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

Notes & Trends – January 2019


• Minn. R. Civ. P. 59.01; affirming denial of motion for new trial after settlement. Plaintiff and defendant were parties to a marriage dissolution proceeding. The parties attended mediation, where an agreement was reached to fully resolve the dispute. After mediation, respondent circulated proposed findings of fact, conclusions of law, and order for judgment. Petitioner refused to sign the proposal, citing fact issues related to the mediation, including respondent’s failure to disclose all assets and petitioner’s lack of capacity to agree at mediation. Petitioner moved for a new trial on these issues. This motion was denied.

 On review, the court of appeals affirmed, finding no abuse of discretion on the merits of appellant’s claims. The court of appeals acknowledged the district court’s finding that relief was not available because no trial occurred, but did not engage in any analysis of this argument. Bitker v. Bitker, No. A17-1749, 2018 WL 5780414 (Ct. App. Minn. 11/5/2018).

• Minn. R. Civ. P. 53.01; affirming appointment of special master. Appellant is a father subject to strict supervision requirements for visits with his child. Father petitioned the court for less restrictive community-based supervised time. After providing all parties an opportunity for comment, the court appointed a special master to serve for two years with discretion “to modify the current parenting time consistent with the court’s previous orders.” The order establishing the special master also created a four-stage plan to guide the special master’s role in permitting the father to exercise his parental visitation rights under less restrictive means. The court apportioned 90% of the financial responsibility for the special master upon the father, citing his substantial resources as compared to the mother. The mother appealed this decision appointing the special master and assessing any portion of his fees to her.

 The court of appeals affirmed on both issues. Under Rule 53.01, the district court has broad discretion to appoint a special master to address any pretrial and post-trial matters that cannot be effectively addressed by the district court. Citing Rule 53.01, the district court found it was ill-equipped to implement and monitor the supervision plan it ordered, and acknowledged the parties needed “a nimbler process” that permits “real time decisions” and the “possibility to change their behavior for the best interests of the child” and “eliminate their unhealthy power dynamic.” The court of appeals agreed that the record supported the district court’s exercise of discretion.

The court of appeals also affirmed apportionment of 10% of the fees upon the mother. The district court order “ensured that both parties had a financial stake in promoting efficient and effective use of the special master.” The order also allowed the special master to alter the financial arrangements to require only one party to contribute to the cost if the need arises. Burdette v. Raiche, No. A18-0626, 2018 WL 5780443 (Minn. Ct. App. 11/5/2018).

• Minn. R. Civ. P. 65.01; affirming denial of temporary injunctive relief. EMERGE is a community development organization that provides employment readiness training, credentialed training placement, job placement, and retention services. In 2016, EMERGE was awarded a multi-million grant by the Minnesota Legislature to carry out its purpose. The grant was to be administered by DEED. EMERGE and DEED entered a contract to govern their relationship. In 2017, DEED issued a monitoring report, detailing substantial concerns with EMERGE’s internal operations and recordkeeping procedures and alleged these failures violated the terms of their contractual relationship. DEED placed EMERGE on suspension pending further review.

A dispute arose between EMERGE and DEED regarding reimbursement of expenses during the suspension period. Ultimately, EMERGE sued DEED and, among other things, moved for a temporary injunction and for a writ of mandamus instructing DEED to reimburse EMERGE’s qualified expenses. 

The district court denied EMERGE’s motion for injunctive relief, but issued the writ of mandamus instructing DEED to reimburse certain expenses. DEED appealed. In affirming denial of EMERGE’s motion for temporary injunctive relief, the court of appeals reviewed the Dahlberg factors, which control such motions. These factors require the courts to consider: (1) the nature and background of the relationship between the parties preexisting the dispute; (2) the comparative harm to the parties if temporary injunctive relief is granted or denied; (3) the movant’s likelihood of ultimate success on the merits; (4) the public policy considerations applicable to that relationship; and (5) the administrative burdens involved in judicial supervision of ongoing litigation. After review, the court of appeals determined the Dahlberg factors were not met, specifically, that EMERGE lacked a likelihood of ultimate success on the merits and on public policy grounds.

The court of appeals also reversed the writ of mandamus, finding the district court improperly resolved material fact issues that carry a statutory right to jury trial when issuing the writ. EMERGE Community Development v. Minnesota Department of Employment and Economic Development, et al., No. A18-0555, 2018 WL 6273106 (Minn. Ct. App. 12/3/2018) (unpublished).

Michael Mather




This month we present a chronological recap of a dozen of the most interesting and important employment and labor law cases decided by the federal and state courts for Minnesota in 2018.


• At-will employment; salary plan not modified. A group of at-will management employees could not have their bonuses capped after higher amounts were agreed to as part of a compensation plan in an employment agreement they signed with their employer. The 8th Circuit Court of Appeals held that the compensation plan constituted an offer to enter into a unilateral contract, and the employer could not modify it after the managers had begun their performance. Boswell v. Panera Bread Company, 879 F.3d 296 (8th Cir. 1/5/2018).


• Union organizing; failure to hire. An employment staffing agency wrongfully failed to hire four electricians who were helping to organize 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).


• Union hiring; exclusive hall violation. The hiring practices of a labor union for employees who work at entertainment facilities violated the National Labor Relations Act. The 8th Circuit denied the union’s challenge to a determination that the union’s exclusive hiring hall infringed the Act. International Alliance et al. v. National Labor Relations Board, 885 F.3d 1123 (8th Cir. 3/6/2018).


• Labor arbitration; reinstatement overturned. The reinstatement by an arbitrator of a Richfield police officer, who was fired for excessive use of force with a Somali youth, was overturned. The court of appeals held that “clear public policy” warranted the extremely rare step of reversing the arbitral ruling. Richfield v. Law Enforcement Labor Services (on behalf of Nathan Kinsey), 2018 WL 1701916 (Minn. App. 4/9/2018).


• Disability discrimination; accommodation denied. A request by a UPS driver for a disability accommodation of an 8-hour workday without overtime was rejected. The 8th Circuit Court of Appeals, in a decision written by Judge James Loken of Minnesota, ruled that working overtime was an “essential function” of the package delivery position, which precluded an accommodation under the Americans with Disabilities Act. Faidley v. United Parcel Service of America, Inc., 889 F.3d 993 (8th Cir. 5/11/2018).


• Non-compete 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’s refusal to issue an injunction on grounds that the boilerplate language alone did not merit equitable relief. St. Jude Medical, Inc. v. Carter, 913 N.W.2d 678 (S.Ct. 6/27/2018).


• Forfeiture of commissions; proportionality standard. The standard for deciding whether an employee’s failure to satisfy a provision in the employment contract to return property upon termination justified a forfeiture of earned commissions should be based on mutuality of the breach and its proportionality to the amount to be forfeited. The state Supreme Court remanded for the trial court to make a determination based upon balancing the proportionality of the significance of the failure to return the property against the amount of commissions sought by the employee. Capistrant v. Lifetouch National School Studios, 2018 WL 3558943 (8th Cir. 7/25/2018) (unpublished).


• FELA, federal interest ratio applies. The federal rate for prejudgment interest applies to Federal Employees Liability Act (FELA) claims brought in the state court of appeals for workplace injuries. The Minnesota Court of Appeals, affirming a Hennepin County District Court ruling, held that, to ensure “uniformity” on claims that can be concurrently brought under federal or state law, the lesser federal rate (capped at about 2% rather than the 10% Minnesota rate) applies. Alby v. BNSF Railway Company, 2018 WL 3716257 (8th Cir. 8/6/2018) (unpublished).


• Disability discrimination; “good faith” bars claim. An employer who made a “good faith” effort to accommodate an employee’s disability prevailed in a lawsuit claiming violation of the employee’s rights under the Americans with Disabilities Act and the parallel provision of the Minnesota Human Rights Act. Affirming a ruling of U.S. District Court Judge Richard Kyle in Minnesota, the 8th Circuit held that the employer made a “good faith” response to the request for accommodation made by the employee. Sharbono v. Northern States Power Company, 902 F.3d 891 (8th Cir. 9/6/2018).


• Unemployment compensation; sleeping at work. A residential services overnight staffer was denied unemployment compensation benefits for sleeping on the job, which constituted disqualifying “misconduct.” Appolon v. Mentor Management, Inc., 2018 WL 48855407 (Minn. Ct. App. 10/8/2018) (unpublished).


• Retaliation rejected; applicant lacks claim. A job applicant who was denied a scheduling accommodation due to religious observance was not entitled to pursue a retaliation claim. Affirming a ruling of U. S. District Court Judge David Doty, the 8th Circuit held, in a decision written by Judge Loken, that withdrawal of a conditional job offer was not actionable as adverse action. EEOC v. North Memorial Health Corp., 908 F.3d 1098 (8th Cir. 11/13/2018).


• Unemployment compensation; trucker denied benefits. An over-the-road truck driver who quit his job was denied unemployment compensation benefits. The court of appeals held that the trucker did not have “good cause” to quit because he wanted longer periods to stay at home. Welch v. Twin Express, Inc., 2018 WL 6273093 (Minn. Ct. App. 12/3/2018) (unpublished).

Marshall H. Tanick

Meyer, Njus & Tanick



• Two additional federal circuits weigh in on Clean Water Act applicability to discharges via groundwater. In September 2016, the U.S. Courts of Appeals for the 4th and 6th Circuits held that the Clean Water Act (CWA) NPDES permit requirement for point-source discharge to waters of the U.S. does not apply to seepage from coal-ash ponds and landfills that travels through groundwater to jurisdictional surface waters. The courts’ decisions add to a growing body of divided federal case law. Although the CWA only applies to point-source discharges of pollutants to surface waters, about half the courts that have addressed this issue have concluded that if pollutants discharged to groundwater subsequently migrate through the groundwater and end up in a jurisdictional surface water, this constitutes a de facto discharge to the surface water that requires an NPDES permit. The 6th Circuit issued a pair of largely matching decisions on 9/24/2018 regarding seepage from coal-ash lagoons in Kentucky and in Tennessee. In holding that the seepage discharge at each facility did not require an NPDES permit, the court held that “[f]or a point source to discharge into navigable waters, it must dump directly into those navigable waters.” In these cases, the pollutants entering jurisdictional surface waters “are not coming from a point source; they are coming from groundwater, which is a nonpoint-source conveyance” over which “[t]he CWA has no say.” 

The 6th Circuit also held that finding jurisdiction under the CWA would be inconsistent with the regulatory balance Congress struck between the CWA and the Resource Recovery and Conservation Act (RCRA). EPA’s 2015 coal combustion residual (CCR) regulations established technical requirements for CCR landfills and surface impoundments under subtitle D of RCRA, including provisions regarding contaminants leaking into groundwater. However, RCRA also explicitly exempts from its coverage any pollution that is subject to CWA regulation. 42 U.S.C. §6903 (27). Because of this conflict, the 6th Circuit reasoned, interpreting the CWA to cover seepage discharges at the coal-ash lagoons would be “problematic.” Kentucky Waterways Alliance v. Kentucky Utilities Co., No. 18-5115 (6th Cir. 9/24/2018); Tennessee Clean Water Network v. TVA, No. 17-6155 (6th Cir. 9/24/2018).

 On a very similar set of facts involving coal ash lagoons associated with a Virginia power plant, the 4th Circuit also held that no NPDES permit was required. The court emphasized that the coal-ash lagoons “could not be characterized as discrete ‘points,’ nor did they function as conveyances. Rather, they were, like the rest of the soil at the site, static recipients of the precipitation and groundwater that flowed through them.” Sierra Club v. Va. Elec. & Power Co., 903 F.3d 403 (4th Cir. 9/12/2018). 


• MPCA proposes new general permit for pond wastewater treatment facilities. The Minnesota Pollution Control Agency (MPCA) issued a public notice on 9/17/2018 of its intent to issue a new general permit for pond wastewater treatment facilities (WWTFs). Facilities eligible for coverage under the proposed permit—National Pollution Discharge Elimination System/State Disposal System (NPDES/SDS) Wastewater Pond General Permit No. MNG585000—would be WWTFs that: have existing stabilization and/or aerated pond systems with a controlled discharge to surface waters; predominantly treat domestic sewage; discharge during predefined, allowed discharge windows; meet predetermined effluent limitations; and are MPCA-classified as a Class D facility. 

The proposed permit would replace MPCA’s stabilization pond general permit, MNG580000, which expired in August 2015. MPCA was delayed in its efforts to issue the new general permit due to the adoption of the agency’s 2015 river eutrophication standards and other new water quality standards relevant to the general permit. In addition, the MPCA in 2015 also began evaluating the need for phosphorus limits in NPDES/SDS permits on a watershed basis. This evaluation required the MPCA to review each WWTF’s contribution to downstream water that would impact lake or river eutrophication standards. 

MPCA plans to issue notices of coverage (NOCs) to municipal wastewater pond facilities in batches, over a period of time, as watershed phosphorus reviews are completed and permit eligibility is determined. The agency has published a list of permittees immediately eligible for coverage under MNG585000. These facilities will be issued a NOC upon issuance of the new general permit. Facilities currently covered under the expired stabilization pond general permit, and not included in the first batch of facilities to be issued NOCs under MNG585000, will remain covered under the MNG580000 until the MPCA is able to complete the review and issue either an NOC under the new permit or an individual permit.

Some rural communities have expressed concern that the new permit may require them to implement new phosphorus removal strategies, including the construction of costly new treatment facilities. The comments period on the proposed permit closed 11/16/2018. 

• MPCA finalizes first reissued taconite-mining NPDES/SDS permit since 1987. On 12/1/2018, the Minnesota Pollution Control Agency (MPCA) reissued an NPDES/SDS water discharge permit to U.S. Steel for its Minntac tailings basin facility near Mountain Iron, MN. The five-year-term permit expired in 1992 but had been administratively continued by MPCA, allowing the company to continue to operate in accordance with the permit’s terms. In issuing the permit, MPCA also formally denied U.S. Steel’s request for a variance from certain water quality standards including sulfate, specific conductance, and total dissolved salts, and also denied the company’s requests for contested case hearings on both the variance and the permit. 

Jeremy P. GreenhouseThe Environmental Law Group, Ltd.

Jake Beckstrom, Vermont Law School, 2015

Erik Ordahl, Flaherty & Hood, P.A. 



• District court may appoint a special master over a party’s objection to address post-decree parenting issues. Mother and father began litigating child custody disputes in 2010, resulting in a court awarding mother sole legal and physical custody as a result of father’s “numerous acts of domestic violence.” Father received only limited parenting time at the highest possible level of supervision. After a series of post-decree motions, father moved the court for a less restrictive supervised schedule, providing the district court with a proposed protocol prepared by an expert psychologist. The court approved father’s protocol over mother’s objection, and appointed a special master under Minn. R. Civ. P. 53.01(a)(3) to implement the transition. In support of its decision, the court specifically found that a special master provided “a more nimble process” for “real time decisions,” which the court—acting alone—could not accommodate. The court also apportioned the cost between the parties, largely based on their discrepant resources.

 Mother appealed, arguing, inter alia, that the district court improperly appointed a special master over her objection. The court of appeals affirmed, permitting the appointment of a special master under the Rules of Civil Procedure. Specifically, the court of appeals held the lower court was permitted to use a special master to “address… post-trial matters that cannot be addressed effectively and timely by an available district judge.” Minn. R. Civ. P. 53.01(a)(3). The district court also made sufficient findings to support its imposition and apportionment of the special master’s expense. Notably, the decision highlights the distinction between special masters—which may be appointed over a party’s objections—and parenting consultants, which remain extra-statutory creatures of contract. C.f. Custody of W.N.M. v. Jacobs, No. A12-1817, 2013 WL 4404575, at *3 (Minn. Ct. App. 8/19/2013). Though the use of parenting consultants is far more typical in family proceedings, special masters remain an available, albeit seldom-used tool. See Lynn Jokela & David F. Herr, “Special Masters in State Court Complex Litigation: An Available and Underused Case Management Tool,” 31 Wm. Mitchell L. Rev. 1299, 1307 (2005). Burdette v. Raiche, No. A18-0626, 2018 WL 5780443 (Minn. Ct. App. 11/5/2018). 

Michael Boulette

Barnes & Thornburg LLP



• Fed. R. Civ. P. 23(f); class certifications affirmed. The same 8th Circuit panel affirmed two district court orders granting class certification on the same day. 

 The panel affirmed an order certifying a class in an action alleging that the Missouri Department of Corrections violated the 8th Amendment and the ADA by providing inadequate medical screening and care for chronic Hepatitis C patients, rejecting defendants’ argument that the medical condition of each class member would necessitate a “highly individualized” inquiry. The panel also declined to reach defendants’ arguments on the merits of plaintiffs’ ADA claim in the context of a Fed. R. Civ. P. 23(f) appeal. Postawko v. Missouri Dept. of Corrections, ___ F.3d ___ (8th Cir. 2018). 

 The same panel also slightly modified and then affirmed a district court’s class certification order alleging insurance coverage-related claims under Arkansas law. Stuart v. State Farm Fire & Cas. Co., ___ F.3d ___ (8th Cir. 2018). 

• Judicial estoppel and quasi-estoppel claims rejected. The 8th Circuit rejected the plaintiffs’ judicial estoppel and quasi-estoppel arguments, finding that defendants’ representations to the IRS were not “clearly inconsistent” with positions they adopted under the FLSA and Nebraska law. Baouch v. Werner Enters., Inc., 908 F.3d 1107 (8th Cir. 2018). 

• Denial of late motion for extension affirmed. Where the plaintiff did not seek an extension of his time to oppose the defendant’s summary judgment motion until nine days after his opposition was due, the district court denied the plaintiff’s motion and granted the defendant’s motion for summary judgment, the plaintiff moved for reconsideration of the denial of his extension motion, and that motion was denied, the 8th Circuit found no abuse of discretion in the district court’s denial of that motion given plaintiff’s counsel’s “carelessness and mistakes,” and the “absence of any apparent meritorious defense” to the motion. Giles v. St. Luke’s Northland-Smithville, 908 F.3d 365 (8th Cir. 2018). 

• Numerous orders on motions for sanctions or attorney’s fees granted or denied. Describing the plaintiff’s motion to compel one defendant to sign interrogatory responses even after she had signed supplemented and amended responses as “unnecessary and frivolous,” Magistrate Judge Menendez awarded the defendants attorney’s fees pursuant to Fed. R. Civ. P. 37(a)(5) in an amount to be determined. Smith v. Bradley Pizza, Inc., 2018 WL 5920626 (Nov. 13, 2018). 

 Judge Ericksen denied the parties’ cross-motions for Rule 11 sanctions, despite finding that the plaintiff’s motion for Rule 11 sanctions was “not clearly warranted under existing law.” Genz-Ryan Plumbing & Heating Co. v. Weyerhaeuser NR Co., 2018 WL 5886173 (D. Minn. 11/9/2018). 

 Judge Frank affirmed Magistrate Judge Thorson’s denial of the defendant’s motion for sanctions premised on plaintiffs’ alleged violation of a previous order, agreeing with the magistrate judge that the plaintiffs did not “willfully or otherwise violate” that order. Murphy ex rel. Murphy v. Piper, 2018 WL 5875486 (D. Minn. 11/9/2018). 

 Judge Ericksen denied the defendant’s motion for sanctions under Rule 11 and the FDCPA, despite her finding that the plaintiff’s claims “border[ed] on the frivolous.” Peacock v. Stewart Zlimen & Jungers, Attorneys, Ltd., 2018 WL 5808808 (D. Minn. 11/6/2018). 

 Where plaintiff’s counsel acknowledged that it improperly shared attorney’s eyes-only documents with its client, Magistrate Judge Menendez ordered counsel to pay a $500 sanction, but denied defendants’ request for an award of attorney’s fees and expenses related to its sanctions motion, finding that defendants’ counsel’s meet-and-confer efforts were “insufficient,” and that meet-and-confer efforts “must involve at least one in-person meeting or personal telephone conversation between counsel.” NutriQuest, LLC v. AmeriAisa Imports, LLC, 2018 WL 5785952 (D. Minn. 11/5/2018). 

• Numerous motions for leave to amend granted and denied. Magistrate Judge Bowbeer denied the plaintiffs’ untimely motion to file a third amended complaint filed more than nine months after the deadline in the scheduling order, rejecting plaintiffs’ argument that there was “good cause” for their delay. Zean v. Wells Fargo Bank, N.A., 2018 WL 6326413 (D. Minn. 12/4/2018). 

 Magistrate Judge Thorson granted plaintiffs’ untimely motion to file a second amended complaint in a patent case despite a finding of “undue delay,” but conditioned her grant of that motion on the plaintiffs’ payment of reasonable attorney’s fees attributable to the delay pursuant to 28 U.S.C. §1927. Berger v. Lydon-Bricher Mfg. Co., 2018 WL 6259250 (D. Minn. 11/30/2018).

 Judge Wright rejected the plaintiff’s appeal of an order by Magistrate Judge Thorson denying the plaintiff’s motion for leave to file a second amended complaint without prejudice, while criticizing the plaintiff’s “dilatory conduct and subversion of the Federal Rules of Civil Procedure.” Subramanian v. Tata Consult. Servs. Ltd., ___ F. Supp. 3d ___ (D. Minn. 2018). 

 Magistrate Judge Leung granted the plaintiff’s motion for leave to file an amended complaint that transformed her individual case into a putative class action, rejecting defendants’ argument that the additional cost of litigating class-wide claims constituted prejudice sufficient to warrant a denial of the motion for leave to amend. Hendrickson v. Fifth Third Bank, 2018 WL 6191948 (D. Minn. 11/28/2018). 

 While expressing some skepticism over the merits of the plaintiff’s proposed amended bad-faith denial of insurance benefits claim, Magistrate Judge Menendez relied on Rule 15’s “lenient amendment standard” in granting the plaintiff’s motion. Darmer v. State Farm Fire & Cas. Co., 2018 WL 6077985 (D. Minn. 11/21/2018). 

 Judge Magnuson found good cause for the plaintiff to amend its answer to counterclaim to assert new defenses, finding that it had acted with “reasonable diligence” once information relating to these new defenses was uncovered. Qwinstar Corp. v. Anthony, 2018 WL 5847243 (D. Minn. 11/8/2018). 

 Magistrate Judge Rau denied the relator’s motion for leave to file a third amended complaint in a qui tam action that had been pending for more than seven years, finding no justification for the relator’s delay in seeking to further amend the complaint, and that the amendment would impose a “tremendous burden” on the defendant. United States ex rel. Higgins v. Boston Sci. Corp., 2018 WL 5617565 (D. Minn. 10/30/2018). 

• Multiple cases on removal and remand. Judge Tostrud remanded an action originally filed in the North Dakota courts under the forum-defendant rule, finding that while the forum-defendant rule is viewed as procedural in most circuits, it is treated by the 8th Circuit as a non-waivable jurisdictional defect. Ally Bank v. Finstad, 2018 WL 6267656 (D. Minn. 11/30/2018). 

 Judge Schiltz remanded an action removed from the Minnesota courts on the basis of diversity jurisdiction where the defendant limited liability companies acknowledged that they were unable to identify the citizenship of their members. Cypress Creek Renewables Devel., LLC v. Sunshare, LLC, 2018 WL 5294571 (D. Minn. 10/30/2018). 

 Judge Nelson denied a motion to remand, agreeing with the removing defendant that the court could exercise ancillary jurisdiction over the action because it arose out of the alleged breach of a settlement agreement that the court expressly retained jurisdiction over. Cardiovascular Sys., Inc. v. Cardio Flow, Inc., 2018 WL 5278728 (D. Minn. 10/24/2018). 

• Motion to quash deposition subpoenas for trial counsel granted. Applying the 8th Circuit’s Shelton (Shelton v. Am. Motors Corp., 805 F.2d 1323 (8th Cir. 1986)) test, Magistrate Judge Menendez granted a motion to quash subpoenas seeking the deposition of plaintiffs’ trial counsel. Int’l Controls & Measurements Corp. v. Honeywell, Int’l, Inc., 2018 WL 5994189 (D. Minn. 11/15/2018). 

• Order requiring plaintiff file a redacted complaint affirmed. Judge Nelson affirmed an order by Magistrate Judge Brisbois that directed the plaintiff to file a redacted version of his amended complaint that would omit the home addresses of multiple Minnesota judges. Scheffler v. City of New Hope, 2018 WL 6012181 (D. Minn. 11/16/2018). 

Josh Jacobson

Law Office of Josh Jacobson 



• ICWA and MIFPA active efforts do not require social services agencies to provide all available services. Under the Indian Child Welfare Act and the Minnesota Indian Family Preservation Act, a court must find that the social services agency engaged in “active efforts” to preserve the Indian child’s family—including the agency’s making appropriate and meaningful services available to the family—before the court can make an out-of-home permanency decision.

The district court terminated the parents’ parental rights, and they appealed, arguing (among other things) that the social services agency did not engage in “active efforts” because it did not provide in-home parenting services to improve the father’s parenting ability. The court of appeals affirmed, agreeing with the district court that the agency provided other services to improve the father’s parenting ability and that “[a]ctive efforts do not require every service that may be available be offered.” In the Matter of the Welfare of the Child of: T.L.F. and D.S., No. A18-462, 2018 WL 5117001 (Minn. App. 10/22/2018).

Jessica IntermillHogen Adams PLLC

Peter J. RademacherHogen Adams PLLC



• Patent: Default by e-commerce sellers results in enhanced damages. Judge Nelson recently granted a permanent injunction and awarded damages for infringing activity by e-commerce sellers. Core Distribution owns patents for a collapsible ladder. Core alleged that several e-commerce sellers sold infringing versions of the ladder on Core sued each seller for patent infringement, false advertising, and deceptive trade practices. Unable to identify the true identities of the Amazon sellers, Core pursued action against each as a “John Doe” defendant and served each seller with the complaint. After the sellers failed to respond to Core’s complaint, the court entered default against them and held that each defaulting seller had infringed Core’s patent claims and falsely advertised and represented that the infringing ladders met the required industry standards. The court granted a permanent injunction against the sellers from continuing their unlawful activities and awarded Core trebled damages and attorneys’ fees. Core Distribution, Inc., v. John Doe 1, No. 16-CV-04059 (SRN/HB), 2018 WL 6178720 (D. Minn. 11/27/2018).

• Trademark invalid because holder did not show exclusive use. The 8th Circuit Court of Appeals recently held a trademark invalid because the holder did not prove it exclusively used the mark. Sturgis Motorcycle Rally, Inc. (SMRI) owns several federally registered marks relating to an annual biker rally held in the City of Sturgis, South Dakota. SMRI sued several parties associated with souvenir provider Rushmore Photo & Gifts, Inc. (RPG) for infringement of the word mark STURGIS. A jury found RPG liable for trademark infringement, and RPG appealed. The appellate court held that RPG could still rebut the presumption of validity conferred by the STURGIS mark’s federal registration. Furthermore, since the STURGIS registration was submitted under section 2(f) of the Lanham Act, SMRI also had to provide sufficient evidence showing that the mark became distinctive of SMRI’s goods based partly on substantially exclusive and continuous use. SMRI’s examples of previous use failed to show that the public associated the STURGIS mark with a single, particular source of goods and services. In addition, evidence showed extensive third-party use of the STURGIS mark, and SMRI could not prove that either it or the preceding mark owner had ever exclusively used the mark in connection with the rally’s commercial activities. Since SMRI could not show exclusive use of the mark, the court held that SMRI could not prove that the mark was distinctive, and therefore it was invalid. The court reversed the jury’s infringement verdict and remanded the case to the district court. Sturgis Motorcycle Rally, Inc. v. Rushmore Photo & Gifts, Inc., 908 F.3d 313 (8th Cir. 2018).

Tony Zeuli, Merchant & Gould

Joe Dubis, Merchant & Gould

Ryan Borelo, Merchant & Gould



• Evidence required to appoint a guardian or conservator. A friend of appellant’s petitioned to have a guardian and conservator appointed after appellant was observed in local businesses with soiled pants on two separate occasions. In addition, the proposed guardian and conservator, who was also a friend of appellant, visited appellant’s home, found it to be “dilapidated” and “unlivable,” and smelled fuel oil throughout the home. These observations were generally confirmed by the court-appointed visitor. Finally, appellant exhibited signs of confusion, including when he claimed he had just had his furnace checked, even though it had not been checked in 10 years. 

 The district court granted the petition and appointed a guardian and a conservator. The court of appeals reversed, holding that the district court made only “conclusory findings” that were “not substantiated with specific evidence.” Specifically, the court noted that the only evidence referenced by the district court was that appellant exhibited confusion during the hearing and the “unquestionable” motives of the petitioner and the proposed guardian and conservator. The court of appeals also noted that “[t]here was no evidence presented and minimal testimony provided about the availability of alternative services that could have been provided to [appellant] to avoid the need for a guardian and conservator.” Given those deficiencies, the court held that “the record evidence was insufficient to meet the clear and convincing standard of proof required to support the appointment of a guardian and conservator.” In re the Guardianship and Conservatorship of Reinhold Struhs, 2018 WL 6273101 (Minn. Ct. App. 12/3/2018).

Casey D. Marshall

Bassford Remele



• Sales & use tax: Prosthetic devices. Handi Medical Supply, Inc. appealed a determination of the Commissioner of Revenue, claiming that its products were exempt from sales tax. Most of the product-types at issue are specialty dressings and bandages. Minnesota law provides that sales of prosthetic devices were exempt from sales tax. (Minn. Stat.§297A.67, subd. 7.) Minnesota law defines prosthetic devices as a replacement, corrective, or supportive device worn on or in the body to: 1) artificially replace a missing portion of the body; 2) prevent or correct physical deformity or malfunction; or 3) support a weak or deformed portion of the body. Handi relied on product descriptions in the Healthcare Common Procedure Coding System for determining which products were nontaxable. The tax court held that Handi did not provide sufficient evidence to establish that some products met the Minnesota definition for prosthetic devices but had sufficient evidence for other products. Thus, summary judgment was granted in part and denied in part. Handi Medical Supply, Inc. v. Comm’r of Rev., No. 8898-R (Minn. T.C. 10/31/2018).

• Pell Grants “income” for purposes of calculating qualification for property tax refund. Federal Pell Grants are awarded to students who demonstrate extraordinary financial need; typically, only students pursuing undergraduate degrees are eligible. Pell Grants, unlike some other forms of education aid, do not have to be repaid and are not considered federal taxable income so long as the grant money is used for specified purposes. At issue in this case was whether $4,263 the taxpayers received in Pell Grants constituted “income” such that the grants were properly included in the taxpayer’s income for purposes of determining eligibility for another program—Minnesota’s property tax refund program. Eligibility for a property tax refund depends on “household income” as that term is defined in Minnesota Statute 290A.04, subd. 1. Household income includes categories of receipts that are specifically excluded from federal taxable income, and includes “nontaxable scholarship or fellowship grants.” Minn. Stat. 290A.03, subd. 3(a)(2)(xiii). The court determined that Pell Grants are properly included in income for property tax purposes, and upheld the tax court’s summary judgment award to the commissioner. The court reasoned that the plain language of the statute encompasses Pell Grants, and since the plain language was clear, no further analysis was necessary. Waters v. Comm’r, ___ N.W.2d ___ (Minn. 12/5/2018).

• Withdrawals from retirement account to support gambling habit not exempt from early distribution penalty as “medical expense.” In 2010, petitioner Gillette became addicted to gambling. Petitioner spent a majority of her time at casinos and her gambling addiction became so severe that in 2012 she began withdrawing from her retirement account to support her gambling habit. The commissioner assessed a 10% early distribution penalty on the amounts withdrawn from her retirement account. Gillette argued that her gambling addiction was a medical condition caused by prescription medication; thus, the distributions were either 1) a distribution attributable to a disability under 72(t)(2)(A)(iii) or 2) a distribution for a medical expense under 72(t)(2)(B). The court rejected petitioner’s argument that she had a medical condition covered by the exceptions because although a gambling addiction might be a medical condition, it is a “remediable impairment.” An impairment is remediable if the taxpayer can treat the impairment with reasonable effort and safety to himself, and where taxpayer will not be prevented by the impairment from engaging in his customary or any comparable substantial gainful activity. Therefore, the court upheld the early distribution penalty. Gillette, et al. v. Comm’r, TC Memo 2018-195 (2018).

• Tax procedure: Reprint not a “copy” but sufficient evidence of notice. This dispute surrounded the procedural efficacy of the commissioner’s notice of deficiency. In particular, the petitioner argued that the commissioner never created a notice of deficiency, and that if such a notice was created, it was not mailed to the petitioner. The commissioner conceded that the commissioner failed to maintain a copy of the notice of deficiency in the petitioner’s file; however, the commissioner produced a certified mail receipt and further produced a reprint of the notice. Petitioner objected to the admission of the reprint, arguing that the Federal Rules of Evidence requires a “copy” and not a reprint. The court concluded that the reprint was not a duplicate and that in fact there were differences between the original notice of deficiency and the proffered reprint. However, the reprint evidenced information that had been stored in the commissioner’s database and therefore provided sufficient evidence to support the commissioner’s determination regarding the existence of a notice of respondent’s determination of a deficiency. Gregory v. Comm’r, TC Memo 2018-192 (2018).

• Tax procedure: Who has the burden of production when petitioner dies after filing but before trial? A deceased taxpayer, Lydia Ramirez, had been a successful entrepreneur and investor. Before she died, she was in a dispute with the commissioner about the nature of many of her businesses. In particular, Ramirez reported that her businesses produced passive income, which she offset with her rental properties’ passive losses. But the commissioner reclassified most of Ramirez’s business income as active. The commissioner also assessed underpayment penalties. In this opinion, the court first addressed the active v. passive question; the estate lost. The court then turned to the issue it characterized as “novel.” The issue, as the court articulated it: “When an individual dies after filing her petition but before trial, who has the burden of producing evidence that the penalties were approved in writing by a supervisor—the Commissioner or petitioner’s estate?” The court first rejected the estate’s argument that the taxpayer had a reasonable cause defense to the penalties. 

 The novel question, though, remained. The question arose because the commissioner cannot assess a section 6662 penalty unless that penalty is personally approved in writing by the immediate supervisor of the individual making such determination. If there is no evidence in the record of an essential condition for the imposition of a penalty, the party who had the burden of production loses. If Ms. Ramirez had lived, the issue would be straightforward: The commissioner would lose. However, because the estate, and not the individual, was before the court, additional analysis was required since the language of the statute speaks only to individuals; in relevant part, the statute provides that the commissioner has the burden of production on penalties only “in any court proceeding with respect to the liability of any individual.” Sec. 7491(c) (emphasis added). In a lengthy analysis, the court reasoned that the ultimate question is whether the underlying tax liabilities relate to an individual taxpayer (in which case, the burden is on the commissioner) or a non-individual taxpayer (in which case, the burden is on the taxpayer). Because this dispute was about the underlying liabilities of an individual taxpayer—even though that taxpayer was deceased—the burden was on the commissioner. The commissioner did not meet that burden, and the estate was not liable for the penalties. Estate of Ramirez v. Comm’r, T.C.M. (RIA) 2018-196 (T.C. 2018). 

• Income tax: Treatment of Medicare waiver payments. Kimberly and Raymond Schafer appealed a notice of determination in which the commissioner decreased the taxpayers’ 2014 Minnesota Working Family Credit (WFC) and property tax refunds for tax years 2013 and 2014. The dispute was due to the treatment of Medicare waiver payments that the Schafers received. For purposes of the WFC, the Schafers treated the payment as earned income, which would result in a higher credit. In contrast, for purposes of the property tax refunds, they excluded it from their household income. Under IRS Revenue Notice 2014-7, Medicaid waiver program payments are excludable from income under IRC Section 131. Additionally, Form M1PR instructions clarify that Medicare payments are treated as nontaxable income in household income. Taxpayers did not provide any evidence to overcome the commissioner’s prima facie validity and the tax court granted summary judgement for the commissioner. Schafer v. Comm’r of Rev., No. 9118-R (Minn. T.C. 11/20/2018). 


• Minnesota House announces committees. Rep. Paul Marquart (DFL-Dilworth) has been named chair of the Minnesota House Taxes Committee, and Rep. Diane Loeffler (DFL-Minneapolis) will chair the Minnesota House Property and Local Tax Division. Marquart has served on one of the two committees since 2009 (excluding the 2015-2016 session). Loeffler has also served on one of the two committees since 2009 and was vice-chair of the Tax Committee during the 2013-2014 session. The Minnesota Senate has yet to release its committee rosters for the 2019-2020 session.

• Taxes and treaties: Decision expected in Washington State Department of Licensing v. Cougar Den Inc. The court heard arguments on October 31 in this dispute between a Yakama tribal citizen and the taxing authority of the state of Washington. Yakama citizen Kip Ramsey imports gasoline through his company, Cougar Den. The gasoline is transported over about 30 miles of Washington state highway into the Yakama reservation for sale at Yakama gas stations. Relying on language in an 1855 treaty that permits Yakama citizens to “the right, in common with citizens of the United States, to travel upon all public highways,” Cougar Den claims it is exempt from the state tax that would otherwise be applicable to off-reservation commercial activities that make use of public highways. Cougar Den argues this treaty right goes beyond simply permitting travel on public highways, and in fact prohibits the fuel tax that would burden travel and therefore impinge on the treaty right. Commentators noted the atypical line-up of justices during oral argument, with Justices Sotomayor, Kagan, Gorsuch, and Kavanaugh appearing in alignment and sympathetic to the tribe’s argument. The decision below is reported at Cougar Den v. Wash. State Dep’t of Licensing, 392 P.3d 1014 (Wa. 2017).

Morgan HolcombMitchell Hamline School of Law

Jessica DahlbergGrant Thornton

Matthew Wildes, Mitchell Hamline School of Law



• Insurance: Subrogation actions against “its insured.” A 16-year-old student of defendant school caused a fatal accident while driving his cross-country teammates and a volunteer coach to an extracurricular athletic competition in South Dakota. The competition was not sponsored by the Minnesota State High School League because it took place after the season had ended and the team’s coaches were not allowed to help the students prepare for it. The meet was, however, posted on the team’s website and team members were “encouraged to participate.” In addition, the student’s parents informed the volunteer coach that the student would be driving and asked that they travel in close proximity. The volunteer coach confirmed they would travel in “a caravan at a safe speed.” Further, while the student’s parents told the volunteer coach that the student could legally transport other students, he was not legally permitted to do so. See Minn. Stat. §171.055, subd. 2(c) (2016). (“For the first six months of provisional licensure, a provisional license holder may not operate a motor vehicle carrying more than one passenger under the age of 20 years who is not a member of the holder’s immediate family.”)

Plaintiff brought a negligence action against defendant school, seeking to recover for personal injuries she suffered and for the death of her husband. The district court granted the school’s motion for summary judgment, concluding that, as a matter of law, the school did not owe a duty of care to members of the general public such as plaintiff. The court of appeals affirmed on different grounds, holding that the school’s conduct did not create a foreseeable risk of injury to a foreseeable plaintiff.

 The Minnesota Supreme Court reversed the decision of the court of appeals. The Court began by noting the general rule that the school, like any other person or entity, “does not owe a duty of care to the general public if the harm is caused by a third party’s conduct.” This rule, however, is subject to two exceptions: “(1) if there is a special relationship between the plaintiff and the school and the harm to the plaintiff is foreseeable; or (2) if the school’s own conduct creates a foreseeable risk of injury to a foreseeable plaintiff.” The Court held the first exception was inapplicable, as there was no special relationship between the general public and the school. But the Court held that genuine issues of material fact precluded summary judgment under the second exception. The Court held that plaintiff is “capable of proving that this is a case of misfeasance” on the part of the school, as an assistant coach organized the trip and approved of the student driving members of the team. The Court also held that the risk was potentially foreseeable, as the student was only 16, had been licensed for less than six months, could not legally drive multiple passengers under the age of 20, and the accident resulted when the student and coach were distracted by electronic devices. The Court remanded the case for trial.

 Justice Anderson filed a dissenting opinion, joined by Chief Justice Gildea. Justice Anderson would have held that the school had no duty as a matter of law because (1) the allegations only involved nonfeasance, rather than misfeasance, and (2) the injuries suffered by plaintiff were not foreseeable. Fenrich v. The Blake School, No. A17-0063 (Minn. 11/21/2018). 

Jeff Mulder

Bassford Remele


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