ADMINISTRATIVE LAW
JUDICIAL LAW
• Rules and “litigation positions.” The Minnesota Supreme Court has held that an agency is not required to go through rulemaking in order to take a position on a question of statutory or regulatory interpretation in an enforcement proceeding, but that such “litigation positions” are not entitled to the judicial deference normally accorded to rules.
The issue arose in the context of an enforcement action against a home health care provider for failure to pay overtime as required under Minnesota Statutes section 177.25 and related regulations. The commissioner of Labor and Industry took the position that the statute and regulations required overtime payments for all hours worked by an employee after the first 48 hours in a given workweek. The provider disagreed with this interpretation and argued that the agency’s interpretation should be disregarded because it was not the product of rulemaking under the Minnesota Administrative Procedure Act (MAPA). However, the Court held that an agency’s interpretation of a statute outside of MAPA rulemaking does not preclude the agency from asserting the interpretation as a litigation position.
The Court stated, “Like any other party, the Department may argue that its regulations should be interpreted in a particular way; that the agency did not choose to proceed with further rule-making under the Minnesota Administrative Procedure Act means only that we interpret the regulation de novo, without deference to the agency’s interpretation.” In this case, the Court reviewed the statute and regulations de novo and agreed with the commissioner’s interpretations.
Justice Anderson, joined by Chief Justice Gildea and Justice Thissen, dissented. The dissenters argued that the majority’s approach encouraged rulemaking-by-adjudication and could deprive regulated parties of adequate notice of an agency’s views on enforcement. In re Minnesota Living Assistance, Inc., No. A17-1821 (9/18/2019).
Mehmet K. Konar-Steenberg
Mitchell Hamline School of Law
CRIMINAL LAW
JUDICIAL LAW
• Manslaughter: First-degree manslaughter predicated on fifth-degree assault does not require proof that death or great bodily harm was reasonably foreseeable. Appellant was convicted of first-degree manslaughter predicated on an underlying fifth-degree assault after he was involved in an altercation outside of a bar. Appellant acted aggressively toward the victim’s friend, after which the victim came out of the bar and began poking, pushing, and yelling at appellant. Appellant then punched the victim once in the face, and the victim fell to the ground, hit his head, and became unresponsive. The victim later died at the hospital as a result of blunt force head trauma and his elevated blood alcohol concentration. At trial, the district court denied appellant’s request to instruct the jury that first-degree manslaughter predicated on a fifth-degree assault requires that death or great bodily harm be reasonably foreseeable. Minn. Stat. §609.20(2) identifies two ways that first-degree manslaughter may be committed: a person “violates section 609.224 [fifth-degree assault] and causes the death of another or causes the death of another in committing or attempting to commit a misdemeanor or gross misdemeanor offense with such force and violence that death of or great bodily harm to any person was reasonably foreseeable…” The court of appeals held that the “reasonably foreseeable” modifier (italicized above) applies to only the misdemeanor-offense clause.
The Supreme Court agrees with the district court and court of appeals. The plain language of section 609.20(2) makes clear that the modifier does not apply to the fifth-degree assault clause. The statute lists two predicate offenses, and the Legislature repeats the harm language (“causes the death of another”) for each, clearly articulating two separate forms of first-degree manslaughter. The reasonably foreseeable modifier comes after only the misdemeanor-offense clause. If that language applied to both forms of manslaughter, the Court reasons, the Legislature would not have included the harm language twice in the statute. This conclusion is further supported by the last-antecedent rule of grammar, which states that “a limiting phrase ordinarily modifies only the noun or phrase that it immediately follows.”
Thus, the Court holds that when fifth-degree assault is the crime underlying a first-degree manslaughter charge, section 609.22(2) does not require the state to prove that death or great bodily harm was a reasonably foreseeable result of the defendant’s conduct. Appellant’s conviction is affirmed. State v. Stay, 935 N.W.2d 428 (Minn. 11/13/2019).
• 4th Amendment: Reasonable suspicion for stop when officer observes driver not wearing seat belt. Appellant was charged with DWI and violating a driver’s license restriction after being pulled over for a cracked windshield and not wearing a seat belt. Before trial, he moved to suppress evidence, arguing there was no reasonable suspicion for the stop of his vehicle. The district court addressed only the cracked windshield, finding it provided the officer with a sufficient basis to stop appellant. After a stipulated facts trial, appellant was convicted of both offenses. The Minnesota Court of Appeals found the officer was not justified in stopping appellant for his cracked windshield, but concluded that the officer had sufficient reasonable suspicion that appellant was not wearing his seat belt.
Driving without a seat belt is a crime, but the officer must be able to articulate facts that support the conclusion that the officer observed the driver not wearing a seat belt. The Supreme Court finds that the officer here articulated sufficient facts showing he observed appellant not wearing a seatbelt: he told appellant more than once he was stopped for the cracked windshield and not wearing a seat belt, his incident report indicated the reason for the stop was appellant’s failure to wear a seat belt, and he testified that he pulled appellant over for not wearing a seat belt.
After appellant was pulled over, the officer observed appellant actually wearing a seat belt. However, the officer testified that he believed appellant’s seat belt was off while he was driving and that, when he approached the vehicle, he observed a vehicle part hanging down, which could have led the officer to believe appellant’s seat belt was unfastened. Thus, even if the officer’s observation that the seat belt was off was mistaken, the mistake was objectively reasonable under the totality of the circumstance. Appellant’s convictions are affirmed. State v. Poehler, No. A18-0353, 2019 WL 6334370 (Minn. 11/27/2019).
Samantha Foertsch
Bruno Law PLLC
Stephen Foertsch
Bruno Law PLLC
EMPLOYMENT & LABOR LAW
JUDICIAL LAW
• Dismissal reversed; discovery sanction improper. The dismissal of an employee’s discrimination claim as a discovery sanction was overturned. The 8th Circuit Court of Appeals held that the dismissal by the trial court with prejudice was improper because the claimant did not wrongfully depart from his deposition before it was completed. Akins v. Southern Glazers Wine & Spirits of Arkansas, 2019 WL 4071876 (8th Cir. 8/29/2019) (unpublished).
• Whistleblowing; DNR claim rejected. A whistleblower claim by a seasonal employee of the Minnesota Department of Natural Resources (DNR) was rejected because the concern he expressed about conversion of his job from a temporary seasonal to a pair of emergency appointments did not “implicate” a violation of law. The Minnesota Court of Appeals affirmed a ruling of the Lake County District Court that neither Minn. Stat. §43A.15, subd. 2 or an accompanying rule requires explicit approval of the appointments by the DNR commissioner. Steffens v. State DNR, 2019 WL 5884570 (Minn. Ct. App. 11/12/2019) (unpublished).
• Accrued PTO; city need not pay. The City of Plainview is not obligated for accrued but unpaid paid-time-off (PTO) following termination of an employee’s job. The court of appeals held that the provision in the municipal handbook calling for payment contained a disclaimer, and there was no other contractual basis under Minn. Stat. §181.13, the prompt payment law, in “the absence of an independent substitute legal right.” Hall v. City of Plainview, 2019 WL 6695142 (8th Cir. 12/9/2019) (unpublished).
• Final wages; timely payment made. An employee’s claim of late payment of final wages under Minn. Stat. §181.14, subd. 4, was denied. The court of appeals held that the dismissal of the case by the Hennepin County District Court was proper because the final payment complied with the 10-day post-termination grace period for the claimant, whose job involved collection, disbursement, and handling of money or property. Ka v. Lonvigson’s Service Center, Inc., 2019 WL 5691820 (Minn. Ct. App. 11/4/2019) (unpublished).
• FELA claim reversed, causation issue remanded. An employee’s negligence claim under the Federal Employers Liability Act (FELA) was revived. The court of appeals reversed and remanded dismissal by the St. Louis County District Court in order to determine whether the employer’s negligence may have been a “contributing” cause of the injury, which also was attributable, in part, to the employee’s own negligence. Wallace v. BNSF Railway Company, 2019 WL 6112446 (Minn. Ct. App. 11/18/2019) (unpublished).
• Retaliatory discharge; no requirement to alter job. An employee who claimed retaliatory discharge following her termination two years after suffering a workplace injury lost her case. The appellate court affirmed a ruling of the Brown County District Court that the employer was not required to alter her job or create a new one to accommodate her physical inabilities due to the injury. Conn v. Bic Graphic USA Manufacturing Co., Inc., 2019 WL 4694673 (Minn. Ct. App. 9/23/2019) (unpublished).
• Police officer reinstatement; arbitration award upheld. A Duluth police officer discharged for excessive use of force was entitled to reinstatement due to an arbitration award overturning the discharge. The court of appeals held that, even though the officer’s use of force was contrary to “public policy,” the St. Louis County District Court did not err in confirming an arbitrator’s ruling reinstating the officer without back pay. City of Duluth v. Duluth Police Officer’s Union, 2019 WL 4165031 (Minn. Ct. App. 9/3/2019) (unpublished).
• Unemployment compensation; improper use of force bars claim. A prison guard who was terminated for excessive use of force on an inmate was denied unemployment benefits. The court of appeals, affirming a ULJ decision, ruled that the officer’s behavior constituted disqualifying misconduct. Casey v. Minnesota Department of Corrections, 2019 WL 6112713 (Minn. Ct. App. 11/18/2019) (unpublished).
• Unemployment compensation; quit due to failure to show up. An employee who failed to report to work or notify his employer of his absence was denied unemployment compensation benefits. The appellate court upheld a determination by an unemployment law judge (ULJ) with the Department of Employment and Economic Development (DEED) of disqualifying misconduct. Mitzuk v. Davlyn, Inc., 2019 WL 4164896 (Minn. Ct. App. 9/3/2019) (unpublished).
• Unemployment compensation; misconduct due to improper remarks. An employee who made inappropriate remarks to employees and guests at a hospitality site was properly denied unemployment compensation benefits. The appellate court upheld a determination by a ULJ that the employee’s behavior constituted disqualifying misconduct. Singh v. Grand Casino Hinckley, 2019 WL 5885074 (Minn. Ct. App. 11/12/2019) (unpublished).
LOOKING AHEAD
• SCOTUS and LGBTQ. A ruling is expected soon by the U.S. Supreme Court on a trio of consolidated cases concerning LGBTQ discrimination. The high court heard them on the second day of its term in October and will decide early this year if the prohibition on sex discrimination by employers in Title VII of the Federal Civil Rights Act extends to LGBTQ employees, which is not explicitly addressed in the statute. Bostock v. Clayton County, No. 16-1628; Altitude Express, Inc. v. Zarda, No. 17-1623, Harris Funeral Homes v. EEOC, No. 18-107. Minnesota is one of about two dozen jurisdictions that bar such discrimination under state or local laws (see Minn. Stat. §363A.03, subd. 44), but periodic efforts to amend the federal statute have failed dating back nearly three decades.
Marshall H. Tanick
Meyer, Njus & Tanick
ENVIRONMENTAL LAW
JUDICIAL LAW
• Minnesota Court of Appeals decides two water law issues of first impression. The Minnesota Court of Appeals issued a published decision reversing and remanding a National Pollutant Discharge Elimination System (NPDES)/State Discharge System (SDS) permit that the Minnesota Pollution Control Agency (MPCA) reissued to U. S. Steel Corporation on 11/30/2018 for U. S. Steel’s Minntac taconite tailings basin facility in Mountain Iron, Minnesota.
The court’s decision addressed two water-law issues of first impression. The first issue involved the regulation of seepage discharges from the tailings basin to groundwater that is hydrologically connected to, and transports pollutants to, certain surrounding surface waters. Specifically at issue was whether these groundwater-to-surface-water discharges (GSWDs) constitute discharges to “waters of the United States” under the Clean Water Act (CWA) and are thus subject to NPDES permitting requirements such as the requirement to meet surface water quality standards—or, as MPCA and U. S. Steel contended, GWSDs are properly regulated under state law only (i.e., MPCA’s SDS permitting program). This issue has been the subject of numerous conflicting federal appellate court opinions, one of which, Hawai’i Wildlife Fund v. County of Maui, 886 F.3d 737 (9th Cir. 2018), is currently being reviewed by the Supreme Court of the United States. However, no Minnesota state or federal court had yet ruled on the issue. The court of appeals applied the analytical framework established by In re Cities of Annandale & Maple Lake NPDES/SDS Permit Issuance for Discharge of Treated Wastewater for determining when to show deference to a state agency’s interpretation of a statute it is charged with administering. 731 N.W.2d 502, 516 (Minn. 2007). Here, the court sided with MPCA and U. S. Steel, holding that the relevant language in the CWA was ambiguous regarding GWSDs and that MPCA’s interpretation of that language as not bringing GWSDs within the scope of the CWA—“regardless of any hydrological connection to surface waters”—was reasonable.
The second issue of first impression was whether groundwater is subject to MPCA’s Class 1 water quality standards in part 7050.0221, which incorporate by reference EPA’s drinking water standards. Based on its position that groundwater is subject to the Class 1 standards, MPCA included numerous conditions in the permit requiring Minntac to comply with the Class 1 standard for sulfate in groundwater. U. S. Steel argued, and the court concurred, that chapters 7050 and 7060 unambiguously do not classify groundwater as Class 1 waters and that therefore MPCA erroneously imposed permit conditions requiring compliance with the Class 1 sulfate standard in groundwater.
In addition to these issues of first impression, the court also concluded that MPCA had not identified substantial evidence supporting its decision that there were no discharges to surface water from the tailings basin, and only seepage discharges to groundwater. Minntac has constructed systems around the tailings basin to intercept aboveground discharges from the basin before they reach surface waters and pump the water back to the basin pond. Based on these systems, MPCA determined there were no surface water discharges from the basin and thus did not impose permit limits based upon surface water quality standards. However, the court held that MPCA failed to base this decision upon substantial evidence.
Finally, the court mostly side-stepped arguments regarding the applicability of the “wild rice rule,” a Class 4 water quality standard for sulfate related to surface waters used for wild rice production. Environmental and tribal appellants argued that MPCA wrongly failed to include permit conditions based upon the wild rice rule. However, because the court remanded the permit to MPCA to make further factual findings on the presence of surface water discharges, the court held it would be premature to rule on the applicability of the wild rice rule. The court did clarify, however, that with regard to the SDS portion of the permit, the wild rice rule “cannot, under current law, be the basis for conditions requiring the expenditure of funds.” The court thus reversed MPCA’s decision reissuing the permit and remanded the permit for further proceedings consistent with its decision. Matter of NPDES/SDS, A18-2094, 2019 WL 6691515 (Minn. Ct. App. 12/9/2019).
• District court defers to EPA, rules groundwater discharge does not violate Clean Water Act. On 11/26/2019, the U.S. District Court for the District of Massachusetts held that discharges of pollutants into groundwater that subsequently reach surface waters are not subject to liability under the Clean Water Act (CWA). The court deferred to the EPA’s recent interpretation of the CWA under the Chevron deference test.
The CWA prohibits the discharge of a pollutant from any point source into navigable waters without a permit. 33 U.S.C §§1251, et seq. In this case, the defendant, the Wychmere Beach Club Hotel, is located on the Wychmere Harbor estuary that connects to the ocean at Nantucket Sound. The Beach Club treats its sewage and wastewater on the property and stores the treated sewage in 22 concrete leaching pits meant to convey the treated sewage from the treatment facility into the ground. Plaintiff filed suit claiming that the resulting discharge of nitrogen into the groundwater subsequently reached the navigable water of Wychmere Harbor estuary, and that the Beach Club failed to obtain a National Pollutant Discharge Elimination System (NPDES) permit under CWA prior to the discharge. However, the Beach Club has an Individual Groundwater Discharge Permit issued by the Massachusetts Department of Environmental Protection. Defendant argued that it is not liable under the CWA because it discharges the nitrogen into groundwater, rather than directly into the harbor.
The court held that the 22 leach pits were in fact point sources within the meaning of the CWA. However, in April 2019, after full notice and comment procedures, EPA published an Interpretive Statement concluding that discharges of pollutants from point sources to groundwater are categorically excluded from liability under CWA’s NPDES permit program. 84 Fed. Reg. 16810 (4/23/2019). Thus, the court followed the Chevron deference test to determine that EPA’s interpretation of CWA was not unreasonable to exclude discharges through groundwater from the NPDES program. In making this determination, the court recognized that Congress deliberately opted to leave groundwater protection to the states under the CWA.
Similar cases from the 4th, 6th, and 9th Circuits were decided prior to the April 2019 EPA Interpretive Statement, leading to a split in the circuits. Sierra Club v. Virginia Elec. & Power Co, No. 17-1895, (4th Cir. 2018); Upstate Forever v. Kinder Morgan Energy Partners, 887 F.3d 637 (4th Cir. 2018); Kentucky Waterways All. v. Kentucky Utilities Co., No. 18-5115, (6th Cir. 2018); Tennessee Clean Water Network v. Tennessee Valley Auth., No. 17-6155, (6th Cir. 2018); Hawai’i Wildlife Fund v. County of Maui, 886 F.3d 737 (9th Cir. 2018).
On 11/6/2019, the U.S. Supreme Court heard oral argument on the same question in the 9th Circuit case Hawai’i Wildlife Fund v. County of Maui. No. 18-260. Until the Supreme Court issues a decision in Hawai’i Wildlife Fund, it is most likely other courts will withhold judgment on similar cases. See also the Minnesota Court of Appeals’ decision on this issue in the Minntac NPDES/SDS permit decision outlined above. Conservation Law Foundation Inc. v. Longwood Venues and Destinations Inc. et al., No. 18-11821-WGY; 2019 WL 6318530 (D. Mass. 2019).
ADMINISTRATIVE ACTION
• EPA releases final guidance on “adjacency” for new source review permitting. The Environmental Protection Agency (EPA) issued guidance on 11/26/2019 to clarify use of adjacency as a factor in determining whether stationary sources in close proximity may be combined under Clean Air Act “major source” permits in nonattainment areas. The agency’s New Source Review (NSR) program regulates new sources of air emissions in geographic areas that do not attain EPA’s National Ambient Air Quality Standards (NAAQS). Major sources—stationary source(s) located within a contiguous area under common control that emit ten tons per year of any one hazardous air pollutant, or 25 tons per year of a combination of pollutants—trigger the requirement for an NSR permit. 42 U.S.C. §7412(a)(1).
In order to reach the “major source” level and trigger NSR permitting requirements, multiple sources within close proximity may be aggregated. But sources may be aggregated only when they (1) are under common control, (2) fall under the same major standard industrial classification (SIC) code, and (3) exist on contiguous or adjacent properties. 40 C.F.R. §70.2. The meaning of “adjacent” has been debated among federal appellate courts. See e.g. Summit Petroleum Corp. v. United States EPA, 690 F.3d 733 (5th Cir. 2012). EPA’s new guidance clarifies that physical proximity is the sole determinative factor of adjacency. If the properties do not share a common border or are not physically touching, EPA concluded, they will be deemed “adjacent” only if “the properties are nevertheless nearby, side-by-side, or neighboring.” EPA’s position terminates the agency’s former practice of grouping more widely spaced related industrial sources into a single “major” facility.
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, J.D. candidate 2020
FEDERAL PRACTICE
JUDICIAL LAW
• Appellate jurisdiction; appeal from denial of motion for temporary restraining order. Rejecting defendants’ argument that it lacked jurisdiction over one plaintiff’s appeal from the denial of the plaintiffs’ motion for a temporary restraining order, the 8th Circuit found that the district court’s order “had the practical effect of denying a preliminary injunction.” Wise v. Dept. of Transportation, ___ F.3d ___ (8th Cir. 2019).
• Sanctions order vacated pending reconsideration. Last month this column noted the imposition of sanctions against a qui tam defendant by Magistrate Judge Rau. The defendant appealed the order, and Judge Ericksen subsequently vacated the order and sent the dispute to Magistrate Judge Leung, with instructions to reconsider the motion for sanctions “in light of Defendant’s objections and with the benefit of oral argument.” United States ex rel. Higgins v. Boston Scientific Corp., 2019 WL 6328135 (D. Minn. 11/25/2019).
• Sanctions; informal collection of documents after discovery deadline. Where the plaintiffs obtained releases from members of the plaintiff class, sought documents from third parties “long after” the close of fact discovery and the filing of dispositive motions, and then produced 10,000 documents to the defendant, Magistrate Judge Thorson rejected plaintiffs’ arguments that they had merely supplemented their document production as Fed. R. Civ. P. 26(e) requires and that their “informal” document collection was not governed by deadlines in the scheduling order. Instead, the magistrate judge determined that “[f]act discovery is fact discovery,” found that sanctions were warranted, and prohibited all parties from utilizing the documents in the litigation. Murphy ex rel. Murphy v. Harpstead, 2019 WL 6650510 (D. Minn. 12/6/2019).
• Motion to amend to add additional parties; standing to oppose. Where the plaintiffs sough to amend their complaint to add additional parties, Magistrate Judge Menendez found that the existing defendant had standing to oppose the motion on the basis of futility, where it was “virtually certain” that the same argument would be raised by the prospective defendants if the amendment was allowed. Brewster v. United States, 2019 WL 6318613 (D. Minn. 11/26/2019).
• Duplicative counterclaim dismissed. Where a law firm that represented the plaintiff in a personal injury action sought a quantum meruit recovery, Judge Montgomery denied that request, the law firm’s appeal was pending in the 8th Circuit, the law firm was sued for malpractice in a separate action by the same plaintiff, and the law firm asserted a counterclaim seeking a quantum meruit recovery, Judge Montgomery granted the plaintiff’s motion to dismiss the counterclaim, finding that the counterclaim was “duplicative” of the law firm’s claim in the first litigation. Judge Montgomery also rejected the law firm’s request that she stay—rather than dismiss—the counterclaim. Trice v. Napoli Shkolnik PLLC, 2019 WL 6324867 (D. Minn. 11/26/2019).
• Fed. R. Civ. P. 45(f); “exceptional circumstances;” motion to quash subpoena transferred. Magistrate Judge Menendez transferred a motion to quash a subpoena to the district where the underlying action is pending pursuant to Fed. R. Civ. P. 45(f), noting that a number of other subpoena-related disputes had already been transferred, and finding “a significant risk of inconsistent decisions” if the motion was not transferred. Pete v. Big Picture Loans, LLC, 2019 WL 6250715 (D. Minn. 11/22/2019).
• Fed. R. Civ. P. 30(b)(6); irrelevant topics. Reversing an order by Magistrate Judge Rau, Judge Brasel granted a defendant’s motion for a protective order, finding that three topics listed in the plaintiff’s Fed. R. Civ. P. 30(b)(6) deposition notice were not relevant to the plaintiff’s claims. Kroening v. Del Monte Fresh Produce N.A., Inc., 2019 WL 6524893 (D. Minn. 12/4/2019).
• Attempt to amend allegations in opposition to summary judgment motion rejected. Granting defendants’ motions for summary judgment, Judge Magnuson rejected the plaintiff’s attempt to raise new allegations in her opposition to the motions, finding that “[a] plaintiff may not amend a complaint in briefs or in oral argument, but must file an amended complaint.” Uradnik v. Inter Faculty Association, 2019 WL 6608784 (D. Minn. 12/5/2019).
• Multiple decisions relating to costs. Where the parties discussed the formats in which ESI would be produced, but did not reduce an agreement to writing or include any agreement in their Rule 26(f) report, Judge Tostrud held that defendant was nevertheless entitled to recover more than $3,300 for the costs of producing ESI as single-page TIFFs with OCR under 28 U.S.C. §1920(4). Wing Enterprises, Inc. v. Tricam Indus., Inc., 2019 WL 5783485 (D. Minn. 11/6/2019).
Rejecting the plaintiff’s argument that the cost of a hearing transcript ordered by the defendants in conjunction with his appeal was not taxable because “no evidence was presented at the hearing,” Judge Nelson affirmed the clerk’s taxation of costs for the transcript. Kushner v. Buhta, 2019 WL 5677869 (D. Minn. 11/1/2019).
Judge Nelson found that an award of costs to the defendants in an ADA action was “inappropriate” where the action was dismissed for lack of jurisdiction and no judgment was entered in favor of the defendants, meaning that the defendants were not the “prevailing party.” Dalton v. Simonson Station Stores, Inc., 2019 WL 5566712 (D. Minn. 10/29/2019).
In contrast, Judge Tostrud found that ADA defendants were prevailing parties where the action was dismissed for lack of subject matter jurisdiction and judgment was entered, and also rejected the plaintiff’s argument that the clerk’s cost judgment should be vacated based on his inability to pay. Smith v. Bradley Pizza, Inc., 2019 WL 6650475 (D. Minn. 12/6/2019).
Josh Jacobson
Law Office of Josh Jacobson
IMMIGRATION LAW
JUDICIAL LAW
• Applications for asylum by those who travel through a third county without first seeking relief there. As previously noted in the November 2019 edition of Bench & Bar, the U.S. Supreme Court issued an order on 9/11/2019 staying the U.S. District Court’s injunction (enjoining the government from implementing its 7/16/2019 rule barring 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) during the pendency of the court litigation on the mandatory bar to asylum eligibility. Barr, el al. v. East Bay Sanctuary Covenant, et al., 588 U.S. ____ (2019). https://www.supremecourt.gov/opinions/18pdf/19a230_k53l.pdf
Since then, the U.S. District Court for the Southern District of California has granted plaintiffs’ motions for provisional class certification and a preliminary injunction enjoining the government from relying on the 7/16/2019 rule to deny asylum eligibility to those non-Mexican asylum seekers who were “metered” at the United States-Mexico border before the ban went into effect. “Metering” is a procedure employed by the U.S. Department of Homeland Security restricting the number of asylum seekers accepted for inspection and processing at U.S. ports of entry—leaving them to thus wait and stay in Mexico. “[A]lthough the regulation clearly states that it applies only to aliens who entered, attempted to enter, or arrived on or after July 16, 2019, the Government is now attempting to apply the Asylum Ban beyond its unambiguous constraints to capture the subclass of Plaintiffs who are, by definition, not subject to this rule. The Government’s position that the Asylum Ban applies to those who attempted to enter or arrived at the southern border seeking asylum before July 16, 2019 contradicts the plain text of their own regulation.” Al Otro Lado, Inc., et al. v. McAleenan, et al., No. 3:17-cv-02366-BAS-KSC (S.D. Cal. 11/19/2019). https://www.americanimmigrationcouncil.org/sites/default/files/litigation_documents/litigation_aol_order_granting_plantiffs_motion_for_professional_class_certification.pdf
• Willful injury causing bodily harm is a “crime of violence” and hence an aggravated felony. The 8th Circuit Court of Appeals held that the petitioner’s conviction for willful injury causing bodily harm in violation of Iowa Code §708.4(2) was indeed a “crime of violence” under 18 USC §16(a) and thus qualified as an aggravated felony under INA §101(a)(43)(F), rendering the petitioner ineligible for asylum and withholding of removal. It further held the Board of Immigration Appeals’ grant of the Department of Homeland Security’s appeal of the immigration judge’s grant of deferral of removal under the Convention Against Torture was warranted. Jima v. Barr, No. 19-1104, slip op. (8th Cir. 11/8/2019). https://ecf.ca8.uscourts.gov/opndir/19/11/191104P.pdf
• Immigrants and proof of health coverage. On 10/4/2019, the president issued Proclamation No. 9945, suspending the entry of immigrants who “will financially burden the United States healthcare system,” effective 11/3/2019 at 12:01 a.m. (EDT). That means any individual applying for an immigrant visa after that date and time must (with certain limited exceptions) provide evidence to the consular officer at the visa interview that (s)he will be covered by approved health insurance within 30 days of U.S. entry or has financial resources to pay for “reasonable foreseeable medical costs.” Otherwise, the visa application will be denied. 84 Fed. Reg., 53991-94 (10/9/2019). https://www.govinfo.gov/content/pkg/FR-2019-10-09/pdf/2019-22225.pdf
On 10/30/2019, a complaint was filed contending, among other things, that the proclamation seeks to rewrite our nation’s immigration laws by creating a new ground of inadmissibility rejected by Congress while imposing requirements that are extremely difficult, if not impossible, to meet. In short, “the Proclamation contravenes well-established and duly enacted immigration and healthcare laws, exceeds the scope of the President’s statutory authority, and violates Constitutional separation of powers and equal protection principles.” Doe, et al. v. Trump, et al., No. 3:19-cv-01743-SB (D. Or. 10/30/2019). https://www.courtlistener.com/recap/gov.uscourts.ord.148990/gov.uscourts.ord.148990.1.0_2.pdf
On 11/26/2019, in response to the plaintiffs’ motion, the U.S. District Court for the District of Oregon, Portland Division, issued a preliminary injunction enjoining the defendants from taking any action to implement or enforce Presidential Proclamation No. 9945 until the court resolves the case on the merits or until such time as the parties agree to amend, supersede, or terminate the preliminary injunction. Doe, et al. v. Trump, et al., No. 3:19-cv-01743-SI (D. Or. 11/26/2019). https://www.courtlistener.com/recap/gov.uscourts.ord.148990/gov.uscourts.ord.148990.95.0.pdf
ADMINISTRATIVE ACTION
• USCIS announces utilization of H-1B electronic registration process for upcoming 2021 cap season. On 12/6/2019, USCIS announced the implementation of a registration process for the upcoming H-1B lottery. Employers intending to file H-1B cap-subject petitions for the upcoming 2021 cap season, including those petitions eligible for the advanced degree exemption, will be required to first electronically register and pay a $10 H-1B registration fee. The initial registration period for employers (or their authorized representatives) to register with basic information about the employer and each sponsored worker will run from 3/1/2020 through 3/20/2020. The H-1B random selection process will be applied to the registrations with those selected then eligible to file H-1B cap-subject petitions. https://www.uscis.gov/news/news-releases/uscis-announces-implementation-h-1b-electronic-registration-process-fiscal-year-2021-cap-season
• Poland designated a Visa Waiver Program country. On 11/8/2019, the acting secretary of the Department of Homeland Security, Kevin McAleenan, published notice that Poland had been designated for inclusion in the Visa Waiver Program, effective 11/11/2019. Eligible citizens, nationals, and passport holders from designated Visa Waiver Programs may apply for admission to the United States at U.S. ports of entry for a period of 90 days or less for business or pleasure without first obtaining a nonimmigrant visa, provided they are otherwise eligible for admission. Other countries included in the Visa Waiver Program are: Andorra, Australia, Austria, Belgium, Brunei, Chile, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Japan, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, Monaco, the Netherlands, New Zealand, Norway, Portugal, Republic of Korea, San Marino, Singapore, Slovak Republic, Slovenia, Spain, Sweden, Switzerland, Taiwan, and the United Kingdom (i.e., British citizens who have the unrestricted right of permanent abode in the United Kingdom, consisting of England, Scotland, Wales, Northern Ireland, the Channel Islands, and the Isle of Man). 84 Fed. Register, 60316-18 (11/8/2019). https://www.govinfo.gov/content/pkg/FR-2019-11-08/pdf/2019-24328.pdf
• Continued retention of Temporary Protected Status for beneficiaries from El Salvador, Honduras, Nepal, Nicaragua, Sudan, and Haiti. On 11/4/2019, the U.S. Department of Homeland Security announced that in order to continue its compliance with the preliminary injunction orders of the U.S. District Court for the Northern District of California in Ramos, et al. v. Nielsen, et al., No. 18-cv-01554 (N.D. Cal. 10/3/2018) and the U.S. District Court for the Eastern District of New York in Saget, et al. v. Trump, et al., No. 18-cv-1599 (E.D.N.Y. 4/11/2019), and with the order of the U.S. District Court for the Northern District Court of California to stay proceedings in Bhattarai v. Nielsen, No. 19-cv-00731 (N.D. Cal. 3/12/2019), beneficiaries of Temporary Protected Status (TPS) designations for El Salvador, Honduras, Nepal, Nicaragua, and Sudan will continue to retain their TPS status while the preliminary injunction under Ramos remains in effect. Beneficiaries of TPS designation for Haiti will retain their TPS status while either of the preliminary injunctions under Ramos or Saget remain in effect. As a result, TPS designations for El Salvador, Haiti, Honduras, Nepal, Nicaragua, and Sudan will continue through 1/4/2021. 84 Fed. Register, 59403-10 (11/4/2019). https://www.govinfo.gov/content/pkg/FR-2019-11-04/pdf/2019-24047.pdf
R. Mark Frey
Frey Law Office
PROBATE & TRUST LAW
JUDICIAL LAW
• Minn. Stat. §524.3-721: Compensation paid by an estate. The estate of Prince Rogers Nelson hired appellants NorthStar Enterprises Worldwide Inc. and CAK Entertainment Inc. to act as entertainment advisors to monetize the estate’s intellectual property. Appellants entered into an agreement with the estate whereby they would receive a 10% commission on all money paid to the estate pursuant to agreements entered into as a result of services provided by appellants. Appellants were to receive the commission “simultaneously with the payment to” the estate of any amounts due under such agreements. The estate entered into a contract with Jobu Presents LLC to organize and promote a tribute concert and a contract with Universal Music Group for the distribution and marketing of certain of Prince’s recordings. Jobu and Universal made initial payments totaling over $33 million and appellants collectively received over $3 million in commissions. The agreements with Jobu and Universal ultimately fell apart and the estate refunded the entire amount received.
A special administrator for the estate brought a motion under Minn. Stat. §524.3-721 seeking an order requiring appellants to refund the commissions. The district court entered a “temporary” order requiring appellants to refund the commissions, which were to be held in escrow by the estate until the court could decide the merits of the estate’s claim. Appellants appealed arguing, among other things, that the court lacked authority under Minn. Stat. §524.3-721 and that it had erred by granting what was in reality a temporary injunction without considering the Dahlberg factors. The Minnesota Court of Appeals determined that the district court’s order had the characteristics of a temporary injunction and accepted the appeal for immediate review.
On appeal, appellants first argued the district court lack authority to proceed by motion, under Section 524.3-721, without filing a formal lawsuit and serving them with process because that statute is generally used for review of accountants’ and attorneys’ fees, which doesn’t require testimony or submission of substantial evidence. Section 524.3-721 allows an interested person to file a motion challenging the reasonableness of compensation paid by an estate to any person employed by a personal representative, “including any attorney, auditor, investment advisor or other specialized agent.” The court of appeals found that Section 524.3-721 applied because appellants were “specialized agent[s].” Appellants next argued that, given the complexity of the issues, the special administrator’s challenge to their commissions must be brought in a plenary action under the rules of civil procedure rather than on an administrative motion under Section 524.3-721. The court of appeals found that Section 524.3-721 expressly allows an interested person to move the district court to review “the reasonableness of the compensation” and to order “appropriate refunds” where compensation was excessive. Finally, appellants argued that their compensation was controlled by an agreement with the personal representative and that the agreement had been approved by the court. The court drew a distinction between the reasonableness of the rate agreed to and the reasonableness of the actual compensation paid given the services provided, and held that it had authority to review the latter pursuant to Section 524.3-721.
Appellants next challenged the order on the basis that it was basically a temporary injunction and the court had not considered the Dahlberg factors. Since the court of appeals accepted jurisdiction over the appeal on the basis that the order had the characteristics of a temporary injunction, it held that the district court erred by not considering the Dahlberg factors that must be analyzed before a temporary injunction can be granted. The court of appeals therefore remanded for consideration of the Dahlberg factors and ultimate determination of the reasonableness of appellants’ commissions. In re Estate of Nelson, No. A19-0503, 2019 WL 6258679 (Minn. Ct. App. 11/25/2019).
Casey D. Marshall
Bassford Remele
TAX LAW
JUDICIAL LAW
• Tolls are not taxes; 1st Circuit instructs district court it has jurisdiction, and remands for resolution of Rhode Island dispute. The Tax Injunction Act (TIA) provides that federal “district courts shall not enjoin, suspend or restrain the assessment, levy or collection of any tax under State law where a plain, speedy and efficient remedy may be had in the courts of such State.” 28 U.S.C. §1341. Principles of comity—and the practical realities of state budgets—animate the TIA. As the 1st Circuit noted in this dispute between members of the trucking industry and the state of Rhode Island, “[a] principal purpose of the TIA was to stop taxpayers, with the aid of a federal injunction, from withholding large sums, thereby disrupting state government finances.” (internal citations omitted).
The TIA applies by its terms only to taxes. If the sums the state seeks to collect are not taxes, but some other payment or fee, the TIA does not apply. The sum Rhode Island sought to collect in this dispute (and continues to seek to collect) was defined as a “toll” in the statutory language. In particular, the state authorized the Department of Transportation to collect tolls exclusively from large commercial trucks in an effort to address a problem with the state’s bridges (23% of large Rhode Island bridges had been deemed structurally deficient). The Legislature found that large commercial trucks, like those owned and operated by the plaintiffs in this case, cause over 70% of the damage to Rhode Island roads and bridges but contribute less than 20% of the revenue to fund transportation infrastructure under then existing sources. The tolls at issue were designed to eliminate that funding disparity.
The plaintiffs, however, argued that the tolls violate the dormant Commerce Clause and sued the state and the state’s transportation department in federal district court. The lower court called it a “close call” but determined that the TIA barred the lower court from hearing the case. The 1st Circuit disagreed, holding that the word “tax” in 1937 (the year the TIA was passed) did not include “toll.” The court looked to plain language, case law, and Thomas Cooley’s treatise The Law of Taxation to reach its conclusion. All of these sources pointed the 1st Circuit to the conclusion that “tolls” are not “taxes” for TIA. Further, the broad purposes of comity and federalism did not compel the federal court to refrain from exercising jurisdiction. The case was reversed and remanded to the district court. Am. Trucking Associations, Inc. v. Alviti, No. 19-1316, 2019 WL 6606088 (1st Cir. 12/5/2019).
• Tax shelters; partnership tax. Opening its opinion with the direct statement, “Andrew Beer was in the tax shelter business,” the DC Circuit affirmed the tax court’s decision that certain at-issue transactions entered into by the defendant partnership “were shams designed to look like real world trades without any of the risk or concomitant opportunity for profit.” Since the transactions lacked economic substance, the $144 million in losses generated could not be used to offset the partner’s gain. As the court explained, sham transactions are those that do not possess “(1) any objectively reasonable potential for profit nor (2) any other legitimate nontax business purposes.” (The transactions at issue occurred prior to Congress’s 2010 establishment of its own test, which applies only prospectively.) The opinion describes clearly the transactions at issue, and a concurring opinion provides even more clarity on the sham nature of the deals. Endeavor Partners Fund, LLC v. Comm’r, No. 18-1275, 2019 WL 6314276 (D.C. Cir. 11/26/2019).
• Nonresident corporation subject to Minnesota income tax. The Minnesota Tax Court revisited a dispute centered on whether gains realized by a nonresident taxpayer are subject to Minnesota corporate income tax. In a previous order, disputed issues of material fact prevented the court from ruling on the parties’ cross motions for summary judgment. In this opinion and order, the court found no such obstacle and ordered summary judgment to the commissioner. The previous order is reported at YAM Special Holdings, Inc. v. Comm’r, Docket No. 9122-R, 2019 WL 2519414 (Minn. T.C. 6/12/2019).
YAM Special Holdings, Inc. (YAM), a nonresident corporation, realized and reported gains on the 2011 sale of a majority interest in the operations of its Go Daddy business. YAM’s sole shareholder, Robert Parsons, received $1.168 billion of the transaction proceeds and although the sale was reported on YAM’s 2011 Minnesota income tax return, it was reported as a transaction not subject to Minnesota tax. The commissioner determined that a portion of YAM’s gain on the sale was subject to Minnesota tax and assessed YAM. The taxpayer appealed the determination and the parties moved for summary judgment. The court concluded that the gains realized by YAM are subject to Minnesota tax. The court therefore denied YAM’s motion for summary judgment and granted the commissioner’s motion for summary judgment.
In a comprehensive opinion, the court first explained the parameters of Minnesota’s taxation of nonresident corporations; such corporations are subject to taxation if the corporation engages in Minnesota contacts with the state and those contacts produce gross income attributable to sources within this state. Minnesota taxes nonresident corporations when that income is “derived from the conduct of a trade or business.” Minn. Stat. §290.17, subd. 2. “All income of a trade or business is subject to apportionment [between Minnesota and other states] except nonbusiness income.” Id., subd. 3. Nonbusiness income is assigned depending on the nature of the income.
Of particular import for this dispute, the statute also provides that “Gain on the sale of an interest in a single member limited liability company that is disregarded for federal income tax purposes is allocable to this state as if the single member limited liability company did not exist and the assets of the limited liability company are personally owned by the sole member…. Gain on the sale of goodwill or income from a covenant not to compete that is connected with a business operating all or partially in Minnesota is allocated to this state to the extent that the income from the business in the year preceding the year of sale was allocable to Minnesota under [Minn. Stat. § 290.17] subdivision 3.” Minn. Stat. §290.17, subd. 2(c).
After setting out these statutory parameters, the court explained the definition of nonbusiness income and discussed constitutional principles governing apportionment of income to a taxing state. Applying these principles, the court concluded that “the December 2011 sale resulted in gains apportionable to Minnesota” and therefore summary judgment for the commissioner was appropriate. YAM Special Holdings, Inc. v. Comm’r of Revenue, No. 9122-R, 2019 WL 6213168 (Minn. Tax 11/12/2019).
• Penalty imposed for continued frivolous position. The taxpayer, an attorney, failed to file federal income tax returns for several years. The taxpayer raised several justifications for this failure, including the frivolous arguments that “there is no constitutional basis for federal taxes on the ordinary labor of a working American,” and that the Service failed to account for the basis value of a person’s labor which “would be valued at near or the same as the value of the gross receipts which that same labor generated.” In previous interactions with the Service, the tax court did not impose penalties but admonished the taxpayer that continued assertion of vexatious arguments would result in sanctions. The court is authorized to impose a penalty of up to $25,000 if the taxpayer’s position in the proceedings is frivolous or groundless. IRC 6673(a)(1). “A taxpayer’s position is frivolous if it is contrary to established law and unsupported by a reasoned, colorable argument for change in the law.” Worsham v. Comm’r, T.C.M. (RIA) 2019-155 (T.C. 2019) (citing Rader v. Comm’r, 143 T.C. 376, 392 (2014) (additional internal citation omitted)). Because the taxpayer continued to make arguments previous rejected by the tax court (and other courts) as frivolous, the court in this case made short work of its opinion: “As we have previously told petitioner: ‘We perceive no need to refute … [frivolous] arguments with somber reasoning and copious citation of precedent.’ Because petitioner continues to make frivolous arguments despite numerous warnings, we will require him to pay to the United States a penalty of $3,000 under section 6673.” Worsham v. Comm’r, T.C.M. (RIA) 2019-155 (T.C. 2019) (internal citations omitted).
Morgan Holcomb
Mitchell Hamline School of Law
Sheena Denny, Mitchell Hamline School of Law
TORTS & INSURANCE
JUDICIAL LAW
• Joint and several liability; liability not reduced by employer’s fault. Plaintiff suffered injuries during a workplace accident. After plaintiff and his employer settled his workers’ compensation claim, he then brought a common-law negligence claim against defendant, alleging that its employee was at fault for his injuries. In response, defendant brought a third-party contribution claim against plaintiff’s employer. Defendant and plaintiff’s employer settled the contribution claim and the employer’s possible subrogation claim. Plaintiff’s lawsuit against defendant then proceeded to trial. The jury found that the injury was caused by plaintiff, his employer, and defendant, and allocated fault 5 percent to plaintiff, 75 percent to the employer, and 20 percent to defendant. Post-trial, defendant, citing Minn. Stat. §604.02, subd. 1, argued that its liability should be proportionate to its 20 percent fault. Plaintiff countered that, by its plain language, section 604.02 did not apply because defendant and his employer were not both “severally liable.” The district court agreed with defendant and applied section 604.02 to reduce the net damage award by an amount proportionate to the employer’s fault. The court of appeals reversed, concluding that it was error to apply section 604.02 in these circumstances, and remanded to the district court for recalculation of the judgment.
The Minnesota Supreme Court affirmed the decision of the court of appeals. The Court began by noting that Minn. Stat. §604.02, subd. 1 requires apportionment of liability according to fault “only when ‘two or more persons are severally liable.’” The Court then rejected defendant’s argument that “both [defendant] and the employer were liable at the moment the tort occurred in this case—in other words, when [plaintiff] was injured,” reasoning that “employers liable in workers’ compensation and third parties liable in tort are not commonly liable, either jointly or severally, because the employer is shielded from tort liability.” Further, the Court noted that if the phrase “severally liable” included employers, then “a severally liable employer would become a person ‘jointly and severally liable for the whole award’ in tort if its fault were greater than 50 percent.” Because the Legislature could not have intended such a result, the Court declined to reduce the judgment by the amount of the employer’s fault. Fish v. Ramler Trucking, Inc., No. A18-0143 (Minn. 11/27/2019). https://mn.gov/law-library-stat/archive/supct/2019/OPA180143-112719.pdf
• Defamation; personal liability of corporate officer. Plaintiff is a former director of a company where defendant serves as chief executive officer. In 2015, plaintiff was accused of sharing defendant’s confidential information with a third party. Plaintiff later resigned as director, and the company commenced suit against him alleging breach of fiduciary duties. Later, the company issued a press release accusing plaintiff of breaching his fiduciary duties and stating that he resigned as a result of his conduct. Plaintiff subsequently sued defendant for defamation. While defendant did not author the press release, plaintiff alleged that it was issued at defendant’s direction and with his approval, and subsequently re-published to the Securities and Exchange Commission at his direction. The district court granted defendant’s motion to dismiss, holding that the complaint failed to state a claim because plaintiff did not allege that defendant authored the press release. The court of appeals affirmed.
The Minnesota Supreme Court reversed and remanded the case for further proceedings. The Court noted that while a “corporate officer cannot be held personally liable for a company’s defamatory acts by virtue of job title alone,” “[I]t is the universal rule that an officer of a corporation who takes part in the commission of a tort by the corporation is personally liable therefor.” Because plaintiff alleged that defendant “personally took part in the commission of a tort by directing, authorizing, and approving a defamatory press release,” the district court erred in granting defendant’s motion to dismiss. DeRosa v. McKenzie, No. A18-1171 (Minn. 12/11/2019). http://www.mncourts.gov/mncourtsgov/media/Appellate/Supreme%20Court/Standard%20Opinions/OPA181171-121119.pdf
Jeff Mulder
Bassford Remele