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

Notes & Trends – February 2018

Commercial and Consumer Law
JUDICIAL LAW

• Care pays. Article 9 of the Uniform Commercial Code is a complex statute where slight mistakes can unfortunately turn a secured creditor into an unsecured one, and perhaps one without any prospect of recovery at all. To illustrate, consider Cornelius v. Bank of Nova Scotia, 93 U.C.C. Rep. Serv. 2d 409, 2017 WL 3412202 (Sup. Ct. U.S.V.I. 2017). The secured party erroneously sent a letter to the debtors informing them that their loan had been repaid and that the lien against their vehicle had been released. The debtors seized on this good news and filed paperwork with the appropriate government agency terminating the creditor’s UCC financing statement. The debtors then apparently sat back to enjoy their now lien-free vehicle; they did not sell or refinance it, and did not go bankrupt or insolvent.

This was a lucky situation for the creditor, who then repossessed the vehicle since the debtors stopped paying. The debtors of course protested but the court said, as against the creditor, perfection was irrelevant (see UCC § 9-201(a), and since nothing in the UCC indicated that the security interest was discharged by the erroneous letter or by the terminated financing statement (UCC §9-201(a)), the creditor retained the right to enforce its security interest and to properly repossess the vehicle. Had perfection been relevant (UCC §9-322(a)(2)), and for example the debtors took bankruptcy, the result would have been different. Bankruptcy Code §544 and §9-322(a)(2)).

The creditor in United States Securities and Exchange Commission v. ISC, Inc., 93 U.C.C. Rep. Serv. 2d 729, 2017 WL 3736796 (W.D. Wisc. 2017) had no such luck. The creditor mistakenly inserted a space in the financing statement in the debtor’s name. This would seem to be a minor error or omission, and such would not invalidate perfection under UCC §9-506. However, as we all know, a space—as well as an added or omitted comma or period or the like—can derail a search by the debtor’s name (UCC §9-506(b)), and prevent the search logic of the filing office from finding a financing statement under the debtor’s correct legal name. The result is the financing statement becomes “seriously misleading,” and accordingly fails to be effective and to perfect the security interest. In the case the debtor was in an insolvency receivership that made perfection relevant, and that was all that needed to be said.

Fred Miller

Ballard Spahr

 

CRIMINAL LAW
JUDICIAL LAW

4th Amendment: Search of guest’s purse reasonable and within scope of premises warrant under totality of circumstances. Following the district court’s denial of appellant’s motion to suppress evidence obtained from her purse during the execution of a search warrant while she was a guest at the subject premises, appellant stipulated to the facts under Minn. R. Crim. P. 26.01, subd. 4., and the district court found appellant guilty. On appeal, appellant argues that, as a visitor not named in the warrant, she had a reasonable expectation of privacy in her belongings, including her purse, even if they were not in her possession when the warrant was executed. The court of appeals affirmed the district court, and the Supreme Court granted review.

Held, the search of appellant’s purse was reasonable under a totality-of-the-circumstances analysis, specifically because: (1) the warrant application suggests police believed a woman lived at the home with the named suspect, and the parties agreed a purse is an item typically associated with women; (2) at the time of the search, the police did not know to whom the purse belonged; (3) the purse was found unattended in a different room than appellant; and (4) it was reasonable for police to believe contraband could be found in appellant’s purse.

In its analysis, the Court declines to adopt all three tests proposed by the parties and used by other courts to determine when the search of a guest’s belongings exceeds the scope of a premises search warrant (the “physical possession test,” the “relationship test,” and the “actual notice test”), in favor of a reasonableness analysis based upon a fact-intensive inquiry into all surrounding circumstances. Because the search was reasonable, the district court did not err in denying appellant’s motion to suppress. State v. Molnau, 904 N.W.2d 449 (Minn. 2017).

• 4th Amendment: Non-probationer has diminished expectation of privacy in common areas of residence shared with probationer. Appellant shared a residence with his brother and J.S., who were both on felony probation and signed agreements providing consent to warrantless searches of their residence. Police received a tip that there might be stolen goods in the residence, and probation determined a warrantless search should be conducted. Appellant was outside the home when police and probation officers arrived, and initially refused to let them inside, relenting only after they threatened to knock the door down. Police asked if there were firearms inside, and appellant said there were. In the hallway, police passed the open door to appellant’s bedroom, through which they observed firearms. In a later interview, appellant admitted to owning the firearms. Appellant, a felon, was subsequently arrested and convicted of receiving stolen property and being a felon in possession of a firearm. On appeal, he argues the district court should have suppressed the evidence found during the search and his statements to law enforcement about the evidence.

Under the 4th Amendment, warrantless searches of a probationer’s residence are reasonable if authorized by a condition of probation and supported by reasonable suspicion. United States v. Knights, 534 U.S. 112, 122 (2001). By choosing to live with an individual on probation, a co-resident assumes the risk that they, too, will have diminished 4th Amendment rights in areas shared with the probationer. Thus, appellant, who himself had been on probation in the past and admitted to knowing his brother and J.S. were subject to probation searches, voluntarily and knowingly took on the risk that the residence might be subject to probation searches. Additionally, the government’s legitimate interest in ensuring compliance with probation conditions supports the reasonableness of the search. Allowing a non-probationer co-inhabitant to object to probation searches would create a loophole allowing probationers to evade probation conditions by making a strategic decision to live with a non-probationer.

The court of appeals notes, however, that a non-probationer still maintains an expectation of privacy in non-common areas of a residence shared with a probationer, areas under the non-probationer’s exclusive control, such as the non-probationer’s bedroom. Here, there is nothing in the record to indicate police reasonably believed appellant’s brother or J.S. exerted any authority over appellant’s bedroom, so they were not allowed to enter the bedroom merely because they were conducting a probation search of the residence. However, the search was lawful under the plain view exception to the warrant requirement, as police observed firearms in appellant’s bedroom while standing in the shared hallway. Appellant’s admission that firearms were located in his bedroom, and police’s observation of firearms therein, also gave police a reasonable, articulable suspicion to conduct a protective sweep of the bedroom. State v. Bursch, __ N.W.2d __, No. A16-1961, 2017 WL 6418216 (Minn. Ct. App. 12/18/2017).

• 4th Amendment: Field sobriety tests not searches under 4th amendment. Appellant was pulled over for speeding when police smelled alcohol on his breath. Appellant admitted to drinking two alcoholic beverages before driving. Police asked appellant to exit his vehicle and had him perform field sobriety tests and a preliminary breath test, without asking him to complete the tests or informing him he did not have to perform them. Appellant was arrested for DWI after the PBT revealed an alcohol concentration of 0.13. Appellant also submitted to a DataMaster breath test, which showed a result of 0.12. Appellant’s driving privileges were subsequently revoked. Appellant argues the field sobriety tests and PBT were impermissible warrantless searches and the DMT lacked a reliable foundational basis.

First, the court of appeals concludes that field sobriety tests are not searches for 4th Amendment purposes. The tests are observations of the subject made by police, and do not involve the collection of physical evidence, and drivers are able to decline them. Roadside sobriety testing is merely an investigatory expansion of a traffic stop.

Next, the court finds that the PBT did not violate appellant’s 4th Amendment rights. The court declines to address whether a PBT is a search entitled to the same treatment as other chemical tests post-McNeely, instead finding that appellant consented to the PBT and, after the field sobriety tests, the officer was authorized to arrest appellant and seize his breath incident to that arrest, without a warrant.

The court concludes that the district court did not abuse its discretion in admitting the DMT result, and affirms the district court’s decision to sustain the revocation of appellant’s driving privileges. Vondrachek v. Comm’r of Pub. Safety, __N.W.2d __, No. A17-0462, 2017 WL 6418089 (Minn. Ct. App. 12/18/2017).

• Appellate procedure: Misdemeanor appeal deadline applies when defendant acquitted of gross misdemeanor, found guilty of misdemeanor, and given petty misdemeanor sentence. Appellant was acquitted of gross misdemeanor fourth-degree assault and misdemeanor disorderly conduct, but found guilty of misdemeanor obstruction, and the district court imposed a petty misdemeanor sentence. Appellant filed a notice of appeal 91 days after final judgement was entered, under Minn. R. Crim. P. 28.02, subd. 4(3)(a) (requiring notice of appeal to be filed within 90 days after entry of final judgement in felony and gross misdemeanor cases). At oral argument, both parties assumed the matter was a gross misdemeanor “case” for the purposes of appeal deadlines, and the parties argued whether there was good cause for a one-day extension to file the notice of appeal.

Held, the matter became a misdemeanor or petty misdemeanor “case” when appellant was acquitted of the gross misdemeanor charge and found guilty of a misdemeanor charge, triggering the 30-day misdemeanor or petty misdemeanor appeal deadline. The court has no authority under the Rules of Criminal Procedure to extend the appeal filing deadline more than 30 days. Appellant’s appeal is dismissed as untimely. State v. Parnell, __ N.W.2d __, No. A16-2009, 2017 WL 6418217 (Minn. Ct. App. 12/18/2017).

• Third-degree murder: Where defendant and victim are not married, no error to refuse to give joint acquisition instruction. Appellant was found guilty of third-degree murder for providing cocaine to a woman who later died. At trial, appellant argued he and the victim jointly purchased the cocaine. Appellant was charged with third-degree murder under Minn. Stat. 609.195(b), which provides that “[w]hoever, without intent to cause death, proximately causes the death of a human being by, directly or indirectly, unlawfully selling, giving away, bartering, delivering, exchanging, distributing, or administering a [Schedule I or II] controlled substance… is guilty of murder in the third degree.” At the conclusion of trial, the district court denied appellant’s request that the jury be instructed that appellant had not “given away” cocaine if the jury found that the victim and appellant jointly acquired the cocaine.

State v. Carithers, 490 N.W.2d 620, 622, 624 (Minn. 1992), established the joint-acquisition defense appellant sought to raise at trial, holding that criminal liability could not be imposed where there was “joint acquisition and possession of drugs under circumstances where neither defendant’s conduct could be fairly characterized as involving a sale or transfer or delivery to the person who died.” The Supreme Court explicitly limited its holding to the facts of the case, which involved a married couple who jointly acquired a controlled substance, id. at 620, 623-24, and has repeatedly reasserted Carithers’ limited scope. The court of appeals declines to extend Carithers’ joint-acquisition defense to cases involving a non-married couple that jointly acquired drugs that killed one of them. State v. Schnagl, __ N.W.2d. __, No. A16-1509, 2017 WL 6418215 (Minn. Ct. App. 12/18/2017).

• 6th Amendment: Revocation of stayed sentence based on probation violation not a new sentence requiring compliance with Blakely. Appellant pleaded guilty to being a felon in possession in 2012 and the district court stayed imposition of his sentence for five years. The sentencing guidelines recommended a presumptive 15-month stayed sentence. In 2017, the district court found appellant violated his probation, vacated the stay, and executed the presumptive 15-month guideline sentence. On appeal, appellant argues the district court violated his 6th Amendment right to a jury trial under Blakely by not imposing a stayed sentence, and imposing an executed sentence, which appellant claims was an upward dispositional departure requiring jury findings or a waiver.

The court of appeals notes that the “critical question in this case is when, exactly, [appellant] was sentenced”—more generally, when a defendant is sentenced on a stay of imposition: when the stay is granted, or when it is vacated. Held, a defendant is sentenced within the sentencing guidelines when a stay of imposition is granted. Sentencing occurs in two steps: (1) imposition of sentence, and (2) execution of the imposed sentence. A stayed sentence can be either a stay of imposition or stay of execution. For a stay of imposition, the guidelines provide that no sentence length is pronounced, and imposition is stayed to some future date. So, while a stay of imposition lacks a defined length of imprisonment, it is still a “sentence” under the guidelines.

Thus, appellant was sentenced when a stay of imposition was granted following his guilty plea in 2012. The execution of his presumptively stayed sentence was the result of his probation violation, rather than a “new” sentence, and appellant has no 6th Amendment right to a jury for a probation revocation hearing. State v. Bradley, __ N.W.2d __, No. A17-1024, 2017 WL 6418876 (Minn. Ct. App. 12/18/2017).

• Conditional release: Phase II of challenge incarceration program not “release from prison.” Appellant filed a civil suit against a MN DOC program manager, claiming his conditional release term was miscalculated. He received a 51-month sentence and five-year conditional release term for first-degree test refusal in June 2007. In July 2008, he moved into phase II of the Challenge Incarceration Program (CIP), which allowed him to reside at home. Appellant argues entering phase II triggered the start of his conditional release term, which would have then expired in July 2013. Appellant began supervised release in December 2010, but was reincarcerated in March 2014. He remained in custody until May 2014.

The mandatory first-degree DWI five-year conditional release term begins when the offender is released from prison. CIP is divided into three phases, and it is not until the completion of the third phase that an offender is entitled to supervised release for the remainder of his sentence. Thus, an offender in CIP is not “released from prison” until after completion of phase III. The court of appeals points to its recent decision in State ex rel. Huseby v. Roy, 2017 WL 4478212 (Minn. Ct. App. 10/9/2017), pet. for review filed (Minn. 11/8/2017), in which the court held that an inmate’s transfer to a residential work release program outside of a correctional facility did not constitute a release from prison and did not begin the inmate’s five-year conditional release term.

Appellant’s conditional release term commenced when he was granted supervised release in December 2010. Heilman v. Courtney, __ N.W.2d __, No. A17-0863, 2017 WL 6418873 (Minn. Ct. App. 12/18/2017).

• Expungement: Charge continued and later dismissed without admission or finding of guilt is “resolved in favor of petitioner.” Appellant was charged with providing false identification to gain access to an airport security area and the state agreed to continue the case for dismissal, and no admission or finding of guilt was made. The charge was dismissed on 8/1/2016. One month later, appellant petitioned to have the charge expunged and the state objected. Both a referee and the district court concluded that appellant’s petition should be denied.

When a case is resolved in a petitioner’s favor, the court must grant expungement unless the agency whose records would be affected “establishes by clear and convincing evidence that the interests of the public and public safety outweigh the disadvantages to the petitioner of not sealing the record.” Minn. Stat. 609A.03, subd. 5(b). In State v. C.P.H., 707 N.W.2d 699 (Minn. Ct. App. 2006), the court held that, for expungement purposes, a criminal charge that is continued for dismissal and subsequently dismissed, without an admission or finding of guilt, is resolved in favor of the petitioner. The court of appeals clarifies that subsequent changes to the expungement statute in 2014 did not affect the holding in C.P.H., but instead extended the reach of the statute to a new class of individuals (those who admitted guilt or were found guilty but nonetheless successfully completed a diversion program or received a stay of adjudication). Here, the district court properly determined that appellant’s case was resolved in his favor.

However, the court also concludes that the district court erred in finding that the state presented clear and convincing evidence that expungement of appellant’s charge presented a unique or particularized risk of harm to the public that outweighs the unrebutted and legally recognized benefits that appellant expects from expungement. The district court made a number of errors in its factual findings, as the record did not support the findings. The state also did not provide sufficient evidence to establish a genuine public safety concern, and the district court improperly analyzed the disadvantages to appellant of not sealing the record when it seemed to require appellant to prove specific disadvantages. Reversed and remanded. State v. A.S.R., __ N.W.2d __, No. A17-0284, 2017 WL 6418089 (Minn. Ct. App. 12/18/2017).

• DWI: DataMaster test result is direct evidence of alcohol concentration. Appellant challenges the sufficiency of the evidence to support his conviction for third-degree DWI, arguing the DataMaster breath test (DMT) result is only circumstantial evidence of alcohol concentration, and other rational inferences inconsistent with guilt can be drawn from the circumstances proved at his court trial. More specifically, appellant argues that, while the DMT reports a number representing alcohol concentration, the factfinder must rely on inference in determining whether that number accurately reflects the true alcohol concentration.

In this case of first impression, the court of appeals holds that a DMT result is direct evidence of a person’s alcohol concentration. Evidence is direct when it directly addresses the fact in dispute. It is circumstantial when proof of the fact in dispute requires an additional inference from the evidence. Here, the fact in dispute is appellant’s alcohol concentration, and the DMT’s report directly addresses that fact. “While no measurement is perfect, that does not meant that all measurements are circumstantial evidence.” The evidence is sufficient to support appellant’s conviction. State v. Brazil, __ N.W.2d __, No. A16-2058, 2017 WL 6567670 (Minn. Ct. App. 12/26/2017).

Samantha Foertsch

Stephen Foertsch

Bruno Law

 

EMPLOYMENT & LABOR LAW
JUDICIAL LAW

Employment contract; remitter ruling reversed. An employer was properly awarded damages against an employee for unpaid work under a contract, but a post-verdict remitter was erroneous. The 8th Circuit Court of Appeals reversed and remanded to allow the employer to choose between reduction of the $520,000 amount or a new trial. Wright v. Byron Financial, LLC, 877 F.3d 369 (8th Cir. 2017).

n Failure to promote; dismissed lawsuit. A failure to promote lawsuit that was dismissed due to lack of exhaustion of administrative remedies was reinstated by the 8th Circuit. It reversed the lower court on grounds that the claimant cured any exhaustion deficiencies and was entitled to amend her complaint and proceed with the action. Rush v. State of Arkansas DWS, 876 F.3d 1123 (8th Cir. 2017).

• Racial bias; police officer fails prima facie case. A lawsuit by a terminated police officer charging the Metropolitan Council with racial discrimination and reprisal was dismissed. The Minnesota Court of Appeals affirmed a ruling by the Hennepin County District Court that the discharged officer failed to establish a prima facie case of discrimination by direct evidence of discriminatory motive. Temple v. Metropolitan Council, 2017 Minn. App. WL 6272716 (Minn. Ct. App. 12/11/2017) (unpublished).

• Workers compensation; no jurisdiction over MHRA claims. A discrimination claim under the Minnesota Human Rights Act was dismissed because the claim arose from an injury covered under the Workers Compensation statute. Reversing the Hennepin County District Court, the court of appeals held that the exclusivity provision of Minn. Stat. §176.031 bars the claim. Daniel v. City of Minneapolis, 2017 Minn. App. WL 618220 (Minn. App. 12/18/2017) (unpublished).

• Unemployment compensation; retaliation rejected. A claim of retaliation by a discharged employee seeking unemployment benefits was rejected. The appellate court held that a trio of incidents of misconduct was the basis for the termination, not retaliation for filing complaints about the employer. Smalley v. TVI, Inc. 2018 Minn. App. WL 256727 (Minn. App. 1/2/2018) (unpublished).

• Unemployment compensation; three quitters lose. Following its usual practice, the Minnesota Court of Appeals dismissed a trio of unemployment compensation appeals by employees who quit their jobs.

An employee who quit for personal reasons was denied benefits. The appellate court upheld the ruling of an unemployment law judge (ULJ) that the claimant resigned, rather than accept a job transfer. Christos v. About U, Inc., 2017 Minn. App. WL 5985467 (Minn. App. Ct. 12/4/17) (unpublished).

An employee who quit because she thought she was about to be terminated was denied benefits. The appellate court affirmed a decision of a ULJ that the claimant did not show a “good reason” to quit based on the alleged unsuitability of the job. Anderson v. Hazelden Foundation, 2017 Minn. App. WL 6272938 (Minn. App. Ct. 12/11/2017) (unpublished).

An employee who quit when her hours were reduced by the employer was not entitled to benefits. The court of appeals, agreeing with a ULJ, ruled that the employer had not promised the employee any particular hours of work. Majeros v. SpartanNash Associates, LLC, 2017 Minn. App. (Minn. Ct. App. 12/1/2017) (unpublished).

ADMINISTRATIVE LAW

The National Labor Relations Board (NLRB), the federal agency that addresses management-labor relations in the private sector, issued two new decisions favorable to employers. The decisions came shortly after a pair of appointments by President Trump gave the agency a 3-2 Republican majority, along with appointment of a new general counsel whose career consisted of representing management in labor law matters. The two rulings, both on 3-2 party line votes, reversed prior board standards.

In Hy-Brand Industrial Contractors v. NRLB, 365 NLRB 156 (2017), the board overturned a rule established in 2015 by the Obama administration making franchising companies liable for some employment and labor law violation by their franchisees’ employees and contractors. Under the new ruling, franchisors are not liable unless they exert “direct control” over the offending employees.

In the other matter, The Boeing Company, 365 NLRB 154 (2017), the board limited when employers might be liable for interfering with workplace rights of employees under federal labor law. In lieu of the previous standard, which prohibited policies that could be “reasonably construed” to impair those rights, the new test will focus on the business-related justifications for policies or practices claimed to be restrictive of the rights. Under the new standard, the board upheld an employer’s “no camera” rule prohibiting employees from using personal cameras or similar video devices in the workplace without authorizations by management.

Marshall H. Tanick

Meyer, Njus & Tanick

 

ENVIRONMENTAL LAW
JUDICIAL LAW

Minnesota Court of Appeals affirms Scott County’s denial of IUP for aggregate mining. The Minnesota Court of Appeals affirmed a denial by the Scott County Board of Commissioners (county) of an application for an interim use permit (IUP) for aggregate mining by S. M. Hentges & Sons, Inc. and Jordan Gravel, LLC (relators) in Sand Creek Township, Scott County. The proposed mining operation included mining both above and below the current water table, which would form a permanent 36-acre groundwater pond in the middle of the site. The pond, and the connection it would create between surface waters and the underlying aquifer, raised water quality and aesthetic concerns for the county. In addition to the fact that several local organizations near the proposed project had public wells that could potentially be affected by mining operations, the county noted that the proposed mine site was adjacent to, and largely within the floodplain of, Sand Creek, which has historically flooded multiple times per year.

In January 2014, the county determined the initial Final Environmental Impact Statement (FEIS) was inadequate because it lacked an acceptable groundwater monitoring and mitigation plan. The county updated the FEIS to include a groundwater monitoring and mitigation plan as well as a requirement that relators provide financial security for any necessary mitigation costs, both before and following mining operations. In July 2015, the county found the updated FEIS to be adequate; however, the county noted that relators were unwilling to fund mitigation of pollution caused by floodwaters—as opposed to pollution associated with mining operations—that entered the aquifer.

Consistent with the updated FEIS, the August 2016 draft IUP for the proposed project included conditions related to groundwater and well monitoring and mitigation and financial security. Relators objected to these conditions, arguing that the more limited monitoring requirements imposed by the MPCA in relators’ NPDES permit for the proposed project, which they had obtained from the MPCA in April 2016, were sufficient to address water quality risks and that the additional monitoring, mitigation, and financial security requirements proposed by the county amounted to impermissible attempt to “second guess” the MPCA. The county disagreed, noting that the NPDES permit did not provide the long-term oversight and financial security the county felt it needed to meet its obligations under the county zoning ordinance. Because relators refused to meet the county’s conditions in the IUP, the county, in September 2016, denied the IUP application. The county also found that mine-related traffic would create an undue burden on public facilities and utilities because each proposed route would require infrastructure updates to township roads and/or nearby highways.

In affirming the county’s denial of the IUP, the court of appeals found that the county’s decision was not arbitrary and capricious because both the water-related and traffic-related bases for denial were legally sufficient and supported by the record. Specifically, the court found that the county considered “extensive information” provided by experts from both sides and, on the basis of this information, had reasonably concluded that (a) there was too much uncertainty regarding the mitigation of floodwater contamination and future infrastructure improvements, and (b) issuing the IUP permit would potentially put the county at risk of substantial financial liability.  Resolution Setting Forth Findings of Fact & Conclusions of Law & Order Denying S. M. Hentges & Sons, Inc. & Jordan Gravel, LLC Application for an Interim Use Permit for Aggregate Mining & Processing Operation in Sand Creek Twp., A16-1768, (Minn. Ct. App. 11/13/2017).

ADMINISTRATIVE ACTION

• OAH report rejects MPCA’s wild rice rule. On 1/11/2018, the chief administrative law judge for the Minnesota Office of Administrative Hearings (OAH) concurred with an OAH rulemaking report on the Minnesota Pollution Control Agency’s (MPCA) proposed amendments to MPCA’s long-standing Class 4 water quality standard for sulfate in wild rice waters. In the report, administrative law judge LauraSue Schlatter disapproved of all major components of the proposed rule, including the proposed repeal of the existing 10 mg/L standard, the equation-based sulfate standard to replace the 10 mg/L standard, and the proposed list of wild rice waters to which the standard would apply.

Regarding the 10 mg/L standard repeal, Judge Schlatter concluded that MPCA failed to make an affirmative showing that the repeal of the standard—without an immediate replacement standard at least as stringent—would ensure that the water quality standards for wild rice in downstream tribal waters would not be exceeded, as required by the Clean Water Act and federal regulations. In addition, Judge Schlatter noted that because the equation-based standard would not be in place for all waters until the required water body-specific calculations had been completed, the practical effect of the repeal would be that for certain wild rice waters, there would be no sulfate standard, which would again risk exceeding downstream tribal standards and not protecting state waters. Judge Schlatter stated that MPCA could cure this problem by retaining the 10 mg/L standard, either by returning to the current rule or by applying the 10 mg/L standard to all wild rice waters in the 4D classification.

Judge Schlatter concluded that her rejection of the repeal of the 10 mg/L standard as not reasonable or necessary meant that the proposed equation-based standard could not be implemented. Nonetheless, she addressed the proposed standard for potential future rulemakings. MPCA’s proposed approach was to calculate the water body-specific standards over time, through permitting and other processes. But Judge Schlatter concluded that this rendered the standard unconstitutionally void for vagueness because regulated dischargers could not know what standard would apply to them until MPCA had calculated the standard applicable to their particular water. MPCA could cure this defect, Judge Schlatter noted, only by first conducting the sampling process necessary to provide standards for each individual wild rice water.

Finally, Judge Schlatter rejected MPCA’s proposed list of wild rice waters as under-inclusive. The MPCA had compiled its list based on waters previously identified by the Minnesota Department of Natural Resources (MDNR) and federally recognized Indian tribes as waters where wild rice had been found. However, MPCA applied certain criteria to exclude waters on the basis of, for example, insufficient acreage of wild rice. Judge Schlatter stated that the list should have included “all waters previously identified by the MDNR and federally recognized Indian tribes as waters where wild rice was an existing use since November 28, 1975.” MPCA could cure this defect, Judge Schlatter noted, by amending the list to include all of the previously identified wild rice waters. Judge Schlatter also held that the proposed list of wild rice waters is severable from the wild rice water sulfate standard and could thus be resubmitted separately. Note that Judge Schlatter’s report is only a recommendation to MPCA; the agency can take various steps in response to the report, including withdrawing the rule, resubmitting it to the OAH with changes, or bypassing the OAH recommendation and adopting the rule as proposed.  In the Matter of the Proposed Rules of the Pollution Control Agency Amending the Sulfate Water Quality Standard Applicable to Wild Rice and Identification of Wild Rice Rivers (OAH 80-9003-34519).

• Department of Interior proposes to allow offshore drilling across 90 percent of U.S. coast; many coastal states push back. On 1/4/2018, U.S. Secretary of the Interior (DOI) Ryan Zinke announced a draft proposal plan (DPP) to incrementally increase the development of nearly all federal offshore areas of the United States for exploration and drilling of oil and gas resources. The National Outer Continental Shelf (OCS) Oil and Gas Leasing Program for 2019-2024 will potentially replace the 2017-2022 program put in place during the previous administration, which maintained the Atlantic and Pacific coasts off-limits to drilling. Both coasts have been protected from offshore drilling for more than 30 years.

Following a 4/28/2017 Executive Order that encouraged drilling in federal waters “to maintain the Nation’s position as a global energy leader,” the DPP includes 47 potential lease sales, the largest number of lease sales in U.S. history, across every coastal region of the United States over a five-year lease schedule. Over that time, 90 percent of the total U.S. OCS acreage will become available for development by private companies.

On January 9, Florida Gov. Rick Scott met with Secretary Zinke to discuss removing Florida’s coastal waters from DPP. Shortly after the meeting, Secretary Zinke announced via Twitter that Florida would be exempted from DPP, stating, “Florida is unique and its coasts are heavily reliant on tourism as an economic driver.”

In the days following DOI announcement to remove Florida from DPP, many other coastal governors and lawmakers voiced their opposition to DPP, and requested that their state coastal waters be exempted as well, arguing for equal treatment with Florida. The Pacific coast governors of California, Oregon, and Washington issued a joint statement stating that they would do “whatever it takes to stop this reckless, shortsighted action.” On the Atlantic Coast, nearly every governor made similar statements and requests to be removed from DPP.

It is unclear whether the DOI announcement removing Florida from DPP violates the “arbitrary and capricious” clause of the Administrative Procedure Act (APA), or the other requirements of consideration of needs and risks of offshore drilling laid out in the Outer Continental Shelf Lands Act (OCSLA). Secretary Zinke made the decision and announcement without waiting for a full public comment period or an environmental impact study (EIS). However, if DOI follows through with the required comment periods and addresses feedback from commentators, as well as completing the necessary EIS, it may be found that the exemption of Florida, or any other state for that matter, from DPP does not violate APA or OCSLA.

On January 11, in an attempt to circumvent the whims of Secretary Zinke to exempt, or not exempt, certain states from DPP, 10 senators from New England’s coastal states introduced a bill called the New England Coastal Protection Act, which would amend OCSLA to prohibit leasing of OCS off the coast of Maine, New Hampshire, Massachusetts, Rhode Island, and Connecticut. A parallel bill has been introduced in the House of Representatives as well.

At press-time Florida remained the only state exempt from DPP, although Secretary Zinke had spoken with many governors of coastal states including Oregon, California, Washington, Delaware, Rhode Island, and North Carolina about the concerns and risks of offshore drilling, as well as the possibility of receiving the same consideration given Florida. For example, the Oregon governor’s office said Secretary Zinke agreed to consider exempting Oregon from DPP after their telephone conversation.

The initial public comment period starts January 16, and will remain open for 60 days. After that, DOI will publish a Proposed Program for public comment and a Draft Programmatic EIS, followed by a Proposed Final Program with a Final EIS.

Jeremy P. Greenhouse
The Environmental Law Group, Ltd.

Jake Beckstrom Vermont Law School, 2015

Erik Ordahl Mitchell-Hamline School of Law, 2017 

 

FEDERAL PRACTICE
JUDICIAL LAW

• Mandamus; Fed. R. Civ. P. 39(a); jury demand reinstated. Where both the plaintiff’s complaint and the defendant’s amended answer included jury demands, the defendant later moved to strike the plaintiff’s jury demand based on jury waiver clauses located in various agreements, and the district court granted the motion to strike while failing to directly address whether the defendant’s jury demand and Fed. R. Civ. P. 39(a) precluded that motion, the 8th Circuit granted the plaintiff’s petition for a writ of mandamus and directed the district court to reinstate a jury trial, finding the right to a jury trial to be “clear and indisputable under the rules of civil procedure.” In Re: Borowiak IGA Foodliner, Inc., ___ F.3d ___ (8th Cir. 2018).

• Fed. R. Civ. P. 12(b)(1); subject matter jurisdiction; arbitration clause. Reversing the district court’s dismissal of an action for lack of subject matter jurisdiction under Fed. R. Civ. P. 12(b)(1) where the dispute was governed by an arbitration agreement, the 8th Circuit held that Rule 12(b)(1) “is not the appropriate mechanism to use to attempt to compel arbitration,” because “the existence of [an arbitration] agreement alone does not deprive the federal courts of jurisdiction.” Seldin v. Seldin, ___ F.3d ___ (8th Cir. 2018).

n Deficient jurisdictional allegations continue. Where the plaintiffs brought purported diversity claims against numerous defendants but failed to properly allege the citizenship of several of those defendants, Judge Ericksen gave the plaintiffs seven days to file an amended complaint that cured the jurisdictional errors. Matson v. Mipro US, Inc., 2018 WL 317814 (D. Minn. 1/8/2018).

• Personal jurisdiction; 28 U.S.C. §1292(b); motion for interlocutory appeal denied. Where one defendant whose motion to dismiss for lack of personal jurisdiction was denied moved for leave to take an interlocutory appeal pursuant to 28 U.S.C. §1292(b), Judge Frank denied the motion, finding that the appeal would “not advance the termination of the litigation.” Rilley v. MoneyMutual, LLC, 2017 WL 6343616 (D. Minn. 12/11/2017).

• Multiple violations of local rules; order to show cause; attorney’s fees. Criticizing plaintiff’s counsel for having “repeatedly violated the Local Rules without excuse, explanation, or even acknowledgment,” Judge Schiltz ordered counsel to show cause why he should not be “ordered to pay $1,000 to to compensate [the defendant] for the attorney’s fees that it incurred in briefing the effect of [counsel’s] multiple violations of the Local Rules.” Naca v. Macalester College, 2017 WL 6622505 (D. Minn. 12/28/2017).

Josh Jacobson

Law Office of Josh Jacobson 

 

IMMIGRATION LAW
JUDICIAL LAW

• Misdemeanor domestic assault conviction is a crime of domestic violence. The 8th Circuit Court of Appeals denied the petitioner’s petitions for review (re: both the Board of Appeals’ dismissal of his appeal and denial of his motion to reconsider), finding him ineligible for cancellation of removal because his Minnesota misdemeanor domestic assault conviction (under Minn. Stat. §609.2242, subd. 1(1) [committing an act with intent to cause fear in another of immediate bodily harm or death] was a crime of violence under 18 USC §16(a) and hence a crime of domestic violence under 8 USC §1227(a)(2)(E)(i). Ramirez-Barajas v. Sessions, Nos. 16-4014 and 17-1618, slip op. (8th Cir. 12/15/2017). http://media.ca8.uscourts.gov/opndir/17/12/164014P.pdf

In like fashion, the 8th Circuit Court of Appeals denied the petitioner’s petitions for review (re: both the Board of Appeals’ dismissal of his appeal and denial of his motion to reconsider) regarding his ineligibility for cancellation of removal because his Minnesota misdemeanor domestic assault conviction (under Minn. Stat. §609.2242, subd. 1(2) [intentionally inflicts or attempts to inflict bodily harm on another] was a crime of violence. “Our conclusion that subsection 2 categorically qualifies as a crime of violence follows naturally from the analysis of subsection 1 in Ramirez-Barajas. Given that convictions for both offenses include the same element of ‘bodily harm,’ we see no basis for reaching the opposite result here.” Onduso v. Sessions, Nos. 16-2164 and 17-1526, slip op. (8th Cir. 12/20/2017). http://media.ca8.uscourts.gov/opndir/17/12/162164P.pdf

ADMINISTRATIVE ACTION

• Changes in temporary protected status for several countries. 

Haiti: On 11/20/2017, Acting Secretary of Homeland Security Elaine Duke announced the end of Temporary Protected Status for Haitians with an effective date of 7/22/2019. According to Acting Secretary Duke, “those extraordinary but temporary conditions caused by the 2010 earthquake no longer exist. Thus, under the applicable statute, the current TPS designation must be terminated.” Approximately 45, 000 Haitians hold temporary protected status. https://www.dhs.gov/news/2017/11/20/acting-secretary-elaine-duke-announcement-temporary-protected-status-haiti

Honduras: On 12/15/2017, Acting Secretary of Homeland Security Elaine Duke announced the automatic extension of temporary protected status for Honduras to 7/5/2018. The failure of the Department of Homeland Security to make a determination at least 60 days before the end of the current temporary protected status designation (1/5/2018) automatically extended it for an additional six months. Prior to 7/5/2018, the secretary will review conditions in Honduras to determine if extension, redesignation, or termination is warranted. Approximately 57,000 Hondurans hold temporary protected status. 82 Fed. Reg. 59630-36 (12/15/2017). https://www.gpo.gov/fdsys/pkg/FR-2017-12-15/pdf/2017-27140.pdf

Nicaragua: On 12/15/2017, Acting Secretary of Homeland Security Elaine Duke announced the end of temporary protected status for Nicaragua with an effective date of 1/5/2019. According to Acting Security Duke, “conditions for Nicaragua’s 1999 designation for TPS on the basis of environmental disaster due to the damage caused by Hurricane Mitch are no longer met. It is no longer the case that Nicaragua is unable, temporarily, to handle adequately the return of nationals of Nicaragua.” Approximately 2,500 Nicaraguans hold temporary protected status. 82 Fed. Reg. 59636-42 (12/15/2017). https://www.gpo.gov/fdsys/pkg/FR-2017-12-15/pdf/2017-27141.pdf

El Salvador: On 1/8/2018, Secretary of Homeland Security Kirstjen Nielsen announced the end of temporary protected status for El Salvador with an effective date of 9/9/2019. According to Secretary Nielsen, termination of the TPS designation is warranted given that the original conditions caused by the 2001 earthquakes no longer exist. The secretary further noted, “Only Congress can legislate a permanent solution addressing the lack of an enduring lawful immigration status of those currently protected by TPS who have lived and worked in the United States for many years. The 18-month delayed termination will allow Congress time to craft a potential legislative solution.” Approximately 200,000 Salvadorans hold temporary protected status. https://www.dhs.gov/news/2018/01/08/secretary-homeland-security-kirstjen-m-nielsen-announcement-temporary-protected 

R. Mark Frey

Frey Law Office

INTELLECTUAL PROPERTY
JUDICIAL LAW

• Patents: Waiver of venue not exclusively controlled by federal rules. An appellate court recently ordered that a decision to transfer a patent case out of Minnesota based on the TC Heartland ruling should be revisited. In May 2012, Cutsforth sued multiple defendants in the District of Minnesota, accusing the defendants of patent infringement. The case was stayed from June 2013 to September 2016 pending inter partes review of the asserted patents. Following the Supreme Court’s recent TC Heartland decision, which reaffirmed that 28 U.S.C. §1400(b) is the sole and exclusive provision controlling venue in an action for patent infringement and that “resides” means the place of incorporation, the defendants moved for leave to amend their answers to assert a defense of improper venue and moved to transfer to Pennsylvania. Finding that defendants do not “reside” within the district under §1400(b) because defendants are not incorporated in Minnesota, the district court granted the motion to transfer. On appeal, Cutsforth argued that the district court erred in its analysis of whether the venue defense was waived. The Court of Appeals for the Federal Circuit relied on its recent In re Micron Tech, Inc., 875 F.3d 1091 (Fed. Cir. 2017) decision, which held: (1) the Supreme Court’s TC Heartland decision effected a relevant change of law, meaning failure to present the venue objection did not constitute waiver; and (2) while Rule 12(h)(1) identifies certain situations that trigger a conclusion of waiver, it is not the sole basis on which a district court might, in various circumstances, rule that a defendant can no longer present a venue defense. The federal circuit held that the district court erred in not considering the non-Rule 12 bases for waiver raised by Cutsforth and directed the district court to reconsider its decision in light of In re Micron Tech. In re Cutsforth, Inc., No. 2017-135, 2017 U.S. App. LEXIS 24294 (Fed. Cir. 11/15/2017).

• Trademark: Premature summary judgment motions. Judge Leung recently recommended denying a motion to dismiss Greg LeMond’s trademark lawsuit. Three-time Tour de France winner Greg LeMond sued two defendants for trademark infringement and for violation of the Anticybersquatting Consumer Protection Act for allegedly registering, using, and/or trafficking domain names, which included LeMond’s name, in bad faith with the intent to profit. Following his cycling career, LeMond started numerous business ventures, including LeMond Companies, LLC and LeMond Composites, LLC, designed to develop a low-cost carbon fiber for use in bicycle frames under the trademark GRAIL. Defendants are accused of owning and/or controlling 66 domain names containing LeMond’s name or his trademarks. Despite stylizing the motions as motions to dismiss, the court found defendants’ motions should be treated as motions for summary judgment because defendants included affidavits and exhibits in support of their motions and asked the court to review the evidence. Citing Fed. R. Civ. P. 12(d), the court found that where matters outside the pleadings are presented to and not excluded by the court, the motion must be treated as one for summary judgment. The court found that defendants’ motions, when treated as motions for summary judgment, were premature. Summary judgment is proper only when the non-movant has had adequate time for discovery, a position refuted by LeMond as LeMond’s counsel submitted a declaration outlining specific discovery to be conducted and the information such discovery would reveal. Finding plaintiff sufficiently articulated (1) specific facts hoped to be elicited from discovery, (2) that the facts sought exist, and (3) that the sought-after facts are essential to resist the summary judgment motion, the court recommended denying the motions as premature. LeMond v. Stinchfield, No. 17-cv-2071 (JRT/TNL), 2017 U.S. Dist. LEXIS 214778 (12/13/2017).

Tony Zeuli 

Merchant & Gould

Joe Dubis

Merchant & Gould

 

PROBATE & TRUST LAW
ADMINISTRATIVE ACTION

• Contested case assignments. On 11/8/2017, the Chief Judge of the District Court entered a Standing Order re Referral of Contested Trust Matters to Civil Division Judges. The order holds that due to the increasingly complex nature of trust litigation and the strain such litigation places on the Probate Court calendar, all trust cases will be assigned to a civil division judge immediately upon the filing of an objection to a trust petition. Contested cases were previously handled by probate referees and the judges presiding over the Probate/Mental Health Division.

Casey D. Marshall

Bassford Remele PA

 

REAL PROPERTY
JUDICIAL LAW

• Preemption and zoning. The City of Burnsville earned a reversal at the court of appeals of an injunction that had prevented enforcement of the city’s zoning, property maintenance, and building codes within a manufactured home park. The plaintiff rents her home lot within the Rambush Estate manufactured home park, which is licensed and regulated additionally by the Minnesota Department of Health. The plaintiff argued that both federal law (National Manufactured Housing Construction and Safety Standards Act of 1974, 42 U.S.C. §5401 et seq.) and state law (incorporation of the federal law, Minn. Stat. § 327.31 et seq.) preempt the city code. The court of appeals held that federal and state law do not preempt the code, because the federal and state law are concerned with regulating construction and safety standards, and the code enforcement was focused upon regulation of carports, awnings, zoning setbacks, trash screening, and exterior storage. The court of appeals further held that state law expressly authorizes, rather than preempts, enforcement of the city’s building code. Eich v. City of Burnsville, ___ N.W.2d ___, No. A17-0496, 2018 WL 313087 (Minn. Ct. App. 1/8/2018).

• Eviction; recovery of attorney fees. The Minnesota Court of Appeals affirmed the denial of an eviction complaint that was based upon non-payment of attorney fees accrued from a previous eviction. Real estate attorneys will be familiar with the terms of the rights and remedies provision in the lease, which states that the landlord has the right to apply payments first to unpaid attorney fees or other costs and second to rent. University Commons leased an apartment to Rodriguez, who fell behind on his payments. University Commons commenced eviction, but later accepted a redemption payment. University Commons incurred $3,090 in attorney fees during the eviction. University Commons continued to demand payment for the attorney fees and applied nearly all subsequent payments to the outstanding attorney fee balance rather than to rent. However, the court of appeals held that upon accepting a redemption, under Minn. Stat. §504B.291 subd. 1(a), University Commons could only demand repayment of $5 of its attorney fees. The second eviction complaint was based upon an alleged default of more than $5 in unpaid attorney fees (which $5 appears to have been paid for by Rodriguez). The court of appeals therefore affirmed the judgment in favor of the tenant. The court suggested that University Commons could pursue the unpaid attorney fees in a separate breach of contract lawsuit, but not as the basis for eviction. ACC OP (University Commons), LLC v. Rodriguez, ___ N.W.2d ___, No. A17-0692, 2017 WL 6418197 (Minn. Ct. App. 12/18/2017).

• Torrens/registered property; time to appeal. Observing that the appeals provision within the law governing registered land “is not a model of clarity,” the court of appeals provided some of its own, holding that parties have 60 days to appeal an order relating to registered land after its original registration (subdivision 4), rather than 30 days under the broad and general rule (subdivision 3) in Minn. Stat. §508.29. In re Petition of Cummins, ___ N.W.2d ___, No. A17-1568, 2017 WL 6567699 (Minn. Ct. App. 12/26/2017).

• Unpublished decisions. The court of appeals affirmed an order requiring a homeowner to repair siding on her home and pay civil penalties of $1,500 to the City of Minneapolis. In re RFS 14-1071686, June 02, 2016, 4037 Washburn Ave. S., No. A16-1621, 2017 WL 6418863 (Minn. Ct. App. 12/18/2017).

The court of appeals affirmed Carver County’s denial of an application for a conditional use permit to construct and operate a four-megawatt solar garden. It appears the CUP was denied primarily because of concerns about stray voltage and the applicant’s failure to satisfy the county that it had a plan for mitigating stray voltage. Minn. Solar, LLC v. Carver Cnty. Bd. of Comm’rs, No. A17-0504, 2017 WL 6418179 (Minn. Ct. App. 12/18/2017).

The court of appeals reversed a district court decision regarding special assessment appeals, holding that property owners should not appeal a proposed special assessment through the process set forth in Minn. Stat. §429.081 (concerning levied assessments), but rather through a declaratory judgment as the plaintiffs used in this case. In addition, the court of appeals notably instructed the district court on remand to determine whether a proposed special assessment raises an actual, justiciable controversy. Johanson v. City of Moorhead, No. A17-0557, 2017 WL 6418236 (Minn. Ct. App. 12/18/2017).

The court of appeals affirmed Goodhue County’s approval of a conditional use permit application for a hog farm. The CUP was approved and affirmed because it was satisfactorily far enough away from the nearest residences, the environmental concerns were not satisfactorily concrete, and complaints that the application was incomplete (because manure-spreading contracts were included but such agreements were not for any defined period of time) were held to be unpersuasive. Rosenquist v. Circle K Family Farms, No. A17-0279, 2017 WL 6418872 (Minn. Ct. App. 12/18/2017).

The court of appeals affirmed a district court’s decision holding that a seller had sufficiently adversely possessed a 10-foot strip of land based upon the construction of a shed and continuous personal use. The court of appeals additionally reversed the adverse-possessor’s special damages award to be recalculated. Aydt v. Hensel, No. A17-0448, 2017 WL 6418083 (Minn. Ct. App. 12/18/2017).

Joseph P. Bottrell

Meagher & Geer, PLLP

 

TAX LAW
JUDICIAL LAW

• Individual income tax: Education might be a good investment, but it is not a deduction for these taxpayers. In two unrelated cases, taxpayers were denied deductions for claimed expenses for higher education. In the first, Pemberton v. Comm’r, No. 13276-16S., 2017 WL 6503424 (T.C. Summ. Op., 12/18/17), an individual who worked as a test preparation tutor (for example, for the GRE, SAT, and LSAT) claimed business expense deductions (under Section 162) for his tuition and related expenses at St. John’s College at the University of Oxford in England, where he studied  jurisprudence. His studies included classes in British criminal law, British constitutional law, Roman law, torts, trusts, land law, European Union law, and jurisprudence. The court agreed with the Service’s conclusion that these courses were not sufficiently “ordinary and necessary” as to qualify for a deduction under 162. The second taxpayer was equally unsuccessful. Taxpayer two worked as a speech and language pathologist. Although she had an undergraduate degree in the field, an additional credential was required to hold the job taxpayer sought. Due to a shortage of credentialed speech pathologists, taxpayer two was permitted to work in the position for a short time under a waiver. The waiver required taxpayer to pursue the credential. She enrolled in a master’s degree program, and sought to deduct the tuition (and related expenses) pursuant to section 162. The Service disallowed the deductions, and the reviewing court agreed. Section 162 deductions are not permitted for education expenses that quality a taxpayer for a new trade or business. Colliver v. Comm’r, No. 15307-16S, 2017 WL 6597993 (T.C. Summ. Op. 12/26/17).

• Individual income tax: Accuracy-related penalty upheld. A pro se married couple challenged the accuracy-related substantial understatement penalty that was imposed after the couple claimed improper real estate loss deductions. The taxpayers conceded the Service’s adjustments to their reported income, including the loss disallowance. But they contested the penalty. The couple argued that they had substantial authority for their position because an attorney advised them to file a form 1040X. The court found this argument unpersuasive because the taxpayers failed to call the attorney as a witness or submit other evidence that she relied on in giving the advice. In addition, the return was actually prepared by another consultant who was not a tax law specialist. Planty v. Comm’r, 114 T.C.M. (CCH) 620 (T.C. 2017).

• Abuse of discretion by IRS appeals office warrants remand. In a case in which the underlying dispute involved FICA classification, the tax court found that the Service’s appeals officer “inexplicably credited petitioner” tens of thousands less than the Service agreed petitioner was owed, that the officer “reneged on respondent’s assurances to the Court of Appeals; failed to consider relevant issues relating to the unpaid tax; inappropriately balanced respondent’s need for the efficient collection of taxes with petitioner’s concern regarding the levy’s intrusiveness; and contravened applicable law and administrative procedure …. and Internal Revenue Manual.” Because the appeals officer’s determination lacked a sound basis in law and fact, the court held that the officer abused his discretion, and therefore the levy notice was not sustained. Credex, Inc. v. Comm’r, 114 T.C.M. (CCH) 624 (T.C. 2017).

• Special assessment: Statutory appeals process not exclusive. A married couple, Gust and Brenda Johanson, brought a declaratory judgment action challenging the City of Moorhead’s proposed special assessments on land the couple farms outside the city. The district court held that the Johansons could not challenge the assessments until they were actually levied, at which time a statutory appeals process would be available to them. The Minnesota Court of Appeals disagreed. The reviewing court held that the statutory appeals process does not provide the exclusive means by which a property owner can challenge a proposed special assessment. The court reasoned that the exclusivity bar in the appeals provision in Minnesota Statutes section 429.081 does not apply to challenges against proposed assessments. The case was remanded “for consideration of whether the Johansons meet the requirements of a declaratory judgment action,” which allows the court “‘to declare rights, status, and other legal relations.’” Johanson v. City of Moorhead, No. A17-0557, 2017 WL 6418236 (Minn. App. 12/18/2017) (quoting Minn. Stat. §555.01 (2016)).

• Minnesota’s individual income tax constitutional; no “real” law argument rejected. An individual taxpayer failed to file or pay income tax for several tax years. When the commissioner audited the taxpayer, the taxpayer argued that because there is no “real” law requiring him to pay income tax on his wages, the imposition of such a tax would be unconstitutional. The commissioner countered that Minnesota’s income tax is constitutional. Reiterating previous case law in which the Minnesota Supreme Court held that Minnesota’s income tax regime is both constitutional and compulsory, the tax court found for the commissioner. Terrance W. Sargent v. Comm’r, No. 9019-R, 2017 WL 6813394 (Minn. Tax 12/15/2017),  judgment entered, No. 9019-R, 2018 WL 305551 (Minn. Tax 1/2/2018). A previous motion by the taxpayer to remove the judge presiding over his case was denied. Terrance W. Sargent v. Comm’r., No. 9019-R, 2017 WL 6813400 (Minn. Tax 12/13/2017).

• Property tax: Motion for fees granted. In a property tax dispute, the county served the taxpayer with written discovery requests. The taxpayer did not respond until after the county filed a motion to compel discovery. The county then filed a motion for expenses, which the court granted for two independent reasons. First, the motion was considered unopposed since the taxpayer did not respond in writing or appear at the hearing. Further, the court granted the motion on the merits. The relevant rule provides that the court “shall” require the nonresponsive party to pay reasonable expenses incurred in making the motion. Minn. R. Civ. P. 37.01(d). Urban Growth Prop. Ltd. P’ship v. Hennepin Co., No. 27-CV-16-05409, 2017 WL 6813393 (Minn. Tax 12/11/2017).

LOOKING AHEAD

Sales tax: Court to take up physical presence requirement. The United States Supreme Court granted review of South Dakota’s sales tax dispute with three online retailers. At issue is whether states can require online retailers to collect and remit sales tax when those retailers have no physical presence in the state. In an interesting coincidence, the controlling precedent also emanated from a Dakota dispute. In the 1992 case of Quill Corp. v. North Dakota, 504 U.S. 298 (1992), the Supreme Court held that the commerce clause “substantial nexus” prong required physical presence in a state in order for the state to require businesses to collect sales tax. Following Quill, the precise scope of the commerce clause “substantial nexus” requirement has been uncertain. Here, South Dakota invites the high court to abrogate the Quill physical-presence requirement. South Dakota v. Wayfair, Inc., No. 17-494, 2018 WL 386568 (U.S. 1/12/2018).

Morgan Holcomb
& Matthew Wildes 

Mitchell Hamline School of Law

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