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

Notes & Trends – August 2018

Commercial and Consumer Law

• Alternative dispute resolution. Arbitration agreements in both consumer and commercial contracts are common and provide in many circumstances both a cheaper and a more rewarding and efficient method of dispute resolution than does litigation. Not surprisingly, trial lawyers may prefer litigation, and some individuals may later seek to evade the agreement they signed for a variety of reasons. A recent case, Jones v. Samsung Electronics America, Inc., Case No. 2:17-cv-00571-MAP (W.D. Pa. 2018), illustrates a type of later challenge to an arbitration agreement.

In Jones, the arbitration clause was located in the “Manufacturer’s Warranty” section of a 64-page “Important Information Booklet” contained in the box in which the product, a phone, came. None of the section headings in the booklet referred to arbitration. When the phone allegedly exploded and caught fire, the plaintiff filed a class action, and Samsung moved to compel arbitration.

The court concluded that “[p]urchasers may be bound by what they have not read, but they may not be bound by what they cannot find, or what has been (negligently or by connivance) buried in the verbal underbrush.” “[I]f Samsung had actually desired to make its customers aware of the Arbitration Agreement, it would have been simple to bring the point home more clearly.”

Fine in theory, but let’s dig a little deeper. An arbitration agreement is not the only type of language that needs to be conspicuous under applicable law, here the Uniform Commercial Code (see UCC §1-201(b)(10)) to be legally effective. For example, disclaimers must be conspicuous under UCC §2-316. Procedural “unconscionability” under UCC §2-302 also may demand conspicuity. See UCC §1-201(b)(10) with respect to a limitation of damages or other remedy under UCC §§2-718 and 2-719. So may other clauses that a court might with hindsight deem to be important. At some point, if much must be conspicuous, nothing will be.

Second, if one reads an agreement, one necessarily must find what is in it, so where can a person stop reading so they cannot “find” a provision? 

Finally, what is the basis for the court’s suggestion of “negligence” or “connivance” merely because something appears later rather than early in an agreement and in the same size type as other provisions? 

In this author’s opinion, the court’s opinion is pure judicial legislation and, unlike a statute, provides little guidance for the future. A further recent case, Cullinane v. Uber Technologies, Inc., No. 16-2023 (1st Cir. 2018), involves much the same issue although in the context of an online agreement. The court holds an arbitration clause, to be enforceable, must be “reasonably communicated and accepted” and found that was not the case in the circumstances of the case. Perhaps the context involved might make the decision arguably tenable—indeed the court noted that if “everything on the screen is written with conspicuous features, then nothing is conspicuous,” which makes a point against the Jones case’s approach, but moreover the test of “reasonably communicated” is ill-defined and provides little guidance.

That said, a word to the wise should be sufficient, and that word is, use a conspicuous heading (but not too many) and, in a lengthy document, perhaps use a table of contents or some other flag to what arguably might be considered important to a customer.

On the subject of the enforceability of arbitration agreements, other recent arbitration decisions worth thinking about are: (1) Baynes v. Santauder Consumer USA, 2018 WL623582 (W.D. Pa. 2018) and (2) Pacanowski v. Fin, L.P., 271 F. Supp. 3d 738 (M.D. Penn. 2017) (both ruling on who can enforce arbitration and concluding in Baynes that employees, agents, and representatives are able to, and concluding in Pacanowski that debt collectors may not, at least on the facts of that case).

See also Gadomski v. Wells Fargo Bank, N.A., 281 F. Supp. 3d 1015 (E.D. Cal. 2018) (holding that a discharge in bankruptcy does not render an arbitration agreement unenforceable in regard to a claim by the debtor for a violation of the Fair Credit Reporting Act; the court thus enforced the arbitration clause).

Fred Miller

Ballard Spahr



Sentencing/criminal sexual conduct: Only one custody-status point should be added to sex offender’s criminal history for new sex offense where offender discharged from probation but remains within original probation term. In 1996, appellant was convicted of second-degree criminal sexual conduct and placed on probation for 25 years. Appellant was discharged from probation in August 2012. He was then charged with and pleaded guilty to two counts of first-degree criminal sexual conduct for acts committed in May 2012 (count one) and February 2014 (count two). When calculating appellant’s criminal history score for his first-degree sentencing, the district court assigned two custody status points on each count, for being within the “original probation term” of the 1996 sex offense, despite appellant’s discharge from probation before the conduct underlying count two. Appellant challenges the district court’s sentence on count two, arguing only one custody-status point should have been added to his criminal history score.

The court of appeals finds first that the district court properly assigned two custody-status points for count one under the version of the sentencing guidelines applicable at that time (2011 version), because (1) the offense was committed while appellant was on probation, and (2) the new offense was a specific sex offense and was committed while he was under one of the custody statuses enumerated in section 2.B.2.a-d of the guidelines. 

On count two, the 2012 revisions of the sentencing guidelines (effective 8/1/2012 to 8/1/2014) apply. The court of appeals concludes that the 2012 guidelines unambiguously provide for only one custody-status point on count two. The 2012 revisions provided that two custody-status points could be assigned only if the offender was under any of the listed custody statuses for another sex offense, which includes “probation,” but does not discuss an offender who has been discharged from probation. Computing the criminal history score of an offender no longer on probation is addressed in another section, which provides that only a single custody-status point should be assigned “if the offender is discharged from probation but commits an offense within the initial period of probation pronounced by the court.” The district court erred in concluding that the 2012 revisions were ambiguous and by looking to the 2014 amendments to determine the intent underlying the 2012 revisions. Reversed and remanded for resentencing on count two. State v. Donald Andrew Oreskovich, Sr., No. A18-0193, __ N.W.2d __, 2018 WL 2770426 (Minn. Ct. App. 6/11/2018). 

• Sentencing/criminal sexual conduct: Blakely findings required to vacate stay of adjudication, impose presumptively stayed sentence, and execute sentence. Appellant pleaded guilty to one count of third-degree criminal sexual conduct, received a five-year stay of adjudication, and was placed on probation with conditions. Appellant violated a number of the conditions and the district court “revoked” the stay of adjudication, imposed the presumptively stayed 36-month sentence, and then executed the sentence. Appellant challenges the executed sentence, arguing it is an unauthorized upward dispositional departure.

Imposition of a presumptive sentence is mandatory, absent judicial findings, per Blakely, which requires that a jury find, or a defendant admit to, any fact, other than a prior conviction, that is necessary to support a sentence exceeding the presumptive sentence. Execution of a presumptively stayed sentence is a sentence requiring compliance with Blakely. The court of appeals rejects the district court’s finding that appellant had been “sentenced” when he received a stay of adjudication, a sentence within the guidelines. A stay of adjudication is not a sentence, because no conviction is entered or sentence imposed. Appellant had not been sentenced until the district court vacated the stay of adjudication. While the district court made some findings, consistent with State v. Austin, 295 N.W.2d 246 (Minn. 1980), at the hearing it treated as a probation violation hearing, it did not make sufficient findings to satisfy Blakely and support its upward dispositional departure. Reversed and remanded for imposition of the presumptive guideline sentence. State v. Joel Evan Greenough, A17-1915, __ N.W.2d __, 2018 WL 2770423 (Minn. Ct. App. 6/11/2018). 

Samantha Foertsch

Bruno Law

Stephen Foertsch

Bruno Law


• At-will employment; termination upheld. The termination of an executive with a manufacturing firm in Shakopee did not breach his compensation agreement. Affirming a ruling of Senior U.S. District Court Judge David Doty, the 8th Circuit Court of Appeals held that the arrangement did not modify the claimant’s status as an at-will employee who could be fired at any time for any reason. Ayala v. Cyber Power Systems, Inc., 891 F.3d 1074 (8th Cir. 6/6/2018).

• 1st Amendment retaliation; claim upheld. A county clerical employee was entitled to pursue a 1st Amendment retaliation claim challenging her discharge. Reversing a lower court ruling dismissing the lawsuit, the 8th Circuit remanded the case for determination of whether the employee’s prior work performance would have justified the discharge absent her claim that she was fired due to “political” patronage. Mahn v. Jefferson County, Missouri, 891 F.3d 1093 (8th Cir. 6/7/2018).

• Retaliation dismissed; no jurisdiction. An employee’s claim of retaliation for filing a civil rights charge was dismissed because the employee had already received a requested transfer. Since future harm was “only a speculative possibility,” the 8th Circuit affirmed dismissal of the case. Brazil v. Arkansas Department of Human Services, 892 F.3d 957 (8th Cir. 6/12/2018).

• Disability discrimination; untimely claim. A disability discrimination claim was deemed untimely by the 8th Circuit, which refused to apply the doctrine of equitable tolling to allow the claim to proceed. Rodriguez v. Wal-Mart Stores, Inc., 891 F.3d 1127 (8th Cir. 6/11/2018).

• Noncompete contract; inspection impermissible. The failure of a party seeking to enforce violation of a noncompete agreement to prove irreparable harm bars injunctive relief, though the contractual language recited that a breach would cause “irreparable” harm and warrant “an injunction.” The state Supreme Court overturned an appellate court ruling and reinstated a lower court ruling that refused an injunction on grounds that the boilerplate language alone did not merit equitable relief. St. Jude Medical, Inc. v. Carter, 2018 WL 3131144 (S.Ct. 6/27/2018) (unpublished).

• Noncompete breach; forfeiture upheld. A retired partner of a Minnesota-based accounting firm forfeited his lucrative future deferred compensation payments of nearly $11 million over the next decade, along with damages in excess of $2 million, for violating a post-retirement noncompete agreement that he helped draft. The court of appeals affirmed a ruling that the agreement was reasonable in scope and duration and that the forfeiture was not “unjust.” Lapidus v. Lurie, LLC, 2018 WL 3014698 (Minn. App. 6/18/2018) (unpublished).

• Arbitration appeal; reinstatement reversed. An arbitration ruling reinstating the warden of the men’s prison in Stillwater, who was fired for inappropriate sexual remarks and behavior, was reversed by the Minnesota Court of Appeals because the warden’s conduct violated prison policies. It marked the second time in two months that the appellate court overturned an arbitral award reinstating a public sector employee to a job, following a reversal involving a discharged Richfield police officer this spring in City of Richfield v. LELS, 910 N.W.2d 465 (Minn. App. 4/9/2018). Department of Corrections v. Hammer, 2018 WL 2769165 (Minn. App. 6/11/2018). 

• Unemployment compensation; quitters lose. A temporary staffing employee lost an appeal for unemployment compensation benefits because she was deemed to have quit her job by not asking for a new assignment within five days after completion of her prior one, as required by Minn. Stat. §268.095, subd. 2(c). The appellate court upheld the denial of benefits and rejected a constitutional challenge to the statute. Fisher v. TCG, Inc., 2018 WL 2470364 (Minn. App. 6/4/2018) (unpublished).

• Unemployment compensation; cell phone violation. An employee who violated company policy by repeatedly using his cell phone at work was denied unemployment benefits. The appellate court ruled that the employee’s non-compliance with the policy against cell phone use constituted disqualifying “misconduct.” Kutschke v. O’Reilly Automotive, Inc., 2018 WL 2470364 (Minn. App. 6/4/2018) (unpublished).

• Unemployment compensation; profane language loses. An employee who used profanity in front of customers was denied unemployment benefits. The court of appeals ruled that the profanity violated company policy and, thus, constituted disqualifying “misconduct.” Erickson v. OT Management, LLC, 2018 2018 WL 3014579 (Minn. App. 6/18/2018) (unpublished).

Marshall H. Tanick

Meyer, Njus & Tanick



• PUC approves Enbridge Line 3. On June 28, the Minnesota Public Utilities Commission (PUC) approved Enbridge Energy’s certificate of need and proposed route for its Line 3 pipeline in northern Minnesota. The PUC voted 5-0 in approving Enbridge’s certificate of need and voted 3-2 in approving the proposed route. The proposed route was approved with one alteration that will move the pipeline farther away from Big Sandy Lake. In approving company’s route, the PUC rejected the April 2018 recommendation of an administrative judge who had advised replacing the pipeline using the existing Line 3 route.

The PUC found that Enbridge was able to prove two crucial elements were met: (1) the reliability of the oil supply would be harmed if the pipeline wasn’t built; and (2) the social and economic impacts of constructing the new pipeline outweighed the possible harms associated with both the new and old lines.

Although the certificate of need and proposed route were both approved by the PUC, several steps remain before Enbridge can begin construction on the new Line 3. In addition to potential lawsuits challenging the PUC’s decision, Enbridge must still obtain state, local, and federal permits before it can begin construction. The company must also provide a PUC-mandated corporate guarantee to cover damage associated with any spills and must await a tribal cultural survey of the approved pipeline route being led by the Fond du Lac Band of Lake Superior Chippewa.

• EPA issues no-action assurance letter to manufacturers of glider vehicles. On July 6, 2018, EPA issued a no-action assurance letter relating to those small manufacturers that either are manufacturing or have manufactured glider vehicles in calendar year 2018 and to those companies that sell glider kits to such small manufacturers. A glider vehicle, or “glider,” is a truck that utilizes a previously owned powertrain but which has new body parts. When these new body parts are put together to form the “shell” of a truck, the assemblage of parts is referred to collectively as a “glider kit.” The final manufacturer of the glider vehicle, i.e., the entity that takes the assembled glider kit and combines it with the used powertrain salvaged from a “donor” truck, is typically a different manufacturer from the original manufacturer of the glider kit.

Pursuant to an October 2016 EPA final rule specifying that glider vehicles were “new motor vehicles” within the meaning of 42 U.S.C. §7550(3), small manufacturers of glider vehicles, beginning January 1, 2018, have been precluded from manufacturing more than 300 glider vehicles per year unless they use engines that comply with the greenhouse gas and fuel efficiency emission standards applicable to the model year in which the glider vehicle is manufactured. 81 Fed. Reg. 73,478 (10/25/2016). For 2017, the rule provided an interim allowance, permitting a manufacturer to produce glider vehicles in the amount of the greatest number it produced in any one year during the period of 2010–2014.

In November 2017, EPA published a notice of proposed rulemaking, proposing to repeal the emissions standards and other requirements of the 2016 rule on the basis of a revised interpretation of the statute holding that glider vehicles are not “new motor vehicles.” 82 Fed. Reg. 53,442 (11/16/2017). EPA has not yet finalized the rule, citing the need for further review of public comments. In the meantime, the agency noted in the 7/6/2018, no-action letter, many small manufacturers, in reliance on EPA’s 2017 proposed rule, have reached the 300-vehicle manufacturing limit for 2018 and must cease production for the remainder of the year, threatening job losses and the manufacturers’ viability. Accordingly, in the 7/6 letter, EPA announced that it will exercise its enforcement discretion and take no action against small manufacturers (and the suppliers that sell them glider kits) that in 2018 and 2019 produce up to the level of the interim allowance that was available to them in calendar year 2017. EPA’s no-action assurance will remain in effect until the earlier of 7/6/2019, or the effective date of a final rule EPA intends to promulgate extending the 2016 rule’s compliance date to 12/31/2019. 

• FWS issues guidance documents limiting key aspects of Migratory Bird Treaty and Endangered Species Acts. In April 2018, U.S. Fish and Wildlife Service (FWS) Principal Deputy Director Greg Sheehan issued two separate guidance documents that limit the agency authority under the Migratory Bird Treaty Act (MBTA) and the Endangered Species Act (ESA).

The MBTA was signed into law in 1918 with the purpose, inter alia, of making it “unlawful… to pursue, hunt, take, capture, kill, attempt to take, capture, or kill,” hundreds of species of migratory birds. 16 U.S.C. §703(a). Until recently, the MBTA covered both intentional and unintentional harm to migratory birds. However, in December 2017, the U.S. Department of Interior (DOI) issued a memo that concluded the MBTA only prohibits “affirmative actions” with the purpose of taking or killing a migratory bird; thus, the MBTA does not prohibit an “incidental take.”

On 4/11/2018, FWS issued a guidance document implementing the DOI memo. The guidance document clarified that MBTA enforcement applies only when the purpose of an action is to take migratory birds, and that a taking of a bird resulting from an activity whose purpose was not to take the bird, is not prohibited by the MBTA.

Similar to the MBTA, the ESA prohibits the “take” of listed species, which means “to harass, harm, pursue, hunt, shoot, wound, kill, trap, capture, or collect or to attempt to engage in any such conduct.” 16 U.S.C. §1532(19). However, the ESA allows for FWS to issue permits for an “incidental take” of a listed species which might occur during an otherwise lawful activity. 16 U.S.C. §1539(a)(1)(B).

On 4/26/2018, FWS issued a guidance document clarifying when the need may arise to apply for an incidental take permit (ITP). The guidance clarifies the definitions of “harass” and “harm” of an ESA-listed species. The guidance states that harassment is prohibited under the ESA, but only applies to “intentional or negligent actions” resulting in the actual injury of a listed species by “significantly disrupting normal behavior patterns (e.g. breeding, feeding or sheltering, etc.).” As for the definition of “harm,” the guidance emphasizes that habitat modification alone may not necessarily “harm” a listed species to trigger the need for an ITP. The guidance establishes these three factors that must be met in order for habitat modification to qualify as “harm”: i) the modification of habitat must be significant; ii) the modification must significantly impair an essential behavior pattern of a listed species; and, iii) the significant modification that significantly impairs the listed species must likely result in the actual killing or injury of the wildlife. According to the guidance, unless all three components are met, an ITP is not required for the proposed project.

These April FWS guidance documents seem likely to result in the acceleration of environmental review and project approvals. “Guidance on the Recent M-Opinion Affecting the Migratory Bird Treaty Act” (Greg Sheehan, 4/11/2018); “Guidance on Trigger for an Incidental Take Permit Under Section 10(a)(1)(B) of the Endangered Species Act” (Greg Sheehan, 4/26/2018).

Jeremy P. Greenhouse
The Environmental Law Group, Ltd.

Jake Beckstrom Vermont Law School, 2015

Erik Ordahl Flaherty & Hood, P.A. 



• Deadlines for claim-processing rules; equitable exceptions; certiorari. The Supreme Court will review a 9th Circuit decision which held that Fed. R. Civ. P. 23(f)’s 14-day deadline for filing a petition for permission to appeal an order granting or denying class certification is subject to equitable exceptions. The 2nd, 3rd, 4th, 5th, 7th, 10th, and 11th Circuits all have held that Rule 23(f)’s deadline is not subject to equitable exceptions. Lambert v. Nutraceutical Corp., 870 F.3d 1170
(9th Cir. 2017), cert. granted, ___ S. Ct. ___ (2018). 

• District court’s denial of motion to intervene for lack of standing reversed. The 8th Circuit reversed and remanded a district court’s denial of a motion to intervene in the long-running St. Louis school desegregation litigation, finding that the proposed intervenors had pleaded all of the elements of standing, and remanding the case to allow the district court to address the merits and timeliness of the intervenors’ motion. Liddell v. Special Admin. Bd. Of the Transitional School Dist., ___ F.3d ___ (8th Cir. 2018). 

• Class certification and settlement in Target security breach class action affirmed. After rejecting Judge Magnuson’s prior certification of a settlement class in the Target security breach class action, the 8th Circuit affirmed Judge Magnuson’s grant of a renewed motion for class certification, commending his “carefully reasoned and complete analysis” of the relevant settlement factors. In Re: Target Corp. Customer Data Sec. Breach Litig., 892 F.3d 968 (8th Cir. 2018). 

• Writ of mandamus granted; dissent. In a suit brought against members of the Arkansas Supreme Court by an Arkansas trial judge, the 8th Circuit granted a writ of mandamus and reversed a district court’s denial of the justices’ motion to dismiss. A dissent by Judge Kelly argued that the petitioners had not exhausted other procedural options, and that mandamus was inappropriate. In Re: Kemp, ___ F.3d ___ (8th Cir. 2018). 

• Claims of alleged FINRA arbitrator bias rejected. Affirming an order by Judge Magnuson, the 8th Circuit rejected claims of bias arising out of an arbitrator’s failure to disclose his involvement in a prior mediation involving the defendant, where the plaintiff was unable to establish the “evident partiality” of the arbitrator. Ploetz v. Morgan Stanley Smith Barney, LLC, ___ F.3d ___ (8th Cir. 2018). 

• Motion to amend scheduling order and add defendant based on newly discovered evidence rejected. Magistrate Judge Rau rejected the plaintiffs’ motion to amend the scheduling order to allow them to file an amended complaint and add a new defendant, finding that the plaintiffs could not establish the “good cause” necessary to support their motion where a delay of more than six months before bringing their motion meant that the plaintiffs had not acted diligently. MCI Communications Servs., Inc. v. Maverick Cutting and Breaking, LLC, 2018 WL 3000339 (D. Minn. 6/15/2018). 

• Motion to dismiss for improper venue denied; estoppel. Where the plaintiff filed an action in the Tennessee courts, the defendants moved to dismiss the action and argued that Minnesota was the proper venue for resolution of the dispute, the plaintiff eventually voluntarily dismissed the Tennessee action and filed a similar action in the District of Minnesota, and the defendants then moved to dismiss, arguing that Tennessee or Mississippi was the proper venue for the action, Magistrate Judge Menendez found that the defendants were estopped from opposing venue in Minnesota. MoneyGram Payment Sys., Inc. v. Bullfrog Corner Express, LLC, 2018 WL 2392010 (D. Minn. 5/25/2018). 

• Fed. R. Civ. P. 41(a)(2); motion for voluntary dismissal without prejudice granted. Finding that the purpose of Fed. R. Civ. P. 41(a)(2) is to “prevent voluntary dismissals which unfairly prejudice the other side,” Judge Doty granted one plaintiff’s motion for voluntary dismissal, finding that his arguments for dismissal were “compelling,” and that the defendants could not establish any prejudice resulting from the dismissal. G.C. v. South Washington Cty. School Dist. 833, 2018 WL 2694503 (D. Minn. 6/5/2018). 

• Motion to confirm arbitration award denied. Judge Montgomery denied a motion to confirm an AAA arbitration award that was filed one day after the entry of the award, finding that the motion was “premature” where it was filed prior to the deadline for moving to vacate, modify, or correct that award. Unison Co. v. Juhl Energy Devel., Inc., 2018 WL 2926495 (D. Minn. 6/11/2018). 

• Taxation of costs; video deposition. While rejecting most of the plaintiff’s multiple challenges to the clerk’s taxation of costs in favor of the prevailing defendant, Judge Doty found that the video deposition of the plaintiff was not “reasonably necessary” where the defendant failed to offer “specific evidence” that the plaintiff would be unable to testify at trial. Smith-Bunge v. Wisconsin Central Ltd., 2018 WL 2926497 (D. Minn. 6/7/2018). 

• Attorney’s request for subpoena-related compensation denied. Where the defendants asserted an advice of counsel defense, thereby waiving attorney-client privilege with their former counsel, plaintiffs served a subpoena on the former counsel, and the former counsel objected to the subpoena and sought compensation at his regular hourly rate of $450/hour for time spent responding to the subpoena, Magistrate Judge Menendez denied the compensation demand, finding that responding to the subpoena would involve neither “significant expense” nor “undue burden.” Cedar Rapids Lodge & Suites, LLC v. Seibert, 2018 WL 3019899 (D. Minn. 6/18/2018). 

• Personal jurisdiction; text messages. Granting defendants’ motion to dismiss for lack of personal jurisdiction, Judge Doty held that text messages sent by the defendants were insufficient to establish personal jurisdiction. Frank v. Gold’s Gym of North Augusta, 2018 WL 3158822 (D. Minn. 6/28/2018). 

• 28 U.S.C. §1292(b); motion to certify interlocutory appeal denied. Judge Nelson denied the defendant’s motion to certify her partial denial of its FLSA decertification motion, agreeing that her ruling involved a controlling question of law, but finding that there were no substantial grounds for difference of opinion and that an interlocutory appeal would not materially advance the ultimate termination of the litigation. Shoots v. iQor Holdings US Inc., 2018 WL 2383158 (D. Minn. 5/25/2018).

Josh Jacobson

Law Office of Josh Jacobson 



• Supreme Court upholds Travel Ban 3.0. On 6/26/2018, the U.S. Supreme Court issued a 5-4 decision in Trump v. Hawaii, upholding President Trump’s 9/24/2017 Proclamation 9645 (aka Travel Ban 3.0). The proclamation, in its third incarnation, sought to improve vetting procedures for foreign nationals seeking entry into the United States from certain countries failing to provide sufficient information necessary for assessing whether those individuals present a national security threat. The eight countries designated as deficient in providing the information were Chad, Iran, Libya, North Korea, Somalia, Syria, Venezuela, and Yemen. (Chad was later removed from the list following a review of that country’s improved practices.)

Chief Justice Roberts majority opinion (joined by Justices Kennedy, Thomas, Alito, and Gorsuch with concurring opinions by Justices Kennedy and Thomas): The majority opinion upheld the proclamation based on an analysis of the following:

8 U.S.C. §1182(f): This provision of the law gives broad discretion to the president to suspend the entry of foreign nationals into the United States. In fact, according to the Court, §1182(f) “exudes deference to the President in every clause.” Thus, the president need only find the admission of certain foreign nationals into the United States to be detrimental to its interests to call for suspension of entry “for such period as he shall deem necessary.” And the Court finds the Department of Homeland Security’s worldwide review and recommendations provide sufficient grounds to warrant such a finding by the president. In sum, the “Plaintiffs have not identified any conflict between the Proclamation and the immigration scheme reflected in the INA that would implicitly bar the President from addressing deficiencies in the Nation’s vetting system.” 

Establishment clause of the 1st Amendment: The issue here involves the significance of a president’s statements, sometimes inflammatory, by way of speeches, tweets, and other avenues, in relation to a presidential directive which, on its face, is neutral and issued within the traditional core of executive responsibility.

  • Applying a rational basis review, the Court asks if the proclamation is “plausibly related” to the government’s objective of protecting the United States and improving the vetting process for issuance of visas to foreign nationals seeking entry into the United States. While acknowledging the president’s outside statements, the Court discounts their significance and insists a presidential directive should be upheld “so long as it can reasonably be understood to result from a justification independent of unconstitutional grounds.” Somewhat forebodingly, the Court notes, “The upshot of our cases in this context is clear:  ‘Any rule of constitutional law that would inhibit the flexibility’ of the president ‘to respond to changing world conditions should be adopted only with the greatest caution,’ and our inquiry into matters of entry and national security is highly constrained. Mathews, 426 U. S., at 81–82.” 
  • At the same time, the Court notes that the proclamation does not universally ban foreign nationals from those countries since it makes allowance for exceptions (e.g., lawful permanent residents and those granted asylum or refugee status) and waivers, following review on a case-by-case basis.
  • In sum, the Court finds the proclamation to be based on legitimate objectives involving national security interests and to “say[] nothing about religion.”

Justice Breyer dissent (joined by Justice Kagan): Much of the dissent is devoted to whether waivers are actually being granted as provided for by the proclamation or instead used in the proclamation as mere window dressing. Citing data suggestive of the latter, the dissent notes that, according to State Department reports, two waivers were approved out of 6,555 applications during the first month. Similarly, while refugees are exempted by the proclamation, few have been allowed into the United States. According to the State Department, 13 Syrian refugees (with 3 from Iran, 1 from Libya, 0 from Yemen, and 122 from Somalia) have arrived since January 2018.  In light of this information and more, the dissent urges a remand for further fact-finding on the waiver process while leaving the injunction in place. “If this Court must decide the question without this further litigation, I would, on balance, find the evidence of antireligious bias… a sufficient basis to set the Proclamation aside.”

Justice Sotomayor dissent (joined by Justice Ginsburg): The dissent contends that the proclamation clearly violates the establishment clause’s guarantee of religious neutrality.

  • The proclamation, now in its third guise, fails to remove the discriminatory intent of the President’s outside statements. The Proclamation “was driven primarily by anti-Muslim animus, rather than by the Government’s asserted national-security justifications.”
  • The dissent also criticizes the majority for failing to recognize the government’s asserted national security rationale as nothing more than a “religious gerrymander.” The Department of Homeland Security’s worldwide review fails to “break the clear connection between the Proclamation and the President’s anti-Muslim statements.” In fact, the majority “empowers the President to hide behind an administrative review process [rational basis review] that the Government refuses to disclose to the public.”
  • The dissent notes the irony of the majority’s 6/4/2018 opinion in Masterpiece Cakeshop, Ltd. v. Colorado Civil Rights Commission  “where a state civil rights commission was found to have acted without ‘the neutrality that the Free Exercise Clause requires,’ [but] the government actors in this case will not be held accountable to breaching the First Amendment’s guarantee of religious neutrality and tolerance.”
  • Citing the Court’s 1944 decision in Korematsu v. United States, upholding Executive Order 9066—a 1942 decree effectively allowing for Japanese Americans to be removed from designated “military areas” and surrounding communities and placed into internment camps—the dissent notes the government continues its reliance on national security interests to justify government action that is, at its heart, discriminatory. “By blindly accepting the Government’s misguided invitation to sanction a discriminatory policy motivated by animosity toward a disfavored group, all in the name of a superficial claim of national security, the Court redeploys the same dangerous logic underlying Korematsu and merely replaces one ‘gravely wrong’ decision with another.” 

Trump, President of the United States, et al. v. Hawaii et al., 585 U.S. ____ (2018). 

R. Mark Frey
Frey Law Office


• Patents: Recovering damages for foreign lost profits. The United States Supreme Court recently held that a plaintiff, having proven patent infringement, could recover lost-profit damages for sales lost in foreign countries. WesternGeco sued ION Geophysical Corp. for infringement of U.S. patents related to surveying the ocean floor. A jury found ION liable and awarded WesternGeco $12.5 million in royalties and $93.4 million in lost profits. The lost profits award included profits from 10 service contracts performed abroad. ION moved to set aside the jury’s verdict, arguing that the lost profits award was improper because U.S. patents have no force beyond U.S. borders and, thus, there can be no damages on sales abroad. 

The district court denied the motion. The Court of Appeals for the Federal Circuit reversed, however, and held that the lost-profit damages were improper because lost-profit damages cannot be recovered on foreign sales. But the Supreme Court disagreed. In determining whether a statute has been improperly applied in an extraterritorial way, a court, first, identifies the statute’s “focus” and, second, asks whether the conduct relevant to that focus has occurred domestically or extraterritorially. If the conduct occurred domestically, the statute is not being given improper extraterritorial effect. The Supreme Court held that the statutory focus of the patent damages statute, §284, is “the infringement.” Next, the Court held that the statutory focus of the infringement statute in this case, §271(f)(2), is the act of “suppl[ying a component of a patented invention]… in or from the United States.” By its plain language, the conduct occurs domestically. Accordingly, the jury’s award of lost profits for sales in foreign countries was not an improper extraterritorial application of U.S. patent law. WesternGeco LLC v. ION Geophysical Corp., 585 U.S. __ (2018). 

• Patents: Issue-preclusive effects of PTAB proceedings. Judge Frank recently denied a motion for summary judgment, finding a claim was not precluded based on an intervening judgment at the Patent and Trial Appeal Board (PTAB). Wilson Wolf Manufacturing sued Corning alleging that Corning acquired information about Wilson Wolf’s proprietary technology under a confidentiality agreement and subsequently (i) misappropriated Wilson Wolf’s trade secret technology, (ii) breached the confidentiality agreement, and (iii) filed patent applications on Wilson Wolf’s technology, improperly identifying Corning employees as the inventors. Corning moved for summary judgment, arguing that all of Wilson Wolf’s claims should be precluded by an intervening PTAB decision in which the PTAB invalidated most of the claims in one of Wilson Wolf’s patents. According to Corning, the technology covered in the invalidated patent was the same technology that was at issue in the lawsuit. Thus, under Corning’s theory, this “generally known” technology could be neither trade secret nor confidential. The court ruled, however, that the doctrine of issue preclusion did not apply. The Patent Act provides that patent claims shall be canceled when there has been “a final judgment adverse to a patentee from which no appeal or other review has been or can be taken.” The court rejected Corning’s issue-preclusion argument because Wilson Wolf could still appeal the PTAB’s decision, meaning that the claims had not yet been “finally” canceled. Accordingly, the court denied Corning’s motion for summary judgment. Wilson v. Corning, No. 13-210 (DWF/FLN), 2018 Dist. LEXIS 88173 (D. Minn. 5/25/2018).

Tony Zeuli 

Merchant & Gould

Joe Dubis

Merchant & Gould

Zach Kachmer, Merchant & Gould



• Statute of limitations. In August 2009, decedent agreed to sell certain real property to the City of Vadnais Heights. Decedent died in November 2009 and respondent was appointed special administrator. In April 2010, the real estate purchase agreement was amended to provide that forecasts were to be provided to ensure that the city would be able to make the debt service payments to decedent’s estate. No such forecasts were provided, but the sale nevertheless closed in April 2010. Based on revenue shortfalls, the city stopped making the debt payments to decedent’s estate in August 2012.

In January 2017, appellants brought breach of fiduciary duty and unjust enrichment claims against respondent alleging that it failed to obtain the required forecasts. The district court held that appellants claims were barred by the six-year statute of limitations period set forth in Minn. Stat. §541.05, subd. 1. At issue was whether the limitations period began to run when the sale closed in April 2010 or when the city stopped making payments in August 2012.

The court of appeals held that Minnesota follows the damage-accrual rule whereby the statute of limitations begins to run once any compensable damages occur. This rule is known as the “some damage rule.” The court held that appellants suffered some damage at the time the sale closed because they lost the opportunity to demand the forecasts, renegotiate the terms of the purchase agreement, or to cancel the purchase agreement. Hansen v. U.S. Bank, NA, 2018 WL 3213105 (Minn. Ct. App. 7/2/2018).

• Minn. Stat. §524.3-101. Decedent purchased a house and financed it with a mortgage. Decedent’s will devised all residue, including the house, to his three children. After decedent’s death, the mortgage went into default, the bank foreclosed, and Wells Fargo bought the house at a sheriff’s sale. Following the sale, the court appointed decedent’s daughter as personal representative. Also, following the sale, decedent’s son conveyed his one-third interest in the house to Premier Properties, LLC. 

The personal representative instituted a quiet title action. The district court held that the son did not have an interest to convey. The court of appeals, interpreting Minn. Stat. §524.3-101,  reversed, holding “that a valid, transferrable ownership interest in real property devolves immediately upon a testator’s death to a person to whom the property is devised by the testator’s will, even if the property is devised through a residuary clause rather than as a specific devise.” The court reasoned that although the personal representative has power over the property, the devisee has title that divests immediately at death. 

The Supreme Court granted review solely on the issue of interpretation of Minn. Stat. §524.3-101. Section 524.3-101 states that “[u]pon death, a person’s real and personal property devolves to the persons to whom it is devised by last will.” The Court first held that the phrase “persons to whom it is devised” unambiguously includes residuary devisees. As to the court of appeals distinction between power over the property and title to the property, the Court held that it did not need to determine the precise limitations on a residuary beneficiary’s interest during the period of estate administration because the personal representative did not exercise any powers that were inconsistent with the beneficiary’s interest in this case. Laymon v. Minnesota Premier Properties, LLC, 2018 WL 3040490 (Minn. 6/20/2018).

Casey D. Marshall

Bassford Remele



Sales and use tax: Supreme Court overrules Quill; new paradigm in interstate sales and use tax. On June 21, the United States Supreme Court announced its opinion in South Dakota v. Wayfair. Overruling nearly 30 years of precedent, the Court held that an out-of-state seller’s physical presence in a taxing state is not necessary for the state to require the seller to collect and remit its sales tax. Stare decisis, the Court reasoned, does not support continued adherence to Quill’s “unsound” and incorrect physical presence requirement. Finally, the Court addressed the specific South Dakota statute and held that the statute satisfied the Court’s new articulation of the nexus requirement for imposing on internet sellers the duty to collect and remit sales tax. 

This long-anticipated decision permits states to require certain retailers with no physical presence, such as online sellers, to collect and remit the applicable sales or use tax on sales delivered to locations within their state. The Minnesota Commissioner of Revenue issued a statement articulating the department’s full support of the decision and noting that the department is analyzing how this decision will affect our state. The department committed to providing guidance based on the decision within 30 days that will ensure fairness, efficiency, and transparency. The 5-4 opinion by Justice Kennedy drew a dissent from Chief Justice Roberts, which Justices Breyer, Sotomayor, and Kagan joined. With his retirement, this decision will be Justice Kennedy’s final word from the bench on the dormant commerce clause. A first look at how Wayfair fits in with Kennedy’s commerce clause jurisprudence can be found at SCOTUS Blog, Daniel Hemel, Justice Kennedy: A justice who changed his mind, SCOTUSblog (6/29/2018), South Dakota v. Wayfair, 138 S. Ct. 2080 (2018).

• Sales and use tax: Intervention of right permitted. Proceedings before the Minnesota Tax Court are subject to the Minnesota Rules of Civil Procedure “where practicable.” Minn. Stat. §271.06, subd. 7 (2016). Those rules provide that intervention of right is permitted provided the party seeking to intervene meets the four-part test set out in Minn. R. Civ. P. 24.01. (1) The intervener must submit a timely application; (2) the intervener must have an interest relating to the property or transaction which is the subject of the action; (3) the circumstances must demonstrate that the disposition of the action may as a practical matter impair or impede the party’s ability to protect that interest; and (4) the intervener must show that he or she is not adequately represented by the existing parties. In this sales and use tax dispute involving TBA Enterprises, Inc., the tax court granted the intervention petition of a former shareholder and officer of TBA Enterprises, Gayle Gaumer. The court was satisfied that Gaumer met each of the four factors set out in Minn. R. Civ. P. 24.01. Her application was timely, and because Gaumer is potentially personally liable for unpaid business taxes, she has an interest in the action. The court also readily found the third and fourth factors met. With regard to Gaumer’s ability to protect her interest, the court “simply conclude[d] that the disposition of this matter may, as a practical matter, impair or impede Gaumer’s ability to effectively challenge her personal liability for such tax, penalty, or interest in any subsequent litigation.” Finally, TBA Enterprises appears in the underlying dispute through its sole shareholder, and has not retained counsel. Although the interests of TBA Enterprises and Gaumer overlap at the moment, the court noted that those interests could become adverse at some point in the proceedings, and therefore the existing party does not adequately represent Gaumer’s interests. TBA Enterprises, Inc. v. Comm’r of Revenue, No. 9113-R, 2018 WL 2709267 (Minn. T.C. 5/23/2018).

• Individual income tax: Summary judgment proper where taxpayer cannot provide documentation of dependents. Taxpayer Ethel Arita claimed head of household status as well as a Minnesota Working Family Credit via Schedule Ml WFC; she also claimed to have two dependent children. The commissioner reviewed Arita’s return and requested more information on her claimed dependents. Arita supplied one birth certificate and later also supplied a divorce decree to the commissioner. The divorce decree, however, did not reference children between the parties, and in fact noted that no children had been born to or adopted by the parties during the marriage. As a result, the commissioner determined that Arita had improperly claimed head of household filing status, two personal exemptions, and the Minnesota Working Family Credit. Arita administratively appealed the commissioner’s determination, following which the commissioner filed for summary judgment. In granting the commissioner’s motion for summary judgment, the court began by noting that assessments made by the commissioner are presumed correct and valid. Minn. Stat. §270C.33, subd. 6 (2016). This presumptive validity imposes on the taxpayer the burden of going forward with evidence to rebut or meet the presumption. Conga Corp. v. Comm ‘r, 868 N.W.2d 41, 53 (Minn. 2015). Here, summary judgment was proper, the court reasoned, because despite multiple opportunities, the taxpayer was unable to supply information that the claimed dependents met the statutory requirements of a qualifying relative or qualifying child under I.R.C. §152(c) or (d). Without the dependents, Arita’s head of household status, personal exemptions, and Minnesota Working family credit could not be sustained. Arita did not oppose the summary judgment motion in writing and did not appear at the hearing. Finding no evidence that the commissioner’s order was erroneous, the court affirmed it. Arita v. Comm’r, No. 9072-R (Minn. T.C. 6/14/2018). 

• Utility Appeal Statute: Interpretation of Subdivision 2(b), 2(c) appeals. Appellant, Minnesota Valley Electric Cooperative (MVEC), filed a tax court appeal challenging the estimated market value of its electric utility operating property and alleging unequal assessment. MVEC filed its appeal pursuant to Subdivision 2(c) of Minn. Stat. §273.372 (2016) (Utility Appeal Statute). As the court explained, “[t]he Utility Appeal Statute sets forth special procedures for challenging the Commissioner’s utility assessments.” Subdivision 2 of the statute provides procedural instruction as to how to appeal to the tax court and it sets out two paths: Subdivision 2(b) sets the path to chapter 271, while Subdivision 2(c) directs the taxpayer to chapter 278. The relationship between those two subdivisions of the Utility Appeal Statute was at issue in the decision. In particular, the commissioner contended that MVEC was required to appeal under Subdivision 2(b) and was not permitted to proceed under Subdivision 2(c). Applying familiar canons of statutory interpretation, the tax court held that the taxpayer is not so limited, and in fact “nothing in the Utility Appeal Statute indicates—or even suggests—that any particular substantive claim is barred unless it is pursued by invoking a particular appeal procedure.” The commissioner’s motion to dismiss was denied. Minn. Valley Electric Coop. v. Comm’r, No. 9047-R (Minn. T.C. 5/1/2018). (The court applied its decision in MERC to another utility property tax appeal announced the same day, Wright Hennepin Coop. v. Comm’r, No. 9048-R (Minn. T.C. 5/1/2018). In the later decision, the court also rejected the commissioner’s claim that the petition was untimely filed.) 

• Property tax: Pipeline valuation dispute continues. Valuing billions of dollars’ worth of oil pipelines is not for the faint of heart. Enbridge Energy, LLP (EELP) owns pipelines that run through 13 greater Minnesota counties. The pipeline not only runs through Minnesota, but also extends to other states and Canada to form the “longest liquid petroleum pipeline system in the word.” Id. at 3. Valuing such property is challenging, and the responsibility for valuing pipelines in Minnesota falls on the Commissioner of Revenue instead of local assessing authorities. Pipeline valuation is also distinctive in that pipeline personal property is not assessed where its owner resides, but in the county, town, or district where that property is usually kept. Finally, the commissioner assesses pipeline property under the unit method—which, in general terms, attempts to capture the fair market value of property that derives its value “not from the sum of its parts, but from the integrated use of the parts to carry traffic, render public service, and from the investors’ standpoint, generate income.” Id. at 9 (quoting Burlington N. R.R. v. Bair, 815 F. Supp. 1223, 1227 (S.D. Iowa 1993)).  To value the extensive amount of pipeline, railroad, and utility property in the state, the commissioner applies a formula set out in Minnesota Rule 8100. The Minnesota Supreme Court has recognized the need for such formula valuation given the limited time the commissioner has to value all such properties, and given the commissioner’s limited staff and resources. Id. at 19 (citing Ind. Sch. Dist. No. 99 v. Comm’r of Taxation, 211 N.W.2d 886 (Minn. 1973)). 

In this valuation dispute, which has spanned five years, six amended scheduling orders, a stay, and various other procedural machinations, the tax court issued its Findings of Fact and Conclusions of Law on 5/15/2018. In its 98-page order, the tax court systematically reviewed and analyzed the fair market value of the pipeline operating system. The court declined to use either the sales comparison approach or the cost approach to valuation in this instance. Instead, the court utilized the income approach to value the property. In the course of its order, the court discussed the interplay of Minnesota property taxation statutes and Minnesota Rule 8100. The court ultimately concluded that the commissioner overstated the system unit of value for EELP’s pipeline operating system for each of the three valuation dates at issue. The tax court’s thorough and extensive order did not, however, resolve all issues in dispute. In particular, the court’s order valued EELP’s pipeline system as a unit but did not determine the appropriate allocation between the system’s value as a whole and the portion of that entire valuation that is appropriately allocated to Minnesota. The court invited input from the parties on the appropriate allocation method. The court’s order contemplated additional proceedings on that issue, and a scheduling conference was ordered. 

Shortly after the tax court issued its Findings of Fact and Conclusions of Law, the commissioner petitioned the Minnesota Supreme Court for discretionary review. The commissioner asks the court to “require the Tax Court to apply Minnesota Rule 8100 in determining the fair market value of the pipeline property.” Petition for Review at 1. EELP opposes the interlocutory appeal. See Response of Enbridge Energy, Limited P’ship to Petition for Discretionary Review at 1. In opposition, EELP notes that interlocutory appeals are disfavored, and articulates a number of reasons why it should not be granted in this dispute. EELP’s arguments include that the tax court did not ignore Minn. Rule 8100, but that the court properly exercised its discretion in interpreting that rule and harmonizing the dictates of Minnesota statute with the administrative rule. EELP further argues that the tax court’s valuation conclusions are unlikely to be impacted by the relief requested by the commissioner. Enbridge Energy, Ltd. P’ship v. Comm’r, Nos. 8579-R, 8631-R, 8771-R (Minn. T.C. 5/15/2018). The Supreme Court file number is A18-0864.

• Property tax: Prosecution without payment permitted. Carol Matheys Center for Children & Families (the center) provides early-childhood care and education to families in Washington and surrounding counties. The center challenged the assessment of real property taxes due and payable in 2018, and sought permission to continue prosecution of its property tax petition without payment. Minnesota statute permits the tax court to permit prosecution without payment if the court is satisfied that three factors are met. First, the proposed review must be taken in good faith; second, there must be probable cause to believe that the property may be exempt from the tax levied; and finally, the court must be satisfied that it would work a hardship on the petitioner to pay the taxes due. Minn. Stat. §278.03 (2016). The center submitted a verified petition and supporting affidavit; the county did not dispute any of the facts asserted in either document and therefore the court assumed those facts for the purposes of the motion. Turning to the factors, the court reasoned that because the property had been exempt from property taxation for many years when it was church-affiliated and then for several tax years after the center took over, the center had a good faith basis for seeking review. Interpreting “probable cause” to mean “reasonable cause” or “reasonable grounds,” the court also found this second factor met. The center articulated two relevant exemptions: first, that the property is exempt as a “seminary of learning;” and next, that the center is an “institution of purely public charity.” Minn. Stat. 272.02, subd. 5, 7 (2016). The court focused on the “seminary of learning” exemption, and reasoned that the center demonstrated it has reasonable grounds to be exempt from taxation as a “seminary of learning.”  Finally, the court held that payment of the disputed tax would be a hardship to the center given its other significant financial liabilities. In so holding, the court rejected the county’s argument that the property tax increase must be unanticipated to constitute a hardship. Carol Matheys Ctr. for Children & Families, Inc. v. Washington Co., No. 82-CV-17-4474 (Minn. T.C. 5/14/2018).

• Unemployment insurance taxes and visa holders. Appellant Svihel Vegetable Farm, Inc. (SV Farm) has employed visa employees on its farms, but has never paid unemployment-insurance taxes on the wages it pays to its visa employees. The Department of Employment and Economic Development audited SV Farm and determined the farm owed $154,726 in unemployment-insurance taxes on the visa employee wages. SV Farm appealed the assessment and the unemployment law judge affirmed. The Minnesota Court of Appeals faced two issues: first, “[d]oes the exclusion of agricultural labor performed by visa employees from the federal definition of employment exclude that labor from being agricultural employment subject to unemployment-insurance taxation under Minnesota law?” The court answered this question in the negative: The cultivating of strawberries, cabbages, tomatoes, peppers, and melons does not cease to be agricultural labor simply because it is performed by visa employees. The court then held that the evidence in the record reasonably tends to support the ULJ’s conclusion that the J-1 employees did not meet the educational-employment exception to covered employment. The reviewing court noted that although there was some testimony that J-1 employees come to the United States to learn about the business, there was no evidence that any educational institution certified any of the several requisite facts that would make this exception applicable (e.g., institution must certify that there is a regular faculty and curriculum and a regularly organized body of students). Svihel Vegetable Farm, Inc. v. Dep’t of Empl. & Econ. Dev., 2018 Minn. App. LEXIS 239 (Minn. Ct. App. 5/7/2018).

Morgan Holcomb & Matthew Wildes
Mitchell Hamline School of Law



• Contract interpretation. Plaintiff sued the defendant for breach of contract. Prior to and during trial, the district court held that contractual provisions were ambiguous and that parol evidence would be admitted to explain the intent of the parties. In its instructions to the jury, over plaintiff’s objection, the district court stated: “If you find the contract is ambiguous, you should determine the intent of the parties. When contract language is reasonably susceptible to more than one interpretation, the ambiguous contract terms are to be construed against the drafter.” After the jury found in favor of plaintiff, the defendant appealed claiming the district court improperly instructed the jury on contract meaning. The court of appeals reversed and remanded for a new trial.

The Minnesota Supreme Court affirmed the decision of the court of appeals. The Court first held that the district court erred in instructing the jury to determine whether or not the contractual provisions were ambiguous. The Court reasoned that whether or not the contract terms were ambiguous was a question of law for the court, and, indeed, a question that had already been decided by the district court. Therefore, the district court should have instructed the jury that the contract terms were ambiguous. Second, the court held that the district court erred in its instruction on contra proferentem because it must be applied only as a last resort—after an attempt is made to determine the parties’ intent behind the ambiguous terms using extrinsic evidence. Because the instructions failed to tell the jury which task must be completed first, the case was remanded for a new trial. Staffing Specifix, Inc. v. TempWorks Mgmt. Servs., Inc., No. A16-1146 (Minn. 6/27/2018).

• Legal malpractice; standing. Defendant law firm drafted a will and revocable trust agreement for decedent in 2009. A provision in the will directed that a substantial portion of the estate be distributed to a beneficiary who was more than 37.5 years younger than the decedent, subjecting the distribution to a generation-skipping transfer tax totaling about $1.654 million. Following the decedent’s death, plaintiff, who was appointed trustee and personal representative of the estate, filed suit against defendant for malpractice. The district court granted defendant’s motion for judgment on the pleadings, finding that plaintiff lacked standing. The court of appeals reversed and remanded.

The Minnesota Supreme Court reversed the decision of the court of appeals. Initially, the Court rejected plaintiff’s argument that a legal-malpractice claim need not accrue during a deceased client’s lifetime to allow the personal representative to pursue it after the client’s death. In so holding, the Court relied on the plain language of Minn. Stat. §524.3-703(c), which provides that personal representatives have the “same standing to sue… as the decedent had immediately prior to his death.” The Court went on to hold that plaintiff lacked standing as personal representative because no claim for malpractice accrued prior to decedent’s death—i.e., “some damage” did not occur until after death. Finally, the Court held that plaintiff lacked standing to sue in its capacity as trustee of the revocable trust because no attorney-client relationship existed between defendant and plaintiff or the trust, and neither was a direct and intended beneficiary of defendant’s services. Security Bank & Trust Co. v. Larkin, Hoffman, Daly & Lindgren, Ltd., No. A16-1810 (Minn. 6/27/2018).

Jeff Mulder

Bassford Remele


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