Employment & Labor Law
JUDICIAL LAW
• High-level executive; new employment enjoined. A highly placed corporate executive was enjoined from moving to a competitor of their employer, which successfully sued to enforce its noncompete agreement. Upholding a lower court decision, the 8th Circuit Court of Appeals held that the former employer’s “legitimate business interests” were served by a preliminary injunction because the new employer was one of the original employer’s largest competitors, which created a likelihood of irreparable harm in the absence of injunctive relief. Cigna Corp. v. Bricker, 103 F.4th 1336 (8th Cir. 2024).
• Termination of agreement; injunction reversed. An employee who had signed a two-year noncompete agreement as part of the acquisition of the employee’s former employer prevailed in his challenge to a preliminary injunction entered by the trial court. The 8th Circuit reversed and vacated an injunction against competing or soliciting customers within a 100-mile radius for two years after his employment was terminated. The lawsuit was not actionable because it was brought nearly four years after the underlying agreement had terminated, and the terms of the agreement stated that the restrictive covenants barring competition or solicitation do not survive the end of that relationship. Wilbur-Ellis Company, LLC v. Erikson, 103 F.4th 1352 (8th Cir. 2024).
• Age discrimination; hostile environment claim rejected. An employee who resigned from the Department of Veterans Affairs failed in his claims of age discrimination and disability discrimination that contributed to a hostile work environment. The 8th Circuit affirmed and dismissed the lawsuit because the employee did not establish a prima facie case of hostile work environment, constructive discharge, disparate treatment, or retaliation, warranting dismissal of his lawsuit. Hill v. McDonough, 2024 WL 2890977 (8th Cir. 2024).
• Employment misrepresentation; some claims upheld, others dismissed. A pro se claim by an employee that his employer misrepresented the employment relationship by terming the arrangement an “employment contract” and then later asserting the worker was an “independent contractor” overcame dismissal on grounds of misrepresentation of employment relationship, fraudulent misrepresentation, and whistleblower retaliation. Affirming a decision of the Hennepin County District Court, but reversing another part, the Minnesota Court of Appeals held that the allegations in the handwritten complaint sufficiently stated claims that could be pursued, although the claims for defamation and intentional infliction of emotional distress were properly dismissed. Robinson v. Amos, 2024 WL 2885587 (Minn. App. 6/10/2024) (nonprecedential).
• Unemployment compensation; rude, aggressive employee loses. An employee who was fired for engaging in rude and aggressive behavior lost his claim for unemployment compensation benefits. The court of appeals upheld the determination of an unemployment law judge (ULJ) with the Department of Employment & Economic Development (DEED) based, in part, on the “rude and aggressive” behavior of the employee during the unemployment hearing, which gave credence to the employer’s allegation that the employee committed disqualifying “misconduct.” Scott v. Jerry’s Enterprises, Inc., 2024 WL 2885587 (Minn. App. 6/10/2024) (nonprecedential).
• Unemployment compensation; untimely appeal. Reiterating established case law that an unemployment applicant must file an appeal from an initial determination of a ULJ within 20 days, the Minnesota Court of Appeals denied an employee’s request for reconsideration. The claim was barred by noncompliance with the former 20-day time period (now expanded to 45 days) for a request for reconsideration after an adverse decision. Hancock v. Aldrich Boarding Care, LLC, 2024 WL 2891210 (Minn. App. 6/4/2024) (nonprecedential).
• Unemployment compensation; not available due to restrictions. An employee whose physical restrictions limited her work opportunities was deemed ineligible for unemployment compensation benefits because she was not “available for suitable employment.” The court of appeals, upholding a ULJ decision, held that benefits were barred under Minn. Stat. § 268.085, subd. 1(4) in In re Mohamoud, 2024 WL 243648998 (Minn. App. 8/5/2024) (nonprecedential).
• Quitting employee; benefits denied. An employee who quit his job a month after starting as a maintenance engineer at a resort in Ottertail County was denied unemployment benefits. Affirming a ruling of an unemployment law judge (ULJ) with DEED, the Minnesota Court of Appeals held that although given an increased workload, he did not suffer any adverse action like a reduction in pay that would have constituted “good reason” to quit under Minn. Stat. §268.095, subd. 1 (1), (3). Kovarik v. JP Hospitality Group, 2024 WL 3565647 (Minn. App. 7/29/2024) (nonprecedential).
• Overpayment of benefits; repayment required. An unemployed individual who sought and received emergency benefits during the covid pandemic was required to reimburse the funds because he was employed and receiving income that he did not report while he was paid those benefits. Upholding a ULJ decision, the appellate court held that repayment was required for misrepresentation under Minn. Stat. §268.18, subd. 1(a), including a 40% penalty. Thigpen v. Best Home Care, LLC, 2024 WL 3564541 (Minn. App. 7/29/2024) (nonprecedential).
Marshall H. Tanick
Meyer, Njus & Tanick
Family Law
JUDICIAL LAW
• Where a party establishes temporary spousal maintenance and reserves permanent spousal maintenance, the motion for permanent maintenance must be made before the temporary maintenance obligation terminates. The parties’ stipulated judgment and decree granted wife temporary spousal maintenance of $5,800 for a period of approximately four years in order for her to complete a Physician’s Assistant’s program and reserved the issues of permanent maintenance. The parties agreed that husband’s maintenance obligation would be reviewed by 12/1/2021. The parties then extended the payment of temporary spousal maintenance to 3/31/2022 due to covid. The parties continued to agree to additional extensions to the time period to review maintenance. Ultimately, the parties agreed that moving papers must be served and filed prior to 3/31/2023. Ten days after the 3/31/2023 deadline, wife served and filed a motion for permanent spousal maintenance of $5,800 per month. Husband moved to dismiss the motion as untimely. The district court denied wife’s motion for permanent spousal maintenance on the grounds of untimeliness.
On review, the Minnesota Court of Appeals affirmed, holding that where temporary maintenance is granted and permanent maintenance is reserved, any motion for permanent maintenance must be served before the temporary obligation ends. The parties’ stipulations clearly laid out the requirements to request a permanent maintenance award. The court of appeals rejected wife’s argument that the district court had implicitly reserved and retained jurisdiction over the issue of permanent maintenance. The parties explicitly reserved other issues, demonstrating that they knew how to reserve an issue. They did not reserve the issue of permanent spousal maintenance. Since the district court did not retain jurisdiction, wife’s late service of the motion was fatal to her request for permanent maintenance. Orthey v. Orthey, A23-1365, 2024 WL 3493518 (Minn. Ct. App. Minn. 7/22/2024).
• Minn. Stat. §609.748 does not impose a time limit to consider the acts of harassment in issuing an HRO. Williams and Moran are neighbors at lakeside cabins on adjacent properties in Crow Wing County. Over the past four years, Williams alleged that Moran engaged in acts of harassment against him, including staring ominously at him, placing junk in full view of his front door, cutting branches on his trees purely to antagonize him, blowing leaves on to his property, placing bricks over the property line, mowing grass over the property line, peeling the numbers off his mailbox, and threatening him with consequences if he proceeded with a request to remove junk from Moran’s girlfriend’s property. In the fall of 2021, Moran drove his truck toward Williams while he was walking on the road. Williams was granted an ex parte harassment restraining order (HRO). In October 2023, at a hearing for the HRO, the referee informed Williams that only recent actions would be considered. At the end of the hearing, the referee determined that Williams had not satisfied his burden of proof to obtain the HRO, in part because Williams was nonspecific with dates and included old incidents.
On review, the court of appeals reversed and remanded. Because the referee refused to consider evidence regarding Moran’s older conduct, the court did not consider the full weight and scope of the harassment. Minn. Stat. §609.748 contains the word “repeated,” which contemplates that the conduct can occur over an extended timeframe. Additionally, the court of appeals has affirmed multiple HROs where the behavior occurred over extended periods of time. The district court misapplied the law by imposing a time limit not contemplated by the statute. Williams v. Moran, A23-1843, 2024 WL 3565922 (Minn. Ct. App. 7/29/2024).
m boulette
Taft Stettinius & Hollister LLP
Laura Kvasnicka
Taft Stettinius & Hollister LLP
Federal Practice
JUDICIAL LAW
• School library policy; dismissal for lack of standing affirmed; no injury-in-fact. Where the plaintiff-parents challenged a public school district’s “automatic” book removal policy, alleging that their children “fear[ed]” that material would be removed from school libraries and alleging 1st Amendment violations; the district court dismissed for lack of standing, finding no injury-in-fact; and the plaintiffs appealed, the 8th Circuit affirmed the dismissal, finding that the plaintiffs had failed to identify any intended conduct by their children which was proscribed by the book removal policy or that enforcement of the book removal policy was “sufficiently imminent.” L.H. v. Independence Sch. Dist., ___ F.4th ___ (8th Cir. 2024).
• Dismissal for lack of standing reversed in part. Where four students brought Title IX claims challenging the elimination of the women’s hockey at NDSU and the district court dismissed their claims for lack of a “concrete” injury, the 8th Circuit found that two students had standing because they had been recruited by NDSU or had enrolled and desired to try out for the team, meaning that their alleged injuries were “fairly traceable” to the elimination of the hockey program, but affirmed the dismissal of the claims asserted by the other two students, whose claims “did not allege nearly as much.” Becker v. N. Dakota Univ. Sys., ___ F.4th ___ (8th Cir. 2024).
• Emergency motion for injunction pending appeal granted. Where a district court granted plaintiffs’ motion for preliminary injunction barring the forgiveness of student loan debt, the defendants appealed the injunction, and the plaintiffs cross-appealed and brought an emergency motion seeking an expanded injunction pending appeal, the 8th Circuit applied the four-factor preliminary injunction test and enjoined “any further forgiveness” of student loans pending appeal. Missouri v. Biden, ___ F.4th ___ (8th Cir.), application denied, ___ S. Ct. ___ (2024).
• International comity; denial of dismissal affirmed. Where more than 1400 Peruvian citizens were plaintiffs in a consolidated action in which they alleged environmental injuries, the defendants moved to dismiss their claims based on the doctrine of international comity, the district court denied the motion, and defendants appealed, the 8th Circuit, applying a three-factor test, found that this was not the “rare case” where prospective international comity was warranted. Reid v. Doe Run Resources Corp., 110 F.4th 1049 (8th Cir. 2024).
• Fed. R. Civ. P. 16(b)(4); denial of leave to amend complaint affirmed; no good cause. Where the plaintiffs were informed in January 2022 that they should add another defendant to the case, and they waited until December 2022, which was after the deadline to amend pleadings established in the scheduling order to amend their complaint, the 8th Circuit agreed with the district court that the plaintiffs had not acted “diligently” and that there was “no good cause” to amend the scheduling order or permit an untimely amendment of their complaint. Burke v. Lippert Components, Inc., ___ F.4th ___ (8th Cir. 2024).
• Fed. R. App. P. 10(a); scope of record on appeal. Affirming an order by Judge Frank that denied a motion to compel arbitration, the 8th Circuit denied a request by the defendant to include a letter in the record on appeal, where the letter was never filed in the district court and did not fall within the “narrow, rarely exercised exception” to Fed. R. App. P. 10(a). Famuyide v. Chipotle Mexican Grill, Inc., ___ F.4th ___ (8th Cir. 2024).
• Fed. R. Civ. P. 37(d)(2); failure to appear for depositions; sanctions imposed. Where a counterclaim-defendant failed to produce a Rule 30(b)(6) designee for a deposition on the date noticed, and had not moved for a protective order on or before that date, Magistrate Judge Docherty found that sanctions were warranted under Fed. R. Civ. P. 37(d)(2), and ordered the sanctioned party to pay the costs and expenses incurred in conjunction with the attempted deposition, including court reporter’s fees, videographer’s fees, and travel expenses, as well as costs associated with a new deposition. Toyota Motor Sales, U.S.A., Inc. v. Allen Interchange LLC, 2024 WL 3617141 (D. Minn. 8/1/2024).
• Sanctions; violation of attorney’s-eyes-only protective order. Where plaintiff’s lead counsel, who had been admitted pro hac vice, violated a protective order by sharing attorney’s-eyes-only documents with his client, and the defendant sought sanctions under Fed. R. Civ. P. 37(b)(2) and the court’s inherent powers, Magistrate Judge Wright declined to impose monetary sanctions, but ordered the attorney to pay reasonable attorney’s fees and costs associated with the sanctions motion, and further ordered that plaintiff’s sponsoring counsel “must participate in the preparation and presentation of all aspects of the case going forward,” including “reviewing all correspondence between counsel, participation in all meet-and-confers, reviewing all of [plaintiff’s] Court filings before they are made, and appearance at all Court proceedings (telephonic, by video, or in person).” Cronin v. Sunawave Health, Inc., 2024 WL 3518142 (D. Minn. 7/24/2024).
• Sanctions; Fed. R. Civ. P. 11; pro se litigants. Granting the defendants’ motion for sanctions following the dismissal of the pro se plaintiffs’ “patently frivolous” claims, Judge Nelson awarded the defendants more than $64,000 in attorney’s fees and costs. Knapp v. Compass Minn., LLC, 2024 WL 3755916 (D. Minn. 8/9/2024).
• Fed. R. Civ. P. 37; attorney’s fees; reasonable hourly rate. Granting in part the petitioner’s request for reimbursement of attorney’s fees related to his motion to compel responses to post-judgment discovery, Magistrate Judge Foster reduced the requested hourly rate from $800 per hour to $400 per hour, where the petitioner failed to offer “any evidence or affidavits supporting his requested rate,” meaning that the court could not “conclude that $800 per hour is in line with reasonable rates prevailing in this community.” In Re: Lindell Mgmt LLC Litig., 2024 WL 3717352 (D. Minn. 8/8/2024).
• Personal jurisdiction; request for jurisdictional discovery denied. In a trademark action, Judge Tunheim determined that the defendant was not subject to general personal jurisdiction in Minnesota, and denied the plaintiff’s request for leave to conduct jurisdictional discovery where it had not advanced “any other theory” of jurisdiction, and the jurisdictional facts were not “unknown or disputed.” goGLOW Enters., LLC v. GP MBM, LLC, 2024 WL 3443883 (D. Minn. 7/15/2024).
• Motion for preliminary injunction denied; no irreparable harm. Relying primarily on Chief Judge Schiltz’s opinion in Moeschler v. Honkamp Krueger Fin. Servs., Inc. (2021 WL 4273481 (D. Minn. 9/21/2021)), Judge Magnuson denied a motion for a preliminary injunction to enforce a non-solicitation agreement, finding that the plaintiff had offered no evidence of irreparable harm, and that Minnesota procedural law presuming irreparable harm did not apply under the Federal Rules of Civil Procedure. Perficient, Inc. v. Craft, 2024 WL 3356977 (D. Minn. 7/10/2024).
• Fed. R. Evid. 201; limitations on judicial notice. Denying a Fed. R. Civ. P. 12(b)(6) motion to dismiss, Judge Tostrud declined the defendant’s requests that he take judicial notice of a number of documents pursuant to Fed. R. Civ. P. 201, distinguishing between the judicial notice of “facts” under Rule 201, and the judicial notice of documents when they are offered for the truth of the matter asserted. United States EEOC v. Union Pac. RR, 2024 WL 3328718 (D. Minn. 7/8/2024).
Josh Jacobson
Law Office of Josh Jacobson
Immigration Law
JUDICIAL LAW
• Failure to meet “exceptional and extremely unusual hardship” standard. On 7/23/2024, the 8th Circuit Court of Appeals, on remand from the U.S. Supreme Court’s vacatur of its previous opinion in light of Wilkinson v. Garland, held that the Board of Immigration Appeals (BIA) did not abuse its discretion when it found that petitioner failed to meet the “exceptional and extremely unusual hardship” standard for purposes of establishing eligibility for cancellation of removal. Furthermore, the BIA, while acknowledging the petitioner’s importance in his children’s lives, reasonably found the level of hardship resulting from the petitioner’s removal was not beyond that typically associated with a parent’s removal from the United States. Gonzalez-Rivas v. Garland, No. 21-3364, slip op. (8th Circuit, 7/23/2024). https://ecf.ca8.uscourts.gov/opndir/24/07/213364P.pdf
• No past persecution here. In July the 8th Circuit Court of Appeals upheld the Board of Immigration Appeals’ conclusion that the petitioner failed to establish past persecution by hospital staff at a government-run hospital in Guatemala where she took her daughter. (Her daughter suffered from a genetic disorder associated with a form of Lenox-Gastaut syndrome, a severe form of epilepsy.) The court agreed with the immigration judge that the petitioner failed to demonstrate hospital staff mistreated her daughter, or, for that matter, that anyone in Guatemala harmed her or her daughter. Consequently, the court upheld the denial of asylum, withholding of removal, and Convention Against Torture (CAT) protection. Calvo-Tino v. Garland, No. 23-3212, slip op. (8th Circuit, 7/12/2024). https://ecf.ca8.uscourts.gov/opndir/24/07/233212P.pdf
• Remand; failed to conduct careful examination of the record. On 7/5/2024, the 8th Circuit Court of Appeals held that the Board of Immigration Appeals (BIA) and immigration judge failed to conduct the obligatory careful examination of the record to determine if religion may have been one of multiple central reasons for gang members’ persecution of the petitioner, a pastor of a Christian church in El Salvador. The court granted in part the petition for review, vacated in part the BIA’s decision, and remanded for further proceedings. Rivera v. Garland, No. 23-2351, slip op. (8th Circuit, 7/5/2024). https://ecf.ca8.uscourts.gov/opndir/24/07/232351P.pdf
ADMINISTRATIVE ACTION
• UPDATE: Keeping Families Together parole-in-place program in litigation. In the August 2024 Notes and Trends, I wrote about President Biden’s June 2024 proposed Keeping Families Together parole-in-place program to allow certain noncitizen spouses (and their children) of U.S. citizens to pursue permanent residence inside the United States, rather than to pursue an immigrant visa process while outside, thus avoiding a years-long wait abroad. On 8/23/2024, 16 Republican-led states and America First Legal filed suit to block implementation of the program, which began operation on 8/19/2024. The states involved in the lawsuit are Texas, Idaho, Alabama, Arkansas, Florida, Georgia, Iowa, Kansas, Louisiana, Missouri, North Dakota, Ohio, South Carolina, South Dakota, Tennessee, and Wyoming. According to its website, America First Legal (AFL) is “led by senior members of the Trump administration who were at the forefront of the America First movement.” AFL is led by Stephen Miller, a senior advisor to former President Trump. At the time of this writing, an administrative stay has been issued, which allows individuals to continue submitting applications but preventing USCIS from approving them until eventual resolution. Stay tuned.
• President Biden announces DED for certain Lebanese nationals. On 7/26/2024, President Biden declared “[h]umanitarian conditions in southern Lebanon have significantly deteriorated due to tensions between Hezbollah and Israel” and consequently issued a memorandum to the Departments of State and Homeland Security; ordering the deferral of removal of certain Lebanese nationals present in the United States at the time of the memo’s issuance, except for those:
(1) who have voluntarily returned to Lebanon after the date of the memorandum
(2) who have not continuously resided in the United States since the date of the memorandum;
(3) who are inadmissible under section 212(a)(3) of the Immigration and Nationality Act (INA) (8 U.S.C. 1182(a)(3)) or deportable under section 237(a)(4) of the INA (8 U.S.C. 1227(a)(4)) [Security and Related Grounds];
(4) who have been convicted of any felony or two or more misdemeanors committed in the United States, or who meet any of the criteria set forth in section 208(b)(2)(A) of the INA (8 U.S.C. 1158(b)(2)(A));
(5) who are subject to extradition;
(6) whose presence in the United States the Secretary of Homeland Security has determined to be not in the interest of the United States or to present a danger to public safety; or
(7) whose presence in the United States the Secretary of State has reasonable grounds to believe would have potentially serious adverse foreign policy consequences for the United States.
89 Fed. Reg. 61341-42 (2024). https://www.govinfo.gov/content/pkg/FR-2024-07-31/pdf/2024-17006.pdf
• Notice extending and redesignating Somalia for TPS. On 7/22/2024, the U.S. Department of Homeland Security (DHS) announced the extension of the designation of Somalia for temporary protected status (TPS) for 18 months, beginning on 9/18/2024 and ending on 3/17/2026. Those wishing to extend their TPS must re-register during the 60-day period running from 7/22/2024 through 9/20/2024. The secretary also redesignated Somalia for TPS for an 18-month period, allowing Somalis to apply who have continuously resided in the United States since 7/12/2024 and been continuously physically present in the United States since 9/18/2024. The registration period for these new applicants, under the redesignation, begins on 7/22/2024 and ends on 3/17/2026. 89 Fed. Reg. 59135-43 (2024). https://www.govinfo.gov/content/pkg/FR-2024-07-22/pdf/2024-15829.pdf
• Notice extending and redesignating Yemen for TPS. On 7/10/2024, the U.S. Department of Homeland Security (DHS) announced the extension of the designation of Yemen for temporary protected status (TPS) for 18 months, beginning on 9/4/2024 and ending on 3/3/2026. Those wishing to extend their TPS must re-register during the 60-day period running from 7/10/2024 through 9/9/2024. The secretary also redesignated Yemen for TPS for an 18-month period, allowing Yemenis to apply who have continuously resided in the United States since 7/2/2024 and been continuously physically present in the United States since 9/4/2024. The registration period for these new applicants, under the redesignation, begins on 7/10/2024 and ends on 3/3/2026. 89 Fed. Reg. 56765-73 (2024). https://www.govinfo.gov/content/pkg/FR-2024-07-10/pdf/2024-15084.pdf
R. Mark Frey
Frey Law Office
Indian Law
JUDICIAL LAW
• Self-employment income of enrolled tribal member earned on-reservation is subject to federal income taxation. Following argument from enrolled tribal member that his self-employment income was not federally taxable due to a lack of express congressional authorization, the 8th Circuit upheld a ruling of the United States Tax Court finding in favor of taxation. The court repeated existing precedent that tribal members, as United States citizens, are generally subject to federal income taxation; and, in order to be excused from that taxation, there needs to be a specific exemption. Finding no such specific exemption in either the Indian Citizenship Act of 1924, or in Article 5 of an 1837 Treaty between the United States and the Minnesota Chippewa Tribe, the court held the tribal member’s self-employment income was subject to federal income taxes. Bibeau v. Comm’r of Internal Rev., 108 F.4th 1038 (8th Cir. 2024).
Leah K. Jurss
Hogen Adams PLLC
Intellectual Property
JUDICIAL LAW
• Trade dress: Infringement claim sufficiently pled in face of expired utility patent. Judge Frank recently denied defendant Revitalyte LLC’s motion for judgment on the pleadings. Plaintiff Abbott Laboratories sued Revitalyte for trade dress infringement related to Abbott’s Pedialyte product, sold in “its uniquely shaped plastic bottle, with a wrap-around label encircling the middle 50-60 percent of the bottle and identifying the product as Pedialyte.” Revitalyte is a competitor in the oral electrolyte solution market. Abbott alleges that the Revitalyte bottle is the same shape and size as Pedialyte’s product, with the same size and shape of the wrap-around label along with similar coloring. To establish a trade dress infringement claim under 15 U.S.C. §1125(a)(1), a party must demonstrate that its trade dress is (1) inherently distinctive or acquired distinctiveness through secondary meaning; (2) nonfunctional; and (3) its imitation would result in a likelihood of confusion in consumers’ minds as to the source of the product. Revitalyte moved for judgment on the pleadings, arguing that Abbott had not pled sufficient facts to support a plausible claim that Pedialyte’s trade dress is nonfunctional—citing an expired utility patent as evidence that the trade dress is functional. Under the Supreme Court’s TrafFix Devices, Inc. decision, a feature of a product is functional if it is essential to the use or purpose of the article or if it affects the cost or quality of the article. A utility patent is strong evidence that the features therein claimed are functional. Abbott had acquired a utility patent in 1993 associated with sterilization of plastic bottles, wherein one of the disclosed embodiments corresponds with the present shape of the Pedialyte bottle. Revitalyte argued that the expired utility patent proved as a matter of law that the Pedialyte trade dress is functional. Abbott argued that the trade dress includes elements besides bottle shape, such as the coloring of the product, cap, and label; the size and orientation of the label; the indentation between the bottle’s ribs; and the shrink-wrapped cap. Abbott also argued that improvements to the manufacturing process since 1993 have eliminated the need for specialized packaging designs. The court found that Abbott had put forth plausible allegations that since the manufacturing process has changed, the bottle shape is not functional. The court found that arguments regarding other aspects of the trade dress, such as placement and size of the wrap-around label and colors, are premature at this stage. Accordingly, the court denied Revitalyte’s motion for judgment on the pleadings. Abbott Labs. v. Revitalyte LLC, No. 23-1449 (DWF/DTS), 2024 U.S. Dist. LEXIS 143524 (D. Minn. 8/13/2024).
• Patents: Discretionary dismissal of inequitable conduct claims to allow for appeal of prior ruling. Judge Frank recently dismissed Corning Inc.’s claims for inequitable conduct, thus allowing the court’s prior summary judgment of noninfringement ruling to proceed to appeal. Corning Inc. sued Wilson Wolf manufacturing seeking declarations of noninfringement, invalidity, and unenforceability due to inequitable conduct. The court previously dismissed Corning’s noninfringement claims. Wilson Wolf Manufacturing moved to dismiss the inequitable conduct claims, arguing that in view of the dismissal of the noninfringement claims, Corning’s declaratory judgment claims for unenforceability were rendered moot. Under the Declaratory Judgment Act, a party has standing to bring an action when an “actual controversy” exists. In patent infringement lawsuits, resolution of claims on the merits in favor of the accused infringer does not necessarily render remaining claims moot. In considering whether the controversy was mooted by the dismissal of the noninfringement claims, the court found the parties continue to dispute the enforceability of the claims—meaning that there continues to be a live case or controversy. Despite the claims not being mooted, the court agreed to exercise its discretionary powers and dismiss without prejudice the inequitable conduct claims. Dismissal would allow the claim construction rulings of the noninfringement decision to proceed to appeal. If affirmed, the dispute between the parties would be settled. If the ruling is reversed, the parties would then have to retry the noninfringement and potentially the inequitable conduct claims. Corning Inc. v. Wilson Wolf Mfg. Corp., No. 20-700 (DWF/TNL), 2024 U.S. Dist. LEXIS 139799 (D. Minn. 8/7/2024).
Joe Dubis
Merchant & Gould
Real Property
JUDICIAL LAW
• Redeeming foreclosures; lien status. Michael Whalen is the owner of a residential condominium unit governed by a housing association. After the association noticed that the ironwork on the complex’s balconies had begun to deteriorate, the board of the association contracted to repair the ironwork and assessed the repair cost to the unit owners. Whalen disputed the assessment, eventually leading to the association’s placing a lien against Whalen’s unit. The association foreclosed the lien. An LLC purchased the property at the subsequent sale, and Whalen filed suit to prevent the sale and lodged a number of claims under the Minnesota Common Interest Ownership Act to invalidate the association’s lien. Whalen then redeemed the property, the district court granted summary judgment in favor of the association, and Whalen appealed.
First, the court of appeals concluded that, by exercising his right to redeem, Whalen “nullified the sale” under Minn. Stat. §580.27, eliminating his ability to challenge the foreclosure under Section 580. Next, after disposing of nearly all of Whalen’s MCIOA arguments, the court found that there was evidentiary support for Whalen’s contention that the association failed to provide documentation to Whalen as required by Minn. Stat. §515B.3-118, allowing Whalen to seek “appropriate relief” under Minn. Stat. §515B.4-116(a).
In sum, the court found that redeeming a property prohibits a property owner from challenging the validity of a foreclosure sale, but not the underlying lien. Property owners should instead preserve their right to redeem after the pendency of their lawsuit by following the procedure outlined in Minn. Stat. §580.28. Whalen v. 200 River Drive Condo. Ass’n, A23-1671, 2024 WL 3648457 (Minn. Ct. App. 8/5/2024).
Joseph M. Graen
DeWitt LLP
State Appellate Practice
MN SUPREME COURT
• Notable decision: The Supreme Court dismissed a challenge to the Re-Enfranchisement Act, the legislative enactment restoring voting rights to individuals convicted of a felony, for lack of taxpayer standing. Three individuals filed suit to prevent state officials from using public funds “to educate and give notice to people about the new voting provision” regarding the restoration of voting rights for convicted felons based on their allegation that such restoration violated the Minnesota Constitution. The district court dismissed the suit for lack of standing. The Supreme Court granted accelerated review and affirmed. Standing exists where a party has suffered an injury-in-fact. Taxpayers without a direct personal injury may nevertheless have standing based on the alleged unlawful use of public funds. However, the Supreme Court reviewed its prior pronouncements on taxpayer standing and clarified that “taxpayer standing does not exist when a taxpayer simply seeks to generally restrain ‘illegal actions on the part of public officials.’” Instead, the Supreme Court reiterated that it recognizes taxpayer standing “only when the central dispute involves alleged unlawful disbursements of public funds.” Here, the claim by the individual taxpayers regarding the use of public funds was merely “incidental to” the petition challenging the Re-Enfranchisement Act, because the act itself is enforceable without any appropriation or disbursement of public funds. As a result, the “central dispute” did not involve the disbursement of public funds so as to grant the individuals taxpayer standing to pursue their claims. Minnesota Voters Alliance v. Hunt, A23-1940 (Minn. 8/7/2024).
MN COURT OF APPEALS
• Notable precedential decision: The court of appeals concluded that a stipulated waiver of all claims in a dissolution judgment and decree did not operate to waive one party’s right to seek a harassment restraining order based on conduct that occurred during the marriage. The parties before the court were a formerly married couple. In their dissolution judgment and decree, they stipulated to waive “any and all liability, claims, and obligations of any kind against the other party, whether arising in contract status, tort or otherwise,” and agreed to be “barred from bringing any actions relating to such liability, claims, or obligations.” Six years after their divorce, the former wife filed a petition for an HRO against the former husband for his alleged threatening and harassing behavior. The district court granted the HRO based on the husband’s “recent conduct in light of the past abuse,” which was documented during their marriage. On appeal, the husband—relying upon the waiver in the dissolution decree—argued that the district court erred when it considered conduct that occurred prior to their divorce. The court of appeals disagreed, stating that “[a]busive and harassing conduct” does not constitute a liability, claim, or obligation subject to the waiver. Moreover, “[a]t a minimum, the district court may use evidence of the predissolution conduct for purposes of providing a historical perspective regarding the parties’ relationship when considering whether to grant an HRO based upon alleged postdissolution conduct.” Because the history of the parties’ relationship was relevant to whether the husband’s conduct was “objectively unreasonable,” the district court did not err by considering the husband’s pre-divorce conduct when awarding an HRO for post-divorce harassing conduct. Wilson v. Wilson, No. A23-1799 (Minn. Ct. App. 8/12/2024).
• Notable nonprecedential decision: The Minnesota Court of Appeals affirmed the dismissal of a former gubernatorial candidate’s breach of contract and civil rights claims against Life Time Fitness. Hugh McTavish sued Life Time Fitness and its employee after it terminated his membership contract for his refusal to remove campaign literature he had distributed in the parking lot during his 2022 campaign for governor. McTavish had placed campaign leaflets on cars parked in the parking lot of the Bloomington location of Life Time Fitness, where he was also a member. The manager of the location requested that he remove the leaflets, which he refused. Two days later, Life Time suspended his membership. Life Time subsequently terminated his membership for continuing to use the facility during his suspension. McTavish claimed that the termination breached his membership contract and infringed upon his 1st Amendment right to freedom of speech. The court of appeals disagreed. It noted that the contract contained an anti-solicitation clause for political purposes, and permitted Life Time the unilateral right to terminate the agreement for conduct it determines in its sole discretion to be contrary to its best interests. It further determined that McTavish’s 1st Amendment claim failed for lack of state action; in other words, the claim failed because “Life Time is not a federal or state governmental body” and its employee “did not act under color of a state or local law.” Because Life Time acted in its private capacity based on its private agreement with McTavish, the 1st Amendment did not apply. McTavish v. Life Time Fitness, No. A24-0065 (Minn. Ct. App. 8/26/2024).
• Notable special term order: The court of appeals dismissed an appeal as premature due to an unresolved motion for attorneys’ fees. The court of appeals questioned whether it had jurisdiction over an appeal stemming from an order amending a judgment. The district court faced two competing motions to amend the judgment at issue as well as a request for attorneys’ fees. It awarded attorneys’ fees, but left the amount of fees undecided pending further submissions. The court of appeals concluded that because the order amending the judgment “did not determine the amount of the attorney-fee award,” the order thus “did not fully adjudicate” the motions before the district court. As a result, the order was not a “final order” subject to appeal. In so concluding, the court of appeals noted that a “pending request for attorney fees generally does not affect the finality of a judgment” except for two circumstances: (1) where the request for fees “is a separate claim, independent of the underlying claim or claims that comprise the merits of the action,” and (2) where “an award of attorney fees is part of the damages that may be awarded on a claim.” However, it is unclear which of the two circumstances applied to render the present appeal premature. Instead, the court of appeals relied upon the general policy against piecemeal appeals in rendering its decision. In re the Lawrence B. Schwagerl Trust dated April 9, 1999, No. A24-1218 (Minn. Ct. App. 8/27/2024).
• Notable special term order: The court of appeals rejected a request for a writ of prohibition to preclude an assigned district court judge from presiding over a case. The court of appeals denied the petition for a writ of prohibition seeking to remove a district court judge from the underlying case due to alleged bias against the petitioner. Although a writ of prohibition is generally available to “challenge the denial of a motion to remove a judge for cause,” the court of appeals determined that it would not grant a writ unless the petitioner demonstrated objective bias on the part of the assigned judge. Ultimately, a writ will only issue to remove a district court judge if a “reasonable examiner, with full knowledge of the facts and circumstances, would question the judge’s impartiality.” The court noted that mere “adverse rulings, even if erroneous,” do not satisfy this objective standard. Nor do erroneous statements made on the record without further evidence of bias. Scheffler v. Franzen, No. A24-1219 (Minn. Ct. App. 8/27/2024).
Pat O’Neill & Sam Schultz
Larson King, LLP
Tax Law
JUDICIAL LAW
• Clarification of taxpayer standing. Individuals and an association opposed to the restoration of voting rights to citizens with felony convictions sued to challenge the act. The plaintiffs argued that they had standing under Minnesota’s broad taxpayer-standing doctrine. The district court dismissed the case, and the Supreme Court affirmed. Taxpayer standing is recognized only when the central dispute involves alleged unlawful disbursements of public funds. The petitioners in this case attempted to establish standing by relying on dicta in a 1928 case, Oehler v. City of St. Paul, 219 N.W. 760 (Minn. 1928). Taxpayer standing is not established by alleging “illegal action on behalf of public officials.” Instead, taxpayers in Minnesota have standing when their action is one to “restrain the unlawful use of public funds.” Further, the allegations of unlawful expenditures of public funds must be central, rather than incidental, to the action. The unanimous opinion traces the history of the taxpayer standing doctrine in Minnesota. Minnesota Voters Alliance v. Hunt, 10 N.W.3d 163 (Minn. 2024).
• Chapter 278 provides the exclusive statutory remedy for challenging property assessments. Hennepin County property owner Theodore Carl Lockhart, Sr., challenged the assessment of his Bloomington property. This is Mr. Lockhart’s fourth case with respect to the property, and he initially filed it in state court. The complaint contained numerous allegations, including alleged violations of the U.S. Constitution, the ADA, the MHRA, and various criminal and non-tax civil statutes. The root of the complaint, however, was a property tax valuation dispute. The district court transferred the case to the Minnesota Tax Court, and the tax court took up various motions, including the defendants’ motion to dismiss and Mr. Lockhart’s motions for default and summary judgment, as well as a jurisdictional motion (seeking transfer from tax court). In a lengthy memorandum, the court held, inter alia, that Mr. Lockhart’s “statutory and constitutional claims in the Complaint, including Mr. Lockhart’s claims of intentional discrimination under the U.S. Constitution, the ADA, and the MHRA, relate directly to the process of tax assessment of the subject property. Accordingly, chapter 278 provides the exclusive remedy for those claims.” The only dispute remaining is Mr. Lockhart’s claim that the property was overvalued as of 1/2/2022. Mr. Lockhart was not entitled to summary judgment on that claim, because the valuation was a disputed issue of material fact. The court will issue a scheduling order for trial on the valuation issue. Lockhart v. Cnty. of Hennepin, No. 27-CV-23-2367, 2024 WL 3867860 (Minn. Tax 8/15/2024).
• “Napkin accounting is bound to attract the Commissioner’s attention,” but does not guarantee its sympathy. In Maggard v. Comm’r of Internal Revenue, a minority owner of S Corp shares was found liable for the proportionate income received by the S Corp, even though the majority owners did not distribute proportionate shares of the S Corp income to the shareholders.
Petitioner founded an S Corp with a partner in the 2000s. In the following years, the partner left, and two new individuals bought into the S Corp, amassing a majority ownership. After nearly a decade, the petitioner realized the new majority was making disproportionate distributions to themselves at the petitioner’s expense. After litigation in the state court and pursuing a claim with the Whistleblower Office (WBO), petitioner received a settlement from the majority shareholders and the WBO did not act on the provided information. What did come from discussions with the WBO was the question of whether the unequal distributions might have terminated the S Corp status.
When shareholders elect to be an S Corp, upon approval, the election remains effective indefinitely. See I.R.C. §1362(c). The code, however, also requires, among other requirements, that S Corps only have one class of stock. §1361(b)(1)(D). Treas. Reg. §1.1361-1(l)(1) provides that “a corporation is treated as having only one class of stock if all outstanding shares of stock of the corporation confer identical rights to distribution and liquidation proceed.” While the IRS has “said it won’t treat any disproportionate distributions made by a corporation as violating the one-class-of-stock requirement if the governing provisions provide for identical rights,” petitioner here argued his circumstances were distinguished. Petitioner argued that the disproportionate distributions were not the only circumstance that warranted consideration. Beyond the distributions, petitioner was also subject to “deferred income, removal of shareholder and board member rights, and lack of sufficient information.” While the court sympathized with petitioner’s position, the majority shareholders never memorialized their actions through formal amendments to any of the S Corp’s governing documents. Without formal amendments, the court could not revoke the S Corp’s status under Treas. Reg. §1.1361-1(l)(2), and found that the S Corp’s income followed through the petitioner and must be included at the proportionate rate in petitioner’s filings. Maggard v. Comm’r of Internal Revenue, T.C. Memo. 2024-77 (U.S. T.C., 2024).
• Sales reps’ production of “Market News Notes” was unprotected activity. In Wisconsin Department of Revenue v. William Wrigley, Jr., Co., 505 U.S. 214 (1992), the Supreme Court set out parameters for taxation of interstate activity. By federal statute, states are not allowed to impose income taxes on out-of-state businesses if the only activities conducted by the business within the state are the “solicitation of orders.” 15 U.S.C. §381(a)(1). The Supreme Court in Wrigley took up the question of what qualified as “solicitation of orders” where the Wrigley chewing gum company used sales representatives to solicit new business and restock stale gum in a neighboring state. The restocking of stale gum was at issue, and the Court reasoned that “employing salesmen to repair or service the company’s products is not part of the ‘solicitation of orders,’ since there is good reason to get that done whether or not the company has a sales force. Repair and servicing may help to increase purchases; but it is not ancillary to requesting purchases, and cannot be converted into ‘solicitation’ by merely being assigned to salesmen.” Wrigley, 505 U.S. 214 at 229 (emphasis added). Additionally, the activity was not “de minimus,” since despite the restocking of stale gum being a relatively small portion of Wrigley’s overall business, it still amounted to “regular and systematic replacement of stale product… that amounted to several thousand dollars per year, which is a lot of chewing gum.” The Court found the restocking of gum therefore to be unprotected activity and subject to income tax.
Here, the Minnesota Supreme Court relied on Wrigley to find Uline subject to Minnesota income tax. Uline, Inc. is based in Wisconsin, but its sales representatives called on customers in Minnesota. After customer calls, Uline sales representatives were required to submit regular “Market News Notes.” These notes summarized information gleaned from their customer calls about Uline’s competition and broader market trends. In 2014 and 2015, the Minnesota Department of Revenue assessed taxes on the company, claiming the activities of Uline’s sales representatives created a sufficient nexus with the state. The commissioner imposed income and franchise taxes, and Uline appealed. The Minnesota Supreme Court found that under Wrigley, the activities of Uline’s sales representatives were not protected and were not de minimus.
First, the Court found that the production of notes by the sales representatives went beyond the mere “solicitation of orders.” As in Wrigley, the Court explained that while the market information might have been part of the sales process for Uline, there was a “good reason” for Uline to collect and produce the market information contained in the notes with or without a sales force. Therefore, the production of the notes was not exclusively “solicitation of orders” and therefore was unprotected from state taxation. Second, the Court found the production of notes was not de minimus. As in Wrigley, the Court determined that the contacts between Uline and the state were “regular and systematic,” and pointed to the 1,600 individual notes the Uline sales representatives produced over the two years at issue. Uline, Inc. v. Comm’r, A23-1561, 2024 WL 3681771 (Minn. 8/7/2024).
• County can require buyer to demolish buildings as condition of purchasing tax-forfeited property. Dodge County sold a tax-forfeited property to Ashcel Companies, Inc. with an attached condition to demolish “all buildings” on the property. The property in question had a house “in poor condition,” without running water or a septic system. The county determined that it was in the public interest to remove the house, and included in its notice of public sale a condition that all buildings would need to be demolished. After purchase, Ashcel asked the county to remove the condition so its president could live in the house. The county refused, and after extensive procedural back and forth, the Minnesota Court of Appeals was tasked with answering “whether counties have the authority to impose a condition requiring demolition of pre-existing structures as part of a tax-forfeiture sale.”
The court found that counties do have this authority. Although the procedural path to the reviewing court was fraught, the court’s decision was straightforward. It reasoned that the Legislature’s primary intention by allowing counties to sell tax-forfeited land is to return the property to the tax rolls without “unduly burdening the public treasury.” Minn. Stat. §282.03. Requiring the buyer of the tax-forfeited property to bear the financial burden of demolishing the buildings, rather than the county, protects the public treasury, and is therefore authorized by statute. Ashcel Companies, Inc. v. Cnty. of Dodge, A24-0056, 2024 WL 3643160 (Minn. Ct. App. 8/5/2024).
• No measurable water use at property contributes to revocation of homestead classification. McLeod County revoked the homestead classification on Renee Vasko’s property in Lester Prairie after learning there had been no appreciable water use at the property and no working postal service for years. The county assessed the property’s value at $110,000. Vasko challenged the decision, claiming she and her son had used the property as a homestead and that the property was overvalued. The tax court affirmed the county’s valuation and revocation, and Vasko appealed.
The Minnesota Supreme Court affirmed. Endorsing the tax court’s test for receiving a homestead classification, the Court quoted another tax court decision to lay out the four requirements: “1) the taxpayer must be the owner; 2) the Subject Property must be residential real estate; 3) the Subject Property must be occupied and used by the owner for the purposes of a homestead; and 4) the owner of the Subject Property must be a Minnesota resident.” (quoting Aanenson v. County of Murray, No. C9-01-63, 2002 WL 1988199 (Minn. T.C. 8/22/2002)). Here, the third requirement was the most in contention.
At trial, Vasko attempted to prove the property was her primary residence by pointing to ongoing garbage services, energy bills, and the address on her driver’s license, but the tax court found those unconvincing in light of no measurable water usage at the property during the time at issue. The Supreme Court carefully sifted through the evidentiary record and concluded that the tax court’s determination that Vasko’s Lester Prairie property was not her primary residence was not clearly erroneous. Second, it found that Vasko did not present “substantial evidence” that the assessed valuation done by the county was incorrect. Rather than offering her own valuation or contesting the county’s valuation methods, Vasko only offered five property tax statements for other properties in Lester Prairie. Accordingly, the Court found that the tax court correctly dismissed the claim. Vasko v. Cnty. of McLeod, A23-0061, 2024 WL 3882574 (Minn. 8/21/2024).
• Office space improperly valued. Minnesota Office Plaza, LLC, owner of an office property in Roseville, disputed Ramsey County’s $14.7 million appraisal for the 2021 tax year, claiming that the property was only worth $12.1 million. The property at issue was an outdated office building with adjacent parking lots. Minnesota Office presented expert evidence from an appraiser who used the sales-comparison approach and the income approach to credential Minnesota Office’s claim. During trial, Ramsey County declined to cross-examine the appraiser or present its own contradictory evidence or appraisals and proceeded to ask the tax court to value the subject property at $16.1 million in post-trial briefs. The tax court reminded the county in its decision that it is unable to exercise “independent judgment and skill without any credible or reliable evidence for the parties,” and since the county did not provide any experts at trial the tax court could not endorse its valuation opinions. The tax court found Minnesota Office’s appraiser credible and ruled the market value was $12.1 million. Minnesota Office Plaza, LLC v. Cnty. of Ramsey, 62-CV-22-2621, 2024 WL 3882576 (Minn. Tax 8/20/2024).
Morgan Holcomb, Leah Olm, Adam Trebesch
Mitchell Hamline School of Law
Torts & Insurance
JUDICIAL LAW
• Breach of warranty; defects in “material or workmanship.” Insurer brought a subrogation action following a tractor fire, asserting claims for breach of express warranty against manufacturer and negligence against dealership. Insurer alleged that the fire was caused by crop debris that accumulated in the engine compartment due to the lack of engine side shields. The 2018.5 model at issue did not have side shields installed; however, the manufacturer included them on the 2019.5 model and sent a notice to the dealership about an optional program to install them for the 2018.5 models. In addition, the model at issue contained a limited warranty, which provided: “Under these warranties, [manufacturer] will repair or replace, at its option, any part covered under these warranties which is found to be defective in material or workmanship during the applicable warranty term.” The limited warranty affirmatively disclaimed all other warranties. The district court granted the manufacturer’s motion to partially dismiss the breach-of-express-warranty claim and later granted both defendants’ motions for summary judgment on all claims.
The Minnesota Court of Appeals affirmed in part, reversed in part, and remanded. With respect to the express warranty claim, the sole issue on appeal was whether the district court properly interpreted the manufacturer’s warranty to exclude design defects. Because the warranty did not define the terms “material” and “workmanship,” the court applied dictionary definitions of the terms, holding: “the phrase ‘defective in material or workmanship’ squarely aligns with a manufacturing defect and does not implicate the intentional omission or inclusion of a challenged component that characterizes a design defect.” The court noted that its “conclusion is reinforced by federal caselaw interpreting warranties for defects in ‘workmanship’ or ‘material,’ which uniformly recognizes that such covered defects are not design defects.” However, the court went on to hold that the district court erred by granting summary judgment on the insurer’s negligence claim against the dealership. The court reasoned that expert testimony was not required to establish the dealership’s standard of care given the evidence in the record that the accumulation of crop debris near the exhaust manifold of the 2018.5 tractor was a known fire risk, that the dealership was aware of the program to install the engine shields and the risk of fire from crop debris, and the dealership installed shields on other tractors. Secura Ins. Co. v. Deere & Co., A23-1773 (Minn. Ct. App. 8/19/2024).
Jeff Mulder
Bassford Remele