestic detentions, the Court is being asked to determine whether the plaintiffs’ claims against former senior government officials meet the Iqbal plausibility standard. Ziglar v. Turkmen, 789 F.3d 197 (2d Cir. 2015), cert. granted, ___ S. Ct. ___ (2016).

Motion to remand granted; mandatory forum selection clause. Granting the plaintiff’s motion to remand a removed action to the Minnesota courts, Judge Nelson found that a forum selection clause providing that any dispute could be adjudicated “only in the state court located in Hennepin County, Minnesota” constituted a “clear and unequivocal” waiver of the defendants’ right to remove. Valspar Corp. v. Sherman, 2016 WL 5477076 (D. Minn. 9/28/2016).

• Personal jurisdiction; action transferred rather than dismissed. Rather than deciding defendants’ motion to dismiss for lack of personal jurisdiction, Judge Nelson treated defendants’ alternative motion to dismiss on the basis of “forum non conveniens” as a motion to transfer venue, and transferred the action to the Southern District of Florida.

The decision includes a lengthy footnote analyzing whether 28 U.S.C. §§1404, 1406 and/or 1631 provided the basis for transfer where personal jurisdiction is lacking, with Judge Nelson concluding that transfer was appropriate under 28 U.S.C. §§1406 and 1631. Jacobs Trading, LLC v. American Eagle Trading Group, LLC, 2016 WL 5508805 (D. Minn. 9/28/2016).

Fed. R. Civ. P. 41(a)(2); request for conditions on dismissal denied. Judge Frank granted the plaintiff’s motion to dismiss with prejudice pursuant to Fed. R. Civ. P. 41(a)(2), rejecting the defendants’ request that the dismissal be conditioned on an award of attorney’s fees and/or limitations on plaintiff’s counsel’s ability to file a similar action in another forum. Ferrari v. Best Buy Co., 2016 WL 5508818 (D. Minn. 9/28/2016).

Fed. R. Civ. P. 41(b); dismissal without prejudice for failure to prosecute. Adopting a report and recommendation by Magistrate Judge Leung, Judge Ericksen dismissed DPPA claims against defendants where those claims had been dormant for more than two years. Kost v. Hunt, 2016 WL 5539768 (D. Minn. 8/11/2016), Report and Recommendation adopted, 2016 WL 5660416 (D. Minn. 9/28/2016).

Significant award of attorney’s fees. In a lengthy opinion, Judge Nelson awarded the plaintiffs more than $1.3 million in trial court and appellate attorney’s fees and costs but, citing several 8th Circuit decisions, declined to award the plaintiffs their computerized legal research expenses. North Dakota v. Heydinger, 2016 WL 5661926 (D. Minn. 9/29/2016).

Fed. R. Civ. P. 8(a)(2); “short and plain statement.” Judge Schiltz struck a pro se plaintiff’s complaint, which ran 81 pages and 250 numbered paragraphs, and allowed the plaintiff four weeks to file an amended complaint not to exceed 10,000 words or face dismissal of her action without prejudice. Naca v. Macalester College, 2016 WL 5842771 (D. Minn. 9/30/2016).

28 U.S.C. §1292(b); Fed. R. Civ. P. 54(b); requests for interlocutory appeal denied. Chief Judge Tunheim denied plaintiffs’ motion to certify their dismissed claims for interlocutory appeal under 28 U.S.C. §1292(b) and/or Fed. R. Civ. P. 54(b), finding that the plaintiffs failed to meet the controlling standards for certification. Shimota v. Wegner, 2016 WL 5109138 (D. Minn. 9/19/2016).

Fed. R. Civ. P. 12(b)(6); motion to strike materials outside the pleadings. While ultimately denying defendants’ motion to strike materials outside the pleadings submitted by the plaintiff in opposition to defendants’ Fed. R. Civ. P. 12(b)(6) motion, Judge Montgomery indicated that a declaration and its attached deposition and interview transcripts were “materials outside the pleadings” that could not be considered “at the Rule 12 stage.” Liptak v. Ramsey County, 2016 WL 5349429 (D. Minn. 9/23/2016).

Josh Jacobson

Law Office of Josh Jacobson 

 

IMMIGRATION LAW
JUDICIAL LAW

Requested administrative closure period is deemed too long. The 8th Circuit Court of Appeals upheld the immigration judge’s denial of the petitioner’s motion for administrative closure, finding no abuse of discretion. The court further found that the immigration judge’s analysis adequately took into account the factors promulgated by In re Avetisyan, 25 I & N Dec. 688, 696 (BIA 2012): why administrative closure is sought and opposed by the parties, the likelihood of success of any action being pursued outside of removal proceedings, the expected duration of the closure period, the responsibility of either party for any current or anticipated delay, and the ultimate outcome of a removal proceeding once it recommences after the closure period. The court did find, however, that the Board of Immigration Appeals had failed to consider the petitioner’s request that it exercise its authority to independently consider his motion to grant administrative closure. The matter was remanded to the Board to review the petitioner’s request. Gonzalez-Vega v. Lynch, No. 15-3281, slip op. (8th Cir. 10/14/2016). http://media.ca8.uscourts.gov/opndir/16/10/153281P.pdf

It’s all about credibility. The 8th Circuit Court of Appeals held that the immigration judge identified, and the Board of Immigration Appeals adopted, specific, cogent reasons for making an adverse credibility determination that was supported by substantial evidence. The court also held the immigration judge had not erred when finding the petitioner failed to provide sufficient corroborative evidence for his claims. Chakhov v. Lynch, No. 15-1673, slip op. (8th Cir. 9/14/2016). http://media.ca8.uscourts.gov/opndir/16/09/151673P.pdf

Social groups, family, and Guatemalan landowners. The 8th Circuit Court of Appeals upheld the Board of Immigration Appeal’s finding that the petitioners (Mario and Ruben Cambara-Cambara) were no different from members of any other Guatemalan family subject to gang violence, nor was there any evidence that their mistreatment was associated with membership in a specific social group; neither the Cambara family or educated Guatemalan landowners or farmers. Cambara-Cambara v. Lynch, No. 15-1916, 15-1917, slip op. (8th Cir. 9/13/2016). http://media.ca8.uscourts.gov/opndir/16/09/151916P.pdf

Burglary and aggravated felony. The 8th Circuit Court of Appeals granted the government’s motion to remand to the Board of Immigration Appeals for consideration, in the first instance, whether the petitioner’s prior conviction for second-degree burglary in Minnesota constituted an aggravated felony under 8 U.S.C. §1101(a)(43)(G). “Rather than allowing the Board’s treatment of the case to force a decision on a constitutional question that might be unnecessary, we conclude that a remand is warranted for the Board to consider in the first instance whether Xiong’s burglary conviction is an aggravated felony under §1101(a)(43)(G).” Xiong v. Lynch, No. 16-1428, slip op. (8th Cir. 9/8/2016). http://media.ca8.uscourts.gov/opndir/16/09/161428P.pdf

Losses due to fraud may be aggregated to meet $10,000 threshold for aggravated felony. The 8th Circuit Court of Appeals held that the three counts of fraud that formed petitioner’s conviction were sufficiently interrelated to warrant aggregation to meet the $10,000 aggravated felony threshold and thus sustain his removability. “The IJ [immigration judge] concluded that Sokpa-Anku caused his victim, the Minnesota DHS, an actual loss greater than $10,000, whether the loss is calculated by aggregating the amount pleaded for each count in the criminal complaint, or by the order to pay $20,791 in restitution on each count.” Sokpa-Anku v. Lynch, No. 15-3230, slip op. (8th Cir. 8/26/2016). http://media.ca8.uscourts.gov/opndir/16/08/153230P.pdf

Entry without inspection? The 8th Circuit Court of Appeals held it would be fundamentally unfair to rely on I-213 (Record of Deportable “Alien” [sic]) documents as the only evidence that the petitioner entered the United States without inspection unless he was given an opportunity to present evidence about the manner in which the paperwork was prepared. The court accordingly remanded the case to the Board of Immigration Appeals. Rodriguez-Quiroz v. Lynch, No. 15-2621, slip op. (8th Cir. 8/31/2016). http://media.ca8.uscourts.gov/opndir/16/08/152621P.pdf

ADMINISTRATIVE ACTION

Department of State issues fact sheet on refugee admissions for FY2016. On 10/4/2016, the Department of State issued a fact sheet providing information on FY2016 refugee admissions. According to the fact sheet, refugees from 79 countries were admitted into the United States with over 70 percent from the following countries: the Democratic Republic of the Congo, Syria, Burma, Iraq, and Somalia, all countries with “protracted conflicts driving millions from their homes.” The top U.S. states welcoming refugees were California, Texas, New York, Michigan, and Ohio. Over 72 percent of the resettled refugees were women and children. “Many are single mothers, survivors of torture, people who need urgent medical treatment, religious minorities, lesbian, gay, bisexual, transgender, or intersex (LGBTI) persons, or others imperiled by violence and persecution… Refugees are screened more carefully than any other type of traveler. Screening includes the participation of the Department of Homeland Security, the FBI, the National Counterterrorism Center, the Departments of State and Defense as well as additional intelligence agencies.” http://www.state.gov/r/pa/prs/ps/2016/10/262776.htm

Temporary protected status extended to 5/21/2017 for nationals of Sierra Leone, Liberia, and Guinea. On 9/26/2016, Secretary of Homeland Security Jeh Johnson extended temporary protected status for the countries of Sierra Leone, Liberia, and Guinea to 5/21/2017. Nationals of those countries currently holding TPS, due to expire on 11/21/2016, will have their status extended an additional six months for the purpose of “orderly transition before termination” of the TPS designation. The secretary is authorized to designate a foreign state for TPS if (s)he finds that it is “experiencing extraordinary and temporary conditions that prevent its nationals from returning in safety and that permitting such aliens [sic] to remain temporarily in the United States is not contrary to the national interest.”

Sierra Leone: 81 Fed. Reg. 66054-59 (9/26/2016). https://www.gpo.gov/fdsys/pkg/FR-2016-09-26/pdf/2016-23249.pdf

Liberia: 81 Fed. Reg. 66059-64 (9/26/2016). https://www.gpo.gov/fdsys/pkg/FR-2016-09-26/pdf/2016-23250.pdf

Guinea: 81 Fed. Reg. 66064-69 (9/26/2016). https://www.gpo.gov/fdsys/pkg/FR-2016-09-26/pdf/2016-23244.pdf

President Obama extends deferred enforced departure for Liberians. On 9/28/2016, President Obama announced that he was extending Deferred Enforced Departure (DED) for Liberians for an additional 18 months to 3/31/2018. “I have determined that there are compelling foreign policy reasons to again extend DED to those Liberians presently residing in the United States under the existing grant of DED.” This extension will include extension of employment authorization. https://www.whitehouse.gov/the-press-office/2016/09/28/presidential-memorandum-deferred-enforced-departure-liberians

R. Mark Frey
Frey Law Office

INDIAN LAW
JUDICIAL LAW

• Federal-law applicability; Title VII civil rights claims against tribal enterprise dismissed. The 8th Circuit Court of Appeals affirmed the district court’s dismissal of plaintiffs’ Title VII claims for lack of subject-matter jurisdiction. The district court dismissed the claims against a tribal casino for two reasons. First, the court noted that by its express terms, Title VII does not apply to Indian tribes. The 8th Circuit has interpreted this exception to include tribal businesses. Second, the casino shares the tribe’s immunity from suit, and because the casino had not waived that immunity, no suit could lie. Nawls v. Shakopee Mdewakanton Sioux Community Gaming Enterprise—Mystic Lake Casino, Case No. 15-2769, 2016 WL 593514 (D. Minn. 2/2/2016), aff’d ___ Fed. App’x ___, 2016 WL 5859707 (8th Cir. 2016).

Criminal law; dissenting view on sentencing under the Major Crimes Act. The defendant, an Indian, appealed from his conviction of and sentence for two second-degree murders in violation of the Major Crimes Act, 18 U.S.C. §1153. That statute was originally enacted in 1885 to address a gap in criminal jurisdiction that occurs because federal law blocks many states’ criminal jurisdiction over Indian defendants in Indian country. The Major Crimes Act filled this gap by making it a federal crime for “any Indian” to murder an “Indian or other person” in “Indian country.” The defendant argued, inter alia, that the district court’s imposition of two consecutive life sentences under the Major Crimes Act was unreasonable.

The 8th Circuit Court of Appeals affirmed. But in a dissenting opinion, Judge Myron H. Bright addressed the “heavy disparity” in sentencing that occur under the Major Crimes Act and are “analogous to disparities in equal rights for African Americans before and since Brown v. Board of Education.”

Judge Bright attributed the sentencing disparity, in part, to 8th Circuit precedent that applies the Federal Sentencing Guidelines to Major Crimes Act convictions “without consideration of sentences imposed and actual time served for similar state-law crimes.” He wrote, “The federal courts’ method of sentencing individuals under the Major Crimes Act creates documented disparities in sentences and, as such, Indians often receive higher sentences purely because of their status as an Indian in Indian Country.” This, he said, is contrary to Congress’s intention in passing the Major Crimes Act, which was “to insure equal treatment for Indian and non-Indian offenders who commit certain offenses in Indian country.” Judge Bright concluded that “[t]he time has come for federal courts to take action to avoid unwarranted sentencing disparities for individuals like [the defendant]. Federal courts must take into account sentences and actual time served for similar state-law crimes when sentencing under the Major Crimes Act . . . .” (emphasis in original) (quotation omitted) United States v. Lasley, ___ F.3d ___, 2016 WL 4254387 (8th Cir. 2016).

LOOKING AHEAD

Oil-pipeline construction; #NoDAPL litigation and related developments. The Standing Rock Sioux Tribe and Dakota Access LLP are waging a national battle over construction of an oil-access pipeline from North Dakota to Illinois, including across the burial grounds of certain Sioux tribes. Since this spring, Indians and non-Indians have constructed encampments along the construction zone, including a spirit camp at the confluence of the Cannonball and Missouri rivers in the path of the pipeline, and have staged protests through the construction zone. Local law enforcement has maintained a continuous presence, and has made arrests throughout the life of the protests. Tribal and non-tribal governments across the country—including those of Minneapolis and St. Paul—have expressed their support for the tribes and protestors, who are now preparing to continue their encampments through the North Dakota winter.

In July, the Standing Rock Sioux Tribe sued the U.S. Army Corps of Engineers, alleging that, in addition to violating various clean-water and environmental statutes, the Corps’ authorization of the construction violated the National Historic Preservation Act. Section 106 of that Act requires federal agencies to consult with affected Indian tribes concerning federal actions that could affect property of traditional religious or cultural importance to those tribes. The Cheyenne River Sioux Tribe intervened as a co-plaintiff and the pipeline company intervened as a defendant. The Yankton Sioux Tribe has filed a second suit that remains in the preliminary stages.

The next month, the pipeline company sued the Chairman of the Standing Rock Sioux Tribe and other protesters in the District Court of North Dakota, seeking to permanently enjoin the defendants “from interfering with Dakota Access’s right to construct the Pipeline.” That court granted a temporary restraining order against the defendants.

Iowa protesters also raise similar environmental objections to the pipeline, and have also been arrested. But in a similar suit that the pipeline company filed against the Iowa protesters, an Iowa district court judge denied a temporary restraining order. The pipeline company voluntarily dismissed the suit.

Meanwhile, in the D.C. district court, the Standing Rock Sioux Tribe filed a supplemental declaration describing additional archeological sites that had been discovered along the pipeline route. After weekend construction at the identified area, the tribes moved to temporarily restrain construction in and around the area. The district court granted the motion in part, temporarily restraining construction as to a portion of the area.

Three days later, the court denied the tribe’s motion for a preliminary injunction. Moments after that decision issued, the U.S. Departments of the Army, Interior, and Justice issued an unprecedented joint statement noting the “important issues raised by the Standing Rock Sioux Tribe and other tribal nations and their members regarding the Dakota Access pipeline specifically, and pipeline-related decision-making generally” and the “need for a serious discussion on whether there should be nationwide reform with respect to considering tribes’ views on these types of infrastructure projects.” The Army had not yet granted all necessary easements to the pipeline company. It voluntarily agreed to withhold the remaining authorizations pending further review, asked the pipeline company to cease construction near the disputed area, and expressed its support for the right of the protesters to peaceably assemble. That same day, the tribes appealed denial of the injunction. The following Monday it applied for an injunction pending appeal.

The pipeline continued construction, the protests continued, and arrests continued. By mid-September, one week after the joint departmental statement, the District of North Dakota sua sponte dissolved its order temporarily restraining the protesters. It reasoned that local law enforcement was already addressing the situation, so the additional threat of “pain of a contempt sanction[] would serve no legitimate purpose.” A motion to dismiss that suit is pending.

This month, the D.C. circuit denied Standing Rock’s request for an injunction pending appeal. It wrote that “[a]lthough the Tribe has not met the narrow and stringent standard governing this extraordinary form of relief, we recognize that Section 106 . . . was intended to mediate precisely the disparate perspectives involved in a case such as this one. . . . We can only hope the spirit of Section 106 may yet prevail.” The next day, the U.S. Departments of the Army, Interior, and Justice issued a second joint statement again stating that the departments support the right to assemble and that the Army will continue to refrain from additional permitting. It repeated “our request that the pipeline company voluntarily pause all construction activity” in the disputed area.

At press time, the pipeline continues construction, the protests continue, and the arrests continue. As Indians and non-Indians from across the country join the Standing Rock protesters, the encampments have grown to historic proportions, and some are now larger than many North Dakota towns. Moreover, the dispute is galvanizing inter-tribal support and support for indigenous rights across the country. The situation at the North Dakota encampments, the D.C. circuit, and the administration is likely to continue to change quickly. For more information and continued coverage of the cases, visit https://turtletalk.wordpress.com.

Jessica Intermill 

Hogen Adams PLLC

Peter J. Rademacher

Hogen Adams PLLC

 

INTELLECTUAL PROPERTY
JUDICIAL LAW

Personal jurisdiction; online sales. Chief Judge Tunheim recently denied defendant’s motion to dismiss for lack of personal jurisdiction. Plaintiff Imation Corp., owner of a series of patents on USB flash-drives, sued Sanho Corp. for patent infringement related to Sanho’s “iStick” line of products. Sanho, a company incorporated in Delaware and having its principal place of business in California, filed its motion to dismiss stating that it was not subject to personal jurisdiction in the forum state. Minnesota’s long-arm statute extends to the limits of due process, thus merging the statutory and constitutional questions of personal jurisdiction. Minnesota has personal jurisdiction where the defendant’s minimum contacts with the forum would not offend the traditional notions of fair play and substantial justice and if the cause of action arises out of the isolated and sporadic contacts. Deciding the matter without an evidentiary hearing, the court found Imation made a prima facie showing that the court could exercise personal jurisdiction over Sanho for two reasons. First, Sanho had made a direct sale to at least one individual in the state of Minnesota. Second, Sanho actively maintains a website primarily devoted to contract formation and the facilitation of transactions. While the analysis would be more complex if Sanho only sold products through third-party websites (e.g. Amazon), Sanho’s independent operation of its website and its Minnesota sale were sufficient for the court to deny Sanho’s motion to dismiss. Imation Corp. v. Sanho Corp., No. 15-1883 JRT/JSM, 2016 U.S. Dist. LEXIS 103626 (D. Minn. 8/5/2016).

Trademark registration. A panel of the United States Circuit Court for the 8th Circuit recently vacated the district court’s cancellation of plaintiff’s trademark registrations and reversed the district court’s granting of attorney’s fees to defendant. Plaintiff East Iowa Plastics (EIP) purchased its facilities and use of the trademark PAKSTER from a third party in the 1990s. The sale included a license-back for use of PAKSTER for a subset of plastic molding techniques. The license-back was freely assignable and was later assigned to defendant PI. Despite knowing of EIP’s use of PAKSTER, PI obtained federal trademark registrations by claiming that it did not know of anyone else using the trademark. After PI sent EIP a series of cease-and-desist letters, EIP sued PI for cancellation of the marks and damages under sections 37 and 38 of the Lanham Act. The district court found in favor of EIP, canceled the marks, and awarded attorney’s fees. Though the 8th Circuit noted that PI fraudulently obtained the marks, it vacated the district court’s decision because EIP had not suffered any damages from PI’s actions. While EIP could point to a generalized harm that may occur when the Patent & Trademark Office (PTO) registers trademarks that it should not, this was not sufficient to satisfy the Article III standing requirement of case or controversy. As a result of vacating the cancellation of the trademarks, EIP was no longer the prevailing party as there had been no material alteration of the legal relationship of the parties. While EIP may be able to cancel PI’s trademarks by petitioning the PTO, filing a lawsuit was not the correct mechanism. East Iowa Plastics, Inc., v. PI, Inc., No. 15-2757, 2016 U.S. App. LEXIS 14762 (8th Cir. 8/11/2016).

Tony Zeuli & Joe Dubis

Merchant & Gould

 

PROBATE & TRUST LAW
ADMINISTRATIVE ACTION

IRC §2704 proposed regulations trigger Congressional response. The U.S. Treasury issued proposed regulations in August, which, if adopted as drafted, will significantly restrict the discounts that have historically been used to value intra-family transfers of interests in family-controlled entities by expanding the scope of IRC §2704. REG-163113-02, 81 Fed. Reg. 51413-02 (8/4/2016). A public hearing is scheduled for December 1. However, several bills are currently pending in Congress to nullify the §2704 proposed regulations before they even become effective. One bill introduced by Senator Marco Rubio (R-Fla.) (S. 3436, 114th Cong., 2d Sess. (Sept. 29, 2016)) is identical to the legislation introduced by Representative Warren Davidson (R-Ohio), which is gaining support in the House. The proposed regulations are available at https://www.regulations.gov/document?D=IRS-2016-0022-0001

Robin Tutt

Lindquist & Vennum LLP

 

REAL PROPERTY
JUDICIAL LAW

Fraudulent misrepresentation. The Minnesota Court of Appeals, in an unpublished decision, affirmed a grant of summary judgment on the basis that the plaintiffs had failed to “demonstrate a genuine issue of material fact [regarding the seller’s agent’s] fraudulent intent” or to show evidence of affirmative misrepresentations or concealment. The particular defendant at issue is a real estate broker, charged with intentionally misrepresenting the length of lakeshore of the sold parcel and the condition of the home. With respect to the lakeshore, the plaintiffs alleged that the broker knew the property had less than the advertised 900 feet of lakeshore, on the basis that the legal description should have put the broker on notice that it had less than 900 feet.

The court held that there was no evidence that the broker knew the meaning of the legal description. The court further held that there was evidence that the broker believed he was right because he consulted an official county map that suggested the property had 900 feet of lakeshore. With respect to the condition of the home, the plaintiffs alleged that the home had a foul odor, mold, urine, and water stains, dead animals, water damage, and fire damage, among other undesirable characteristics. Yet, the plaintiffs had visited and walked through the home twice in the three months before the closing of their purchase, and did not raise any concerns. The plaintiffs also declined the option of an inspection and agreed to an “AS-IS” exculpatory disclaimer in the purchase agreement. While the plaintiffs alleged that the broker “represented that the [property] was habitable and clean, free of vermin, and free of odors and other contamination,” the plaintiffs did not provide any evidence to buttress the allegation, and did not depose the broker. Further, the plaintiffs did not have any evidence that the broker concealed the undesirable or harmful qualities. There was no evidence that the broker aired out the home before the plaintiffs visited (the doors and windows were closed and locked), no evidence that the broker had visited the property prior to the visits, and no evidence that the broker knew of any fires, urine, mold, or water damage at the property. Beckman v. Wells Fargo Bank N.A., No. A15-1819, 2016 WL 5640664 (Minn. Ct. App. 10/3/2016) (unpublished).

Joseph P. Bottrell

Meagher & Geer, PLLP

 

TAX
JUDICIAL LAW

Estate tax and theft loss: Issues of first impression. James Heller died in January 2008. At the time of his death, he held a 99% interest in an LLC, the only asset of which was an account with Bernard L. Madoff Investment Securities, LLC. In December 2008, the Securities and Exchange Commission notified the public that Madoff had been charged with securities fraud; Mr. Heller’s 99% interest in the LLC became worthless. The estate reported a $26,296,807 gross estate, including the value of the 99% interest (i.e., $16,560,990). The estate also claimed a $5,175,990 theft loss deduction relating to the Ponzi scheme, the amount of which reflected the difference between the value of the estate’s interest in the LLC reported on the estate tax return and the estate’s share of the amounts withdrawn from the JHF Madoff account (before the SEC’s announcement, amounts had been withdrawn from the account and the estate’s share was used to pay taxes and administrative expenses). The commissioner determined that the estate was not entitled to the $5,175,990 theft loss deduction because, according to the commissioner, the estate did not incur a theft loss—the LLC did. Noting this was an issue of first impression, the court disagreed. The court held that the estate was entitled to the theft loss deduction because there was a sufficient nexus between the theft and the estate’s loss. All that is required by the statute, the court reasoned, was such a nexus, and although in some cases, it might be difficult to determine sufficient nexus, here, the nexus was “direct and indisputable.” Estate of James Heller v. Comm’r, No. 11390-12., 2016 WL 5373305 (T.C. 9/26/2016).

Property tax; external obsolescence. In a case on remand from the Minnesota Supreme Court, the tax court addressed the proper valuation of a large ethanol production facility in rural Waseca County. The reviewing court faulted the tax court for having failed to explain why it relied on a particular measure of external obsolescence, and reversed and remanded on that issue. On remand, the tax court was not required to use a particular methodology, and instead was free to adopt a methodology that was different from either parties’, so long as the methodology used by the tax court on remand was supported and explained. In its memorandum, the tax court first reevaluated the parties’ theories of economic obsolescence and explained why the court did not follow either of the parties’ theories. The court then reexamined its own reasoning on obsolescence and rejected, as unsupported by the record, overcapacity as the appropriate measure of economic obsolescence. Finally, the court concluded that the record supported the existence of some economic obsolescence, using the income shortfall method, a generally accepted approach to calculating external obsolescence. Guardian Energy v. Waseca Co., No. 81-CV-10-348, 2016 WL 5874449 (Minn. Tax 9/28/2016).

Property tax; costs and disbursements. The tax court ordered Hennepin County to pay American Multi-Cinema costs and disbursements in the amount of $5,658.50 following a property tax appeal in which the value of the subject property was reduced from the county’s assessed value of $8,536,400 to $7,557,000. Upon the determination of any tax court appeal, the Minnesota Tax Court is authorized by statute to award costs and disbursements “in favor of the prevailing party and against the losing party as in civil actions or, if there has been an offer of judgment or settlement by a party prior to ten days before the court hears the appeal, pursuant to Minnesota Rules of Civil Procedure, rule 68….” (Minn. Stat. § 271.19.) Rule 68 in turn provides that if the respondent makes a qualifying offer and either prevails or the relief awarded to the petitioner is less favorable than the offer, then the petitioner must pay the respondent’s costs and disbursements incurred after service of the offer and the petitioner is barred from recovering its own costs and disbursements incurred after service of the offer. (Minn. R. Civ. P. 68.03(b)(1).) In this dispute, the county argued first that because it made a mid-trial settlement offer that would have reduced the valuation to a value less than that of the court’s final value, the taxpayer’s rejection of the offer bars the taxpayer owner from receiving an award of costs and disbursements. The court rejected this argument, reasoning that the cost-shifting provision of the statute applies only to offers that satisfy the requirements of Rule 68, and the county’s mid-trial offer did not satisfy those requirements. The court held further that the taxpayer was a “prevailing party” in any event. The court also rejected the county’s request that the court use its discretion to decline to award the costs because, while the court rejected some of the taxpayer’s arguments in the underlying dispute, it relied on some portions of the taxpayer’s appraisal. Am. Multi-Cinema, Inc. v. Hennepin Co., No. 27-CV-12-8506, 2016 WL 5874439 (Minn. Tax 9/30/2016).

LOOKING AHEAD

Property tax, state and local aid: Connecticut Has 180 days to develop its own “Minnesota Miracle.” In 1971, Minnesota enacted sweeping tax reform designed in part to equalize funding between rich and poor school districts. Critical parts of the plan included increasing the state’s share of local public school operating funds and reforming the distribution of school aid to equalize funding between districts. This school funding reform was part of a package of reforms that came to be known as the “Minnesota Miracle.” Last month, a Connecticut trial court judge ordered his state to develop a rational spending plan for the benefit of Connecticut’s schoolchildren. The court seemed persuaded by discrepancies in student achievement between school districts—sometimes significant discrepancies even in districts that sit side by side. Admonishing the state to “stick to an honest formula that delivers state aid according to local need,” the court ordered the state to propose changes on the following subjects: “the relationship between the state and local government in education; an educational aid formula; a definition of elementary and secondary education; standards for hiring, firing, evaluating, and paying education professionals; funding, identification, and educational services standards for special education.” The state was given 180 days—or until spring 2017—to comply with the order. Connecticut Coal. for Justice in Educ., Inc. v. Rell, No. X07HH DCV145037565S, 2016 WL 4922730 (Conn. Super. Ct. 9/7/2016).

Morgan Holcomb

Mitchell Hamline School of Law

Jessica Dahlberg

Grant Thornton

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