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

Notes & Trends – April 2018

COMMERCIAL AND CONSUMER LAW
JUDICIAL LAW

• When does the clock run and who has what rights? In Trebelhorn v. Agrawal, 94 U.C.C. Rep. Serv. 2d 241, 2017 WL 5560063 (Minn. Ct. App. 2018), the court had to decide whether the statute of limitations in Uniform Commercial Code Article 2, which applies to sales of goods (§ 2-725), or Minnesota’s six year statute of limitations applicable to actions “upon a contract or other obligation, express or implied, as to which no other limitation is expressly prescribed,” applied to an account stated claim asserted by a supplier of petroleum products against the buyer of those products and arising out of a breach of the supply contract between the parties. The court correctly held that (1) the buyer’s obligation to pay for the petroleum products was governed by the supply contract, (2) that contract was a contract for the sale of goods, and (3) since the account stated claim was based on the same facts and alleged the same harm as the breach of contract claim, the four-year limitations period applied. This result is consistent with the purpose of the UCC Article 2 statute of limitations, which is to introduce a uniform statute of limitations. See Official Comment to UCC §2-725. Indeed, as uniformity is a general policy of the UCC (see §1-103(a)(3)), most of its provisions contain a general or limited statute of limitations or an allowance to set one, even though uniformity in this context is not strict per UCC §1-302, or a statute of repose. See for example UCC §2A-506, §3-118, §4-111, §4A-505, §5-115, §6-110 (if Article 6 is not repealed), §§7-204(c) and 7-309(c), §8-406, and §9-603 (but note the debt secured may be subject itself to a limitation).

Two other recent decisions relevant to Minnesota are equally interesting. In ARA, Inc. v. Waste Management National Services, Inc., 94 U.C.C. Rep. Serv. 2d 1, 2017 WL 4857428 (D. Minn. 2017), the court held that UCC §9-406, which governs who an account debtor must pay, merely allowed a secured party assignee of an account to step into the shoes of its debtor, the creditor on the account, and assert a breach of contract or other claim against the account debtor on the account of which the secured party’s debtor was the creditor, and did not create an independent cause of action for the assignee against the account debtor when payments by the account debtor after a valid notice of assignment were made to the debtor instead of the assignee.

Finally, King v. 200 Silverado 1500, VIN •••••• 6662, 94 U.C.C. Rep. Serv. 2d 252, 2017 WL 5560062 (Minn. Ct. App. 2017) (unpublished opinion, not precedential), involved a mother whose son was arrested for driving a truck while impaired. The truck secured a loan. The mother began making payments on the loan after the son was arrested. She had signed the loan documents as a borrower. The Minnesota statute, §169A.63 subdivision 7, saved a perfected secured lender from forfeiture unless the lender had knowledge of or consented to the act allowing forfeiture, but an “owner” was only protected if the owner had no knowledge the vehicle would be used in violation and knowledge was imputed to a member of the family. The statute defines an “owner” as a person legally entitled to possession, use, and control of a vehicle.

Perhaps given the terms of the statute, the mother argued that she was a secondary obligor on the loan and thus was subrogated to the rights to possession in the event of default of the secured lender. Not so fast, said the court; it is clear from the loan documents that you are a primary obligor and have no recourse against the son or the property, and left it at that so on her argument the mother was not entitled to the statute’s protection and the truck was, therefore, subject to forfeiture.

Fred Miller
Ballard Spahr

 

CRIMINAL LAW
JUDICIAL LAW

• Confrontation clause: No confrontation clause violation to admit document whose purpose is to authenticate nontestimonial statements. During his jury trial for first-degree DWI and driving after cancellation, appellant stipulated to his three prior DWI convictions but did not stipulate to his license being revoked prior to the date of these offenses in July 2016. The state offered a three-page exhibit into evidence, the first page of which was a “Certificate of Order Sent” certifying that the attachment was a true, correct, and identical copy of an order in the Department of Public Safety’s records, and stating that the original had been mailed on a particular date. The next two pages was an order informing appellant that his license would be revoked for driving under the influence effective 2/16/2016. No witness testified as to the foundation or authenticity of the exhibit and it was admitted without objection. The state was then permitted to amend the driving-after-cancellation charge to driving after revocation, and appellant was found guilty of all counts. On appeal, appellant argues the admission of the Certificate of Order Sent violated his right to confront witnesses and that the district court erred by admitting the exhibit with unredacted references to prior DWI convictions.

The court of appeals points to United States Supreme Court precedent and Minnesota case law that suggests documents introduced only for authentication purposes, rather than to prove a fact, are not testimonial. Testimonial statements include (1) ex parte in-court testimony; (2) extrajudicial statements contained in formalized materials such as affidavits, depositions, prior testimony, or confessions; and (3) statements that would lead a reasonable witness to believe it would later be used at trial. The Certificate of Order Sent does not fall under the first category, as it is not testimony that a reasonable witness would expect to be used in a prosecutorial fashion to prove a fact. The second category is not representative of the certificate. The certificate also does not fall within the third category, because a reasonable person would believe it would only be used for authentication purposes.

Additionally, the court of appeals finds the certificate is nontestimonial because it is duplicative of the underlying record, the Department of Public Safety record, which itself was nontestimonial.

The court of appeals next concludes that district court committed plain error by admitting the unredacted exhibit, as it contained information appellant had a right to exclude from the jury. However, appellant’s substantial rights were not affected by the error, as the improper reference to his past convictions was not pervasive and the state put forth additional overwhelming evidence of appellant’s guilt. Appellant’s convictions are affirmed. State v. Abdullahi Abdiqadir Noor, __ N.W.2d __, A17-0349, 2018 WL 817284 (Minn. Ct. App. 2/12/2018).

• Criminal vehicular operation: Passenger grabbing steering wheel of moving vehicle is “operating.” Appellant was drinking at a bar, after which B.H. drove appellant and others to appellant’s friend’s house. Appellant sat in the front passenger seat and began to argue with B.H. about directions. At one point, appellant told B.H. she had missed a turn and took the steering wheel, yanking it toward himself. B.H. lost control of the vehicle and it crashed, causing great bodily harm to the three occupants. Appellant was charged with and convicted of CVO. The court of appeals affirmed.

Minn. Stat. Ch. 609 does not define “operating,” and the appellate courts have not previously interpreted the term in the CVO context. Dictionary definitions of the term refer to acts that affect the function of a motor vehicle, which is to transport people or things. Manipulation of the steering wheel of a moving vehicle by a passenger falls within this definition. Held, “operating” a motor vehicle in Minn. Stat. §609.2113, subd. 1, “means any act that causes a motor vehicle to function or controls the functioning of the motor vehicle, which includes manipulation of the steering wheel of a moving vehicle by a passenger.” Affirmed. State v. Tchad Hu Henderson, __ N.W.2d __, A16-0575, 2018 WL 844382 (Minn. 2/14/2018).

• Forfeiture: Statute does not authorize forfeiture of insurance proceeds. Appellant’s son crashed and totaled appellant’s GNC Terrain SUV in a drunk driving incident, and police seized the vehicle. Appellant planned to recover on his automobile insurance policy rather than recover the totaled vehicle. Without appellant’s knowledge, the police department told appellant’s insurance company to hold any insurance proceeds, asserting a right to them. Appellant did not learn of this conversation until after the 60-day statutory deadline for his right to file a challenge to the forfeiture. Appellant filed the Demand for Judicial Determination anyway, arguing that the vehicle was improperly seized and that the insurance proceeds were not forfeitable. The district court rejected appellant’s filing as untimely. The court of appeals concluded that appellant’s complaint was time-barred, but that insurance proceeds are not subject to forfeiture under Minn. Stat. §169A.63.

If used in the commission of a “designated offense,” a motor vehicle is subject to forfeiture under Minn. Stat. §169A.63, subd. 8(a). By operation of the statute, “[a]ll right, title, and interest in a vehicle subject to forfeiture… vests in the appropriate agency upon commission of the conduct resulting in the designated offense.” Id. at subd. 3. A challenge of the forfeiture must be filed within 60 days of the vehicle owner’s receipt of notice of intent to forfeit. Id. at subd. 8(b)-(c). Appellant undoubtedly filed his challenge to the forfeiture of his vehicle after the expiration of the 60-day deadline.

Appellant separately challenges the forfeiture of the insurance proceeds. The phrase “right, title, and interest” conveys all interest in a piece of property. The Supreme Court notes that “interest” is defined as “[a] legal share in something; all or part of a legal or equitable claim to or right in property,” and, in the vehicle forfeiture context, that property is the “vehicle subject to forfeiture.” Only property rights in the vehicle are subject to forfeiture. Insurance proceeds are payments due under an insurance contract about a vehicle and are not a property interest in the vehicle. Whether such proceeds are forfeitable is not an issue properly litigated within the confines of Minn. Stat. §169A.63. The court of appeals is affirmed. Russell Eldon Briles v. 2013 GMC Terrain, __ N.W.2d __, A16-0768, 2018 WL 845974 (Minn. 2/14/2018).

• Firearms: Driving under influence with pistol within arm’s reach is carrying pistol “about the person’s clothing or person.” Police conducted an inventory search of respondent’s vehicle following his arrest for DWI, during which they found a loaded handgun in the center console. Respondent was charged with carrying a pistol while under the influence of alcohol, but the district court granted respondent’s motion to dismiss for lack of probable cause, finding that Minn. Stat. §624.7142, subd. 1(4), does not extend to the pistol in the center console. The court of appeals affirmed, finding no physical nexus between appellant and the pistol.

Minn. Stat. §624.7142 makes it a crime for a person to “carry a pistol on or about the person’s clothes or person” while under the influence of alcohol. The Supreme Court first looks to the dictionary definitions of “carry,” “on,” and “about,” finding that, taken together, the only reasonable interpretation of §624.7142 is that a person carries a pistol on or about one’s person either by (1) physically moving the pistol, or (2) having the pistol in one’s personal vicinity, at least within arm’s reach, while moving. The court of appeals’ “physical nexus” interpretation is unreasonable, because the statute does not prohibit only carrying a pistol “on” one’s person, and this interpretation would read the “or about” language out of the statute.

The complaint here was sufficient to survive respondent’s motion to dismiss. Reversed and remanded. State v. Christopher Michael Prigge, __ N.W.2d __, A17-0403, 2018 WL 846426 (Minn. 2/14/2018).

• Juvenile: Miller and Jackson do not limit authority to sentence juvenile to consecutive life sentences without possibility of release. A juvenile at the time of his offense, respondent was convicted of two counts of first-degree premeditated murder and sentenced to two mandatory terms of life imprisonment without the possibility of parole (LWOR). Respondent petitioned for postconviction relief, arguing that his sentence violated Miller v. Alabama, 567 U.S. 460 (2012), and Jackson v. State, 833 N.W.2d 272 (Minn. 2016). Respondent’s petition was granted and he was resentenced to two concurrent life sentences with the possibility of release after 30 years, after the district court concluded that Jackson made unavailable any information that would be elicited at a Miller hearing and any information that could theoretically support a consecutive sentence was beyond the court’s reach.

Respondent’s conviction was final before Miller, but he is entitled to retroactive application of Miller’s rule under Montgomery v. Louisiana, 136 S.Ct. 718 (2016). Miller held that, before a juvenile is sentenced to LWOR, the court must take into account the differences between children and adults, distinguishing between “the juvenile offender whose crime reflects unfortunate yet transient immaturity, and the rare juvenile offender whose crime reflects irreparable corruption.” Montgomery clarified that Miller’s rule categorically prohibits LWOR for juvenile offenders who are not irreparably corrupt.

The Minnesota Supreme Court recently held that the Miller/Montgomery rule will not be extended to multiple consecutive sentences of life imprisonment with the possibility of release after 30 years. State v. Ali (Ali II), 895 N.W.2d 237, 246 (Minn. 2017), cert. denied, No. 17-5578, 2018 WL 311461 (U.S. 1/8/2018). Thus, the district court was mistaken in its belief that Miller limited its authority to impose consecutive sentences involving the possibility of release after 30 years in this case involving multiple first-degree murder convictions and multiple victims.

Jackson addressed whether the district court could re-impose a LWOR sentence on remand, which required a determination that the defendant fell within the “irreparably corrupt class” of juvenile offenders. The Minnesota Supreme Court concluded that too much time had passed since the defendant’s original sentencing, that a determination regarding permanent corruption was not possible. The district court was wrong in concluding that Jackson’s conclusions regarding a Miller hearing prevented it, at the time of sentencing, from exercising its discretion or considering all available facts relevant to a juvenile offender’s culpability and criminality, as this inquiry is fundamentally distinct from a Miller hearing.

Reversed and remanded for a determination as to whether consecutive or concurrent sentences are appropriate. Brian Lee Flowers v. State, __ N.W.2d __, A17-0750, 2018 WL 1075638 (Minn. 2/28/2018).

Samantha Foertsch
Stephen Foertsch
Bruno Law, PLLC

 

EMPLOYMENT & LABOR LAW
JUDICIAL LAW

• Breach of contract; ambiguous terms. The dismissal of a counterclaim for breach of an employment agreement was reversed because the terms of the agreement were ambiguous. Overturning a ruling of U.S. District Court Judge Richard Kyle in Minnesota, the 8th Circuit remanded the case, although it upheld dismissal of the main claim for failure to deliver inventory as part of an asset purchase agreement. Qwinstar Corp. v. Anthony, 882 F.3d 748 (8th Cir. 2/16/2018).

• Police officer; retaliation, discrimination claims dismissed. Claims of retaliation and discrimination in a wrongful termination lawsuit by a police officer were dismissed. The 8th Circuit upheld summary judgment on grounds that the retaliation claim was not pleaded sufficiently and the discrimination claim was untimely. Winfrey v. City of Forrest City, Arkansas, 882 F.3d 757 (8th Cir. 2/16/2018).

• Wrongful termination; retaliation against deputy. A deputy sheriff who unsuccessfully ran for office against his boss was entitled to pursue a wrongful termination suit after he was fired. The 8th Circuit held that the deputy can assert a 1st Amendment retaliation claim against the sheriff. Morgan v. Robinson, 881 F.3d 646 (8th Cir. 2/2/2018).

• Union organizing; failure to hire. An employment staffing agency wrongfully failed to hire four electricians who were hoping to assist in organizing a labor union at the facility. The 8th Circuit affirmed a determination of the National Labor Relations Board (NLRB) that “anti-union” animus improperly contributed to the failure to hire them. Aerotek v. National Labor Relations Board, 2018 Minn. App. WL 987805 (8th Cir. 02/21/2018).

• Trucker injury; no breach of duty. An injured truck driver lost his lawsuit against a company loading boxes in his truck. The 8th Circuit Court of Appeals affirmed summary judgment because there was no actionable breach of duty during the loading process. Bedford v. Doe, 2018 Minn. App. WL 547455 (8th Cir. 01/25/2018).

• Unemployment compensation; epithet causes denial. An employee fired for directing a crude epithet at his supervisor was denied unemployment compensation. The Minnesota Court of Appeals held that the unemployment law judge (ULJ) properly rejected the employee’s denial due to lack of credibility. Butler v. Primeflight Aviation Services, Inc., 2018 Minn. App. WL 817572 (8th Cir. 02/12/2018).

• Unemployment compensation; sister’s surgery no defense. An employee who quit her job because her sister was undergoing a kidney transplant was ineligible for unemployment compensation. The reason was not job-related nor the responsibility of the employer. Further, the sister was not statutorily covered as an “immediate family member” under Minn. Stat. §268.095, subd. 1(7). Morris v. Unity Health Care, 2018 Minn. App. WL 817571 (02/12/2018)(unpublished).

ADMINISTRATIVE ACTION

• NLRB reversal. A rare reversal by the National Labor Relations Board (NLRB) restored a predecessor ruling concerning liability of franchisors and contractors for labor law violations by their franchisers and subcontractors. The decision last year in The Boeing Company, 365 NLRB 154 (2017), had overturned a ruling during the Obama administration expanding liability. See Notes & Trends, February 2018. But a newly discovered conflict of interest on the part of one of two newly appointed Republican board members resulted in a 2-2 split, maintaining the prior ruling in effect for “joint employment” situations.

LOOKING AHEAD

• Title VII; sexual orientation. The possibility that Title VII of the Federal Civil Rights Act will be interpreted to include a prohibition on discrimination in employment based upon sexual orientation, consistent with the law in Minnesota and nearly two dozen other jurisdictions, has arisen due to a trio of federal appellate court rulings. The touchstone is a ruling earlier this year by the 2nd Circuit upholding such a claim in Zarda v. Altitude Expression, 2018 WL 1040820 (2nd Cir. 2/26/2018). The ruling conforms with a decision last year by the 7th Circuit in Hively v. Ivy Tech Community College of Indiana, 853 F.3d 339 (3rd Cir. 4/4/2017), but conflicts with one of the 11th Circuit earlier this year. Evans v. Georgia Regional Hospital, 850 F.3d 1248 (11th Cir. 03/10/2017), cert. denied (12/11/17).

The disparate decisions create a conflict among the Circuits that may permit review by the U.S. Supreme Court under Rule 10 of its procedural rules, which includes lower court rulings “in conflict” as grounds for granting certiorari.

The developments come 25 years after Minnesota became the first state to ban discrimination under Minn. Stat. §363.03A, subd. 44. Since then, 19 other states, along with the District of Columbia, Puerto Rico, and Guam, have joined the prohibition. The state law came four years after the 8th Circuit Court of Appeals, in Williamson v. A.G. Edwards & Sons, Inc., 876 F.2d 69 (8th Cir. 1989), rejected such a claim under the Federal Act, holding that it only applies by its terms to discrimination based on gender and not sex orientation.

If a petition for certiorari is granted, the High Court would probably have the case and decide it during its 2018-19 term.

Marshall H. Tanick
Meyer, Njus & Tanick

 

ENVIRONMENTAL LAW
JUDICIAL LAW

• SCOTUS declines to review water transfer rule. The U.S. Supreme Court denied a petition for a writ of certiorari to review a January 2017 decision of the 2nd Circuit Court of Appeals that upheld EPA’s water transfer rule (WTR). The WTR, adopted by EPA in 2008, exempts from NPDES permitting requirements “water transfers,” which EPA defines as “an activity that conveys or connects waters of the United States without subjecting the transferred water to intervening industrial, municipal, or commercial use.” 40 CFR §122.3(i). In 2001, a collection of advocacy groups and states (including Minnesota) challenged the WTR, claiming it would allow discharges clearly contrary to the intent of the CWA, such as the ability to pipe highly polluted water from an industrial water to a pristine wilderness water. In a 2014 decision, the Federal District Court for the Southern District of New York agreed, and invalidated the WTR. Catskill Mts. Chapter of Trout Unltd. v. EPA, 8 F. Supp. 3d 500, 567 (S.D.N.Y. 2014).

On appeal, the 2nd Circuit reversed, reinstating the WTR. 846 F.3d 492 (2d Cir. 2017). Applying the Chervon analytical framework for evaluating the validity of federal agency regulations, the court held that the question of whether a water transfer was an “addition” of pollutants to navigable waters (and thus a “discharge” requiring an NPDES permit) was ambiguous, and that EPA’s interpretation that the language should not include water transfers was a reasonable one. At the core of EPA’s interpretation, set forth in the preamble to the WTR, is a reading of “navigable waters” as referring not just to an individual water body but to all navigable waters taken together as a whole. By transferring water (and pollutants) from one part of the navigable waters to another part, EPA argues, there has been no “addition”; the pollutants were already in the unitary navigable waters. By declining to grant the petition for a writ of certiorari, the Supreme Court leaves in place the Second Circuit’s decision that the WTR is good law.  New York v. EPA, 86 U.S.L.W. 3428 (2/26/2018).

State of Minnesota and 3M settle groundwater contamination lawsuit for $850 million. On 2/20/2018, the 3M Corporation (3M) and state of Minnesota agreed to an out-of-court settlement of $850 million to resolve a groundwater contamination lawsuit against the company. The case, Minnesota v. 3M Company, was first filed in 2010 in the 4th Judicial District of the State of Minnesota. Civil File No. 27-CV-10-28862. The case was brought on behalf of the state by Attorney General Lori Swanson as well as the Commissioner of the Minnesota Pollution Control Agency (MPCA) and Commissioner of the Minnesota Department of Natural Resources (DNR), pursuant to Minn. Stat. §115B.04 in the name of the State as “trustee[s] of the air, water and wildlife.” See Minn. Stat.§115B.17, subd. 7.

Since the 1950s, 3M produced perfluorochemicals (PFCs) for use in products like stain repellent and nonstick cookware. Throughout that time, 3M disposed of PFC-containing waste into unlined disposal areas across the eastern Twin Cities as well as directly into the Mississippi River. The State alleged that 3M’s discharge of PFCs caused damage to the state’s natural environment and that 3M knew or should have known that disposal of PFCs would result in injury. The state alleged that 3M even went so far as to actively conceal the risks posed by the accumulation of PFCs in humans and the environment.

In 2000, the Environmental Protection Agency began investigating the health effects of PFCs, leading 3M to announce it would be phasing-out production of the chemical in Minnesota. Around 2004, PFCs were detected in groundwater beneath and down-gradient from 3M’s disposal sites, including four major aquifers covering over 100 square miles of groundwater. The contaminated groundwater serves as the sole source of drinking water for over 125,000 residents who live in the area. The state claimed damages under trespass, nuisance, negligence, and the Minnesota Environmental Response and Liability Act, and Minnesota Water Pollution Control Act. The State sought $5 billion in punitive damages to clean up and restore the damage caused by 3M. Prior to settlement, it was the largest environmental lawsuit in state history.

However, on the day the trial was set to begin, the parties announced the $850 million settlement to fully and finally resolve the matter. The parties agreed that 3M shall make a grant to the state held in the 3M Grant for Water Quality and Sustainability Fund. The MPCA and DNR shall be the only entities with authority to use the grant, and they will use it on projects ranked by priority. The highest priority project will be enhancing the quality, quantity, and sustainability of drinking water for the residents of the East Metro areas affected by the PFC contamination. This will include treatment of existing water supplies, connecting individual households to clean municipal water supplies, and constructing new wells. The next highest priority project will be restoring and enhancing the aquatic resources and wildlife habitat in the areas affected. These projects will include creating outdoor hiking trails, as well as building boat ramps and fishing piers on other water bodies not affected by the PFC contamination. The grant will be established within 15 days from the settlement. Minnesota v. 3M Company, Civil File No. 27-CV-10-28862.

ADMINISTRATIVE ACTION

• EPA issues guidance documents upending key aspects of NSR applicability determinations. On 12/7/2017, and 3/13/2018, EPA Administrator Scott Pruitt issued two substantial guidance documents aimed at streamlining the New Source Review (NSR) process under the Clean Air Act (CAA). Both mark substantial departures from prior agency practice.

The NSR provisions of the CAA and EPA implementing regulations require owners or operators of existing stationary sources, before beginning construction of a “major modification,” to obtain an air quality permit, which generally involves a significant investment of time and resources. To determine whether a project at a stationary source is a “major modification,” EPA regulations set forth a two-step process: Step 1 involves determining whether the projected emissions from the project itself will result in a “significant emissions increase” of a regulated NSR pollutant, and, if so, Step 2 requires evaluating whether the project will result in a “significant net emissions increase” of an NSR pollutant after factoring in contemporaneous increases and decreases in emissions at the stationary source as a whole. 40 C.F.R. §52.21.

EPA’s December NSR guidance document clarified EPA’s intended approach concerning procedures in EPA regulations for sources using “projected actual emissions” (PAE) to determine NSR applicability. EPA regulations provide that the determination of whether there will be a “significant emissions increase” of a regulated NSR pollutant from an existing emissions unit that is part of a proposed project involves comparing PAE to “baseline actual emissions” (BAE). §52.21(a)(2)(iv)(c). EPA regulations direct sources to consider “all relevant information” when determining an emission unit’s PAE. The guidance document clarifies that EPA will interpret this “all relevant information” language to allow a source to factor into the PAE calculation the owner or operator’s intent to actively manage future emission from the project to prevent a significant emissions increase or significant net emission increase.  In addition, the guidance document clarifies that EPA will largely defer to, and will not “second guess,” a company’s calculations of PAE, so long as the company has followed the prescribed PAE calculation procedures and has not made a “clear error.” Accordingly, EPA will refrain from bringing enforcement actions based on PAE calculations and will instead focus on whether actual emissions during the applicable post-construction reporting period indicate that a significant emissions increase or significant net emissions increase occurred.

EPA’s March NSR guidance addresses a different aspect of the NSR applicability process, clarifying that permit applicants may consider likely emissions decreases, as well as increases, of their project when determining whether a project will result in a “significant emissions increase” of a regulated NSR pollutant, i.e., Step 1 above. In the guidance, Pruitt indicated that EPA no longer subscribes to prior EPA statements that only allowed the consideration of emissions decreases in Step 2 and required Step 1 to evaluate solely emissions increases. Noting the “inherent complexities associated with doing multi-year contemporaneous netting under Step 2 at a large facility,” Mr. Pruitt speculated that the agency’s prior interpretation had dissuaded companies from taking on certain projects that would have resulted in a net decrease in emissions. Pruitt concluded that the regulations support a reading that emissions decreases associated with the proposed project itself may be considered in Step 1 (a process the guidance calls “project emissions accounting”), whereas emissions decreases associated with other projects at the stationary source can only be considered in Step 2. One potential problem with this interpretation, Mr. Pruitt conceded, is that EPA generally defers to a source’s definition of the scope of its “project,” raising the possibility that a source could attempt to circumvent NSR requirements by defining a “project” unreasonably broadly to include artificial grouping of activities in an effort to maximize emission decreases. Pruitt stated that EPA plans to address this issue in an upcoming action on “project aggregation.”  “New Source Review Preconstruction Permitting Requirements: Enforceability and Use of the Actual-to-Projected-Actual Applicability Test in Determining Major Modification Applicability” (Scott Pruitt, 12/7/2017); “Project Emissions Accounting Under the New Source Review Preconstruction Permitting Program” (Scott Pruitt, 3/13/2018).

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

• Diversity jurisdiction; plaintiff’s membership in defendant limited liability company. Affirming Judge Kyle’s sua sponte dismissal of a purported diversity action, the 8th Circuit held in an unpublished opinion that one plaintiff’s membership in the defendant limited liability company defeated diversity jurisdiction. Little Otters of Love, LLC v. Rosenberg, ___ F. App’x ___ (8th Cir. 2018).

• Motion to transfer venue; intervening change in the law; timeliness. In October 2017, this column noted Judge Nelson’s grant of a motion to transfer venue in a patent action. The plaintiff subsequently petitioned the Federal Circuit for a writ of mandamus, and the Federal Circuit vacated Judge Nelson’s order after holding in a related case that Fed. R. Civ. P. 1 could be considered in addition to Fed. R. Civ. P. 12 when evaluating the timeliness of a venue defense. Evaluating the defendants’ renewed motion to transfer venue under this standard, and rejecting the plaintiff’s argument that the defendant had engaged in “tactical gamesmanship” and that it would be prejudiced by a venue transfer close to the trial ready date, Judge Nelson once again ordered venue transferred to the Western District of Pennsylvania. Cutsforth, Inc. v. LEMM Liq. Co., 2018 WL 847763 (D. Minn. 2/13/2018).

• Alleged arbitrator bias; TRO and preliminary injunction denied. Adopting a report and recommendation by Magistrate Judge Menendez, Judge Davis denied the plaintiffs’ motion for a temporary restraining order and preliminary injunction premised on alleged arbitrator bias. Magistrate Judge Menendez had found that the court was powerless to stay the arbitration, and that the plaintiffs’ claims of irreparable harm were belied by their ability to seek relief after the conclusion of the arbitration. Shields v. General Mills, Inc., 2018 WL 895398 (D. Minn 1/26/2018), Report and Recommendation adopted, 2018 WL 894570 (D. Minn. 2/14/2018).

• Fed. R. Civ. P. 9(b) and 12(b)(6); motion to dismiss granted. Chief Judge Tunheim dismissed several of the plaintiff insureds’ claims against their insurer under Iqbal and Twombly, finding that their promissory estoppel, breach of fiduciary duty, and tortious interference claims failed to allege “sufficient facts” to support those claims. In addition, the plaintiffs’ fraud claim was dismissed pursuant to Fed. R. 9(b) due to their failure to meet the “heightened” pleading standard. All of these claims were dismissed without prejudice. Diocese of St. Cloud v. Arrowood Indem. Co., 2018 WL 1175421 (D. Minn. 3/6/2018).

• Fed. R. Civ. P. 12(b)(6); motion to dismiss; matters outside the pleadings. Overruling objections to a report and recommendation by Magistrate Judge Brisbois, Judge Wright found that the documents submitted by one defendant in support of its motion to dismiss were not “embraced” by the pleadings where the authenticity of the documents was in dispute, and therefore could not be considered in support of the motion to dismiss. Boyd & Co., LLC v. Tom’s Backhoe Serv., Inc., 2018 WL 740389 (D. Minn. 2/7/2018).

• Local Rule 5.6; continued sealing of documents. While granting the plaintiff’s motion for continued sealing of documents relating to his “garden variety” emotional distress claims, Magistrate Judge Rau described as “problematic” the plaintiff’s request to prevent disclosure of this information “at hearings or trial,” finding that this matter should be addressed through a motion in limine, and that his request for the continued sealing of meet and confer statements and proposed orders was “generally inappropriate.” Feinwachs ex rel. United States v. Minnesota Hosp. Assoc., 2018 WL 882808 (D. Minn. 2/13/2018).

• Fed. R. Civ. P. 9(b); fraud claims dismissed; “informal” request to amend denied. Judge Frank dismissed numerous fraud claims, finding that they “lack[ed] the particularity required under Rule 9(b)” because they failed to provide details about allegedly fraudulent materials, failed to explain how alleged misrepresentations were false or misleading, because their allegations regarding intent were “conclusory,” and because their reliance allegations were “insufficiently specific.” Judge Frank also denied plaintiffs’ “informal” request for leave to amend, but dismissed plaintiffs’ claims without prejudice. Bhatia v. 3M Co., 2018 WL 1122374 (D. Minn. 3/1/2018).

• Motion to strike late-filed reply brief denied. Chief Judge Tunheim denied the defendants’ “motion to strike” the plaintiffs’ untimely reply brief submitted in support of their motion for class certification, on the basis that “neither the Federal Rules of Civil Procedure nor the local rules for the District of Minnesota permit a party to move to strike a belatedly filed brief.” Portz v. St. Cloud State Univ., 2018 WL 1050405 (D. Minn. 2/26/2018).

• 35 U.S.C. §285; attorney’s fees denied to prevailing plaintiff in patent case. Chief Judge Tunheim denied the prevailing patent plaintiff’s request for attorney’s fees, finding that the case was not “exceptional” for purposes of 35 U.S.C. §285. Schwendimann v. Arkwright Advanced Coating, Inc., 2018 WL 1041038 (D. Minn. 2/23/2018).

• Removal; remand; request for sanctions and fees denied. Where the defendant removed the plaintiff’s action on the basis of ERISA preemption, Chief Judge Tunheim granted the plaintiff’s motion to remand, but the denied the plaintiff’s request for costs and fees under 28 U.S.C. §1447(c), finding that the removal was “not unreasonable,” and also denied the plaintiff’s related motion for sanctions under Fed. R. Civ. P. 11. Miller v. Starkey Labs., Inc., 2018 WL 1141377 (D. Minn. 3/2/2018).

Josh Jacobson
Law Office of Josh Jacobson 

 

IMMIGRATION LAW
JUDICIAL LAW

• Detained immigrants and bonds. The U.S. Supreme Court reversed the 9th Circuit Court of Appeals by holding that INA §§235(b), 236(a), and 236(c) do not give detained noncitizens the right to periodic bond hearings over the course of their detention. “Because the Court of Appeals erroneously concluded that periodic bond hearings are required under the immigration provisions at issue here, it had no occasion to consider respondents’ constitutional arguments on their merits.” Consequently, the Court remanded the case for the 9th Circuit to consider the respondents’ constitutional arguments. Jennings et al. v. Rodriguez et al., 583 U.S. ___ (2018). https://www.supremecourt.gov/opinions/17pdf/15-1204_f29g.pdf 

• Deferred Action for Childhood Arrivals (DACA) developments. On 1/9/2018, the U.S. District Court for the Northern District of California issued a nationwide injunction ordering the U.S. Department of Homeland Security (DHS), pending final judgment, to maintain the DACA program on the same terms and conditions as were in effect prior to the government’s 9/5/2017 rescission with certain exceptions: (1) new applications by applicants who had never held deferred action need not be processed; (2) the advance parole feature of DACA need not be continued for anyone for the time being; and (3) DHS may take certain steps to ensure that fair discretion is exercised on an individualized basis for each renewal application. The district court further noted, “Nothing in this order prohibits the agency from proceeding to remove any individual, including any DACA enrollee, who it determines poses a risk to national security or public safety, or otherwise deserves, in its judgment, to be removed. Nor does this order bar the agency from granting advance parole in individual cases it finds deserving, or from granting deferred action to new individuals on an ad hoc basis.” Regents of University of California, et al. v. U.S. Department of Homeland Security, et al. (3:17-CV-05211-WHA) (N.D. Cal. 1/9/2018). https://www.nilc.org/wp-content/uploads/2018/01/Regents-v-DHS-prelim-injunction-2018-01-09.pdf

On 2/13/2018, the U.S. District Court for the Eastern District of New York issued an injunction on a universal or “nationwide” basis ordering the U.S. Department of Homeland Security (DHS) to maintain the DACA program in existence prior to the 9/5/2017 rescission with the following exceptions: (1) DHS need not consider DACA applications by those who were never before granted DACA benefits; (2) the agency need not continue granting advance parole to DACA beneficiaries; and (3) DHS may adjudicate renewal requests on a case-by-case basis. “Accordingly, the court finds that the balance of the equities tip decidedly in Plaintiffs’ favor, and that the public interest would be well-served by an injunction.” Batalla Vidal v. Nielsen (1:16-CV-04756-NGG-JO) (E.D.N.Y. 2/13/2018). https://www.nilc.org/wp-content/uploads/2018/02/Batalla-Vidal-v-Nielsen-updated-pi-order-2018-02-13.pdf

On 1/18/2018, the government asked in a petition for certiorari before judgment that the U.S. Supreme Court take up its appeal of the California U.S. District Court’s 1/9/2018 decision. United States Department of Homeland Security, et al., v. Regents of the University of California, et al. https://www.supremecourt.gov/DocketPDF/17/ 17-1003/28381/20180119100226711_DACA%20Rule%2011%20Petition.pdf 

On 2/26/2018, the U.S. Supreme Court declined to do so, for now.  https://www.supremecourt.gov/orders/courtorders/022618zor_j426.pdf 

On 3/5/2018, the U.S. District Court for the District of Maryland declined to enjoin the government’s rescission of the DACA program, finding it had the authority to do so. However, the court noted that it would not allow the government to rely on DACA-provided information to “track and remove” DACA recipients. “Therefore, while the Government will not be enjoined from rescinding DACA, given the substantial risk for irreparable harm in using Dreamers’ DACA-provided information, the Court will enjoin the Government from using information provided by Dreamers through the DACA program for enforcement purposes.” Casa de Maryland, et al. v. DHS, et al. (8:17-cv-02942-RWT) (D. Md. 3/5/2018). http://cdn.cnn.com/cnn/2018/images/03/06/maryland-daca-opinion.pdf 

Stay tuned.

• Insufficient nexus between faith and mistreatment in Mexico. On 1/11/2018, the 8th Circuit Court of Appeals denied the petition for review, holding substantial evidence supported the finding that the petitioner had failed to establish either a sufficient nexus between his faith (as a follower of the deity Santa Muerte, which some Mexican government officials and others associated with criminal activity, specifically membership in a drug cartel) and his mistreatment in Mexico or a likelihood of torture if removed to Mexico. Garcia-Moctezuma v. Sessions, No. 16-4433, slip op. (8th Circuit, 1/11/2018). http://media.ca8.uscourts.gov/opndir/18/01/164433P.pdf

ADMINISTRATIVE ACTION

• Temporary Protected Status extended for Syria. On 3/5/2018, the Department of Homeland Security announced that Secretary of Homeland Security Kirstjen Nielsen had extended the designation of Syria for Temporary Protected Status for 18 months, from 4/1/2018 through 9/30/2019. The re-registration period runs from 3/5/2018 to 5/4/2018. According to Secretary Nielsen, “an 18-month extension is warranted because the ongoing armed conflict and extraordinary and temporary conditions that prompted Syria’s 2016 redesignation for TPS persist. Syria is engulfed in an ongoing civil war marked by brutal violence against civilians, egregious human rights violations and abuses, and a humanitarian disaster on a devastating scale across the country.” 83 Fed. Reg. 9329-36 (3/5/2018). https://www.gpo.gov/fdsys/pkg/FR-2018-03-05/pdf/2018-04454.pdf

R. Mark Frey
Frey Law Office

INTELLECTUAL PROPERTY
JUDICIAL LAW

• Patents: Litigation stay pending reexamination and post-grant review. Judge Bowbeer recently stayed patent litigation until the conclusion of reexamination and post-grant review of some, but not all, of the patents-in-suit. Telebrands sued Seasonal Specialties alleging Seasonal’s Laser Motion product infringed Telebrands’ utility and design patents. Seasonal moved to stay the litigation after the Patent Office ordered a reexamination of Telebrands’ utility patents and a third party filed requests for post-grant review of the patents. A stay in proceedings allows courts to control their dockets, to conserve judicial resources, and to provide for the just determination of cases before it. A court considers: (1) whether a stay would unduly prejudice or present a clear tactical disadvantage to the non-moving party; (2) whether a stay will simplify the issues in the litigation and facilitate trial; and (3) whether discovery is complete and a trial date is set. The court found that each factor favored a stay. First, Telebrands did not seek a preliminary injunction, indicating that it would not be irreparably harmed by Seasonal’s continued sales of the accused products during the stay. Second, the litigation was in its early stages and discovery was just starting. Third, it was highly likely the reexaminations and post-grant reviews would materially affect the patents-in-suit even though not all of the patents-in-suit were subject to reexaminations and review. After deciding to stay the portion of the case where the patents were subject to review, the court considered whether to split the case to allow Telebrands to litigate its design patents while the infringement claims of the utility patents were stayed. Due to the likelihood of discovery problems created by parties trying to produce documents related only to the design patents but not the utility patents, the entire case was stayed pending the conclusion of the post-grant reviews and a ruling on whether the stay would last through the conclusion of the reexaminations was deferred. Telebrands Corp. v. Seasonal Specialties, LLC, No. 17-cv-4161 (WMW/HB), 2018 U.S. Dist. LEXIS 29112 (D. Minn. 2/23/2018).

• Patents: Precluding arguments for willful infringement. Judge Nelson recently precluded willful infringement in a patent suit because it was not timely pled. Solutran sued U.S. Bank and Elavon Inc. for infringing patents related to processing checks and check transactions. Solutran did not expressly allege willful infringement in its complaint. After the deadline to amend pleadings, it asked the court for permission to add an allegation for willful infringement based on defendants’ conduct before the lawsuit was filed, i.e., pre-suit willful infringement. The court denied Solutran’s request because it lacked good cause to amend its complaint after the scheduling order’s deadline to amend had passed. Solutran next argued that it could recover for willful infringement committed after the complaint was filed, i.e., post-complaint willful infringement, but the court again disagreed. Solutran argued that it had pled post-complaint willfulness because it sought “all damages that are available pursuant to 35 U.S.C. §284” in its initial complaint. The court, however, noted that Solutran’s earlier, failed motion to amend the complaint sought to add the allegation that defendants’ infringement was and continues to be willful. In other words, its earlier motion included post-complaint willful infringement. Moreover, the factual evidence of discovery misconduct that Solutran wanted to use as evidence of willful infringement was inadmissible. Although U.S. Bank’s document-retention policy may have allowed for the destruction of some discoverable documents, only a tenuous connection existed between the policy and the kind of concealment-related conduct that could support a claim of willful infringement. Additionally, even if the evidence was probative of willfulness, the weak inference it raised was substantially outweighed by the danger of unfair prejudice.  Solutran, Inc. v. U.S. Bancorp, No. 13-cv-02637 (SRN/BRT), 2018 U.S. Dist. LEXIS 31564 (D. Minn. 2/26/ 2018).

Tony Zeuli 
Merchant & Gould

Joe Dubis
Merchant & Gould

 

PROBATE & TRUST LAW
JUDICIAL LAW

• Attorneys’ fees. Plaintiff successfully removed the trustee of a trust established for her benefit. Following the removal, the trustee moved for attorneys’ fees to be paid from the trust based on the general rule that a trustee is entitled to reasonable attorneys’ fees, incurred in good faith in defending the administration of the trust, to be paid from the trust estate.

The court held that the adoption of the new Minnesota Trust Code on 1/1/2016 changed the approach to awarding attorneys’ fees to trustees. The court reasoned that Minn. Stat. §501C.1004 provides that courts may award attorneys’ fees “as justice may require,” and that therefore, the analysis no longer turns on whether the trustees fees were incurred in “good faith” and were “reasonable.” The court found that under the new standard, courts have expanded discretionary authority to award attorneys’ fees and that the new Trust Code places an emphasis on flexibility and equity. Lund v. Lund, File No. 27-CV-14-20058 (Minn. Dist. Ct. 10/18/2017).

Casey D. Marshall
Bassford Remele PA

REAL PROPERTY
JUDICIAL LAW

• National Environmental Protection Act; municipal consent. In what Federal Judge Tunheim called a “close case,” the United States District Court for the District of Minnesota held that Met Council did not “irreversibly and irretrievably commit itself to a specific route” in completing an environmental review of the proposed Southwest Light Rail Transit project, and therefore did not violate federal law (NEPA). Judge Tunheim acknowledged the potential direct conflict between local law and federal law. Minn. Stat. §473.3994 gives a veto right to each city and county that a light-rail line is proposed to run through. By contrast, federal law requires an environmental impact statement, during the preparation of which the Met Council cannot predetermine a route. Of course, without municipal consent, there is no point to conducting an environmental study. The district court found in favor of the Met Council because the memoranda of understanding from various municipalities granting consent (for only a particular route) were not binding, and the Met Council made several changes to the route that it later obtained consent for, therefore militating against a finding of predetermination. Lakes and Parks Alliance of Minneapolis v. Metropolitan Council, No. 14-3391, 2018 WL 1073160 (D. Minn. 2/27/2018).

• Eminent domain. A taking under the 5th Amendment to the U.S. Constitution does not occur where a county informs a landowner it intends to exercise eminent domain, but then enters into a voluntary purchase agreement with the landowner. The United States District Court for the District of Minnesota also held that the plaintiffs could not pursue the federal claim because a federal claim for violation of the just compensation clause of the 5th Amendment arises if and only if the landowner has exhausted any and all available state procedures for seeking just compensation and been denied it. The plaintiffs had filed their action originally in Federal District Court and not in any state court. Johnson v. City of Richfield, No. 17-cv-1254, 2018 WL 1009107 (D. Minn. 2/22/2018).

• Rental licensure; claim and issue preclusion. In the continuing saga of former landlord Mahmood Khan, the United States District Court for the District of Minnesota dismissed Khan’s federal lawsuit claiming a violation of substantive due process and disparate-impact discrimination under the FHA. The lawsuit had been filed while the revocation of his rental licenses was being adjudicated in state court, and the parties had agreed to stay the federal litigation. In May 2017, the Minnesota Supreme Court denied Khan’s petition for review, leaving in place the court of appeals opinion that upheld the revocation. Following the Minnesota Supreme Court’s denial of Khan’s petition for review, Khan appealed to the United States Supreme Court, which petition was denied November 2017. Critically, the district court held that Minneapolis’s ordinance prohibiting licensure for five years if the licensee has had two licenses revoked “does not come remotely close to” violating a substantive due process right. Khan v. City of Minneapolis, No. 16-cv-3104, (D. Minn. 2/20/2018). 

Joseph P. Bottrell
Meagher & Geer, PLLP

 

TAX LAW
JUDICIAL LAW

• What evidence can be considered to overcome prima facie validity? Taxpayer Court Park Company appealed Hennepin County’s assessed fair market value of the parking ramp the company owns near Hennepin County Medical Center. At the end of the taxpayer’s case-in-chief, the county moved to dismiss on the ground that the taxpayer had failed to overcome the prima facie validity of the county’s assessment. The tax court deferred ruling on the motion, and the county presented its case. The tax court ultimately denied the county’s motion. In its decision, the tax court relied on evidence presented during the county’s case. In a footnote, the tax court alternatively held that the taxpayer’s evidence, by itself, overcame the presumptive validity of the assessment. On review, the Minnesota Supreme Court interpreted two statutes and a previous decision to hold that when determining whether a taxpayer has produced evidence sufficient to overcome the statutory presumption that a property tax assessment is valid, the tax court may consider only the evidence presented by the taxpayer. In the instant case, though, the tax court did not abuse its discretion in denying the county’s motion to dismiss because the tax court held in the alternative that the evidence presented by the taxpayer overcame the statutory presumption. Court Park Co. v. Hennepin Co., No. A17-0962 (Minn. 2/14/18).

• Can an affiliated clinic utilize the tax-exempt status of the public hospital? Lake View Memorial Hospital in Clay County is a public hospital exempt from taxation under the Minnesota Constitution. Minn. Const. art. X, §1; Minn. Stat. §272.02, subd. 4 (2016). Our Constitution exempts from taxation those hospitals that offer “free access to the public without discrimination” and that are also “operated for the benefit of the public.” Hospitals operated for the benefit of a private individual, corporation, or group of individuals are not entitled to the exemption. In certain circumstances, auxiliary properties can also benefit from the exemption. At issue in this dispute is whether a clinic associated with the tax-exempt Lake View Memorial Hospital qualifies for tax exempt status. Lake View Clinic is an affiliated outpatient primary-care facility located approximately 175 feet from the hospital. The clinic and the county submitted cross motions for summary judgment on the question of the clinic’s tax-exempt status. The tax court denied both motions. The court began its analysis by discussing the status of the law surrounding auxiliary properties generally, before turning to the degree to which the auxiliary property here (the clinic) and the public hospital were functionally interdependent. The tax court catalogued the types of properties previously found sufficiently related to satisfy the auxiliary property test in the public hospitals settings. In particular, laundry facilities; patient, family, and medical personnel lodging; and facilities necessary for accreditation have all satisfied the standard. In contrast, Minnesota case law has yet to apply the auxiliary property exemption to clinics. That rejection has rested on the rationale that clinics, although associated with public hospitals, are usually privately owned and operated. The last time the court had occasion to address the question, however, was over 30 years ago. In the interim, the tax court reasoned here, the relationship between hospitals and clinics may have changed. Citing Minnesota Supreme Court precedent, the tax court noted the two-fold difficulty in determining whether auxiliary properties satisfy the tax-exempt test. “First, it is difficult to know where to draw the line; almost any auxiliary facility can be found to improve the financial well-being of a hospital. Secondly, these exemptions, because they are exceptions to the requirement of uniform taxation, tend to give an unfair competitive advantage to the exempted facility over similar facilities privately operated.” (Quoting Chisago Health Servs. v. Comm’r of Revenue, 462 N.W.2d 386, 388 (Minn. 1990)). With those difficulties in mind, and because neither party provided sufficient evidence that it was entitled to judgment as a matter of law as to either the “devoted to” or the “reasonably necessary” prong of the auxiliary-property test, summary judgment was denied. Lake View Memorial Hosp., Inc. v. Lake Co., No: 38-CV-14-443 (M. T.C. 2/7/18).

• Property tax: Motion to consolidate and for scheduling amendment denied. In two cases concerning the market value of commercial income-producing property in Farmington, Minnesota, the Minnesota Tax Court denied the taxpayer’s motion for consolidation and its motion to amend the scheduling order. Minnesota Rule of Civil Procedure 42.01 permits consolidation of cases “involving a common question of law or fact.” Consolidation, however, is not required and in this instance, the tax court denied the taxpayer’s consolidation motion for several reasons, including the fact that discovery had already closed for one of the files, therefore consolidation would “effectively bar either party from conducting discovery with respect to [one of the disputed] valuation date[s].” The court also noted that the parties had already exchanged written appraisals with respect to the one valuation date, and that one of the cases was to be trial-ready shortly, and the parties were to begin filing pretrial submissions in “little more than a month.” The taxpayer, the court noted, simply moved for consolidation “too late in the proceedings.” Amos Fin., LLC v. Dakota Co., No. 19HA-CV-16-1263 (M.T.C. 2/8/18).

• Summary judgment granted: No grounds for penalty abatement. The tax court granted the commissioner’s summary judgment motion upholding a penalty for failure to timely file employee withholding statements. The taxpayer did not appeal the assessment itself, but instead requested abatement of the penalty. The commissioner denied the request for abatement of the penalty and the taxpayer appealed to the tax court. The tax court granted the commissioner’s motion for summary judgment to affirm the penalty assessment. Minnesota law permits the commissioner to abate penalties imposed as a result of the late filing of a return “if the failure to timely file the return is due to reasonable cause.” Minn. Stat. §270C.34, subd. 1 (2016). Although the taxpayer was unrepresented by counsel in these proceedings and did not appear or oppose the commissioner’s motion, the tax court looked to a previous filing in which the taxpayer argued that abatement was appropriate because “at the time W–2s were due the company was under an unemployment audit. The W–2s were in error and were not filed until corrected. The letters [illegible] were not received or not [illegible] from [illegible] employee.” Based on this argument, the tax court surmised that the taxpayer did not timely file duplicate withholding statements because it believed them to be incorrect, and decided to wait to file them only after they were amended. The tax court did not find this argument persuasive to abate the penalty. Instead of ignoring its filing obligation, the court explained, the taxpayer could have sought an extension of the filing deadline under Minnesota Statute §289A.09, subd. 2(c) (2016). The tax court also explained that the taxpayer’s filing obligation is not excused even if the taxpayer believed its failure to timely file was the fault of an employee or an outside accounting firm, because the taxpayer itself bears the ultimate responsibility for fulfilling that duty. PerformTel, LLC v. Comm’r of Revenue, No. 9012-R (M.T.C. 2/8/18).

LOOKING AHEAD

• Taxes a potential weapon in opioid fight. Rising concern over the public health crisis created by opioid abuse has prompted Gov. Mark Dayton to announce a legislative proposal to tax prescription opioid pills to help fund treatment. Minnesota, along with at least 13 other states, has considered an opioid tax in recent years to help pay for the costs associated with the opioid epidemic. So far, no such legislation has passed. Minnesota had 395 opioid overdose deaths in 2016—an 18 percent increase compared to 2015. Dayton’s proposal would levy a one-cent tax on opioid manufacturers for each milligram of active ingredient in a prescription pain pill. This proposed excise tax is estimated to generate $20 million a year. This money would fund programs in Minnesota designated for prevention, policing, emergency response, and treatment.

Morgan Holcomb
& Matthew Wildes
Mitchell Hamline School of Law

 

TORTS & INSURANCE
JUDICIAL LAW

• Legal malpractice; statute of limitations. Plaintiff retained defendant attorney to draft an antenuptial agreement, which was signed by plaintiff and his fiancé on 9/28/2006. But the witness lines in the agreement were left blank, resulting in an unenforceable agreement. One year later, plaintiff retained defendant to draft a new will, which expressly incorporated the antenuptial agreement. In 2013, plaintiff’s wife filed for divorce and successfully argued the antenuptial agreement was unenforceable. Plaintiff filed suit against defendant for malpractice in 2013, more than six years after the antenuptial agreement was executed but less than six years after the will was executed. The district court granted judgment on the pleadings to defendant based on the statute of limitations. The court of appeals affirmed.

The Minnesota Supreme Court reversed. The Court acknowledged that any claim arising out of the drafting of the antenuptial agreement did occur upon marriage, and was, therefore, barred by the statute of limitations. But the Court held that Minnesota law allows “two separate transactions within the same set of facts to be reasonably characterized as separate acts that give rise to independent negligence claims.” To determine when multiple acts by the same lawyer are independent acts of negligence, the Court endorsed a fact-specific approach that may include weighing whether the plaintiff’s position was significantly worsened, whether the subsequent act involved the same type of conduct, whether the acts occurred at different times and during different transactions, whether the subsequent act was connected by a causal link to the first, and whether the subsequent act explicitly relied on the continued validity of the prior work.

Here, the Court held that the drafting of the will, which explicitly referenced the antenuptial agreement, constituted a separate act of negligence that allegedly caused independent damage, reasoning, “had [plaintiff] known that the antenuptial agreement was invalid in 2007, rather than incorporating it into his will, he could have sought a new agreement or a divorce to avoid the 6 additional years of appreciation.” In addition, while the negligent act of drafting the will related to the antenuptial agreement, the Court reasoned that the subsequent act “spanned multiple areas of law” and the acts “took place at different times and during different transactions.”

Justice Gildea, joined by Justice Anderson, filed a dissenting opinion, finding that defendant’s “later failures to remedy her original error were not independent acts of negligence giving rise to new and separate damages.” Frederick v. Wallerich, No. A15-2052 (Minn. 2/7/2017). https://mn.gov/law-library-stat/archive/supct/2018/OPA152052-020718.pdf

Jeff Mulder
Bassford Remele

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