CRIMINAL LAW
JUDICIAL LAW
• Procedure: A precedential court of appeals opinion is binding immediately upon filing. Appellant was charged with second-degree and third-degree murder, as well as second-degree manslaughter, following the death of a single victim. The district court granted appellant’s motion to dismiss the third-degree murder charge, because appellant’s death-causing actions were specifically directed at only one particular person. The Minnesota Court of Appeals subsequently issued a precedential opinion in State v. Noor, 955 N.W.2d 644 (Minn. Ct. App. 2021), which held that “a conviction for third-degree murder… may be sustained even if the death-causing act was directed at a single person.” Id. at 656. The state then moved to reinstate appellant’s third-degree murder charge, but the district court denied the motion, finding that the court of appeals opinion did not become binding “until the deadline for granting review by the Minnesota Supreme Court has expired.”
The court of appeals holds that the district court erred by refusing to treat Noor as binding precedent. Stare decisis, as reflected in the Minnesota Rules of Civil Appellate Procedure, requires the district courts to “‘stand by things decided’ by [the appellate court] until a different decision is made by the Supreme Court.” No appellate rules exist that limit the precedential effect of a court of appeals opinion that the court labels precedential. Giving precedential appellate opinions immediate authoritative effect also “promotes consistency, predictability, and stability in the law…” Once a precedential opinion from the court of appeals is filed, it immediately becomes binding authority. Reversed and remanded for reconsideration of the state’s motion to reinstate the third-degree murder charge. State v. Chauvin, 955 N.W.2d 684 (Minn. Ct. App. 3/5/2021).
• Wrongfully obtaining public assistance: State need not prove intent to defeat purposes of all public assistance statutes. In 2012, to obtain public assistance benefits, appellant submitted a number of forms on which he denied having any assets or unearned income and asserted that he paid rent of $400 per month. His application was approved. He applied for recertification for the next four years, each time stating he had no assets or unearned income and paid a monthly rent of $400-425. An investigation revealed thousands of unreported funds in various bank accounts, 12 cars, and thousands of dollars in gambling winnings. Appellant also never rented the home listed on his application forms, but had, instead, signed a contract for deed and owned the property outright as of July 2015. Ultimately, a jury found him guilty of wrongfully obtaining benefits of more than $35,000.
On appeal, appellant argues his conviction should be reversed because the state failed to prove he acted with the intent to defeat the purposes of all of the public assistance statutes listed in the wrongfully obtaining public assistance statute, Minn. Stat. §256.98, subd. 1. The statute makes it a crime to wrongfully obtain public assistance “with intent to defeat the purposes of” a number of listed statutes, joined by the conjunction “and.” The court of appeals finds, however, that interpreting the list as conjunctive would produce an absurd result, noting “[t]here could be no sound reason” to require an intent to defeat the various purposes of all the listed benefits programs. The state need only prove an intent to defeat the purposes of one of the listed statutes. The appellate court also finds the district court did not err in its jury instructions or restitution order, and appellant’s conviction is affirmed. State v. Irby, 957 N.W.2d 111 (Minn. Ct. App. 3/8/2021).
• Missouri v. McNeely does not apply retroactively on collateral review. Respondent was convicted of test refusal in 2010, after he refused warrantless urine and blood tests. Since then, Missouri v. McNeely, 569 U.S. 141 (2013), and Birchfield v. North Dakota, 136 S.Ct. 2160 (2016), were decided. Under McNeely, alcohol dissipation is not a per se exigent circumstance justifying a warrantless blood test, and whether a warrantless blood test is reasonable must be determined on a case-by-case basis based on the totality of the circumstances. Under Birchfield, “test refusal… may be criminalized consistent with the Fourth Amendment only when there is a warrant for the test or a warrant exception applies.” Respondent’s petition for post-conviction relief was denied, but the Supreme Court ultimately held that Birchfield applied retroactively to respondent’s petition because it announced a new substantive rule. On remand, the district court did not address whether McNeely applied, but found respondent was entitled to post-conviction relief. The court of appeals reversed but held that McNeely applied retroactively.
On the state’s petition for review, the Supreme Court considers whether McNeely applies retroactively to respondent’s post-conviction petition. A new rule is applied retroactively only on direct review of convictions that were final before the new rule was announced, unless the rule is substantive or a “watershed” rule of criminal procedure. The parties agree McNeely announced a new rule and that it is not a watershed procedural rule, so the remaining question is whether it announced a new substantive rule.
New substantive rules “narrow the scope of a criminal statute by interpreting its terms, as well as constitutional determinations that place particular conduct or persons covered by the statute beyond the State’s power to punish.” Schriro v. Summerlin, 542 U.S. 348, 351-52 (2004). The rule in McNeely, however, is procedural, as it controls the manner of determining whether an exigency exists. “Exigent circumstances was a valid exception to the warrant requirement both before and after McNeely. The Court in McNeely simply clarified how the State proves that exception.” This analysis is the same in both the DWI and test refusal contexts. Therefore, McNeely does not apply retroactively to respondent’s post-conviction challenge.
The district court did not properly apply the pre-McNeely standard for exigent circumstances in this case, so the case is remanded for the district court to determine if the test refusal statute was constitutional as applied to respondent. Johnson v. State, 956 N.W.2d 618 (Minn. 3/24/2021).
• Criminal sexual conduct: A person voluntarily intoxicated by alcohol is not “mentally incapacitated” under Minn. Stat. §609.341, subd. 7. J.S. became intoxicated after consuming five shots of alcohol and one prescription narcotic pill. Appellant drove J.S. and her friend to a house, where J.S. “blacked out” on the living room couch. She awoke some time later to appellant having intercourse with her. J.S. protested but again lost consciousness. She woke in the morning with her shorts around her ankles and went to the hospital for a rape kit. The district court instructed the jury that “you can be mentally incapacitated following consumption of alcohol that one administers to one’s self or narcotics that one administers to one’s self or separately something else that’s administered without someone’s agreement.” The jury found appellant guilty of third-degree criminal sexual conduct involving a mentally incapacitated complainant. The Minnesota Court of Appeals affirmed appellant’s conviction.
Minn. Stat. §609.344, subd. 1(d), criminalizes sexual penetration with a person the actor knows or has reason to know is mentally impaired, mentally incapacitated, or physically helpless. Here, the state had to prove appellant knew or had reason to know that J.S. was mentally incapacitated. The Legislature specifically defined “mentally incapacitated” to mean “that a person under the influence of alcohol, a narcotic, anesthetic, or any other substance, administered to that person without the person’s agreement, lacks the judgment to give a reasoned consent to sexual contact or sexual penetration.” Minn. Stat. §609.341, subd. 7.
Based on its text, structure, and punctuation, the Supreme Court finds section 609.341, subd. 7’s definition of “mentally incapacitated” to be unambiguous in that it requires that alcohol causing a person to lack judgment to give a reasoned consent must be administered to the person without the person’s agreement. The Court notes that section 609.341, subd. 7, “is made up of a very simple and straightforward list of parallel nouns [intoxicating substances] followed by a qualifier [“administered to that person without the person’s agreement] offset from the list of nouns by a comma,” indicating that the qualifier should apply to all of the nouns.
The district court’s instruction to the jury on this definition was erroneous, and, because the Supreme Court cannot conclude beyond a reasonable doubt that the error was harmless, the case is remanded for a new trial. State v. Khalil, 956 N.W.2d 627 (Minn. 3/24/2021).
• Burglary: Second-degree burglary requires proof a defendant committed burglary while possessing tools specifically to gain access to money or property. A surveillance camera inside a convenience store captured a glass pane shattering, after which appellant stepped through. Appellant put boxes of cigars and cigarettes into a bag and left. After a jury trial, appellant was convicted of second-degree burglary.
As is relevant in this case, second-degree burglary requires entry into a building without consent, the commission of a crime therein, and the possession of a tool to gain access to money or property “when entering or while in the building.” Minn. Stat. §609.582, subd. 2(a). Looking to case law and the dictionary, the court of appeals notes that the phrase “to gain” requires the state to prove the burglar possessed a tool for the purpose of gaining access (“the means, place, or way by which a thing may be approached” or “passageway”) to money or property.
The court agrees that the evidence is insufficient to prove that appellant possessed and used a tool to gain access to money or property when he entered the store, because the evidence was inconclusive as to how the glass was broken. The court also rejects the state’s argument that the gloves and garbage bag were tools appellant used to gain access to money or property once inside the store. Even assuming gloves or a plastic bag are “tools,” mere possession of tools is insufficient. Once inside the store, appellant had access to the items he stole. He did not use the gloves or bag to gain access to them. Appellant’s conviction is reversed. State v. Nixon, 957 N.W.2d 131 (Minn. Ct. App. 3/29/2021).
• Traffic violations: Driving with tires touching the edge of a fog line constitutes moving the vehicle “from the lane.” A trooper observed the outside edge of the passenger side tires of appellant’s vehicle briefly touch the fog line on the right side of a highway. The trooper stopped appellant’s vehicle and he was ultimately arrested for fourth degree DWI.
Minn. Stat. §169.18, subd. 7(1), requires that “a vehicle shall be driven as nearly as practicable entirely within a single lane and shall not be moved from the lane until the driver has first ascertained that the movement can be made with safety.” The court of appeals concludes that even brief contact with the fog line violates section 169.18, subd. 7(1). From prior case law and the language of the statute, the court infers that a “lane” is the area between the painted lines, not the lines themselves. Any movement at all outside of this area is a violation of the statute, which aims to prevent collisions outside of a vehicle’s lane that “can occur when even a small portion of a car extends out of bounds.”
The trooper here had reason to suspect appellant violated section 169.18, subd. 7(1), and, therefore, had reasonable suspicion to stop appellant’s vehicle. Soucie v. Comm’r of Pub. Safety, 957 N.W.2d 461 (Minn. Ct. App. 3/29/2021).
• Homicide: Depraved mind murder requires an eminently dangerous act committed with the mental state of reckless disregard of human life. While intoxicated, appellant drove a snowmobile at a high rate of speed and collided with an eight-year-old child, who later died. At trial, the district court gave the model jury instruction on third-degree depraved mind murder, to which appellant did not object. The jury ultimately found appellant guilty on the third-degree murder charge. He appealed, challenging the court’s instructions on the mental state required for third-degree depraved mind murder. The Minnesota Court of Appeals found the jury instruction was erroneous, but that it was not plain error. The Supreme Court granted petitions for review from both appellant and the state.
The third-degree depraved mind murder statute states that “[w]hoever, without intent to effect the death of any person, causes the death of another by perpetrating an act eminently dangerous to others and evincing a depraved mind, without regard for human life, is guilty of murder in the third degree….” The jury instruction in question is as follows: “The defendant’s intentional act which caused the death of [the child] was eminently dangerous to human beings and was performed without regard for human life. Such an act may not be specifically intended to cause death and may not be specifically directed at [the child], but it was committed in a reckless or wanton manner with the knowledge that someone may be killed and with a heedless disregard of that happening.” The Supreme Court finds that the instruction was erroneous.
The Court first summarizes its previous cases discussing depraved mind murder, noting that dicta from those cases caused confusion regarding the required mental state, leading some to believe a reckless act was required, as opposed to a mental state of reckless disregard of life. The court clarifies that “the mental-state element for third-degree depraved mind murder requires a showing that the eminently dangerous act was committed with a mental state of reckless disregard of human life” (emphasis in original). The offense does not include “a mental-state element that requires a showing that the act was committed in a reckless manner” (emphasis in original).
The Court specifically holds that “a defendant is guilty of third-degree murder, when based on the attending circumstances: (1) he causes the death of another without intent; (2) by committing an act eminently dangerous to others, that is, an act that is highly likely to cause death; and (3) the nature of the act supports an inference that the defendant was indifferent to the loss of life that this eminently dangerous activity could cause.”
The jury instruction here, which mirrored CRIMJIG 11.38, incorrectly attaches the reckless component to the act itself. But even if this error was plain, it did not affect appellant’s substantial rights, as it is not reasonably likely it had a significant effect on the verdict. Appellant’s conviction is affirmed. State v. Coleman, 957 N.W.2d 72 (Minn. 3/31/2021).
• Firearms: A driver of a motor vehicle on a public highway is in a “public place.” Appellant was arrested for DWI and told police his phone was in the center console of his vehicle, next to his pistol. Appellant had a valid permit to possess a pistol. He was charged with, among other offenses, carrying a pistol in a public place while under the influence of alcohol. The district court granted his motion to dismiss, determining that the appellant’s private vehicle was not a public place. But the court of appeals reversed, finding that the public highway on which appellant drove was a public place.
Minn. Stat. § 624.7142, subd. 1(4), notes that “[a] person may not carry a pistol on or about the person’s clothes or person in a public place… when the person is under the influence of alcohol.” “Public place” is not defined in the statute, and dictionaries provide multiple reasonable definitions. Thus, the Supreme Court first determines the statute is ambiguous.
Multiple canons of construction support a conclusion that the statute prohibits carrying a pistol in a motor vehicle that is driven on a public highway. First, the “mischief to be remedied” is carrying a pistol in public while impaired, which endangers others. This danger is present even if the person is in a vehicle. The “object to be attained” by the statute is public safety, specifically, reducing injury to people from the discharge of a pistol in a public place. Vehicles are mobile and may be driven in close proximity to people in public places, so prohibiting an impaired driver from carrying a pistol on a highway promotes the purpose of the statute. As to the “consequences” of the court’s interpretation, the Court notes that its holding is narrow, does not open the door to warrantless vehicle searches, and protects the public while imposing only a minimal burden on carry permit holders. The Supreme Court affirms the decision of the court of appeals. State v. Serbus, 957 N.W.2d 84 (Minn. 3/31/2021).
Samantha Foertsch Bruno Law PLLC
Stephen Foertsch Bruno Law PLLC
EMPLOYMENT & LABOR LAW
JUDICIAL LAW
• Sex harassment, retaliation; claim denied. A woman’s lawsuit for sex harassment retaliation after she quit and claimed constructive discharge was dismissed. The 8th Circuit affirmed a lower court ruling on grounds that the claimant did not give her employer reasonable opportunity to address her workplace harassment complaints, and she also failed to engage in statutorily protected conduct to buttress her retaliation claim. Lopez v. Whirlpool Corp., 989 F.3d 656 (Minn. Ct. App. 3/4/2021).
• Reinstatement of employees; reconsideration denied. The rejection of a wrongful termination claim by a railroad conductor under the Federal Railway Safety Act was upheld. The 8th Circuit ruled that the Administrative Review Board did not err in denying the employee’s request for reconsideration of the declination of the employee’s petition for review. Soo Line Railroad, Inc. v. Administrative Review Board, 990 F.3d 596 (8th Cir. 3/4/2021).
• Sheriff’s salary; 23% increase allowed under statute. The Freeborn County sheriff was entitled to an increased salary because the County Board did not “articulate any reasoning in setting the figure at $97,020 for 2019.” The Supreme Court reversed the Minnesota Court of Appeals and upheld the Freeborn County trial court decision establishing a 23% salary increase to $133,951 under Minn. Stat. §387.20, which authorizes the challenge to salaries of sheriffs. In re year 2019 Salary of Freeborn County Sheriff, — N.W.2d —— (Minn. Ct. 3/10/2021).
• Non-profit immunity; not applicable for volunteer. A volunteer for a nonprofit organization was not entitled to immunity from a civil lawsuit brought against him for injuries incurred by a youth he was supervising at an event. The court of appeals held that the statutory immunity for nonprofits under Minn. Sat. §317A.257, subd. 1 did not cover the volunteer because his actions exceeded the scope of responsibilities and transgressed express limitations on his activities. Hogan v. Brass, 2021 WL 852073 (Minn. Ct. App. 3/8/2021) (unpublished).
• Union bargaining; employer’s refusal to negotiate. An employer’s refusal to bargain with a certified union violated the National Labor Relations Act. The 8th Circuit upheld an administrative ruling that the workers were not “supervisors” and, thus, the employer was obligated under the Act to negotiate with the representative of the union. Transdev Services, Inc. v. NLRB, ___ F.3d ____ (8th Cir.App. 3/16/2021).
• Off-duty employment; officer not defended or indemnified. An off-duty St. Paul police officer was not entitled to be defended and indemnified by the city for a lawsuit brought against him in Minnesota for off-duty work as a private security guard at a homeless shelter. The Supreme Court held that the defense and indemnification statute, Minn. Stat. §466.07, did not apply because the officer was not “acting in performance of the duties of the position” of a police officer in connection with the incident, which involved his failure to detect a knife in possession of a resident there.
• Arbitration award; “wellness pay” permitted. An arbitration ruling that teachers in a Minneapolis School District were entitled to “wellness pay” benefits under their union contract was upheld. The court of appeals affirmed a decision of the Hennepin County District Court that the petition by the union was timely and the benefit was permissible under the bargaining agreement. Special School Dist. No, 1 Minneapolis Public Schools v. Minneapolis Federation of Teachers, 2021 WL 955462 (Minn. Ct. App. 3/15/2021) (unpublished).
• Unemployment compensation; time period extended. The provision in an executive order issued by Gov. Walz suspending “strict compliance” with the state unemployment insurance law during the covid pandemic permitted a belated appeal by an applicant of an initial denial for benefits. Reversing a ruling of an unemployment law judge (ULJ) with the Department of Employment & Economic Development (DEED), the court of appeals held that the order entered under the Emergency Management Act, Minn. Stat. §12.01, et seq. allowed the late filing, although it did not extinguish the deadlines altogether. In re Murack, 2021 WL 852083 (Minn. Ct. App. 3/8/2021) (unpublished).
• Unemployment compensation; untimely appealed. An appellant for unemployment compensation was denied benefits because of an untimely appeal from an adverse decision. The court of appeals ruled that the appellant did not seek reconsideration within the required 20-day period. Miller v. Hollenback & Nelson, Inc., 2021 WL 955937 (Minn. Ct. App. 3/15/2021) (unpublished).
• Unemployment benefits; untimely appeal. An applicant was denied benefits because she did not challenge an adverse determination by the ULJ within the 20-day extended deadline. The appellate court deemed the appeal untimely under the strict 20-day requirement. Peterson v. Electrolux Home Products, Inc., 2021 WL 772586 (Minn. Ct. App. 3/1/2021) (unpublished).
• Unemployment compensation; autism therapist loses. A behavioral therapist for autistic individuals was denied unemployment compensation benefits because of his use of an unauthorized, pain-causing restraint resulting in multiple bodily injuries. The Minnesota Court of Appeals affirmed the determination of a ULJ that the applicant was barred by “misconduct” under Minn. Stat. §268.095. Hanson v. Autism Opportunities Foundation, 2021 WL 772551 (Minn. Ct. App. 3/1/2021) (unpublished).
Marshall H. Tanick Meyer, Njus & Tanick
ENVIRONMENTAL LAW
JUDICIAL LAW
• Minnesota Supreme Court clarifies contested case hearing standard for environmental permits. The Minnesota Supreme Court issued an opinion clarifying the standard that determines when the Department of Natural Resources (DNR) must grant a contested case hearing (CCH) on a permit to mine (PTM) under Minn. Stat. 93.483, subd. 3(a). Because the CCH standard in §93.483, subd. 3(a) is essentially identical to the standard for when the Minnesota Pollution Control Agency (MPCA) must grant a CCH under Minn. R. 7000.1900, subp. 1, the opinion is also relevant to MPCA’s review of CCH requests regarding MPCA-issued permits such as NPDES/SDS permits, air permits, and Clean Water Act section 401 certifications.
The NorthMet case involved a challenge to a permit to mine and two dam safety permits the DNR recently issued to PolyMet Mining Inc. to build and operate Minnesota’s first copper-nickel mine. Environmental and tribal groups submitted comments on the draft permits and requested a CCH; DNR denied the CCH requests; and the groups appealed both the permits and the CCH denials.
The opportunity to request a CCH arises during the comment period on a proposed permit, prior to issuance of the final permit. CCHs are conducted by administrative law judges and, especially for large controversial projects, can resemble district court trials and add up to a year to the process of obtaining a permit. Minn. Stat. 93.483, subd. 3(a) specifies that the DNR commissioner must grant a CCH petition if she finds that there is a material issue of fact in dispute concerning the completed application before the commissioner;
the commissioner has jurisdiction to make a determination on the disputed material issue of fact; and there is a reasonable basis underlying a disputed material issue of fact so that a contested case hearing would allow the introduction of information that would aid the commissioner in resolving the disputed facts in order to make a final decision on the completed application.
The Supreme Court rejected the court of appeals’ broad interpretation of when a CCH must be held. The court of appeals had held that if a petitioner simply presented evidence of significant conflicting factual issues, DNR was required to hold a CCH. The Supreme Court held that this interpretation improperly read DNR’s discretion out of the statute. DNR has discretion, the Court held, “to determine whether a hearing on the factual disputes in a petition for a contested case hearing will ‘aid’ the agency in making a final decision on the completed application.”
Applying this standard to DNR’s rejection of the environmental and tribal groups’ CCH requests, the Court held that substantial evidence in the record supported DNR on some but not all issues in the CCH request. Specifically, while the Court held that there was substantial evidence supporting DNR’s rejection of a CCH (or the issues had not been properly raised) regarding (a) the tailings basin upstream construction design, (b) alternatives to a wet closure basin design, (c) whether the planned bentonite amendment will negatively impact dam stability, (d) financial assurance, and (e) investor Glencore’s involvement, the Court held that there was not substantial evidence in the record supporting DNR’s denial of a CCH on the issue of whether bentonite amendment is a practical and workable reclamation technique that will satisfy DNR’s reactive waste rule. Thus, DNR ordered a CCH on this single issue.
The Supreme Court also held that the environmental and tribal groups had satisfied a standing requirement unique to DNR’s CCH statute. Subdivision 1 of section 93.483 provides that a CCH may be requested by “[a]ny person owning property that will be affected by the proposed operation…” The Supreme Court agreed with the court of appeals that the environmental and tribal groups had standing to seek a CCH under this standard. The key phrase “affected by the proposed [mining] operation” did not refer only to individuals owning property directly adjacent to the mining project but also to those property owners whose properties would be “affected” by the project, meaning “acted upon, influenced, or changed” by the possible release of pollutants from the tailings basin or by the risk of dam failure. The groups had met this standard, the Court held.
Finally, the Supreme Court rejected DNR’s longstanding practice of not establishing fixed terms for mining permits, concluding that the statutory word “term” meant a fixed, definite period of time. The Court held that DNR erred by issuing the PTM without a fixed term.
The Supreme Court remanded to DNR to hold a CCH on the issue of the effectiveness of the bentonite amendment and, thereafter, to fix the appropriate term for the PTM. The Court also concluded that the court of appeals had prematurely reversed the dam safety permits to allow for reconsideration after a CCH on the PTM. If, after the PTM CCH, reconsideration of the dam safety permits is necessary, then at that point, the Supreme Court held, the DNR in its discretion may modify the dam safety permits. Matter of NorthMet Project Permit to Mine Application Dated December 2017, ___ N.W.2d ____ 2021 WL 1652768 (Minn. 4/28/2021).
• Minnesota Supreme Court holds PUC need not conduct environmental review for affiliated-interest agreement for power produced outside of Minnesota. The Supreme Court issued an opinion addressing the issue of whether the Minnesota Environmental Policy Act (MEPA) requires the Minnesota Public Utilities Commission (MPUC) to conduct an environmental review under Minnesota law before deciding whether to approve affiliated-interest agreements for the construction and operation of a power plant in a neighboring state.
The issue in front of the Court arose when Minnesota Power filed a petition with MPUC in 2017 seeking approval for its EnergyForward resource package, as required under Minnesota law. Specifically, the petition included a proposal for the Nemadji Trail Energy Center (NTEC), a natural gas power plant, to be located in Superior, Wisconsin. Minnesota Power proposed that NTEC would be jointly owned and developed by South Shore Energy LLC, a Wisconsin affiliate of Minnesota Power, and Dairyland, a Wisconsin generation and transmission cooperative.
As required under Minnesota law, Minnesota Power sought MPUC review and approval of its three affiliated-interest agreements with South Shore associated with NTEC. The first agreement was for South Shore to sell its portion of the capacity produced at NTEC to Minnesota Power; the second was for South Shore to assign its rights and responsibilities as construction agent for NTEC to Minnesota Power; the third was for South Shore to assign its rights to act as the operating agent of NTEC to Minnesota Power. MPUC referred the EnergyForward plan and the affiliated-interest agreements to a contested case hearing before an administrative law judge (ALJ). The ALJ concluded that Minnesota Power failed to establish that the capacity purchase from NTEC was needed and reasonable, and therefore recommended that MPUC deny Minnesota Power’s petition. After the ALJ recommendation, respondent Honor the Earth filed a petition with the Environmental Quality Board (EQB) to request MEPA review of the NTEC plant. EQB referred the petition to MPUC as the government unit responsible for making such decisions.
The MPUC did not adopt the ALJ’s recommendations, instead finding that the capacity purchase from NTEC, as proposed by Minnesota Power, was needed and reasonable since it constituted a cost-effective resource for Minnesota Power to meet its energy needs as it works toward retiring older coal-powered resources.
In addressing the request for MEPA review, MPUC determined that its jurisdiction is limited to power plants proposed to be built in Minnesota; therefore, because NTEC was to be built in Wisconsin and was not a cross-border project, the power plant was not subject to Minnesota permitting and environmental review regulations. MPUC further determined that there was no “project” subject to MEPA review as approval of the affiliated-interest agreements would not grant permission to Minnesota Power to construct or operate a power plant. Instead, Minnesota Power would need to obtain such permission from the Wisconsin regulators.
Respondents appealed MPUC’s decision to the Minnesota Court of Appeals. The court of appeals reversed MPUC’s decision, concluding that “MEPA requires all state agencies to consider ‘to the fullest extent practicable’ the environmental consequences flowing from their actions.” In re Minn. Power’s Petition for Approval of the EnergyForward Res. Package (in re Minn. Power), 938 N.W.2d 843, 850 (Minn. App. 2019) (quoting Minn. Stat. §116D.03, subd. 1 (2020)).
Upon review of the court of appeals’ holding, the Supreme Court held that the court of appeals erred when it held that MPUC’s approval of Minnesota Power’s affiliated-interest agreements was a “project” that would be subject to MEPA regulations. In reviewing the plain language of Minn. Stat. §216B.48, the Court first determined that nothing within the plain language of the text pointed to the Legislature contemplating the need for environmental review simply because a regulated utility enters into and seeks MPUC approval of an affiliated-interest agreement. Second, the Court determined that MPUC approval of affiliated-interest agreements serves the purpose of ensuring fairness of the deal—making sure that the agreement is reasonable and consistent with the public interest. Finally, the Court determined that MPUC’s review of an affiliated-interest agreement is focused on whether the agreement is fair to ratepayers and whether it is actually needed and reasonable in order to meet consumer demand. The review need not be as broad as the one that would be required under an environmental impact statement or environmental assessment worksheet.
The Court further held that MPUC’s approval of the affiliated-interest agreements did not grant permission to Minnesota Power to construct and operate NTEC in Wisconsin, as MPUC does not have the authority to permit such construction or operation in another state. The Court found that MPUC approval of the affiliated-interest agreements did not meet the criteria to be considered a “project” under MEPA, and as such, did not cause environmental effects. Therefore, MEPA review would not apply to MPUC’s decision to approve the affiliated-interest agreements. The Court remanded the case to determine whether MPUC’s approval of the affiliated-interest agreements was supported by substantial evidence. In the Matter of Minnesota Power’s Petition for Approval of the EnergyForward Resource Package, Nos. A19-0688, A19-0704, 2021 WL 1556816, ___ N.W.2d ____ (Minn. 2021).
ADMINISTRATIVE ACTION
• EPA usurps MPCA in listing impaired wild rice waters. In late April the U.S. Environmental Protection Agency (EPA) sent a letter to the Minnesota Pollution Control Agency (MPCA) identifying 30 Minnesota waters that EPA determined to be impaired under Minnesota’s controversial Class 4A 10 mg/L sulfate water quality standard, which applies to “water used for production of wild rice during periods when the rice may be susceptible to damage by high sulfate levels.” Minn. R. 7050.0224, subp. 2. EPA’s listing follows a 3/26/2021 letter to MPCA in which EPA partially disapproved MPCA’s Clean Water Act (CWA) section 303(d) List of Impaired Waters still requiring Total Maximum Daily Loads (the “303(d) List”), which MPCA submitted for EPA approval, as required by the CWA, on 2/25/2021. EPA’s partial disapproval was based on MPCA’s decision to not list any waters as impaired for the wild rice sulfate standard (WRSS) in part 7050.0224, subp. 2.
By way of brief background, although the WRSS was adopted decades ago, MPCA only started enforcing it relatively recently. Following complaints by mining and other groups about the rule’s lack of clarity regarding the waters to which it applied, the Minnesota Legislature, in 2011 and 2015, passed legislation limiting MPCA’s ability to enforce the WRSS and prohibiting MPCA from listing waters as impaired for the WRSS until MPCA amends the rule to identify the specific waters to which the standard applies. (2015 Minn. 1st Spec. Sess. Ch. 4, Art. 4, Sec. 136.) Pursuant to these directives, MPCA in August 2017 issued a set of proposed rules repealing the 10 mg/L standard, establishing an equation-based approach for determining the protective sulfate level for a water body, and identifying 1,300 “wild rice waters” that would become subject to the new standard.
In January 2018, however, the administrative law judge presiding over the rulemaking proceeding issued a report disapproving of all major components of the proposed rule, including the proposed list of wild rice waters, which the ALJ determined was under-inclusive. In April 2018, MPCA withdrew the proposed rule, leaving the 10 mg/L standard in place. MPCA has not yet undertaken renewed rulemaking on the WRSS.
In February 2021, when MPCA submitted its 303(d) list to EPA, MPCA identified seven waters that it considered to be subject to the WRSS and that exceeded the WRSS. But MPCA indicated it did not include these waters on the 303(d) list because it was barred from doing so by state law. In response, EPA, in its 3/26/2021 letter, disapproved of MPCA’s decision not to include the seven waters on the 303(d) list and indicated that EPA would itself list waters impaired for the WRSS pursuant to 40 C.F.R. §130.7. EPA’s 4/27/2021 letter does just that, identifying 30 waters it has concluded are both subject to the WRSS and impaired for the WRSS. EPA set a 30-day comment period on the proposed listing and indicated that EPA is in the process of evaluating additional data received from tribal governments and may identify other sulfate-impaired waters as a result of that process. The initial comment period ran until 5/31/2021. Letter from Tera Fong, EPA Region 5, D to Katrina Kessler, MPCA, re Addition of Waters to Minnesota’s 2020 List of Impaired Waters under Clear Water Act, Section 303(d) (4/27/2021).
Jeremy P. Greenhouse The Environmental Law Group, Ltd.
Jake Beckstrom Vermont Law School, 2015
Erik Ordahl Barna, Guzy & Steffen
Audrey Meyer University of St. Thomas School of Law 2020
FEDERAL PRACTICE
JUDICIAL LAW
• Personal jurisdiction; substantial business in forum state. In March 2020, this column noted the Supreme Court’s grants of certiorari in two cases (including one from the Minnesota) addressing whether Ford was subject to personal jurisdiction only if its conduct in the state gave rise to the plaintiff’s claims.
The Supreme Court recently rejected Ford’s argument that it was subject to specific personal jurisdiction only if it had designed, manufactured, or sold the particular vehicles at issue, instead finding that when a company “serves a market for a product in a State and that product causes injury in the State to one of its residents, the State’s courts may entertain the resulting suit.” Ford Motor Co. v. Montana Eighth Judicial Dist. Ct., 141 S. Ct. 1017 (2021).
• No waiver of arbitration despite participation in litigation; dissent. Where the plaintiff filed an FLSA action in the Southern District of Iowa, the defendant moved to dismiss the action in favor of a Michigan action under the first-filed rule, the defendant lost that motion, answered the complaint, participated in a mediation with the Michigan plaintiffs, and then moved to compel arbitration of the Iowa action eight months after that action was commenced, the 8th Circuit reversed the district court and found that the defendant had not waived its right to arbitrate because the “nature” of its motion to dismiss “did not address the merits of the dispute,” and because the plaintiff had not been prejudiced by the delay.
Judge Colloton dissented, arguing that the motion to dismiss and the filing of an answer that “made no mention of arbitration” were both acts that were “inconsistent” with the right to arbitrate. Morgan v. Sundance, Inc., 992 F.3d 711 (8th Cir. 2021).
• Untimely forum non conveniens motion waives argument. Where one defendant waited 18 months before bringing a motion to dismiss based on the doctrine of forum non conveniens, the 8th Circuit found that the district court had abused its discretion when it granted that motion because the 18-month delay was “sufficiently untimely.” The 8th Circuit further commented that requiring that forum non motions be brought at an early stage in the litigation “promotes judicial economy” and “prevents defendants from engaging in impermissible gamesmanship.” The court also noted that “when a party spends substantial time in a forum” before bringing a forum non motion, “it belies the claim that the forum is truly inconvenient.” Estate of I.E.H. v. CKE Restaurants Holdings, Inc., ___ F.3d ___ (8th Cir. 2021).
• Motion to dissolve preliminary injunction provisionally granted; dissent. Where a district court granted a preliminary injunction in November 2017, the defendant did not appeal from the entry of that injunction, the defendant moved to dissolve the injunction in March 2019, the motion was denied in May 2019, and the defendant appealed from the denial of that motion, an 8th Circuit panel found that changed circumstances—the passage of time—warranted a grant of the motion if the preliminary injunction was not replaced by a final order (either granting a permanent injunction or vacating the preliminary injunction) by 10/31/2021.
Judge Erickson dissented from the injunction ruling, asserting that the defendant’s failure to identify “subsequent changes in law or fact” meant that the 8th Circuit lacked jurisdiction over that portion of the appeal. Ahmad v. City of St. Louis, ___ F.3d ___ (8th Cir. 2021).
• Fed. R. Evid. 403; jury instructions; cumulative error; judgment reversed. Determining that Judge Frank abused his discretion in admitting multiple pieces of evidence where the “minimally” probative value of that evidence was “substantially” or “unfairly” outweighed by the risk of unfair prejudice to the defendants, and that one jury instruction also constituted an abuse of discretion, the 8th Circuit found that the cumulative effect of these errors affected the defendants’ “substantial rights,” vacated the judgment, and remanded the case for a new trial. Krekelberg v. City of Minneapolis, 991 F.3d 949 (8th Cir. 2021).
• Fed. R. Civ. P. 23(f); class certification reversed. After granting the defendants leave to appeal a class certification order pursuant to Fed. R. Civ. P. 23(f), the 8th Circuit found that the district court had abused its discretion in certifying a plaintiff class pursuant to Fed. R. Civ. P. 23(b)(3) where a “prevalence of... individual inquiries” was required, and because it was an improper “fail-safe” class. Ford v. TD Ameritrade Holding Corp., ___ F.3d ___ (8th Cir. 2021).
• Mandamus; right to jury trial. Where the district court struck the defendant’s demand for a jury trial, the 8th Circuit granted her petition for a writ of mandamus and found that she had a “clear and indisputable right to a jury trial.” The 8th Circuit also found that the defendant was not required to seek interlocutory review under 28 U.S.C. §1292(b) before seeking mandamus. In Re: Brazile, 993 F.3d 593 (8th Cir. 2021).
• Punitive damages; due process; no compensatory damages. Where a jury awarded no compensatory damages, the 8th Circuit rejected the argument that the jury’s award of $200,000 in punitive damages was unconstitutionally excessive, finding that the relevant question was the potential harm to the plaintiff, and that because the plaintiff faced $1,000,000 in potential harm, the punitive damages award was not excessive. Dunne v. Resources Converting, LLC, 991 F.3d 931 (8th Cir. 2021).
• Denial of request for leave to amend complaint; no abuse of discretion. The 8th Circuit found that a district court did not abuse its discretion in denying the plaintiff’s request for leave to amend his complaint a second time when that “conclusory,” “two-sentence request” was made in response to the defendant’s motion to dismiss. Rivera v. Bank of America, N.A., 993 F.3d 1046 (8th Cir. 2021).
Josh Jacobson Law Office of Josh Jacobson
IMMIGRATION LAW
JUDICIAL LAW
• Supreme Court: Notice to appear must be a single document to trigger stop-time rule. The U.S. Supreme Court held that a notice to appear (NTA) sufficient to trigger the Illegal Immigration Reform and Immigrant Responsibility Act of 1996 (IIRIRA) stop-time rule (within the cancellation of removal context and its 10-year requirement of continuous presence in the United States) must be a single document containing all information about a removal hearing as specified under 8 U.S.C. §1229(a)(1). More specifically, it must include: 1) nature of the proceedings against foreign nationals; 2) legal authority under which the proceedings are conducted; 3) acts or conduct alleged to be in violation of law; 4) charges against them with statutory provisions alleged to have been violated; 5) advisory that they may be represented by counsel and given time to secure said counsel; 6) written record of address and telephone number with consequences for failing to provide such information; 7) time and place at which proceedings will be held with consequences for failing to appear at such proceedings.
In view of the Court’s decision in Pereira v. Sessions, 585 U.S. ___ (2018), finding inadequate a notice to appear lacking the hearing time and place, the government in the instant case argued its acts of sending two NTAs over the span of two months (with the second one containing information about the time and place for the hearing) collectively met the requirements under 8 U.S.C. §1229(a)(1). The Court agreed to hear the case after some circuits had accepted the government’s “notice by installment theory,” while others did not, arguing that a single NTA must be issued in order to trigger the stop-time rule. The Court agreed with the latter and opined that “words are how the law constrains power. In this case, the law’s terms ensure that, when the federal government seeks a procedural advantage against an individual, it will at least supply him with a single and reasonably comprehensive statement of the nature of the proceedings against him.” Niz-Chavez v. Garland, 593 U.S. ___, No. 19-863, slip op. (2021). https://www.supremecourt.gov/opinions/20pdf/19-863_6jgm.pdf
• Supreme Court: Convictions, burden of proof, and eligibility for cancellation of removal. The U.S. Supreme Court affirmed the 8th Circuit, finding that, under the Immigration and Nationality Act, certain nonpermanent residents seeking cancellation of removal bear the burden of proving they have not been convicted of certain criminal offenses (e.g., crime of moral turpitude) barring their eligibility for such relief. Here, the foreign national had “not carried that burden when the record shows he has been convicted under a statute listing multiple offenses, some of which are disqualifying, and the record is ambiguous as to which crime formed the basis of his conviction.” Pereida v. Wilkinson, 592 U.S. ___, No. 19-438, slip op. (2021). https://www.supremecourt.gov/opinions/20pdf/19-438_j4el.pdf
• Temporary protected status (TPS) is not an “admission” for cancellation of removal purposes. The 8th Circuit Court of Appeals held that the petitioner’s grant of temporary protected status (TPS) pursuant to INA §244(e) did not eliminate the requirement that he provide evidence he was “admitted” (i.e., “lawful entry… into the United States after inspection and authorization by an immigration officer”) in order to establish eligibility for cancellation of removal under INA §240A(a). The court noted that its decision in Velasquez v. Barr, 979 F.3d 572 (8th Cir. 2020), dealing with TPS and “admission” in the adjustment of status context, was distinguishable given Congress’s intent to create a legal fiction by its express stipulation that TPS status be considered an “admission” for adjustment of status and change of status purposes under 8 U.S.C. §1254a(f)(4). Consequently, the petitioner’s grant of TPS in the instant case was not an “admission” for cancellation of removal purposes. Artola v. Garland, 19-1286, slip op. (8th Cir. 5/5/2021). https://www.ca8.uscourts.gov/content/19-1286-fredis-artola-v-merrick-b-garland
• “Serious reasons for believing” standard, probable cause, and asylum eligibility. The 8th Circuit Court of Appeals held that the “serious reasons for believing” [that a foreign national has committed a serious nonpolitical crime outside the United States prior to arrival in the United States] standard requires a finding of probable cause before finding one ineligible for asylum or withholding of removal. With that in mind, the court rejected a Board of Immigration Appeals decision upholding the immigration judge’s denial of asylum to the petitioner based on a finding that serious reasons existed to believe he committed a serious nonpolitical crime while in El Salvador. “The statutory framework and relevant case law direct us to require something more than ‘some evidence’ in order to meet the probable cause standard in cases involving ‘serious reasons for believing’ that a serious nonpolitical crime was committed.” Barahona v. Wilkinson, 20-1546, slip op. (8th Cir. 2/3/2021, amended 4/15/2021). https://ecf.ca8.uscourts.gov/opndir/21/04/201546P.pdf
• Khat, federal controlled substances, and asylum. The 8th Circuit Court of Appeals held that the petitioner was removable because of his Minnesota conviction for possession of khat, which contains at least one of two substances listed in the federal schedules, related to federal controlled substances under INA §237(a)(2)(B)(i). The court further affirmed the Board of Immigration Appeals’ conclusion that the petitioner’s claimed membership in a “particular social group consisting of those suffering from mental health illnesses, specifically [post-traumatic stress disorder]” failed to comprise a socially distinct group. That is, Somali society does not make “meaningful distinctions based on the common immutable characteristics defining the group.” Ahmed v. Garland, 19-3480, slip op. (8th Cir. 4/8/2021). https://ecf.ca8.uscourts.gov/opndir/21/04/193480P.pdf
• Particularly serious crime analysis: Consider all reliable information, including mental health conditions. The 8th Circuit Court of Appeals held that the immigration judge and Board of Immigration Appeals (BIA) had impermissibly refused to consider the Iraqi petitioner’s mental illness as a factor in determining whether he was barred from the relief of withholding of removal based on a conviction for a particularly serious crime. The court concluded the BIA’s categorical bar on considering the petitioner’s mental health evidence was an arbitrary and capricious construction of INA §241, reaffirming its position in Marambo v. Barr that “all reliable information” pertaining to the nature of the crime, including evidence of mental health conditions, may be considered in a particularly serious crime analysis. Shazi v. Wilkinson, 19-2842, slip op. (8th Cir. 2/11/2021). https://ecf.ca8.uscourts.gov/opndir/21/02/192842P.pdf
ADMINISTRATIVE ACTION
• DHS announces 22,000 additional H-2B temporary non-agricultural worker visas. In April the Department of Homeland Security announced a supplemental increase of 22,000 visas for the H-2B temporary non-agricultural worker program as the economy reopens with an increased need for temporary seasonal workers. The H-2B visa program “is designed to help U.S. employers fill temporary seasonal jobs, while safeguarding the livelihoods of American workers” by requiring those employers to test the U.S. labor market and certify there are insufficient workers who are “able, willing, qualified, and available” to do the work. At the same time, 6,000 of those visas will be reserved for nationals of the Northern Triangle countries of Honduras, El Salvador, and Guatemala in order to expand “lawful pathways for opportunity in the United States” consistent with the President’s Executive Order 14010 on “Creating a Comprehensive Regional Framework to Address the Causes of Migration, to Manage Migration Throughout North and Central America, and to Provide Safe and Orderly Processing of Asylum Seekers at the United States Border.” The 22,000 visas will be made available in the coming months by way of a temporary final rule to be published in the Federal Register. U.S. Department of Homeland Security, News Release (4/20/2021). https://www.dhs.gov/news/2021/04/20/dhs-make-additional-22000-temporary-non-agricultural-worker-visas-available
• DHS Secretary Mayorkas designates Burma for temporary protected status. In March, Department of Homeland Secretary Alejandro N. Mayorkas announced that he was designating Burma for temporary protected status for 18 months. Individuals able to demonstrate continuous residence in the United States as of 3/11/2021 will be considered eligible for TPS under Burma’s designation. Additional eligibility criteria will be outlined in a forthcoming Federal Register notice. U.S. Department of Homeland Security, News Release (3/12/2021). https://www.dhs.gov/news/2021/03/12/secretary-mayorkas-designates-burma-temporary-protected-status
• TPS designation for Venezuela. On 3/9/2021, U.S. Citizenship and Immigration Services (USCIS) published notice designating Venezuela for Temporary Protected Status (TPS) for 18 months, running from 3/9/2021 through 9/9/2022. The notice also provides information about Deferred Enforced Departure (DED) and DED-related employment authorization for eligible Venezuelans based on the 1/19/2021 memorandum issued by former President Donald Trump. 86 Fed. Register, 13574-81 (3/9/2021). https://www.govinfo.gov/content/pkg/FR-2021-03-09/pdf/2021-04951.pdf
R. Mark Frey Frey Law Office
INTELLECTUAL PROPERTY
JUDICIAL LAW
• Trademarks: Voluntary dismissal of Lanham Act claim deprives court of supplemental jurisdiction. Judge Ericksen recently dismissed without prejudice an action for breach of contract and trademark infringement after Country Inn & Suites by Radisson, Inc. voluntarily dismissed its Lanham Act claims in its motion for summary judgment. Country Inn sued defendants Alexandria Motels, Inc.; Lake Country Motels, LLC; and Vibha Patel related to breach of a license agreement. Country Inn alleged that Alexandria Motels breached the license agreement, that Lake Country Motels and Patel breached their guarantees, and that the defendants continued to use Country Inn’s trademark after the termination of the license agreement. In its motion for summary judgment, Country Inn sought judgment on its breach of contract claims and attorneys’ fees claims but voluntarily dismissed the Lanham Act trademark infringement claims (Count IV) and false designation of origin/federal unfair competition claims (Count V). Following Country Inn’s dismissal of Counts IV and V, the court either had an obligation to dismiss the action for lack of subject-matter jurisdiction or an option to decline to exercise supplemental jurisdiction over the remaining claims. The court found no reason to exercise supplemental jurisdiction over the remaining claims, and dismissed the action without prejudice. Country Inn & Suites by Radisson, Inc. v. Alexandria Motels, Inc., No. 19-cv-1485 (JNE/LIB), 2021 U.S. Dist. LEXIS 78983 (D. Minn. 4/26/2021).
• Copyright: Use of application programming interfaces deemed “fair use” under the Copyright Act. The Supreme Court of the United States recently held that Google’s use of application programming interfaces (APIs), part of Oracle’s Java SE platform that uses the Java programming language, to build a new Android platform constituted permissible “fair use.” Following the Court of Appeals for the Federal Circuit’s reversal of the district court’s finding of fair use, Oracle appealed, and cert was granted. When considering whether use of a work constitutes fair use, courts consider four statutory factors: the purpose and character of the use; the nature of the copyrighted work; the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and the effect of the use upon the potential market for or value of the copyrighted work. 17 U.S.C. §107. Google’s use of the APIs served an organizational function akin to the Dewey Decimal System, which is different from code that executes a task. The use was transformative because Google used only the portions of code necessary to create the Android platform, which furthered the development of computer programs and the creative process that is supported by the constitutional objective of copyright itself. Google’s copying of 11,500 lines of Oracle’s API code supported fair use because Google used only 0.4% of the Sun Java API (2.86 million lines of code) and because the used lines did not include the “heart” of the original work’s creative expression. Finally, the risk of creativity-related harms to the public outweighed any potential harm to Oracle as Oracle was not competing in the smartphone market. The court held the copying constituted “fair use” and reversed the Federal Circuit. The case was remanded for further proceedings in conformity with its opinion. Google LLC v. Oracle Am., Inc., 141 S. Ct. 1183 (2021).
Joe Dubis Merchant & Gould
TAX LAW
JUDICIAL LAW
• “Stupid tax policy”: Advance premium credit creates trap for unwary insureds. The Affordable Care Act (ACA) provided for various tax credits, one of which is the premium assistance tax credit (PTC). The PTC subsidizes health insurance premiums for taxpayers whose income in the tax year was between 100% and 400% of the federal poverty line. Unlike most tax credits, the PTC benefits are not claimed after the taxpayer files a return. “Instead, the ACA provides for advance payment of the PTC if taxpayers qualify under an advance eligibility determination. These advances are paid directly to the insurer in monthly payments and the insurer, in turn, reduces the premium charged to the insured taxpayers by the amount of the APTC received.”
As the tax court explains, “[w]hile the APTC helps to ease the timing burden by spreading the payments throughout the tax year, it also creates a potential trap for taxpayers whose household income increases year over year. Specifically, if taxpayers who qualified for a PTC in a prior year increase their household income to more than 400% of the Federal poverty line in a following year, they may continue to receive an APTC to which they are not entitled in that year. To recover the erroneous payments, the law requires such taxpayers to reconcile the amount of APTC they received with their actual eligible credit amount when they file their income tax return.… If taxpayers receive more APTC than they are due, they owe the excess credit back to the Government and must repay it as an increase in tax.” Aschenbrenner v. Comm’r, No. 2676-20S, 2021 WL 1661227, at *2 (T.C. 4/1/2021).
Several cases were reported this month in which taxpayers were caught in this trap. See also, e.g., Gates v. Comm’r, No. 1475-20S, 2021 WL 1521726, at *3 (T.C. 3/12/2021) (expressing sympathy with the petitioners and noting “that petitioners are not the first taxpayers who have found themselves in similar situation faced with unexpected Federal tax consequences because of poor or erroneous tax advice received with respect to the premium tax credit”); Antilla-Brown v. Comm’r, No. 14511-19S, 2021 WL 1720005, at *2 (T.C. 3/18/2021) (involving a particularly sympathetic taxpayer who, due to a combination of factors, faced a tax rate of 580% on the $956 by which she and her spouse exceeded 400% of the federal poverty level; this court had particularly strong language: “I noticed that the government had no defense on the grounds of tax justice here. There is none. This is stupid tax policy to have such a high rate of tax on working people when they enter retirement.”)
• Minnesota Supreme Court ruling influences tax court to deviate from Rule 8100 default rule. Enbridge Energy, Limited Partnership (EELP) owns and operates an interstate petroleum pipeline system in Minnesota and throughout the upper Midwest and elsewhere. The Minnesota portion of the pipeline system is known as the Lakehead system. Previously, the tax court concluded that the commissioner overvalued EELP’s pipeline system for assessment dates of January 2012, January 2013, and January 2014. See Enbridge Energy, Ltd. P’ship v. Comm’r of Revenue, No. 8579-R et al., 2019 WL 5995766, at *2 (Minn. T.C. 11/5/2019). In the 2017 consolidated trial, the court was asked to consider the three main approaches to value—market, cost, and income. In that case, EELP presented testimony from two experts who stated that the sales comparison approach had no validity at all in the appraisal process and asked the court not to consider it. Without offering additional evidence, the commissioner also asked the tax court to not consider the sales comparison approach. Both parties encouraged the court to consider the cost approach to valuation, but the court rejected the cost approach, reasoning that: 1) EELP was not rate-regulated during the years at issue, and 2) the tax court was not bound by the cost approach. See Minn. R. 8100; see also Enbridge Energy, Ltd. P’ship v. Comm’r of Revenue, No. 8579-R et al., 2018 WL 2325404, at *15-*23 (Minn. T.C. 5/15/2018). Having rejected the sales comparison and cost approaches, the court concluded that the income approach to valuation was appropriate, and the total unit value of the Lakehead system was $3,595,398,000; $3,292,362,000; and $3,416,667,000 as of the respective assessment dates.
The commissioner filed a discretionary appeal of the tax court’s order and challenged the court’s rejection of Rule 8100 as binding on the tax court. See Comm’r of Revenue v. Enbridge Energy, LP (Enbridge I), 923 N.W.2d 17, 19 (Minn. 2019). The Supreme Court granted review and analyzed the tax court’s decision to reject the cost approach in light of Minnesota Administrative Rule 8100, concluding that the tax court erred by determining it was not bound by Rule 8100, and remanded for proceedings consistent with the Court’s ruling.
Considering the Supreme Court’s decision, the tax court agreed that the record was sufficient to reach a determination of value under the cost approach. With Rule 8100 in mind, the tax court reevaluated its conclusion under the income approach, concluding to the value of the Lakehead system as $2,947,220,888; $2,807,096,461; and $2,685,631,007 as of the respective assessment dates. The tax court then evaluated the system under the cost approach and concluded the Lakehead system was valued at $4,209,710,781; $4,856,317,249; and $6,766,060,594 under the cost approach as of the respective assessment dates. After determining valuations under both the income and cost approach, the court evaluated how much weight should be given to each approach. The commissioner argued that the two approaches should be given equal weighting. EELP argued that the tax court should give the income approach no less than 80% weight. Reasoning that Rule 8100.0300 dictates equal weighting even though the pipelines being assessed under the Rule are, by definition, income-producing, the tax court concluded that the cost and income approaches should be weighed 50-50.
EELP filed a motion for amended findings arguing that the tax court erred: “(1) by misapplying Rule 8100’s reconciliation provisions; (2) by indiscriminately taxing construction work in progress (CWIP); and (3) by making inadvertent numerical and computational errors in determining apportionable values.” The motion, however, was stayed because the presiding judge left the tax court. Before the motion was reassigned, the tax court ruled in another matter involving EELP’s 2015 and 2016 assessments. See Enbridge Energy, Ltd. P’ship v. Comm’r of Revenue, Nos. 8858-R & 8984-R, 2019 WL 2853133 (Minn. T.C. 6/25/2019). EELP appealed the tax court’s 2015 and 2016 decision to the Minnesota Supreme Court. See Enbridge Energy, Ltd. P’ship v. Comm’r of Revenue, Nos. 8858-R & 8984-R, 2019 WL 5995805 (Minn. T.C. 11/5/2019). On appeal, EELP raised three issues: “(1) the court’s application of Rule 8100’s reconciliation provisions; (2) the court’s treatment of CWIP; (3) and the court’s treatment of external obsolescence.”
The Minnesota Supreme Court ruled on all three issues raised by EELP, and issued its decision, known as Enbridge II, in July 2020. Relevant to this matter, is the Court’s evaluation of “whether the tax court erred by placing equal weight on the cost and income indicators of value to calculate the unit value of the pipeline system.” The Supreme Court held that the tax court erred in applying equal weight, explaining that the rules recognize that the tax court has the discretion to depart from the valuation formula “whenever the circumstances of a valuation estimate dictate the need for it.” Minn. R. 8100.0200. However, “[i]n failing to recognize that it had the discretion to depart from the default weightings if dictated by the circumstances of the case, the tax court erred as a matter of law.” The Supreme Court reversed and remanded “for the limited purpose of allowing the tax court to consider whether the circumstances of this case dictate a need to depart from the default weightings,” and, if so, the tax court must fully explain its reasoning.
Following the Supreme Court’s ruling in Enbridge II, the tax court lifted the stay on EELP’s motion and allowed for an amended motion to amend the tax court’s findings. In its amended motion, EELP asks the tax court: “(1) to use its discretion to depart from Rule 8100’s default weighting provision and adopt the reconciliation percentages advocated by EELP’s appraiser at trial; and (2) to correct inadvertent numerical and computation errors.” The commissioner argued that although the Supreme Court clarified that the tax court may exercise discretion to deviate from the default equal weightings in Rule 8100, the circumstances in this case do not dictate that the court do so.
The tax court agreed with EELP that the Supreme Court’s decision in Enbridge II required it to modify its previous determination to assign a 50% weighting to the income and cost approaches, and that the record is sufficient to reach a determination on proper weighting.
When valuating property, the tax court is not required to give weight to all three valuation approaches. It may also place a greater weight on one approach over the others. See Equitable Life Assur. Soc’y of U.S. v. Cty. of Ramsey, 530 N.W.2d 544, 554 (Minn. 1995). Using multiple approaches is generally useful to serve as checks upon each other. Id. “[T]he three valuation approaches are neither exclusive nor mandatory and the quantity and quality of available data ultimately determines which approaches are useful and how much weight each is given.” Nw. Racquet Swim & Health Clubs, Inc. v. Cty. of Dakota, 557 N.W.2d 582, 587 (Minn. 1997). The income approach usually receives considerable weight if the subject property is an income-producing asset, while the cost approach generally does not lend itself to accurate valuations of older properties. See KCP Hastings, LLC v. Cty. of Dakota, 868 N.W.2d 268, 275-76 (Minn. 2015); Menard Inc. v. Cty. of Clay, 886 N.W.2d 804, 819-20 (Minn. 2016). Ultimately, the weight placed on each approached depends on the reliability of the data and the property being evaluated. Id. “Pipelines, such as the Lakehead system, however, are special purpose properties, which can be reliably valued using the cost approach.” Guardian Energy, LLC v. Cty. of Waseca, 868 N.W.2d 253, 261-62 (Minn. 2015).
After evaluating the evidence in the record, and the appraisal theory supported by expert testimony, the tax court agreed with EELP that the income approach should be afforded 80% weight and the cost approach should be given 20% weight. The court valued Lakehead system at $3,199,718,866 for January 2012, $3,216,940,619 for January 2013, and $3,501,716,925 for January 2014. Enbridge Energy, Limited Partnership v. Comm’r of Revenue, 2021 WL 935006 (MN Tax Court 3/9/2021).
• Tax law proves a change in state legislation is needed. On 12/30/2019, petitioner Bridgette Williams filed forms M1PR seeking to recover property tax refunds for rent paid in 2016 and 2017. The commissioner responded by issuing two notices of change denying the refund requests because the applications for refund were not filed within the time limit allowed by state law. Ms. Williams filed an administrative review appeal of the two notices of change, conceding that her refund claims were filed late, but explaining it was due to circumstances beyond her control. “Ms. Williams explained she did not receive her Certificate of Rent Paid in time, because her landlord had passed away, and her new landlord spent the remaining time gaining legal rights to the property to release her Certificate.” Additionally, Ms. Williams stated her own medical condition deterred her from timely filing. The commissioner reviewed and denied the administrative appeal. The commissioner acknowledged the basis for the appeal but explained that the statute does not provide for any exceptions to the one-year limit for filing an original return.
On 4/16/2020, Ms. Williams timely filed an appeal with the tax court. “The Notice of Appeal asserts that the physical or mental incapacity of Ms. Williams and her landlord ‘tolls the time of filing.’” The commissioner responded that the refunds were correctly denied under Minnesota law and brought a motion for judgment on the pleadings pursuant to Minn. R. Civ. P. Rule 12.03 and Minn. R. ch. 8610.0070, subpart 5. Ms. Williams appeared at the motion hearing and opposed the commissioner’s motion.
Under Minnesota law, “[a]ny claim for refund based on rent paid must be filed on or before August 15 of the year following the year in which the rent was paid.” Minn. Stat. §289A.18, subd. 5 (2020). Further, “[a] property tax refund claim... is not allowed if the initial claim is filed more than one year after the original due date for filing the claim.” Minn. Stat. §289A.40, subd. 4 (2020). The tax court has previously interpreted these two statutes as having created a filing deadline one year beyond the statutory due date for filing property tax refund claims. See Halonen v. Comm’r of Revenue, 2019 WL 2932260, at *2 (Minn. T.C. 7/2/2019). Based on this interpretation, the due date of Ms. Williams’ latest tax refund claim, 2017, was 8/15/2018 with the last filing deadline being one year later, on 8/15/2019. Ms. Williams did not file her claim for rent paid for 2016 and 2017 until December 2019; therefore, both claims were untimely.
Ms. Williams argued that “the doctrine of equitable tolling permits [the tax] court to toll the statutory time limit” for extraordinary circumstances. “The doctrine of equitable tolling allows a court to consider the merits of a claim when it would otherwise be barred by a statute of limitations.” Sanchez v. State, 816 N.W.2d 550, 560 (Minn. 2012). The Minnesota Supreme Court has stated “where a statute gives a new right of action, not existing at common law, and prescribes the time within which it may be enforced, the time so prescribed is a condition to its enforcement....” State v. Bies, 258 Minn. 139, 147, 103 N.W.2d 228, 235 (1960). Further, the Supreme Court acknowledged that because the Legislature has created the right, it also has “the power to impose any restrictions it sees fit.” Id. The tax court, therefore, does not have the authority to toll the statutory deadline for property tax refund claims. The court previously stated in a nearly identical case that the outcome “appears unjust,” and reiterates that statement here. See Mays v. Comm’r of Revenue, 2001 WL 561335 (Minn. T.C. 5/15/2001). It is up to the Legislature to allow for tolling in special circumstances. Unfortunately, the tax court lacks the authority to provide Ms. Williams relief, and affirmed the commissioner’s denial of the 2016 and 2017 property tax refund requests. Williams v. Comm’r of Revenue, 2021 WL 1206480 (MN Tax Court 3/26/2021).
Morgan Holcomb Mitchell Hamline School of Law
Sheena Denny Mitchell Hamline School of Law