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

Notes & Trends – November 2017

COMMERCIAL AND CONSUMER LAW
ADMINISTRATIVE ACTION

• Regulation CC changes; DFPB on overdrafts. Despite the recent proliferation in alternative payment platforms (from Venmo to prepaid cards to Bitcoin), checks and checking accounts remain central to transactions in the American economy. According to the 2016 Federal Reserve Payments Study, as of 2015, checks and debit card transactions accounted for 70 billion U.S.-based transactions. Two recent developments may have lasting impacts on these transactions.

The first was the publication by the Federal Reserve in June 2017 of a final rule making significant changes to Regulation CC, which governs check transactions. The Regulation CC updates, which go into effect 7/1/2018, are intended to further modernize check processing efforts enacted under the Check 21 Act, which first allowed for the presentment of substitute checks in 2004. This rule, along with the advent of the iPhone three years later, led to the development of mobile apps that allowed users to deposit checks simply by taking a picture of the check (as well creating a new type of fraud where check presenters would deposit a check once electronically and once physically).

The updates to Regulation CC will align the rule with efforts by the Federal Reserve to increase the speed and reliability of check processing by encouraging banks to submit, accept, and return checks electronically. The updates also apply existing warranties to checks that are collected electronically, while adding new warranties and indemnities to checks that are electronically created (under old Regulation CC, a check had to take a physical, printed form in order to be treated as a check). The updates additionally seek to address the dual presentment problem, requiring each bank that transfers or presents an electronic check and is paid to warrant that there will be no other presentment of an original check; the presenting bank will have to indemnify a depositary bank that accepts a paper check (this will likely require banks offering remote deposit capture to adjust their rules for accepting check images for presentment). These rule changes should help in the Fed’s efforts to increase electronic handling of check processing and clearing, making use of checks faster and more reliable.

The second development came from the Consumer Financial Protection Bureau, which on 8/4/2017 unveiled new overdraft disclosure prototypes to replace the current overdraft disclosure form found in Regulation E (implementing the Electronic Funds Transfer Act) for banks and credit unions to use to disclose overdraft fees and obtain a consumer’s consent for certain overdraft services. The CFPB also issued a new report (similar to reports issued in June 2013 and July 2014) on the users of overdraft services and the costs associated with overdraft services.

The CFPB, in reviewing roughly 240,000 accounts, found that roughly 9 percent of accounts paid 79 percent of all overdraft fees. The CFPB found overdrafters generally had lower credit scores, were less likely to have a general purpose credit card, had low end-of-day balances, and made lower monthly deposits compared to accountholders that did not incur overdraft charges.

The CFPB offered no conclusions based on the report and there is no rule currently expected from the CFPB regarding overdrafts, but it is reasonable to infer from the report and the prototype disclosures that the agency believes overdraft fees burden a limited consumer population.

An ironic link between these two developments is that as payments become faster, more consumers may find themselves using overdraft services. Prior to the Check 21 Act, the time between writing and submitting a check and the time when the funds moved from an account based on a check, or the “float,” could be two to four days, giving consumers a liquidity cushion while their checks cleared. After Check 21 and the adoption of check image presentment, the float significantly dropped, with checks generally clearing within a day. As all payment channels process transactions faster, the need to manage account shortfalls will potentially increase. Consumers not utilizing credit products will need to either use liquidity management products such as overdraft services, more closely watch account balances (or use technology to assist in that monitoring), or be willing to accept declined transactions.

Andrew Toftey (guest contributor)

Lindquist & Vennum

CRIMINAL LAW
JUDICIAL LAW

Search and seizure: Use of narcotics dog inside secured apartment building is a search. The police received a tip that appellant was selling methamphetamine from an apartment and used a narcotics detection dog to examine the apartment doors on the floor where appellant’s apartment was located from the common hallway. The outer doors of the apartment building are secured, but a lock box is kept outside with a key to enable law enforcement to enter the building. The police accessed the inner hallway of the building using that key. The detection dog alerted to the presence of narcotics in the apartment where appellant was staying. The police then obtained a search warrant for the apartment, and the search revealed methamphetamine, firearms, ammunition, and several digital scales. Appellant was also located inside the apartment at the time of the search. Appellant was subsequently charged with first-degree sale, first-degree possession, and possession of a firearm by an ineligible person. He moved to suppress the evidence found during the search, claiming that the police should have obtained a warrant prior to using the narcotics dog in the apartment building hallway. His motion was denied, and appellant was found guilty of the drug and firearm possession offenses.

The court of appeals rejects appellant’s argument that the apartment hallway is “curtilage,” as that issue was disposed of in State v. Luhm, 880 N.W.2d 606 (Minn. Ct. App. 2016). However, the court finds that there is a legitimate expectation of privacy associated with an apartment door inside a secured apartment building.

The home is recognized as a zone of privacy, and the 4th Amendment protects persons from the warrantless use of sense-enhancing technology that is not in general public use to obtain information regarding the interior of the home that could not otherwise be obtained without a physical intrusion into the home. A narcotics detection dog is a form of “sense-enhancing technology” and, when employed at the door outside of an apartment, in the hallway of a secured apartment building, is used to obtain details of the apartment that were not otherwise discernible. This is an invasion upon a legitimate expectation of privacy. Under the Minnesota constitution, the use of a narcotics detection dog in the common area of a secured building is a search, which requires ether a warrant or exigent circumstances that justify an exception to the warrant requirement. State v. Cortney John Edstrom, Ct. App. 9/5/2017.

• Theft: Motor vehicle theft requires only adverse possession of vehicle. Respondent was charged with theft of a motor vehicle after police found him sitting in J.V.’s vehicle, parked outside J.V.’s home, with the doors locked and rear lights illuminated. The district court dismissed the charge, finding no evidence that respondent had taken or driven J.V.’s vehicle. The court of appeals affirmed.

The motor vehicle theft statute states that a person commits theft if he “takes or drives a motor vehicle without the consent of the owner…, knowing or having reason to know that the owner… did not give consent.” Minn. Stat. 609.52, subd. 2(a)(17). The question here is whether respondent “took” or “drove” J.V.’s vehicle—that is, whether adversely possessing a motor vehicle rises to the level of a taking.

The Court first finds that the statute, as applied to the facts of this case, is ambiguous, pointing to the many available dictionary definitions of the terms. Looking to three canons of interpretation, the canon against surplusage, the related-statutes canon, and the imputed-common-law-meaning canon, the Court holds that all that is required to “take” a motor vehicle is to adversely possess it.

The Court notes that both the district court and court of appeals relied on the rule of lenity, but reaffirms that the rule of lenity applies only after the other canons of construction have been exhausted and what remains is a grievously ambiguous statute. State v. Somsalao Thonesavanh, Sup. Ct. 9/6/2017.

Disorderly conduct: Prohibition against disturbing assemblies or meetings violates 1st Amendment. Following a disturbance at a city council meeting, at which appellant refused to move her chair after multiple requests and exchanged comments with a number of city employees, causing the meeting first to be rescheduled and then to start late, appellant was charged with disorderly conduct for disturbing a public meeting. The district court denied appellant’s motion to dismiss for lack of probable cause and on 1st Amendment grounds. A jury found appellant guilty, and she appealed, arguing that Minn. Stat. §609.72, subd. 1(2), is both vague and overly broad, in violation of the 1st Amendment. The court of appeals affirmed her conviction.

The Court first finds that the statute regulates protected and unprotected speech, because it prohibits any conduct or speech that disturbs an assembly or meeting. Next, it finds the statute substantially overbroad. Its mens rea element “know[ ], or hav[e] reasonable grounds to know that [the activity] will, or will tend to, alarm, anger, or disturb others or prove an assault or breach of the peace”) encompasses even negligent activity, and its actus reus element (any act that “disturbs an assembly or meeting, not unlawful in its character”) is even broader, placing no meaningful limit on the statute’s scope.

The statute is invalidated, as the Court finds no reasonable narrowing construction is available to remedy the statute’s overbreadth. Each possible narrowing construction would require the court to rewrite the statute, not simply interpret it. State v. Robin Lyne Hensel, Sup. Ct. 9/13/2017.

Criminal procedure: State v. Her’s new rule of criminal procedure does not apply to collateral review of sentence. Respondent was required to register as a predatory offender for a 1995 offense. In 2005, he was charged with failing to register. The complaint stated respondent was a level III offender, but made no reference to a conditional release period. Respondent pleaded guilty pursuant to a plea agreement. In 2007, the district court amended his sentence to add the required 10-year conditional release period. Respondent filed a motion to correct his sentence in 2014, requesting that the conditional release period be vacated, because a jury had not found he was a level III risk offender at the time he failed to register. His motion was denied. Two weeks later, State v. Her, 862 N.W.2d 692 (Minn. 2015), was decided, and respondent moved for reconsideration based on that case. The district court granted his motion, applied Her retroactively, and vacated the conditional release term. The court of appeals affirmed.

 Her held that the fact that a defendant was a risk level III offender at the time of the offense must be admitted by the defendant or found by a jury beyond a reasonable doubt before the district court may impose a 10-year conditional release period for failing to register as a predatory offender.

Applying the standard for retroactivity established in Teague v. Lane, 489 U.S. 288 (1989), the Supreme Court finds that Her established a new rule of constitutional criminal procedure, and was not “a predictable extension of pre-existing doctrine.” Her was based on U.S. Supreme Court cases that established that a judge may not increase the penalty for a crime beyond the statutory maximum based on facts not found by a jury or admitted by the defendant, except for the fact of a prior conviction. However, at the time of respondent’s conviction, the U.S. Supreme Court had not clarified the scope of the prior conviction exception, and the Minnesota Supreme Court had extended the exception beyond what it now encompasses. At that time, the question of whether an offender’s assigned risk level falls within the prior conviction exception was susceptible to debate, and this question was not addressed until Her.

Because Her established a new rule, it may not be applied retroactively, and respondent’s motion to correct his sentence should have been denied. The court of appeals is reversed. State v. Brian William Meger, Sup. Ct. 9/20/2017.

Controlled substances: “School zone” includes all city blocks surrounding school property. After a jury trial, appellant was found guilty of second-degree sale controlled substance under Minn. Stat. §152.022, subd. 1(6), which prohibits selling a controlled substance in a school zone. Appellant’s petition for post-conviction relief, which argued the evidence was insufficient to support that conviction, was denied. On appeal, appellant claims his residence, where the sale took place, was not located within one city block of the school.

Held, a “school zone” includes all city blocks that surround a school property. Minn. Stat. 152.01, subd. 14a, defines “school zone” as “the area surrounding school property… to a distance of 300 feet or one city block, whichever is greater.” This definition is different from “park zone,” which is “the area within 300 feet or one city block… of the park boundary.” Minn. Stat. 152.01, subd. 12a. The use of “surround” shows the Legislature’s intent to establish a drug-free perimeter around school property. Appellant’s house is within the one-block distance from the school. Edward John Lapenotiere, Jr. v. State, Ct. App. 9/25/2017.

Evidence: Conviction for crime that occurred after charged offense may be used to impeach defendant. At appellant’s trial for first-degree property damage, the district court permitted the state to introduce, for impeachment purposes, evidence of appellant’s South Dakota conviction for conspiracy to commit second-degree robbery. The South Dakota conviction took place after appellant’s alleged property damage in Minnesota, but before the trial on those charges. A jury found her guilty of the property damage offense.

In this case of first impression, the court of appeals holds that MRE 609 does not preclude evidence of a criminal defendant’s conviction from being admitted to impeach the defendant’s trial testimony simply because the conviction and the offense underlying it occurred after the defendant’s charged offense. While MRE 609 not refer to “past” or “prior” convictions, it is written in the past tense. It is unclear, however, if it refers to convictions that occurred prior to the charged offense or those that occurred prior to the testimony being impeached. The purpose of the rule is a witness’s testimony, and any conviction occurring before a witness’s testimony bears on their credibility. There is no basis in the rule for distinguishing between convictions that occurred prior to the charged offense and those that occurred after. State v. Kelsey Anne Souder, Ct. App. 9/25/2017.

Sentence: Multiple victim aggravating factor not applicable to sex trafficking and prostitution charges involving single victim. Appellant was convicted of 10 counts of various offenses, including sex trafficking, criminal sexual conduct, and solicitation to practice prosecution. Following a sentencing trial, the jury found 15 aggravating factors. The district court imposed consecutive sentences for four counts of sex trafficking and three counts of solicitation to practice prostitution, and concurrent sentences for the criminal sexual conduct and domestic assault offenses, for a total sentence of 700 months. On appeal, appellant raises multiple issues, including whether his sentence was unlawfully enhanced.

The statutory maximum sentence for second-degree sex trafficking and second-degree solicitation to practice prostitution is 15 years, unless certain statutory aggravating factors are present, which then raises the maximum to 25 years. Under the sentencing guidelines, when an aggravating factor is present, the presumptive sentence is the guideline sentence (or mandatory minimum, whichever is greater), plus 48 months.

The state argues one statutory aggravating factor was present in this case: The offense involved more than one sex trafficking victim. However, appellant argues the jury was never asked whether, and he never admitted that, more than one sex trafficking victim was involved, so his sentence violates Blakely and Apprendi.

The court of appeals finds that neither Blakely nor Apprendi, which set forth procedures for imposing an aggravating sentence above the statutory range, are implicated here. Section 609.322, subd. 1(b), establishes the statutory maximum sentence for a crime committed under section 609.322, subd. 1a, when the aggravating factor of multiple victims is present, and the sentencing guidelines establish the presumptive sentence for such an offense. The multiple victims aggravating factor, then, does not increase the penalty for the offense beyond the prescribed statutory maximum, because such a penalty is established by statute.

However, appellant’s sentence violates the plain language of section 609.322. Under that statute, the state can charge an offender suspected of a sex trafficking or prostitution scheme with a single offense involving more than one victim, which would implicate the multiple victim aggravating factor. The state can also charge an offender, as it did in this case, with a separate sex trafficking or prostitution offense for each individual victim, in which case the multiple victim aggravating factor would not apply, because each separate count references only one victim. The term “offense” under section 609.322 refers to each individually charged offense, not a general, overarching sex trafficking or prostitution scheme.

Because appellant was charged with seven separate sex trafficking and prostitution counts under section 609.322, and each separate count alleges a single different victim, the multiple victims aggravating factor does not apply. While the jury found other aggravating factors that may have supported an upward departure, the district court did not indicate it was departing from the guidelines. Reversed and remanded for resentencing. State v. Rashad Ramon Ivy, Ct. App. 9/25/2017.

Minnesota Imprisonment and Exoneration Remedies Act: Prosecutorial dismissal requirement of MIERA violates equal protection. Respondent’s conviction for second-degree manslaughter based on culpable negligence was reversed by the Supreme Court in 2009, after which appellant petitioned for an order under Minn. Stat. §590.11 declaring her eligible to file a claim for compensation under the Minnesota Imprisonment and Exoneration Remedies Act (MIERA). Her petition was denied, because the post-conviction court found she does not meet the definition of “exonerated,” as the prosecutor did not dismiss the charges after her conviction was reversed. The court of appeals reversed, finding the prosecutorial dismissal requirement of the MIERA violates equal protection and severing that requirement from the MIERA.

First, the Supreme Court finds that a person is “exonerated” under the MIERA only if the prosecutor has dismissed the charges, even if an appellate court has reversed or vacated a conviction on grounds consistent with innocence. Respondent does not satisfy this statutory definition of “exonerated.”

Second, applying the rational basis test, the Court concludes that the prosecutorial dismissal requirement of the MIERA violates equal protection. The MIERA divides claimants into three groups: (1) those whose convictions are “vacated or reversed,” but not dismissed by the prosecutor, (2) those with charges dismissed by the prosecutor, whose convictions are never “vacated or reversed,” and (3) those whose charges are dismissed and their convictions are “vacated or reversed.” Only the third group is eligible for compensation under the MIERA, but the court finds no rational basis for the statute’s classification of claimants—that is, for separating claimants based on whether the prosecutor has dismissed the charges that no longer exist, a meaningless, and legally impossible, act.

Third, to remedy the constitutional violation, the Court severs the prosecutorial dismissal requirement from the remainder of the MIERA. Danna Rochelle Back v. State, Sup. Ct. 9/27/2017.

Frederic Bruno 

Bruno Law

Samantha Foertsch

Bruno Law

ENVIRONMENTAL LAW
JUDICIAL LAW

DC Circuit requires FERC to consider GHG emissions in NEPA pipeline analyses. In August, the D.C. Circuit Court of Appeals held that the Federal Energy Regulatory Commission (FERC) was required under the National Environmental Policy Act (NEPA) to estimate the amount of downstream greenhouse gas (GHG) emissions resulting from its approval of a natural gas pipeline.

In February 2016, FERC issued a certificate of public convenience and necessity under Section 7 of the Natural Gas Act, 15 U.S.C. §717f, allowing for the construction of the Southeast Market Pipelines Project, which is designed to carry over 1 billion cubic feet of natural gas per day across Alabama, Georgia, and Florida. Although FERC prepared an environmental impact statement (EIS) before approving the project, as required under NEPA, 42 U.S.C. §4332(2)(C), the EIS did not discuss GHG emissions resulting from the burning of the natural gas that will travel through those pipelines.

During a NEPA review, an agency must consider the reasonably foreseeable indirect environmental effects of the project under consideration. 40 C.F.R. §1502.16(b). The D.C. Circuit concluded that the natural gas traveling through the proposed pipelines would be burned at power plants, generating both electricity and carbon dioxide, which is a primary contributing factor in global climate change. This, the court held, constituted a “reasonably foreseeable indirect environmental effect[]” of the construction of pipelines, and “FERC should have estimated the amount of power-plant carbon emissions that the pipelines will make possible” in the EIS.

Nonetheless, in its decision, the court explicitly “[did] not hold that quantification of [GHG] emissions is required every time those emissions are an indirect effect of an agency action.” The court recognized that in some cases “quantification may not be feasible,” referring to Sierra Club v. U.S. Dep’t of Energy, 867 F.3d 189, (D.C. Cir. 8/15/2017). In that case, the court upheld the Department of Energy (DOE) approval of a liquefied natural gas export terminal. The court agreed with the DOE’s claim that it could not determine any related upstream GHG impacts due to the fact that “unconventional sources of natural gas are spread throughout the 48 states.” Without knowing where the natural gas production would occur, the court held that the DOE was not required to “foresee the unforeseeable” effects in the EIS.

On the other hand, in this case, the court noted that FERC could estimate GHG emissions “largely influenced by assumptions rather than direct parameters about the project,” and that educated assumptions are inevitable in the NEPA process. The court ruled that FERC must either quantify and consider the project’s downstream carbon emissions or explain in more detail why it cannot do so. Sierra Club v. FERC, 867 F.3d 1357 (D.C. Cir. 8/22/2017).

9th Circuit furthers split on viability of CERCLA contribution claims based on non-CERCLA settlements. In August the U.S. Court of Appeals for the 9th Circuit issued an opinion regarding when a potentially responsible party (PRP) may bring a contribution claim under the Comprehensive Environmental Response, Compensation & Liability Act (CERCLA). In addition, the 9th Circuit interpreted when a PRP has “resolved its liability” for purposes of CERCLA contribution claims.

Section 113(f)(3)(B) of CERCLA allows a PRP to pursue monetary contribution from other non-settling PRPs if the PRP has “resolved its liability to the United States or a State for some or all of a response action or for some or all of the costs of such action in an administrative or judicially approved settlement.” At issue in Asarcow was whether, for purposes of section 113(f)(3)(B), a corrective action under the Resource Conservation & Recovery Act (RCRA) qualifies as a “response action” such that a settlement agreement resolving the PRP’s liability can give rise to a contribution claim.

Other federal circuits ruling on the same issue have reached divergent results. In 2013, the 3rd Circuit ruled that Section 113(f)(3)(B) “does not require that a party have settled its liability under CERCLA in particular to be eligible for contribution.” Trinity Industries, Inc. v. Chicago Bridge & Iron Co., 735 F.3d 131, 136 (3d Cir. 2013). Conversely, in a 2005 ruling, the 2nd Circuit held that Section 113(f)(3)(B) created a contribution right “only when liability for CERCLA claims, rather than some broader category of legal claims, is resolved.” Consolidated Edison Co. of New York, Inc. v. UGI Utilities, Inc., 423 F.3d 90, 95 (2d Cir. 2005). In the case at hand, the 9th Circuit sided with the 3rd Circuit and held that a non-CERCLA settlement agreement may be eligible to form the basis for a CERCLA contribution action under Section 113(f)(3)(B). Citing CERCLA’s “broad remedial purpose,” the 9th Circuit found that there was no intent by Congress to limit eligible response actions under Section 113(f)(3)(B) to only those actions initiated under CERCLA settlements.

On the issue of what it means for a PRP to have “resolved its liability,” the 9th Circuit disagreed with a decision of the 7th Circuit that held a PRP had not “resolved its liability” where EPA reserved its right to seek relief to enforce the terms of the agreement, and EPA only conditionally promised to release the PRP from liability upon completion of remediation. “If a covenant not to sue conditioned on completed performance negated resolution of liability,” the 9th Circuit wrote, “then it is unlikely that a settlement agreement could ever resolve a party’s liability.” In addition, the court noted, “An agreement may ‘resolve’ a PRP’s liability once and for all without hobbling the government’s ability to enforce its terms if the PRP reneges.” Asarco LLC v. Atlantic Richfield Company, 866 F.3d 1108 (9th Cir. 2017).

Minnesota district court grants injunction to stop construction on Fargo-Moorhead flood diversion project. In September the Federal District Court for the District of Minnesota ordered an injunction on the $2.2 billion Fargo-Moorhead diversion project. The project is designed as a series of dams, levees, and channels to redirect high water of the flood-prone Red River of the North around the cities and suburbs of Fargo, ND and Moorhead, MN.

A major flood event in 2009 prompted the U.S. Army Corps of Engineers (Corps) and cities of Fargo and Moorhead to begin planning the project. After the project was authorized by Congress and the president through the Water Resources Reform and Development Act of 2014 (WRRDA), the Corps signed a project partnership agreement (PPA) with the Fargo-Moorhead Flood Diversion Board of Authority to divide construction responsibilities into “Federal Work” and “Non-Federal Work.” In early 2016, the diversion authority applied for a Dam Safety and Public Waters Work Permit from the Minnesota Department of Natural Resources (DNR). However, in late 2016, DNR denied the permit. Despite the denial of the permit, the Corps and diversion authority moved forward with the project and have begun construction.

In March 2017, the Richland-Wilkins Joint Powers Authority (JPA) and DNR filed complaints against the Corps and diversion authority. The DNR and JPA also filed motions for preliminary injunctions to enjoin the Corps and diversion authority from continuing construction on the project until DNR issues a permit.

Pursuant to the Administrative Procedure Act, DNR and JPA claimed that the Corps and diversion authority’s PPA was arbitrary and capricious because the partnership agreement allowed the diversion authority to begin construction of the project without a permit from DNR. This violated 33 U.S.C. §2232, DNR and JPA argued, which states that before carrying out a water resources development project, non-federal interests, in this case the diversion authority, must “obtain any permit or approval required… under State law…” §2232(b)(2)(A). Furthermore, DNR and JPA claimed the PPA was arbitrary and capricious because it also violated WRRDA §7002, which authorized the Corps to carry out the project in accordance with the final environmental impact statement (FEIS). DNR and JPA emphasized the FEIS’s acknowledgement that non-federal sponsors were required to obtain a DNR protected waters permit, and that the project would comply with federal and state laws and regulations. The court held that both of these claims show a likelihood of success on the merits necessary to grant a preliminary injunction.

The court ordered the Corps and diversion authority to cease all construction work on the Fargo-Moorhead Flood Risk Management Project until further order of the court. The court also strongly urged the parties to find a way to work together to provide permanent flood protection for communities along the Red River. On October 4, North Dakota Gov. Doug Burgum and Minnesota Gov. Mark Dayton, apparently taking the court’s advice, agreed to form a collaborative working group, with eight members from each state, to find a viable path forward. Richland/Wilkin Joint Powers Auth. v. U.S. Army Corps of Eng’rs, 2017 WL 3972471 (D. Minn. 9/7/2017).

ADMINISTRATIVE ACTION

• EPA proposes repeal of Clean Power Plan. On 10/10/2017, the U.S. Environmental Protection Agency (EPA) issued a notice of proposed rulemaking (NPRM) to repeal the Carbon Pollution Emission Guidelines for Existing Stationary Sources: Electric Utility Generating Units (EGUs), commonly referred to as the Clean Power Plan (CPP), as promulgated on 10/23/2015. The proposed rule is in response to President Trump’s 3/28/2017 Executive Order 13783, which directed the EPA to determine whether the CPP exceeds the bounds of EPA’s statutory authority.

Under section 111 of the Clean Air Act, performance standards for pollutants such as CO2 must be based upon the degree of emission limitation achievable through the application of the “best system of emission reduction” (BSER). In the 2015 CPP rule, EPA identified four broad “building blocks” that together constitute BSER for existing power plants: making plants more efficient; increasing the use of low-carbon power sources such as natural gas; using more low-carbon power sources (e.g., solar, wind); and increasing energy efficiency. On the basis of these BSER building blocks, the CPP established CO2 emission performance rates for two subcategories of affected electric generating units (EGUs)—fossil fuel-fired electric utility steam generating units and stationary combustion turbines. The rule then set state-specific CO2 goals, expressed as both emission rates and as mass, that reflect the subcategory-specific CO2 emission performance rates and each state’s mix of affected EGUs subject to the two performance rates. States could determine the methods they will use to comply with the CO2 goals, which could include emissions credit trading between sources or even between states.

In the NPRM, EPA explains its determination that the CPP was based upon an overly broad interpretation of section 111 of the act. In particular, the agency notes all EPA regulations under section 111 except for the CPP are based on a BSER consisting of technological or operational measures that can be applied to or at a single source. By contrast, the CPP set CO2 emission guidelines for existing power plants that “can only realistically be effected by measures that cannot be employed to, for, or at a particular source,” such as measures that would “require power generators to change their energy portfolios through generation-shifting (rather than better equipping or operating their existing plants).” EPA concluded that this “raised substantial concerns that the CPP would necessitate changes to a state’s energy policy, such as a grid-wide shift from coal-fired to natural gas-fired generation, and from fossil fuel-fired generation to renewable generation.” Accordingly, EPA proposes to interpret BSER in a way that only considers “measures that can be applied to or at the source” and to repeal the CPP. The NPRM simply proposes repealing the CPP; EPA “has not determined the scope of any potential rule under CAA section 111(d) to regulate greenhouse gas (GHG) emissions from existing EGUs, and, if it will issue such a rule, when it will do so and what form that rule will take.” Comments on the NPRM must be received by EPA on or before 12/15/2017. 82 Fed. Reg. 48035 (10/16/2017).

• MPCA proposes 2018 impaired waters list. On 10/11/2017, the Minnesota Pollution Control Agency (MPCA) released its proposed Section 303(d) list of impaired waters. Under Section 303(d) of the federal Clean Water Act, 33 U.S.C. §1313(d), every two years, each state must identify and list waters for which technology-based limits are not strict enough to achieve or maintain state water quality standards and submit the list to EPA for approval. For each body of water on the 303(d) list, a state must establish a “total maximum daily load” (TMDL) for each pollutant that is “preventing or [is] expected to prevent attainment of water quality standards.” 40 C.F.R. §130.7(c)(1)(ii). The MPCA reports that the number of impaired Minnesota waters on the draft 2018 303(d) list totals 5,101 impairments, with 618 new listings, covering a total of 2,669 water bodies across the state (many water bodies are impaired by several pollutants). The agency is proposing to remove nine lakes and streams whose water quality has improved. Overall, 40 percent of waters in Minnesota are impaired; the other 60 percent are in good condition. Minnesota is detecting more impaired waters, the MPCA explained on its website, because of its 10-year plan to study all 80 major watersheds in the state. www.pca.state.mn.us/2018-impaired-waters-list.

Jeremy P. Greenhouse
The Environmental Law Group, Ltd.

Jake Beckstrom 

Vermont Law School, 2015

Erik Ordahl 

Mitchell-Hamline School of Law, 2017 

 

EMPLOYMENT & LABOR LAW
JUDICIAL LAW

Sex discrimination; dismissal upheld. A sex discrimination lawsuit was properly dismissed after the employee quit and claimed constructive discharge due to a hostile environment. The 8th Circuit Court of Appeals held that the employee failed to give her employer a reasonable opportunity to resolve his concerns, and she did not show that the allegedly offensive conduct was unwelcome. Blake v. MJ Optical, Inc., 870 F.3d 820 (8th Cir. 08/31/2017).

Whistleblower claim; preemption. Dismissal of a whistleblowing claim was vacated and remanded on behalf of a flight paramedic. The 8th Circuit held that the lower court erred in deeming the state law whistleblowing claim was preempted by the Federal Airline Deregulation Act for reports of alleged air safety regulation violations. Watson v. Air Methods Corp., 870 F.3d 812 (8th Cir. 08/31/2017).

Tortious interference; judgment affirmed. A ruling of tortious interference with a business relationship and breach of duty of loyalty was upheld against ex-employees who wrongfully solicited customers from their former employer. The 8th Circuit affirmed the findings of liability and damages by the trial court. West Plains, LLC v. Retzlaff Grain Co., 870 F.3d 774 (8th Cir. 08/30/2017).

Union representation; unit determination reversed. The assignment of a particular bargaining unit by the University of Minnesota was upheld by the Minnesota Court of Appeals. It reversed a determination by the Bureau of Mediation Services on grounds that the Legislature created specific units in the Public Employment Law Relations Act (PELRA), Minn. Stat. §179A.11, which could not be altered in the absence of significant modification of the relevant job duties. Serv. Empls. Int’l. Union, Local 284 v. University of Minnesota, 2017 Minn. App. LEXIS 108 (Minn. App. 09/05/2017) (unpublished).

Labor law; arbitration required. An arbitrator, not a judge, must determine the scope of a contractual obligation to mitigate grievance procedures with a public sector union. The court of appeals held that the matter must be decided by an arbitrator, not litigation, under PELRA. Itasca County v. Teamsters Local 320, Minn. App. LEXIS 559 (Minn. App. 06/26/ 2017) (unpublished).

Unemployment compensation; missing work. An employee who knowingly violated her employer’s policy for giving advance notice for nonemergency medical appointments was denied unemployment benefits. The Minnesota Court of Appeals held that the failure to do so warranted a determination of disqualifying “misconduct” for missing work without notice. Schwantes v. Northwest Packaging, Inc., 2017 Minn. App. LEXIS 813 (Minn. App. 09/11/2017) (unpublished).

Unemployment compensation; absences and tardiness. Another employee who failed to give advance notice before missing work was not entitled to unemployment compensation. The appellate court held that the lack of advance notice, coupled with repeated tardiness, justified denial of benefits. Cook v. Pelican Biothermal, LLC, 2017 Minn. App. LEXIS 557 (Minn. App. 06/26/2017) (unpublished).

Unemployment compensation; meal ‘misconduct. An employee fired for wrongfully eating meals at his employer’s cafeteria without using a meal ticket was denied unemployment benefits. His conduct and dishonesty when asked about it constituted disqualifying “misconduct,” according to the court of appeals. Christensen v. Benedictine Living Community of Mora, 2017 Minn. App. LEXIS 732 (Minn. App. 08/28/2017) (unpublished).

Unemployment compensation; unavailable for work. A university student was deemed ineligible for unemployment benefits because she was not “available” for work and “actively seeking” it. The appellate court regarded her enrollment in regularly scheduled classes one month away from graduation supported the determination under Minn. Sat. §268.085, subd. 1(4)(5). Dusterhoft v. DEED, 2017 Minn. App. LEXIS 797 (Minn. App. 09/05/2017) (unpublished).

Marshall H. Tanick

Hellmuth & Johnson, PLLC

 

FEDERAL PRACTICE
JUDICIAL LAW

Certiorari granted; is a separate judgment in a consolidated action appealable? The Supreme Court has granted certiorari to consider whether a final judgment in one of multiple consolidated cases triggers the appeal clock for that case. The 3rd Circuit held that a judgment is not appealable under these circumstances. In 1991, the 8th Circuit held on similar facts that the judgment was appealable. And it appears that the circuit courts have adopted four different standards for analyzing this issue. Hall v. Hall, 679 F. App’x 142 (3d Cir.), cert. granted, ___ S. Ct. ___ (2017). McCuen v. Am. Cas. Co., 946 F.2d 1401 (8th Cir. 1991).

n Class action decertified; no predominant common facts; related grant of mandamus. Having granted the defendants leave to appeal a class certification decision pursuant to Fed. R. Civ. P. 23(f), the 8th Circuit reversed the class certification decision and vacated related classwide discovery orders, finding that there were no “predominant common facts at issue.” In re: State Farm Fire & Cas. Co., ___ F.3d ___ (8th Cir. 2017).

Less than two weeks later, in a closely related putative class action, the 8th Circuit granted a petition for writ of mandamus that sought an order transferring venue from the Western District of Missouri to the Eastern District of Missouri, vacated the district court’s venue-related order, and remanded the matter for further proceeding in light of In Re: State Farm. In re: Travelers Home & Marine Ins. Co., ___ F. App’x ___ (8th Cir. 2017).

Jurisdictional decision by administrative panel as law of the case. Applying a “clear error or manifest injustice standard,” the 8th Circuit found that an administrative panel’s denial of a motion to dismiss for lack of appellate jurisdiction was the law of the case. Thompson v. United States, ___ F.3d ___ (8th Cir. 2017).

Fed. R. Civ. P. 36(b); motion to withdraw admissions denied; summary judgment granted. Finding that denial of the plaintiffs’ motion to withdraw admissions would not “prevent the ascertainment of the truth,” and that the defendants would be prejudiced if the motion was granted, Judge Doty denied that motion and granted the defendants’ motions for summary judgment. Filipek v. The Boeing Co., 2017 WL 4220400 (D. Minn. 9/21/2017).

Fed. R. Civ. P. 58(c)(1) and 79(a); timing of post-trial motions; entry of judgment. Denying defendants’ motions to strike the plaintiff’s post-trial motions as untimely, Judge Montgomery found that under Fed. R. Civ. P. 58(c)(1) and 79(a), the deadline for those motions should be measured from the date of entry of the judgment itself, rather than the date of the corresponding docket entry. Orduno v. Pietrzak, 2017 WL 4354686 (D. Minn. 9/29/2017).

Personal jurisdiction; burden of proof at motion to dismiss stage. While rejecting the defendants’ argument that the plaintiff was required to “prove” the facts supporting personal jurisdiction to withstand the defendants’ motion to dismiss, Judge Nelson found that the defendants were not subject to personal jurisdiction in the District of Minnesota and transferred the action to the Central District of California. NexGen HBM, Inc. v. ListReports, Inc., 2017 WL 4040808 (D. Minn. 8/25/2017).

Punitive damages; summary judgment; evidence required. Overruling objections to an order by Magistrate Judge Brisbois, Judge Montgomery rejected the plaintiff’s argument that a previous grant of his motion to amend to assert a claim for punitive damages necessarily precluded a later motion for summary judgment by the defendants on that claim. Sellner v. MAT Holdings, Inc., 2017 WL 4286202 (D. Minn. 9/26/2017).

TCPA; Spokeo; Article III standing. Denying the defendant’s motion to dismiss, Judge Wright followed the “vast majority” of post-Spokeo TCPA decisions, and found that the plaintiff’s allegations of invasion of privacy and intrusion upon seclusion were sufficiently “concrete” to establish Article III standing under Spokeo, Inc. v. Robins, 136 S. Ct. 1540 (2016). Greenley v. Laborers’ Int’l Union, ___ F. Supp. 3d ___ (D. Minn. 2017).

Motion to amend denied; violation of local rules. Overruling the plaintiff’s objections to Magistrate Judge Rau’s denial of her motion for leave to amend her complaint, Judge Schiltz criticized plaintiff’s counsel for filing an objection that was more than twice the length permitted under Local Rule 72.2(c)(1)(A) and raising arguments that had not been made before the magistrate judge, and also denied the motion to amend on the merits. Naca v. Macalester College, 2017 WL 4122601 (D. Minn. 9/18/2017).

“Personal reactions” regarding press coverage not protected work product. Overruling the majority of objections to an order by Magistrate Judge Rau, Judge Nelson found that attorneys’ “personal reactions” to press coverage and blog comments did “not reflect legal strategies and opinions” about the underlying case, and were therefore not protected work product. Kushner v. Buhta, 2017 WL 4271247 (D. Minn. 9/25/2017).

DPPA; attorney’s fees; multiple attorneys at rule 16 conference. Reviewing numerous objections to the prevailing plaintiff’s motion for attorney’s fees in a DPPA case, Judge Schiltz found that it was “not unreasonable” for two attorneys to represent the plaintiff at the Rule 16 conference in “a complex case involving dozens of defendants and hundreds of allegedly illegal acts.” Taylor v. City of Amboy, 2017 WL 4075163 (D. Minn. 9/14/2017).

Josh Jacobson

Law Office of Josh Jacobson 

 

INDIAN LAW
JUDICIAL LAW

NAHASDA not money-mandating under the Tucker Act. The Department of Housing and Urban Development (HUD) determined that it had improperly allocated grant money to the tribe and its housing entities under the Native American Housing Assistance and Self-Determination Act of 1996 (NAHASDA). HUD began recouping the improperly allocated money by withholding money from future grant payments. The tribe sued in the Court of Federal Claims under the Tucker Act, a jurisdictional statute that allows certain claims against the U.S. The Tucker Act requires a plaintiff to rely on an additional separate “money-mandating” source of substantive law to vest jurisdiction in the court.

On appeal, the Federal Circuit Court of Appeals concluded that the NAHASDA is not “money-mandating.” It reasoned that for a source of law to be money-mandating, the plaintiff must be “entitled to a monetary judgment that would allow it to use the funds appropriated… for any purpose, without restriction.” Here, because the tribe would have had to follow NAHASDA in using any judgment funds, NAHASDA could not support Tucker Act jurisdiction. Lummi Tribe of the Lummi Reservation v. United States, ___ F.3d ___ (Fed. Cir. 2017).

Lay-advocate representation in tribal court may satisfy right-to-counsel requirement. The defendant fired multiple gunshots at three people in a car, and was charged with being a prohibited person in possession of a firearm. That charge requires proof of a predicate conviction for which the defendant was “represented by counsel in the case, or knowingly and intelligently waived the right to counsel in the case.” The U.S. argued that a predicate tribal-court conviction satisfied this element of the charge, but the defendant argued that because he was represented by an unlicensed lay advocate in that tribal-court conviction, it did not meet the right-to-counsel requirement of the charge. Over a strong dissent, the 8th Circuit Court of Appeals affirmed the conviction, reasoning that the phrase “in the case” means the right to counsel as it exists in the predicate proceeding. Because the tribal court in the earlier conviction allowed both licensed attorneys and lay advocates to practice, the defendant’s reliance on a lay advocate satisfied the prohibited-person charge’s right-to-counsel requirement. United States v. Long, ___ F.3d ___ (8th Cir. 2017).

Jessica Intermill 

Hogen Adams PLLC

Peter J. Rademacher

Hogen Adams PLLC

 

INTELLECTUAL PROPERTY
JUDICIAL LAW

• Patents: Granting motion to dismiss based on first-filed action. Magistrate Judge Bowbeer recently dismissed a patent lawsuit based on the first-filed rule in favor of an earlier filed declaratory judgment action involving the same patents. QFO owns patents on hovercrafts. QFO sent a cease-and-desist letter to Parrot alleging that it was infringing QFO’s patents. Parrot filed a declaratory judgment action against QFO in Delaware. Two months later, QFO filed a patent infringement action against Parrot in Minnesota.  Both complaints concerned the same QFO patents. Parrot moved to dismiss the Minnesota action based on its earlier declaratory judgment action in Delaware citing the first-filed rule. The “first-filed rule” favors hearing only the first-filed action when multiple lawsuits involving substantially similar claims are filed in different jurisdictions to avoid conflicting decisions and promote judicial efficiency. However, there are exceptions. QFO argued that Parrot’s declaratory judgment action in Delaware was anticipatory and, therefore, an exception to the first-filed rule. The court, however, found that Parrot’s declaratory judgment action was not anticipatory, finding: (1) QFO never specified a resolution deadline for Parrot to undermine; (2) multiple lawsuit threats are insufficient without a specified associated date; (3) two years of unbounded negotiations yields no filing immediacy; (4) nothing indicated a potential QFO lawsuit when Parrot filed; and (5) QFO’s suit was filed two months after Parrot’s lawsuit. QFO Labs, Inc. v. Parrot, Inc., No. 16-cv-3443(JRT/HB), 2017 U.S. Dist. LEXIS 94609 (D. Minn., 6/19/2017).

Trade secrets: Misappropriation of trade secrets claim appropriately pled. Chief Judge Tunheim recently refused to dismiss trade secret misappropriation claims because facts were adequately pled under the Defend Trade Secrets Act and Ohio law. Deluxe Financial Services sued Brian Shaw and Harland Clarke Corp., accusing them of misappropriating trade secrets involving confidential sales information. Shaw was formerly employed by Deluxe for many years. He left Deluxe and eventually went to work for Harland Clarke, a direct competitor of Deluxe. Deluxe sued both Shaw and his new employer, alleging that defendants used confidential sales information about a certain client to win the bid over Deluxe. Defendants brought a motion to dismiss the misappropriation of trade secret claims, arguing that Deluxe failed to allege specific facts supporting the existence of a trade secret and misappropriation. The court disagreed as to both. First, the court found that Deluxe adequately alleged facts to support the existence of a trade secret because it alleged that the confidential sales information was not publicly available, was significantly valuable to competitors, and was protected by Deluxe as a trade secret through employee training and various policies, such as an internal classification and guideline for confidential information. The court also found sufficient facts alleged to support the misappropriation allegation: Shaw had access to the confidential sales information, acquired it by improper means (through email and USB drives) and Shaw used that information at Harland Clarke to win the bid against Deluxe. Deluxe Fin. Serv., LLC v. Brian S. Shaw, No. 16-3065(JRT/HB), 2017 U.S. Dist. LEXIS 122795 (D. Minn., 8/3/2017).

Tony Zeuli & Joe Dubis

Merchant & Gould

 

REAL PROPERTY
JUDICIAL LAW

Real property title in probate. Property owner died testate. Decedent did not specifically devise his real property. Decedent’s residuary clause left all remaining property to his children that survive him, in equal shares. Decedent’s will named his daughter as personal representative of his estate. Shortly after decedent’s death, the mortgage holder on the property commenced foreclosure proceedings. The foreclosing mortgage company was the high bidder at the sheriff’s sale and received the sheriff’s certificate of sale. During the six-month redemption period, decedent’s surviving son sold his interest in the property by quit-claim deed to a speculator. The speculator granted a mortgage on the property, and then both the speculator and its mortgagee quickly conveyed their respective interests to other speculators.

Meanwhile, the personal representative commenced informal probate proceedings and sued the speculators and their mortgagees for quiet title and slander of title. After commencement of the lawsuit, the speculator used its status as an owner of the property to redeem from the sheriff’s certificate holder. The district court granted summary judgment on the quiet title claims in favor of the personal representative, ruling that the quit-claim deed from decedent’s son to the speculator transferred no valid ownership interest in the property. The speculator appealed. The court of appeals reversed the district court and held that a valid, transferable ownership interest in real property devolves immediately upon testator’s death to a person to whom the property is devised by the testator’s will. While that interest is subject to administration and the personal representative has a right to the property and may take possession and control over it during that administration, the administration does not divest an heir or devisee of its immediate devolved property ownership interest in the property. The court of appeals likened the personal representative’s interest in the property during administration as an encumbrance, but not title. The court of appeals found no case law or reason to distinguish between the devolution of real property that devised through a residuary clause and that which is specifically devised. The court of appeals remanded the case back to the district court to determine ownership of the property consistent with its opinion. Laymon v. Minnesota Premier Properties, LLC, ___N.W.2d ___, 2017 WL 4478228 (Minn. Ct. App. 2017).

Real Estate Settlement Practices Act; Minnesota Residential Mortgage Originator and Servicer Licensing Act; federal preemption. Homeowner’s mortgage servicer failed to timely pay property taxes from homeowner’s escrow account. Homeowner notified the servicer, which acknowledged the error, but did not immediately pay the property taxes. Homeowner was forced to pay directly the property taxes due and owing, plus penalties and late fees, so that he could obtain an emergency second mortgage loan. It took more than 60 days for the servicer to reimburse the property owner after the servicer was notified of the error, and then it was only a partial reimbursement. Homeowner brought suit in federal court alleging violations of the Real Estate Settlement Practices Act (RESPA) and Minnesota Residential Mortgage Originator and Servicer Licensing Act (MOSLA). The servicer brought a motion to dismiss. The servicer claimed the RESPA counts must be dismissed because they complied with the safe harbor provision, which allows a servicer to avoid statutory penalties under RESPA if it corrects the error within 60 days of discovering it and before the homeowner files suit. The court held the safe harbor defense is available to the servicer even if the error is discovered by the homeowner and the homeowner brings it to the attention of the servicer.

In this case, however, the servicer failed to place homeowner in as good a position as it would have otherwise been within the 60 days allotted by the safe harbor provision. RESPA also allows for additional statutory damages where there is a pattern or practice of noncompliance with RESPA. The court ruled that allegations in the complaint of other homeowners’ experiences with the same servicer failing to pay property taxes in a timely manner and being damaged thereby, based on website posts, are sufficient at the pleadings stage. Therefore, the court denied the servicer’s motion to dismiss on the RESPA count. Homeowner also brought claims under MOSLA for additional damages, and the servicer moved to dismiss claiming that the MOSLA claims were preempted by federal law and regulations under 12 C.F.R. §34.4(a) (6) and (10). However, the court ruled that §34.4(a)’s express preemption only applies to “making” loans, not servicing loans. The court ruled that the Office of the Comptroller of the Currency, which promulgates the regulations, could have used broader language if it intended for the regulations to apply to more than making loans. The court also ruled that MOSLA is not implicitly preempted under Barnett Bank of Marion Cty., N.A. v. Nelson, 517 U.S. 25 (1996) because MOSLA complements the federal regulations by only adding additional damages and not imposing additional requirements. Althaus v. Cenlar Agency, Inc., Slip Copy 2017 WL 4536074 (D. Minn. 10/10/2017).

Michael Kreun

Beisel & Dunlevy PA

 

TAX LAW
JUDICIAL LAW

Tax and administrative law. In April 2016, the Internal Revenue Service and the United States Department of the Treasury issued a rule identifying stock of foreign acquiring corporations that is to be disregarded in determining an ownership fraction relevant to categorization for federal-tax purposes because the stock is attributable to prior domestic-entity acquisitions. 26 C.F.R. §1 .7874-8T. This rule was issued simultaneously as a temporary regulation effective immediately and as a proposed regulation for the subject case. 26 C.F.R. §1.7874-8T(j); Prop. Treas. Reg. §1.7874-8, 81 Fed. Reg. 20,588-591. Plaintiffs, the Chamber of Commerce and the Texas Association of Business, asserted the rule violated the Administrative Procedures Act (APA). See 5 U.S.C. §500-96. Plaintiffs argued the agencies violated the APA in issuing the rule because they failed to provide affected parties with notice and an opportunity to comment on the rule. The rule was issued simultaneously as a temporary regulation effective immediately and as a proposed regulation subject to notice and comment. Plaintiffs did not assert that defendants had failed to undergo the notice-and-comment procedure required by the APA with regard to the rule as a proposed regulation, but instead argued that the rule as a temporary regulation became effective without a 30-day notice period or opportunity for comment as required by the APA. After notice required by this section, the agency shall give interested persons an opportunity to participate in the rulemaking through submission of written data, views, or arguments with or without opportunity for oral presentation. After consideration of the relevant matter presented, the agency shall incorporate in the rules adopted a concise general statement of their basis and purpose. The required publication or service of a substantive rule shall be made not less than 30 days before its effective date. 5 U.S.C. §553. The agencies argue the rule is a temporary regulation, which the agencies have authority to issue without notice-and-comment. See 26 U.S.C. §7805(e). The court concluded that the rule was unlawfully issued without adherence to the APA’s notice-and-comment requirements. Accordingly, the court granted summary judgment in favor of plaintiffs on their claim that defendants failed to complete the notice-and-comment procedure required by the APA and set aside the rule. Chamber of Commerce v. IRS, No. 1:1 6-CV-944 (W.D. TX 9/29/2017).

Individual income tax: “Separate return.” Camara and Jatta were a married couple for the 2012 tax year. During 2012, only Camara filed a return. He incorrectly claimed to be a single taxpayer in that return. The IRS caught the error and sent Camara a Notice of Deficiency where they instructed a change in filing status from “single” to “married, filing separately.” After receiving the notice, Camara and Jatta filed a joint return for 2012 and they timely petitioned the tax court to contest the deficiency. The parties debated if IRC §6013(b) permitted taxpayers to now file a joint return, which permits married taxpayers to switch from a “separate return” to a joint return but says that taxpayers cannot do so after receiving a Notice of Deficiency for the year in question. The tax court held for taxpayers by interpreting the term “separate return” in §6013(b)(1) as referring only to returns claiming a status of “married, filing separately.” Since Camara had filed as a single filer and not married, filing separately, the restrictions in (b)(1) did not apply. The tax court stated that this section “was not intended to foreclose correction of an erroneous initial return.” Camara & Jatta v. Comm’r, No. 12051-15, 149 T.C. 13 (2017).

ADMINISTRATIVE ACTION

National abuse in the VITA program. The Treasury Inspector General for Tax Administration (TIGTA) released a report on September 20 that the Volunteer Income Tax Assistance (VITA) grant program needs improvements to ensure tax return preparation is only extended to the underserved populations. TIGTA reviews millions of tax returns annually prepared through the VITA program. From a three-year span of 2014 to 2016, 201,572 returns exceeded the maximum AGI allowed under the VITA program. TIGTA even found that 34,371 returns were prepared with an AGI over $100,000 and 11 returns with an AGI over $1,000,000. TIGTA made recommendations in their report to the IRS. First, develop procedures to measure the extent to which the VITA program increases coverage to underserved populations. Second, identify and communicate with grantees preparing a high percentage of tax returns over the VITA program income tolerance level to ensure that funds are expended in compliance with congressional intent. Third, ensure that grantees have processes and procedures to confirm that only volunteers with advanced certifications prepare complex tax returns. Lastly, ensure that VITA grant program internal guidelines are consistent with publications for VITA grantees. Treasury Inspector General for Tax Administration, Improvements Are Needed to Ensure That the Volunteer Income Tax Assistance Grant Program Extends Tax Return Preparation to Underserved Populations, 2017-40-088 (9/20/2017).

Morgan Holcomb

Mitchell Hamline School of Law

Jessica Dahlberg

Grant Thornton

TORTS & INSURANCE
JUDICIAL LAW

Insurance; loss & no-fault claims. Claimant sustained injuries in a motor-vehicle accident during the course of his employment. Insurer paid no-fault benefits to claimant until an IME showed that no further medical treatment was reasonable, necessary, or related to any injury sustained in the accident. Based on the IME, the insurer notified claimant’s attorney of its denial of future benefits. Claimant filed for no-fault arbitration, but the arbitrator denied his claim in its entirety. The next year, claimant began treating with a new health-care provider. That provider submitted a single bill to the insurer for one of claimant’s first visits. The insurer again denied coverage based on the previous IME and arbitration. Claimant continued treating, but the provider did not submit any additional bills to insurer. After claimant’s charges exceeded $10,000, he filed another no-fault arbitration proceeding. This time, claimant was awarded the full amount of charges incurred with the provider. The district court vacated the majority of the award.

The Minnesota Court of Appeals affirmed. The court held that Minn. Stat. §62Q.75, subd. 3 precluded a health-care provider’s claim for benefits unless they were submitted to the insurer within six months from the date of service. Because only one bill was submitted to the insurer, the insurer could not be liable for the remaining charges. In so holding, the court rejected claimant’s argument that the statute was inapplicable because he was not a health care provider. The court reasoned that the provider’s failure to submit the invoices to claimant’s insurer also barred any right to recover those amounts from the claimant. As a result, claimant had not suffered any compensable loss. W. Nat’l Ins. Co. v. Nguyen, No. A17-0314 (Minn. Ct. App. 9/18/2017). https://mn.gov/law-library-stat/archive/ctappub/2017/OPa170314-091817.pdf

Jeff Mulder

Bassford Remele

 

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