• District court affirms order denying substantive consolidation. The Unsecured Creditor’s Committee in the Chapter 11 bankruptcy case of the Archdiocese of St. Paul and Minneapolis sought to substantively consolidate the debtor with a number of entities, including 187 separately incorporated parishes, various high schools, and other targeted entities, on behalf of numerous individuals who had filed proofs of claim alleging clergy sexual abuse. Bankruptcy Judge Kressel denied the motion and granted the motions to dismiss brought by the debtor and the targeted entities. On appeal to the district court, Judge Montgomery affirmed the decision of the bankruptcy court. She held that the Creditor’s Committee had standing to appeal, as its members had direct pecuniary interests affected by the order. The district court noted that substantive consolidation is not expressly provided under the Bankruptcy Code, but rather arises from the court’s equitable powers under Section 105 of the Code, and that such powers must be “exercised consistent with the provisions of the Bankruptcy Code.” The district court noted that In re Giller, 962 F.2d 796 (8th Cir. 1992), the sole decision in the 8th Circuit addressing substantive consolidation, identifies three non-exclusive factors: (1) necessity of consolidation because of interrelationship between the debtors; (2) whether benefits outweigh harm to creditors; and (3) prejudice resulting from not consolidating the debtors. The district court affirmed the holding of the bankruptcy court that substantive consolidation would effectively be an involuntary bankruptcy of the targeted entities, and that Section 303(a) prohibits the commencement of an involuntary bankruptcy against eleemosynary institutions such as the churches and schools which were the target of the motion. The district court further affirmed the bankruptcy court’s dismissal of the motion on the grounds that the Creditor’s Committee had failed to plead sufficient facts to support substantive consolidation, under an analysis of the Giller factors. In re Archdiocese of Saint Paul and Minneapolis, et al., No. 16-2712 (D. Minn. 12/6/2016) (Montgomery).
• Chapter 7; failure to perfect appeal. Debtor filed a Chapter 7 petition, apparently pro se, and checked the box certifying that he had requested but was not able to timely obtain credit counseling services, and requested a 30-day temporary waiver. He failed to submit the mandatory statement detailing the exigent circumstances. The bankruptcy court immediately entered an order and notice of documents due, noting that the missing documents needed to be filed within 14 days. Debtor filed some, but not all, of the required documents. The bankruptcy court entered an order dismissing the case for failure to comply. Debtor submitted a “motion to reinstate the case and motion to vacate.” This motion was denied. Debtor filed a letter, treated by the court as another motion, stating that he had not had sufficient time to gather and file the required documents. This motion was also denied. Debtor then proceeded to file the missing documents and certificate of credit counseling, and filed a third motion to reconsider and reinstate the case. This was also denied. Debtor filed an appeal of this last order. The BAP noted that the Rules and Code do not provide for a motion to reconsider or to reinstate, noting it could be treated as a motion under Rules 52, 59, or 60(b). The BAP held that while debtor’s first motion was timely filed, he failed to timely perfect an appeal of the order dismissing his case. Practice tip: It is a good idea to comply with a bankruptcy court order, and to timely perfect an appeal. In re Dan Lee, Sr., No. 16-6020 (8th Cir. BAP 11/15/2016).
DeWitt Mackall Crounse & Moore S.C.
EMPLOYMENT & LABOR LAW
• Disability discrimination; reasonable accommodation request. The notification by an employee of an inability to do her work until cleared to do so by her doctor constituted sufficient request for a reasonable accommodation to avoid summary judgment. The 8th Circuit Court of Appeals reversed dismissal of the lawsuit for disability discrimination under the Americans with Disabilities Act (ADA), although a dissent by Judge Michael Colloton would have affirmed because there was no specific accommodation requested. Kowitz v. Trinity Health, 2016 U.S. App. LEXIS 18559 (8th Cir. 10/17/2016).
• Retaliation discharge; dismissal claim is upheld, qui tam remanded. A pair of employees who sued a for-profit college after they were fired following complaints about the school’s record-keeping were unsuccessful in challenging their termination on grounds of retaliation. Although upholding the dismissals, the 8th Circuit reversed and remanded a qui tam claim that the college obtained federal funding by fraudulent promises to keep accurate student attendance and grade records, which it failed to maintain. Bolderson v. City of Wentzville, 2016 U.S. App. LEXIS 19594 (8th Cir. 11/01/2016).’
• Worker’s compensation; assault exception upheld. The assault exception that allows employees injured at work to sue their employers in civil litigation outside of the workers compensation system may be applicable to an injury caused by horseplay in the workplace. While upholding dismissal of a tort claim, the court of appeals remanded to determine whether the exception applied to avoid the exclusivity of the workers compensation system. Schaefer v. Cargill Kitchen Solutions, 2016 U.S. App. LEXIS 995 (8th Cir. 11/07/2016) (unpublished).
• Unemployment compensation; misconduct upheld. A determination of disqualifying “misconduct” in denying a claim for unemployment compensation was upheld by the court of appeals. It held that the employee was properly denied benefits for violating the employer’s alcohol and drug testing policies. Ogunkola v. Cirrus Design Corp. 2016 U.S. App. LEXIS 967 (8th Cir. 10/24/2016) (unpublished).
• Unemployment compensation; training concerns no reason to quit. An employee who quit her job because she felt she was not given adequate training was denied unemployment compensation benefits. The appellate court held that her concerns did not constitute “good reason” to resign. Davies v. Donaldson Co., 2016 U.S. App. LEXIS 985 (8th Cir. 10/17/2016) (unpublished).
• Minneapolis school district severance agreements. The use by the Minneapolis School District of severance agreements that include an agreement by employees not to sue for employment discrimination has been proscribed by the Equal Employment Opportunity Commission (EEOC). The agency that oversees federal harassment and discrimination laws demanded that the district remove this provision in severance agreements signed by 50 departing employees over the past two and a half years. The EEOC’s aversion to those clauses might be extended to other severance agreements by employers in Minnesota.
As 2017 begins, the Minnesota Supreme Court is pondering a trio of workers compensation cases it heard in the closing weeks of last year.
A case with high topical significance and national importance raises the issue of whether an undocumented immigrant working illegally in this country is entitled to claim workers compensation benefits. The undocumented employee claims he was fired because he filed a workers compensation claim, in violation of the anti-retaliation provision of Minn. Stat. section 176.82. Sanchez v. Dahlke Trailer Sales, Inc., No. A15–1183.
The allowance of a discontinuance of benefits due to the judge’s determination that the claimant’s expert witness lacked competency is at issue in another case. The injured employee, who was hurt in a vehicle accident while on the job, challenges the termination of her benefits. Gianotti v. Ind. Sch Dist. 152, No.A16-0629.
The third case raises the issue of the propriety of an employee’s refusal of a job offer on grounds that it was inconsistent with her rehabilitation plan, which prompted discontinuance of her temporary total disability benefits. The hearing judge allowed termination of benefits, but the Workers’ Compensation Court of Appeals reversed. Gilbertson v. Williams Dingmann, LLC, No. A16-0895.
In one other workplace case argued late in 2016 (and not connected with job-related injury), the justices are contemplating whether a City of Minneapolis internal investigation of an age discrimination claim by a police officer challenging a job transfer constituted a voluntary “dispute resolution process” tolling the one-year statues of limitations under Minn. Stat. section 363A.28 subd 3 of the Human Rights Act. The Hennepin County District Court thought not, but the court of appeals reversed and remanded. Peterson v. City of Minneapolis, No. A15-1711
Hellmuth & Johnson, PLLC
• 9th circuit to address groundwater rights for Native American tribes. In a case that could set a precedent for all Native American tribes, the 9th Circuit Court of Appeals will be addressing whether the Agua Caliente Tribe holds a federal reserved right to the groundwater beneath its reservation in Palm Springs, California. Federal reserved water rights take priority over state-based water rights, so this decision could have major implications for the 25 states in which Native American tribes have reservations.
In the case, the U.S. District Court for Central California found that groundwater pumping by state water districts violates the tribe’s federal reserved water right to the groundwater underlying their reservation. Under the Supreme Court’s decision in the Winters case, Native American tribes receive reserved rights to appurtenant water “to accomplish the purpose of the reservation” by virtue of the set aside of the reserved land by the Federal government. Winters v. United States, 207 U.S. 564 (1908). The question at issue on appeal is whether this right under Winters extends to the groundwater in this case. The water districts are arguing that it does not because it is not necessary to accomplish the primary purpose of the reservation.
Up until now, the courts have inconsistently applied the concept of reserved rights to groundwater. Some tribes have secured such rights through approximately 15 water settlements reached between 1978 and 1980 addressing groundwater. Even so, these settlements are inconsistent, with some specifying amounts or limits on groundwater use. Agua Caliente Band of Cahuilla Indians v. Coachella Valley Water Dist., No. EDCV 13-883-JGB, 2015 WL 1600065 (C.D. Cal. 3/20/2015).
• EPA sets a precedent with CERCLA financial assurance rule for mining industry. On 12/1/2016, EPA announced a proposal for the hardrock mining industry to meet financial assurance requirements under CERCLA. The proposal would require the industry to meet three types of financial assurances associated with releases and potential releases of hazardous substances subject to regulation under CERCLA: 1) response costs; 2) health assessment costs; and 3) natural resource damages. EPA would use a formula to calculate the amount for each of these categories, and recalculation by an independent third-party is required every three years.
This proposal is significant, as the concept of financial assurances under CERCLA has long been in the works, and EPA has its eye on several other industries that will be targeted in the near future: petroleum and coal products manufacturing, chemical manufacturing, and electric power generation, transmission, and distribution. Other industries are likely to follow once these industries have been regulated.
EPA’s proposal will be published in the Federal Register in the near future, which will trigger a 60-day comment period. EPA will be seeking comments from all industries that may be subject to such regulations in the future, not just the hardrock mining industry. One question EPA seeks to answer is whether to allow the use of self-insurance through credit-rating-based financial tests and corporate guarantees.
EPA’s regulation on financial responsibility is the result of a 2008 lawsuit by environmental organizations over the need for financial responsibility regulations in the hardrock mining industry, as well as a suit in 2014 seeking to require EPA to publish financial responsibility rules. One of the goals is to shift CERCLA liability from the government to the industry, as EPA estimates that it spent approximately $1.1 billion from 2010 to 2014 to clean up from hardrock mining operations.
• Ten chemical substances targeted by EPA under revised TSCA. On 11/29/2016, EPA released its list of the first 10 high priority substances to be evaluated on whether they in fact pose an unreasonable risk of injury to health or the environment. These ten substances are:
- 1,4-Dioxane (solvent, stabilizer)
- 1-Bromopropane (solvent)
- Asbestos (wide variety of uses, e.g. building materials)
- Carbon Tetrachloride (precursor in refrigerant manufacturing, solvent)
- Methylene Chloride (solvent)
- N-methylpyrrolidone or “NMP” (solvent)
- Pigment Violet 29 (pigment)
- Tetrachloroethylene, also known as perchloroethylene or “perc” (dry cleaning)
- Trichloroethylene or “TCE” (solvent)
The next step is for EPA to publish the scope of the risk evaluations on these substances by June 2017. At that point there will be an opportunity for public comment. Then, within three years, the risk evaluations must be completed. If EPA finds an unreasonable risk, a risk management rule must be developed within two years of the final risk evaluations.
Three of the ten substances have already undergone risk evaluation under EPA’s pre-existing TSCA authority. A proposed rule on TCE was issued on 12/7/2016, and proposed rules on NMP and methylene chloride are expected soon. The proposed rule on TCE would ban the manufacture, import, processing, and distribution in commerce of TCE for use in aerosol degreasing or use in spot cleaning in dry cleaning facilities. Although these three have been evaluated, their inclusion on the 11/29 list suggests that additional evaluation is needed.
Parkway Law LLC
• Binding agreements in mediation. In a published opinion, the court of appeals confirmed that parties may enter into a binding agreement in mediation by memorializing the terms in an oral recording.
The parties and their respective attorneys participated in an eight-hour mediation session and reached a comprehensive agreement. The parties memorialized the terms of their agreement in a tape recording made by the mediator. Three days later, the mediator emailed the attorneys a letter detailing the terms of the agreement. In the email, the mediator referenced the fact that the case had been resolved. The written agreement stated that all issues had been settled and that husband’s attorney would draft the decree. Husband’s attorney then drafted the decree and sent it to wife’s attorney. After wife refused to sign the decree, husband brought a motion to enforce the agreement. Husband and his attorney each submitted affidavits describing how the parties stated on the tape recording that they understood the terms of the agreement and that they intended to be bound by the agreement and that they could not change their minds about the terms.
Wife filed an affidavit alleging that she did not consent to the settlement becoming permanent, that she had felt pressure in mediation to settle, and that she did not believe the agreement was in the children’s best interests.
The district court found that the parties had made a binding agreement based on the fact that the parties had orally acknowledged their understanding that the agreement would be presented to the court. The district court then ordered the parties to make a record of the terms of their agreement by submitting a written stipulation or by appearing in court. A hearing was held after the stipulation was not forthcoming. The district court admitted into evidence the mediator’s email to the attorneys, the mediator’s letter detailing the terms of the settlement, and the stipulation drafted by husband’s attorney, and then entered the decree.
Wife appealed, making various arguments that were ultimately unsuccessful. She argued that the district court erred in enforcing the settlement agreement because it had not been reduced to a marital termination agreement. Wife argued that because she had repudiated the agreement shortly after mediation, the district court’s actions violated Minn. Stat. §518.619, subd. 7, which states that mediated agreements may not be presented to the court absent consent. The court of appeals rejected this argument because wife had provided the requisite consent as part of the oral recording made in mediation.
Wife also argued that the district court erred in finding that the parties’ mediated agreement was a binding contract, asserting that there had not been a meeting of the minds because she was told she would have time to review the agreement after mediation. The court of appeals explained that the parties’ recorded statements expressing their intention to be bound demonstrated a meeting of the minds and that settlement agreements need not be in writing so long as the contract requisites exist. Moreover, wife never claimed that the stipulation prepared by husband’s attorney did not accurately reflect the terms that had been agreed upon in mediation. Thus, the district court was affirmed. Tornstrom v. Tornstrom, ___ N.W.2d ___ (Minn. Ct. App. 2016).
• Parenting time modification. The parties’ stipulated dissolution decree from 2014 granted them joint legal custody and granted mother sole physical custody. After obtaining a promotion which resulted in father working fewer days, father brought a motion to modify parenting time to reflect his new work schedule. Father’s proposal increased his parenting time from 33% to 47%. Mother opposed father’s motion on several grounds, including that it was, in essence, a modification of physical custody. The district court rejected mother’s argument and granted father’s motion.
On appeal, mother argued that the district court erred in adjudicating father’s motion under the best interest standard rather than the endangerment standard. While acknowledging that the increase in father’s parenting time was not a restriction on her parenting time, mother argued that the grant of almost 50% parenting time was tantamount to a change in physical custody. The court of appeals disagreed, citing its decision in Geiger v. Geiger, 470 N.W.2d 704 (Minn. Ct. App. 1991), in which it held that a grant of almost 50% parenting time did not amount to a grant of de facto joint physical custody. The court of appeals also relied upon its more recent decision in Suleski v. Rupe, 855 N.W.2d 330 (Minn. Ct. App. 2014), in which it rejected an argument that a modification to a parenting time schedule was a de facto modification of primary residence because the order did not modify the primary residence designation and the complaining party retained the majority of parenting time. Applying the rationale of Suleski, the court of appeals reasoned that father had not requested any change to the physical custody label itself and that mother continued to have the majority of the parenting time, and affirmed the district court. McCuen v. McCuen, A16-0136, 11/21/16.
• OFP and intoxicated respondent. The parties were separated and began exchanging text messages because mother needed to come to father’s house to retrieve the children’s duffel bags from him since the children were in her care. In his messages, father stated more than once that he had been drinking heavily and that mother should not come over. Father’s messages referenced that he was upset at having received papers to establish his child support obligations. The argument via text escalated and at one point father wrote: “I wouldn’t come if I was you. I’ll f—ing beat your ass. I’m sick of getting f—ed over by stupid b—-es.” At mother’s request, police officers accompanied her to father’s home. When they arrived, father was drinking and he brought the duffel bags to the car and then started screaming at mother and the police officers for bringing the “f—ing cops.” Father put the bags into mother’s car and then opened the door and gave one of the children a hug. The police officers approached father and the children began screaming and crying. Mother then left. Later that day, father called 911 and threatened to kill mother and the police officers.
Mother obtained an order for protection (OFP) on behalf of herself and the children and father appealed. He argued that the evidence was insufficient to support the issuance of the OFP in mother’s favor because the district court had erred in admitting a police report and criminal complaint regarding the 911 call. The court of appeals affirmed, explaining that the text message threat alone was sufficient to support the issuance of the OFP. However, the court of appeals reversed the OFP on behalf of the children because even though the district court had found that father’s conduct was frightening and alarming to the children, nothing in the record indicated that the father had threatened the children, that father had intended to cause the children to fear that he would harm them, or that father had actually caused the children to have such fear. Martin v. Freundl, A16-0387, 12/5/16.
• Reliance on prior imputed income. The parties were divorced in 2014 after a trial. In its decree, the district court denied father’s request for spousal maintenance after finding that father had unreasonably failed to begin employment. The district court imputed income to father of $75,000 per year based on extensive evidence of father’s employment potential, work history, occupational qualifications, and current job market. Child support was reserved. In 2015, the mother brought a motion to establish child support and relied on the imputed income figure for father from the decree. She later amended her motion and asked that $100,000 be imputed as father’s annual income. Mother did not present the evidence she had presented during the 2014 trial and she did not present evidence that the information from 2014 remained accurate. The court rejected mother’s proposed figure of $100,000 and instead imputed income to father at 150% of minimum wage.
Mother appealed and the court of appeals affirmed, explaining that the district court had correctly determined that it needed to make a finding on father’s current income and that it could not rely on the previous imputation of income. And because mother failed to present any evidence concerning father’s current ability to earn income (which was presumably the same evidence or very similar evidence that mother presented to the court in 2014), the only method available to the court was to impute income to the father at 150% of minimum wage. Stillwell v. Stillwell, A16-0114, 12/5/16.
Henson & Efron PA
• Arbitration compelled despite unavailability of designated arbitrators. The 8th Circuit affirmed a district court order compelling arbitration despite the unavailability of the fora specified in the arbitration agreement, finding that the appointment of an alternate arbitrator was proper under 9 U.S.C. §5 because the specified forum was not “integral” to the arbitration agreement. Robinson v. EOR-ARK, LLC, 841 F.3d 781 (8th Cir. 2016).
• Attorney-client privilege; non-reporting experts; Fed. R. Civ. P. 26(a)(2)(C). Two recent decisions by Judge Susan Richard Nelson affirmed an order by Magistrate Judge Franklin L. Noel which found that the plaintiff’s designation of a consultant as a non-reporting, testifying expert under Fed. R. Civ. P. 26(a)(2)(C) waived any privilege attaching to documents the consultant had authored, received or seen, as well as his communications with counsel. Judge Nelson did allow the plaintiff seven days to preserve the privilege by withdrawing its designation of the consultant as a non-reporting expert.
These decisions appear to be the first in the district to examine the intersection of the attorney-client privilege and non-reporting experts. Accordingly, they are likely to carry great weight the next time these issues arise in the district. Luminara Worldwide, LLC v. Liown Elecs. Co., 2016 WL 6774229 (D. Minn. 11/15/2016), and Luminara Worldwide, LLC v. RAZ Imports, Inc., 2016 WL 6774231 (D. Minn. 11/15/2016), both aff’g, Luminara Worldwide, LLC v. Liown Elecs. Co., 2016 WL 6871374 (D. Minn. 10/5/2016).
• District court amicus briefs; required procedures. In response to a letter request by the plaintiff that the court entertain motions to file amicus briefs, Judge Nelson adopted procedures modeled on Fed. R. App. P. 29, and required that amici file their briefs no later than the filing deadline of the party being supported. Rumble v. Fairview Health Servs., 2016 WL 6534407 (D. Minn. 11/3/2016).
• Motion for leave to take trial depositions denied. Affirming an order by Magistrate Judge Mayeron, Chief Judge Tunheim denied the defendant’s request to take “trial” depositions long after the close of discovery, agreeing with the magistrate judge that the defendant had failed to establish the “good cause” required by Fed. R. Civ. P. 16(b)(4), and that any delay was the result of the defendant’s “tactical decision,” meaning that it could not establish a “diligent pursuit of discovery.” Sorin Group USA, Inc. v. St. Jude Medical, S.C., 2016 WL 6661147 (D. Minn. 11/10/2016).
• Fed. R. Civ. P. 15(c)(1)(C); relation back; Doe defendants; latest decisions. This column has noted a series of recent decisions by Judges Montgomery, Schiltz, and Frank, which held that claims asserted against defendants previously identified as “John Does” did not relate back for purposes of Fed. R. Civ. P. 15(c)(1)(C).
Two recent decisions by Judge Susan Richard Nelson also hold that plaintiffs’ amendments identifying John Does defendants do not relate back, and summarize the current state of the law in the district. Cumulatively, the decisions make clear how difficult it will be for any District of Minnesota plaintiff to prevail on this issue, unless and until the Supreme Court or the 8th Circuit adopt a different interpretation of Fed. R. Civ. P. 15(c)(1)(C)(ii). Rollins v. City of Albert Lea, 2016 WL 6818940 (D. Minn. 11/17/2016); Karasov v. Caplan Law Firm, P.A., 2016 WL 6836930 (D. Minn. 11/18/2016).
• Anti-injunction act; relitigation exception; request for injunction denied. In a fee dispute between law firms that had represented various plaintiffs in a settlement that included an award of attorney’s fees, Judge Magnuson denied one firm’s request for a permanent injunction to bar the other firm’s Minnesota state court action against it, finding that the state court action was a “run-of-the-mill” contract action that did not interfere with the federal court’s jurisdiction, and that it did not fall within the scope of the “relitigation” exception. Dryer v. Nat’l Football League, 2016 WL 6609182 (D. Minn. 11/7/2016).
• Motion for consolidation of cases for trial granted. Judge Montgomery granted plaintiffs’ request to consolidate their sexual abuse cases for trial despite the defendant’s objection, finding that the defendant’s concerns regarding prejudice resulting from consolidation could be addressed through jury instructions and a special verdict form. A subsequent letter request for reconsideration or 28 U.S.C. §1292(b) certification was denied. Doe YZ v. Shattuck-St. Mary’s School, 2016 WL 6594077 (D. Minn. 11/4/2016), reconsideration denied, 2016 WL 7042070 (D. Minn. 12/2/2016).
• Motion to stay arbitration pending appeal denied. Having granted the plaintiff’s motion to require the defendant to arbitrate, Judge Schiltz denied the defendant’s motion to stay that order pending appeal, finding, among other things, that being forced to arbitrate the dispute would not constitute irreparable harm. United Food & Commercial Workers, Local 653 v. Fresh Seasons Market, LLC, 2016 WL 6634874 (D. Minn. 11/8/2016).
• 28 U.S.C. §1404(a); multiple motions to transfer denied. Judge Nelson denied a motion to transfer an action to the Western District of Pennsylvania, finding that the defendant had failed to meet its “heavy burden” on any of the relevant factors. Valspar Corp. v. PPG Indus., Inc., 2016 WL 6534414 (D. Minn. 11/3/2016).
Judge Frank denied defendants’ motion to transfer an action to the Western District of Wisconsin, finding that all of the relevant factors either favored the plaintiff or were “neutral.” KTJ 229, LLC v. Towner, 2016 WL 6637696 (D. Minn. 11/8/2016).
• Denial of motions to amend; absence of proposed amended complaint; Local Rule 15.1(b). Judge Doty denied the plaintiffs’ request for leave to amend their complaint in response to a motion to dismiss where the plaintiffs failed to submit a proposed amended complaint as Local Rule 15.1(b) requires. Armstrong v. Sumitomo Rubber USA, LLC., 2016 WL 6883194 (D. Minn. 11/18/2016).
Judge Montgomery also denied a motion to amend where the plaintiff failed to comply with Local Rule 15.1(b). Hartlieb v. Carey, 2016 WL 6762401 (D. Minn. 11/15/2016).
• Local rule amendment governing the filing of documents under seal in civil cases to take effect. Previously noted proposed amendments to the District of Minnesota’s Local Rules modifying the procedures for filing documents under seal in civil cases have been approved, and are scheduled to take effect on 2/27/2017.
• Change in procedure for requesting transcripts. Effective 1/1/2017, all requests for transcripts and copies of audio recordings in the District of Minnesota must be filed via CM/ECF. Further details are available on the Court’s website: http://www.mnd.uscourts.gov/
Law Office of Josh Jacobson
• U.S. Supreme Court docket carries four immigration-related cases for October 2016 term. The first, Jennings v. Rodriguez, 15-1204, (Oral Argument: 11/30/2016) will address the following issues:
- Whether foreign nationals seeking admission to the United States who are subject to mandatory detention under [8 U.S.C.] Section 1225(b) must be afforded bond hearings, with the possibility of release into the United States, if detention lasts six months.
- Whether criminal or terrorist foreign nationals who are subject to mandatory detention under [8 U.S.C.] Section 1226(c) must be afforded bond hearings, with the possibility of release, if detention lasts six months.
- Whether, in bond hearings for foreign nationals detained for six months under [8 U.S.C.] Sections 1225(b), 1226 (c), or 1226(a), one is entitled to release unless the government demonstrates by clear and convincing evidence that (s)he is a flight risk or a danger to the community; whether the length of that detention must be weighed in favor of release; and whether new bond hearings must be afforded automatically every six months.
The second, Esquivel-Quintana v. Lynch, 16-54, (Oral Argument: TBD) will address the following issue:
Whether a conviction under one of the seven state statutes [criminalizing consensual sexual intercourse between a 21-year-old and someone almost 18] constitutes the “aggravated felony” of “sexual abuse of a minor” under 8 U.S.C. §1101(a)(43)(A) of the Immigration and Nationality Act—and therefore constitutes grounds for mandatory removal.
The third, Lynch v. Dimaya, 15-1498, (Oral Argument: 1/17/2017) will address the following issue:
Whether 18 U.S.C. 16(b) [crime of violence], as incorporated into the Immigration and Nationality Act’s provisions governing a foreign national’s removal from the United States, is unconstitutionally vague.
The fourth, Lynch v. Morales-Santana, 15-1191, (Oral Argument: 11/9/2016) will address the following issues:
- Whether Congress’s decision to impose a different physical-presence requirement on unwed citizen mothers of foreign-born children than on other citizen parents of foreign-born children through 8 U.S.C. 1401 and 1409 (1958) violates the 5th Amendment’s guarantee of equal protection.
- Whether the court of appeals erred in conferring U.S. citizenship on respondent, in the absence of any express statutory authority to do so.
• No presumption of a “well-founded fear of persecution” for Haitian who previously entered United States as a refugee. The 8th Circuit Court of Appeals upheld the Board of Immigration Appeals’ denial of the Haitian petitioner’s Convention Against Torture (CAT) claim, holding that he was not entitled to a presumption of a “well-founded fear of persecution” simply because he was originally admitted as a refugee. “The fact of Martine’s past persecution does not equate to a presumption of a likelihood of future torture. Similarly, it does not eliminate Cherichel’s mandate that ‘a petitioner may not obtain relief under the CAT unless he can show that his prospective torturer has the goal or intent of inflicting severe physical or mental suffering or pain upon him’ for an enumerated purpose. 591 F.3d at 1013.” Martine v. Lynch, No. 15-3117, slip op.) (8th Cir. 11/2/2016). http://media.ca8.uscourts.gov/opndir/16/11/153117P.pdf
• USCIS issues memo on discretionary options for spouses, parents, and children of certain military personnel, veterans, and enlistees. On 11/23/2016, USCIS issued a policy memo with guidance on discretionary options for certain foreign national family members of individuals serving on active duty in the U.S. Armed Forces or in the Selected Reserve of the Ready Reserve, as well as those who had previously served (whether living or deceased) and not dishonorably discharged and enlistees in the Department of Defense (DoD) Delayed Entry Program (DEP). https://www.uscis.gov/sites/default/files/USCIS/Laws/Memoranda/2016/PIP-DA_Military_Final_112316.pdf
Frey Law Office
• Tribal court exhaustion; federal claims stayed. After a member of the Fond du Lac Band of Lake Superior Chippewa Indian Tribe defaulted on a loan secured by her vehicle, the lender repossessed her vehicle on the Fond du Lac Reservation. The tribal member sued the lender (and others) for violation of the Fair Debt Collection Practices Act, because that statute requires a present right of possession, but tribal law rendered the repossession wrongful. The lender moved for stay or dismissal for failure to exhaust tribal-court remedies.
The court agreed with the lender, staying federal proceedings until the parties commenced and litigated a tribal-court action. It explained, “due to considerations of comity, federal court jurisdiction does not properly arise until available remedies in the tribal court system have been exhausted. The doctrine is based on a policy of supporting tribal self-government and self-determination, and it is prudential, rather than jurisdictional. Exhaustion is mandatory, however, when a case fits within the policy, and the legal scope of the doctrine is a matter of law to be reviewed de novo. Unless it is plain that tribal jurisdiction does not exist, a federal court should stay its hand until after the Tribal Court has had a full opportunity to determine its own jurisdiction.” Tiessen v. Chrysler Capital, No. 16-cv-422 (JRT/LIB), 2016 WL 6782776 (D. Minn. 10/20/2016) (report and recommendation), adopted, No. 16-422 (JRT/LIB), 2016 WL 5859707 (D. Minn. 11/15/2016).
• Oil pipeline construction; #NoDAPL litigation and related developments. Legal and factual developments first outlined in the November 2016 edition of this column continue. On November 14, the U.S. Army Corps of Engineers announced a delay in its decision of whether to grant the pipeline company an easement to build under Lake Oahe. The next day, the pipeline company filed a cross-claim against the Corps in the Standing Rock Sioux Tribe’s D.D.C. suit against the Corps. The pipeline company seeks a declaration that a right of way that the Corps granted the pipeline company in July allows construction to continue. The pipeline company also moved to dismiss Standing Rock’s appeal of the denial of a preliminary injunction against construction as mooted by the pipeline company’s near-completion of the pipeline.
Back at the agency, on December 4, the Corps refused to issue the Lake Oahe easement, citing the need for (1) a robust consideration and discussion of alternative locations for the pipeline crossing the Missouri River, (2) detailed discussion of potential risk of an oil spill and potential impacts to Lake Oahe, and (3) consideration of the extent and location of Standing Rock’s treaty rights. The next day, the pipeline company moved for summary judgment in its D.D.C. cross-claim against the Corps. It is unclear whether the Corps’ decision will survive a change of administrations. President-elect Trump—who, according to the N.Y. Times, holds stock in the pipeline company, Energy Transfer Partners—has pledged to support the Lake Oahe route.
Meanwhile, the North Dakota encampments and conflict between local officials and the protesters continue. Protesters filed an excessive-force class action against certain local governments and officials after those officials, inter alia, turned a water cannon and hoses on protesters in freezing weather. The protesters argue that the defendants’ actions violate their 1st and 4th Amendment rights.
For more information and continued coverage of the cases, visit turtletalk.wordpress.com.
Hogen Adams PLLC
Hogen Adams PLLC
• Copyright law: Statutory damages. The 8th Circuit Court of Appeals recently affirmed $2.57 million in statutory copyright infringement damages. Warner Brothers sued A.V.E.L.A. for copyright infringement related to A.V.E.L.A.’s licensing of images from Gone With the Wind, The Wizard of Oz, and Tom and Jerry films. The district court awarded Warner Brothers $10,000 in statutory damages for each of the 257 acts of infringement. A.V.E.L.A. argued that the total damages award violated due process as it was disproportionate to the offense, oppressive, and unreasonable. In affirming the award, the 8th Circuit noted that the $10,000 award per offense was well within the $750 to $30,000 per offense range set by 15 U.S.C. §504(c)(1) and was consistent with past cases. The circuit court also noted the district court’s findings that A.V.E.L.A. had continued to infringe during the duration of the decade-long litigation and that discovery issues, including missing or inaccurate records on the part of A.V.E.L.A., made calculating actual damages impossible. Therefore, the substantial damages award was necessary to deter future infringement, sufficient to provide restitution, and not clearly erroneous. Warner Bros. Entm’t, Inc. v. X One X Prods., et al., No. 15-3728, 2016 U.S. App. LEXIS 19671 (8th Cir. 11/1/2016).
• Patent law: Stay or consolidation of litigation. Judge Montgomery recently affirmed Magistrate Judge Brisbois’s order denying a motion to stay or alternatively to consolidate proceedings. Graphic Packaging sued Inline Packaging for patent infringement related to food packaging that creates high surface temperatures to brown and crisp food. Inline later sued Graphic for antitrust violations. Graphic’s patent infringement lawsuit had previously been stayed after the Patent Trial and Appeal Board of the United States Patent and Trademark Office instituted an inter partes review, a means of challenging the patentability of issued patent claims. Graphic sought a stay of the antitrust litigation until the completion of the inter partes review or to consolidate the patent and antitrust proceedings for pretrial purposes. In overruling Graphic’s objection, the district court agreed with the magistrate judge that any simplification of issues gained from staying the antitrust litigation pending the inter partes review would be modest because the inter partes review has minimal impact on issues related to threats of sham litigation against competitors and customers and no impact on issues related to misappropriation of trade secrets. Thus, granting a stay would primarily have resulted in delay without much simplification of issues. The district court further reasoned that the sole issue was whether to stay the antitrust litigation, as granting a stay would make the consolidation issue moot and alternatively, granting consolidation would result in a de facto stay because the patent litigation had previously been stayed. Inline Packaging, LLC v. Graphic Packaging Int’l, Inc., Civil No. 15-3183 ADM/LIB, 2016 U.S. Dist. LEXIS 152774 (D. Minn. 11/2/2016).
Tony Zeuli & Joe Dubis
Merchant & Gould
• Landlord-tenant. Minnesota Statutes section 504B.161, subdivisions 1(a)(1) and 1(a)(2) obligate residential landlords to two covenants: (1) the residence is fit for its intended use; and (2) the residence is maintained in reasonable repair. The Minnesota Court of Appeals held that under (1), the covenant of habitability obligation only requires objectively reasonable measures of repair, and under (2), there is no liability for damage to personal property caused in connection with making a reasonable repair. This case concerns pest eradication measures taken by the landlord and subsequent damage to the tenants’ personal property. The residences were infested by bed bugs. The landlord advised the tenants regarding cleaning and disposal of certain personal property, and agreed to pay the cost of a chemical-only treatment. The tenants desired a heat treatment, which was more expensive, and does not appear to be any more effective than a chemical-only treatment. The tenants sued to recover the cost of their personal property, for an application of the heat treatment at no cost, based upon the above-mentioned statutes, and for potential rent abatement. The court of appeals determined that though there is no statutory definition for the term “premises,” the term means the functional building, and therefore the term does not extend to personal property located therein. The court therefore affirmed the district court in holding that subdivision (1)(a)(2) does not provide a mechanism for tenants to recover the value of personal property that is discarded or damaged when the landlord conducts repairs. The court also determined that the covenant of habitability under subdivision (1)(a)(1) does not compel landlords to take or make repairs in only the fashion most preferred by tenants. Landlords have obligations, but the court declined to extend those obligations beyond requiring landlords to cure or attempt to cure defects “within a reasonable time using an effective method of repair.” Rush v. The Westwood Village Partnership, Nos. A16-0249, A16-0250, 2016 WL 7041950, ___ N.W.2d ___ (Minn. Ct. App. 12/5/2016).
• Commercial lease obligations. A case from the 8th Circuit Court of Appeals offers two points of caution to landlords and attorneys: Do not multiply by zero when providing calculations for monetary obligations in agreements; and follow through with collections and enforcement. The Gap operates a retail store at the Columbia Mall in Grand Forks, ND and asserts that its lease does not require it to pay for heating, ventilation, and air conditioning (HVAC) expenses. HVAC expenses are commonly paid by landlords and billed back to tenants based on an agreed-upon ratio so that all tenants share in the monetary burden derived from common benefits, otherwise known as common area maintenance (CAM) expenses. Usually, a tenant pays estimated CAM charges throughout the year, and conducts a “true-up” with the landlord at the end of the year based upon the actual expenses, whereby the tenant receives a rebate or must pay additional money. Here, Gap didn’t pay HVAC expenses for the first 10 years of the lease because it did not receive any bills. The landlord began sending HVAC bills in 2011 and Gap paid until it objected in 2013. The Federal District Court for the District of North Dakota determined that GAP did not owe any HVAC expenses. The lease states that Gap owes nothing for HVAC expenses in the first year, and then the obligation in subsequent years is the lesser of either (a) Gap’s agreed-upon ratio of actual expenses, or (b) the amount that is a 5 percent increase over the previous-year’s expenses. The district court interpreted this to mean that the lease is unambiguous, the first-year obligation was zero dollars, and therefore the lesser obligation for the next year (and every subsequent year) was a 5 percent increase over zero, which is zero. The court of appeals, however, was not entirely convinced. The court determined that a statement of “N/A” with respect to initial CAM charges in the lease suggested ambiguity because it could mean either that the parties understood that Gap had no CAM obligations at all, or just at the start of the lease. Yet the court nevertheless affirmed the district court’s grant of summary judgment, because there was sufficient evidence that the parties intended for Gap to be free from CAM obligations. The landlord, after all, waited 10 years to attempt to collect CAM payments, and submitted an estoppel certificate about four years into the lease that stated that Gap’s CAM expenses were “N/A,” just as they were at the start. The Gap, Inc. v. GK Development, Inc., No. 16-1223, 2016 WL 7156785, ___ F.3d ___ (8th Cir. 12/8/2016).
Meagher & Geer, PLLP
PROBATE AND TRUST LAW
• 2017 indexed amounts. The IRS has published the inflation adjustments applicable in 2017. See Rev Proc 2016-55, IR-2016-139 (10/25/2016). The following adjustments relate to estate planning:
- Unified estate and gift tax exclusion amount applicable to gifts made and estates of decedents dying in 2017 will be $5,490,000 (up from $5,450,000).
- Generation-skipping transfer (GST) tax exemption amount will increase to $5,490,000 for transfers in 2017.
- Gift tax annual exclusion amount remains steady at $14,000 for gifts made in 2017.
- The decrease in value resulting from the use of special valuation is limited to $1,120,000 for decedents dying in 2017. This is an increase of $10,000 over the 2016 special use valuation reduction limit.
- The annual exclusion amount for gifts made in 2017 to noncitizen spouses will be $149,000 (up from $148,000 in 2017).
Lindquist & Vennum LLP
• Court has jurisdiction over whistleblower’s request for award. Analogizing to its collection due process and deficiency jurisprudence, the United States Tax Court held that it had jurisdiction to hear a whistleblower’s section 7623(b) award review petition, even though the petition was filed years after the IRS sent its original, final disallowance determination letter. The court reasoned that to be a “determination” and trigger the 30-day jurisdictional filing period, notices of determination must be mailed to a last known address. Since the original, final disallowance had not been mailed to the taxpayer’s last known address, it was the subsequent letter, mailed to the proper address, that set the 30-day clock in motion. The court rejected, however, the whistleblower’s argument that because the original letter was signed by the wrong person, and because the subsequent letter attached a copy of original, there was no valid jurisdiction-triggering determination on which to base the petition. The court held instead that the director properly delegated his authority and there is no requirement that the director himself sign letter. Whistleblower 26876-15W v. Comm’r, 147 TC No. 12 (11/9/2016).
• Attorney not “party” for purposes of award of costs. An attorney represented a taxpayer in an underlying proceeding and was owed attorney fees following the resolution of the underlying proceeding. The client and attorney agreed that in lieu of fees from the client, the attorney would receive any administrative fees awarded under section 7430. Section 7430 provides for the award of “reasonable administrative costs” to “prevailing parties” in “any administrative or court proceeding… in connection with the determination, collection, or refund of any tax, interest, or penalty…” 26 USC 7430. The commissioner denied the attorney’s application for an award, and then moved to dismiss the attorney’s appeal to the tax court of the commissioner’s denial. The commissioner argued that the attorney was not a proper party under the statute, and that therefore the court lacked jurisdiction.
After reciting its authority (or jurisdiction) to determine its own jurisdiction, the court turned to the statute and found two distinct criteria in the statute. First, the person seeking an award must be a “party;” next, that award-seeker must be “prevailing.” These requirements do not seem to offer much in the way of ambiguity, but the attorney was able to point to cases in which individuals who were not named parties nonetheless were considered “parties” for purposes of application of section 7430. In particular, the court discussed the Dixon exception—an exception “narrowly cabined to situations involving complex tax litigation where similarly situated taxpayers have foregone [sic] individual litigation to further their independent legal claims and shared in the costs of their representative litigation.” Greenberg v. Comm’r, 147 T.C. No. 13 at *3 (11/9/2016) (quoting Estate of Palumbo v. United States, 675 F.3d 234 (3d Cir. 2012)). Although the court recognized that the term “party” does leave room for some interpretation, the court reasoned that the Dixon exception was not applicable here because the attorney was acting as his client’s representative and not in any way that could be interpreted as a party. The court also rejected the attorney’s “real party in interest” argument (prior to the court’s opinion, the attorney had dropped an argument that the client effectively assigned the claim to the attorney (see 31 USC sec. 3727(b) (barring the assignment of a legal suit against the United States government)). The attorney’s petition was dismissed for lack of jurisdiction. Greenberg v. Comm’r, 147 T.C. No. 13 (11/9/2016).
• Property tax: Sale near assessment date “best indicator of value.” A property that had been used as an automobile dealership and then sat unused and for sale for several years was assessed at over $2 million in January 2012. At the end of the year, the property was sold for $600,000. The property had been “aggressively marketed” for several years before a real estate development company, the petitioner in the instant dispute, purchased it. Although a sale that is proximate in time to an assessment is good evidence of market value, it is not market value. As the court quoted, “‘one sale does not make a market.’” Zephyr Group, LLP v. Washington Co., File No. 82-CV-13-1668, 2016 WL 7108568 (11/30/2016) (quoting Schneider v. Chisago Co., No. CV-05-304, 2006 WL 995622 at *3 (Minn. T.C. 4/3/2006)). The tax court therefore reviewed sales evidence, as well as the parties’ appraisals, before reaching its valuation determination. The court first addressed whether the sale for $600,000 was an arm’s length transaction, since it is only when a sale is an arm’s length transaction that it is probative of market value. The court rejected the county’s argument that because the sale was “lender mediated,” the sale should be less persuasive. A number of factors seemed persuasive to the court, including the aggressive marketing of the property, the length of time the property was on the market, and the extended and gradual reduction of offering price. The court then turned to the parties’ appraisals, and concluded that the county’s appraisal was not sufficiently probative to warrant any reliance. Similarly, the appraisal offered by the taxpayer’s expert was not sufficiently probative to merit weight in the court’s ultimate value conclusion. Noting that appraisals are merely attempts to “retrodict how the market would have responded to the subject property,” the court returned to the recent sale as the best evidence of the value. Zephyr Group, LLP v. Washington Co., File No. 82-CV-13-1668, 2016 WL 7108568 (11/30/2016).
• Tax and the dormant commerce clause. In Quill v. North Dakota, the Supreme Court prevented the state of North Dakota from compelling office supply company Quill to collect and remit sales and uses taxes for sales made to North Dakota businesses. Although Quill had sufficient nexus with the state for due process purposes, the Court held that some different, and higher, nexus would be required to satisfy the requisites of the dormant commerce clause. Because Quill did not have the requisite nexus in the state, North Dakota could not conscript the company to be its tax collector. The Court’s dormant commerce clause tax jurisprudence has been difficult to apply as sales practices have evolved. Now, if the petitioner in American Business USA Corporation v. Florida Department of Revenue gets its way, the Court might revisit, and possibly clarify, how Quill applies to our increasingly large e-economy. The Court has not yet granted cert, but the issue, as framed by the petitioner, is “Whether a state can collect sales tax on out-of-state property ordered over the internet for out-of-state delivery, by relying on this court’s decision in Quill v. North Dakota and the state’s connection to the corporation that accepts the order and arranges the sale, or whether such a tax violates both the due process clause and dormant commerce clause of the United States Constitution by imposing a sales tax on the out-of-state transfer of tangible personal property.”
Mitchell Hamline School of Law
Jessica Dahlberg, Grant Thornton
TORTS & INSURANCE
• No-fault; unlicensed insurers. Plaintiff, an Illinois resident, purchased an insurance policy from defendant. The policy, written to comply with Illinois law, provided only $1,000 for medical payments—it did not provide for at least $20,000 in medical expense loss as required by Minnesota’s No-Fault Act. After plaintiff moved to Minnesota, he was injured in a car accident. Defendant denied the claim asserting that the No-Fault Act does not require it to provide benefits because it is not “licensed to write motor vehicle accident reparation and liability insurance” in Minnesota. An arbitrator issued an award in favor of plaintiff for $19,128. The district court affirmed the arbitrator’s award, but the court of appeals reversed.
The Minnesota Supreme Court reversed the decision of the court of appeals and reinstated the arbitrator’s award. The court held that the requirements imposed by Minn. Stat. §65B.50, subd. 2—that “every contract of liability insurance for injury, wherever issued… includes basic economic loss benefit coverages and residual liability coverages… while the vehicle is in this state”—unambiguously encompassed all policies of insurance, even those issued by insurers that are not licensed by the State of Minnesota. The Court held that its reading was consistent with subdivision 1, which applied only to licensed insurers, because subdivision 1 imposed additional requirements on licensed insurers not applicable to unlicensed insurers. The Court recognized that its application of subdivision 2 to unlicensed, out-of-state insurers could present one or more constitutional issues. But it declined to address these issues because the defendant did not raise a constitutional challenge. Founders Ins. Co. v. Yates, A15-1174 (Minn. 12/7/2016). http://mn.gov/law-library-stat/archive/supct/2016/OPA151174-120716.pdf