Criminal Law
JUDICIAL LAW
• Driving after cancellation: Offense does not apply when operating a motor vehicle on private property. A sheriff’s deputy visited appellant at his mother’s home to fill out an annual predatory offender registration form. Appellant’s driver’s license was cancelled as inimical to public safety at that time. The deputy saw appellant driving a car in the driveway, but appellant stopped before reaching the road. Appellant was arrested for driving after cancellation and, following a chemical test that revealed methamphetamine, he was also charged with first-degree DWI. Appellant argued the deputy had no probable cause to arrest him, because he drove only on private property. The district court denied the motion. He was found guilty of both charges after a stipulated facts trial.
Under Minn. Stat. §171.24, subd. 5(3), a person disobeys an order cancelling his or her license by operating a motor vehicle for which a license is required. Minn. Stat. §171.02, subd. 1(a), requires a valid license to drive a motor vehicle “upon a street or highway,” which are defined to exclude private property. Thus, the plain language of the cancellation statute covers only situations in which a person operates a motor vehicle on a public street or highway. Here, the deputy lacked probable cause to believe appellant drove after cancellation, because he observed appellant driving only on a private driveway, and the evidence obtained as a result of his arrest should have been suppressed. Appellant’s convictions are reversed. State v. Velisek, A21-0275, __ N.W.2d __, 2022 WL 351175 (Minn. Ct. App. 2/7/2022).
• Guilty plea: Parole eligibility determination is a collateral consequence that does not implicate a guilty plea’s intelligence. Appellant pleaded guilty to first-degree criminal sexual conduct, including one heinous element of great bodily harm, first-degree assault, and inducement to prostitution, under an agreement with the state that he would receive a life sentence with the possibility of parole after 30 years. Prior to entering his plea, both appellant’s counsel and the district court informed him that the parole decision would be made by the Department of Corrections (DOC) based on his conduct in prison, which is only one factor the DOC is to consider. See Minn. Stat. §244.05, subd. 5(c) and (d). Appellant later sought to withdraw his guilty plea, arguing he was misinformed of the consequences of the plea. He was sentenced on the first-degree criminal sexual conduct offense first, followed by the inducement to prostitution offense. The district court sentenced appellant to life with the possibility of parole after 30 years. Appellant appealed from his sentence and the court’s denial of his motion to withdraw his guilty plea.
The Minnesota Court of Appeals holds that parole eligibility determinations are collateral consequences of a guilty plea that do not affect the intelligence of the plea. Parole eligibility determinations are based on factors that occur after the imposition of the sentence, so they cannot be “definite,” “immediate,” or “automatic” results of the sentence, as with direct consequences. Sentences and their direct consequences serve to punish defendants, while parole eligibility determinations also serve to ensure public safety. Any incomplete information appellant received about the parole eligibility determination did not render his guilty plea unintelligent.
The court also finds appellant’s plea was not induced by an unfulfillable promise by the district court. Appellant entered his plea to avoid a life sentence without the possibility of parole, a real risk in his case, not because of any statements the district court made about parole eligibility. The district court also did not tell appellant that only his in-prison conduct would be considered by the DOC, did not guarantee good behavior would automatically entitle appellant to parole, or affirmatively promise anything regarding the DOC’s parole eligibility process.
The case is nonetheless remanded for resentencing. Appellant should have been sentenced first on the inducement to prostitution offense, as it occurred first in time. The district court also used an incorrect criminal history score. Finally, the district court’s 30-year minimum term of imprisonment was an upward departure from the sentencing guidelines, but the court failed to state as much in its sentence or make any findings of substantial and compelling aggravating factors to support the departure. “This failure… requires reversal of the sentence and prohibits any future upward departures from the guidelines.” State v. Bell, A21-0283, __ N.W.2d __, 2022 WL 351122 (Minn. Ct. App. 2/7/2022).
• Confrontation clause: No violation of confrontation right to require witnesses to wear face masks to prevent the spread of covid-19. After a jury trial, appellant was convicted of third-degree possession of a controlled substance and giving a false name to police. During his trial, due to covid-19, the district court required witnesses to wear a face covering while testifying and closed the courtroom, while providing a live video feed of the proceedings in a nearby courtroom. On appeal, appellant argues these measures violated his rights to confrontation and a public trial.
A defendant’s confrontation rights are not absolute and may be satisfied without a full physical, face-to-face confrontation at trial if the interference with confrontation is necessary to further an important public policy and the testimony’s reliability is otherwise assured. Here, the district court’s covid-19 procedures followed the Supreme Court’s covid-19 orders and safety plans. The district court also noted that research showed an increase in the spread of covid-19 was higher absent mask-wearing and that the courtroom in which the trial took place was small. The trial also took place before covid-19 vaccines were available and experts were still learning how to best prevent the spread of covid-19.
The court of appeals notes that the masks prevented the jury from seeing only the witnesses’ mouths and nose. The jury was still able to see the witnesses’ eyes, observe their body language, and hear their tone and vocal inflections. Thus, the masks did not render the testimony unreliable.
The court of appeals also finds appellant’s right to a public trial was not violated. The courtroom was closed to prevent the spread of covid-19 and, to maintain public access, the court provided live video of the proceedings in a nearby courtroom that remained open to the public. The record also suggests the district court considered alternatives, but given the Supreme Court’s social distancing requirements and the small size of the courtroom, limiting public access to the courtroom was necessary to maintain safety.
Appellant’s right to confrontation and a public trial were not violated by the district court’s covid-19 prevention measures here, and his convictions are affirmed. State v. Modtland, A21-0146, __ N.W.2d __, 2022 WL 433245 (Minn. Ct. App. 2/14/2022).
• Restitution: State does not bear burden of producing evidence of a defendant’s ability to pay. Following his sentencing for second-degree unintentional felony murder, the district court ordered appellant to pay $7,500 in restitution as repayment for the victim’s funeral expenses. Appellant argued he was unable to pay that amount, testifying he had no prison job, could not collect Social Security, and had no assets. The district court denied appellant’s motion to eliminate or reduce the restitution order.
The court of appeals first rejects appellant’s argument that the state bears the burden of proving a defendant’s ability to pay and that the state failed to do so here. The plain language of the restitution statute, Minn. Stat. §611A.045 and 611A.05, places the initial burden on the defendant to contest restitution and produce evidence stating his challenges. Then, the statute places two burdens on the state: (1) to demonstrate the amount of loss sustained by a victim, and (2) to demonstrate the appropriateness of a particular type of restitution. The statute plainly does not require the state to produce evidence of or proving the defendant’s ability to pay restitution.
The only mention of a defendant’s ability to pay in the restitution statute is the requirement that a district court consider the same in making a restitution determination. The district court must expressly state that it considered a number of factors, including the defendant’s ability to pay, and the record must contain sufficient evidence to facilitate the court’s consideration. Here, the district court made sufficient findings regarding appellant’s ability to pay, and the record supports those findings.
But the case is remanded to the district court for the court to assign responsibility for developing a restitution payment schedule or structure. The restitution statute requires that a restitution order include a payment schedule or structure and permits the court to assign responsibility for developing the schedule or structure to probation, court administration, or another person. The court here merely stated there was no deadline for payment, which does not satisfy the statute’s payment schedule requirements. State v. Cloutier, A21-1270, __ N.W.2d __, 2022 WL 518480 (Minn. Ct. App. 2/22/2022).
Samantha Foertsch
Bruno Law PLLC
samantha@brunolaw.com
Stephen Foertsch
Bruno Law PLLC
stephen@brunolaw.com
Employment & Labor Law
JUDICIAL LAW
• Whistleblower claims; independent contractor not covered. An emergency room physician who was terminated was not entitled to seek relief under the Minnesota Whistleblower Law, Minn. Stat. §181.932. The 8th Circuit Court of Appeals, affirming a ruling of U.S. District Court Judge Joan Ericksen in Minnesota, held that because the doctor was an independent contractor, he was not covered by the statute and further held that a breach of contract claim was untimely. Placzek v. Mayo Clinic, 18 F.4th 1010 (8th Cir. 11/30/2021).
• Retaliation rejected; other claims dismissed. An employee was unsuccessful in suing for retaliation, defamation, and intentional infliction of emotional distress after she was terminated for insurance fraud related to enrolling her adult daughter on her health plan even though she was not entitled to be on it. The 8th Circuit, affirming a lower court ruling, held that the claims were not actionable, including an assertion that the claimant had been retaliated against for testifying before state oversight committees, because her employers had no knowledge of her testimony and thus, there was no causal connection warranting a retaliation claim. Ackerman v. State of Iowa, 19 F.4th 1045 (8th Cir. 12/06/2021).
• 1st Amendment retaliation; deputy sheriffs lose. Another retaliation claim, this one brought under the 1st Amendment by deputy sheriffs who were terminated or demoted by a newly elected sheriff, allegedly because they supported the sheriff’s opponent, was unsuccessful. Affirming a lower court ruling, the 8th Circuit held that the sheriff was allowed to take adverse action against them because they were not immune under existing case law limiting the right of government employees to support political candidates. Burns v. Cole, 2022 WL 108607 (Minn. Ct. App. 01/11/2022) (unpublished).
• FMLA claim denied; failure to re-certify. An employee who was on family & medical leave under FMLA lost his claim for wrongful termination after he was fired for failing to produce re-certification from his psychiatrist after initial approval for intermittent leave for depression and anxiety. The 8th Circuit upheld summary judgment for the employer because it was reasonable for it to require re-certification based on a significant change in circumstances of the employee’s absence. Whittington v Tyson Foods, Inc., 21 F.4th 997 (8th Cir. 12/29/2021).
• Arbitration upheld; employment age discrimination claim rejected. An arbitration ruling favoring an employer in an employment discrimination case was upheld by the 8th Circuit. It upheld a decision by U.S. District Court Judge Michael J. Davis in Minnesota that there were no legitimate grounds to overturn the arbitrator’s decision. Zhang v. United Health Group, 2021 WL 6137359 (Minn. Ct. App. 12/29/2021) (unpublished).
• Untimely arbitration challenge; arbitration compelled. An untimely effort by employees to challenge a district court order compelling arbitration and denying a motion for extension of time to object to an arbitrary decision was rejected. The 8th Circuit held that there was no basis to reverse the lower court ruling confirming the arbitration award. Livingston v. Progressive Eldercare Service–Cleveland, Inc., 2022 WL 200813 (Minn. Ct. App. 01/24/2022) (unpublished).
• Court reporters not entitled to arbitrate; judge’s decision not subject to arbitration. A pair of court reporters who were terminated by district court judges in Minnesota for “disruptive and disrespectful” conduct were not entitled to arbitrate under their collective bargaining agreements. A decision by Ramsey County District Court barring an arbitrator’s decision allowing an arbitration to proceed was affirmed by the Minnesota Court of Appeals because the court reporters are “at will” employees and their bargaining agreement does not permit arbitration of a determination by a judge to discharge them. Minnesota Judicial Branch v. Teamsters Local 320, 2022 WL 200361 (Minn. Ct. App. 01/24/2022) (unpublished).
• Collective bargaining agreements implemented; legislative challenge moot. A challenge by state legislators to the action by the Minnesota Management and Budget (MMB) commissioner to implement certain public sector collective bargaining agreements failed. The appellate court, affirming a decision of Ramsey County District Court, denied the argument that the agreements were not properly ratified by both houses of the Legislature because it was clear that both the House of Representatives and the Senate intend to fully ratify them and effect their implementation and their terms, which rendered the case moot. O’Neill v. Schowalter, 2022 WL 200336 (Minn. Ct. App. 01/24/2022) (unpublished).
• Reasonable accommodations; dismissal reversed. An employee who sued for failure to reasonably accommodate a disability had her dismissal reversed and remanded by the court of appeals. The appellate court determined that the Hennepin County District Court erred in granting summary judgment because the record reflected an issue of material fact, based upon a strong inference that the employee was wrongfully discharged from employment after being only six minutes late for her scheduled meeting with human resources, where she was intending to ask for an accommodation for her disability. Layeux v. Dedicated Logistical Services, 2021 WL 6109805 (Minn. Ct. App. 12/27/2021) (unpublished).
• Reasonable accommodation offered; employee denied unemployment benefits. An employee who quit his job on grounds of a medical necessity was denied unemployment compensation benefits. The appellate court, affirming a ruling of an unemployment law judge (ULJ) with the Department of Employment & Economic Development (DEED), held that the employer offered the claimant a reasonable accommodation in the form of an unpaid leave of absence, which came prior to the time the employee quit. Walker v. Knutson Counseling & Seminars, Inc., 2022 WL 17133 (Minn. Ct. App. 01/03/2022) (unpublished).
Marshall H. Tanick
Meyer, Njus & Tanick
mtanick@meyernjus.com
Federal Practice
JUDICIAL LAW
• FDCPA; standing; absence of particularized harm. Declining to resolve an intra-district split between Judges Schiltz and Magnuson on an FDCPA preemption issue, the 8th Circuit instead found that the plaintiff lacked standing to pursue his FDCPA claim where he failed to sufficiently allege any “concrete and particularized” harm or a “concrete injury in fact,” and remanded the action with instructions to dismiss. Ojogwu v. Rodenburg Law Firm, 26 F.4th 457 (8th Cir. 2022).
• 9 U.S.C. §4; arbitration enjoined. Finding that the defendants had waived any argument that the district court had lacked the power to enjoin a FINRA arbitration under 9 U.S.C. §4, the 8th Circuit affirmed the district court’s injunction, finding that the defendants were not “customers” who were entitled to invoke the FINRA arbitration process. Principal Secs., Inc. v. Agarwal, 23 F.4th 1080 (8th Cir. 2022).
• Preliminary injunction; equitable estoppel; delay. While agreeing with the district court that the plaintiff had established a likelihood of success on its claim that the defendants breached a license agreement, the 8th Circuit nevertheless reversed the district court’s entry of a preliminary injunction, finding that the court had abused its discretion in rejecting defendants’ equitable estoppel defense, that the plaintiff could not establish irreparable harm where any harm was compensable by money damages, and that the plaintiff’s delay of more than a year in bringing the action had prejudiced the defendants. Wildhawk Invests., LLC v. Brava I.P., LLC, ___ F.4th ___ (8th Cir. 2022).
• Fed. R. Civ. P. 65(a)(1); procedural due process; injunction reversed; case reassigned. Where a hearing on a request for a temporary restraining order was converted to a hearing on a request for a preliminary injunction with roughly one hour’s notice, the 8th Circuit expressed “grave doubts” that the defendant received “sufficient notice” of the request for an injunction. The 8th Circuit also found a “lack of evidence” sufficient to support the injunction. Finally, the 8th Circuit found this to be the “rare case… to warrant reassignment of the case on remand.” Tumey v. Mycroft AI, Inc., ___ F.4th ___ (8th Cir. 2022).
• Statute of limitations; federal holiday rule; no forfeiture. Where the statute of limitations on the plaintiff’s Section 1983 claim would have run on a date that happened to be a federal holiday, the plaintiff commenced his action the following day, the defendants moved to dismiss on the basis of the statute of limitations, the plaintiff never raised the federal holiday rule, Judge Doty acknowledged the existence of the federal holiday rule but dismissed the claims because the plaintiff had failed to invoke the rule, and the plaintiff appealed, the 8th Circuit reversed the dismissal of the claims that had been dismissed on the basis of the statute of limitations, finding no “forfeiture” of a “purely legal issue,” while suggesting that “bad lawyering” may have played a role. Robinson v. Norling, 25 F.4th 1061 (8th Cir. 2022).
• Fed. R. App. P. 3 and 4; intervenor; failure to file separate notice of appeal. Where the plaintiff commenced an action that was eventually removed on the basis of ERISA preemption, another plaintiff intervened, the district court granted the defendant’s motion for summary judgment, only the original plaintiff filed a notice of appeal, both plaintiffs filed briefs in the 8th Circuit, and the defendant moved to strike the intervenor’s appellate brief, the 8th Circuit granted the motion to strike the intervenor’s brief and dismissed the intervenor from the appeal where the intervenor neither filed his own notice of appeal nor formally joined in the plaintiff’s appeal. Vercellino v. Optum Insight, Inc., 26 F.4th 464 (8th Cir. 2022).
• Reduction of requested attorney’s fees affirmed; no abuse of discretion. The 8th Circuit found no abuse of discretion in a district court’s reduction of a request for attorney’s fees of more than 75% in an FLSA action where the law firm had a long history of unreasonable fee requests and had “engaged in negotiating tactics that unreasonably extended the litigation.” Oden v. Shane Smith Enters., Inc., ___ F.4th ___ (8th Cir. 2022).
• Removal; mootness; remand required. Agreeing with the district court that the previously removed action was moot, the 8th Circuit reiterated in an unpublished opinion that the “proper disposition” of a removed action that is determined to be moot is to remand rather than dismiss the action. Clark v. Forte, 2022 WL 620553 (8th Cir. 3/3/2022).
• Personal jurisdiction; “conspiracy-based” jurisdiction rejected. Chief Judge Tunheim granted a motion to dismiss for lack of personal jurisdiction brought by the attorneys general of Connecticut, Maryland, and New York, rejecting the plaintiff’s argument that the defendants were subject to “conspiracy-based personal jurisdiction” and finding that conspiracy-based jurisdiction only applies where the “harm of the overt act taken in furtherance of the conspiracy” must be “directly felt within Minnesota’s borders.” WinRed, Inc. v. Ellison, 2022 WL 228244 (D. Minn. 1/26/2022), appeal docketed, No. 22-1238 (8th Cir. 2/1/2022).
• Preliminary injunction denied; delay belied claim of irreparable harm. Where the plaintiff waited 13 months before seeking a preliminary injunction, Judge Nelson found that his delay “negate[d] a finding of irreparable injury.” Ng v. Bd. of Regents of the Univ. of Minn., 2022 WL 602224 (D. Minn. 3/1/2022).
• Fed. R. Civ. P. 68; motion to strike offer of judgment denied. Following Magistrate Judge Schultz’s decision in Borup v. CJS Solutions, Group, Inc. (333 F.R.D. 142 (D. Minn. 2015)), Magistrate Judge Wright denied plaintiffs’ motion to strike defendants’ Rule 68 offer of judgment, rejecting plaintiffs’ argument that defendants were attempting to “pick off” the name plaintiffs prior to class certification in an FLSA action. Murphy v. Labor Source, LLC, 2022 WL 378142 (D. Minn. 2/8/2022).
• Fed. R. Civ. P. 37(b)(2)(C); sanctions imposed for deficient discovery responses. While rejecting one defendant’s request that plaintiff’s claims be dismissed as a sanction for her “deficient” discovery sanctions, Magistrate Judge Leung did award the defendant the “reasonable expenses and attorneys’ fees” associated with its motion. Peterson-Rojas v. Dakota Cnty., 2022 WL 336829 (D. Minn. 2/4/2022).
• Fed. R. Civ. P. 37(a)(5)(B); L.R. 37.1(b); request to withdraw discovery motions denied; fees and costs awarded. Where the plaintiff filed multiple “placeholder” motions to compel without specifying which document requests, interrogatories, and depositions were at issue, defendants asserted that they were unable to respond substantively to the “barren” motions and also asserted that the plaintiff had not complied with her meet-and-confer obligations, and the plaintiff sought to withdraw her motions at the motion hearing, Magistrate Judge Leung denied the request to withdraw the motions and awarded the defendants their attorney’s fees and costs incurred in responding to the motions. Brinkman v. Sprinkler Fitters Local #417, 2022 WL 420881 (D. Minn. 2/11/2022).
• Personal jurisdiction; successor corporation; corporate veil. Judge Brasel denied a motion by multiple defendants to dismiss for lack of personal jurisdiction, finding that the plaintiff had raised sufficient allegations of successor liability against the limited liability company defendant to plead specific jurisdiction, and that the plaintiff also sufficiently asserted veil-piercing claims against the individual defendants to make them subject to personal jurisdiction. HEK, LLC v. Votum Enters., LLC, 2022 WL 329682 (D. Minn. 2/3/2022).
• 28 U.S.C. §1292(b); personal jurisdiction; Knowlton; leave to appeal denied. Having previously denied one defendant’s motion to dismiss for lack of personal jurisdiction premised on the alleged abrogation of Knowlton v. Allied Van Lines, Inc. (900 F.2d 1196 (8th Cir. 1990)), Judge Schiltz denied a request to certify that order for interlocutory appeal, finding that even if the defendant was correct that Knowlton has been abrogated by subsequent Supreme Court decisions, the defendant might have sufficient contacts with Minnesota to establish personal jurisdiction. Brunhilda v. Purdue Univ. Global, Inc., 2022 WL 607408 (D. Minn. 3/1/2022).
• Punitive damages; Minn. Stat. §549.191; intra-district split remains. Acknowledging the “disagreement” in the District of Minnesota on the applicability of Minn. Stat. §549.191 to a motion to amend a complaint to add a claim for punitive damages, Magistrate Judge Brisbois applied Minn. Stat. §549.191 and denied the plaintiff’s motion to amend. Morton v. Park Christian School, 2021 WL 7082938 (D. Minn. 12/15/2021).
Josh Jacobson
Law Office of Josh Jacobson
joshjacobsonlaw@gmail.com
Indian Law
JUDICIAL LAW
• Mille Lacs Reservation created by 1855 treaty not diminished or disestablished. In an exhaustive opinion granting the Mille Lacs Band of Ojibwe’s motion for partial summary judgment, the United States District Court for the District of Minnesota held that the Mille Lacs Reservation’s boundaries remain as they were created under Article 2 of the 1855 Treaty with the Chippewa. The court applied the United States Supreme Court’s standard framework for determining whether later treaties or laws change the boundaries of a reservation by examining statutory language and textual indications of Congress’s intent, and rejected the arguments of the Mille Lacs County defendants that the band’s reservation was diminished or disestablished through the Treaties of 1863, 1864, and 1867, the Nelson Act, or three other 19th century congressional actions. The court’s decision allows the band to continue to litigate its claims for declaratory and injunctive relief concerning the scope of its law enforcement authority within the reservation. Mille Lacs Band of Ojibwe v. County of Mille Lacs, 2022 WL 675980, slip. op. (D. Minn. 3/4/2022).
Leah K. Jurss
Hogen Adams PLLC
ljurss@hogenadams.com
Intellectual Property
JUDICIAL LAW
• Copyright: SCOTUS holds mistakes of law in copyright registrations are eligible for safe harbor. The Supreme Court of the United States recently vacated an appellate court’s decision holding that 17 U.S.C. §411(b), a “safe harbor” provision, excused mistakes of law and mistakes of fact in the registration of copyrights. In 2016, Unicolor sued H&M for copyright infringement of Unicolor’s fabric designs. A jury found in favor of Unicolor. H&M moved to vacate the verdict, contending the copyright registration was invalid under 37 C.F.R. §202.3(b)(4) because Unicolor had registered 31 independent works within a single application. The district court denied H&M’s motion, finding that because Unicolor did not know it failed to meet the “single unit” requirement, the copyright registration was not invalid. H&M appealed the decision to the United States Court of Appeals for the 9th Circuit, which reversed the district court and held that a collection of works did not meet the “single unit” requirement in §202 unless published as a “singular, bundled unit” and failure to know of the requirement did not save the copyright.
The Supreme Court vacated the 9th Circuit’s decision. With a focus on §411(b)’s safe harbor provision, the Supreme Court held that the provision included both mistakes of law and mistakes of fact. The Supreme Court first interpreted “knowledge” to be broad enough to cover knowledge of both facts and law through statutory construction principles. Second, the Court cited past cases, prior to the enactment of §411(b), that held inadvertent mistakes in registration certificates were not a means to invalidate a copyright. Finally, the Court reviewed the legislative history to find that §411(b) was added to make obtaining valid copyrights easier and to eliminate loopholes for preventing enforcement of copyrights. H&M argued that “ignorance of the law is no excuse,” but the Court rejected the argument, finding that the maxim applied to the mens rea element of a crime but not to “civil case[s] concerning the scope of a safe harbor that arises from ignorance.” The Court further noted that claims of mistake are not automatically accepted, and circumstantial evidence should be reviewed for instances of willful blindness. Unicolors, Inc. v. H&M Hennes & Mauritz, L.P., No. 20-915, 2022 U.S. LEXIS 1226 (2/24/2022).
• Copyright: Copyright claims based on sovereign nation status dismissed as frivolous. Chief Judge Tunheim recently dismissed a local man’s lawsuit for copyright infringement where plaintiff, a man claiming to be a sovereign citizen, alleged that Brown County, Minnesota, owed monetary damages for the wrongful use of his copyrighted name during criminal proceedings against him. The court dismissed the copyright claim as “plainly frivolous” because 37 C.F.R. §202.1(a) prohibits the copyrighting of “[w]ords and short phrases such as names.” Accordingly, plaintiff could not seek monetary damages for the use of his name by state courts. The court also found that the criminal proceedings against plaintiff were not invalid due to the supposed copyright violation because the existence of a copyright or trademark does not prevent a court from exercising jurisdiction over a civil or criminal matter. Gould v. Brown Cty., No. 21-2762 (JRT/DTS), 2022 U.S. Dist. LEXIS 27505 (D. Minn. 1/5/2022).
Joe Dubis
Merchant & Gould
jdubis@merchantgould.com
Zachary Zadow
Merchant & Gould
zzadow@merchantgould.com
Real Property
JUDICIAL LAW
• Park dedication fees. A municipality may not impose a park dedication fee as a condition of subdivision approval unless it makes an individualized determination that the proposed development will result in a need to acquire, develop, or approve land for a park or other public uses identified in Minn. Stat. §462.358, subd. 2b(a) and the reasons given by the municipality have a factual basis in the record. Furthermore, the amount of the fee must relate in both nature and extent to the impact of the project. In Puce, a landowner sought various approvals from the City of Burnsville to develop a property for use as an automobile dealership and bakery. The city granted approvals subject to the payment of a $11,700 park dedication fee, with the amount based on a formula set forth in an ordinance, over the owner’s objections. The landowner sought judicial review. The district court denied motions for summary judgment and then conducted a bench trial based solely on the submission of exhibits and concluded that the imposition of the fee was lawful. The Minnesota Court of Appeals reversed, holding that the city violated subdivisions 2b(e) and 2c(a) of Minn. Stat. §462.358. Puce v. City of Burnsville, No. A21-0895, ___N.W.2d ___, 2022 WL 351119 (Minn. App. 2/7/2022).
• Mechanic’s liens. A contractor entitled to a mechanic’s lien cannot pursue an equitable remedy such as unjust enrichment if the contractor failed to timely record the lien. In Craig Scherber, a contractor performed grading and soil correction work in 2015 and the property owner did not pay for the work. In 2016, the contractor notified the owner of its intent to file a lien and the owner then allegedly convinced the contractor to submit false invoices to allow the contractor to preserve the lien and the owner to maintain a positive relationship with its lender. Another party provided secondary lending to the project in 2018, but the owner defaulted, and the two lenders and the owner in 2020 negotiated an agreement whereby the secondary lender would obtain title to the property. A title search on behalf of the secondary lender revealed that the contractor filed a lien in February 2020. The secondary lender proceeded to close on its acquisition of the property and then brought a declaratory judgment seeking a determination that the lien was invalid and alleged a claim for slander of title. The contractor counterclaimed for unjust enrichment and withdrew its lien. The district court granted cross-motions for dismissal. The court of appeals reversed, holding that the contractor was barred from pursing an unjust enrichment claim given that its lien rights constituted an adequate legal remedy even though the lien was not perfected. Further, the secondary lender was entitled to an award of attorney’s fees if they were necessarily incurred and a direct result of an attempt to clear title of an invalid lien. Craig Scherber & Assocs., Inc. v. Matt Bullock Contracting Co., Inc., No. A21-0428, 2022 WL 433240 (Minn. App. 2/14/2022).
Julie N. Nagorski
DeWitt LLP
jnn@dewittllp.com
Tax Law
JUDICIAL LAW
• Property tax: Clinics owned by hospital districts are property-tax exempt. Hospitals are exempt from property tax in Minnesota. In addition, Minnesota statutes exempt from taxation property owned by “hospital districts” so long as that property is used for purposes set out by the statute. Perham Hospital District owns and operates the hospital in Perham, as well as three clinics. Otter Tail County reasoned that the statutory tax exemption for hospital districts is available only to hospitals and not to clinics and therefore classified the three clinics as commercial property, and thus subject to tax. The hospital district challenged the county’s determination in the Minnesota Tax Court. The tax court denied both parties’ requests for summary judgment and following trial, the tax court held that the three at-issue clinics were statutorily exempt from property taxation because the hospital district used the property for a statutory purpose—in particular, the tax court held that to meet the statutory purpose, the property at issue must be used “to acquire, improve and run” the district’s hospital, which, in this case, the tax court deemed satisfied.
The county appealed. The Minnesota Supreme Court noted that “the only issue we need to address is the tax court’s conclusion that the District owns, uses, or occupies the Clinics… to improve and run the Hospital.” Reviewing the tax court’s conclusion for clear error, the Supreme Court affirmed. The Court concluded, “Because there is sufficient evidence in the record to support the tax court’s findings and conclusions, and in light of our deferential standard of review, we conclude that the tax court did not clearly err in finding that the [Hospital] District used the Clinics to improve and run Perham Hospital.” Perham Hosp. Dist. v. Otter Tail Co., 969 N.W.2d 366 (Minn. 2022).
• Property tax: Tax court affirmed in unequal assessment challenge. Without oral argument, the Minnesota Supreme Court considered and rejected four issues raised by the taxpayer, a self-storage facility in Oakdale. First, the Court held that that tax court did not abuse its discretion when it denied the taxpayer’s motion to compel detailed discovery regarding other self-storage facilities in the county. The Court similarly held that the lower court did not abuse its discretion in denying the taxpayer leave to amend its pleadings to add constitutional claims and did not err in declining to compel disclosure of the county assessor’s home address. Finally, the Court held that the taxpayer had not met its burden of proof to establish its claim of unequal assessment. Chambers Self-Storage Oakdale, LLC v. Washington Co., No. A21-0825, 2022 WL 697698, ___ NW2d ___ (Minn. 3/9/2022).
• County’s departure from appraiser’s report does not warrant exclusion from trial. This dispute arises from inconsistencies between the county’s appraisal report and its pretrial brief. In its appraisal report, the county’s appraiser asserts that petitioner is not considered a special purpose property, and therefore used both the cost and sales comparison approach to valuation, giving more weight to the cost approach. Petitioner Marvin Lumber and Cedar Co.’s appraiser used the same approaches but relied more on the sales comparison. In the county’s pretrial brief, it states that several aspects of Marvin’s facility make it a special purpose property and the cost approach should be the sole or principal method of valuing the property.
When a property is used for special purposes, “appraisal commonly proceeds using only the cost approach to value, based on the conclusion that the income capitalization and sales comparison approaches are either inapplicable or insufficiently supported to warrant reliance.” The county’s ask values the facility “at an aggregate amount well above that proposed by its own appraiser.”
Marvin filed a motion in limine asking the court to exclude evidence and argument that the facility is a special purpose property, arguing that any testimony that the facility is considered a special purpose property would constitute “improperly undisclosed expert opinion evidence” and directly contradict the opinion of the county’s own appraiser. The county opposed the motion, asserting that it properly responded to petitioner’s discovery requests, that trial evidence outside of any expert’s opinion supports the special purpose property valuation, and that a motion in limine is not a vehicle to exclude arguments, only evidence.
The court concluded that “much properly disclosed anticipated trial evidence… could be relevant to determining whether the [facility] qualifies as a special purpose property under Minnesota law,” and neither the county appraiser’s report nor its pretrial brief warrants exclusion, and therefore denied petitioner’s motion. Marvin Lumber and Cedar Co., v Roseau Cty, 2022 WL 69109 (MN Tax Court 1/4/2022).
• Attention counties: Session Law 74 extends to the tax court! Petitioners Ira Azhakh and Bassam K. Abu Samrah both filed property tax petitions on 4/15/2021 for property located in Minneapolis and Medina, respectively. In both cases, Hennepin County filed a motion to dismiss on the grounds that the petitions were untimely. “The County argued that the Minnesota legislature, in response to the COVID-19 pandemic, extended the deadline for property tax petitions filed in the district court, but did not similarly extend the deadline for property tax petitions filed in the tax court.” Petitioners opposed the motion and joint hearing was held.
In WMH Prop. Owner LLC v. Cnty. of Hennepin, Nos. 27-CV-20-6274 & 27-CV-21-4306, 2021 WL 4312988 (Minn. T.C. 9/9/2021) the “court addressed the effect that Session Law 74 had on chapter 278 property tax petitions and held that the plain meaning of Session Law 74 extended the deadlines in all district court proceedings, including chapter 278 petitions filed in the district court,” but did not address whether Sessions Law 74 included deadline extensions for chapter 278 petitions filed in the tax court. However, in a subsequent ruling that the was not released at the time Hennepin County briefed its motion, the court held that “the suspension of deadlines provided in Session Law 74 applies not only to chapter 278 petitions invoking the jurisdiction of the district court but to those invoking the jurisdiction of the tax court.” See Timber New Ulm Props. LP v. Brown Cnty., No. 08-CV-20-1048, 2021 WL 5856123 (Minn. T.C. 12/7/2021).
The court reiterated that it could not “find no plausible—or rational—reason why the legislature would create an implicitly bifurcated scheme in which a case involving the same claims and the same property would be subject to one deadline if filed in the district court, and an entirely different deadline if filed in the tax court.” Thus, the court denied the county’s motions to dismiss. Azhakh v. Hennepin Co., 2022 WL 150847 (MN Tax Court 1/12/2022).
• Incorrect email address leads to improper service of process. In response to the pandemic, Hennepin County created an email inbox accepting service of property tax petitions. When the petitioner emailed a petition to a designated email address, the petitioner would receive in return a reply from that email address bearing proof of service.
Petitioners 2200 Gateway LLC and Milwaukee Avenue Townhome Associates filed petitions challenging their property valuations for taxes payable in 2020, using Hennepin County’s email filing procedure. “Around the time of the petition, 2200 and the County were engaged in settlement negotiations involving several years of assessments as to several parcels of real estate, including the subject property.” 2200 received a stipulated settlement from the County and executed it on 4/24/2020.
Subsequently, counsel for 2200 filed in the district court an affidavit of service claiming that personal service was made on the county by email to CA.PetitionService@hennepin.us on April 10. “Counsel for 2200 also forwarded the County an email evidencing that on April 10, 2020, he sent a PDF document titled ‘2200 Gateway Tax Petition 4-10-20’ to CA.PetitionServiCA.PetitionService@hennepin.us.” Counsel for 2200 never received proof of service from the county’s email and did no follow-up as to why, instead assuming that it went to junk mail without further investigation.
In April 2020, the county sent counsel for 2200 a notice of deficient proof of service. 2200 attempted to serve the county at the designated email address but failed because it inadvertently sent the petition to CA.PetitionServiCAPetitionService@hennepin.us, instead of CA.PetitionService@hennepin.us, the former of which does not exist.
The court concluded that 2200 “did not follow the specified procedure for serving the County, as it attempted service on the wrong email address and never received return proof of service from the County.” As such, the court dismissed both petitions on the grounds that petitioners failed to effectuate proper service of process. 2200 Gateway LLC v. Hennepin Co., WL 2022 433118 (MN Tax Court 2/9/2022).
• Limited nonacquiescence in 5th Circuit decision. James Quezada works as a stone mason and owns Quezada Masonry. For several years, he hired subcontractors to perform the labor, and, like all business owners, was required to file a Form 1099 when threshold payments to subcontractors were met. A Form 1099 shows the name and address of the payee and how much she was paid. Each payee for whom a payor files a Form 1099 must provide a “Taxpayer Identification Number” (TIN). Because several of Mr. Quezada’s subcontractors failed to supply him a TIN, Mr. Quezada was required to withhold a flat rate for all payments to the payee and send the withholdings to the IRS. This is called “backup withholding.” Mr. Quezada failed to comply with backup withholding requirements. The dispute did not center on Quezada’s compliance with the withholding requirements. Instead, the “appeal raises one overarching question: whether the IRS’s assessment of Quezada is barred by the Internal Revenue Code’s three-year limitations period.” The 5th Circuit, disagreeing with the lower court, held that the three-year limitations period applied, and that the assessment was therefore barred. The dispute centered on the meaning of “the return” in 26 U.S.C. §6501(a). The taxpayer argued, and the Circuit agreed, that the Forms 1040 and 1099 that he filed were sufficient to constitute “the return.” The court rejected the IRS’s contention that only the form that is prescribed by treasury regulations for the specific tax liability at issue—here, the Form 945—can be “the return” that starts the running of the limitations period. Quezada v. IRS, 982 F.3d 931 (5th Cir. 2020).
ADMINISTRATIVE ACTION
• Limited nonacquiescence. The IRS recognized the precedential effect of Quezada to cases appealable to the circuit and indicated it will follow the ruling in cases within the 5th Circuit in instances where the opinion cannot be meaningfully distinguished. The IRS is not acquiescing to the opinion and will continue to litigate its position in other circuits. AOD 2022-1 appears in Internal Revenue Bulletin 2022-6 (2/7/2022).
Morgan Holcomb
Mitchell Hamline School of Law
morgan.holcomb@mitchellhamline.edu
Sheena Denny
Mitchell Hamline School of Law
sheena.denny@mitchellhamline.edu