CRIMINAL LAW
JUDICIAL LAW
• Burglary: Misdemeanor trespass not lesser-included offense of first-degree burglary. Appellant pleaded guilty to first-degree burglary while possessing a firearm and being an ineligible person in possession of a firearm. He argues on appeal that his plea to first-degree burglary was inaccurate and invalid. Specifically, he claims his plea testimony negated the element of entering the building “without consent” and failed to demonstrate he “committed a crime while in the building.” Appellant was found on a cot in a boarded-up tribal house with a revolver and heroin nearby, and a needle and money in his pants pocket. Appellant was ineligible to possess a firearm at that time.
Appellant testified at his plea hearing that his cousin used to be a tenant of the building but that he knew it was owned by the Leech Lake Housing Authority at the time he entered it. On appeal, he argues he had a claim of right to enter the house because he believed he had his cousin’s permission, and the first-degree burglary statute requires proof he entered without a claim of right, as trespass is a lesser-included offense of burglary. However, the court of appeals clarifies that misdemeanor trespass is not a lesser-included offense of burglary, because the burglary statute, Minn. Stat. § 609.582, subd. 1, plainly does not require proof that a defendant entered a building without a claim of right. Appellant testified he did not enter the house with the legal possessor’s consent.
Appellant also argues that because he possessed a firearm before entering the building, he had already committed the crime of being a felon in possession when he entered, and therefore did not commit a crime while in the building. The court of appeals rejects this argument, concluding that, even though appellant possessed a firearm before he entered, he still possessed the firearm inside the building, which is sufficient to satisfy the first-degree burglary element of committing a crime while in the building. Appellant’s conviction is affirmed. State v. David James Jones, Nos. A17-1840, A17-1841, __ N.W.2d __, 2018 WL 6442304 (Minn. Ct. App. 12/10/2018).
• Controlled substances: Knowledge another person is storing meth paraphernalia in private bedroom of child’s home insufficient to prove crime of storing meth paraphernalia in a child’s home. Appellant and her two children temporarily stayed at her mother-in-law’s house with appellant’s husband, who permanently lived at the house. Appellant’s husband allowed a drug dealer to live in the basement rent-free to satisfy a debt he owed to the dealer. Appellant was aware the dealer dealt drugs out of the basement. After an anonymous tip and a garbage pull, police searched the house, finding methamphetamine and drug paraphernalia in the dealer’s bedroom in the basement, as well as marijuana and a pipe in appellant’s bedroom upstairs. Appellant admitted to taking a hit from a methamphetamine pipe in the dealer’s bedroom at one time. Appellant was charged with various drug offenses, including storage of methamphetamine paraphernalia in a child’s residence. A jury found appellant guilty.
Minn. Stat. §152.137, subd. 2(a)(4), provides, “No person may knowingly engage in any of the following activities in… the residence of a child[:]… storing any methamphetamine paraphernalia.” “Engage in” and “storing” are not defined, but the court of appeals employs dictionary definitions of the words to determine their ordinary usage and concludes that the statute is not ambiguous and that the statute’s plain meaning “prohibits a person from participating and taking part in the activity of keeping methamphetamine paraphernalia for future use in a child’s residence” (emphasis added). Thus, mere knowledge that another person is storing paraphernalia in a private bedroom of the home is insufficient.
Ultimately, the court of appeals finds that the circumstances proved at trial “do not preclude a reasonable inference that [appellant] did not participate in the activity of storing methamphetamine paraphernalia in the home.” There was no evidence that appellant shared the room with the dealer, that she had any ownership or control over who could live in the house, or that the bedroom was not the dealer’s private space. Appellant’s conviction is reversed. State v. Jessica Lynn Maack, No. A18-0315, 2018 WL 6729763 (Minn. Ct. App. 12/24/2018).
• Criminal sexual conduct: Criminal sexual conduct with vulnerable complainant excused when complainant is actor’s spouse at time of offense. The state appeals from the pretrial dismissal of criminal sexual conduct charges against respondent. Respondent was charged with third-degree and fourth-degree criminal sexual conduct for encounters with G.H., who functions at the mental capacity of a seven- to eight-year-old and who the state alleged was “mentally impaired, mentally incapacitated, or physically helpless.” Shortly before trial, respondent and G.H. married. The district court granted respondent’s motion to dismiss, finding that Minn. Stat. §609.349 prohibits criminal culpability if the complainant is the actor’s legal spouse.
Both parties on appeal argue the statute is ambiguous, but the state argues it excuses criminal sexual conduct only if the defendant and victim are married at the time of the offense, while respondent argues the defendant and victim need only be married at any time before trial. The court of appeals agrees the statute is ambiguous, but holds that only one construction is reasonable: the protections accorded a legal spouse in section 609.349 apply only if the actor is married to the victim at the time of the alleged offense, unless the couple is legally separated (emphasis in original). Such a construction harmonizes the entire text of the statute and gives effect to the Legislature’s intent to protect vulnerable adults.
Because respondent and G.H. were not married at the time of the offense, the legal-spouse provision of section 609.349 does not excuse his conduct, and the district court’s pretrial dismisses of the charges against respondent are reversed. State v. Gosewisch, Nos. A18-1142, A18-1143, 2018 WL 6837739 (Minn. Ct. App. 12/31/2018).
Samantha Foertsch
Bruno Law PLLC
Stephen Foertsch
Bruno Law PLLC
EMPLOYMENT & LABOR LAW
JUDICIAL LAW
• Disability discrimination; missing work bars claim. An employee who was fired for taking multiple periodic absences due to an incurable condition lost her disability discrimination claim. The 8th Circuit ruled that the employee’s claim under the Americans with Disability Act (ADA) lacked merit because she did not provide medical verification for missing work due to a flare-up after she had been placed on a “last notice.” Lipp v. Cargill Meat Solutions Corp., 911 F.3d 537 (8th Cir. 12/19/18).
• Sex harassment; “severe & pervasive” prevails. The familiar standard of “severe and pervasive misconduct” was not satisfied by a sexual harassment claimant. The Minnesota Court of Appeals rejected an invitation to abandon that test for hostile workplace claims and upheld summary judgment because the employer took prompt remedial action after learning of the employee’s allegations against a maintenance employee at the nonprofit facility where they worked. Kenneh v. Homeward Bound, Inc., 2019 WL 178153 (Minn. App. Ct. 01/14/2019) (unpublished).
• Breach of contract; LLC not employer. A breach of contract action failed against an LLC; the action arose out of the failure by a mechanic to complete a repair project while representing that he was acting on behalf of the LLC. The court of appeals affirmed a lower court ruling that the default judgment obtained against the mechanic could not be collected against the LLC because there was no evidence that the mechanic was actually an employee of the LLC. Takuanyi v. Mobil Auto Rescue & Repair, 2019 WL 272882 (8th Cir. 1/22/2019) (unpublished).
• Unemployment compensation; quitter loses benefits. A claimant laid off from his previous machinist job who began working as a machinist for a different company, then quit in order to participate in the Dislocated Worker program, hoping to obtain more lucrative employment elsewhere, was denied unemployment compensation benefits. The appellate court held that the employee’s explanation of why he quit his job was insufficient to allow him to obtain benefits because he voluntarily resigned his employment. Pernu v. Cragin Machine Shop,2019 WL 272893 (8th Cir. 1/22/2019) (unpublished).
• Unemployment compensation; cashiers lose claims. A pair of cashiers lost their claim for unemployment compensation.
A grocery store cashier who took two bottles of soda pop without paying for them was denied benefits. Citing its practice of upholding denials of benefits for “minimal” value theft, the court of appeals ruled the employee committed disqualifying “misconduct.” Steiger v. Cub Foods, 2019 WL 115338 (Minn. App. Ct. 01/07/2019) (unpublished).
A cashier whose testimony vacillated was not entitled to unemployment compensation after he was discharged for a multitude of infractions. The appellate court upheld denial of benefits and of a request for a new hearing. Ka v. Lonvigan’s Service Center, 2019 WL 272882 (8th Cir. 1/22/2019) (unpublished).
Marshall H. Tanick
Meyer, Njus & Tanick
ENVIRONMENTAL LAW
JUDICIAL LAW
• Minnesota state law governing vehicle air pollution control systems held preempted by the Clean Air Act. In an unpublished opinion, the Minnesota Court of Appeals dismissed the Minnesota Attorney General’s claims that car manufacturer Volkswagen Group violated a Minnesota law that prohibits tampering with air pollution control systems by finding the Minnesota law was preempted by the Clean Air Act (CAA). Section 209(a) of the CAA provides that states may not enforce standards relating to emission controls of new motor vehicles. Minnesota alleged, however, that Volkswagen tampered with used vehicles and thus argued that its state law claims pursuant to Minnesota’s anti-tampering laws was not preempted by the CAA. See Minn. Stat. §325E.0951, subd. 2(a) and Minn. R. 7023.120).
The state prevailed in district court, overcoming Volkswagen’s argument that the tampering claims were preempted by the CAA. On appeal, the court found Minnesota’s law, if upheld, would regulate thousands of vehicles on a model-wide basis. This intrusiveness into the nationwide regulatory scheme of the CAA, the court held, was an obstacle to the execution of the purposes and objectives of the CAA as EPA, not the states, was delegated the power by Congress to regulate such nationwide conduct. The appellate court also found that the preemption doctrine prohibited the state’s enforcement action, holding that if the state’s claims were allowed to proceed, the state’s efforts could interfere with the federal government’s ability to reach a settlement with Volkswagen. State v. Volkswagen Aktiengesellschaft, No. A18-0544, 2018 WL 6273103 (Minn. Ct. App. 12/3/2018) (unpublished).
• 7th Circuit appeal set to widen circuit split of CWA groundwater jurisdiction. On 11/14/2018, the U.S. District Court for the Central District of Illinois held that discharges of pollutants into groundwater are not subject to liability under the Clean Water Act (CWA). The court granted defendant’s motion to dismiss due to lack of subject matter jurisdiction.
The CWA prohibits the discharge of a pollutant from any point source into navigable waters without a permit. 33 U.S.C §§1251, et seq. In this case, the defendant, a retired coal-fired power plant, held a permit from the Illinois Environmental Protection Agency allowing limited discharge of certain pollutants from specific points into the Middle Fork of the Vermilion River. However, the power plant also stored millions of tons of coal ash in three unlined pits on its property. Plaintiff alleged that, for years, water from two of those coal ash pits leached contaminants and pollutants—such as arsenic, boron, lead, and sulfate— into the groundwater. The pollutants flowed down-gradient, through the groundwater, eventually reemerging from numerous unpermitted seeps on the riverbank of the Middle Fork and into the river.
In its analysis, the court turned to its circuit for precedent. The 7th U.S. Circuit Court of Appeals decided a very similar case involving oil-polluted water collecting in artificial retention ponds, which eventually seeped into groundwater. Village of Oconomowoc Lake v. Dayton Hudson Corp., 24 F.3d 962 (7th Cir. 1994). The circuit court held that the CWA does not assert “authority over ground waters, just because these may be hydrologically connected with surface waters.” Id. at 965. Thus, in Prairie Rivers, the district court held that offending discharges made into groundwater that somehow later find their way into surface waters are not in violation of the CWA. Prairie Rivers Network, 2:18-cv-02148 at 14.
On 12/14/2018, plaintiff filed a notice of appeal to the 7th Circuit. If the appellate court affirms the decision, it will further the already clear circuit split on the issue. On one end of the spectrum, in addition to Oconomowoc of the 7th Circuit, the 4th Circuit and 6th Circuit have recently considered whether leachate into groundwater from coal ash pits is a violation of CWA, and both have rejected it. Sierra Club v. Virginia Elec. & Power Co, No. 17-1895, (4th Cir. 2018); Kentucky Waterways All. v. Kentucky Utilities Co., No. 18-5115, (6th Cir. 2018); Tennessee Clean Water Network v. Tennessee Valley Auth., No. 17-6155, (6th Cir. 2018).
On the other hand, the 4th Circuit and 9th Circuit have found that CWA applies to pollutants discharged, via a point source, into groundwater, when those pollutants reach navigable waters. Upstate Forever v. Kinder Morgan Energy Partners, 887 F.3d 637 (4th Cir. 2018); Hawai’i Wildlife Fund v. County of Maui, 886 F.3d 737 (9th Cir. 2018).
In both the Kinder Morgan and County of Maui cases, petitions for certiorari have been filed with the U.S. Supreme Court. On 1/3/2018, the Solicitor General submitted an amicus brief supporting Supreme Court review to resolve the circuit split. Prairie Rivers Network v. Dynegy Midwest Generation, LLC, No. 2:18-cv-02148, (C.D. Ill. 2018).
ADMINISTRATIVE ACTION
• EPA proposal rejects public-health benefit determination underlying Obama-era mercury emission standards for coal plants while retaining the standards. On 12/28/2018, the U.S. Environmental Protection Agency (EPA) announced a long-awaited proposed rule setting forth the agency’s reconsideration of the agency’s 2011 mercury and air toxics standards (MATS), which limit mercury emissions from coal-fired power plants. EPA’s proposal would retain the 2011 standards but would revise the underlying cost-benefit analysis upon which the agency based its original finding that the rule was “appropriate and necessary” under the Clean Air Act’s section 112 hazardous air pollutant (HAP) regulations. In promulgating the 2011 MATS, EPA estimated that complying with the standards would cost utilities $9.6 billion per year while mercury reductions realized as a result of the MATS would result in annual public health benefits of only $6 million. However, because the utilities, in reducing mercury emissions, would necessarily also be significantly reducing emissions of fine particulate matter (PM2.5) (which is not a HAP under section 112), the overall annual public health benefits, factoring the “co-benefits” of reducing PM2.5, would be between $37 billion and $90 billion.
In the current proposed rule, EPA concludes it was inappropriate for the agency to consider these co-benefits and that, as a result, the original “appropriate and necessary” finding was erroneous. Nonetheless, EPA proposes to keep the MATS in place, citing a 2008 decision from the D.C. Circuit Court of Appeals, New Jersey v. EPA, which held that a source category cannot be removed from regulation under section 112 merely because the original listing was found to be in error. Reaction from the power sector is likely to be mixed because in many cases, the technology updates needed to comply with the MATS were completed years ago. Meanwhile, environmental groups are decrying the precedent that would be set by not considering co-benefits when determining public health impacts in future rulemakings. According to an EPA fact sheet, the agency will be receiving public comments on the proposed rule for 60 days following publication in the Federal Register, which was anticipated to occur in mid-February 2019.
Jeremy P. Greenhouse
The Environmental Law Group, Ltd.
Susan Wiens
The Environmental Law Group, Ltd.
Jake Beckstrom, Vermont Law School 2015
Erik Ordahl, Flaherty & Hood, P.A.
FAMILY LAW
JUDICIAL LAW
• When considering a motion to modify permanent spousal maintenance, a district court may not impute income to a recipient based on an alleged failure to rehabilitate. The parties divorced in 2012. After a two-day trial, the district court granted wife permanent spousal maintenance of $10,000 per month. In determining the amount of wife’s maintenance award, the court found her capable of earning approximately $30,000 per year, but expressed that in the future wife might expect to earn as much as $50,000 per year. Despite this possibility, the district court did not fashion a step-down in spousal maintenance to account for these increased earnings, instead simply leaving the award open to future modification. Wife elected not to return to the workforce, despite the court’s finding she had the ability to do so.
Several years later, husband experienced health problems that required him to sell his business and reduce his working hours. Husband moved to modify or terminate spousal maintenance, primarily citing the reduction in his income. The district court agreed husband has experienced a substantial change in circumstances sufficient to modify maintenance, and adjusted the maintenance award accordingly. In determining the amount of the modified award, the district dourt took notice of wife’s failure to seek employment, and imputed income to her of $50,000 per year—consistent with what wife might have expected after several years of experience.
Wife appealed and the Minnesota Court of Appeals reversed. While recognizing that even permanent spousal maintenance recipients may have a duty to increase their earning potential in some circumstances, the appellate court held that when modifying spousal maintenance, a district court may not impose such an obligation where the original maintenance award did not. In support of its holding, the court of appeals distinguished permanent maintenance awards from temporary awards, which assume a recipient will progress toward self-sufficiency. The court further contrasted permanent maintenance awards, which expressly impose an expectation of rehabilitation by imposing automatic (or step-down) reductions in spousal maintenance over time. However, where a district court does not expressly require a permanent maintenance recipient to increase her earning capacity, a court may not later impute income to a recipient who elects not to do so. Instead, the court must reevaluate the recipient’s ability to self-support independently and based on the circumstances that exist at the time maintenance is modified. Madden v. Madden, No. A18-0505, ___ N.W.2d ___ (Minn. Ct. App. 2/4/2019).
Michael Boulette
Barnes & Thornburg LLP
FEDERAL PRACTICE
JUDICIAL LAW
• 9 U.S.C. §1; arbitration; “contracts of employment”; threshold issues of arbitrability. The Supreme Court unanimously held that it is up to a court—and not an arbitrator—to determine whether a dispute falls within 9 U.S.C. §1’s exception for “contracts of employment” for certain transportation workers, even where the parties have agreed that an arbitrator is to decide threshold issues of arbitrability. New Prime, Inc. v. Oliveira, 139 S. Ct. 532 (2019).
• 9 U.S.C. §16(a)(2); arbitration; appealable order. Where the defendants obtained a stay of litigation pending arbitration, the district court entered a stay, the defendants asserted counterclaims in the arbitration, the plaintiff sought relief from the stay and an order requiring the defendants to pursue their counterclaims in the litigation, the district court issued an order declaring that certain counterclaims “were not before the arbitration panel” and that others “remain in arbitration” but the district court did not purport to issue an injunction, and the plaintiff appealed, the 8th Circuit looked to the “substance” of the district court’s order, and determined that it was an “injunction against arbitration” appealable pursuant to 9 U.S.C. §16(a)(2). Meierhenry Sargent LLP v. Williams, ___ F.3d ___ (8th Cir 2019).
• 42 U.S.C. §1988; attorneys’ fees. In October 2017, this column noted Judge Nelson’s award of more than $900,000 in attorney’s fees and expenses to the plaintiffs under 42 U.S.C. §1988, even after reducing plaintiffs’ fee request by more than 50 percent.
Not satisfied with the reduced fee award, the defendant appealed, arguing that Judge Nelson had failed to impose additional reductions for excessive argument preparation and travel time. However, the 8th Circuit affirmed the award in its entirety, finding no abuse of discretion in Judge Nelson’s billing reductions, and noting that it has repeatedly held that counsel can be compensated at their regular hourly rate for travel time. Safelite Group, Inc. v. Rothman, ___ F. App’x ___ (8th Cir. 2019).
• Fed. R. Civ. P. 26(a)(2)(C); non-reporting employee expert; waiver of privilege.Magistrate Judge Leung granted the bulk of the plaintiffs’ motion to compel production of documents authored or received by one defendant’s non-reporting employee expert, agreeing with a number of other decisions that have held that “designating an individual who is also a percipient witness to the facts at issue as a non-reporting expert waives privilege and work-product protections.” City of Wyoming v. Procter & Gamble Co., 2019 WL 245607 (D. Minn. 1/17/2019).
• Late-filed counterclaim stricken; no justification for late filing. Where one defendant was served with the summons and complaint on 8/24/2018, that defendant did not file his answer and counterclaim until 61 days later, the plaintiff moved to strike the counterclaim as untimely, and the defendant declined to respond to that motion, Chief Judge Tunheim granted the motion to strike, finding that the defendant’s “failure to move for an extension of time justifies striking his counterclaim,” and that “because [the defendant] failed to explain his late filing, there is no evidence for the Court to consider regarding prejudice, the reason for the delay, and whether he acted in good faith.” Larsen v. Isanti County, 2019 WL 332203 (D. Minn. 1/25/2019).
• Counsel sanctioned for violation of protective order. While finding that the plaintiff had suffered no prejudice and rejecting the plaintiff’s request for a monetary sanction of $20,000 and the reimbursement of certain attorney’s fees and costs, Magistrate Judge Menendez did sanction defendants’ counsel $500 for its improper use of documents produced by the plaintiff with a “confidential” designation in one action in support of a summary judgment motion in a separate action brought by the same plaintiff. Smith v. Bradley Pizza, Inc., 2019 WL 430851 (D. Minn. 2/4/2019).
• Fed. R. Civ. P. 45(f); motion to transfer subpoena-related dispute denied. After communicating with the magistrate judge handling the underlying litigation, Magistrate Judge Menendez denied a motion to transfer a dispute related to the timing of a Minnesota witness’s deposition to the Middle District of Florida pursuant to Fed. R. Civ. P. 45(f), and ordered that the deposition be taken within 21 days of her order. Entrust DataCard Corp. v. Atlantic Zeiser, GMBH, 2019 WL 181531 (D. Minn. 1/14/2019).
• Orders related to the sealing and unsealing of documents. While acknowledging the public’s “common-law right of access to judicial records,” Magistrate Judge Menendez ordered the continued sealing, pursuant to Local Rule 5.6, of eight documents filed under temporary seal in connection with defendants’ motion for summary judgment, finding the interests of student and teacher confidentiality outweighed the “generally strong public interest.” Benner v. St. Paul Public Schools, 2019 WL 259637 (D. Minn. 1/18/2019).
Also acknowledging the public’s “common-law right of access to judicial records,” Magistrate Judge Wright ordered the unsealing of legal memoranda and excerpts from deposition transcripts despite the defendant’s objection, finding that the defendant had not met its burden to demonstrate that the documents contained “proprietary policies or procedures” that could place it “at risk of competitive disadvantage” if disclosed. Micks v. Gurstel Law Firm, P.C., 2019 WL 220146 (D. Minn. 1/16/2019).
• Orders relating to costs. Judge Montgomery rejected most of one defendant’s challenge to the clerk’s denial of more $372,000 in ESI-related costs, awarding that defendant just over $42,000 in ESI expenses that were analogous to the “exemplification” or copying of documents and were therefore taxable under 28 U.S.C. §1920(4), but found that costs relating to ESI “processing” were not taxable. In re Wholesale Grocery Prods. Antitrust Litig., 2019 WL 413554 (D. Minn. 2/1/2019).
Judge Schiltz denied the plaintiff’s motion to review the taxation of slightly more than $2,300 in costs for deposition transcripts, rejecting the plaintiff’s argument that the depositions were not “reasonably necessary,” and also finding that the plaintiff had “provided no evidence” that he could not pay the costs now or in the future. Svendsen v. G4S Secure Solutions (USA) Inc., 2019 WL 277605 (D. Minn. 1/22/2019).
Josh Jacobson
Law Office of Josh Jacobson
INDIAN LAW
JUDICIAL LAW
• Tribes are “stateless” for purposes of diversity jurisdiction. The plaintiff brought a negligence claim against a tribal entity and two private insurance companies in federal court. The defendants moved to dismiss for lack of subject-matter jurisdiction. The district court agreed that the parties were not diverse. It explained that a tribe’s “presence destroys complete diversity” because Indian tribes are “neither foreign states, nor citizens of any state.” Dettle v. Treasure Island Resort & Casino, No. 17-cv-2327 (SRN/TNL), 2019 WL 259652 (D. Minn. 1/18/2019).
• New limitations on Tribal Lifeline subsidy are arbitrary and capricious. In 2000, the Federal Communications Commission began the Tribal Lifeline program, which offers a $25-per-month subsidy for telecommunications service for consumers on tribal lands. In 2017, the FCC adopted two limitations to the program. First, it limited the subsidy to service providers with their own facilities, excluding providers that resell services provided over other carriers’ facilities. Second, it limited the subsidy to rural areas. The petitioners challenged these limitations under the Administrative Procedures Act, and the District of Columbia Circuit Court of Appeals concluded that both limitations were arbitrary and capricious. It vacated the 2017 limitations and remanded for a new notice-and-comment-rulemaking proceeding. National Lifeline Association v. Federal Communication Commission, ___ F.3d ___ (D.C. Cir. 2019).
Jessica Intermill
Hogen Adams PLLC
Peter J. Rademacher
Hogen Adams PLLC
INTELLECTUAL PROPERTY
JUDICIAL LAW
• Patent: Irreparable harm found where patentee forced to compete against infringing product. Judge Nelson recently granted a permanent injunction for patent infringement. Solutran sued US Bank and its subsidiary for infringing Solutran’s patent for electronically processing paper checks. A jury found in favor of Solutran and awarded it royalties and lost profits. Solutran later moved for a permanent injunction barring US Bank from offering its infringing check processing service. The court wrote that it was persuaded by substantial trial evidence showing that Solutran and US Bank were direct market competitors. Solutran was forced to compete against an infringing product, and this favored a finding of irreparable harm. Though the jury did not find that there was a two-supplier market, the court held that such a determination was not required for a finding of irreparable harm. Additional evidence showing that Solutran did not license its product also weighed in favor of finding irreparable harm. Furthermore, the jury’s $1.3 million lost profits award implied that money damages were inadequate to repair Solutran’s losses and that US Bank’s infringement had caused damage to Solutran’s brand recognition and loss of prospective business. The court noted that additional harm to Solutran’s brand name and growth prospects was unaccounted for in the jury’s verdict. Though US Bank offered to pay an ongoing royalty, it also had indicated that it would not cease offering its infringing products until the appeals process concluded, which further weighed in favor of granting injunctive relief. Solutran, Inc. v. US Bancorp & Elavon, Inc., Docket No. 447, Case No. 0-13-cv-02637-SRN-BRT (D. Minn. 12/11/2019).
• Patent: Venue improper despite forum selection clause in product licensing agreement. Judge Schiltz recently granted a motion to dismiss patent infringement claims, finding improper venue despite the parties entering into a forum-selection clause. ARP Wave and its subsidiary manufacture and distribute devices that electronically stimulate muscles. ARP Wave sued its Austin, Texas-based licensee for patent infringement, breach of contract, and misappropriation of trade secrets. Defendants sought dismissal of the claims for improper venue. Plaintiff argued that the parties’ product leasing and licensing agreements included a forum-selection clause that made “[v]enue for the enforcement of the agreement” Hennepin County, Minnesota, Federal or State District Court. Under 28 U.S.C. §1400(b), however, a patent-infringement action may only be brought (1) in the judicial district where the defendant resides or (2) in any judicial district in which the defendant has committed acts of infringement and has a regular and established place of business. ARP Wave did not dispute that, in the absence of the forum-selection clause, venue for the patent infringement claims was not proper in Minnesota. The court found the patent infringement claims did not relate to the parties’ agreements, as the agreements did not mention the patents, which issued after the agreements were signed. The forum-selection clause, therefore, was not applicable. The court dismissed the patent infringement claims for improper venue but retained jurisdiction over the contract claims, which are governed by the forum-selection clause, and the trade secret claims, which were found to be related to the enforcement of the contract. ARP Wave, LLC v. Salpeter, No. 18-CV-2046 (PJS/ECW), 2019 WL 403712 (D. Minn. 1/31/2019).
Joe Dubis
Merchant & Gould
Ryan Borelo
Merchant & Gould
REAL PROPERTY
JUDICIAL LAW
• Condominiums; statute of repose. Village Lofts at St. Anthony Falls in Minneapolis consists of a seven-story building (A) and a six-story building (B). Building A was issued partial certificates of occupancy in 2002, 2003, and 2006. Building B was issued a certificate of occupancy and a certificate of substantial completion in 2004. The association discovered alleged defects in the buildings in 2014 and 2015.
The court of appeals affirmed the district court’s grant of summary judgment to the developer, architect, contractor, and three subcontractors on the basis that the statute of repose in Minn. Stat. §541.051 subd. 1(a) barred common-law claims. The court held that Building A was substantially completed in September 2002, even though only a single unit was covered by the partial certificate of occupancy, because purchases were already being closed and deeds were recorded shortly thereafter. The court further held that the building was substantially completed no later than 2003 because the vast majority of units had been covered by certificates of occupancy. The association did not appear to seriously challenge the statute of repose issue as to Building B.
However, the court of appeals reversed the summary judgment as to the breach-of-statutory-warranty claims, holding that Minn. Stat. §541.051 subd. 4 requires a determination of each applicable warranty date. The district court held that the term “dwelling” in Minn. Stat. §327A.01 means “building,” and the relevant warranty date applies to an entire building, not particular units. The court of appeals reversed, holding that the district court’s interpretation is too strict in the case of multi-unit condominium buildings. It would result in some units, which were first sold years after the first unit was sold, receiving less than the statutory 10-year warranty period. Village Lofts at St. Anthony Falls Association v. Housing Partners III-Lofts LLC, ___ N.W.2d ___, No. A18-0256, 2019 WL 418521 (Minn. Ct. App. 2019).
• Americans with Disabilities Act. The Federal District Court dismissed an ADA complaint against TCF Bank as moot. The plaintiff’s complaint alleged deficient disabled parking signs, a physically hazardous parking lot surface, a hazardous curb ramp, and that the designated parking spaces and aisles had too great of a slope. TCF hired a certified accessibility specialist and remedied several of the alleged architectural barriers. The specialist determined, however, that the curb ramp did not create such an obstruction as to constitute an ADA violation. The plaintiff sought to avoid the mootness issue by seeking, in the court’s words, “policy changes within TCF to ensure future ADA compliance.” The court determined that the plaintiff was not entitled to this relief because TCF redressed the alleged deficiencies in a swift manner and the court believed TCF would act swiftly in the future. Boitnott v. TCF Banking & Savings, F.A., No. 18-3062, 2018 WL 6727067 (D. Minn. 12/21/2018).
• Zoning. United States Solar Corporation obtained a reversal of the Carver County Board of Commissioner’s denial of a conditional use permit for a solar garden. The board denied the application on the grounds that the risk of stray voltage was not mitigated. At oral argument, the board conceded that four other putative grounds for denial were not factually supported. The board’s decision was based upon “concerns” about the “potential” for stray voltage, without satisfactory observational or expert testimony. U.S. Solar Corp. v. Carver Cnty. Bd. of Comm’rs, No. A18-0111, 2018 WL 6729753 (Minn. Ct. App. 12/24/2018).
• Easements. The Minnesota Court of Appeals affirmed dismissal of a request for an injunction to prohibit a landowner from putting sod anywhere within a driveway easement. The easement in question is a long shared driveway benefitting two homes close to a public road and one home farther in the woods. The easement covers a width of 24 feet, but is paved only to a width of 12 feet. The owners of the homes nearer the public road have been covering the remainder with sod, but the owners of the home farther away sought to prevent the laying of sod. The district court and court of appeals held that sod on the unpaved portion of the easement does not constitute an improper encroachment or unreasonably interfere with the use of the easement as a driveway. Athanasakoupolous v. Bogart, No. A18-0045, 2018 WL 6729752 (Minn. Ct. App. 12/24/2018).
• Eviction expungement. Courts have inherent authority derived from the Minnesota Constitution to control court records, and therefore expunge criminal records. In a case of first impression for the court of appeals, it was asked to hold that Minnesota courts have inherent authority derived from the Constitution to likewise expunge eviction records, even where there is no statutory authority provided under Minn. Stat. §484.014 subd. 2. The district court did not make any decision as to whether it has such inherent authority, and the court of appeals remanded with instructions to make such a determination. At Home Apartments, LLC v. D.B., No. A18-0512, 2019 WL 178509 (Minn. Ct. App. 1/14/2019).
Joseph P. Bottrell
Meagher & Geer PLLP
TAX LAW
JUDICIAL LAW
• Property tax: Internet not decreasing all big-box stores’ valuation. Lowe’s Home Centers, LLC challenged the 2015 property valuation for their Plymouth store location. Lowe’s is a big-box home improvement store with many locations across North America. The location in Plymouth is placed at an ideal location with large traffic flow and favorable population and income demographics. However, Lowe’s expert claims that the development of the internet and webstores are devaluing big-box stores. In the property valuation, this claim was brought up twice: with the sales approach and with functional obsolescence in the cost approach. In support, a Fortune magazine article reporting on how the internet has radically transformed retail and listing store closings across all major big box store categories was cited. The tax court held that even if this evidence gave some limited weight to the conclusions about a general national decline in big-box retailing, there was no data indicating that this national trend applies to big-box home improvement stores, performing well and located in good retail locations in Minnesota or local markets in the 2015 valuation year. Thus, the tax court valued the property closer to the Hennepin County’s appraisal of $12 million rather than the $5 million appraisal developed by Lowe’s. Lowe’s Home Centers, LLC v. Hennepin Cnty, No. 27-CV-16-04306 (Minn. T.C. 1/17/2019).
• Property tax: Sales comparison not ideal for big-box store valuation. Menard, Inc. challenged the 2014 and 2015 property valuation for their Coon Rapids store location. The three approaches to property valuation are the sales, income, and cost approaches. Both the sales approach and the cost approach, in determining the land value, use sales comparisons to value the property. However, the tax court held that sales comparisons were not the best indicators of the property’s value. First, the tax court agreed with Menard’s expert that big-box stores do not buy from one another. They all use prototype designs, so all store locations look the exact same. This results in a lower demand for a big-box store to buy from another because they would have to incur the cost of tearing down the old building. Next, the tax court found that when the big-box stores do sell a store, they place many deed restrictions on the property. This would severely lower the value of the property and not allow the sales to be an accurate reflection of the property’s value. Lastly, the tax court held that when a big-box store does sell a store, it is because it was placed in a failed location. Typically, big-box stores build a location with no plan to sell. So, it is difficult to compare the poor locations to ideal locations, such as the one in this case. However, the tax court held that the sales comparisons could be adjusted enough to determine the land value under the cost approach but use other methods to determine the building’s valuation. Taking all of this into account, the tax court lowered the property value from the County’s appraisal of $15 million to $12 million. Menard, Inc. v. Anoka Cnty, Nos. 02-CV-15-2043 & 02-CV-16-1997 (Minn. T.C. 1/15/2019).
• Property tax: Taxation of former pipeline abatement systems. After several years of treating them as exempt from taxation, the Commissioner of Revenue in 2017 denied the exemption of Enbridge Pipelines, LLC property used to control erosion during and after construction of two pipelines. Pipelines are taxable personal property, unless they are used to abate or control pollution. Minn. Stat. §272.02, subd. 9 & 10. The commissioner contended that the property was removed from the pipeline system and thus taxable. The tax court disagreed, finding no evidence in the record that the devices were removed from the pipeline and no statutory authorization to tax personal property formerly used for the abatement of pollution. Therefore, the tax court granted summary judgement for Enbridge. Enbridge Pipelines, LLC v. Comm’r of Rev., No. 9081-R (Minn. T.C. 1/23/2019).
LOOKING AHEAD
• Minnesota House looking to conform. On January 22, the House Taxes Committee began a two-day briefing from the nonpartisan House Research Department regarding state/federal tax conformity issues. If no changes are made, Minnesota will receive an additional $650 million in tax revenue compared to last year. Both the DFL committee chair and the Republican lead are optimistic that they can get a nonpartisan bill passed. It appears they may be using the bill that was vetoed last session by then-Gov. Mark Dayton as a starting point. One major change contained in that bill would have switched the starting point for Minnesota taxes from federal taxable income to federal AGI. Currently, Minnesota is one of only five states that use federal taxable income as a starting point, while 28 states use AGI.
• Other tax bills introduced. Rep. Greg Davids, R-Preston, introduced HF351, which would expand the sales tax exemption for equipment bought by local fire departments. The expanded exemption would include purchases made on their behalf by the Department of Public Safety and provide an exemption for equipping and resupplying ambulances and first responder vehicles. Another House bill, HF37, sponsored by Rep. Jerry Hertaus, R-Greenfield, would expand the stillborn tax credit to those stillbirths that happened out-of-state. This would mainly benefit those western Minnesotans who go to Fargo hospitals, or other border cities.
• Trust tax: Can states tax trusts based on beneficiaries’ in-state residency? The United States Supreme Court will hear a trust tax case originating from North Carolina. The question posed in the case is whether the due process clause prohibits states from taxing trusts based on trust beneficiaries’ in-state residency. This issue arises when a trust is created in one state and the named beneficiary resides in another state. In such instances, can that other state then tax the trust even though the trust is only a resident in the state where it was formed? The Supreme Court will have to establish what minimum contact or nexus is required for a state to tax a trust. This question has reached nine other state supreme courts. Four of them have said that this is enough nexus, while five have said it is not enough. Recently, this issue reached the Minnesota Supreme Court in Fielding, a case in which the justices held that there was not sufficient nexus for the trusts to be taxed in Minnesota.
Jessica Dahlberg
Grant Thornton
Matthew Wildes
Mitchell Hamline School of Law
TORTS & INSURANCE
JUDICIAL LAW
• Negligence; third-party’s liability for fault of employer. Plaintiff suffered workplace injuries while working aboard a flatbed trailer being pulled by a tractor driven by an employee of defendant, a third party. Pursuant to the loaned-servant agreement, the insurer of plaintiff’s employer paid workers’ compensation benefits to plaintiff. After settling his workers’ compensation claim, plaintiff sued defendant for negligence, and defendant brought a third-party action against plaintiff’s functional employer. Defendant and plaintiff’s employer’s insurer settled their respective contribution and subrogation claims before trial in a “reverse-Naig” agreement.
The jury found plaintiff 5% at fault, plaintiff’s functional employer 75% at fault, and defendant 20% at fault. The district court entered judgment against defendant in the amount of 20% of the damages awarded to plaintiff after offsets for workers compensation benefits were applied.
The Minnesota Court of Appeals reversed. Relying on the decision in Lambertson v. Cincinnati Welding Corp., 257 N.W.2d 679 (Minn. 1977), the court held that “the procedure for allocating damages between an employer and a third party when workers’ compensation benefits have been paid is distinct from a comparative-fault apportionment under Minn. Stat. §604.02[.]” As a result, it could not be utilized “to reduce the damages awarded to [plaintiff] based on the percentage of fault allocated to [plaintiff’s functional employer],” meaning defendant was liable for 95% of the damages awarded to plaintiff remaining after offsets were applied. In so holding, the court rejected defendant’s argument that Lambertson had been overruled by the 2000 amendment to the workers compensation act, the 2003 amendment to Minn. Stat. §604.02, and by the decision in Staab v. Diocese of St. Cloud, 813 N.W.2d 68 (Minn. 2012). With respect to Minn. Stat. §604.02 and Staab, the court found them inapplicable because there was no common liability between defendant, a third-party tortfeasor, and plaintiff’s employer. Fish v. Ramler Trucking, Inc., No. A18-0143 (Minn. Ct. App. 1/22/2019). https://mn.gov/law-library-stat/archive/ctappub/2019/OPa180143-012219.pdf
• Innkeeper negligence; primary assumption of risk. Plaintiffs’ son was an off-duty employee of defendant bar. Two individuals, who arrived intoxicated, continued to drink at defendant’s establishment. After the individuals became unruly, plaintiffs’ son assisted a bar employee in escorting them outside. Once outside, plaintiff’s son and the other individuals fell. Plaintiffs’ son suffered severe head injuries, resulting in his death. Plaintiffs then sued defendant for innkeeper negligence and violation of the Dram Shop Act. The district court granted summary judgment to defendant, holding that the innkeeper negligence claim was barred by primary assumption of risk, and plaintiff had failed to establish proximate cause on the dram shop claim. The Minnesota Court of Appeals reversed.
The Minnesota Supreme Court affirmed the decision of the court of appeals. With respect to the claim for innkeeper negligence, the Court noted that “[t]his is the first case in which we have been asked to extend the doctrine to foreclose claims arising out of the operation and patronage of bars.” The Court declined to extend the doctrine, reasoning that “[t]he doctrine of assumption of risk is not favored, and should be limited rather than extended.” The Court further noted “we have never considered operating and patronizing bars to be inherently dangerous activities” and that the “operation and patronage of bars is not—and should not be—a contact sport.” Regarding the dram shop claim, the Court held there was sufficient evidence on the issue of foreseeability to create a disputed issue of material fact precluding summary judgment. Henson v. Uptown Drink, LLC, No. A17-1066 (Minn. 1/23/2019). https://mn.gov/law-library-stat/archive/supct/2019/OPA171066-012319.pdf
Jeff Mulder
Bassford Remele