July 2008

July 2008

July 2008

CRIMINAL LAW
JUDICIAL LAW

• Blakely: Companion Convictions. Appellant was convicted of third-degree criminal sexual conduct, third-degree controlled substance, child neglect and child endangerment.  He was acquitted of third-degree murder.  The facts of this case concern the appellant’s criminal sexual conduct with a juvenile who was intoxicated by methamphetamine to the point of death.  The district court held, and the Court of Appeals affirmed, the use of the convictions for child neglect and child endangerment to satisfy the fact-finding requirement of Blakely for an upward departure on the third-degree criminal sexual conduct conviction.

Held, it was error to use elements of the companion convictions to independently satisfy the upward departure requirement of Blakely.  Conduct underlying one conviction cannot be relied upon to support departure on a sentence for a separate conviction.  In this case, the neglect and endangerment verdicts did not demonstrate that the appellant’s conduct for the criminal sexual conduct charge was significantly more serious than that typically involved in the commission of those crimes.  In addition, the aggravation of the sentence for criminal sexual conduct, based on the neglect and endangerment verdicts, amounted to cumulative punishment.  As such, the 24-month enhancement imposed in this case was a de facto consecutive sentence, which would not have otherwise been authorized under the sentencing guidelines. 

On remand, the district court is ordered to impose the presumptive guideline sentence or, unless waived by the appellant, empanel a resentencing jury with respect to the aggravating factors for the offense of conviction sought to be aggravated, namely, criminal sexual conduct.  State of Minnesota v. Daniel E. Jones, A06-1719 (Minn. 03/13/08. www.lawlibrary.state.mn.us/archive/supct/0803/OPA061719-0313.pdf

• Jurisdiction. Operative Event in Minnesota Confers Jurisdiction.  Appellant was charged with theft and damage to property.  Appellant drove a truck for PLI, which was located in Minneapolis.  Appellant resided in Wisconsin.  Appellant requested and the company approved his purchase of a “captain’s seat” at a cost of approximately $1,700.  The agreement between the appellant and PLI was that if appellant paid $50 per week, deducted from his paycheck, the captain’s seat would be his upon full payment but, in the meantime, it would remain the property of PLI until fully paid.

In September 2003, tension developed between appellant and PLI.  On September 21st, PLI did not have appellant’s paycheck.  On that same date, appellant left PLI headquarters, deciding, at the headquarters, that if his check was not ready on September 23rd, he was going to quit his job.  Appellant drove back to his home in Wisconsin, where he removed the captain’s seat and vandalized the interior of the vehicle.  Appellant explained that if he were to receive his check on September 23rd, he would put the captain’s seat back in, but if he did not receive the check he would quit.  On September 23rd PLI did not give appellant his paycheck.  Police were called, and the truck was located with damage and the captain’s seat missing.

The evidence fails to support the conviction for criminal damage to property because the damage to the vehicle was complete in Wisconsin.  There was no “operative” event of the criminal damage to property which occurred in Minnesota.  No part of that offense occurred in Minnesota. Furthermore, causing injury to a Minnesota resident through acts committed entirely outside Minnesota is not, by itself, enough to confer criminal jurisdiction in Minnesota. The result was not part of the crime or related to an element of the crime.

On the contrary, the court did have jurisdiction over the theft charge. The defendant’s intent to permanently deprive PLI of the captain’s seat was formed, at least in part, in Minnesota, on September 23rd, when he finally decided to not return the captain’s seat.  This was a triggering or operative event, occurring in Minnesota, which was sufficient to accord the district court jurisdiction of the theft charge.  State v. C. Dennis Simion, A06-83 (Minn. 03/13/08). www.lawlibrary.state.mn.us/archive/supct/0803/OPA060083-0313.pdf

• DWI/Implied Consent: Source Code Discovery. Appellant moved the trial court for discovery of the source code driving the Intoxilyzer 5000EN device.  In support of this motion, the appellant filed a memorandum containing seven points which, in sum, described a need for an expert to examine how the source code analyzes a breath sample and converts its analysis to a numeric value, in that there can be no effective way to rebut the state witness’s testimony as to the accuracy and reliability of the result.  Held, it was not an abuse of discretion to deny appellant’s motion to compel production of the source code.  Although misdemeanor discovery is governed by Rule 7.04 of the Minnesota Rules of Criminal Procedure, trial courts have the discretion to be guided by Rule 9.01, subd. 23 in determining motions regarding misdemeanor discovery beyond police investigatory reports.  That rule requires a “showing” that the information sought to be disclosed may relate to the guilt or innocence of the defendant, or reduce culpability. The Court of Appeals finds that there was nothing in the record that “even marginally attempts to satisfy” the Rule 9 showing requirement.  The court then lists possible grounds for disclosure which the appellant could have asserted, for example (1) what a source code is; (2) how it fits into the operation of the Intoxilyzer; (3) its precise role in regulating the accuracy of the machine; (4) possible deficiencies which could be found in the source code; (5) how significant a deficiency might be to the accuracy of the machine’s result; (6) whether testing of the machine cannot reveal potential inaccuracies without also knowing the source code.  “By presenting only argument under the discovery issue, Olcott left the district court, and this court, to speculate.” State v. Creighton Martin Olcott, A06-2340 (Minn. App. 04/15/08)(unpublished). www.lawlibrary.state.mn.us/archive/ctapun/0804/opa062340-0415.pdf

• Evidence: Feigned Memory Loss. In a murder prosecution, a key witness for the state had testified at his prior plea hearing that he, the appellant and another had robbed the victim, and also had testified about use of a firearm. In appellant’s trial, the witness testified that he could not remember anything about the day of the incident because he was assaulted in prison and had since lost his memory. The district court made a finding that memory loss was being feigned and, over the objection of the appellant, allowed reading of the transcript of the witness’s guilty plea.  Held, the witness’s guilty plea was properly admitted as a prior inconsistent statement. The Minnesota Supreme Court has found that feigned memory loss is, by itself, inconsistent with a witness’s prior testimony. Case law does not require that the court expressly make a finding that the witness was subject to cross-examination at trial about the prior testimony, as was the witness in this situation.  State v. Tony M. Caine, A07-176 (Minn. 03/27/08). www.lawlibrary.state.mn.us/archive/supct/0803/OPA070176-0327.pdf

• Stay of Adjudication: Appeal.  Defendant challenged a warrantless search of a container inside his vehicle. After the district court denied his motion to suppress, the appellant proceeded to a Lothenbach trial, at which he was found guilty, but the court stayed adjudication of the conviction under Minn. Stat. §152.18.

In this case of first impression, the Court of Appeals holds that the stay of adjudication is appealable, and jurisdiction is accepted.  The state argued that a stay of adjudication is a pretrial order, and not a final judgment that a defendant can appeal as of right, citing State vs. Verchelde, 595 N.W.2d 192, 196 (Minn. 1999).

The Court of Appeals, however, notes that in an unpublished order opinion by the Minnesota Supreme Court, State v. Manns, the Supreme Court states that stays of adjudication are to be treated as pretrial orders for purposes of appeal only in misdemeanor cases.  Appeals from stays of adjudication in felony cases are to be treated as appeals from sentencing, and are appealable, as of right, under Minnesota Rules of Criminal Procedure 28.02 and 28.04.  While the Manns case involved the state’s right to appeal a stay of adjudication, rather than defendant’s, the Court of Appeals finds that the Manns language is broad and covers both the state and the defendant’s right to appeal from a stay of adjudication in a felony matter.  State v. Courtney James Allindir, A08-0068 (Minn. App. 04/08/08). www.lawlibrary.state.mn.us/archive/ctappub/0804/opa080068-0408.pdf

• Accomplice Testimony: Basis for Accomplice Instruction.  Jenkins and Lamar testified against the appellant in a first-degree murder case.  The evidence showed that Jenkins and Lamar were merely “along for the ride,” were passengers in the same vehicle, and did not intentionally aid or abet the appellant’s commission of the crime.  Because this mere presence would not support either of these witnesses being charged with the same crime as the appellant, there was no requirement on the part of the district court to give an accomplice instruction under the definition of State v. Lee, 683 N.W.2d 309 (Minn. 2004).  State v. Prentis Cordell Jackson, A07-395 (Minn. 04/10/08). www.lawlibrary.state.mn.us/archive/supct/0804/OPA070395-0410.pdf

• Ineffective Assistance of Counsel: Failure to Warn Concerning Timing of Motion to Withdraw Guilty Plea. Appellant contends that she was innocent of charges involving criminal sexual conduct with a foster child.  Appellant contends that the judge had promised four months in the workhouse, although nothing in the record supports this contention.  Appellant received 41months in prison, mostly based upon her failure to accept responsibility and show remorse following the guilty plea during the presentence investigative report.

The Court of Appeals finds that the court did not improperly inject itself into the plea negotiations, because there is nothing in the record to support her contention that the court had promised the four-month sentence.  Next, the Court of Appeals rejects appellant’s contention that her attorney was ineffective by failing to counsel her to “continue to lie” during the presentence investigative report process.

Finally, the appellant asserts that her counsel was ineffective because he restrained her from challenging her guilty plea before sentencing.  The uncontradicted affidavits of the appellant, including her own and those of her immediate family, state that her attorney said that she could bring a motion to withdraw the plea before sentencing, but advised her to wait because the judge would probably deny the motion and then she would receive an even longer sentence.  The attorney stated that the better option would be to express remorse, take full responsibility during sentencing, and hope to curry favor with the judge to reduce the sentence to less than 41 months.  The attorney also said that after sentencing, she could bring a motion to withdraw the guilty plea.

Held, it was ineffective assistance of counsel for appellant’s attorney to advise her to follow a course that made it more difficult for her to withdraw her guilty plea while failing to warn her of that difficulty. The standard to withdraw a guilty plea before sentence is “fair and just,” while the standard to withdraw a guilty plea after sentence is a much stricter “manifest injustice” standard.  Defense counsel’s advice to defer withdrawal of the guilty plea until after sentencing, without warning appellant as to the differing standards of proof, prejudiced appellant, and entitled her to a reversal of the conviction and remand.  Jennifer Diane Anderson v. State of Minnesota, A07-91 (Minn. App. 04/08/08). www.lawlibrary.state.mn.us/archive/ctappub/0804/opa070091-0408.pdf

• Sex Offender Registration: Retroactive Application.  In 2003, appellant was convicted of burglary.  The facts of the case, as admitted by the appellant, involved his entry into the residence in order to get a better view of the occupant sunbathing on a porch.  Appellant had a long history of voyeurism.  At sentencing, the district court imposed a 39-month executed sentence and found, under the then current version of §243.166, that the burglary was committed to achieve sexual gratification.  Hence, the court required him to register as a sex offender upon his release from prison. 

Appellant did not file a direct appeal of his conviction, but after he was released in 2006, petitioned the court to remove the registration requirement.  A 2005 amendment to §243.166 stated that the burglary offense could not be used to require registration, and eliminated the judge’s ability to, sua sponte, determine whether the offense was sexually motivated.

Held, the 2005 amendments of the sex offender registration law may be applied retroactively for the benefit of the defendant.  Other case law has applied the sex offender law retroactively to the detriment of offenders, and the same reasoning applies.  The statute applies retroactively because it requires registration upon a defender’s release into the community, without regard to the date of his conviction.

Finally, the Court of Appeals rejects the state’s contention that the appellant failed to challenge the district court’s decision in a timely manner, for the main reason that the registration requirement did not come into effect until after he was sentenced, but before he was subject to actual registration upon release from prison. Hence, the district court does have authority to address a challenge to its order containing the registration notice, and that condition may properly be removed in a post-conviction proceeding.  State v. Rodney J. Jedlicka, A07-0193 (Minn. App. 04/15/08). www.lawlibrary.state.mn.us/archive/ctappub/0804/opa070193-0415.pdf

—Frederic Bruno
Frederic Bruno & Associates

July 2008

EMPLOYMENT & LABOR LAW
JUDICIAL LAW

• Arbitration: Probationary Teacher; Reprisal.  In an unpublished decision, the Court of Appeals ruled that a probationary teacher is entitled to pursue a grievance and arbitration proceeding on a claim that her school district employer violated an agreement not to engage in reprisal to her because she participated in a teacher’s strike. The “clear and unmistakable language” in an agreement between the school district and the union that “no reprisal, punishment, or action” would be taken against strikers constituted a waiver of the school district’s inherent management right in refusing to accept the application by the former striker, who was a probationary teacher for an open teaching position.  Whether the school district retaliated against the teacher in violation of the agreement with the union constitutes an arbitral issue that must be decided by an arbitrator under the school district’s collective bargaining agreement with the union. In the Matter of the Arbitration between Independent School District No. 182 v. Education Minnesota, 2008 WL 933495 (Minn. App. 2008) (unpublished). 

• Whistleblowing: Teacher; Protected Activity.  A whistleblower claim by a suspended public school teacher was dismissed by the Court of Appeals in an unpublished decision.  The teacher had raised issues regarding the violations by a parent of the school’s harassment policy, but her complaints did not constitute a “report” within the meaning of the Whistleblower Act, Minn. Stat. §181.932, such as to constitute protected activity under the statute.  Further, she did not maintain that her suspension was because of any violations that she raised, which also negated her whistleblower claim. Ellison-Harpole v. Special School District No. 1, 2008 WL 933537 (Minn. App. 2008) (unpublished).

• Tolling Agreement.  An employee’s breach of a tolling agreement by suing before expiration of the tolling period does not warrant dismissal of the lawsuit.  The Court of Appeals reversed dismissal of the lawsuit alleging discrimination and harassment claims, while allowing the employee to raise contractual defenses to the premature lawsuit. Kunza v. St. Mary’s Regional Health Center, 747 N.W.2d 586 (Minn. App. 2008).

• ADA; “Reasonable Accommodation.”  An employee at a manufacturing plant was not entitled to additional medical leave for medical reasons as a “reasonable accommodation” under the Americans with Disabilities Act (ADA). The employer was not obligated to furnish additional leave to the employee under the ADA because there was no showing that additional time-off would allow the employee to perform her job.  Brannon v. Luco Mop Co., 521 F.3d 843 (8th Cir. 2008). 

• Discrimination. Dismissal of a lawsuit brought by a 50-year old employee, claiming he was terminated from the job because of his age and need for health insurance benefits to pay for shoulder surgery, was overturned by the 8th Circuit in Fitzgerald v. Action, Inc., 523 F.3d 867 (8th Cir. 2008).  The employer’s claim that the employee committed a series of misbehavior would have been a pretext for terminating the employee because of his insurance benefits, which overcame summary judgment on the employee’s claim under the Employee Retirement Income Security Act (ERISA) and warranted a remand for trial. 

• Retaliation; Discrimination Complaint. An associate professor at Creighton University claimed that she was retaliated against for filing a discrimination charge, but the 8th Circuit held that the various internal actions that were taken by the university were not sufficient to constitute retaliation.  Additionally, there was insufficient showing of any causal relationship between the filing of the professor’s discrimination complaint and the actions taken against her by the school.  Recio v. Creighton University, 521 F.3d 934 (8th Cir. 2008).

• Retaliation; Race Discrimination. An African-American factory employee’s claim of retaliation after he was terminated was thrown out where the employee did not show that he was engaged in protected activity when he made comments about his supervisor’s conduct and, furthermore, he did not allege that those comments constituted the grounds for his subsequent termination.  Smith v. International Paper Co. 2008 WL 899949 (8th Cir. 2008).

• Age, Sex Discrimination; Untimely Complaint. A school teacher’s claims of age and sex discrimination were dismissed on grounds of untimeliness and other reasons. The sex bias claim was based on an incident that occurred more than a year before any charge was filed with the Department of Human Rights and could not be extended in the absence of any “continuing violations” within the one-year statutory time period under Minn. Stat. §363.061, subd. 1, 3.  The age discrimination claim was not actionable because it was based on a single “stray remark unrelated to any decision-making process,” and the teacher quit before giving the school “a reasonable opportunity” to correct any problem. Malknecht v. Independent School Dist. No. 833, 2008 WL 1799768 (Minn. App. 2008) (unpublished).

• Unemployment Compensation; Transportation Requirement.  An unemployment compensation applicant who relies on public transportation may satisfy the statutory requirement of having “transportation throughout the labor market area” to be available for suitable employment in order to be entitled to benefits under Minn. Stat. § 268.095, subd. 15(e).  The applicant, who first raised that issue before an unemployment law judge (ULJ) on reconsideration met the statutory standard and, therefore, was eligible to receive benefits.  Work Connection v. Bui, 2008 WL 1700291 (Minn. App. 2008).

• Unemployment Compensation; “Voluntarily Quit.” An employee lost his bid for unemployment compensation when he lost his driver’s license for a DUI, was unable to arrange transportation to work, and failed to speak to his employer about returning to work after release from jail, as had been instructed to do.  He was deemed to have voluntarily quit without good reason caused by the employer.  Anderson v. R.P. Enterprise, Inc., 2008 WL 763171 (Minn. App. 2008) (unpublished).

• Unemployment Compensation; “Voluntarily Quit.” An employee who asked for a letter of reference in order to seek other employment closer to where he lived was denied unemployment compensation benefits on grounds that he voluntarily quit without good cause attributable to the employer. The employer and the secretary were credible in testifying that the employee said he would quit in two weeks and asked for a letter of reference.  The employee had testified that he had asked for a letter of reference only to look for other work but did not express intention to quit.  The employee’s testimony was deemed lacking credibility because he had problems with other coworkers and also had a hostile confrontation with the employer shortly before the conversation about the reference letter took place.  Referring to the credibility determination of the ULJ, the appellate court upheld the denial of unemployment benefits. Schmidt v. Standard Process Equipment, 2008 WL 942559 (Minn. App. 2008) (unpublished).

LEGISLATION

• Genetic Information Nondiscrimination Act.  A new federal law, overwhelmingly passed by Congress and signed by President Bush, bars health insurers and employers from discriminating against individuals because of data in their genes.

The legislation, known as the Genetic Information Nondiscrimination Act, prohibits health insurance companies from using genetic information to deny benefits or raise premiums for individual policies.  Employers who use genetic information to make decisions about hiring, firing, or compensation could be fined up to $300,000 for each violation.

While its intent is to prohibit discrimination by insurance companies based on genetic tests, the measure may have the effect of opening the way for them to encourage patients to take them.  The goal would be not to deny coverage, but to help find the best and least expensive  therapy for a patient. It also may strengthen patients’ privacy protections.

—Marshall H. Tanick
Mansfield Tanick & Cohen, PA

July 2008

ENVIRONMENTAL LAW
JUDICIAL LAW

• Mining Production; Air Permits; Administrative Permit Amendment Procedure.  The Minnesota Court of Appeals upheld a decision by the Minnesota Pollution Control Agency (MPCA) to deny an application to amend a mining production facility’s operating permit to remove a judicially mandated control standard.  The relator, Northshore Mining Company, operates a taconite production facility in Silver Bay, Minnesota.  The facility’s operations result in the release of asbestos fibers.  In a decades-earlier case, Reserve Mining Co. v. Envtl. Protection Agency, 514 F.2d 492 (8th Cir. 1975), the 8th Circuit Court of Appeals ordered that the permit held by relator’s predecessor must include air emission control measures that allow the asbestos fiber count in the ambient air to achieve a “level ordinarily found in the ambient air of a control city such as St. Paul.”  Id. at 538-39.  Subsequent permits issued to Reserve Mining and its successor(s) included this “control-city” standard.  In December 2006, relator submitted an administrative permit application to the MPCA pursuant to Minn. R. 7007.1400 to eliminate that standard, arguing that the standard had been satisfied and had become obsolete.  The MPCA denied the application, finding that Minn. R. 7007.1400 does not provide an appropriate procedure for making substantive permit changes.  The MPCA pointed out that Minn. R. 7007.1400 is typically used to correct typographical errors and other uncontroversial amendments and does not provide for public notice, public comments or hearings, whereas Minn. R. 7007.1500 provides an appropriate process to deal with major permit amendment requests.  Relator appealed, arguing that the MPCA erred as a matter of law in determining that Minn. R. 7007.1400 could not be used to process its request to change a control standard.  Reviewing the MPCA’s decision de novo, the Court of Appeals affirmed.

Relator argued that the plain language of Minn. R. 7007.1400 expressly allows its request to eliminate the “control-city” standard from its permit, as the process laid out in the rule allows changes to “clarify the meaning of a permit term.”  The court disagreed, concluding that relator sought to eliminate a substantive monitoring requirement, not a mere clarification of a “permit term” as the subject rule allows. Relator further contended that the MPCA erred in finding that the process in Minn. R. 7007.1500 provided an appropriate process for its application, because that rule is for significant permit amendments and that since the “control-city” standard in its permit is obsolete, its proposed elimination cannot be considered a significant amendment.  The court disagreed, finding that relator failed to show an adequate substitute for the standard and, therefore, its elimination would constitute a significant permit amendment.  Northshore Mining Company v. Minnesota Pollution Control Agency, A07-0634, 2008 WL 2103550 (Minn. App., 05/20/08) (unpublished). www.lawlibrary.state.mn.us/archive/ctapun/0805/opa070634-0520.pdf

—Chris McGlincey
Leonard, Street and Deinard

July 2008

FEDERAL PRACTICE
JUDICIAL LAW

• Post-Trial Motions; Unopposed Extension of Time of No Effect. The 8th Circuit held that even though the time limits found in Fed. R. Civ. P. 6(b) and 50(b) are “claim-processing rules” rather than jurisdictional limits, those rules are “inflexible” when an objection to an extension is made prior to a ruling on the related post-trial motion, even if no objection was made prior to the time the extension was granted.  Accordingly, the 8th Circuit held that it lacked jursidiction over the appeal because the appeal had not been filed within 30 days of entry of the judgment, and there had been no timely post-trial motion that would have extended that deadline.  Dill v. General Am. Life Ins. Co., ___ F.3d ___ (8th Cir. 2008). 

• Class Certification; Medical Implants; Individual Issues Predominate. The 8th Circuit reversed for the second time the certification of a plaintiff class in a medical implant case, and strongly suggested that consumer fraud cases under Minnesota law will rarely if ever be appropriate for class certification when the issue of reliance will necessitate a plaintiff-by-plaintiff inquiry. In Re St. Jude Medical, Inc., 522 F.3d 836 (8th Cir. 2008). 

• Fed. R. Civ. P. 68; Offer of Judgment; Attempt to Exclude Costs. The 8th Circuit reversed a district court’s entry of judgment under Fed. R. Civ. P. 68, finding that the offer of judgment was invalid because it expressly excluded costs.  Dissenting, Judge Riley argued that “A deal is a deal!” and that the plaintiffs should have been bound to the settlement offer they had accepted regardless of Rule 68.  Thompson v. Southern Farm Bureau Cas. Ins. Co., 520 F.3d 902 (8th Cir. 2008). 

• Fed. R. Civ. P. 12(b)(6); Conspiracy; “Conclusory” Allegations. Relying heavily on the Supreme Court’s recent decision in Bell Atlantic Corp. v. Twombly, 127 S.Ct. 1955 (2007), Judge Kyle dismissed conspiracy claims against multiple defendants pursuant to Fed. R. Civ. P. 12(b)(6), finding that plaintiffs’ “conclusory” allegations of a conspiracy were “simply insufficient to ‘nudge’ [p]laintiffs’ claims across the conceivable/plausible line.”  Buetow v. A.L.S. Enterprises, Inc., 2008 WL 1994989 (D. Minn. 05/05/08). 

• Class Certification; Effect of Summary Judgment. Judge Kyle granted plaintiffs’ motion for summary judgment in a putative FDCPA class action, but then held that the plaintiffs had waived any right to prosecute their case as a class action by “jumping directly to a final determination of the merits of their case” without first seeking to certify a plaintiff class.  Owens v. Hellmuth & Johnson, PLLC, ___ F. Supp. 2d ___ (D. Minn. 2008). 

• Motions to Remand Granted and Denied. Judge Frank granted plaintiffs’ motion to remand a purported diversity action, rejecting defendants’ argument that a nondiverse defendant was a “nominal” defendant for diversity purposes.  In addition, Judge Frank found no “reasonable basis” for the removal and awarded attorney fees to the plaintiffs pursuant to 28 U.S.C. §1447(c).  H.B. Fuller Co. v. BRTT, Inc., 2008 WL 1924182 (D. Minn. 04/29/08). 

Judge Doty also granted a motion to remand, rejecting the single defendant’s argument that it had been fraudulently joined, and finding that the fraudulent joinder doctrine can never apply when there is a single defendant.  Saunders v. Countrywide Home Loans of Minnesota, Inc., ___ F. Supp. 2d ___ (D. Minn. 2008). 

Judge Schiltz also granted a motion to remand, finding that the plaintiff was entitled to no more than $24,000 on her breach-of-contract claim at the time she filed her state court action, and rejecting the defendant’s argument that her settlement demand in excess of $75,000, that encompassed matters not related to the lawsuit, had any bearing on the amount in controversy.  Garvey v. Prudential Ins. Co., 2008 WL 1805603 (D. Minn. 04/18/08). 

Judge Doty denied a motion to remand where the plaintiff’s state court complaint sought an amount “in excess of $50,000” plus treble compensatory damages and attorney fees, finding that even if the plaintiff was seeking less than $75,000 in total compensatory damages, the addition of even nominal attorney fees was sufficient to satisfy the required amount in controversy.  Gabrielson v. Hartford Co., 2008 WL 1745660 (D. Minn. 04/11/08). 

• Motion for Recusal Denied. Judge Doty denied a motion to recuse himself in the long-running National Football League labor litigation, finding that the movants had failed to comply with the procedural requirements or to establish the actual bias necessary to warrant disqualification under 28 U.S.C. §144, and that the “average person” with knowledge of “all the relevant facts of the case” would “impute no bias” in his public statements or conduct.  White v. National Football League, 2008 WL 1827423 (D. Minn. 04/22/08).  

—Josh Jacobson
Law Offices of Josh Jacobson

INTELLECTUAL PROPERTY
JUDICIAL LAW

• Patent Litigation; Basis for Injunction. Chief Judge Rosenbaum granted a preliminary injunction in a patent case despite recent law suggesting it is more difficult these days than ever to get such preliminary relief.  EZ Gard makes athletic mouthguards under its U.S. patent.  It sued XO Athletic for patent infringement when XO not only lured away EZ’s former sales manager but also started selling a competing mouthguard.  EZ sought a preliminary injunction.  However, recent case law has suggested injunctions, especially preliminary ones, should be reserved for only those cases in which monetary relief will not make the plaintiff whole.  For example, no longer does a presumption of irreparable harm exist in favor of the patent owner.  Here, the court noted that EZ and XO compete directly for mouthguard sales, that EZ had already lost one fairly large sale due to XO’s competition, and that XO was touting its mouthguard as superior to a second EZ customer.  Despite recent case law, the court found enough harm here to grant the injunction: “Lost sales, particularly sales lost to an infringing product, cannot be remedied by dollar damages alone.”  EZ Gard Industries, Inc., v. XO Athletic Co. et al., 07-CV-4769 (D. Minn. 04/23/08).

• Patent Claim Construction; Preferred Embodiments. The Court of Appeals for the Federal Circuit recently corrected a patent claim construction that excluded preferred embodiments.  PSN sued a number of defendants for infringement of a patent covering a dental method for making veneers.  The claim term construed by the district court used arguably absolute wording: “ready for mounting.”  The district court held that “ready for mounting” meant just that—that the veneer was ready to be mounted and excluded subsequent finishing operations.  However, the Federal Circuit disagreed and reversed.  Noting that a claim construction that excludes preferred embodiments is rarely if ever correct, the appellate court corrected the construction to include subsequent finishing steps: “a person of ordinary skill in the art would understand that a veneer was ‘ready for mounting’ … even if some ‘finishing’ operations still needed to be performed.”  PSN Illinois, LLC, v. Ivoclar Vivadent, Inc., et al., No. 2007-1512 (Fed. Cir. 05/06/08).

• Patent Litigation; Invalidity Issues. The Federal Circuit also clarified a point of law concerning when invalidity issues must be addressed.  For some time, it has been unclear whether a district court, or appellate court, must address invalidity issues in patent cases if the case is disposed of on alternate grounds, typically noninfringement.  For example, if a defendant brought motions for summary judgment of noninfringement and invalidity, and the court agreed with the former, it would often describe the latter as “moot.”  However, Solomon Techs, Inc. v. ITC, makes clear that the answer depends on how the invalidity issues arose.  The district court should decide the invalidity issue if it was pled as a counterclaim.  But the district court may treat invalidity as “moot” if it was raised only as an affirmative defense.  Although the rationale for the above distinction is not clearly laid out in this decision, it likely has to do with counterclaims being able to stand on their own independent of the plaintiff’s claims.  Affirmative defenses, of course, expire when plaintiff’s claims cease to exist.  Solomon Techs, Inc. v. ITC, No. 2007-1391 (Fed. Cir. 05/07/08).

—Tony Zeuli
Merchant & Gould

July 2008

JUVENILE LAW
JUDICIAL LAW

• Termination of Parental Rights; Harm Suffered “in Parent’s Care.” A mother challenged the order of the district court terminating her parental rights, arguing that the district court erred in concluding that there was clear and convincing evidence that the statutory criteria for termination of parental rights were met.  The Court of Appeals affirmed the district court and the matter was then accepted by the Minnesota Supreme Court for review. 

Under the facts of the case, the parents were a married couple who had one child together.  The mother had another child from a prior relationship who also resided with them.  One of the children sustained serious injuries while the child was in the father’s care.  After reviewing medical evidence, and based on the father’s admission to numerous individuals that the child was injured while in his care, and where the mother acknowledged that she and the father were both children’s primary caretakers, the trial court found clear and convincing evidence to believe that the injuries to the one child occurred at a time when she was in the direct physical care of the father.  The trial court went on to find clear and convincing evidence that the child’s fractures occurred at a time when she was in the care of both the mother and father, either jointly or individually.  The child was found to have suffered egregious harm, which the trial court found did not have to be sustained at the mother’s hand, but merely while the child was in her care and custody. This finding provided a basis for terminating the mother’s parental rights to both children, and terminating the father’s parental rights as to the one child who was his biological child. 

In reviewing the Court of Appeals decision affirming the trial court decision, the Supreme Court held that pursuant to Minn. Stat. §260C.301, subd. 1(b)(6) (2006), a child can be considered to have experienced egregious harm “in the parent’s care” even though the parent was not physically present at the time the harm occurred.  Under the facts of this case, it was found that the injured child was “in the parent’s care” where, at the time the child was injured, the family was intact, the child resided in the home with the parents, and the parent whose rights were terminated acknowledged her role as one of the child’s primary caretakers.  The Court further held that this same statutory provision does not authorize the termination of the rights of a parent who has not personally inflicted egregious harm on a child unless there is clear and convincing evidence that the parent knew or should have known that egregious harm occurred.  The Supreme Court remanded the matter for findings as to whether the mother in this case knew or should have known that the child experienced egregious harm.  In the Matter of the Welfare of the Child of: T.P and P.P., A07-16 (Minn. 04/17/08). www.lawlibrary.state.mn.us/archive/supct/0804/OPA070016-0417.pdf

• Termination of Parental Rights; Parent Not Named Party. The Minnesota Supreme Court reviewed a case where the county filed a petition to terminate parental rights in relation to a minor child.  The petition listed the child’s mother and named her as a party to the proceeding, but did not name the child’s father as a party.  Instead, he was listed as the alleged father, and therefore only a “participant” in the litigation.  On the first day of the scheduled trial on the termination of the mother’s parental rights, the father appeared in the action for the first time and acknowledged that he and the mother had previously signed a Recognition of Parentage form and that he was therefore the child’s legally recognized father.  Although never named as a party, either by amendment to the existing petition or execution of a new petition, the father subsequently participated in a full adversarial trial.  The juvenile court ordered the termination of his parental rights.  The Minnesota Court of Appeals affirmed that decision. 

In reversing the Court of Appeals affirmance, the Supreme Court held that the parental rights to a minor child may not be terminated in the absence of a petition naming the parent as a party to the proceedings.  Even though the child’s father, represented by counsel, participated in a full adversarial trial before the juvenile court terminated his rights, and the absence of the petition naming the father as a party to the termination proceeding was not raised to the juvenile court or before the Court of Appeals, the Supreme Court nonetheless reversed the termination where the petition listed the child’s father as the alleged father, and therefore only a participant in the proceeding.  There was no evidence that the father was served with the petition, or that the juvenile court determined whether the petition established a prima facie case, nor were there any statutory grounds cited in the petition setting forth the basis for termination of the father’s parental rights.  The matter was reversed and remanded for further proceedings.  In the Matter of the Welfare of the Child of: B.J.-M. and H.W., A07-272 (Minn. 02/21/08). www.lawlibrary.state.mn.us/archive/supct/0802/OPA070272-0221.pdf

• Termination of Parental Rights; “Inadequate Parenting.” In an unpublished decision, the Minnesota Court of Appeals overruled the district court’s termination of a mother’s parental rights where the mother had voluntarily placed her children in the care of county social services because she was having a mental health crisis and because the conditions in her home at the time were messy and unsanitary.  The Court of Appeals, in reversing the decision of the district court, concluded that evidence did not support termination where the state of the home was intolerable only at the time of the mother’s mental health crisis, the mother voluntarily admitted herself to a mental health facility after placing her children in the care of the county, the mother complied with case plan requirements concerning improvement of parenting skills, the mother’s financial and budgeting problems were not directly relevant to the conditions that led to the children’s placement, and neither the mother’s cognitive functioning nor her mental health issues were alone sufficient to terminate her parental rights.  The Court of Appeals also observed that the criticisms by the county of the mother’s parenting did not show inadequate parenting.  In the Matter of the Welfare of the Children of S.L.B. and W.A.H., A07-1589 (Minn. App. 03/04/08) (unpublished). www.lawlibrary.state.mn.us/archive/ctapun/0803/opa071589-0304.pdf

• Termination of Parental Rights; Presumption of Unfitness. A mother challenged the district court’s order terminating her parental rights to her child.  The mother had had prior involuntary terminations of her parental rights in both 1995 and 2002.  In 2005, she had been involved in another termination proceeding where she had successfully rebutted the presumption of unfitness based on those prior terminations.  In a 2007 termination of parental rights trial, the district court applied the presumption of unfitness based on those earlier terminations of parental rights.  The Court of Appeals concluded that the rebuttal in 2005 did not preclude the presumption from applying in the subsequent 2007 termination trial because the application of the presumption was deemed to be consistent with the statutory requirements and policies underlying the doctrine.  The doctrine of collateral estoppel was deemed to be inapplicable where, as a result of changed circumstances in the mother’s life, the identical issue requirement was not met.  In the Matter of the Welfare of the Child of: D.D. and W.H., No. A07-1881 (Minn. App. 03/11/08) (unpublished). www.lawlibrary.state.mn.us/archive/ctapun/0803/opa071881-0311.pdf

• Foster Parents; Visitation Rights. In an unpublished Court of Appeals decision, that court reviewed a district court’s determination of visitation rights by foster parents in family court.  In a juvenile court child protection proceeding, a mother had previously agreed to transfer legal and physical custody of her child to the child’s father.  At a juvenile court permanency hearing, two social workers and the child’s guardian ad litem recommended that the child continue to have a relationship with her foster parents.  The child’s father agreed to allow the ongoing contact between the child and the foster parents and agreed that such contact was in the child’s best interests.  Dispositional orders transferring custody in a juvenile court proceeding are enforceable and modifiable in family court.  Subsequently, the foster parents moved in family court to intervene in the proceeding so as to enforce their visitation rights.  The Court of Appeals held that the family court correctly determined that the foster parents’ motion was for enforcement of visitation already granted in the juvenile court and that the visitation order was supported by the record.  Perdomo v. Flying, A07-0169 (Minn. App. 02/26/08) (unpublished).  www.lawlibrary.state.mn.us/archive/ctapun/0802/opa070169-0226.pdf

• Child Custody; Protective Order; Prior Restraints on Publishing. In an unpublished Court of Appeals decision, a father appealed a district court denial of his motion to modify child custody based on child endangerment.  He also appealed two prior orders that in varying degrees restricted his ability to publish information about his former wife and family flowing out of the family court proceedings.  In the earliest of the two orders, he was denied permission to publicize information obtained in the depositions of the custody evaluator, psychological evaluator, and coordinator of the guardian ad litem program.  The Court of Appeals observed that although such an order of prior restraint is viewed with a heavy presumption against its constitutional validity, the district court properly considered the following factors:  the nature of the protective order, the party’s reliance on it, the ability to gain access to the information in other ways, the need to avoid repetitive discovery, the nature of the material for which protection is sought,  the need for continued secrecy,  and the public interest involved. 

The district court concluded that the court-appointed evaluators did not rely on the order when they gave depositions and that this factor favored the father’s motion to vacate the order.  However, the trial court also found factors that weighed against the motion; these factors included the need for a broad protective order because the case was fraught with bitter disagreement; the father had access to the information and was restricted simply in how he could use it; the father had filed no other lawsuits that would require the information; that the most intimate and personal details of the lives of members of a family, including the minor children were involved; that the controversy was ongoing.  The district court also questioned whether there was any public interest in the specific deposition testimony.  The district court denied the father’s motion to vacate the protective order, and the Court of Appeals affirmed that decision. 

With regard to the subsequent order which prohibited the father from publishing “anything” about his former wife and her family, this was found to violate his free speech rights under the 1st Amendment of the United States Constitution.  The Court of Appeals observed that despite the compelling interest of protecting the minor child’s privacy, this later order was not narrowly tailored to serve that interest; by prohibiting the publishing of “anything” about the former spouse or her family, the Court of Appeals felt this went beyond protecting the child’s interests and that there was no compelling interests to justify such a broad prohibition.  That order was thus held to be unconstitutional, overbroad and an inappropriate content-based restriction.  Jabr v. Jabr, A07-203 (Minn. App. 04/22/08) (unpublished).

—Gary A. Debele
Walling, Berg & Debele PA

PROBATE & TRUST LAW
JUDICIAL LAW

• Will Construction; Relationship of Devisee to Testator as Descriptive vs. Conditional; Burden of Proof; Unjust Enrichment.  The Minnesota Court of Appeals has held that a gift under a will to the testator’s “companion, Diane M. Ruhland” did not fail even though the testator’s relationship with Ms. Ruhland terminated several years prior to his death.  The Court of Appeals held that the term “companion” was descriptive, rather than conditional, citing In re Estate of Kerr, 520 N.W.2d 512, 514 (Minn. 2003).  In the Kerr case, the Minnesota Supreme Court held that a gift to a devisee identified in the will as the testator’s “step-daughter” did not fail despite the fact that the testator and the devisee’s mother divorced prior to the testator’s death.  The Court of Appeals also cited In re Will of Dezell, 194 N.W.2d 190, 192 (Minn. 1972), where it was stated that in such cases it is the beneficiary’s status at the time the will is executed, and not at the date of death, that “ordinarily” governs.  In dicta, the Court of Appeals stated that the trial court committed harmless error by applying Minn. Stat. §524.3-407 (2006) to impose the burden of proof on the parties challenging the right of the testator’s former companion to take under the will.  The Court of Appeals stated that §524.3-407 applies only to “contests to the validity of the will.”  Finally, the Court of Appeals affirmed the trial court’s conclusion that the former companion’s receipt of the devise did not constitute unjust enrichment.  Citing In re Estate of Savich, 671 N.W.2d 746, 751 (Minn. App. 2003), the Court of Appeals held that the appellants failed to establish the testator’s former companion was “not entitled to the thing of value” she received, an essential element of an unjust enrichment claim.  In re the Estate of John L. Novotny, A07-257 (Minn. App. 04/15/08). www.lawlibrary.state.mn.us/archive/ctapun/0804/opa070257-0415.pdf

ADMINISTRATIVE ACTION

• Gift and Estate Tax; Applicable Federal Rates Reduced.   The assumed rate of return under §7520 of the Internal Revenue Code for May, 2008, dropped to 3.2 percent, its lowest level in nearly five years.  The current rate (and monthly rates going back to January of 2000) can be found at this website: www.irs.gov/taxpros/lists/0,,id=

98042,00.html.  The §7520 rate is the assumed rate of return used for establishing the gift and estate tax values of annuities, life interests or interests for terms of years and remainder or reversionary interests.  Generally, it is 120 percent of the mid-term applicable federal rate under Code Section 1274, using annual compounding, rounded to the nearest two-tenths of one percent.  The current low rate makes various estate-tax-planning strategies, such as gifts to grantor-retained annuity trusts and charitable lead trusts, more attractive than they would otherwise be, all else being equal.  Rev. Rul. 2008-24 (04/18/08).

• Trust Income Tax and Estate Tax; Grantor Trust Substitution Power Does Not Cause Estate Tax Inclusion.  The IRS has ruled that where a grantor of an irrevocable trust retains the power to reacquire the trust property by substituting other property of equivalent value (causing the trust to be ignored for income tax purposes), the substitution power does not cause the trust property to be included in the grantor’s estate under Sections 2036 and 2038 of the Internal Revenue Code.   Rev. Rul. 2008-22 (04/17/08).

LEGISLATION

• Transfer-on-Death Deeds; Minnesota. Recently passed legislation authorizes “transfer on death” deeds, which will allow the transfer of real estate upon the death of the owner in a manner similar to that available with respect to financial accounts having “pay on death” designations.  Unlike a typical deed, a transfer-on-death deed must be recorded prior to the grantor’s death to be effective, and is revocable during the grantor’s lifetime.  A transfer-on-death deed may direct the transfer of real estate to one or more named beneficiaries, to a class of beneficiaries, or to the trustee of a trust (including a revocable trust or a testamentary trust).  Like a will or other “governing instrument,” a transfer-on-death deed will be revoked upon the divorce of the grantor and the grantee pursuant to Minn. Stat. §524.2-804.  The new law contains an antilapse provision similar to the one set forth in Minn. Stat. §524.2-603.  A transfer-on-death deed may not be revoked by a contrary provision in a will.  Full text of the new law, which will be codified as Minn. Stat. §507.071 and will become effective on August 1, 2008, is available on-line at www.revisor.leg.state.mn.us/

laws/ (click on “2007-2008,” then “2008 Regular Session,” then “Chapter 341”).  The law includes suggested deed and revocation forms.  Minn. Laws 2008, Ch. 341, Art. 2, Sec. 5.

Cameron R. Seybolt
Fredrikson & Byron, P.A.

REAL PROPERTY
JUDICIAL LAW

• Foreclosure; Prerequisites for Creditor Redemption.  The Minnesota Court of Appeals has recently clarified the requirements necessary to allow a creditor to redeem following a foreclosure sale.  A property owner defaulted on its second mortgage, which led to foreclosure.  In the foreclosure process, a priority dispute arose between Northern Realty Ventures (Northern), which had been assigned a judgment that was a lien against the property, and the Minnesota Housing Finance Agency (MHFA), which held a mortgage recorded after the judgment lien was in place.  In connection with the foreclosure, Northern filed notice of intent to redeem, but did not record or provide to the sheriff the judgment itself or the assignment of it to Northern.  Although Northern was the senior creditor, the sheriff initially refused to allow it to redeem because Northern had not recorded the judgment and assignment.  Instead, the sheriff gave the MFHA the first opportunity to redeem.  The sheriff later changed his decision and allowed Northern to redeem, considering Northern the senior creditor.  The sheriff treated the MFHA as the next creditor in line and allowed it to redeem from Northern even though the time to do so had expired.  Northern refused to accept the payment tendered by the MFHA for redemption.  At approximately the same time, the property owner’s first mortgagee was also commencing foreclosure proceedings.  When it was time to redeem from the first mortgagee’s foreclosure, both Northern Realty and the MFHA claimed that they were the fee owner of the property and that they were entitled to redeem.  The sheriff did not allow either to redeem and a lawsuit followed.  The district court ruled that Northern had complied with the statutory prerequisites for redemption and was entitled to redeem.  The court further held that despite the timeliness issue, the MFHA substantially complied with the redemption requirements and therefore was the fee owner of the property. 

The Court of Appeals reversed.  The critical issue on appeal was whether Northern had met the requirements entitling it to redeem.  Minn. Stat. §580.24 establishes as a prerequisite to redeeming that the creditor record its notice of intent to redeem as well as “all documents necessary to create the lien … and to evidence the creditor’s ownership of the lien.”  All such documents must also be provided to the sheriff.  Northern argued that it was not required to record the judgment and assignment to create the lien and, therefore, the statute did not require the recording or delivery of those documents in order to redeem.   The Court of Appeals disagreed.  In reviewing the legislative history of the statutory provision, the court noted that the purpose of the statute was to provide the sheriff with the information necessary to determine the priority of creditors.  Given that purpose, the Court of Appeals concluded that a creditor seeking to redeem must record and deliver to the sheriff all documents that created the lien and evidence ownership of the lien regardless of whether those documents would need to be recorded to create the lien itself.  Reversed and remanded. Northern Realty Ventures, LLC v. Minnesota Hous. Fin. Auth., ___ N.W.2d ___, A07-0800 (Minn. App. 04/15/08). www.lawlibrary.state.mn.us/archive/ctappub/0804/opa070800-0415.pdf

• Public Nuisance; Proof Necessary to Support Injunctive Relief.  Krengel owned property in the city of West St. Paul (city).  Over several years, neighbors lodged numerous complaints about the activities of Krengel and her guests, primarily relating to the use of alcohol and corresponding disorderly behavior.  Two of the incidents resulted in Krengel’s conviction for public nuisance.  On July 29, 2005, the city attorney sent a letter to Krengel notifying her that she needed to abate the nuisance or enter into an abatement plan with the city.  Subsequently, the city and Krengel entered into an abatement plan whereby she agreed to a number of terms relating to the use of the property.  Although the “nuisance” behavior ceased, Krengel repeatedly violated the terms of the abatement plan.  Accordingly, on June 27, 2006, the city sent Krengel a letter notifying her that the city intended to seek injunctive relief to abate the nuisance.  The district court issued a temporary injunction, followed by a permanent injunction, which prohibited Krengel from using the property as her residence for the period of one year.  The hearing on the permanent injunction occurred over one year after the last cited “nuisance” event.  In a 2-1 decision, the Court of Appeals reversed. 

Under Minn. Stat. Ch. 617, the government may seek injunctive relief for the abatement of a nuisance, which could include an order barring the use of the property.  Krengel argued that the injunction was improperly granted because the nuisance activity was not ongoing at the time of the injunction, in other words, that there was no nuisance to abate when the court issued its order.  But the statute contemplates seeking an injunction for activity that is sporadic rather than continuous.  The statute permits the government to prove the existence of a public nuisance by proving two or more separate incidents “committed within the previous 12 months.”  The issue for the court was to determine the date from which the 12 months should be measured.  The city contended that the triggering date should be the day that the government provides notice of its intent to seek injunctive relief.  Krengel argued that the 12-month period should be measured from the date of the hearing on the permanent injunction.  Construing the statutory language, the Court of Appeals decided that the 12-month period was based on when the government provides “proof” of the nuisance activity, which the court concluded would be the date of the injunction hearing.  Because the city did not prove incidents of nuisance behavior for the 12-month period prior to the injunction hearing, the injunction was improperly granted.  Vacated; motion denied.  City of West St. Paul v. Krengel, ___ N.W.2d ___, A07-310 (Minn. App. 05/06/08). www.lawlibrary.state.mn.us/archive/ctappub/0805/opa070310-0506.pdf

• Title Insurance; Coverage Related to Bankrupcty Claims.  A property owner planned to enter into a 1031 exchange transaction whereby it would sell certain property to a builder and receive farm land by a third party.  The owner contracted with a qualified 1031 intermediary to handle the transaction.  In the transaction, the owner deeded its property to the intermediary which then deeded the property to the builder and received over $600,000 in exchange.  That $600,000 was deposited in a common account for the intermediary, funds from which were used to pay out on other transactions.  The funds were subsequently transferred to a title company, which paid the sellers of the farm land at the closing.  The sellers deeded the farm land directly to the owner.  After the closings, the intermediary filed for bankruptcy.  In the bankruptcy proceedings, the bankruptcy trustee sought to recover the $600,000 that had been paid out by the intermediary under a statute allowing it to avoid certain transfers made by the debtor.  The owner filed claims with its title insurer seeking coverage and defense against the bankruptcy trustee’s claims.  The insurance company denied the claims.  The owner ultimately settled with the bankruptcy trustee by agreeing to pay over $100,000 to the bankruptcy estate.  The owner then sued the title insurance company for breach and other claims.  The owner claimed that the bankruptcy claims threatened the title to the property and, therefore, entitled the owner to coverage under the title insurance policy.  The district court granted summary judgment in favor of the title insurance company.  The Court of Appeals affirmed.  According to the court, the decision was dependent upon whether the intermediary held an interest in the property.  If the intermediary had not held an interest in the property, the bankruptcy trustee could not have placed a lien or otherwise affected the title of it.  Although as a qualified intermediary, the intermediary could have held title to the property, the facts of the case showed that it did not ever hold title in this transaction.  As a result, title to the property was never threatened and the insurance did not provide coverage.  Affirmed.  Evelyn I. Rechtzigel Trust v. Fidelity Nat’l Title Ins. Co., ___ N.W.2d ___, A07-0645 (Minn. App. 05/06/08). www.lawlibrary.state.mn.us/archive/ctappub/0805/opa070645-0506.pdf

• Mechanics Liens; Standard for Determining Abandonment.  According to a new decision of the Minnesota Court of Appeals, for purposes of determining whether a contractor has abandoned a construction project, the courts must view the intent to abandon under an objective standard.  In 2002, a construction company contracted with a property owner to provide repair work.  Most of the work was completed within the next six months.  The owner did not pay for the repairs.  In 2005, with the authorization of the owner, the contractor performed minimal additional work to complete the project.  The contractor subsequently recorded a mechanics lien on the property which included fees for the work done in 2002.  The district court determined that the contractor had abandoned the construction begun in 2002 and that the work done in 2005 was not sufficient to relate back to the 2002 performance.  The Court of Appeals affirmed. 

A mechanics lien attaches from the time the first item of material or labor is provided, but ceases if not recorded 120 days after the last work.  As a result, a lien filed within 120 days after the completion of the project relates back to the first work provided.  However, later work will not relate back to the original performance if a construction project has been abandoned.  The Court of Appeals concluded that in order to determine whether a project has been abandoned, the court must look at the intent of the parties.  At issue was whether the intent to abandon should be determined by an objective or subjective standard.  The court decided that the intent to abandon must be determined based on the objective manifestations of the parties, rather than their subjective intent.  The court further concluded that despite the contractor’s assertions that it did not intend to abandon the project, the evidence was sufficient to establish as a matter of law that the project had been abandoned, particularly considering the contractor’s failure to perform any work on the project for a two-year period.  Affirmed.  Superior Construction Services v. Belton, ___ N.W.2d ___, A07-0377 (Minn. App. 04/29/08). www.lawlibrary.state.mn.us/archive/ctappub/0804/opa070377-0429.pdf

• Conveyance of Homestead; Both Spousal Signatures Required.  Property owners purchased land and built a house on it, financed by a construction loan.  Once the construction was completed, the owners secured traditional financing from Wells Fargo Bank (bank) and paid off the construction loan.  Although the owners were a married couple, only the husband signed the note and mortgage.  Subsequently, the bank began foreclosure proceedings.  The owners learned that to be valid, the mortgage needed to be signed by both spouses.  The owners brought action in the federal district court to set aside the foreclosure.  The court granted the owners’ motion for summary judgment and declared the mortgage void.  Minn. Stat. §507.02 provides that any conveyance of the homestead (which here includes a mortgage) is not valid unless signed by both spouses.  The bank did not dispute that its mortgage failed to comply with the statute.  Nevertheless, the bank argued that the wife was estopped from arguing that the mortgage was invalid.  In fact, it was undisputed that the wife knew about the mortgage, approved of the mortgage, knew her husband was going to sign the documents, wanted the refinancing, and would have signed the mortgage if asked.  Illustrating the rather strict application and grave effects of failing to comply with the statute, the court ruled that those facts were not sufficient to estop the wife from claiming that the mortgage was invalid. Karnitz v. Wells Fargo Bank, N.A., 2008 WL 1734201 (D. Minn. 04/10/08).

—C.J. Deike
Edina Home Realty Services

TAX
JUDICIAL LAW

• Federal Income Tax: Multistate Enterprise. The Illinois Department of Revenue determined that a multistate enterprise, Meadwestvaco Corp., which had sold one of its business divisions and generated capital gain from the sale, was not a “unitary business.”  Despite this determination, the state sought to apportion the capital gain for the purpose of subjecting it to taxation in Illinois under the “operational function” principle. The U.S. Supreme Court held that once a multistate business was determined not a “unitary business” by the Illinois state courts, the courts should not have proceeded to the question of whether this business division served “operational functions” in the multistate enterprise’s business because the “operational function” determination was not intended to modify the “unitary business” principle by adding a new apportionment ground. The Court also held that on review of the state court decision upholding the constitutionality of a tax that Illinois had imposed on the apportioned share of the capital gain that was realized by the out-of-state corporation upon sale of one of its business divisions, the United States Supreme Court would not address the alternative ground for affirmance urged by state and its amici, because it was not raised or passed upon in the state courts. Meadwestvaco Corp. v. Illinois Department of Revenue, 128 S. Ct. 1498 (April 2008).

• Federal Income Tax: Tax on Export.  Where the taxpayer sued for refund of taxes collected in violation of the Export Clause of the United States Constitution, the Supreme Court held that: (1) taxpayer’s suit could not proceed under the Tucker Act when his suit did not meet time limits for refund actions in the Internal Revenue Code (IRC); and (2) IRC’s plain language required the taxpayer to file a timely administrative claim before bringing suit against the government. United States v. Clintwood Elkhorn Mining Co., 128 S. Ct. 1511 (April 2008).

• Excise Tax: Definition of Private Communication Service Required for Excises Tax Exemption. The Court of Appeals for the Federal Circuit held that lines that served only to provide connectivity to a local exchange carrier and not to facilitate or provide any “communication service” that fairly could be characterized as “private” did not constitute a statutorily defined “private communication service” entitled to exemption from communications excise tax.. The court also said that the lines that provided access to network servers of an internet service provider from any telephone number and that permitted at least limited communication with any subscriber did not meet the statutory definition of “private communication service,” as required for communications excise tax exemption.  USA Choice Internet Services LLC v. United States, No. 2007-5077, __ F.3d. __ (D.C. Cir. 2008).

• Federal Income Tax: Supplemental Notice of Determination.  The U.S. Tax Court reviewed only the position taken by the commissioner’s Appeals Office in the last supplemental notice of determination, not the positions taken in prior notices issued before the last notice under IRC §6330. The court based this decision on the provision of IRC §6330 that the taxpayers are entitled to a single hearing with respect to the year to which the unpaid liability relates. Kelby v. Commissioner, 130 T.C. No.6.

• Federal Income Tax: U.S. Tax Court’s Jurisdiction over Supplemental Determination Notice.  The U.S. Tax Court examined a case in which the effective date of the Pension Protection Act of 2006 (10/16/06), expanding the U.S. Tax Court’s jurisdiction to include review of the commissioner’s collection activity regardless of the type of underlying tax liability involved, fell between the date of the original determination notice and the date of the supplemental determination notice.  The court held that the court lacks jurisdiction to review the commissioner’s determinations in the supplemental determination notice because the supplemental notice related back to the date of the original notice which was before October 16, 2006.  The tax court lacked jurisdiction over the original determination notice because the court lacked jurisdiction to review the underlying tax liability at the time it was issued. Ginsberg v. Commissioner, 130 T.C. No.7 (April 2008).

• Federal Income Tax: Accuracy-Related Penalty.  Where the U.S. Tax Court found petitioners had reasonable cause and acted in good faith as to any underpayment under IRC §6664 (c)(1), petitioners were not liable for the accuracy-related penalty under IRC §6662 (a). The court said that the reasonable cause and good faith are determined under the facts and circumstances. The court relied on the facts that the petitioners reasonably relied on their return preparer and disclosed the payment along with the basis for excluding this amount of payment from gross income on the tax return. Pettit v. Commissioner, T.C. Memo. 2008-87 (April 2008).

• Income Tax: Accuracy-Related Penalty.  The U.S. Tax Court chose not to impose an accuracy-related penalty on the petitioner under IRC §6662(a), applying the previous decision that the court does not impose penalties in instances where an area of law is novel or the statute is unclear under IRC §6664(c)(1). Petitioner received a disability annuity which later became defined as a retirement annuity due to a change in Minnesota law. Given the limited education of the petitioner, a disabled policeman, the court held that the petitioner acted with reasonable cause and in good faith based on his understanding of Minnesota law.  Tateosian v. Commissioner, T.C. Memo. 2008-101.

• Federal Income Tax: Foreign Tax Credit.  The U.S. Tax Court examined the interaction between the Article XXIV of the U.S.-Canada Convention which generally avoids double taxation by the U.S. and Canada and IRC §59 (a)(2) which limits the AMT Foreign Tax Credit.  The court applied the Kappus case decided by the D.C. Court of Appeals and assumed that there was a conflict between the U.S.-Canada Convention, amended by the 3rd and 4th protocols and IRC §59 (a)(2 ) and therefore applied the “last-in-time” rule.  The court concluded that IRC §59 (a)(2) was the last expression of the sovereign will that the 90 percent cap on the AMT foreign tax credit shall supersede existing treaty provisions prohibiting double taxation since neither the 3rd nor 4th Protocol bars its application nor modifies any treaty provision that bars it. Jamieson v. Commissioner, T.C. Memo. 2008-118.

• Federal Income Tax: Recovery of Litigation Costs.  The U.S. Tax Court examined whether the petitioner exhausted the available administrative remedies before filing a petition in order to obtain an award of reasonable litigation costs under IRC §7430 (b)(1).  The court held that the petitioner did not exhaust all administrative remedies by refusing to participate in an Appeals Office conference when the commissioner made this administrative remedy available by advising the petitioner of the right to challenge the commissioner’s determination in an Appeals Office conference.  Thus, the court held that the petitioner was not entitled to any reasonable litigation costs. Covert v. Commissioner, T.C. Memo. 2008-90.

• Estate Tax Deduction: Family-Owned Business Interests.  The U.S. Tax Court confirmed its decision in Estate of Farnam and held that for purposes of the liquidity test of IRC §2057(b)(1)(C), decedent’s loans to an entity owned by her and two of her children and carrying on a trade or business are to be treated as interests in that entity. Estate of Artall v. Commissioner, T.C. Memo. 2008-67 (2008).

• Procedure: Determination to Proceed with Collection was an Abuse of Discretion.  The U.S. Tax Court held the commissioner’s determination to proceed with collection of petitioner’s tax liabilities for 1989 and 1990 was in error and thus an abuse of discretion because respondent failed to show that respondent issued a notice of deficiency before assessing petitioner’s taxes. Butti v. Commissioner, T.C. Memo. 2008- 82 (2008).

• Federal Income Tax: Improper Revocation of Exempt Status.  The U.S. District Court for the District of Columbia held that it was not necessary to determine whether the Democratic Leadership Council (DLC) qualified for exempt status under IRC §501(c)(4) during certain years because even if the DLC did not so qualify, the IRS improperly revoked that status retroactively. Reg. §601.201(n)(6)(i) generally provides that revocation of a favorable ruling of the IRS may be retroactive if the organization omitted or misstated a material fact. The district court found that DLC did not omit or misstate a material fact or operate in a manner materially different in the years in question from that originally represented in its application for IRS recognition of its exemption. Thus, the court concluded that the IRS abused its discretion by retroactively revoking DLC’s exempt status, and granted DLC’s claim for refund.  Democratic Leadership Council v. United States, Civ. No. 05-1067 (LFO) (D. D.C., 04/04/08). 

• Sales Tax: Personal Liability for Unpaid Sales Tax.  The Minnesota Tax Court applied the Minnesota Supreme Court’s clarification that the federal willfulness standard does not apply to the imposition of personal liability for unpaid sales tax under Minnesota’s statutory standards.  The court applied the five Benoit factors to determine whether appellant had the necessary authority to see the sales tax paid regardless of whether he chose to exercise this power. Paddock v. Commissioner, No. 7856-R (Minn. Tax Court 2008).

• State Tax Procedure: 60-Day Rule.  The Minnesota Tax Court held that in terms of the calculation of the 60-day period for filing an appeal with the court, the normal business practice is not relevant. The court applied the strict 60-day calculation rather than the “the same date of the next month” normal business practice.  The court set August 8, 2008, as the due day after the 30-day extension following the 60-day filing period since the date on the commissioner’s Notice of Determination is May 10, 2008. O’Meara v. Commissioner, No. 7943 (Minn. Tax Court 2008).

ADMINISTRATIVE ACTION

• Tax Treatment of Losses Sustained from Abandoned Stock or Securities. Effective on March 12, 2008, the final regulations (T.D. 9386) provide that a loss from an abandoned security is governed by §165(g), and that the loss is only allowed if all rights in the security are permanently surrendered and relinquished for no consideration. Section 165(g) treats losses from worthless securities as a loss from the sale or exchange of a capital asset. The final regulations provide that the abandonment of a security establishes the worthlessness of the security to the taxpayer. Accordingly, a loss from the abandonment of a security is treated as a loss from the sale or exchange of a capital asset. To abandon a security, a taxpayer must permanently relinquish all rights in the security and receive no consideration in exchange. T.D. 9386, 2008-16 I.R.B. 788.

• Commercial Building Energy Efficiency Deduction. Effective after March 31, 2008, Notice 2008-40, as a clarification of Notice 2006-52, provides a process that allows a taxpayer who owns a commercial building and installs certain property to obtain a certification that the property satisfies the energy efficiency requirements of §179D(c)(1) and (d). Notice 2008-40 provides additional guidance on the deduction for energy-efficient commercial buildings under §179 D. It also provides a special rule for government-owned buildings and explains the tax consequences to designers and owners of such buildings.  Notice 2008-40, 2008-14 I.R.B. 725.

• Safe-Harbor Method of Accounting for Payroll Tax Liabilities. New guidance provides a safe-harbor method of accounting for taxpayers using an accrual method of accounting and incurring FICA tax and FUTA tax liabilities for compensation. The guidance applies to an accrual method taxpayer that uses the recurring item exception under Reg. §1.461-5 for its payroll tax liabilities and chooses to account for its payroll tax liabilities using the safe-harbor method of accounting described in the guidance.  Under the safe harbor, a taxpayer will be treated as satisfying the requirement in Reg. §1.461-5(b)(1)(i) for its payroll tax liability in the same tax year in which all events have occurred that establish related compensation liability and when the amount of the liability can be determined with reasonable accuracy. Rev. Proc. 2008-25.

• Multiemployer Defined Benefit Plans.  Proposed regulations under IRC §432 provide additional rules for certain multiemployer defined benefit plans that were in effect on July 16, 2006. The regulations affect sponsors and administrators of, and participants in, multiemployer plans that are in either endangered or critical status. The regulations are necessary to implement the new rules set forth in §432 that are effective for plan years beginning after 2007.  REG–151135–07, 2008-16 I.R.B. 815.

• Public Utility Accounting Regulations.   Effective on March 20, 2008, final regulations under IRC §168 provide guidance regarding the application of normalization accounting rules for balances of excess deferred income taxes (EDFIT) and accumulated deferred investment tax credits of public utilities whose assets cease to be public utility property. The final regulations provide, on a prospective basis, that they will apply even if the property remains regulated public utility property in the hands of a transferee. The regulations also provide an exception from the generally applicable rule allowing transferor flow-through when the transferee will continue flow-through of the EDFIT reserves. T.D. 9387, 2008-16 I.R.B. 789.

• Notice Requirement for Plan Amendments that Reduce the Future Benefit Accruals.  Proposed regulations provide guidance on the application of IRC §4980F to a pension plan amendment that is permitted to reduce benefits accrued before the amendment’s effective date. The proposed regulations would set the timing rules for providing a §204(h) notice for a plan amendment that goes into effect before the applicable amendment date. The proposed regulations also provide guidance on changes made to §4980F by the Pension Protection Act of 2006. REG-110136-07, 2008 TNT 56-10.

• Disclosing Return Information about Contracts among IRS, Whistleblowers. Effective March 25, 2008, temporary regulations were promulgated on the disclosure of return information under IRC §6103(n) in connection with written contracts among the IRS, whistleblowers, and legal representatives of whistleblowers for services concerning the detection of violations of the internal revenue laws or related statutes. Return information may be disclosed only to the extent the IRS deems it necessary in connection with the reasonable or proper performance of the contract. The regulations also provide the civil and criminal penalties to which whistleblowers and their legal representatives are subject for unauthorized inspection or disclosure of return information. Before any return information is disclosed under the regulations, whistleblowers and their representatives must agree in writing to allow an inspection of their premises by the IRS. T.D. 9389, 2008 TNT 58-5.

• Income Tax: Minimum Funding Requirements for Single-Employer Defined Benefit Plans.  Proposed regulations determining the minimum required contributions for purposes of the funding rules that apply to single-employer defined benefit plans, affecting sponsors, administrators, participants, beneficiaries of single-employer defined benefit plans have been promulgated. These proposed regulations enable plan sponsors to determine the contribution requirements that apply to their defined benefit plans under the new funding regime—including the application of the quarterly contribution requirements. REG-108508-08, 26 CFR Parts 1 and 54.

• Income Tax: Charitable Remainder Trusts.  Proposed regulations, for purposes of IRC §664(c), provide that charitable remainder trusts with unrelated business taxable income in taxable years beginning after December 31, 2006, are exempt from federal income tax, but are subject to a 100 percent excise tax on the unrelated business taxable income of the charitable remainder trust pursuant to §424 of the Tax Relief on Health Care Act of 2006. REG-127391-07, 2008-13 I.R.B. 689.

• Income Tax: Release of Federal Tax Lien.  Final regulations for the purposes of IRC §6325 provide the specific procedures for obtaining a release of a federal tax lien or a discharge of a federal tax lien from property to which it has attached.  These regulations afford a means for a person whose property is encumbered by a federal tax lien, but who does not owe the tax giving rise to the lien, to have his/her property discharged from the federal tax lien. T.D. 9378, 2008-14 I.R.B. 720.

• Income Tax: Musical Compositions.  Temporary and proposed regulations under IRC §1221 provide the time and manner for making an election to treat the sale or exchange of musical compositions or copyrights in musical works created by the taxpayer as the sale or exchange of a capital asset. T.D. 9379, REG-153589-06, 2008-14 I.R.B. 715.

• Administrative Procedure.  Final regulations under IRC §6020 provide guidance for preparing a substitute for return under §6020(b). Absent the existence of this return, the addition to tax under IRC §6651(a)(2) does not apply to a nonfiler. These regulations affect any person who fails to file a required return. T. D. 9380, 2008-14 I.R.B. 718.

• Income Tax: Diversification Requirements.  Final regulations under IRC §817(h) expand the list of holders whose beneficial interests in an investment company, partnership, or trust do not prevent a segregated asset account from looking through to the assets of the investment company, partnership, or trust, to satisfy the requirements of IRC §817 (h).  T.D. 9385, 2008-15 I.R.B. 735.

• Estate Tax: Inter Vivos Trust.  A ruling provides guidance regarding the corpus of an inter vivos trust and provides that the substitution power will not cause the value of the trust corpus to be includible in the grantor’s gross estate, because the trustee has a fiduciary obligation to ensure the grantor’s compliance with the terms of this power by satisfying itself that the properties acquired and substituted by the grantor are in fact of equivalent value and further because the substitution power cannot be exercised in a manner that can shift benefits among the trust beneficiaries. Rev. Rul. 2008-22, 2008-16 I.R.B. 796.

• Income Tax: Foreign Business Entity.   Final, temporary, and proposed regulations add an entity to the list of foreign business entities that are always classified as corporations under IRC §7701. This entity is not eligible to check the box to change its classification. T.D. 9388, REG-143468-07, 2008-17 I.R.B. 848.

• Income Tax: Germany-U.S. Mutual Agreement.  An announcement provides procedures for implementing a mandatory arbitration program to resolve interpretive disputes, noting that the program focuses on cases in the mutual agreement procedure (MAP) between the U.S. and Germany. The new program is part of the 2006 protocol to the U.S. income tax treaty with Germany, which entered into force on December 28, 2007. Announcement 2008-39, 2008-18 I.R.B. 867.

• Income Tax: Material Advisers.  This procedure provides that under IRC §6112, the material advisers are required to prepare and maintain a list for each reportable transaction, including an itemized statement, a detailed description of the transaction, and copies of some documents. Form 13976, “Itemized Statement Component of Advisee List,” is intended to simplify the method of list maintenance regarding the itemized statement and reduce the burden on material advisers trying to comply with the regulations. Rev. Proc. 2008-20, 2008 TNT 86-10.

• Income Tax: Economic Stimulus Payments Deposited to Tax-Favored Account. Individuals who requested that their regular tax refunds be deposited directly to some types of tax-favored accounts will automatically have their economic stimulus payments deposited to these accounts. Recognizing that individuals may not have been aware of this fact, the IRS said it won’t impose penalties or taxes on withdrawals of amounts equal to or less than an individual’s economic stimulus payment if the payment was directly deposited to a tax-favored account. Taxpayers choosing to withdraw their economic stimulus payments in the coming year will receive instructions in their Form 1040 package on how to report the distribution as tax free and penalty free on their tax return.  Announcement 2008-44, 2008 TNT 85-7

• Income Tax: Partnership with Foreign Partners.  The IRS has issued final regulations on when a partnership may consider some deductions and losses of a foreign partner to reduce or eliminate the partnership’s obligation to pay withholding tax under IRC §1446 on effectively connected taxable income (ECTI) allocable under IRC §704 to that partner. To apply the rules of Reg. §1.1446-6, the partnership must receive a valid certificate from the foreign partner and attach the certificate, and the computation of the §1446 tax due for that partner, to certain forms filed for that partner. The regulations provide some relief for a partnership’s failure to comply timely with this requirement. Under the regulations, a reasonable cause standard applies to determine whether a partnership that failed to attach the certificate and the IRC §1446 tax computation to the relevant filing is eligible for an extension to comply with this requirement. T.D. 9394, 2008 TNT 83-10

LEGISLATION

• Amended Pension Protection Technical Corrections Act.   The substitute amendment to H.R. 3361 would make technical corrections to the Pension Protection Act of 2006. According to a description of the bill released by the Ways and Means Committee, H.R. 3361 would clarify language in §436(d)(5) that restricts underfunded pension plans from making lump-sum payments to participants without their consent. It would also treat defined benefit plans that do not meet preservation-of-capital regulations under §411 as violating age discrimination rules.

• Tax-Delinquent Contractors Barred.  The House Oversight and Government Reform Committee approved a bill, H.R. 4881, the Contracting and Tax Accountability Act of 2007, keeping tax-delinquent contractors from winning government contracts and grants. It would require individuals, corporations, and partnerships to submit in writing that they have no “seriously delinquent tax debts” before being awarded a contract or grant. The Treasury Department would be authorized to disclose information concerning whether the recipient has unpaid taxes.

• Canada-U.S. Tax Treaty Fifth Protocol.  The Senate referred the fifth protocol, which was signed on September 21, 2007, to the Committee on Foreign Relations. Major provisions include a zero withholding rate on cross-border interest payments, the extension of treaty benefits to U.S. residents deriving Canadian-source income through a U.S. limited liability company, mandatory “baseball-style” arbitration for certain cases that are not resolved by competent authorities (forcing the parties to produce their final best offer), mutual recognition of pensions and other registered retirement plans, and apportionment of taxing rights on stock options.

LOOKING AHEAD

• Foreclosure Prevention Act of 2008.  Senate Majority Leader Harry Reid, has introduced S. 2636, cited as “the Foreclosure Prevention Act of 2008,” which is considered an amendment to H.R. 3221. This bill would seek to provide housing reform by modifying the usage of qualified mortgage bonds and by offering emergency assistance for the redevelopment of abandoned and foreclosed homes, among other provisions.  The bill would raise the cap for tax-exempt mortgage revenue bonds by $10 billion and permit states to use the bonds to help homeowners refinance troubled mortgages. It would also extend the net operating loss carryback period from two to five years for losses incurred in 2006, 2007, and 2008.  2008 TNT 64-1

• Foreign Earned Income Exclusion. As proposed, two bills—the “Working American Competitiveness Act,” S. 1140, sponsored by Jim DeMint, and H.R. 4752, sponsored by Rep. Gregory W. Meeks—would eliminate the cap on the foreign earned income exclusion under IRC §911. These bills are driven by concern that IRC §911 discourages companies from sending American employees abroad because of the risk of double taxation. 2008 TNT 64-3.

• Pension Protection Act of 2006.  The IRS will follow up on the Pension Protection Act of 2006 (PPA) by releasing employee benefits-related items from its 2007-2008 guidance priority list as regulations for retirement plans. The four items of this list are first, a model notice for IRC §402(f) addressing issues related to rollovers and automatic rollovers; second, proposed regulations for IRC §411(a)(11); third, final regulations for IRC §430 on quarterly contributions to single-employer plans; fourth, proposed regulations on market rates of return for cash balance plans. The Congress will follow up on the Pension Protection Act of 2006 by legislation on IRC §401(k) on retirement-plan fees.

• Federal Aviation Administration Reauthorization Bill.  The Senate on April 29 unanimously agreed to begin debate on a Federal Aviation Administration reauthorization bill even as the measure drew a veto threat from President Bush and Republican senators objected to tax provisions to replenish the Highway Trust Fund. The Senate package would restructure aviation taxes to fund the Airport and Airway Trust Fund, modernize the air traffic control system, and provide the Highway Trust Fund with billions of dollars for 2009. 2008 TNT 84-1.

—Kathryn J. Sedo
—Yang Yang
University of Minnesota Law School

TORTS & INSURANCE
JUDICIAL LAW

• Landowner Liability; Immunity. The Minnesota Court of Appeals has held that the “recreational land use” statute, Minn. Stat. §604A.20-207, provides immunity from liability only if the landowner gives oral or written permission for use of the land for a recreational purpose.  The court also held that, to recover under a negligence theory, an injured trespasser must establish that a person who creates or maintains a structure or artificial condition on land should have recognized that it created an unreasonable risk of harm to others. Razink v. Krutzig, A07-0389, (Minn. App. 04/01/08). www.lawlibrary.state.mn.us/archive/ctappub/0804/opa070389-0401.pdf

• Torts: Heightened Duty Owed to Visiting and Trespassing Children. The Minnesota Court of Appeals has held that the heightened duty of care owed to child trespassers does not apply to a child visiting a private residence accompanied by a parent.  The court further held that a landowner’s duty of reasonable care does not require homeowners to protect a visiting child accompanied by a parent from the dangers posed by ordinary household objects. Foss v. Kincade, A07-313, (Minn. App. 04/08/08).  www.lawlibrary.state.mn.us/archive/ctappub/0804/opa070313-0408.pdf

• No-Fault Act: Duplicate Payments Exclusion. The Minnesota Court of Appeals has held that when an insured in a multivehicle accident seeks uninsured motorist (UM) benefits based solely on the fault of an uninsured driver, an insurance policy’s duplicate payments exclusion (which reduces the amount of UM benefits by the amount paid under liability coverage) is invalid under the Minnesota No-Fault Act. Michael Marchio, as Trustee for the Next of Kin of Ida Marchio v.  Western Nat’l Mutual Ins. Co., A07-0477, (Minn. App. 04/15/08). www.lawlibrary.state.mn.us/archive/ctappub/0804/opa070477-0415.pdf

• Minnesota No-Fault Act: Excess UIM Coverage. The Minnesota Court of Appeals has held that an injured person may only obtain excess UIM (underinsured motorist) benefits under a policy in which the injured person fits the definition of an “insured” provided by the No-Fault Act. West Bend Mutual Ins. Co. v. Allstate Ins. Co. and Thomas Oczak, et al., A07-248, A07-357, (Minn. App. 04/15/08) (unpublished). www.lawlibrary.state.mn.us/archive/ctapun/0804/opa070248-0415.pdf

• Contracts: Contract Not To Sue. The Minnesota Court of Appeals has held that a contract not to sue that reflects an intent to temporarily refrain from bringing a cause of action, rather than an intent to extinguish the cause of action, is not a release that bars the cause of action. Michelle Kunza v. St. Mary’s Regional Health Center, A07-0360, (Minn. App. 04/22/08). www.lawlibrary.state.mn.us/archive/ctappub/0804/opa070360-0422.pdf

—David Turner
Bassford Remele, A Professional Association