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Notes & Trends – July 2019

CRIMINAL LAW

JUDICIAL LAW

 

• Sentencing: Consecutive sentences for attempted murder and criminal sexual conduct are a departure requiring written reasons. Appellant pleaded guilty to attempted second-degree murder and second-degree criminal sexual conduct. The district court imposed consecutive sentences and a 10-year conditional release term on both sentences. Appellant filed a motion to correct his sentence, arguing the consecutive sentences were an unlawful upward departure and the conditional release term for the attempted second-degree murder offense was not permitted by law. The district court treated the motion as a postconviction petition and dismissed the petition. The court of appeals vacated the conditional release term for the attempted murder charge but affirmed the consecutive sentences. Appellant petitioned for review solely on the consecutive sentences issue.

Under the 2007 sentencing guidelines, in effect at the time of appellant’s offense, when a defendant is convicted of “multiple current offenses… concurrent sentencing is presumptive.” Minn. Sent. Guidelines II.F (2007). However, under specific circumstances, consecutive sentences are “presumptive” or “permissive.” A consecutive sentence “in any other case constitutes a departure…” When departing from the guidelines, the district court must provide reasons that show “identifiable, substantial, and compelling circumstances to support” the departure. Minn. Sent. Guidelines II.D (2007). Section II.F lists seven categories of convictions that are eligible for permissive consecutive sentences, including a category that provides that “[m]ultiple current felony convictions for crimes on the list of offenses eligible for permissive consecutive sentences found in Section VI may be sentenced consecutively to each other.” Minn. Sent. Guidelines II.F.2. Section VI lists second-degree criminal sexual conduct as an offense eligible for permissive consecutive sentencing, but does not list attempted second-degree murder. The plain language of sections II.F.2 and VI does not authorize permissive consecutive sentences in this case, because only one of appellant’s two felony convictions is contained on the list.

The sentences in this case were a departure and required the support of written reasons, which are absent here. Therefore, appellant’s sentence was not authorized by law. The court of appeals is reversed, and the case is remanded to the district court for imposition of concurrent sentences. Bilbro v. State, 927 N.W.2d 8 (Minn. 5/8/2019). 

• Sentencing: Multiple sentences allowed for violating OFP’s no-contact provision as to multiple protected persons. An OFP prohibited appellant from contacting his former girlfriend and their minor child. He pleaded guilty to two counts of violating the OFP after meeting his former girlfriend and their child at a hotel to help them get a room. The district court sentenced him to 24 months on the first count and 12 months on the second, to be served consecutively. The issue on appeal is whether the district court erred by sentencing appellant to consecutive terms of imprisonment for two counts arising from a single behavioral incident.

Generally, a person cannot receive multiple sentences for two or more offenses that were committed as part of a single behavioral incident, unless (1) there are multiple victims and (2) the sentences do not unfairly exaggerate the criminality of the defendant’s conduct. The court of appeals first concludes that there were multiple victims of appellant’s conduct, rejecting appellant’s argument that violating an OFP is a crime against the court, not against the protected persons. While the elements of the crime of violating an OFP do not include harm to a victim, harm to a victim need not be an element for the multiple-victim rule to apply, nor is direct harm to the victims necessary. Indirect harm and general societal harms with some personal components are sufficient victimization for the multiple-victim rule. Violation of an OFP can be prosecuted as criminal contempt, but that does not make it a crime against only the court. It is an offense against the protected persons and also contempt of court. 

The court also finds that the imposition of multiple sentences did not exaggerate the criminality of appellant’s conduct. It is a defendant’s burden to show a sentence unfairly exaggerates the criminality of his conduct. The court concludes appellant failed to satisfy his burden. The district court is affirmed. State v. Alger, No. A18-1000, 2019 WL 2079356 (Minn. Ct. App. 5/13/2019). 

•  Interference with privacy: “Intent to intrude upon or interfere with” privacy when entering property of another not required. While staying at his brother’s home, appellant gave beer to his minor niece and three of her minor friends, made sexual remarks to the girls, touched one of his niece’s friend’s inner thighs and buttocks, and was caught on the garage roof watching his niece’s friends undress. He was convicted of interference with the privacy of a minor, furnishing alcohol to a minor, and disorderly conduct. On appeal, he argues the evidence is insufficient to support his privacy interference conviction because the state did not prove he entered another’s property “with the intent to intrude upon or interfere with the privacy of a member of the household.” The state argued appellant forfeited this argument because it was not raised before the district court. The court of appeals held that appellant did not forfeit the argument, but affirmed his conviction. Both parties challenge the court of appeals’ conclusions. 

First, the Supreme Court holds that a sufficiency-of-the-evidence challenge based on a statutory interpretation argument may be raised for the first time on appeal. As such, appellant did not forfeit his sufficiency-of-the-evidence argument here.

Next, the Court considers appellant’s argument that the state was required to prove that he had an intent to intrude upon the victim’s privacy when he entered his brother’s property, not just when he peeped at the girls undressing. The Court interprets the interference with privacy statute under which appellant was convicted, Minn. Stat. §609.746, subd. 1(e)(2), which incorporates subd. 1(a). Subdivision 1(a), lists three elements of interference with privacy: (1) enters upon another’s property; (2) surreptitiously gazes, stares, or peeps in the window or any other aperture of a house or place of dwelling of another; and (3) does so with the intent to intrude upon or interfere with the privacy of a member of the household. The question is whether “does so” in clause (3) requires that an intent to intrude upon privacy be present for each of the acts set forth in clauses (1) and (2), or only those set forth in clause (2). 

The Court finds the intent requirement in subdivision 1(a) ambiguous. The Court rejects a number of the parties’ suggested cannons of construction as inapplicable and unhelpful in resolving the ambiguity. Instead, the Court looks to the statute’s legislative history and the purpose for enacting the statute, protecting personal privacy. The Court ultimately concludes that the intent requirement of clause (3) in subdivision 1(a) applies only to the peeping conduct described in clause (2). That is, the state was required to prove only that appellant had intent to intrude upon or interfere with the privacy of his victim when he peeped in the window while his victim was changing, not that he had this intent when he entered his brother’s property. The evidence was sufficient to satisfy this element, and appellant’s conviction is affirmed. State v. Pakhnyuk, 926 N.W.2d 914 (Minn. 5/8/2019). 

•  Tribal authority: Tribal officer has authority to detain non-Indian suspected of violating DWI statute on reservation. Appellant was called to the Red Lake Indian Health Service Hospital on the Red Lake reservation to pick up his brother, and the nurse who spoke with him perceived him to be intoxicated. The nurse notified Red Lake Police Department Officer Bendel, who went to the hospital and saw appellant drive up. Officer Bendel noted a number of indicia of intoxication and administered a PBT, which revealed a BAC of 0.121, and additional field sobriety tests. Officer Bendel then placed appellant in handcuffs, Mirandized him, and placed him in the back of the squad car. Officer Bendel drove appellant to the reservation boundary, where appellant was transferred to Beltrami County Deputy Roberts. Deputy Roberts also observed indicia of intoxication upon taking custody of appellant, drove him to the jail, and read the implied consent advisory. Appellant consented to a breath test, which reported a BAC of 0.11. Appellant argues he was unlawfully arrested by Officer Bendel, because Officer Bendel is not a “peace officer” for purposes of the DWI statute.

First, the court of appeals concludes a tribal police officer is not a “peace officer” under the DWI statute. Under Minn. Stat. §169A.40, subd. 1, a “peace officer” may arrest a driver if there is probable cause to believe they have committed DWI, and the term “peace officer” is specifically defined in Minn. Stat. §169A.03, subd. 18, to mean: “(1) a State Patrol officer; (2) University of Minnesota peace officer; (3) police officer of any municipality… or county; and (4) … a state conservation officer.” The state argues a tribal police officer falls under section (3), because an Indian tribe can be considered a “municipality.” The court rejects this argument and notes that no law or cooperative agreement exists to give Red Lake Band’s police officers concurrent jurisdiction to enforce state criminal law on the Red Lake Reservation.

Next, the court determines Officer Bendel did have authority to arrest appellant for violating Minnesota’s DWI statute on the Red Lake reservation. Indian tribes retain authority to prosecute Indians for violations of the tribe’s criminal code that are committed on the reservation, but cannot prosecute a non-Indian for violating the tribe’s criminal code if the crime is victimless or if the victim is a non-Indian. Generally, absent a special grant of jurisdiction, states may exercise jurisdiction over criminal offenses on an Indian reservation only to the extent that the federal government and a tribe may not do so. Neither the United States Supreme Court nor Minnesota’s courts have considered whether a state may prosecute a non-Indian for committing a state DWI offense on an Indian reservation. However, courts in other states have held that a state does have such authority. The court notes that, because there is no particular victim of appellant’s DWI offense, the state has jurisdiction to prosecute him in this case.

It follows, then, that the state may enforce its DWI laws on the Red Lake reservation if such an offense is committed by a non-Indian and, conversely, that the Red Lake police is authorized to enforce its own impaired driving laws on the reservation if such an offense is committed by an Indian. However, an officer will not immediately know whether a driver is an Indian or non-Indian, and courts have held that tribal officers may stop a driver long enough to ascertain whether they are an Indian or non-Indian. If a non-Indian, case law makes clear that the tribal officer has authority to detain a violator and deliver them to state or federal authorities. 

Here, it is undisputed that Officer Bendel had probable cause to believe appellant violated Minnesota’s DWI statute. He was authorized to detain appellant, drive him to the reservation boundary, and delivery him to the deputy sheriff, because of both tribal law enforcement’s general power to restrain and eject those who disturb public order on the reservation and more specific power to detain a non-Indian who has committed a criminal offense that may not be prosecuted by the tribe and transport him to the proper authorities. Thus, the district court did not err in denying appellant’s motion to suppress evidence. State v. Thompson, No. A18-0545, 2019 WL 2079426 (Minn. Ct. App. 5/13/2019). 

• Evidence: Court must instruct jury on proper use of relationship evidence admitted under Minn. Stat. §634.20, unless defendant objects. At appellant’s trial for first-degree burglary and fourth-degree criminal sexual conduct, the district court admitted relationship evidence under Minn. Stat. §634.20. The victim and a number of other witnesses testified that appellant repeatedly verbally and physically abused her during their relationship. Appellant did not request and the district court did not give the jury a limiting instruction as to the proper use of this evidence. On appeal, appellant argues the district court committed plain error by failing to sua sponte instruct the jury on the proper use of the 634.20 evidence.

At the time of appellant’s appeal, case law on this issue was unclear. In State v. Word, 755 N.W.2d 776 (Minn. Ct. App. 2008), the court of appeals said failure to sua sponte instruct the jurors on the proper use of 634.20 evidence is plain error. Later, in State v. Melanson, 906 N.W.2d 561 (Minn. Ct. App. 2018) (decided when appellant’s appeal was still pending), the court of appeals held “the district court did not plainly err in failing to provide a limiting instruction sua sponte to the jury regarding the admission of [634.20] evidence.” Given these conflicting opinions, the law at the time of appellate review of appellant’s case did not clearly require a district court to sua sponte instruct the jurors on the proper use of 634.20 evidence. As such, appellant did not establish an error that was plain.

The Supreme Court takes this opportunity to clarify the law and adopts a new rule, applicable to future cases: “[W]hen a district court admits relationship evidence under Minn. Stat. § 634.20, over a defendant’s objection that the evidence does not satisfy section 634.20, the court must sua sponte instruct the jurors on the proper use of such evidence, unless the defendant objects to the instruction by the court.” State v. Zinski, 927 N.W.2d 272 (Minn. 5/15/2019).

• Medical marijuana: Transfer of cannabis oil from one wholly owned subsidiary of parent company to another is a transfer to another “person.” Vireo Health, LLC (VH) wholly owns two subsidiary companies: Minnesota Medical Solutions, LLC (MMS) and Vireo Health of New York, LLC (VHNY). MMS is one of two companies in Minnesota allowed to manufacture and distribute medical marijuana, while VHNY does the same in New York. To resolve a supply issue with VHNY, the chief security officer and chief medical officer of MMS transferred 5.6 kilograms of cannabis oil from MMS to VHNY and falsified inventory records for both MMS and VHNY. The MMS officers were charged with intentionally transferring medical cannabis to a person other than allowed by law, in violation of Minn. Stat. §152.33, subd. 1. 

The district court certified this question, an issue of first impression: Are two wholly owned sister subsidiaries of the same parent company legally one “person,” such that a transfer of medical marijuana from one to another does not constitute a transfer to another “person”? The court of appeals holds that sister wholly owned subsidiaries of the same parent corporation are separate “persons” under the plain language of Minn. Stat. §152.33, subd. 1.

Section 152.33, subd. 1, is not ambiguous and includes limited liability companies in the definition of “person.” Section 152.33, subd. 1, states that “a manufacturer or an agent of a manufacturer who intentionally transfers medical cannabis to a person other than a patient, a registered designated caregiver or… a parent or legal guardian of a patient is guilty of a felony…” Section 152.01, subd. 13, defines a “person” as “every individual, copartnership, corporation or association of one or more individual.” With this definition of “person,” section 152.33, subd. 1, unambiguously prohibits the transfer of medical marijuana to an unauthorized limited liability company. There is no statutory exemption for the transfer to a separate corporation with shared ownership. State v. Owens, No. A18-1800, 2019 WL 2167730 (Minn. Ct. App. 5/20/2019).

Samantha Foertsch

Bruno Law PLLC

Stephen Foertsch

Bruno Law PLLC


EMPLOYMENT & LABOR LAW

JUDICIAL LAW

• Jury instructions; pretext not required. A jury verdict rejecting a Richfield police officer’s age discrimination and retaliation lawsuit was upheld after remand. The Minnesota Court of Appeals affirmed the jury instructions given by a Hennepin County District Court despite the absence of reference to pretext, which the claimant argued was required. It reasoned that the charge properly directed the jury to determine whether the officer’s prior lawsuits against the city were a “motivating factor” in his discharge, which the jury declined to do. Peterson v. City of Richfield, 2019 WL 1510703 (Minn. Ct. App. 4/8/2019) (unpublished).

• Military discrimination; USERRA claim denied. A returning military veteran whose request for reinstatement to his prior job was refused lost his claim of discrimination under the federal Uniformed Services Employment and Re-employment Rights Act (USERRA), 38 U.S.C. §4301, et seq. The Minnesota Court of Appeals, after another remand, affirmed dismissal of the lawsuit on grounds that the veteran refused several “comparable” job offers after his position had been eliminated and there was insufficient evidence that his military status was a substantial or “motivating” reason for the job elimination. Breaker v. Bemidji State University, 2019 WL 1510687 (8th Cir. 4/8/2019) (unpublished). 

•  Defamation per se; harm presumed. A defamation per se lawsuit by a 911 dispatch supervisor in Scott County due to alleged false statements made by two former co-workers during a background check was allowed to proceed. The appellate court reversed and remanded the lower court’s decision dismissing the lawsuit on grounds that harm to reputation is presumed for defamation per se, while upholding dismissal of one of the employee defendants, and directing the lower court to determine whether the other employee’s statements were made with actionable malice. Sames v. Scott County, 2019 WL 1510948 (8th Cir. 4/8/2019) (unpublished). 

•  Pension benefits; reinstatement rejected. A request by a widow for pension benefits following the death of her school teacher husband was rejected by the appellate court, which upheld a decision by the Teacher’s Retirement Association (TRA). The TRA was not negligent in erroneously informing the widow that the benefits would continue for her life, and equitable or promissory estoppel was inapplicable because the organization’s recantation of its incorrect representation was not arbitrary or capricious. In re petition of Kuehne, 2019 WL 1983370 (8th Cir. 5/6/2019) (unpublished). 

•  Workers’ compensation; no standing for auto insurer. Following precedent, the Minnesota Court of Appeals rejected a claim by an employer’s automobile insurance carrier against the employer’s workers compensation insurer for wrongfully denying an employee’s claim for injuries incurred in a work-related accident. Affirming a ruling of the Hennepin County District Court, the appellate tribunal held that the auto insurer lacked standing under existing case law. Integrity Insurance Co. v. First Dakota Indemnity Co., 2019 WL 2079474 (8th Cir. 2/22/2019) (unpublished). 

•  Unemployment compensation; four applicants lose. A quartet of employees in a variety of circumstances recently lost unemployment compensation claims decided by the Minnesota Court of Appeals. 

The violation of a company’s attendance policy constituted disqualifying “misconduct.” Upon remand, the repeated denial of benefits was deemed not arbitrary or capricious. Choronzy v. Viracon, Inc., 2019 WL1510691 (Minn. Ct. App. 2/25/2019) (unpublished). 

Another “misconduct” ruling was upheld against an employee who was fired after testing positive for drugs following a prior failed drug test. Thaemert v. Electrolux Home Appliances, 2019 WL 1510838 (8th Cir. 4/8/2019)(unpublished). 

An executive chef at a restaurant in Minnetonka was denied benefits after she quit because a former employee made her feel unsafe, and she claimed the facility failed to implement recommendations of a private security consultant. She was not entitled to benefits because an “average, reasonable employee” would not have resigned under these circumstances. Sarazin v. Ruth Stricker’s Fitness Unlimited, Inc., 2019 WL 2079480 (Minn. Ct. App. 5/13/2019) (unpublished). 

Failure to appeal an adverse determination of ineligibility for benefits within the 20-day time period barred benefits. An employee’s untimely appeal precluded the court from considering the merits of the application. Westphal v. Friedges Landscaping, Inc., 2019 WL 1510868 (Minn. Ct. App. 4/18/2019) (unpublished). 

 

LOOKING AHEAD

• Harassment. Cutting-edge issues concerning sex harassment law are to be addressed by the Minnesota Supreme Court, which in May granted the claimant’s petition for review of an appellate court decision this winter affirming summary judgment by the Hennepin County District Court in Kenneh v. Homeward Bound, Inc., A18-0174 (5/28/2019). The Court will be deciding whether to maintain the “severe” or “pervasive” standard and the quantum of evidence required to sustain a harassment claim under the Human Rights Act. A hearing will probably take place later this year and a ruling rendered in 2020 on a case that has attracted considerable attention and amici participation. 

 

LEGISLATION

•  2019 legislative session. Few employment laws emerged from the recently concluded 2019 session of the Minnesota Legislature. 

But one important measure was included within the Omnibus Jobs & Economic Development Finance Bill, creating what has been characterized as one of the toughest “wage theft” measures in the country. The law, which includes several changes in labor and industry policy in the state’s unemployment insurance system, makes it a felony for an employer to fail to pay employees more than $1,000 in earned wages, if there is “intent to defraud” on the part of the employer or for retaliating against an employee who complains about claimed wages shortages. It also provides $4 million to the Department of Labor and Industry to enforce the measure, along with the enforcement wing of the Attorney General’s office.

The effort to wipe out the $15 minimum per hour wage ordinance of Minneapolis and St. Paul with a retroactive pre-emption bill, advanced by Republicans in the Senate, was not enacted. A major priority of the Minnesota Chamber of Commerce, which claimed that specific rules on wages could not be enacted on a municipal basis, was fended off by DFLers and left out of the omnibus bill.

Two other workplace measures, both of them supported by DFLers and opposed by Republicans, failed to make it through session. One would have established a mini-version of the federal Family & Medical Leave Act (FMLA), providing a 12-week paid leave of absence for employees for family medical purposes. The other bill would have expanded the existing “severe” or “pervasive” standard for sexual harassment claims with a lesser one of offensive behavior.

At the federal level, the U.S. House of Representatives, on largely partisan grounds, approved a sweeping measure promoted by Democrats entitled the “Equality Act,” an expansion formerly known as EDNA (End Discrimination Now Act). It would prohibit workplace discrimination on grounds of sexual orientation or gender identification, as well as barring discrimination in education, housing, and jury service on these grounds. The bill, however, is dormant in the Republican-controlled Senate and unlikely to be enacted in the current session of Congress.

Marshall H. Tanick

Meyer, Njus & Tanick


ENVIRONMENTAL LAW

JUDICIAL LAW

•  Court of appeals reverses PUC’s Line 3 final environmental impact statement adequacy determination. The Minnesota Court of Appeals issued an opinion overturning the Minnesota Public Utilities Commission’s (PUC) adequacy determination of the final environmental impact statement (FEIS) for the proposed Line 3 pipeline project being undertaken by Enbridge Energy due to its failure to address potentially significant issues raised during the scoping and public comment period. 

The court of appeals consolidated three appeals made by different environmental organizations and tribal bands (plaintiffs), all of which challenged the decision by the PUC determining that the FEIS for the proposed Line 3 pipeline was adequate. The court of appeals grouped the plaintiffs’ arguments into three categories: (1) the identification of alternatives in the FEIS; (2) alleged “danger signals” indicating that the PUC failed to take a “hard look” at the adequacy question; and (3) the analysis of environmental impacts in the FEIS.

In addressing the first category, the court found that the PUC’s adequacy determination regarding the need for and purpose of the Line 3 project was proper. The court found that the FEIS adequately defined the need for and purpose of the Line 3 project, and did not err by (a) considering the project proposer’s objective when defining the purpose of and need for the project, or (b) excluding from consideration alternatives that would not meet that objective. In addition, the court found that plaintiffs had demonstrated no improprieties in the PUC’s determination that Enbridge’s “no-action” alternative was adequately addressed in the FEIS.

In addressing the second category, the court found that the alleged “danger signals” argued by plaintiffs did not indicate that the PUC failed to take a “hard look” at the adequacy of the FEIS. The court rejected plaintiffs’ argument that the PUC’s decision to seek assistance from the Minnesota Department of Commerce’s Energy Environmental Review and Analysis division (DOC-EERA) in preparing the FEIS—instead of from the MN Department of Natural Resources (DNR) or the MPCA—was a “danger signal”; the DOC, the court noted, is statutorily obligated to provide technical expertise and other assistance to the PUC in relation to pipeline-routing matters. Additionally, the DOC-EERA designated the DNR and the MPCA as assisting agencies, which further negated plaintiff’s argument that the PUC’s actions constituted “danger signals.”

Finally, in addressing the third category, the court found that although the FEIS adequately analyzed potential impacts to greenhouse gas emissions, potential impacts on historic and cultural resources, the relative impacts of alternative routes, and cumulative potential impacts, it failed to address the issue of how an oil spill from Line 3 would impact Lake Superior and its watershed. Concerns about how an oil spill would impact Lake Superior and its watershed were raised both during the scoping and in public comments on the draft EIS. The PUC’s actions in failing to consider this critical aspect of the environmental analysis, the court held, were arbitrary and capricious. Accordingly, the court reversed the PUC’s adequacy decision and remanded for further proceedings. In re Applications of Enbridge Energy, Limited Partnership, for a Certificate of Need and a Routing Permit for the Proposed Line 3 Replacement Project in Minnesota from the North Dakota Border to the Wisconsin Border, Nos. A18-1283, A-18-1291, A18-1292, (Minn. Ct. App., 6/3/2019).

 

ADMINISTRATIVE ACTION

• EPA releases draft interim guidance on PFAS cleanup. On 4/25/2019, the EPA released draft interim guidance addressing groundwater contaminated with PFAS (per- and polyfluoroalkyl substances) in cleanups required by the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) or the Resource Conservation and Recovery Act (RCRA). The document was open for public comment until June 10. 

PFAS are man-made chemicals—over 5,000 of which have been identified—that were produced for a variety of industries and products, including surface treatments for soil/stain/water resistance; surface treatments of textiles, paper, and metals; and for specialized applications, such as fire suppression for hydrocarbon fires. These chemicals do not easily break down and accumulate over time in the environment and in humans. Major sources of PFAS include fire training and response sites, landfills, and wastewater treatment processes. 

The draft interim guidance provides a recommended screening value of 40 parts per trillion (ppt) for two of the most common PFAS, perfluorooctanoic acid (PFOA) and perfluorooctane sulfonate (PFOS). The screening value is based on EPA’s 2016 lifetime drinking water health advisory (HA) for PFOA and PFOS of 70 ppt in groundwater that is a current or potential source of drinking water. EPA applied a Hazard Quotient (HQ) of .1 to arrive at the recommended screening value. 

In addition, the draft interim guidance recommends—in circumstances where a groundwater cleanup program is addressing PFOA- and/or PFOS-contaminated groundwater—using the HA of 70 ppt for the combined concentration of PFOA and PFOS as the preliminary remediation goal (PRG). However, where state or tribal laws or regulations qualify as Applicable or Relevant and Appropriate Requirements (ARARs) for PFOA or PFOS, the guidance clarifies that those standards should be used to develop PRGs. Seventeen states have diverse rules to address PFAS contamination. The Minnesota Department of Health has set health-based values of 35 ppt for PFOA and 15 ppt for PFOS. 

 

LEGISLATIVE ACTION

• Minnesota Legislature recap: State bee, water transfers, sugar beets, and more. The 2019 special session of the Minnesota Legislature resulted in several notable environmental bills signed into law by Gov. Tim Walz. These include, in no particular order: 

Water transfer rule. The Minnesota Pollution Control Agency (MPCA) has for years allowed water transfers—the conveyance of water from one water body to another without an intervening use—without requiring an NPDES permit, relying on the U.S. Environmental Protection Agency (EPA) “water transfer rule” in 40 C.F.R. §122.3(i), which exempts water transfers from the Clean Water Act’s NPDES permit requirement. However, the Minnesota Court of Appeals, in West McDonald Lake Ass'n v. Minn. Dep't of Natural Res., 899 N.W.2d 832 (Minn. Ct. App. 2017), held that the federal water-transfer exemption had not been incorporated by reference in Minnesota's NPDES program, pursuant to Minn. R. 7001.1030, and did not apply in Minnesota. The Legislature addressed the situation by adopting a new part (b) to Minn. Stat. §115.03, subd. 5, which provides: “An activity that conveys or connects waters of the state without subjecting the transferred water to intervening industrial, municipal, or commercial use does not require a national pollutant discharge elimination system permit. This exemption does not apply to pollutants introduced by the activity itself to the water being transferred.”

Remote beet piling sites. The Legislature added subdivision 5e to Minn. Stat. §115.03, providing that MPCA may not require a sugar beet company that has a current NPDES or SDS system permit to install an engineered liner for a stormwater runoff pond at remote beet piling sites unless “a risk assessment confirms that there is significant impact on groundwater and that an engineered liner is necessary to prevent, control, or abate water pollution.”

State bee. The Legislature added Minn. Stat. §1.1465, which proclaims, “The rusty patched bumble bee, Bombus affinis, is the official bee of the state of Minnesota.”

Mandatory WQS peer review. The Legislature amended Minn. Stat. §115.035, which previously provided for optional peer review of new water quality standards, to mandate that “[e]very new or revised numeric water quality standard must be supported by a technical support document that provides the scientific basis for the proposed standard and that has undergone external, scientific peer review” (emphasis added). The amendments also specify that the purpose of the external peer review process is “to evaluate whether the technical support document and proposed standard are based on sound scientific knowledge, methods, and practices,” and require that reviews must be conducted according to the guidance in the most recent edition of the EPA’s Peer Review Handbook. No external peer review is required when MPCA is simply adopting, without change, an EPA numeric criterion that has been through peer review at the federal level. 

Jeremy P. Greenhouse The Environmental Law Group, Ltd.

Jake Beckstrom Vermont Law School, 2015

Erik Ordahl Flaherty & Hood, P.A. 

Audrey Meyer University of St. Thomas School of Law, JD candidate 2020


FEDERAL PRACTICE

JUDICIAL LAW

•  CAFA; removal; third-party defendant. A divided Supreme Court held 5-4 that 28 U.S.C. §1453(b), the Class Action Fairness Act’s removal provision, does not permit removal by a third-party counterclaim defendant, because the term “defendant” in that provision and 28 U.S.C. §1441(a), the general removal statute, refer only to the party sued by the original plaintiff. 

Justice Alito, on behalf of four dissenters, argued that the majority’s distinction between defendants and third-party defendants read an “irrational distinction into both removal laws.” Home Depot U.S.A., Inc. v. Jackson, ___ S. Ct. ___ (2019). 

•  Title VII; failure to exhaust administrative remedies; jurisdiction. The Supreme Court unanimously held that Title VII’s charge-filing requirement is a nonjurisdictional claim processing rule that can be waived, rather than a jurisdictional rule not subject to waiver. Fort Bend County v. Davis, ___ S. Ct. ___ (2019). 

• Order compelling arbitration; stay of action; appealability. Where a district court granted the defendant’s motion to compel arbitration, left it to the parties to agree on an arbitrator, and stayed the action pending completion of the arbitration, the 8th Circuit found that it lacked jurisdiction over the defendant’s interlocutory appeal, rejecting the defendant’s argument that the stay was a final appealable order under 9 U.S.C. §16(a)(3); that the district court had effectively denied the motion to compel arbitration, thereby creating appellate jurisdiction under 9 U.S.C. §16(a)(1)(B); or that the district court’s order was appealable under the collateral order doctrine. Webb v. Farmers of N. Am., Inc., ___ F.3d ___ (8th Cir. 2019). 

• Trademark; presumption of irreparable harm; appealability of stay order. Affirming the denial of a request for a preliminary injunction in a trademark action, the 8th Circuit found that it was “unclear” whether the presumption of irreparable harm in trademark cases had “survived” recent Supreme Court decisions holding that the movant has the burden to demonstrate that irreparable harm is “likely” absent an injunction, and noted decisions from other circuits that have “abandoned” that presumption. 

The 8th Circuit also found that it lacked jurisdiction over an appeal from the district court’s order staying litigation pending resolution of related proceedings, where the stay order did not “effectively end the litigation.” Phyllis Schlafly Revocable Trust v. Cori, ___ F.3d ___ (8th Cir. 2019). 

• Limited liability company; motion to remand denied; jurisdictional discovery. Where the plaintiff limited liability company commenced an action in the Minnesota courts, defendants removed the action on the basis of diversity jurisdiction but did not allege the citizenship of the plaintiff, the plaintiff moved to remand (arguing that the defendants had not met their burden to establish its citizenship), and the defendants sought leave to conduct jurisdictional discovery to allow them to determine the citizenship of the members of the LLC, Judge Magnuson denied the motion to remand without prejudice and found that the defendants were “entitled” to jurisdictional discovery. MN Airlines, LLC v. Global Aviation Servs. USA, Inc., 2019 WL 2296882 (D. Minn. 5/30/2019). 

• Punitive damages; Minn. Stat. §549.191; Fed. R. Civ. P. 15. While ultimately denying the plaintiff’s motion to add claims for punitive damages, Magistrate Judge Menendez concluded that the motion was governed by Fed. R. Civ. P. 15 rather than Minn. Stat. §549.191. In re: McNeilus Mfg. Explosion Coor. Litig., 2019 WL 2387110 (D. Minn. 6/6/2019). 

•  28 U.S.C. §1441(b)(2); forum defendant rule; motion to remand denied. Where the plaintiffs commenced their action against a number of defendants, including persons domiciled in Minnesota, in the California state courts, the defendants removed the action to the Central District of California, and the California federal court transferred the case to the District of Minnesota, Judge Magnuson denied the plaintiffs’ motion to remand premised on the so-called forum defendant rule, finding that the rule applies only at the time of removal, and that the removal was proper where no defendant was domiciled in California. Bruni Media LLC v. AAPM Media Group, LLC, 2019 WL 2192781 (D. Minn. 5/21/2019). 

•  Motion to certify question to the Minnesota Supreme Court denied. While acknowledging disagreement between the District of Minnesota and the Minnesota Court of Appeals on an issue of central importance to the case, Magistrate Judge Menendez denied defendants’ motion to certify, finding that resolution of the issue was “premature,” and that, having granted review of the court of appeals’ decision, the Minnesota Supreme Court was likely to resolve the issue even in the absence of a certified question. In re: McNeilus Mfg. Explosion Coor. Litig., 2019 WL 2151703 (D. Minn. 5/17/2019). 

•  28 U.S.C. §1367(c)(3); supplemental jurisdiction; order to show cause. Where the plaintiff commenced an eight-count action in the Minnesota courts and the defendants removed based on a presence of a single federal claim, Judge Nelson granted the defendants’ motion for judgment on the pleadings on seven of the eight claims, including the federal claim, and then ordered the parties to show cause why the remaining claim should not be remanded. The defendants urged the court to retain jurisdiction because the case had been pending for nine months and discovery was underway. Judge Nelson remanded the remaining claim, finding that any discovery could be used in the remanded action, and that the “default rule” required remand. CH Bus Sales, Inc. v. Geiger, 2019 WL 2337449 (D. Minn. 6/3/2019). 

Josh Jacobson

Law Office of Josh Jacobson 


IMMIGRATION LAW

JUDICIAL LAW

•  Board of Immigration Appeals fails to apply Sanchez-Sosa factors to remand request. The 8th Circuit Court of Appeals remanded the case to the Board of Immigration Appeals to explain why it found the petitioner’s inclusion of a U visa (nonimmigrant visa for victims of certain crimes) filing receipt in his remand request was of no consequence, when Matter of Sanchez-Sosa, 25 I&N Dec. 807 (BIA 2012), suggests a completed application should pause the removal process. Caballero-Martinez v. Barr, Nos. 17-2044, 18-1198 (8th Cir. 4/3/2019). https://ecf.ca8.uscourts.gov/opndir/19/04/172044P.pdf 

• Asylum denial to Guatemalan woman abused by domestic partner. The 8th Circuit Court of Appeals upheld the Board of Immigration Appeals’ denial of asylum to the petitioner, finding a reasonable adjudicator would not be compelled to find that the Guatemalan government was and would be unwilling or unable to protect the petitioner against her daughter’s abusive father. “Marroquin has conceded that the government was willing to protect her and substantial evidence supports the conclusion that the Guatemalan government was not unable to provide protection.” Marroquin v. Barr, No. 17-3780 (8th Cir. 3/29/2019). https://ecf.ca8.uscourts.gov/opndir/19/03/173780P.pdf 

•  “Salvadoran female heads of households” does not constitute a social group. The 8th Circuit Court of Appeals held the Board of Immigration Appeals did not err when ruling the petitioner failed to prove past persecution on account of her membership in the social group, “Salvadoran female heads of households,” finding the group lacked social distinction and particularity. The court cites approvingly the board’s rationale that “The respondent’s proposed group is too broad and amorphous to meet the particularity requirement. The respondent did not show that ‘head of household’ has a commonly accepted definition with Salvadoran society, nor is such condition necessarily immutable... The respondent also did not establish that such group is socially distinct.” De Guevara v. Barr, No. 18-1080 (8th Cir. 3/21/2019). https://ecf.ca8.uscourts.gov/opndir/19/03/181080P.pdf 

R. Mark Frey

Frey Law Office



INTELLECTUAL PROPERTY

JUDICIAL LAW

•  Trademark: SCOTUS holds trademark-licensor’s bankruptcy does not revoke licensee’s rights. The U.S. Supreme Court recently held that a trademark licensor’s bankruptcy did not revoke the licensee’s rights to continue use of the trademarks. Tempnology granted Mission Product Holdings a non-exclusive license to use certain trademarks in the distribution of Tempnology products. Tempnology later filed for bankruptcy and asked the bankruptcy court to allow it to reject (i.e., terminate) the contract under §365(a) of the Bankruptcy Code, thereby ending Mission’s right to use the trademark. The bankruptcy court approved the rejection, meaning Tempnology could stop performing under the contract and Mission could no longer use the licensed trademarks. The bankruptcy appellate panel relied on a decision from the 7th Circuit in reversing. However, the 1st Circuit reinstated the bankruptcy court’s decision to terminate the contract. The Supreme Court heard the case to resolve the circuit split and determine the effect of a debtor-licensor’s rejection of a contract under §365(a). The Court relied on the Bankruptcy Code’s text, which says a rejection is a breach. “Breach” is not a specialized bankruptcy term, so it means the same thing in the Code as it does in contract law outside of bankruptcy. In non-bankruptcy contract law, after a breach, the injured party can continue performance or refuse to perform, but the breaching party cannot unilaterally revoke the rights created under the contract. Therefore, “the licensee can continue to do whatever the license authorizes” following the rejection of a licensing agreement. Mission Product Holdings, Inc. v. Tempnology, LLC., No. 17-1657, 2019 WL 2166392 (U.S. 5/20/2019).

•  Copyright, trade secrets: Failure to demonstrate likelihood of success fatal to motion for preliminary injunction. Judge Magnuson recently denied a preliminary injunction for copyright infringement and trade-secret misappropriation because plaintiff failed to prove likelihood of success. Under the terms of a license agreement, defendants (a group of payroll processors) were able to use MPAY’s software for payroll systems. MPAY sued defendants for providing copyrighted source code to unauthorized third parties and for trade-secret misappropriation. MPAY moved for a preliminary injunction. The court first determined MPAY’s claims were unlikely to succeed. MPAY claimed that defendants’ permissible use of the software did not include providing the source code to third parties, but the license agreement rebutted this claim. The license agreement also allowed defendants to use the source code to develop enhanced software products, “which must necessarily entail providing the source code to others.” Therefore, MPAY had not shown a likelihood of success. The court next determined that regardless of whether irreparable harm is presumed in copyright and trade-secret infringement claims, it could not presume irreparable harm in this case because MPAY failed to establish a likelihood of success. Finally, given that MPAY did not demonstrate a likelihood of success and did not establish irreparable harm, the public interest and the balance of equities did not require an injunction. MPAY Inc. v. Erie Custom Computer Applications, No. 19-704 (PAM/BRT), 2019 WL 2099843 (D. Minn. 5/14/2019).

Joe Dubis  Merchant & Gould

Kristen Geary  Merchant & Gould


TAX LAW

JUDICIAL LAW

• Pipeline valuation dispute continues. Two decisions have been issued in the valuation dispute between Northern Natural Gas and the commissioner. In the first (2019 WL 2479445), the tax court granted the parties’ joint motion to correct clerical errors and further granted in part the commission’s motion to amend. In the second, the court issued amended findings of fact, conclusions of law, order for judgment, and an amended memorandum, which supersede in their entirety the court’s 1/30/2019 findings of fact, conclusions of law, and order for judgment.

The court summarized the issue as “the market value of the Minnesota portion of the Northern Natural Gas pipeline system, which stretches from the Permian Basin in Texas to the Upper Peninsula of Michigan.” Trial on the matter was heard in August 2018 and in January, the court filed the findings of fact, conclusions of law, and order for judgment noted above. In that earlier decision, the court “concluded that the Commissioner had overvalued Northern’s pipeline operating system as of both January 2, 2015, and January 2, 2016, and ordered that the apportionable value of the Minnesota portion of the system be reduced as of both valuation dates.”

In the June decision, the court first corrected a clerical error, and then ruled on the parties’ motions for rehearing or amendment. The commissioner’s challenge to the court’s finding that accumulated deferred income taxes were a source of external obsolescence (by comparing the rate of return NNG earned during the years at issue to the after-tax rate of return allowed by the Federal Energy Regulatory Commission (FERC)) was successful. The commissioner argued that the comparison was based on an erroneous figure for the FERC-allowed rate of return. The commissioner also succeeded in its argument that a finding as to the amount spent by NNG on pipeline safety and integrity was unsupported by the record. All other motions or portions thereof were denied. N. Nat. Gas Co. v. Comm'r, Nos. 8864-R, 2019 WL 2479445 and 2019 WL 2490771 (Minn. Tax 6/4/2019). 

•  Unopposed motion for protective order granted. In a sales and use tax dispute, the commissioner motioned for a protective order to preclude the taxpayer from introducing expert witness testimony in relation to a summary judgment motion. The commissioner argued that the expert was not timely identified under the governing scheduling order. Because the taxpayer filed no response to the commissioner's motion, the court granted it as unopposed. Inthermo, Inc. v. Comm'r, No. 9143-R, 2019 WL 2402287 (Minn. Tax 5/28/2019).

•  Motion to intervene granted to protect non-public data. 1300 Nicollet L.L.C. owns a downtown hotel. The owners’ written discovery request included a request for “tenancy, income, and expense information” about other downtown Minneapolis hotels. This information had been submitted by the other hotels to the assessor. Such information is denominated “assessor's data” and is classified as private or nonpublic by the Minnesota Government Data Practices Act (MGDPA). The county resisted discovery and the owners then sent to the other hotels a notice that the owners intended to compel the production of the private/nonpublic data. Sometime after receipt of the notice, Ashford Foshay LP, the entity that owns one of the hotels whose private data 1300 Nicollet sought, moved to intervene as a matter of right. Ashford Foshay noted its desire to protect its private propriety financial information. Finding the intervention both “warranted and unopposed,” the court granted the motion. 1300 Nicollet, L.L.C. v. Cty. of Hennepin, No. 27-CV-17-06284, 2019 WL 2213904 (Minn. Tax 5/15/2019).

•  Assessor’s estimate understates market value. At issue in this dispute was the valuation, for several tax years, of a “big-box” store along Interstate 35 in Chisago County. In a thorough opinion, the tax court discussed and applied the sales comparison approach to valuation as well as the cost approach. Although testimony was taken concerning the income capitalization approach, the court concluded that “the record does not contain data from which to develop a reliable market rent estimate for the subject property” and therefore did not rely on income capitalization to reach its decision. The court similarly deemed the sales comparison approach “minimal reliable” due to an absence of good comparable sales. In the end, the court relied most heavily on the cost approach, noting that the recency of the building improvements rendered the building “relatively new construction” on each assessment date. For the three years at issue, the court increased the assessed value by between $308,500 and $324,200. Shopko Stores Operating Co., LLC v. Chisago Co., No. 13-CV-15-852, 2019 WL 2077463 (Minn. Tax Ct. 5/6/2019).

•  Wages paid to workers holding H-2A and J-1 visas subject to unemployment-insurance taxation. A fruit and vegetable farm in Foley, Minnesota must pay just over $150,000 in unemployment insurance tax after the Minnesota Supreme Court agreed with the lower court that the wages of certain of the farm’s employees are not exempt from the tax. The employer, Svihel Vegetable Farm, conceded that if the same work had been performed by United States citizens or by permanent residents, the tax would be due. The farm argued, though, that since the visa holders were not “in the employ of” the farm as that phrase is defined in federal statute, and the work was not “performed by a farm by an employee” as defined in the CFR, the wages paid to visa holders were exempt. 26 USC §3121(g)(1); 26 C.F.R. § 31.3121(g)-1(b)(1). The high court was not persuaded by the farm’s parsing of the Code and Regulations. Minnesota unemployment insurance tax does not incorporate the definitions cited by the farm, the Court held. Instead, “the Legislature imported only the definition of ‘agricultural labor’ into Minnesota’s unemployment-insurance tax statute… that some visa workers' wages are exempt from federal unemployment-insurance taxation is unconnected to the question of whether those wages are covered wages for the purpose of Minnesota’s unemployment-insurance tax statute.” Svihel Vegetable Farm, Inc. v. Dep't of Employment & Econ. Dev., No. A17-1250, ___N.W.2d___, 2019 WL 2439726 (Minn. 6/12/2019).

•  Matter of first impression: Taxpayers may claim EITC based on Medicaid waiver payment that was excluded from gross income. The Earned Income Tax Credit (EITC) provides a benefit for working people with low to moderate income. To qualify for the credit, taxpayers must have “earned income.” In this dispute, the tax court held that income that a taxpayer has excluded from gross income as Medicaid waiver payments under IRS Notice 2014-7 nonetheless qualifies as “earned income” for EITC and ACTC (additional child tax credit) purposes.

The taxpayers’ successful argument hinged on the amount of deference the tax court owed to the agency’s interpretation of the Code as advanced through a notice. Notice 2014-7 announced that the Service would consider “difficulty of care payments” (the type of payment at issue here) to be excludable from gross income under 131(c). However, as the court noted, “these payments clearly do not meet the plain statutory definition found in the Code.” The court was persuaded by the taxpayer’s argument that the secretary had no statutory, regulatory, or judicial authority that classifies Medicaid waiver payments as not includible in gross income under section 131. The IRS cannot, through a subregulatory notice, reclassify their otherwise “earned income” as unearned for purposes of determining tax credit eligibility. Feigh v. Comm'r, No. 20163-17., 2019 WL 2124923 (T.C. 5/15/2019).

•  “Love offerings” from church members to pastor taxable income, cannot be characterized as gifts. Gifts are excluded from income. Salary, of course is not. Payments received by employees or service providers in a typical workplace are often easy to categorize. As Judge Holmes notes in this opinion, however, “the relationship between a pastor and his congregation is not typically viewed as commercial, which makes the line between gifts and compensation blurrier than in less sacred places.” Despite this line-drawing difficulty, the tax court reasoned that because the donations “were made by congregants who meant to keep Reverend Brown preaching where he is” and there was a congregation-wide expectation to make such payments in a routinized, highly structured program, the payments were income, and could not be excluded as gifts. Also important to the court’s holding was the ratio of “gifts” to reported “salary.” In this instance, the clergy member reported a “salary” of about $25,000 but “gifts” of nearly $60,000. Quoting language from an earlier clergy-gift case, the court “struggle[d] to see how such large sums of money can be gifts, …‘[w]hen comparatively so much money flows to a person from people for whom he provides services (even intangible ones), and to whom he expects to provide services in the future, we find it to be income and not gifts.’” Brown v. Comm'r, T.C.M. (RIA) 2019-069 (T.C. 2019) (quoting Felton v. Comm’r, T.C. Memo. 2018-168).

Morgan Holcomb  Mitchell Hamline School of Law

Jessica Dahlberg  Grant Thornton


TORTS & INSURANCE

JUDICIAL LAW

•  Insurance: First-party bad faith. Plaintiff was injured in an automobile collision, sustaining a whiplash injury that resulted in daily headaches. Plaintiff was not at fault and was covered by an underinsured-motorist (UIM) policy issued by defendant insurer. After exhausting other treatments, plaintiff began receiving periodic Botox injections, which reduced her daily headaches by 50%. Plaintiff’s treating neurologist believed that the injuries were permanent and that plaintiff would need Botox injections every three to four months to manage her chronic headaches. A second neurologist concurred in the treatment plan. Plaintiff then notified defendant insurer that her past and future medical expenses would likely exceed the limits of the at-fault driver’s insurance, and that she would likely seek UIM coverage. Later, plaintiff sent defendant a detailed written settlement demand that requested payment of her UIM policy limits, which enclosed extensive copies of her medical records. Defendant assigned a claims adjuster to plaintiff’s claim and made several requests for medical documentation over the next 11 months but did not accept or deny the UIM coverage demand. Approximately 19 months after her initial submission, plaintiff sent defendant a letter seeking an update on the status of the claim and repeated her request for the UIM policy limits. Defendant did not respond.

Plaintiff then filed suit seeking to recover UIM benefits. The jury returned a unanimous verdict awarding damages of over $1.4 million, including more than $900,000 for past and future medical expenses. As a result, defendant paid the policy limits of $250,000. The district court then granted Peterson leave to amend her complaint to add a bad-faith claim pursuant to Minn. Stat. § 604.18. After a bench trial, the district court found that plaintiff proved her claim by showing that defendant lacked a reasonable basis to deny her claim and that defendant either knew of, or acted with reckless disregard of, the lack of a reasonable basis for denying the claim. The district court awarded $100,000 plus $97,940.50 in attorney fees.

The Minnesota Court of Appeals affirmed. The court began by finding the phrase “absence of a reasonable basis” for denying the benefits of the insurance policy found in Minn. Stat. § 604.18, subd. 2(a)(1) to be ambiguous as the parties identified more than one reasonable interpretation. So the court looked to legislative history surrounding the statute, finding that the Legislature attempted to adopt the “Anderson standard” that is found in Wisconsin. As a result, the court held that “pursuant to Minn. Stat. §604.18, subd. 2(a), an insurer must conduct a reasonable investigation and fairly evaluate the results to have a reasonable basis for denying an insured’s first-party insurance-benefits claim.” The court went on to note: “If, after a reasonable investigation and fair evaluation, a claim is fairly debatable, an insurer does not act in bad faith by denying the claim.” Because the district court applied the correct standard and sufficient evidence supported the judgment, it was affirmed. Peterson v. W. Nat’l Ins. Co., No. A18-1081 (Minn. Ct. App. 6/3/2019). https://mn.gov/law-library-stat/archive/ctappub/2019/OPa181081-060319.pdf

Jeff Mulder

Bassford Remele