Criminal Law
JUDICIAL LAW
• Conditional release: Lifetime conditional release is not a punishment of life imprisonment requiring prosecution by indictment. Appellant was charged by complaint with third- and fourth-degree criminal sexual conduct. A jury found him guilty, and the court imposed a lifetime conditional release term, due to appellant’s prior third-degree criminal sexual conduct conviction. Appellant argues the lifetime conditional release term is improper, because the state charged him by complaint, rather than by indictment.
Minn. R. Crim. P. 17.01, subd. 1, requires that offenses punishable by life imprisonment be prosecuted by indictment. The court of appeals considers whether a lifetime period of conditional release constitutes “life imprisonment” under this rule. There is a legal distinction between supervised release, conditional release, and life imprisonment. Unlike supervised and conditional release, where a sentence of life imprisonment is imposed, a defendant’s release from incarceration is not guaranteed. “‘[L]ife imprisonment’ contemplates a sentence of incarceration from which there is no requirement or assurance of release.”
Here, appellant was not sentenced to “life imprisonment.” He was sentenced to 140 months in prison and would be released after serving a minimum of two-thirds of that time. He would then be on conditional release within the community. Because his release from incarceration was certain under this sentence, appellant was not sentenced to “life imprisonment.” For the rest of his life, appellant does face the potential for reincarceration should he violate the conditions of his release, but any reincarceration would not be due to the original underlying offense; rather, it would be due to the conditional release term violation(s). Thus, the state was not required to prosecute appellant by indictment. State v. Snyder, A22-0318, 2023 WL 192907 (Minn. Ct. App. 1/17/2023).
• RICO: An “enterprise” can exist within a corporation that does not participate in and is unaware of criminal activity. Respondent was charged with racketeering and aiding and abetting theft by swindle. The district court granted respondent’s motion to dismiss the racketeering charge, finding there was no “enterprise.” The state appealed.
Respondent was a district manager for a corporation that sold cell phones in retail stores. Seven employees, including respondent, were arrested for their involvement in a scheme that involved credit mules purchasing expensive phones on installment plans, making only the first payment, and selling the phone for a large profit. The sales representatives, team leaders, and respondent all financially benefited from the fraudulent sales. Evidence showed respondent encouraged sales to the credit mules.
Under the RICO Act, it is a crime for a person to be employed by or associated with an enterprise and to participate in a pattern of criminal activity relating to that enterprise. See Minn. Stat. §609.903, subd. 1. “Enterprise” is defined as “a sole proprietorship, partnership, corporation, trust, or other legal entity, or a union, government entity, association, or group of persons, associated in fact although not a legal entity, and includes illicit as well legitimate enterprises.” Minn. Stat. §609.02, subd. 3.
Here, the defendants all worked with a common purpose, to make money from fraudulent cell phone sales. Their organization extended from credit mules to team leaders to respondent. The activities of the defendants who were employees of the corporation extended beyond making money from the fraudulent sales (the underlying criminal act) to other activities, fulfilling their job responsibilities as employees of the corporation. Thus, the criteria set forth for a RICO enterprise in State v. Huynh, 519 N.W.2d 191, 196 (Minn. 1994), are met.
There is no requirement that the corporation was aware of, involved with, or engaged in the criminal activity. The district court erred when it concluded otherwise. The dismissal of the RICO charge is reversed and the case is remanded. State v. Paulson, A22-1243, 2023 WL 351217 (Minn. Ct. App. 1/23/2023).
• Controlled substances: Knowingly permitting a child to ingest meth does not require knowledge of the child’s age. Appellant, who lived next door to K.F., asked K.F. and her friend A.D., both 14 years old, to come to his home to smoke marijuana with him. They all smoked marijuana and methamphetamine provided by appellant. After a jury trial, appellant was convicted of knowingly permitting A.D. to ingest methamphetamine. On appeal, appellant argues there was insufficient evidence to prove he knew A.D. was a “child.”
Minn. Stat. §152.137, subd. 2(b), prohibits a person from “knowingly caus[ing] or permit[ting] a child… to inhale, be exposed to, have contact with, or ingest methamphetamine.” A “child” is “any person under the age of 18 years.” Minn. Stat. §152.137, subd. 1(c). The court of appeals points to Minn. Stat. §609.02, subd. 9(6), which provides that “[c]riminal intent does not require proof of knowledge of the age of a minor even though age is a material element in the crime in question.”
Thus, the only reasonable interpretation of section 152.137, subd. 2(b), is that “knowingly” refers to the volitional act of providing a substance the actor knows to be methamphetamine, not the age of the child. Thus, the state was not required to prove appellant knew A.D. was under the age of 18. Appellant’s conviction is affirmed. State v. Lehman, A22-0200, 2023 WL 1094416 (Minn. Ct. App. 1/30/2023).
Samantha Foertsch
Bruno Law PLLC
samantha@brunolaw.com
Stephen Foertsch
Bruno Law PLLC
stephen@brunolaw.com
Environmental Law
JUDICIAL LAW
• Court in PolyMet mining case partially grants motion to dismiss claims under the ESA. A District of Minnesota court recently issued an opinion granting and denying portions of a motion to dismiss stemming from a proposed mining project. PolyMet Mining, Inc. proposes to build an open-pit copper-nickel mine in northeastern Minnesota. Pursuant to the Endangered Species Act (ESA) (16 U.S.C. §1531 et seq.), the United States Fish and Wildlife Service (FWS) conducted a study and issued a biological opinion discussing whether the proposed action was “likely to jeopardize the continued existence of listed species or result in the destruction or adverse modification of critical habitat.” FWS examined three species—the Canada lynx, the gray wolf, and the northern long-eared bat—and concluded that the mine would not jeopardize their continued existence or adversely modify critical habitat.
Plaintiffs, a group of environmental advocacy organizations, challenged the FWS’s opinion and alleged that subsequent permitting approvals violated the ESA. First, plaintiffs alleged that the FWS failed to reinitiate consultation of endangered species under the ESA. Reinitiation is required under four scenarios, two of which plaintiffs contended applied here—that new information revealed effects of the mine that were not previously considered, and that the proposed mine was subsequently modified in a manner that would cause an effect that was not originally considered. Plaintiffs alleged three types of “new information” arose: (1) Disease devastated the population of northern long-eared bats in the area; (2) the extent and magnitude of other mining activity in northeastern Minnesota has significantly increased; and (3) the Forest Service gained a better understanding of the potential adverse impacts of a copper mine in the region.
Regarding plaintiffs’ first contention, PolyMet responded that the population decrease of the northern long-eared bat was due to disease and not an effect of the operation of the mine. The court recognized that this was true; however, the specific bat population was now much lower than when the opinion was initially prepared. The opinion, therefore, used inapplicable population statistics and was insufficient in this regard. The court denied the motion to dismiss on this claim.
The court rejected plaintiffs’ second claim requesting reinitiation due to an increase of mining activity in northeastern Minnesota. The court held that it was difficult to understand how the “new information” of two companies exploring the area revealed that the impact of the mine on listed species may affect species in a manner not previously considered by FWS in its opinion. The court dismissed this aspect of plaintiffs’ ESA claim.
Regarding plaintiffs’ third contention, the court determined that plaintiffs failed to identify any alleged new scientific developments or to explain how they revealed anything about the mine that was not previously considered. The court determined that these allegations were too conclusory.
Finally, plaintiffs contended that a change in PolyMet’s wetland mitigation plan should also trigger reinitiation. The opinion indicated that the wetland mitigation plan played no role in FWS’s conclusion that the mine would not jeopardize the listed species. The court found the opinion adequately discussed and examined the wetland mitigation plan, and since FWS did not rely on the plan in issuing its opinion, the alleged changes were insufficient to trigger reinitiation under the ESA. Center for Biological Diversity et al. v. Haaland et al., D. Minn. (2/1/2023) Slip Copy2023, WL 1451581.
ADMINISTRATIVE LAW
• EPA rejects Minnesota’s and 20 other states’ SIPs for 2015 ozone NAAQS; “Good Neighbor Plan” FIP forthcoming. On 1/31/2023, the U.S. Environmental Protection Agency (EPA) disapproved the implementation plans of Minnesota and 20 other states addressing interstate transport for the 2015 ozone National Ambient Air Quality Standards (NAAQS).
EPA’s disapproval arose under section 110 of the Clean Air Act. 42 USC §7410. Within three years after the agency has promulgated a new or revised NAAQS, each state is required to submit to EPA a plan for implementing, maintaining, and enforcing the NAAQS within the state. Section 110(a)(2)(D)(i) requires these “state implementation plans” (SIPs) to include, among other things, provisions adequate to prevent in-state emissions from causing adverse impacts to downwind states’ ability to meet the NAAQS. This so-called “good neighbor” or “interstate transport” regulation contains two prongs, which EPA and states must evaluate independently: (1) For downwind states that have not yet attained the NAAQS, the SIP must prohibit any source or other emission activity from contributing to the nonattainment; and (2) for states that are in attainment with the NAAQS, the SIP must prohibit any source or other emission activity from interfering with the state’s maintenance of the NAAQS. Under section 110(c), if EPA disapproves a SIP, the agency must promulgate a federal implementation plan instead (FIP) within two years, unless the state corrects the deficiency (and EPA approves the revised SIP) before EPA issues the FIP.
On 10/1/2015, EPA promulgated a revised NAAQS for ozone, setting both the primary and secondary standards to 0.070 parts per million (ppm). The Minnesota Pollution Control Agency (MPCA) submitted its SIP for the 2015 ozone NAAQS on 10/1/2018. MPCA concluded that the state’s emissions of volatile organic compounds (VOCs) and nitrogen oxide (NOx) (ozone precursor chemicals) were not projected to contribute above 1 percent of the NAAQS to any downwind state, a threshold EPA has established to determine whether a state is linked to a downwind air quality problem. In addition, MPCA pointed to steadily decreasing emissions of NOx and VOCs in Minnesota between 2002 and 2015, particularly in the power sector. Accordingly, MPCA concluded that Minnesota would not contribute significantly to nonattainment (prong 1) or interference with maintenance in downwind states (prong 2) and that therefore no additional emission reductions were required to comply with the Good Neighbor rule for the 2015 ozone NAAQS. In February and May 2022, EPA proposed to disapprove the SIP submissions for 21 states, including Minnesota. Meanwhile, in April 2022, EPA issued a proposed FIP—the “Good Neighbor Plan” for the 2015 ozone NAAQS—to replace all of the state SIPs. EPA intends to finalize the FIP by 3/15/2023.
EPA has developed and used the following 4-step interstate transport framework to evaluate a state’s obligations to eliminate interstate transport emissions under the interstate transport provision for the ozone NAAQS: (1) Identify monitoring sites that are projected to have problems attaining and/or maintaining the NAAQS (i.e., nonattainment and/or maintenance receptors); (2) identify states that impact those air quality problems in downwind states sufficiently such that the states are considered “linked” and therefore warrant further review and analysis; (3) identify the emissions reductions necessary (if any), applying a multifactor analysis, to eliminate each linked upwind state’s significant contribution to nonattainment or interference with maintenance of the NAAQS at the locations identified in Step 1; and (4) adopt permanent and enforceable measures needed to achieve those emissions reductions.
Applying this framework to Minnesota’s SIP, EPA concluded that updated air modeling indicated Minnesota was linked to a downwind attainment/maintenance area (Cook County, Illinois) under step 2 of the interstate transport framework and that the SIP thus failed to identify and adopt enforceable emission reduction measures (steps 2 and 3). However, EPA only partially disapproved Minnesota’s SIP because it agreed with MPCA that Minnesota is not linked to any nonattainment receptors.
EPA’s forthcoming FIP is expected to jointly address all 21 of the disapproved SIPs. According to EPA’s proposed rule, the FIP will establish NOx emissions budgets requiring fossil fuel-fired power plants in 25 states to participate in an allowance-based ozone season trading program beginning in 2023. In addition, the agency for the first time is proposing to establish NOx limitations applicable to certain other industrial stationary sources with an earliest possible compliance date of 2026. These industrial source types are:
- reciprocating internal combustion engines in pipeline transportation of natural gas;
- kilns in cement and cement product manufacturing;
- boilers and furnaces in iron and steel mills and ferroalloy manufacturing;
- furnaces in glass and glass product manufacturing; and
- high-emitting equipment and large boilers in basic chemical manufacturing, petroleum, and coal products.
EPA, Final Disapprovals: “Good Neighbor” State Implementation Plans Addressing Interstate Transport Obligations for the 2015 Ozone National Ambient Air Quality Standard (1/31/2023), 88 Fed. Reg. 9336 (2/13/2023).
• EPA takes several actions on PFAS. EPA recently doubled down on the commitment it made in the 2021-2024 PFAS Strategic Roadmap. PFAS (per- and poly-fluoroalkyl substances) are a large group of chemicals historically used in consumer products and industrial processes. EPA has targeted PFAS due to their accumulation and persistence in the environment and the associated risks of human and animal health problems. Recent EPA activity includes the following:
Guidance on addressing PFAS in NPDES permits: On 12/6/2022, EPA issued a guidance memo for state environmental agencies that issue wastewater and stormwater discharge permits under the Clean Water Act’s (CWA) National Pollutant Discharge Elimination System (NPDES) and manage CWA pretreatment programs. The memo advises use of the most current sampling and analysis methods to identify sources of PFAS. The memo also identifies various means under the NPDES permitting program to regulate PFAS discharges from publicly owned treatment works (POTWs), industrial facilities, and stormwater discharges, e.g., by imposing technology-based effluent limits or establishing PFAS best management practices in an NPDES permit. Memorandum from Radhika Fox, EPA assistant administrator, to EPA Regional Water Division Directors, Regions 1-10, “Addressing PFAS Discharges in NPDES Permits and Through the Pretreatment Program and Monitoring Programs” (12/5/2022).
TSCA significant new use rule for inactive PFAS: On 1/26/2023, EPA published in the Federal Register a significant new use rule (SNUR) under the Toxic Substances Control Act (TSCA) for those per- and poly-fluoroalkyl substances (PFAS) that have not been manufactured (including imported) or processed for many years and are consequently designated as inactive on the TSCA Chemical Substance Inventory. Persons subject to the SNUR would be required to notify EPA at least 90 days before commencing any manufacture (including import) or processing of the chemical substance for a significant new use. Once EPA receives a notification, EPA would require a demonstration that the proposed use does not pose an unreasonable risk to human health and the environment. The public comment period for this rule extends through 3/27/2023. 88 Fed. Reg. 4937 (1/26/2023).
Updated CERCLA AAI standard referencing PFAS: In addition to this proposed rule, EPA published a final rule relating to PFAS. This rule affects the ability to seek liability protection under the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA) by conducting “all appropriate inquiries” into the environmental condition of a property prior to purchase. (The rule adopts the updated American Society for Testing and Materials (ASTM) International’s “Standard Practice for Environmental Site Assessments: Phase I Environmental Site Assessment Process.” The new standard (E1527-21) replaces the old standard (E1527-13) that has been used since 2013. 87 Federal Register 76578 (12/15/2022).
EPA’s new all-appropriate-inquiries rule recognizes that emerging contaminants such as PFAS may be addressed in a Phase I. For now, PFAS are not required to be considered under the ASTM standard but may be included in a Phase I report as a “non-scope consideration.” Once EPA classifies one of the PFAS as a hazardous substance under CERCLA, it will become subject to review in Phase I assessments. It is expected that EPA will classify certain PFAS (PFOA and PFOS) as hazardous substances later this year when a rule proposed on 8/25/2022 is finalized.
PFAS proposed as EPA enforcement & compliance initiative: Finally, EPA proposed addressing PFAS contamination as one of the National Enforcement and Compliance Initiatives (NECI) for the 2024-2027 cycle. NECI are selected every four years to determine where to focus EPA’s resources. With PFAS as a NECI, EPA would focus on identifying the extent of existing PFAS contamination in the environment. When the need for cleanup is identified, EPA would use its enforcement authority to hold companies responsible for the costs. In particular, EPA identified an intent to pursue liability under CERCLA for PFAS manufacturers. EPA is seeking comments on this proposal until 3/13/2023. 88 Fed. Reg. 2093 (1/12/2023).
Jeremy P. Greenhouse
Cody Bauer
Vanessa Johnson
Fredrikson & Byron P.A.
Jake Beckstrom
Vermont Law School, 2015
Erik Ordahl
Barna, Guzy & Steffen
Federal Practice
JUDICIAL LAW
• Attorney-client privilege; certiorari dismissed as improvidently granted. Last month this column noted the Supreme Court argument in In Re Grand Jury, which involved the issue of “whether a communication involving both legal and non-legal advice is protected by attorney-client privilege when obtaining or providing legal advice was one of the significant purposes behind the communication.”
Two weeks after that argument, the writ of certiorari was dismissed as improvidently granted. In Re Grand Jury, 23 F.4th 1088 (9th Cir.), cert. granted, 143 S. Ct. 80 (2022), cert. dismissed, 143 S. Ct. 543 (2023).
• Appellate review of denial of summary judgment; circuit split; grant of certiorari. The Supreme Court recently granted certiorari to consider the question of “whether to preserve the issue for appellate review a party must reassert in a post-trial motion a purely legal issue rejected at summary judgment.”
The circuits are badly divided on this issue, with eight circuits answering “no,” four circuits answering “yes,” and the 8th Circuit answering “sometimes yes and sometimes no.” Younger v. Dupree, 2022 WL 738610 (4th Cir. 3/11/2022) (unpublished), cert. granted, ___ S. Ct. ___ (2023).
• 28 U.S.C. §1447(d); order for remand; reconsideration not permitted. Relying on 28 U.S.C. §1447(d)’s restriction on review of remand orders “on appeal or otherwise,” the 8th Circuit held that once a district court remanded a case for lack of subject matter jurisdiction, it lacked any authority to reconsider that order. Stone v. J & M Secs., LLC, 55 F.4th 1150 (8th Cir. 2022).
• CAFA; 28 U.S.C. 1453(c)(1); remand reversed; no presumption in favor of remand; notable footnote. In an opinion authored by Judge Stras, the 8th Circuit reversed a district court’s remand of an action for lack of the required amount in controversy that had been removed under CAFA, finding that the usual “resolve all doubts in favor of remand” presumption does not apply in CAFA cases, that a removing defendant need only establish that the amount in controversy might exceed $5 million, and that the district court had erred in failing to consider a post-removal declaration that established the amount in controversy.
The panel commented in dicta in a footnote that the anti-removal presumption may no longer apply in “ordinary” diversity cases, but noted that it need not decide that question. Leflar v. Target Corp., 57 F.4th 600 (8th Cir. 2023).
• Younger abstention and Rule 11 sanctions both affirmed. The 8th Circuit affirmed an order by now-Chief Judge Schiltz, which had abstained under Younger, and also affirmed Judge Schiltz’s imposition of $50,000 in Rule 11 sanctions against the plaintiff. Igbanugo v. Minn. Office of Lawyers Prof. Responsibility, 56 F.4th 561 (8th Cir. 2022).
• Sanctions and contempt order affirmed; no abuse of discretion. The 8th Circuit found no abuse of discretion in a district court’s finding of contempt and award of attorney’s fees against a plaintiff that failed to comply with a deadline imposed by a district court to supplement its discovery responses. Cincinnati Ins. Co. v. Jacob Rieger & Co., ___ F.4th ___ (8th Cir. 2023).
• Common interest doctrine claim rejected; intra-district split. Acknowledging an intra-district split as to whether the common interest doctrine applies only to “legal” interests or extends to “legal, factual, or strategic” interests, Judge Menendez found that Magistrate Judge Schultz had not clearly erred when he found that it was limited to legal interests and affirmed his order requiring the defendant to disclose communications with a third party. Williams v. BHI Energy I Power Servs. LLC, 2022 WL 1748550 (D. Minn. 12/7/2022).
• Fed. R. Civ. P. 45(d)(2)(B)(ii); subpoena; request for cost-shifting rejected. Magistrate Judge Docherty denied a request by an “interested non-party” to shift an estimated $150,000 in subpoena compliance costs pursuant to Fed. R. Civ. P. 45(d)(2)(B)(ii), relying on the fact that the subpoena recipient was “interested” in the outcome of the case and that it failed to show that the party that issued the subpoena was “better able to bear the burden of their production costs.” Prime Therapeutics LLC v. CVS Pharm., Inc., 2022 WL 17414478 (D. Minn. 12/5/2022).
• Trial subpoena; “undue burden” on witness; motion to quash denied. Rejecting a physician’s arguments that he would suffer “undue burden” if forced to testify at trial and that his deposition testimony was an adequate substitute for his live testimony, Judge Wright denied the witness’s motion to quash a trial subpoena. United States ex rel. Fesenmaier v. Cameron-Ehlen Group, Inc., 2022 WL 18012008 (D. Minn. 12/30/2022).
• Fraudulent joinder; motion to remand denied. Judge Wright denied the plaintiff’s motion to remand an action that had been removed on the basis of diversity jurisdiction, finding that the one non-diverse defendant had been fraudulently joined where there was “no factual support” for either of the claims against that defendant. Lane v. Century Int’l Arms, Inc., 2022 WL 17721508 (12/15/2022).
• Motion to compel; no opposition; L.R. 7.1(g); attorney’s fees awarded. Where the plaintiffs failed to respond to the defendant’s discovery requests, the defendant moved to compel discovery, and the plaintiffs failed to oppose the motion, Magistrate Judge Leung canceled the motion hearing, granted the motion, and awarded the defendant its reasonable attorney’s fees for the motion in an amount to be determined. Rose v. Qdoba Restaurant Corp., 2023 WL 34349 (D. Minn. 1/4/2023).
• FDCPA; Fed. R. Civ. P. 12(b)(1); motion to dismiss based on lack of standing denied. Where FDCPA defendants made a facial attack on the plaintiff’s standing, Judge Tunheim found that the plaintiff’s allegations of physical harms, including headaches, digestive disorders, and chronic pain, were sufficiently “concrete” to confer standing, and that defendants’ argument that the plaintiff’s allegations “defie[d] credulity” could not be considered in the context of a facial attack. Drechen v. Rodenburg, LLP, 2022 WL 17543056 (D. Minn. 12/8/2022).
• Awards of attorney’s fees; hourly rates; multiple cases. Finding that hourly rates as high as $775 per hour were “reasonable,” Judge Tostrud awarded the prevailing plaintiff more than $1.1 million in attorney’s fees under the FRSA even after disallowing the fees and costs associated with a mock trial. Sanders v. BNSF Rwy. Co., 2022 WL 17414504 (D. Minn. 12/5/2022).
Awarding certain prevailing defendants fees under the Copyright Act, Judge Tostrud reduced national counsel’s hourly rates by 30 percent to account for prevailing rates in the Twin Cities, rejected the plaintiff’s challenge to alleged “block billing,” and awarded these defendants almost $833,000 in attorney’s fees. MPAY Inc. v. Erie Custom Computer Applications, Inc., 2022 WL 17829712 (D. Minn. 12/21/2022).
• Fed. R. Civ. P. 42(b); consolidation; multiple cases. Judge Frank denied a motion to consolidate related actions, finding that the issues in the two actions were “legally and factually distinct,” and that consolidation of the actions “would not further judicial economy.” Select Comfort Corp. v. Baxter, 2022 WL 17555484 (D. Minn. 12/9/2022).
In contrast, Judge Frank granted a motion to consolidate two personal injury actions involving the same defendant and the same allegedly defective product. Sprafka v. DePuy Ortho., Inc., 2022 WL 17414477 (D. Minn. 12/5/2022).
Josh Jacobson
Law Office of Josh Jacobson
joshjacobsonlaw@gmail.com
Immigration Law
JUDICIAL LAW
• Insufficient justification for reversing IJ’s grant of CAT relief. On 12/28/2022, the 8th Circuit Court of Appeals held that the Board of Immigration Appeals (BIA) did not provide sufficient justification for reversing the immigration judge’s decision to grant the Salvadoran petitioner relief under the Convention Against Torture (CAT). The BIA failed to provide reasons “grounded in the record” that the immigration judge clearly erred when finding the petitioner would more likely than not suffer torture in El Salvador. “Here, we conclude that the BIA’s explanation for rejecting the IJ’s factual findings to support a finding of past torture or the likelihood of future torture was insufficient to ‘satisfy a reasonable mind that there was clear error.’ See Abdi Omar, 962 F.3d at 1064.” Alvarez-Gomez v. Garland, No. 21-2279, slip op. (8th Circuit, 12/28/2022). https://ecf.ca8.uscourts.gov/opndir/22/12/212279P.pdf
• Burden of proving “alienage” satisfied. On 12/15/2022, the 8th Circuit Court of Appeals held that substantial evidence supported the immigration judge’s conclusion, affirmed and adopted by the BIA, that the Department of Homeland Security had satisfied its burden of proving the Honduran petitioner’s “alienage” by clear and convincing evidence. The court also affirmed the denials of Convention Against Torture (CAT) relief by both the immigration judge and Board of Immigration Appeals, finding that substantial evidence supported the conclusion that the petitioner failed to show he would more likely than not be subject to torture in Honduras. Escobar v. Garland, No. 22-1249, slip op. (8th Circuit, 12/15/2022). https://ecf.ca8.uscourts.gov/opndir/22/12/221249P.pdf
• Credible but weak testimony lacked sufficient corroboration. On 11/21/2022, while applying a highly deferential standard of review, the 8th Circuit Court of Appeals upheld the Board of Immigration Appeals’ determination that the Cameroonian petitioner’s credible but weak testimony supporting her asylum claim was insufficiently corroborated. “The absence of medical records supporting hospitalization and treatment of those injuries was an important issue” in relation to allegations of detention, beatings, and rape at the hands of Cameroonian military officers. The petition for review was consequently denied. Adongafac v. Garland, No. 21-1800, slip op. (8th Circuit, 11/21/2022). https://ecf.ca8.uscourts.gov/opndir/22/11/211800P.pdf
• Multiple DUI convictions; presumption of lack of good moral character. On 11/16/2022, the 8th Circuit Court of Appeals held that the Board of Immigration Appeals did not err when it determined that the petitioner failed to make a prima facie showing of good moral character in his motion to reopen his cancellation of removal proceedings for the purpose of presenting new evidence of “exceptional and extremely unusual hardship” to his U.S. citizen children. With multiple DUI convictions, the petitioner was found to have failed to overcome the presumption that such an applicant lacks good moral character. Llanas-Trejo v. Garland, No. 21-3770, slip op. (8th Circuit, 11/16/2022). https://ecf.ca8.uscourts.gov/opndir/22/11/213770P.pdf
ADMINISTRATIVE LAW
• TPS litigation: El Salvador, Nicaragua, Honduras, Nepal, Haiti, and Sudan. On 11/16/2012, the U.S. Department of Homeland Security (DHS) announced plans to continue its compliance with the preliminary injunction issued by the U.S. District Court for the Northern District of California in Ramos, et al. v. Nielsen, et al., No. 18-cv-01554 (N.D. Cal. 10/3/2018) and with the order of the U.S. District Court of the Northern District of California to stay proceedings in Bhattarai v. Nielsen, No. 19-cv-00731 (N.D. Cal. 3/12/2019). Beneficiaries under the existing temporary protected status (TPS) designations for El Salvador, Nicaragua, Honduras, and Nepal, the 2011 designation of Haiti, and the 2013 designation of Sudan will retain their TPS as long as the preliminary injunction in Ramos and the Bhattarai orders remain in effect, provided their TPS is not withdrawn because of individual ineligibility. The validity of certain TPS-related documentation for beneficiaries under the TPS designations has been automatically extended to 6/30/2024 from the 12/31/2022 expiration date. 87 Fed. Reg. 68717-25 (2022). https://www.govinfo.gov/content/pkg/FR-2022-11-16/pdf/2022-24984.pdf
• TPS designation: Ethiopia. On 12/12/2022, the U.S. Department of Homeland Security (DHS) announced the designation of Ethiopia for temporary protected status (TPS) for 18 months, effective 12/12/2022 through 6/12/2024. The Secretary of DHS has determined that TPS is warranted in view of “ongoing armed conflict and extraordinary and temporary conditions.” Those Ethiopian nationals who have continuously resided in the United States since 10/20/2022 and been continuously physically present in the United States since 12/12/2022 may apply for TPS. The registration period for TPS runs from 12/12/2022 through 6/12/2024. 87 Fed. Reg. 76074-81 (2022). https://www.govinfo.gov/content/pkg/FR-2022-12-12/pdf/2022-26880.pdf
• TPS extension and redesignation: Yemen. On 1/3/2023, the Department of Homeland Security (DHS) announced the extension of the designation of Yemen for temporary protected status (TPS) for 18 months, from 3/4/2023 through 9/3/2024. Those wishing to extend their TPS must re-register during the 60-day period running from 1/3/2023 through 3/6/2023. The secretary also redesignated Yemen for TPS, allowing additional Yemeni nationals to apply for the first time, provided they have been continuously residing in the United States since 12/29/2022 and were continuously physically present in the United States since 3/24/2023. The registration period for these new applicants runs from 1/3/2023 through 9/3/2024. 88 Fed. Reg. 94-103 (2023). https://www.govinfo.gov/content/pkg/FR-2023-01-03/pdf/2022-28283.pdf
n TPS extension and
redesignation: Somalia. On 1/12/2023, the Secretary of the Department of Homeland Security, Alejandro N. Mayorkas, announced the extension of temporary protected status (TPS) for Somalia for an additional 18 months, from 3/18/2023 through 9/17/2024. He also redesignated Somalia for TPS, allowing Somali nationals continuously residing in the United States since 1/11/2023 to apply for TPS for the first time, provided they meet all eligibility requirements. Secretary Mayorkas’s decision was based on the continued “armed conflict and extraordinary and temporary conditions that prevent Somali nationals from safely returning.” Publication of a Federal Register notice is expected in the coming weeks. News Release (1/12/2023). https://www.uscis.gov/newsroom/news-releases/secretary-mayorkas-extends-and-redesignates-somalia-for-temporary-protected-status-for-18-months
• TPS extension and redesignation: Haiti. On 12/26/2023, the Department of Homeland Security (DHS) announced the extension of the designation of Haiti for temporary protected status (TPS) for 18 months, from 2/4/2023 through 8/3/2024. Those Haitian nationals seeking to extend their TPS must re-register during the 60-day period running from 1/26/2023 through 3/27/2023. At the same time, DHS redesignated Haiti for TPS, beginning 2/4/2023 and running 18 months through 8/3/2024. The redesignation allows Haitian nationals who have continuously resided in the U.S. since 11/6/2022 and were continuously physically present in the United States since 2/4/2023 to apply for TPS for the first time. The registration period for first-time applicants runs from 1/26/2023 through 8/3/2024. 88 Fed. Reg. 5022-32 (2023). https://www.govinfo.gov/content/pkg/FR-2023-01-26/pdf/2023-01586.pdf
• DED extension and expansion: Hong Kong. On 1/26/2023, President Biden issued a memorandum extending and expanding eligibility for deferred enforced departure (DED) for certain Hong Kong residents, in light of the People’s Republic of China’s (PRC) continued erosion of those residents’ “human rights and fundamental freedoms.” According to the memo, removal of any Hong Kong resident shall be deferred for 24 months for anyone present in the United States on 1/26/2023, except those who 1) voluntarily returned to Hong Kong or the PRC after 1/26/2023; 2) have not continuously resided in the United States since 1/26/2023; 3) are inadmissible under section 212(a)(3)of the Immigration and Nationality Act (INA) or deportable under section 237(a)(4) of the (INA); 4) have been convicted of any felony or two misdemeanors committed in the United States or meet any of the criteria in section 208(b)(2)(A) of the INA; 5) are subject to extradition; 6) whose presence in the United States is determined, by the Secretary of Homeland Security, as not in the interest of the United States or presents a danger to public safety; or 7) whose presence in the United States has been determined by the U.S. Secretary of State to have serious adverse foreign policy consequences for the United States. 88 Fed. Reg. 6143-44 (2023). https://www.govinfo.gov/content/pkg/FR-2023-01-31/pdf/2023-02093.pdf
• Parole process for Haitians, Nicaraguans, Cubans, and Venezuelans. On 1/9/2023, the Department of Homeland Security (DHS) published notice of the implementation of a new parole process for nationals of Haiti, Nicaragua, and Cuba. For the most part, this new process reflects an effort modeled on the earlier Uniting for Ukraine (U4U) and process for Venezuelans implemented to allow nationals of those countries to “lawfully enter the United States in a safe and orderly manner and be considered for a case-by-case determination of parole.” Eligibility requirements: 1) Applicants must have a supporter in the United States who agrees to provide financial support for the duration of their parole period; 2) applicants must pass national security and public safety vetting; and 3) applicants must fly at their own expense to an interior port of entry rather than a land port of entry.
- Haiti. 88 Fed. Reg. 1243-54 (2023). https://www.govinfo.gov/content/pkg/FR-2023-01-09/pdf/2023-00255.pdf
- Nicaragua. 88 Fed. Reg. 1255-66 (2023). https://www.govinfo.gov/content/pkg/FR-2023-01-09/pdf/2023-00254.pdf
- Cuba. 88 Fed. Reg. 1266-79 (2023). https://www.govinfo.gov/content/pkg/FR-2023-01-09/pdf/2023-00252.pdf
On 1/9/2023, the Department of Homeland Security (DHS) published notice updating the parole process for Venezuelans that commenced in 10/2022. The program provides, according to DHS, “a safe and orderly pathway for certain individuals to seek authorization to travel to the United States to be considered for parole at an interior Port of Entry.” The limit of 24,000 travel authorizations has been replaced by a new monthly limit of 30,000 travel authorizations spread across this process as well as the separate and independent parole processes for Cubans, Haitians, and Nicaraguans. 88 Fed. Reg. 1279-82 (2023). https://www.govinfo.gov/content/pkg/FR-2023-01-09/pdf/2023-00253.pdf
R. Mark Frey
Frey Law Office
rmfrey@cs.com
Probate & Trust Law
JUDICIAL LAW
• Trustee removal: No de minimis defense to duty of loyalty. A trustee of a charitable trust admittedly used trust assets for non-trust purposes and misappropriated $1,875, causing tax liability under the IRS code. The trustee also displayed a hostile attitude and animosity toward his co-trustees, made disparaging statements about a co-trustee, and treated a longtime beneficiary in an abusive manner, causing a rift between the beneficiary and the trust. The district court exercised its discretion to remove the trustee. On appeal, the removed trustee argued that the district court improperly weighed his self-dealing and that the district court erred in determining that his contentious behavior and treatment of beneficiaries violated the duty of loyalty. The Minnesota Court of Appeals noted that if a trustee appropriates trust property for his own use, the trustee should be removed. Further, “even assuming that [the trustee’s] personal use of the Trust’s assets was ‘de minimis,’ there is no ‘de minimis defense’ to whether self-dealing violates the duty of loyalty.” The court of appeals further noted that the district court did not abuse its discretion in concluding that the removed trustee’s other behaviors violated the duty of loyalty, and found that the series of breaches, when viewed collectively, constituted a serious breach of trust. In the Matter of the Otto Bremer Trust, A22-0906, 2023 WL 193144 (Minn. Ct. App. 1/17/2023).
• Trustee removal: Court does not have in rem jurisdiction. The Minnesota Court of Appeals recently held that Minn. Stat. §501C.0204 “dictates that a district court cannot remove a trustee in an in rem proceeding. Rather, the district court must act in an in personam proceeding to remove a trustee.” In coming to its decision, the court considered the language of the statute, which distinguishes between in rem jurisdiction and in personam jurisdiction. Specifically, the court noted that the statute provides that an order in an in rem proceeding “is binding in rem upon the trust estate and upon the interests of all beneficiaries” (i.e., property) while an order in an in personam proceeding is binding on various individuals. Because an order can only bind a party if the court has jurisdiction over the party, the court found that “the language of the statute unambiguously indicates that a district court must have in personam jurisdiction to remove a trustee.” Swanson v. Wolf, A22-0688, 2023 WL 1094140 (Minn. Ct. App. 1/30/2023).
• Trust amendment: The method articulated by the trust controls. A settlor executed a statutory short-form power of attorney naming her daughter as her attorney-in-fact. The power of attorney provided “all powers” to the attorney-in-fact. Years later, the settlor’s daughter, acting as her attorney-in-fact, amended the settlor’s trust to change the distribution scheme. The trust contained language that indicated that the right to amend the trust was personal to the settlor. Two individuals contested the change. The district court concluded that, while the trust expressly limited the power to amend the trust, the statutory short-form power of attorney expressly gave the attorney-in-fact the authority to amend the trust. Therefore, the district court concluded that the trust amendment was valid. The court of appeals reversed the district court’s decision and held that when an unambiguous trust instrument provides an exclusive method to amend a trust, Minn. Stat. §501C.0602 “prohibits consideration of any other method of amending the trust found in another writing, such as a power of attorney.” The court of appeals declined to consider whether a statutory short-form power of attorney could ever convey the power to amend a trust. In re Eva Maria Hanson Living Trust dated December 11, 1995, A22-0826, 2023 WL 1095034 (Minn. Ct. App. 1/30/2023).
• Capacity and undue influence. A decedent, at the age of 95 and eight months before her death, changed the beneficiaries on her annuities. The decedent’s nephew, and the trustee of her trust, brought suit against the financial company holding the annuities and the new beneficiaries to invalidate the beneficiary designation on the grounds of lack of capacity and undue influence. The financial company moved for summary judgment, which was granted by the district court. The court of appeals found that—despite the fact that the decedent’s nephew produced evidence of cognitive decline from two hospitalizations prior to the change, and there were medical records evidencing confusion, memory impairment, and lack of orientation, as well as expert testimony indicating that the decedent likely suffered from moderate vascular dementia—the evidence was not enough to raise a genuine issue of material fact as to the decedent’s cognition on the day she changed her beneficiary designation. Additionally, the court of appeals found that, although the decedent had a confidential relationship with the alleged influencer, the alleged influencer met with her alone regarding her finances; that the alleged influencer suggested that the decedent do her “homework” and identify charities to leave money to; and that the alleged influencer assisted the decedent in executing the beneficiary change, there was not enough evidence to find that a genuine issue of material fact existed. Davis v. Ameriprise Financial Inc., A22-0555, 2023 WL 1093863 (Minn. Ct. App. 1/30/2023).
• Special administrator: Non-probated will properly considered. A decedent granted a power-of-attorney to his sister. Shortly thereafter, the decedent’s sister, acting as attorney-in-fact, transferred ownership or sold several pieces of the decedent’s real estate. The decedent had executed a will that devised all of his property to his sister. Twelve years after the decedent died, the decedent’s brother petitioned the district court to appoint a special administrator to investigate the attorney-in-fact’s actions. The district court concluded that it was unnecessary to appoint a special administrator for two primary reasons: (1) The decedent’s will devised everything to the attorney-in-fact; and (2) any causes of action that a special administrator could assert against the attorney-in-fact were time-barred. The decedent’s brother appealed, arguing, among other things, that the district court erred in considering the decedent’s will as it had never been probated. The court of appeals disagreed, finding that the district court properly relied on the exception delineated in Minn. Stat. §524.3-102, which allows a non-probated, duly executed, unrevoked will to be admitted as evidence of a devise. The court of appeals further held that the circumstances of the case “provide ample justification” for the district court’s decision to decline to appoint a special administrator. In re Estate of Carlson, A22-0957, 2023 WL 1771649 (Minn. Ct. App. 2/6/2023).
Jessica L. Kometz
Bassford Remele
jkometz@bassford.com
Tax Law
JUDICIAL LAW
• Otto Bremer trustee’s removal affirmed. A trustee of the Otto Bremer Trust was removed by the district court on a petition by the Attorney General’s Office. The trustee challenged his removal, and the Minnesota Court of Appeals affirmed.
Trustees can be removed for committing a serious breach of trust or if the court determines that the trustee’s removal serves the best interest of the beneficiaries. Minn. Stat. §501C.0706(b)(1), (3). In this case, the district court removed the trustee to best serve the interests of the beneficiaries following the trustee’s “serious breach of trust” under Minn. Stat. §501C.0706(b)(1). The appeals court affirmed. The reviewing court agreed with the district court’s conclusion that the trustee’s actions “breached his duties of loyalty and information and violated the Minnesota Charitable Trust Act.” No single action constituted a “serious breach of trust,” but the series of events viewed collectively constituted a breach. The series of actions included self-dealing, abuse of power in trust relations, and the trustee’s behavior during the sale of Bremer Financial Corporation.
While the trustee admitted to self-dealing “probably from the day [he] arrived at Otto Bremer Trust,” in violation of the Charitable Trust Act and the trustee incurred a tax on self-dealing under the IRS code, he nonetheless challenged the court’s position that those self-dealings, which he refunded, constituted a serious breach of the trust. While the amount of assets misused was small compared to the value of the trust, the district court did not abuse its discretion in determining a breach when the trustee’s self-dealings were considered in series with the trustee’s other actions.
During the sale of Bremer Financial Corporation, the trustee “allowed his own personal interest, animosity, enmity, or vindictiveness to impact his decisions and behavior as a trust of one of the region’s most important charitable institutions.” This personal interest, coupled with “crude, vulgar[,] and otherwise offensive brashness [which] has no place in the charitable world,” constituted a violation of loyalty to the trust.
The trustee also challenged the district court’s determination that his removal best served the interest of the trust and its beneficiaries. A district court can remove a trustee “because of unfitness, unwillingness or persistent failure of the trustee to administer the trust effectively.” Minn. Stat. §501C.0706(b)(3). A finding that the trustee “continually breached his duties to the Trust’s beneficiaries, [Trustee] caused the Trust to incur unnecessary expenses, injured the Trust’s charitable reputation, refused to disclose information to the AGO [about his successor], and eliminated a relationship with at least one beneficiary” supported the determination that the trustee was unfit and persistently failed to administer the trust.
In sum, the district court did not abuse its discretion because the trustee’s actions constituted a “serious breach of trust” and demonstrated that his removal was in “the best interest” of the trust and its beneficiaries. Minn. Stat. §501C.0706(b)(3). Matter of Otto Bremer Tr., No. A22-0906, 2023 WL 193144 (Minn. Ct. App. 1/17/2023).
• Successful CPA/businessperson’s claim “beggars belief”; taxpayer who could not substantiate loss not entitled to NOL carryover. Taxpayer Betty Amos enjoyed decades of success in the business world. Among other accomplishments, she had owned her own CPA practice, served as a trustee for the University of Miami, and owned several Fuddruckers restaurants with former Miami Dolphins football star Nick Buoniconti. Ms. Amos’s business fortunes took a turn for the worse in the late ‘90s, and it was around that time when Ms. Amos’s tax problem took root. In 1999 Amos, along with her since-deceased spouse, claimed a net operating loss (NOL) of about $1.5 million. Fast-forward to 2014 and 2015, when she reported about $100,000 of IRA income against which she claimed over $4 million of NOLs that dated back to the 1999 return.
The Service disallowed the net operating loss deductions claimed on Amos’s 2014 and 2015 tax returns and determined accuracy-related penalties under section 6662(a). Ms. Amos countered that the NOLs from 1999 and 2000 were properly carried forward to 2014 and 2015. The court sustained the deficiency because Ms. Amos was not able to establish the underlying NOLs and she was not able to establish that any portions of those NOLs remained available for use in 2014 and 2015. Although Ms. Amos produced her 1999 tax returns showing the NOLs, she could not produce the underlying records substantiating what she had then reported. The court chastised, “It beggars belief that she would be unaware...[of] her responsibility to demonstrate her entitlement to the deductions she claimed.” Prof. Bryan Camp (Texas Tech) excerpted Ms. Amos’s case in the popular TaxProf blog, where he described the case as “an object lesson for all of us” about maintenance of records. Amos v. Comm’r, 124 T.C.M. (CCH) 289 (T.C. 2022). https://taxprof.typepad.com/taxprof_blog/2022/11/lesson-from-the-tax-court-an-object-lesson-for-tax-professionals-.html
• Extensive order and memorandum in long-running discovery dispute. In a property tax dispute concerning the market value of a retail building currently leased and occupied by a Kohl’s retail store in Anoka County, the tax court granted aspects of the taxpayer’s motion to compel as well as portions of the taxpayer’s request for a protective order. KIN, Inc. v. Cnty. of Anoka, No. 02-CV-20-3741, 2022 WL 17972092 (Minn. Tax 12/23/2022).
• Property tax: Minnesota estate tax scheme not unconstitutional. The estate of a deceased taxpayer sought a refund of Minnesota estate taxes paid on property with a South Dakota situs. The taxpayer established a trust, which included property in Minnesota and South Dakota, and upon the taxpayer’s death, the trustees filed both a Minnesota estate tax return and a federal estate tax return. After amending the Minnesota return and paying the Minnesota estate taxes, the return was amended a second time requesting a refund due to improperly imposed taxes on the property in South Dakota. The commissioner denied the estate’s refund request and the estate appealed, arguing that “the Commissioner seeks to enforce an estate tax law which purports to impose a tax on the value of real property located entirely within South Dakota, and thus with a situs outside of Minnesota and that such an estate tax should be invalidated as a violation of the Due Process Clause.” The estate contended that the Minnesota taxable estate amount would have equaled zero if the South Dakota property was excluded. The commissioner contended that to determine the imposed tax amount, first Minnesota law computes MTE, without non-Minnesota situs property, then the apportionment ratio is applied, which leads to the non-Minnesota situs property not being taxed. Because the parties did not dispute the material facts, the court agreed that summary judgment was appropriate. The court considered “whether either the determination of MTE based on FTE, or the apportionment ratio set forth in Minnesota Statutes section 291.03, violates the Due Process Clause or, in the alternative, the dormant Commerce Clause, of the United States Constitution, as applied to the Estate” and concluded that the “Minnesota estate tax scheme does not violate either due process or the dormant Commerce Clause.” The court affirmed the tax order, denied appellants’ motion for summary judgment, and granted the commissioner’s motion for summary judgment. Est. of Anderson v. Commr. of Revenue, 9489-R, 2022 WL 17588033 (Minn. Tax 12/12/2022).
• Income tax: Income generated from the sale of goodwill is business income subject to apportionment. A non-Minnesota resident taxpayer founded a Minnesota corporation in 1988. The corporation mostly engaged in managing community associations in Wisconsin and Minnesota. The company handled contract negotiations, collections, communications, and financial reporting. The taxpayers of the original corporation incorporated another company to handle the maintenance of the community associations the original corporation managed. On 9/1/2015, the taxpayer sold her 80% stock in both companies to a third party for $8,763,041; the third party acquired the remaining 20% interest from another owner. The taxpayer consulted with a public accounting firm regarding the impact of a §338(h)(10) election and to get assistance with IRS filings in relation to the 2015 stock sale.
The accounting firm provided the taxpayer with advice that relied on the Minnesota Tax Court’s 2006 decision in Nadler v. Comm’r of Revenue, No. 7736-R, 2006 WL 1084260 (Minn. T.C. 4/21/2006). Based on the advice she received from the accounting firm, the taxpayer informed the third party that the sale should be treated as a “sale of assets” under Internal Revenue Code §338(h)(10) instead of as a “sale of stock.” The proceeds from the sale were not held or received by either company but were directly paid to the taxpayer. The 2015 Form M8 Minnesota S Corporation Return was timely filed by the companies and included two Schedule KS forms, one for each taxpayer, and “reported $333,844 in net Minnesota long-term capital gain from the Transaction.” “The companies reported gain from the deemed sale of assets in the Transaction, including goodwill, as income not derived from the conduct of a trade or business pursuant to Minn. Stat. §290.17, subd. 2” for the taxpayer. The taxpayer also filed a 2015 individual income tax return, which included a Schedule M1NR form where she reported “$333,844 in capital gain from Minnesota sources.”
In 2007, the Department of Revenue advised taxpayers not to follow Nadler and issued Revenue Notice 17-02 in 2017 specifically stating that the commissioner did not agree with Nadler and “advises non-resident individuals that the department does not administer the income allocation provisions in Chapter 290 of the Minnesota Statutes... using the Minnesota Tax Court’s reasoning in Nadler v. Commissioner....” Though the company had already made its §338(h)(10) election, an audit was conducted and a tax order was issued “determining that gain from the Transaction was ‘business income’ subject to apportionment under Minnesota Statutes section 290.17, subdivision 3.” The company was assessed $433,017 in nonresident withholding tax and a $86,603 substantial understatement of tax payable penalty. The commissioner removed the penalty after the company filed an administrative appeal but affirmed the nonresident withholding tax.
The company appealed the matter to tax court, where both parties filed cross-motions for summary judgment. The case turned on “whether gain on the sale of goodwill from the Transaction is business or nonbusiness income.” The company argued that the “gain from the sale of goodwill attributed to a nonresident individual should be considered income not derived from the conduct of a trade or business and allocated accordingly.” The commissioner argued that the “gain should be considered income of a unitary business and apportioned to Minnesota.” The court concluded that “the supreme court’s reasoning in YAM Special Holdings, Inc. v. Comm’r of Revenue, 947 N.W.2d 438, 442 (Minn. 2020) is directly applicable” and that “there is no dispute that the goodwill at issue was an integral asset of the company’s unitary business.” The court denied the taxpayer’s motion for summary judgment and granted the commissioner’s motion for summary judgment, reasoning that the “income stemming from the goodwill generated by the sale of the taxpayer’s stock ownership interests in the company constitutes income of a unitary business and is thus subject to apportionment under Minn. Stat. §290.17, subds. 3-4.” Cities Mgt., Inc. v. Commr. of Revenue, 9484-R, 2022 WL 17825925 (Minn. T.C. 12/20/2022).
• Property tax: No residential homestead designation when there is a lack of water usage. A taxpayer contested the assessed value, special assessment, and classification of her property in Lester Prairie, Minnesota. The taxpayer’s property previously held a residential homestead classification, but the designation was removed beginning 1/2/2019, and the assessed value for 2020 was $110,100. The taxpayer challenged the assessor’s revocation of the homestead classification, a special assessment added to the property’s tax bill, and the estimated market value.
While assessments are presumptively valid, taxpayers have an opportunity to offer evidence and arguments to dispute the assessed value of the property. Minn. Stat. §271.06, subd. 6(a) (2020). The burden of proof falls to the taxpayer “to show that [the assessment] does not reflect the true market value of the property” to invalidate the assessment. S. Minn. Beet Sugar Coop (SMBSC) v. Cnty. Of Renville, 737 N.W.2d 545, 557-58 (Minn. 2007). The court must review the authorizing statute’s plain language to determine that a property be classified as a residential homestead.
The plain language of Minn. Stat. §273.124, subd. 1(a) (2022) states, “[r]esidential real estate that is occupied and used for the purposes of a homestead by its owner, who must be a Minnesota resident, is a residential homestead.” Further, Sayles v. Cnty. of Cottonwood (No. 17-CV-08-282, 2009 WL 4035666, at *5 (Minn. T.C. 11/20/2009)) states, “It is the use, not the number of days present that matters.” While the taxpayer overcame prima facie validity, the parties disagreed that the taxpayer “occupied and used” the subject property “for the purposes of a homestead.” Minn. Stat. §273.124, subd. 1(a). The county argued that the taxpayer did not occupy the property. Specifically, while the taxpayer’s garbage, water, and sewer services were operational, “the water meter at the subject property has not detected any water usage since 2016.” The taxpayer responded by stating that “she and her son brought in water in order to live in the house.” The court held that the taxpayer’s testimony was directly contradicted by the county’s evidence and that the taxpayer failed to show through a preponderance of the evidence that she or her son actually resided in the house. Further, the taxpayer failed to overcome prima facie validity regarding the estimated market value of the property. As such, the court concluded that while the taxpayer “submitted sufficient credible evidence to rebut the prima facie validity of the County’s classification,” the assessor’s classification of the taxpayer’s property as residential non-homestead was correct; the taxpayer “did not successfully challenge the County’s estimated market value assessment;” and that the court “did not have subject matter jurisdiction to adjudicate challenges to special assessments.” Vasko v. County of McLeod, 43-CV-20-723, 2022 WL 17747905 (Minn. Tax 12/15/2022).
• To timely petition for review of an APO, the party seeking review must both serve and file the petition within 30 days of receiving the APO. The Minnesota Pollution Control Agency (MPCA) commissioner issued nine administrative penalty orders (APO) against a taxpayer. The taxpayer filed and mailed a petition seeking judicial review on 12/10/2021, along with an affidavit stating, “I served the Joint Petition to Review Administrative Penalty Orders by placing a true and correct copy of the document in an envelope.” The petition was received by the Attorney General’s Office (AGO) on 12/14/2021, after which the AGO informed the taxpayer that “the MPCA had not been served but would accept service without waiving jurisdictional defenses or objections.” On 12/17/2021, the taxpayer prepared form 22B and a summons and sent them to the AGO.
The AGO executed a waiver of service of summons, saying “I received your request that I waive service of a summons in th[is] lawsuit.... I understand that I (or the entity on whose behalf I am acting) will retain all defenses or objections to the lawsuit or to the jurisdiction or venue of the court except for objections based on a defect in the summons or in the service of the summons.... A party who waives service of the summons... may later object to the jurisdiction of the court or to the place where the action has been brought” the same day. The waiver of service of summons was filed by the AGO on 12/20/2021, and the summons was filed with the district by the taxpayer on 12/22/2021. MPCA “moved to dismiss the petition pursuant to Minn. Stat. §586.07 (2022) and Minn. R. Civ. P. 12.02(a),2 (e) based on untimely service” three weeks later. The district court granted MPCA’s motion to dismiss, reasoning that the taxpayer’s “failure to personally service or file a waiver of personal service within 30 days as provided by statute deprived [the district court] of subject matter jurisdiction.” “The relevant statute authorizing a petition for review, or appeal, of an APO reads ‘Within 30 days after the receipt of an order from the commissioner... the person subject to an order under this section may file a petition in district court for review of the order in lieu of requesting an administrative hearing under subdivision 6. The petition shall be filed with the court administrator with proof of service on the commissioner....’ Minn. Stat §116.072, subd.7(a) (emphasis added).” The court concluded that “In order to timely petition for review of an APO under Minn. Stat. §116.072, subd. 7(a), the party seeking review must both serve and file the petition within 30 days of receiving the APO. Because statutory deadlines for judicial review of administrative decisions are strictly construed, and because the taxpayer failed to serve timely its petition for review, the district court did not err by dismissing the petition.” Twin City Petroleum and Properties, LLC v. Kessler, A22-0918, 2023 WL 193143 (Minn. App. 1/17/2023).
Morgan Holcomb
Mitchell Hamline School of Law
morgan.holcomb@mitchellhamline.edu
Brandy Johnson
Mitchell Hamline School of Law
brandy.johnson2@mitchellhamline.edu