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Notes & Trends – September 2019

CRIMINAL LAW

JUDICIAL LAW

• Domestic assault: For felony enhancement, Minn. Stat. §609.2242, subd. 4, requires two qualifying prior convictions, not sentences. In June 2009, appellant was convicted of third-degree assault and domestic abuse by violation of an order for protection for assaulting his estranged wife, D.L.D., and was sentenced on the assault conviction. In March 2018, appellant was charged with, among two other offenses, two domestic assault offenses after a confrontation with M.R.D. and her daughter. The domestic assault offenses were charged as felonies under Minn. Stat. §609.2242, subd. 4, because they were committed within 10 years of the June 2009 convictions. The district court granted appellant’s motion to strike the domestic assault charges, concluding that, to comply with Minn. Stat. §609.035’s prohibition of multiple punishments for the same course of conduct, only convictions for which appellant was sentenced may be used for enhancement under Minn. Stat. §609.2242, subd. 4. The state appealed and the Minnesota Court of Appeals reversed. 

On appellant’s petition for review, the Supreme Court affirms the court of appeals. Minn. Stat. §609.2242, subd. 4, enhances a domestic assault offense from a misdemeanor to a felony if the domestic assault offense was committed “within ten years of the first of any combination of two or more previously qualified domestic violence-related offense convictions” (emphasis added). The plain language of the statute refers to convictions, not sentences. The record shows appellant was convicted of third-degree assault on December 3, 2010, and then convicted of violating an order for protection. The fact that both convictions occurred on the same day is irrelevant. These two qualifying convictions occurred within 10 years of his March 2018 domestic abuse charges, and, thus, the 2018 charges qualify for enhancement under Minn. Stat. §609.2242, subd. 4. State v. Defatte, 928 N.W.2d 338 (Minn. 5/22/2019). 

•  Sentencing: Credit for time in Red Lake Nation custody permitted only if custody was solely in connection with Minnesota offense. Appellant received a stay of imposition and was placed on probation for 20 years following a guilty plea to a third-degree controlled substance crime in 2011. In 2017, she was convicted of two gross misdemeanor offenses on the Red Lake Reservation and was released pending sentencing. The stay of imposition of the sentence for her 2011 conviction was revoked for failing to remain law abiding, and the court ordered that appellant be taken into custody. She was taken into custody by Beltrami County after remaining in Red Lake custody for 21 days. Appellant thereafter requested execution of her 2011 sentence and custody credit for the 21 days she spent in Red Lake custody. The district court denied her request for credit for the time she spent in Red Lake detention, and the court of appeals affirmed. 

Under Minn. R. Crim. P. 27.03, subd. 4(B), a defendant is entitled to custody credit for time spent in custody “in connection with the offense or behavioral incident being sentenced.” To receive credit for time spent in another jurisdiction’s custody, the Minnesota offense must be the sole reason for the custody. Although the Red Lake Nation is within the borders of Minnesota, it is an independent sovereign nation, and thus the rule for determining interjurisdictional, not intrajurisdictional, custody credit applies. Appellant was in Red Lake custody in connection with her Red Lake convictions and, thus, the sole reason for her detention could not be her Minnesota conviction. State v. Roy, 928 N.W.2d 341 (Minn. 5/22/2019).

• Sentencing: Drive-by shooting at motor vehicle does not constitute offense against each occupant. During an argument with C.L.G., appellant fired a handgun in C.L.G.’s direction, but hit the vehicle next to C.L.G., containing two adults and a child. Appellant pleaded guilty to drive-by shooting, second-degree assault, and reckless discharge of a firearm. He was sentenced to 48 months for the drive-by shooting and 36 months for the assault. On appeal, the question is whether the drive-by shooting and assault offenses arose out of a single behavioral incident and, therefore, whether the district court erroneously imposed multiple sentences. 

Minn. Stat. §609.035, subd. 1, provides that “if a person’s conduct constitutes more than one offense… the person may be punished for only one of the offenses.” A defendant should be punished for the most serious of the offenses arising out of a single behavioral incident. However, Minn. Stat. §609.035, subd. 1, also includes a multiple victim rule: If a crime affects multiple victims, a court may impose more than one sentence for convictions arising out of a single behavioral incident.

The court of appeals applies State v. Ferguson, 808 N.W.2d 586 (Minn. 2012), in which the Supreme Court approved multiple sentences for eight counts of aiding and abetting drive-by shooting and one count of drive-by shooting in connection with a drive-by shooting of a building occupied by eight people. The drive-by shooting statute makes no distinction between the drive-by shooting of an occupied building or a motor vehicle—both are premised on the object of the shooting, the occupied building or motor vehicle, not the occupants. Therefore, the court holds that the offense of drive-by shooting of an occupied motor vehicle is not an offense against each of the vehicle’s occupants. As such, the district court did not err in imposing sentences for appellant’s drive-by shooting and assault convictions, even if both arose out of a single behavioral incident. State v. Branch, 930 N.W.2d 455 (Minn. Ct. App. 6/10/2019)

•  Circumstantial evidence: Uncontroverted circumstances from a state witness that do not necessarily contradict the verdict constitute “circumstances proved” but absence of evidence does not constitute a “circumstance proved.” Appellant was convicted of, among other offenses, first-degree controlled substance crime for possessing methamphetamine, but he argues there was insufficient circumstantial evidence to prove beyond a reasonable doubt he knowingly possessed methamphetamine. Appellant was pulled over for swerving and detained when police discovered he did not have a valid driver’s license and was not the registered owner of the vehicle. The sole passenger, J.S., had a history of drug and weapon convictions and was a known methamphetamine user. J.S. was left in the vehicle, unmonitored, for 30-60 seconds while appellant was secured. When appellant was in the squad, the officer removed J.S. from the vehicle, searched her and her purse, finding nothing illegal, and conducted an inventory search of the vehicle. The inventory search revealed a duffle bag on the floor of the truck, within reach of the front seats. The bag contained a bulletproof vest, a casino card with appellant’s name, and a glove in which a plastic bag of methamphetamine was found. Additional methamphetamine was also found in appellant’s wallet in the front console.

The state sought to prove appellant constructively possessed methamphetamine through circumstantial evidence. To analyze the sufficiency of this evidence, the court identifies the circumstances proved, deferring to the jury’s acceptance of proof of these circumstances and rejection of evidence that convicted with evidence proved by the state, and, then, the court determines whether the circumstances proved are consistent with guilt and inconsistent with any rational hypothesis except that of guilt. 

The state argues that J.S.’s criminal history and methamphetamine use cannot be considered, as they are inconsistent with the jury’s verdict. However, these were uncontroverted facts established by a state witness, and the court of appeals finds that it is inconsistent with neither a verdict of guilty nor a verdict of not guilty. The state also argues against considering the fact that the state did not produce any evidence of appellant’s DNA or fingerprints on the bag of methamphetamine. There was no testimony at all regarding DNA or fingerprint testing. The court of appeals holds that absence of evidence in the record regarding a certain circumstances does not constitute a circumstance proved.

The court concludes that the circumstances proved, particularly that the duffle bag contained a card with appellant’s name and the additional methamphetamine found in appellant’s wallet, tie the methamphetamine in the duffle bag to appellant—that is, the circumstances proved form a complete chain which, viewed in light of the evidence as a whole, leads so directly to appellant’s guilt as to exclude beyond a reasonable doubt any reasonable inference except that of guilt. State v. German, 929 N.W.2d 466 (Minn. Ct. App. 5/28/2019).

• Permit to carry: No disqualifying conviction for crime of domestic violence if conviction expunged under court’s inherent authority, unless order expressly prohibits possession of firearms. Appellant’s application for a permit to carry a pistol was denied by the county sheriff due to his 1996 domestic assault conviction. That conviction was expunged by the district court in 2007, solely under its inherent authority. Appellant petitioned the district court for a writ of mandamus to compel the sheriff to issue the permit, but his petition was denied. The district court concluded appellant was disqualified from possessing a firearm because his domestic assault conviction was not expunged under 18 U.S.C. §921(a)(33)(B)(ii). 

Under Minn. Stat. §624.714, subd. 2(b)(4)(ix), a sheriff is not required to issue a carry permit to a person prohibited from possessing a firearm under federal law. 18 U.S.C. §922(g)(9) prohibits any person convicted in any court of a misdemeanor crime of domestic violence from possessing a firearm. However, under 18 U.S.C. §921(a)(33)(B)(ii), a person is not considered convicted of a misdemeanor crime of violence if the conviction has been expunged, unless the expungement “expressly provides that the person may not ship, transport, possess, or receive firearms.”

In 2007, the district court ordered the judicial records relating to appellant’s conviction to “be expunged,” directed that the case file be “seal[ed],” and directed the county corrections department to “seal” its records relating to appellant’s arrest and court proceedings. Federal law does not require that an expungement be statutory or result in the sealing of records in every branch of government. Thus, the court of appeals concludes that the 2007 expungement order meets the plain meaning of “expunged” in 18 U.S.C. §921(a)(3)(B)(ii). Appellant’s domestic assault conviction was expunged and, therefore, he is not prohibited from possessing a firearm or disqualified from holding a carry permit. Reversed and remanded. Bergman v. Caulk, 931 N.W.2d 114 (Minn. Ct. App. 6/3/2019).

• Confrontation clause: Use of interpreter does not implicate confrontation clause or hearsay rules. Appellant agreed to give a recorded statement to police during a criminal sexual conduct investigation. Appellant’s first and second languages are Mam and Spanish. A Spanish translator was used via telephone to translate the officer’s questions and appellant’s answers. During the interrogation, appellant admitted to having sexual intercourse with a child under 13. Appellant was charged with first-degree criminal sexual conduct. Prior to trial, he objected to the recording of his translated statement on confrontation clause and hearsay grounds because the interpreter was not present to testify. The district court admitted the video recording and the officer’s testimony regarding the statement at trial, and appellant was convicted. The court of appeals affirmed the district court’s conclusion that admission of the translated statements did not violate the confrontation clause or hearsay rules.

The Supreme Court concludes that the use of a foreign language interpreter to convert appellant’s statements from Spanish to English does not implicate the confrontation clause. Although the facts of this case are quite different from those in Crawford, in that the statements at issue here were made by appellant himself and translated by an interpreter (rather than made by a third party), the bedrock principle of Crawford still applies—that the primary objective of the confrontation clause is to regulate the admission of testimonial hearsay by witnesses against the defendant.

An interpreter is merely the vehicle for conversion or translation of language. An interpreter does not add content to a declarant’s statement. Thus, the act of processing the defendant’s statement from one language to another does not transform the interpreter into a witness against the defendant. The translated statement is the original declarant’s statement, not the translator’s. The court notes that the proper method of challenging a translation’s accuracy, completeness, or authenticity is a foundation objection.

Appellant’s hearsay challenge also fails. Appellant was the declarant of the statements in question, and the statements were offered by the state against appellant. Therefore, under Minn. R. Evid. 801(d)(2)(A), the statements are not hearsay. State v. Lopez-Ramos, 929 N.W.2d 414 (Minn. 6/12/2019).

• Criminal procedure: Rule 9.01, subds. 1-1a, does not authorize inspection of crime scene in third party’s control. Appellant was charged with first-degree criminal sexual conduct and domestic assault by strangulation after a violent confrontation between appellant and his wife. A DANCO prevented appellant from entering the house he shared with his wife, where the confrontation occurred. The district court denied appellant’s requests to allow his attorney and investigator to enter the home to inspect and photograph the crime scene. Appellant was found guilty after a jury trial. The court of appeals affirmed appellant’s convictions, finding that, although the district court abused its discretion when it concluded that the defense was not required to have reasonable access to the crime scene, appellant was not prejudiced by the error.

The first question the Supreme Court addresses is whether Rule 9.01, subdivisions 1-1a, of the Minnesota Rules of Criminal Procedure requires the state to permit the defense to inspect a crime scene that is in a third party’s control. Rule 9.01, subdivisions 1-1a, requires the state to allow the defense access to all matters within the prosecutor’s possession and control that relate to the case. The state must also disclose the location of buildings and places that relate to the case and allow the defense to inspect and photograph any object, place, or building required to be disclosed. 

So, while the state must disclose the location of the crime scene, the plain language of the rule does not require the state to allow inspection of a crime scene not within the prosecution’s possession or control. To conclude otherwise would require the state to do something not within its power and would interfere with the property owner or possessor’s rights. The Court overrules State v. Michael Gary Lee, 461 N.W.2d 245 (Minn. Ct. App. 1990), which it finds inconsistent with the plain language of the current version of Rule 9.01.In this case, appellant’s wife controlled the crime scene, so the district court did not abuse its discretion by denying appellant’s motions to inspect the crime scene.

The Court also addresses appellant’s argument that the district court’s denial of his motions violated his rights to due process and effective assistance of counsel. The Court does not decide whether there exists a constitutional right to inspect a crime scene, because it concludes that, even if there is such a right, any error in denying appellant’s motions was harmless, given the very strong evidence of appellant’s guilt, very little of which depended on an inspection of the crime scene. State v. Lee, 929 N.W.2d 432 (Minn. 6/19/2019).

• 4th Amendment: Search of rented room invalid only if officers knew or reasonably should have known it was in multiple-occupancy house. Police obtained a search warrant for a home in St. Peter, which they believed was a single-family home. When executing the warrant, police made contact with D.H.J., the home’s registered owner. The home was not registered as a rental unit. D.H.J. told officers another person, appellant, was in the house, but not that he lived there. Police found appellant upstairs behind a partially closed bedroom door that had a padlock on it. There was no signage or other indicators that the house contained rental units. In appellant’s room, police found drug paraphernalia, guns, ammunition, and three homemade firearm suppressors. Appellant was charged with drug offenses and unlawful possession of a firearm suppressor. After a stipulated facts trial, appellant was convicted of the firearm suppressor offense. 

The general rule regarding searches of multiple occupancy buildings is that a search is invalid unless the warrant describes the particular unit to be searched with sufficient definiteness. However, this rule is applied to apartment buildings, but not “community occupation,” where two or more people occupy common living quarters but have separate bedrooms. The question here is, what if police are unaware when applying for the warrant and conducting the search that another person lives in the building?

The Minnesota Court of Appeals holds “that the validity of the search of a rented room, pursuant to a warrant authorizing the search of the entire house, depends on whether officers reasonable knew or should have known that it was a multiple-occupancy building at the time of the search.” Here, the record shows that from outward appearances, this was a single-family residence. Inside, there were no indicators of private residences. Appellant’s room had a lock on the door, but that is not determinative. Under the totality of the circumstances, the court finds there were insufficient indicators to objectively notify police at the time of the search that it was a multiple-occupancy residence. Thus, the search did not exceed the scope of the search warrant. State v. Marsh, A18-1093, 2019 WL 2571677 (Minn. Ct. App. 6/24/2019).

•  1st Amendment: Stalking-by-mail statute violates 1st Amendment, but mail-harassment statute is subject to narrowing construction. The juvenile court and Minnesota Court of Appeals held that the stalking-by-mail, Minn. Stat. §609.749, subd. 2(6), and mail-harassment, Minn. Stat. §609.795, subd. 1(3), statutes are both constitutional under the 1st Amendment. Charges under these statutes arose against appellant after he and two friends posted a number of cruel and egregious insults about a classmate on Twitter, which made the classmate extremely upset, fearful, and suicidal. After trial, appellant was adjudicated delinquent. The Supreme Court finds both statutes violate the 1st Amendment as facially overbroad, but finds that the mail-harassment statute is reasonably subject to a narrowing construction.

Minn. Stat. §609.749, subd. 2(6), provides that a person stalks another if they “repeatedly mails or delivers or causes the delivery by any means, including electronically, of letters, telegrams, messages, packages, through assistive devices for people with vision impairments or hearing loss, or any communications made through any available technologies or other objects.” Stalking is engaging “in conduct which the actor knows or has reason to know would cause the victim under the circumstances to feel frightened, threatened, oppressed, persecuted, or intimidated, and causes this reaction on the part of the victim, regardless of the relationship between the actor and victim.” Minn. Stat. §609.749, subd. 1. 

The Supreme Court finds Minn. Stat. §609.749, subd. 2(6), overbroad, because it criminalizes mailing or delivery of any form of communication an actor directs more than once at a specific person whom the actor knows or has reason to know would cause, after considering the victim’s specific circumstances, that person to feel frightened, threatened, oppressed, persecuted, or intimidated, and the victim subjectively feels that way. Even though the statute may proscribe some unprotected speech, the Court concludes the statute prohibits a substantial amount of constitutionally protected speech compared to the unprotected speech and conduct the statute reaches.

The Court points to a number of examples of clearly protected speech and expressive conduct the statute would criminalize, as well as the expansiveness of many elements of the crime. Even negligent conduct is reached. The statute focuses primarily on speech and expressive conduct (and even includes “any communication” within its scope), and the statute describes the actus reus with several broad, unqualified terms (frighten, threaten, oppress, persecute, intimidate). The Court contrasts Minnesota’s statute with the federal stalking statute, which requires a more specific and onerous “malicious intent,” requires “substantial” harm to the victim, and reaches far more unprotected speech and conduct than Minnesota’s statute. 

Finally, the Court concludes that the stalking-by-mail statute is not subject to a narrowing construction, as any narrowing constructions are inconsistent with the Legislature’s intent to have a low mens rea standard for this offense. As facially overbroad and not reasonably subject to a narrowing construction, Minn. Stat. §609.749, subd. 2(6), violates the 1st Amendment.

As to the mail-harassment statute, the Court also finds it overbroad. Minn. Stat. §609.795, subd. 1(3), makes the following act a misdemeanor: “with the intent to abuse, disturb, or cause distress, repeatedly mails or delivers or causes the delivery by any means, including electronically, of letters, telegrams, or packages.” The statute is overbroad because it criminalizes conduct closely connected to expressive activity, by focusing on letters, telegrams, and packages. Also, although it includes a specific-intent requirement, the range of the type of harm the actor must cause (abuse, disturb, or cause distress), is great and there is no requirement that the victim actually suffer any harm. 

However, unlike Minn. Stat. §609.749, subd. 2(6), the constitutional defect in Minn. Stat. §609.795, subd. 1(3), can be remedied with a narrowing construction. The Court finds two types of potential harms too broad and unlimited in the speech and conduct they reach: “disturb” and “cause distress.” Eliminating “disturb” and “cause distress” still gives the statute the effect intended by the Legislature while sufficiently narrowing the statute. Requiring only an “intent to abuse” reaches a more specific type of conduct and more substantial injury. 

Appellant’s adjudications are reversed and the case is remanded to the juvenile court for consideration under the newly-narrowed mail-harassment statute. Matter of Welfare of A.J.B., 929 N.W.2d 840 (Minn. 6/19/2019).

• DWI: Driver’s license revocation is “present” for DWI enhancement upon driver’s receipt of notice of revocation. Appellant was arrested for DWI on 10/2/2016 and 12/18/2016. A week after his October arrest, appellant was notified that his driver’s license was revoked, and the revocation was sustained in April 2017, after he waived judicial review. For his December DWI arrest, appellant was charged with second-degree test refusal and third-degree DWI in August 2017, after waiving judicial review on the October revocation. Both charges were enhanced due to appellant’s October license revocation. Appellant moved to dismiss both counts, arguing there was insufficient evidence to prove the enhancement of the offenses and that using the October license revocation as an aggravating factor to support the December charges violated due process. The district court denied appellant’s motion. After a stipulated facts trial, the court found appellant guilty on both counts.

The issue on appeal is whether appellant’s October driver’s license revocation was “present” when he committed the December DWI. Second-degree test refusal requires proof that the defendant refused a chemical test and that “one aggravating factor was present when the violation was committed.” Minn. Stat. §169A.25, subd. 1(b). 

The court of appeals holds that a prior driver’s license revocation is “present” as an aggravating factor to enhance a subsequent DWI after a driver receives notice of the prior driver’s license revocation. A driver’s license revocation is “present” when it becomes effective, and Minn. Stat. §169A.52, subd. 6, makes clear that a revocation becomes effective when a driver is notified of the revocation. It is undisputed that appellant’s driver’s license was revoked for one year on 10/9/2016, and that he received notice of the revocation. Thus, the revocation was “present” at the time he committed the December DWI.

Appellant cites State v. Wiltgen, 737 N.W.2d 561 (Minn. 2007), in which the Supreme Court read the statutory definition of prior impaired driving-related loss of license to “require that judicial review be completed” before the state can use a license revocation as an aggravating factor in a subsequent DWI charge. However, the court of appeals determines that Wiltgen did not alter the elements of an enhanced DWI offense, and only modified criminal procedure, or when the charge can be made. 

Appellant also argues that he was not afforded due process because the state used his October license revocation as an aggravating factor, even though it was unreviewed at the time he committed the December DWI. Appellant again relies on Wiltgen, which held that the potential prejudice to the defendant “from the use of an unreviewed administrative revocation to enhance a subsequent DWI rises to the level of a violation of [the defendant’s] right to procedural due process.” However, in a footnote, the Supreme Court noted this problem could be avoided by delaying the issuance of a second-degree DWI complaint until after an implied consent hearing is conducted and the revocation sustained (or charge third-degree DWI before the hearing and amend the complaint to add second-degree DWI after the hearing). That is exactly what the state did here. State v. Anderson, A18-1491, 2019 WL 2495520 (Minn. Ct. App. 6/17/2019).

Samantha Foertsch  Bruno Law PLLC

Stephen Foertsch  Bruno Law PLLC

 

EMPLOYMENT & LABOR LAW 

JUDICIAL LAW

•  Age, sex discrimination; claims dismissed. An employee who claimed that her pay was cut and she was treated discriminatorily compared to another male employee due to her age and gender had her claim dismissed by the 8th Circuit Court of Appeals. Affirming a lower court ruling, the court held that “budgetary reasons” constituted the reason for cutting the claimant’s pay. And because her work was different from a male co-worker’s, her gender-based claim lacked merit. Routen v. Suggs, 2019 WL 2881586 (8th Cir. 7/3/2019) (unpublished).

• Agricultural employment; unemployment-insurances taxes payable on wages. The wages paid by a grower to sell fruits and vegetables to farm workers on “H2A” and “J-1” Visas are subject to unemployment insurance taxation. The Minnesota Supreme Court ruled that because the duties performed by the workers constitute “covered agricultural employment” under Minn. Stat. §268.035, subd. 11(a), the wages are subject to unemployment insurance taxation to be paid by the employer. Spihel Vegetable Farm, Inc. v. DEED, 929 N.W.2d 391 (S.Ct. 6/12/19).

• FELA; collateral source exclusion upheld. The exclusion by a trial judge of evidence of collateral source disability benefits received by an employee from the Veteran’s Administration was upheld. Affirming a decision of the Hennepin County District Court, the Minnesota Court of Appeals held that the “broad discretion” accorded evidentiary decisions prompted upholding the trial court’s exclusion of that evidence under the abuse-of-discretion standard. Houchins v. Soo Line Railroad Company, 2019 WL 2571720 (8th Cir. 6/24/2019) (unpublished).

 

n Unemployment compensation; one reversal, three affirmances. The court of appeals reversed one adverse unemployment compensation determination in favor of an employee and affirmed three others. Denial of unemployment compensation benefits for a welder on grounds that he quit his job and was not available for “suitable other employment” was overturned. The appellate court reasoned that the evidence did not support a determination that the claimant’s words and actions would lead a reasonable employer to believe that he would no longer work in any capacity other than as a welder, and there was no determination made by the unemployment law judge (ULJ) of the availability of other work and the labor market. Modeen v. Mirabell Enterprises, LLC, 2019 WL 2495655 (8th Cir. 6/17/2019) (unpublished). 

A quitting employee lost his claim after he left work following a disciplinary meeting with management, even though continued employment was available. Rankila v. Fairview Health Services, 2019 WL 2416012 (8th Cir. 6/10/2019) (unpublished). 

Another employee who quit his job because his pay was reduced 18% (after his employer told him he would not receive any pay raises in the future) was entitled to unemployment compensation benefits. The appellate court, upheld the decision of an unemployment law judge (ULJ), that the employee quit his job for “good reason” caused by his employer, due to the effective wage reduction. Interplastic Corp. v. Rausch, 2019 WL 2571703 (8th Cir. 6/24/2019) (unpublished). 

An unemployment claimant was denied benefits because she filed an appeal from an adverse initial determination after the 20-day deadline for appeal. The employee’s claim that she did not receive the notification because she had changed her address was insufficient because it was her responsibility to update her address after changing her residence. Carney v. Optum Services, Inc., 2019 WL 2415258 (8th Cir. 6/10/2019) (unpublished).

Marshall H. Tanick  Meyer, Njus & Tanick

ENVIRONMENTAL LAW

JUDICIAL LAW

• Court of appeals upholds Minnetonka’s denial of EAW petition. The Minnesota Court of Appeals upheld the City of Minnetonka’s denial of a petition brought by Protect our Minnetonka Parks (POMP) for an environmental-assessment worksheet (EAW) concerning a proposed project to establish 4.7 miles of 18–24-inch wide mountain bike trails in Lone Lake Park. 

The court noted that prior to denying the EAW petition, the city council reviewed an independent biological assessment, a mountain bike study, multiple articles, correspondence from various state and federal agencies, and a technical memorandum prepared by an independent environmental-consulting firm on behalf of POMP. The city also heard testimony from concerned organizations and members of the public. On a 4-2 vote, the city council resolved that none of the criteria in POMP's petition required the preparation of an EAW and denied the petition.

Under Minn. R. 4410.1100, subp. 6, a responsible governmental unit such as the city council may deny an EAW petition “if the evidence presented fails to demonstrate the project may have the potential for significant environmental effects.” A denial may be reversed by the court of appeals only if the decision is found to be unreasonable, arbitrary, or capricious, or unsupported by substantial evidence. Watab Twp. Citizen All. V. Benton Cty. Bd. Of Comm’rs, 728 N.W.2d 82,89 (Minn. App. 2007). 

In this case, the court cited several reasons why POMP’s claims for lack of substantive evidence to support the city’s decision were not convincing, including:

(1) The project would not have a detrimental effect on the park’s water resources;

(2) The grades, adhering to the National Park Service’s best practices for mountain-bike-trail construction and management, will not result in significant soil erosion;

(3) The project, though it may displace individual animals, will not significantly impact the overall wildlife population within the park and only smaller trees will be removed, preserving the existing tree canopy in the park;

(4) The project will be sufficiently distant from known habitats of the long-eared bat, and will work with the U.S. Fish and Wildlife Service to minimize the impact on the rusty-patched bumble bee by identifying nesting areas and relocating trails accordingly;

(5) No evidence suggested that predatory mammal populations would drop or disease-carrying rodents would increase;

(6) The odds of finding a preserved but yet-undiscovered archaeological site within the park was low; and

(7) No evidence suggests that the bike trail would disturb the quiet sanctity of the park.

Nor, the court held, was there any evidence to suggest that the decision was arbitrary or capricious; the evidence made clear the city council identified POMP’s concerns, reviewed the evidence, and reasonably concluded that the project will not cause significant environmental impact. 

Finally, the city sufficiently reviewed all material evidence in deciding whether the project would have the potential for significant environmental effects. The city applied the correct standard in its decision, as well, because it assessed significant environmental impacts, rather than some environmental impacts. Protect Our Minnetonka Parks, Inc. v. City of Minnetonka, A18-1503, 2019 WL 2495648 (Minn. Ct. App. 6/17/2019).

• PolyMet legal challenges continue on several fronts. Following the issuance of all major environmental permits for PolyMet’s NorthMet copper mining project—a proposed aboveground mine, processing plant, and transportation/utility corridor occurring over 20 years, processing 32,000 tons of ore per day—groups opposed to the project have mounted various legal challenges. There have been recent significant developments in some of these challenges, including the following: 

Court of appeals rejects calls for an SEIS: First, the Minnesota Court of Appeals affirmed the denial by the Department of Natural Resources (DNR) of a petition by Minnesota Center for Environmental Advocacy (MCEA), Friends of the Boundary Waters Wilderness (Friends), and WaterLegacy (WL) to prepare a supplemental environmental impact statement (EIS) for the project. State and federal environmental review for the project has occurred over almost a decade, including completion of draft EIS in 2009, a supplemental draft EIS in 2013, and a final EIS (FEIS) issued in November 2015 and subsequently approved by the co-lead agencies—the DNR, the U.S. Forest Service, and the U.S. Army Corps of Engineers. 

In June 2018, MCEA and Friends submitted a petition to the DNR for the preparation of a Supplemental EIS (SEIS) under Minn. R. 4410.3000 (2017), which was denied in July. Later in July, WL also submitted an SEIS petition, which was also denied in August. MCEA, Friends, and WL filed separate appeals (opportunity for appeal provided in Under Minn. Stat. §116D.04, subdiv. 10 (2018)), which were consolidated in this case. 

The basis for the petitions was a number of alleged changes in circumstances or information that came to the knowledge of the DNR following its approval of the FEIS including: (a) a change to the proposed project to eliminate a wastewater treatment facility and add a pipeline between the mine and plant to transport wastewater; (b) an allegedly anticipated major expansion of the mine in the future that wasn’t accounted for in the EIS; and (c) changes in projected internal rate of return that was lower than estimated prior to the FEIS. 

In limited circumstances, an SEIS must be prepared following approval of an EIS. Minn. R. 4410.3000, subp. 3. For example, an SEIS is required if (1) substantial changes have been made in the project that would affect the potential adverse environmental effects of the project or (2) there is substantial new information or circumstances that significantly affect the potential environmental effects (Minn. Stat. §14.69 (2018)).

In this case, the DNR determined that foreseeable changes in PolyMet’s project proposal were not substantial enough to affect potential and adverse environmental effects under Minnesota rule. Applying the standards of review in Minn. Stat. §14.69, the court of appeals deferred to the decisions made by the DNR, which, the court concluded, were based upon the department’s expertise. In re Application for Supplemental Environmental Impact Statement for the Proposed NorthMet Project, A18-1312, 2019 WL 2262780 (Minn. App. 5/28/2019).

Court of appeals upholds non-ferrous mining rules: Second, the court of appeals rejected a declaratory judgment action, brought by MCEA and Friends of the Boundary Waters Wilderness pursuant to Minn. Stat. §14.44, seeking to invalidate Minn. R. chapter 6132, the non-ferrous mineral mining rules pursuant to which the NorthMet project permit to mine was issued. The DNR adopted chapter 6132 in 1993; however, no permit to mine was issued under chapter 6132 until 11/1/2018, when the DNR issued the permit to mine for the NorthMet project. Petitioners initiated this action about a month later. 

After rejecting a defense asserted by PolyMet and the DNR based upon theories of standing and laches, the court turned to the petitioners’ two main bases for seeking a declaratory judgments: (1) that the rules exceed the DBR’s statutory authority, and (2) that the rules are unconstitutionally void for vagueness. On the first basis, petitioners argued that language in Minn. Stat. §93.47, subd. 3, requires the DNR to adopt rules setting performance or prescriptive standards governing reclamation; the actual language of chapter 6132, petitioners claimed, failed this requirement by conferring too much discretion on the commissioner to grant or deny a permit. 

In rejecting these arguments and concluding that chapter 6132 does not exceed the DNR’s authority, the court looked to the broader statutory context as well as to prior court decisions recognizing the importance of agency discretion in enforcement, “particularly in complex, evolving areas and particularly when procedural safeguards are in place.” With regard to the second basis, the court questioned whether the petitioners, under applicable constitutional law standards, had even asserted a justiciable, viable facial challenge to the rules. Even assuming they had, the court held, they had not met their “steep burden of proving that chapter 6132 is ‘unconstitutional in all applications,’” a burden that stems from “the presumption that statutes are constitutional” and a judicial practice of declaring a statute unconstitutional only with “extreme caution and only when absolutely necessary.” (Citations omitted.) Applying these standards, the court easily found chapter 6132 constitutional, rejecting, for example, petitioners’ claims that the some of the rules’ standards are too generalized by observing that the requirements will “become specific through the permitting process.” In this way, the court continued, “chapter 6132 does not implicate constitutional vagueness concerns because no one is left to guess what conduct is proscribed.” MCEA, et al. v. MN DNR and PolyMet Mining, Inc., A18-1956, 2019 WL 3545839 (Minn. Ct. App. 8/5/2019).

Court of appeals stays PolyMet’s NPDES permit: Third, on 8/6/2019, the court of appeals issued an order staying the National Pollutant Discharge Elimination System (NPDES) permit for the NorthMet project. The stay arises in the appeal brought by WaterLegacy and others challenging the NPDES permit. In June 2019, the court stayed the appeal and ordered a hearing in district court regarding alleged irregularities related to the grant of the permit, specifically concerning how the Minnesota Pollution Control Agency (MPCA) handled and allegedly concealed the receipt of comments from the federal Environmental Protection Agency that were critical of the draft permit. In granting the motion to stay the permit pending the outcome of the district court hearing, the court of appeals cited “substantial issue[s]” regarding the regularity of the permit proceedings as well as the potential irrevocable injuries to the petitioners’ environmental interests should the project proceed.

DNR denies request to reconsider PolyMet mining and dam safety permits: Finally, on 8/7/2019, DNR Commissioner Sarah Strommer denied requests by a collection of environmental groups and tribes to reconsider the DNR’s 11/1/2018 decisions issuing a dam safety permit and a nonferrous permit to mine to PolyMet for the NorthMet project, or, in the alternative, to reconsider the department’s decision denying the group’s prior motion to stay the permits. The group’s requests were primarily based upon concerns stemming from the fatal January 2019 failure of a tailings dam in Brazil—which, according to the group, called into question the methods by which the NorthMet tailings basin dam would be constructed. In denying the requests, the DNR explained that not only did it lack standing to review the permits due to pending court appeals, the DNR had also reviewed all its tailings basin permits in light of the Brazil disaster and concluded that the NorthMet dam would still be sufficiently safe. The DNR also disagreed with the group’s arguments that the NorthMet dam safety permit was irrevocable. 

 

ADMINISTRATIVE ACTION

• EPA issues memorandum aimed at enhancing partnership with state co-regulators. The Environmental Protection Agency (EPA) issued its final version of an interim memo that had been in place since January 2018, detailing the relationship between the EPA and states that are authorized, delegated, or approved to implement federal environmental programs.

In addition to maintaining its deference policy, under which the EPA defers to states on inspection, enforcement actions, and related matters in most instances, the memo also details a “no surprise” principle that the EPA intends to use as the foundation of joint work planning between the EPA and states in order to minimize the misunderstandings that are often caused by the lack of regular, bilateral communication.

In addition to providing for better communication between the EPA and states, the EPA stated its overall goal for joint planning is “the sharing of enforcement responsibilities with a clear agreement on EPA and state roles in individual inspections and formal enforcement actions.”

The EPA’s memo outlines that at a minimum, joint planning should consist of strategic planning, joint inspection planning, and formal enforcement planning.

Strategic planning is intended to address: (1) the environmental compliance problems and needs in the states; (2) national, regional, and state compliance assurance priorities; (3) emerging issues; and (4) how the combined resources of the EPA and state could be used to address these needs.

Joint inspection planning is intended to identify which inspections the EPA or a state will perform. The purpose of identifying the appropriate party is to avoid duplicative inspection efforts, improve efficiency, reduce unnecessary burdens on regulated communities, and to provide the EPA and states with more flexibility in setting and adjusting inspections targets and compliance strategies. The memo goes on to provide for best practices that should be followed when conducting the joint inspection planning process.

Joint enforcement planning is intended to identify which enforcement actions, either individual or classes, the EPA or a state will initiate. The memo provides best practices the EPA and states should use on a case-by-case basis for each enforcement action.

Although the memo reiterates the EPA’s intent to generally defer to states, it does provide for nine situations in which EPA involvement is warranted. The memo does not state that EPA involvement is mandatory in those nine situations; instead they are provided as examples of instance in which the EPA could be involved. 

This memo has been viewed by some as an attempt by the federal government to reduce enforcement of environmental laws by placing the responsibility on the states, which may not have the budget or adequate resources to take on proper enforcement actions. Memorandum from the U.S. Envtl. Prot. Agency on Enhancing Effective Partnerships Between the EPA and the States in Civil Enforcement and Compliance Assurance Work (7/11/2019).

Jeremy P. Greenhouse  The Environmental Law Group, Ltd.

Jake Beckstrom Vermont Law School, 2015

Erik Ordahl  Flaherty & Hood, PA

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

 

FEDERAL PRACTICE

JUDICIAL LAW

• Summary judgment for plaintiff; waiver of affirmative defense. In an ADA action brought against a St. Louis theater seeking captioning of theater performances, the parties cross-moved for summary judgment and the defendant did not raise an undue burden defense. After the district court granted the plaintiffs’ motion, the defendant appealed, arguing that the district court had erred in failing to account for its potential undue burden defense. However the 8th Circuit found that it was the defendant’s responsibility to assert the defense, and that “A party who does not assert a defense in the district court cannot assert that defense on appeal.” Childress v. Fox Assocs., LLC, ___ F.3d ___ (8th Cir. 2019). 

• Standing; damages; due process. The 8th Circuit found that the plaintiffs’ receipt of two unlawful messages on their answering machine caused a “concrete injury” sufficient to confer standing on their TCPA claims, and also agreed with the district court that statutory damages of $1.6 billion would violate the due process clause, and affirmed the district court’s reduction of damages to $32 million. Golan v. FreeEasts.com, Inc., ___ F.3d ___ (8th Cir. 2019). 

•  28 U.S.C. §1446(c); remand; no appellate jurisdiction. The 8th Circuit found that it lacked jurisdiction over one defendant’s appeal from a remand order, where the district court had remanded the action for lack of jurisdiction, and the 8th Circuit viewed the district court’s characterization of its remand order as “colorable.” 

The 8th Circuit declined to reach the issue of whether the one-year limitation on removal under 28 U.S.C. §1446(c) is jurisdictional, though it acknowledged that “several courts” have held that it is not. Vasseur v. Sowell, ___ F.3d ___ (8th Cir. 2019). 

•  DPPA; attorney’s fees reduced. The 8th Circuit found no abuse of discretion in Judge Montgomery’s reduction of plaintiff’s request for attorney’s fees in a DPPA case by 60%, where she reduced fees 40% for “excessive billing and overstaffing,” and an additional 20% for “limited success.” Orduno v. Pietrzak, ___ F.3d ___ (8th Cir. 2019). 

• Fed. R. Civ. P. 38(d) and 39(b); late motion for jury trial denied. Where the defendant was sued in 2016, the action was originally assigned to Judge Doty but was then consolidated with other RFC and ResCap litigation pending before Judge Nelson for pre-trial purposes, neither plaintiff nor the defendant demanded a jury trial in its pleadings, the judges in the district later determined that Judge Nelson would preside over a number of related cases through trial, Judge Nelson apprised counsel of this change, ResCap prevailed in the first trial and the defendant then filed a motion for a jury trial, Judge Nelson denied the motion, finding that counsel’s delay in bringing the motion was “inexcusable” and had prejudiced ResCap, and that her impartiality was not in question. ResCap Liquidating Trust v. Primary Residential, Mortgage, 2019 WL 3340698 (D. Minn. 7/25/2019). 

• Fed. R. Civ. P. 6(b); D. Minn. L.R. 7.1(c)(1); motion to strike untimely memorandum denied. Where the plaintiff moved to strike defendants’ motion to dismiss that was filed without a supporting memorandum in violation of Local Rule 7.1(c)(1) and defendant then sought leave to file an untimely memorandum in support of its motion, Magistrate Judge Menendez granted defendants’ motion and denied the plaintiff’s motion, finding no prejudice to the plaintiff, cautioning defendants’ counsel to make ""greater efforts” to comply with the Local Rules, and chastising all counsel for their “petty bickering.” Management Registry, Inc. v. A.W. Cos., 2019 WL 3574464 (D. Minn. 8/6/2019). 

•  28 U.S.C. §1920; Fed. R. Civ. P. 54(d)(1); cross-motions for review of cost judgment. Where the prevailing plaintiff filed a bill of costs seeking more than $300,000, the defendant filed an objection, the clerk awarded the plaintiff less than $48,000 in costs, and both parties sought review of the clerk’s cost judgment, Judge Montgomery denied the plaintiff’s request for more than $226,000 in ESI-related expenses, finding that the “forensic collection” of documents was not a taxable cost related to making copies, and that deduplication of files and OCR charges were not taxable costs. In response to the defendant’s motion, Judge Montgomery reduced certain witness-related costs the clerk had awarded to the plaintiff but rejected a challenge to the clerk’s award of $800 in pro hac vice fees. Inline Packaging., LLC v. Graphic Packaging Int’l, LLC, 2019 WL 3387777 (D. Minn. 7/26/2019). 

• Fed. R. Civ P. 54(b); Multiple motions to enter final judgments denied. Judge Davis denied plaintiffs’ motions to enter final judgment in related cases under Fed. R. Civ. P. 54(b) following the entry of summary judgment on many of their claims while other claims and counterclaims remained pending, finding that “there were no dangers of hardship or injustice” in declining to enter final judgment. Strategic Energy Concepts, LLC v. Otoka Energy, LLC, 2019 WL 3431160 (D. Minn. 7/30/2019). Dean Street Capital Advisors, LLC v. Otoka Energy, LLC, 2019 WL 3428834 (D. Minn. 7/30/2019). 

Josh Jacobson  Law Office of Josh Jacobson 

 

IMMIGRATION LAW 

JUDICIAL LAW

• Federal court strikes down executive branch rule placing restrictions on asylum seekers. In November 2018, the Attorney General and Secretary of Homeland Security issued an interim final rule adding “a new mandatory bar on eligibility for asylum for certain aliens” subject to a presidential proclamation that placed limitations on their entry into the United States (i.e., Aliens Subject to a Bar on Entry Under Certain Presidential Proclamations; Procedures for Protection Claims). 83 Fed. Reg. 55934-53 (11/9/2018). https://www.govinfo.gov/content/pkg/FR-2018-11-09/pdf/2018-24594.pdf

The President issued a proclamation suspending for a period of 90 days
“[t]he entry of any foreign national into the United States across the international boundary between the United States and Mexico,” except by those “who enter[] the United States at a port of entry and properly present[] for inspection…” (i.e., Addressing Mass Migration Through the Southern Border of the United States). 83 Fed. Reg. 57661-64 (11/15/2018).  https://www.govinfo.gov/content/pkg/FR-2018-11-15/pdf/2018-25117.pdf

Since then, the President has issued two additional proclamations disallowing entries across the southern border, except at a port of entry, for additional 90-day periods. (i.e., Addressing Mass Migration Through the Southern Border of the United States). 84 Fed. Reg. 3665-67 (2/12/2019); Addressing Mass Migration Through the Southern Border of the United States. 84 Fed. Reg. 21229-31 (5/13/2019).  https://www.govinfo.gov/content/pkg/FR-2019-02-12/pdf/2019-02303.pdf https://www.govinfo.gov/content/pkg/FR-2019-05-13/pdf/2019-09992.pdf

In sum, these actions make foreign nationals entering the United States from Mexico, outside a designated port of entry, ineligible for asylum. 

The lawfulness of this action was challenged a few weeks later in suits filed by 19 individuals from Honduras, El Salvador, Nicaragua, and Guatemala and two nonprofit organizations providing legal services to refugees, later consolidated into two cases, O.A. v. Trump, Civ. No. 18-2718, and S.M.S.R. v. Trump, Civ. No. 18-2838. The primary argument for the challenge rested on the Immigration and Nationality Act (INA §208(a)(1)), which declares “[a]ny alien who is physically present in the United States or who arrives in the United States (whether or not at a designated port of arrival...) irrespective of such alien’s status, may apply for asylum.” 8 U.S.C. §1158(a)(1). (Emphasis added.)

After concluding that it had federal question jurisdiction to review this matter, the U.S District Court for the District of Columbia found the action by the Attorney General, Secretary of Homeland Security, and President “contrary to law” and “in excess of statutory… authority.” It consequently vacated the action while also allowing for certification of the proposed class and designation of the individual plaintiffs as class representatives. The matter of injunctive relief was mooted on account of the vacatur and assurances by the defendants to comply with the court’s decision. O.A., et al. v. Trump, et al. and S.M.S.R., et al. v. Trump, et al. (1:18-cv-02718-RDM) (D.D.C. 8/2/2019). https://cases.justia.com/federal/district-courts/district-of-columbia/dcdce/1:2018cv02718/201831/92/0.pdf?ts=1564823895

•  Inadmissibility and public charge grounds. On 8/14/2019, the Department of Homeland Security (DHS) published its final rule amending regulations addressing inadmissibility, on public charge grounds, of foreign nationals seeking admission or adjustment of status. The rule goes into effect on 10/15/2019. (Other portions of the rule addressed public charge bond and extension or change of status requests by nonimmigrants).

Although the rule is dense and vague in some of its aspects and consequently gives adjudicators more discretion, thus making the process more subjective, one can take away a few key features:

1) The rule will be applied to those individuals perceived to be more likely than not to receive designated benefits for more than 12 months in the aggregate within any 36-month period.

2) The rule will expand the list of current benefits programs (i.e., Supplemental Security Income (SSI), Temporary Assistance to Needy Families (TANF), state general relief or general assistance, and a Medicaid program covering institutionalization for long-term care) to include five additional programs: non-emergency Medicaid; Supplemental Nutrition and Assistance Program (SNAP); Section 8 Housing Choice Voucher Program; Section 8 Project-Based Rental Assistance; and Public Housing.

3) The rule will focus less on the current procedure of scrutinizing the petitioning sponsor’s income and assets (as provided in the Affidavit of Support) to five statutory factors involving the foreign national’s age, health, family status, financial status, and education. 

4) Finally, the rule allows the foreign national to post a public charge bond in circumstances where the adjudicator believes (s)he may fail the public charge test.

84 Fed. Reg., 41292-508 (8/14/2019). https://www.govinfo.gov/content/pkg/FR-2019-08-14/pdf/2019-17142.pdf

On 8/13/2019, the City and County of San Francisco and the County of Santa Clara filed suit in U.S. District Court in the Northern District Court of California seeking declaratory and injunctive relief, challenging the final rule. The grounds for the challenge: 1) the rule is not in accord with existing law as to how “public charge” is defined (i.e., a shift away from those who are  “primarily” dependent on public assistance for survival to those who may have even a “minimal use of a much wider range of non-cash benefits”); 2) the rule is arbitrary and capricious, and an abuse of discretion, by relying “on factors Congress did not intend for it to consider,” failing “to consider important aspects of the problem it is addressing,” or explaining “its decision counter to the evidence before it.” Other suits are likely to follow. City and County of San Francisco, et al. v. USCIS, et al., No. 3:19-cv-4717 (N.D. Cal. 8/13/2019). https://www.sfcityattorney.org/wp-content/uploads/2019/08/Filed-Complaint.pdf

• DHS and DOJ seek to prevent applications for asylum by those who travel through a third county without first seeking relief there. On 7/16/2019, the Departments of Justice and Homeland Security published a joint interim final rule dictating a mandatory bar to asylum eligibility for individuals entering or attempting to enter the United States through the southern border while traveling through a third country without first seeking relief in that country. 84 Fed. Reg. 33829-45 (7/16/2019). https://www.govinfo.gov/content/pkg/FR-2019-07-16/pdf/2019-15246.pdf

On 7/24/2019, an order was issued (following suit filed by East Bay Sanctuary Covenant, Al Otro Lado, Innovation Law Lab, and Central American Resource Center on 7/16/2019) by the U.S. District Court in the Northern District of California enjoining the government from implementing the interim final rule until a final judgment had been made on the matter or a further order issued by the court. “The effect of the Rule is to categorically deny asylum to almost anyone entering the United States at the southern border if he or she did not first apply for asylum in Mexico or another third country.” East Bay Sanctuary Covenant, et al. v. Barr, et al., No. 3:19-cv-04073-JST (N.D. Cal. 7/24/19). Stay tuned.
https://ccrjustice.org/sites/default/files/attach/2019/07/Preliminary%20Injunction%20Decision.pdf

R. Mark Frey  Frey Law Office

TAX LAW

JUDICIAL LAW

•  Property tax: Summary judgment motion denied; hospital district argument confuses “broad powers” with “broad purposes.” Minnesota law provides for the creation of “hospital districts,” which are defined as municipal corporations and are political subdivisions of the state. Minn. Stat. 447.31, subd 1. Minnesota law also provides an exemption from property taxation for property “owned, leased, controlled, used or occupied by a district” if that property is used “for the purposes of sections 447.31 to 447.37.” 

Perham Hospital District in Otter Tail County is one such hospital district. The district owns Perham Hospital, as well as several clinics. It is the tax status of the clinics at issue in this property tax dispute. Before January 2016, the county classified the three at-issue clinics as exempt property. Since that date, however, the clinics have been classified as commercial property, and have been subject to taxation. The district filed a motion for summary judgment, arguing the clinic properties are exempt from property tax because the district enjoys the power to own and operate the clinics under Minnesota law. The court denied the motion.

The court explained that the “District [mistakenly] insists that because Minnesota law grants hospital districts broad powers, it authorizes them to pursue broad purposes.” The court reasoned that the purposes a hospital district may pursue are limited to those set forth in statute. Those purposes, according to the court, are limited to “to acquire, improve, and run the hospital, nursing home facilities, and facilities described in section 447.45, subdivision 2, paragraph (b).” Minn. Stat. §447.33, subd. 1. 

If the district uses the real property occupied by the clinics for a statutorily authorized purpose, the tax exemption is appropriate. The court concluded, however, that there were disputed issues of fact concerning whether the district used real property occupied by the clinics for a statutorily authorized purpose. Because there were disputed issues of material fact, summary judgment was inappropriate. Perham Hosp. Dist. v. Otter Tail Co., No. 56-CV-18-1196, 2019 WL 3210638 (Minn. Tax 7/10/2019).

•  Poker hobby expenses: Deductions not permitted on Schedule C tax return. Mr. Zalesiak began playing poker in 2008 during college. He took a year off from poker to focus on gaining steady income and maintained full-time employment as a construction manager for a period of years. Mr. Zalesiak continued to play poker on nights and weekends and reported a small profit from his winnings in 2011 and 2015. In 2015, Zalesiak occasionally engaged in poker-related activities during his leisure time. Between May and September 2015, he did not engage in poker-related activities due to a busy work schedule. When work slowed down in December 2015, Zalesiak began traveling again to poker tournaments and casinos while visiting family and friends. Zalesiak’s 2015 Form 1040 reported a net profit from gambling as $1,100.

Mr. Zalesiak filed a petition to contest a notice of deficiency issued by the Internal Revenue Service. The parties disputed whether Mr. Zalesiak was entitled to deduct gambling losses on a Schedule C as a professional gambler, or whether he may only deduct gambling losses only on Schedule A, as a nonprofessional gambler. The parties also disputed whether he had substantiated deductions for non-wagering travel expenses. The court held that the taxpayer lacked requisite profit objective to qualify his gambling activity as a trade or business for 2015 and therefore was permitted to deduct only losses or any allowable expenses on Schedule A. Zalesiak v. Comm’r, T.C. Summary Op. 2019-16. 

•  Pair of decisions clarify that federal rules determine Minnesota-based companies’ R&D activities. General Mills filed its 2011 research and development (R&D) Minnesota corporate franchise tax return, claiming $1,112,772 as its tax credit. The Commissioner of Revenue did not dispute that General Mills was entitled to that tax credit, nor the amount of the credit. In 2015, General Mills filed an amended 2011 return based on a recalculation of its Minnesota R&D credit. General Mills originally calculated its R&D tax credit by using the federal “minimum base amount,” but did not use the federal minimum base amount on its amended return. Additionally, on its initial tax return, General Mills used Minnesota “aggregate gross receipts” for calculating the R&D credit, but used the federal aggregate gross receipts for the R&D credit formula on its amended return. As a result of these changes, General Mills sought a refund of $949,236 plus interest. The commissioner denied General Mills’ refund claim and the company appealed to the Minnesota Tax Court. 

Similarly, IBM filed its Minnesota corporate franchise tax return for the 2011 tax year. The company claimed Minnesota R&D credits based on its increased research activities. In 2016, IBM filed an amended 2011 return, requesting a refund of $4,395,399 based on recalculation of the R&D credit. The Commissioner of Revenue denied IBM’s refund claim. IBM appealed to the Minnesota Tax Court.

General Mills and IBM sought review on whether the Minnesota Legislature’s incorporation of the federal tax code’s definition of the term “base amount” in Minn. Stat. §290.068 (2010) included the federal minimum base amount limitation. The Commissioner of Revenue cross-appealed on whether the term “aggregate gross receipts” as used in the Internal Revenue Code’s formula for calculating R&D tax credit refers to Minnesota or federal aggregate gross receipts. 

Applying de novo review to this question of statutory interpretation, the Supreme Court affirmed the Minnesota Tax Court and held that the calculation of Minnesota’s research and development tax credit incorporates the minimum base amount limitation of federal statute delineating base amount of qualified research expenses (QREs) for calculation of research credit. 

The Court also resolved whether “aggregate gross receipts” refers to Minnesota, or federal, aggregate gross receipts. The Court noted that the Minnesota Statute incorporates the federal definition of “base amount” into Minnesota’s R&D tax credit calculation. As the Court explained, “[o]ne element of the ‘base amount’ determination is calculation of the ‘fixed-base percentage,’ which is the ratio of ‘aggregate qualified research expenses’ over ‘aggregate gross receipts.’” I.R.C. §41(c)(3)(A). The Court summarized its holding on this second issue as follows: “the plain language of Minn. Stat. §290.068, subd. 2(c), and its incorporation of the term ‘aggregate gross receipts’ through the term ‘base amount,’ referred to federal aggregate gross receipts for the 2011 tax year. …[F]ederal aggregate gross receipts must be used in the fixed-base-percentage formula contained within the base amount calculation for General Mills' 2011 Minnesota R&D tax credit.” Gen. Mills, Inc. v. Comm'r, No. A18-1660, 2019 WL 3439577 at *8 (Minn. 7/31/2019). The companion decision is reported at Int'l Bus. Machines Corp. v. Comm'r, No. A18-1740, 2019 WL 3439708 (Minn. 7/31/2019).

•  Property tax: Affirmed in part and reversed in part; remanded to tax court. KCP owns a shopping mall and surrounding parking lot in Hastings (Dakota County). In 2015, the Minnesota Supreme Court remanded this valuation dispute to the tax court. The tax court reached a new valuation after taking additional evidence, and KCP again appealed the tax court’s valuation. In this second opinion on the valuation of the subject property, the Minnesota Supreme Court affirmed the tax court in most respects, but held the tax court erred in two ways: (1) the court erred in its assignment of value to an outlot on the property, (2) and the lower court erred in the use of a building area other than the one stipulated to by the parties.

The Court summarized the procedural history of the dispute, noting its reasons for the initial remand and the additional steps the tax court and parties had taken following that remand. Those steps including permitting both parties to supplement their appraisals with further analyses and holding at least one additional hearing. The tax court then filed its final order, setting out its final valuation of the subject property. KCP again appealed, raising numerous allegations of reversible error. 

The Court held that the tax court neither abused its discretion nor exceeded the scope of remand by admitting a discounted-cash-flow analysis prepared by the county, and further that the tax court did not clearly err when it found that the appraisal conducted by the taxpayer’s expert was a leased-fee appraisal (rather than a fee-simple appraisal). Similarly, KCP’s argument relating to rejection of certain portions of expert evidence were not persuasive to the Supreme Court, and the Court held that the tax court did not abuse its discretion in deciding different evidentiary weight to place on differing valuation approaches. There was no error, the Court held, when the tax court determined terminal capitalization and discount rates based on market-survey evidence.

However, the tax court clearly erred when it assigned value to an outlot on the property on the basis that the outlot could be sold and developed. The tax court reasoned that although the outlot could not be sold due to zoning restrictions, a valuation was nonetheless appropriate since a potential buyer could seek a variance. The Supreme Court determined that although there is no reasonable probability for a change of the ordinance in the near future, the lot does add some value to the property. This Court therefore remanded the issue of the outlot’s valuation. 

The Court also held that the tax court erred when it held that KCP had abandoned a certain stipulation relating to building area. The Court reasoned that because the parties stipulated to the gross building area on 2/12/2014, an expert report written and filed with the court prior to that stipulation could not form the basis for the tax court’s finding that KCP had abandoned the stipulation. It is “obvious,” the Court noted, “that a party cannot abandon a stipulation that has not yet been made. KCP did not abandon its stipulation and the court erred by using the gross building area.” KCP Hastings, LLC, vs. Dakota Co., A18-0133 (Minn. 7/31/2019).

Morgan Holcomb  Mitchell Hamline School of Law

 

TORTS & INSURANCE

JUDICIAL LAW

• Defamation: Free speech and actual malice requirement. Plaintiff and defendant were married and subsequently divorced. During the divorce proceedings, defendant was a client of defendant nonprofit organization (NPO), which provided services for victims of domestic abuse. However, the dissolution decree did not reference domestic violence, defendant never sought an order for protection, and no criminal charges were ever filed against plaintiff for domestic abuse. Years later, defendant began volunteering with the NPO. Defendant spoke at community events about her experience “as a survivor of domestic violence” and made similar postings on social media. Later, defendant was given a “Survivor Award” by the NPO and her story was featured in the NPO’s newsletter, which sought donations. Plaintiff filed suit against defendant and the NPO for defamation, and against the NPO for negligence. The district court granted summary judgment in favor of defendants. The court of appeals reversed and remanded.

The Minnesota Supreme Court affirmed in part, reversed in part, and remanded. The Court’s decision featured a number of holdings. First, the Court held that plaintiff failed to provide evidence of actual harm to his reputation. Second, the Court held that “emotional damages are not compensable” in a defamation action “absent harm to reputation.” Therefore, plaintiff’s claims would fail unless he could recover presumed damages. 

The Court went on to hold that while the statements at issue accused plaintiff of a crime—one of the categories of defamation per se, allowing recovery of presumed damages—plaintiff could not recover presumed damages if the statements involved a matter of “public concern” absent a showing of actual malice, which plaintiff had not made. The Court remanded the defamation claims back to the district court to determine whether or not the statements involved a matter of “public concern.” The Court instructed that this determination should be made “based on a totality of the circumstances” including “the content, form, and context of the speech.”

Finally, the Court affirmed summary judgment in favor of the NPO on plaintiff’s negligence claim, finding “no dispute of material fact regarding whether [the NPO] breached” its duty of care to plaintiff. Justice Thissen filed an opinion concurring in part and dissenting in part. Justice Thissen concurred with the majority’s holdings on the defamation claims but would have remanded the negligence claim for trial. Maethner v. Someplace Safe, Inc., No. A17-0998 (Minn. 6/26/2019). https://mn.gov/law-library-stat/archive/supct/2019/OPA170998-062619.pdf

Jeff Mulder  Bassford Remele