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Notes & Trends –September 2020

CRIMINAL LAW

JUDICIAL LAW

• Implied consent: Whether an advisory sufficiently informs a person that refusal to submit to a breath test is a crime depends on whether the advisory, considered in its context as a whole, is misleading or confusing. Appellant was arrested for DWI and read a breath test advisory that stated: “This is the breath test advisory… Minnesota law requires you to take a test to determine if you are under the influence of alcohol. Refusal to take a test is a crime…” Appellant was then offered and submitted to a breath test, revealing a BAC over the legal limit, and his driving privileges were revoked. Appellant sought judicial review of the revocation, arguing the officer did not properly inform him of his rights and the consequences of taking or refusing a test, because Minn. Stat. §169A.51, subd. 2, provides that “refusal to submit to a breath test is a crime,” but the officer told appellant refusal to submit to “a test” is a crime. The district court sustained the revocation and appellant appealed.

Section 169A.51, subd. 2, unambiguously requires officers to “inform” a person “that refusal to submit to a breath test is a crime.” To “inform” a person requires that officers make the person aware that refusal to submit to a breath test is a crime. In the context of advisory given in this case, the court of appeals concludes the officer did sufficiently inform appellant that refusing to take a breath test would be a crime. The officer called the advisory a “breath test advisory,” asked appellant to submit to only a breath test, and did not mention or request blood or urine tests. Moreover, no legal authority requires officers to give a verbatim recitation of section 169A.51, subd. 2. The district court properly sustained the revocation of appellant’s driving privileges. McCormick v. Comm’r of Pub. Safety, A19-1466, 2020 WL 2108103 (Minn. Ct. App. 5/4/2020).

• Firearms: Whether a flare launcher is a firearm depends on whether the defendant used or intended to use it as a weapon. Respondent was charged with possession of a firearm by an unauthorized person after police responded to a theft report and found respondent with a loaded flare launcher. The district court granted respondent’s motion to dismiss the firearm charge, concluding a flare launcher is not a firearm because it is not designed to be used as a weapon. 

The court of appeals holds that whether a flare launcher is a firearm is a question of fact for trial and depends on the defendant’s use or intended use of the flare launcher. Respondent was charged under Minn. Stat. §624.713, subd. 1(2), which prohibits a person previously convicted of a crime of violence from possessing a “firearm.” “Firearm” is not defined, but case law makes clear that it is a “weapon that uses explosive force.” 

The district court properly determined that a flare launcher meets the “explosive force” requirement, because it propels a projectile by the combustion of gunpowder or other explosive. A flare launcher is not designed as a weapon, but may become one depending on how it is used. The record does not make clear how respondent intended to use the flare launcher, so a fact issue remains for resolution at trial. Reversed and remanded. State v. Glover, A19-1656, 2020 WL 2108108 (Minn. Ct. App. 5/4/2020).

• Sentencing: Sentences permitted for both  drive-by shooting at an occupied vehicle and second-degree assault of a victim outside the vehicle. 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 at an occupied vehicle, second-degree assault against C.L.G., 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. The court of appeals affirmed appellant’s sentences, concluding that the offense of drive-by shooting at an occupied vehicle does not constitute an offense against each occupant of the vehicle, so sentences for both the drive-by shooting and assault convictions were not prohibited, even if both arose out of a single behavioral incident involving the same victim.

Minn. Stat. §609.035, subd. 1, states that a person may be punished for only one offense if their “conduct constitutes more than one offense under the laws of this state.” Case law has clarified that “a person may be punished for only one of the offenses that results from acts committed during a single behavioral incident and that did not involve multiple victims.” The Supreme Court previously held in Ferguson, 808 N.W.2d 586 (Minn. 2012), that section 609.035 does not prohibit multiple sentences for drive-by shooting when the same conduct (the shooting) also constitutes assault. Ferguson involved counts of second-degree assault and drive-by shooting at an occupied building. The court held that a single count of drive-by shooting at an occupied building does not constitute a crime against each building occupant. 

Here, the Supreme Court extends Ferguson’s holding to the offense of drive-by shooting at an occupied vehicle. Drive-by shooting at an occupied building and drive-by shooting at an occupied vehicle share essentially identical elements and the drive-by shooting statute does not distinguish between the two offenses. Appellant’s “sentences comply with [the] holding in Ferguson that a single count of drive-by shooting is effectively a victimless crime.” Thus, appellant received one sentence for his victimless offense and one for his offense against C.L.G. The district court properly sentenced appellant for both offenses. State v. Branch, 942 N.W.2d 711 (Minn. 5/6/2020). 

• Sentencing: When determining whether a prior conviction has decayed, the current offense date must be established by the factfinder or through the defendant’s admission. Appellant pleaded guilty to one count of first-degree criminal sexual conduct in 2019 for conduct the complaint alleged occurred between 2012 and 2018. Appellant argued it occurred in 2015. He had a prior first-degree criminal sexual conduct conviction from 1994, for which he received a stay of imposition that expired on 3/11/2014, and for which he received three criminal history points. On appeal, appellant argues that he is entitled to resentencing, because a change in the sentencing guidelines regarding when a prior conviction decays reduces his criminal history score.

The sentencing guidelines were amended in 2019, before appellant’s case was final. The decay factor section now provides that, when computing the criminal history score, “a prior felony sentence or stay of imposition following a felony conviction must not be used if all of the following, to the extent applicable, occurred before the date of the current offense: (1) the prior felony sentence or stay of imposition expired or was discharged; (2) a period of 15 years elapsed after the date of the initial sentence following the prior conviction; and (3) if the prior felony sentence was executed, a period of 15 years elapsed after the date of expiration of the sentence.” Minn. Sent. Guidelines 2.B.1.c. Requirement (3) does not apply to appellant, as his sentence for the 1994 conviction was not executed, and requirement (2) is met. The parties disagree as to whether appellant’s stay of imposition in 1994 was discharged before the date of the current offense.

Appellant pleaded guilty to a single offense occurring sometime between 1/1/2012, and 3/26/2018, but he did not specifically admit to committing an act between 1/1/2012, and 3/11/2014, the time period before he was discharged from probation on his 1994 conviction. A specific offense date is necessary to complete the decay factor analysis. No jury made a finding as to the specific offense date, nor did appellant admit to an offense date. The case is reversed and remanded for a determination of appellant’s current offense date and resentencing. State v. Woods, A19-1061, 2020 WL 2517077 (Minn. Ct. App. 5/18/2020).

• Search and seizure: Examination of a hotel registry is a search that must be supported by a reasonable, articulable suspicion of criminal activity. Without a warrant or any individualized suspicion of criminal activity, police obtained a hotel guest list from the hotel’s clerk and learned appellant had rented a room for six hours and paid with cash. This prompted police to check appellant’s criminal history, where they discovered numerous drug, firearms, and fraud arrests. Appellant allowed police to enter his room, and police observed a large amount of cash, two printers, and several envelopes. After obtaining a search warrant, police found several suspicious paychecks, a large amount of cash, and check-printing paper. The district court denied appellant’s motion to suppress evidence obtained from his hotel room and convicted appellant of check forgery and offering a forged check after a stipulated evidence trial. The court of appeals affirmed, holding appellant could not challenge the police’s examination of the guest registry because he did not have a reasonable expectation of privacy in it.

First, the Supreme Court determines that law enforcement’s suspicionless examination of a guest registry is a search. A person’s very presence at a hotel may be a sensitive piece of information, information that affords that person a reasonable expectation of privacy in the hotel’s guest registry. Although the registry includes seemingly public information, such as a guest’s name and address, the act of recording that information in the registry “creates sensitive location information.”

Second, the Court holds that law enforcement must at least have a reasonable, articulable suspicion to search a guest registry’s sensitive location information. This standard strikes the appropriate balance between an individual’s privacy rights and “the government’s significant interest in proactively addressing the serious criminal behavior that often takes place in hotels.”

Third, the Court examines Minnesota’s hotel guest registry statutes to determine whether they give law enforcement unfettered access to guest registries in violation of the Constitution. Minn. Stat. §327.12 requires that registries be “open to the inspection of all law enforcement officers,” but is silent as to what standard law enforcement must meet to search a registry. Section 327.10 requires that registries “be… always accessible for inspection by proper authorities,” which the Court interprets to mean that the registries be accessible at any time of day, not on every occasion regardless of law enforcement’s suspicion. Thus, the Court finds the guest registry statutes, sections 327.10-.13, constitutionally valid.

Finally, the Court addresses the admissibility of the evidence seized from appellant’s hotel room. It is undisputed that law enforcement had no individualized suspicion when they examined the guest registry at appellant’s hotel, making the search of the registry in this case illegal. The Court finds the evidence subsequently found in appellant’s hotel room to be fruit of the poisonous tree. If police had not illegally searched the registry, they could not have run a background check, would not have been able to find appellant’s room and perform a “knock and talk,” and could not have applied for a search warrant, all of which was done immediately after the guest registry search. Therefore, the district court erred in admitting the evidence found in appellant’s hotel room. As this evidence was “the foundation of [appellant’s] conviction,” the district court’s error was not harmless beyond a reasonable doubt. The case is reversed and remanded to the district court. State v. Leonard, 943 N.W.2d 149 (Minn. 5/13/2020).

• Competency: Court of appeals must defer to district court’s factual findings made as part of a competency determination by applying clear error review to those findings. A competency hearing was held in appellant’s fleeing a peace officer case, at which three experts testified that appellant suffered from cognitive impairment but disagreed as to its effect on his competency. Relying on the court-appointed evaluator, the district court found appellant competent. The district court found the court-appointed evaluator’s opinion most convincing because she had performed three forensic evaluations, thoroughly explained her reasoning, and focused her evaluations on appellant’s ability to rationally consult with his attorney, comprehend court proceedings, and participate in his defense. Appellant was convicted after a bench trial. 

The primary issue is how the appellate court is to review the district court’s finding regarding appellant’s competency. The Minnesota Supreme Court previously established the following standard (the “Ganpat standard”): “We independently review the record to determine if the district court gave ‘proper weight’ to the evidence produced and if ‘its finding of competency is adequately supported by the record.’” The court of appeals concludes that this standard requires the appellate court to accept the district court’s factual findings after a hearing, unless they are clearly erroneous.

The Ganpat standard creates a bifurcated analysis, which the court of appeals characterizes as follows: (1) Did the facts require the district court to inquire further into a defendant’s competency? (2) Did the district court’s inquiry uncover facts sufficient to support its findings? The second question in the analysis highlights a clear error review of the district court’s factual determination made after a hearing on disputed evidence. However, no deference is given to the district court’s decision as to the first question, because this preliminary determination is made as a matter of law and based on undisputed facts.

Applying this standard of review to appellant’s case, the court concludes that the record adequately supports the district court’s competency decision. State v. O’Neill, No. A19-0803, 2020 WL 2643648 (Minn. Ct. App. 5/26/2020).

Samantha Foertsch
Bruno Law PLLC
samantha@brunolaw.com

Stephen Foertsch
Bruno Law PLLC
stephen@brunolaw.com

 

EMPLOYMENT & LABOR LAW

JUDICIAL LAW

• Class action; certification reversed. Certification of a class action of railroad employees challenging their employer’s fitness for duty policy under the Americans with Disabilities Act (ADA) was overturned. The 8th Circuit Court of Appeals held that the predominantly “individualized” issues in the litigation precluded class treatment under Rule 23 of the Federal Rules of Civil Procedure. Harris v. Union Pacific Ry. Co., 953 F.3d 1030 (8th Cir. 3/24/2020) (unpublished).

• Replaced employees; age and sex claims rejected. Claims of age and sex discrimination by a discharged manager of radiology at a medical facility were rejected. The 8th Circuit affirmed dismissal on grounds that the employee’s termination was based on rude and insubordinate behavior, and her replacement by a younger male was not sufficient to establish grounds for liability. Main v. Ozark Health, Inc., 959 F.3d 319 (8th Cir. 5/11/2020). 

• Employee treatment; not similarly situated. A claim by a dismissed lab technician of race and national origin discrimination after he was fired for an altercation with a co-worker was dismissed. The 8th Circuit, affirming a ruling of U.S. District Court Judge Joan Ericksen in Minnesota, held that the comparison with the treatment given other co-workers who were not African-American was not compelling because they engaged in different types of misconduct and, therefore, were not “similarly situated,” which negated the claim of disparate treatment on racial and national origin grounds. Further, the plaintiff failed to present sufficient evidence of pretext to overcome the legitimate issues for her termination. Findlator v. Allina Health Clinics, 2020 WL 2745549 (8th Cir. 5/27/2020) (unpublished).

• ERISA claims affirmed and reversed. The 8th Circuit partially affirmed and partially reversed a trio of cases brought by employees under the Employees Retirement & Income Security Act (ERISA). A group of employees were entitled to challenge partial denial of claims for air ambulance benefits under the employer’s health care plan, but even though they had standing, their claims were rejected on the merits by the 8th Circuit. Mitchell v. Blue Cross Blue Shield of North Dakota, 953 F.3d 529 (8th Cir. 3/20/2020). 

A suit by participants in a university retirement plan, claiming that the funds were mismanaged, was not actionable. Reversing summary judgment, the 8th Circuit, in a decision written by Judge David Stras from Minnesota, held that participants could proceed on a breach of duty of prudence claim, but another assertion that the plan should have dropped certain investment options because they were overly expensive and performed poorly was properly dismissed because the allegations could not be meaningfully evaluated. Davis v. Washington University in St. Louis, 2020 WL 2609865 (8th Cir. 5/22/2020) (unpublished).

A nurse with a religious affiliate hospital could not pursue his claim that the plan was unfunded because it was a church-related plan that was not subject to ERISA. The 8th Circuit, however, reversed and remanded for determination of whether the exemption of the religious institution constituted violation of the establishment clause of the First Amendment. Sanzone v. Mercy Health Circuit, 954 F.3d 1031 (8th Cir. 3/27/2020). 

• Interference claim; noncompete clause. A trucking company could maintain a lawsuit against a competitor for allegedly wrongfully recruiting and hiring away long-haul drivers in violation of a noncompete agreement. The 8th Circuit reversed summary judgment on grounds that there were genuine issues of material fact concerning the claim of intentional interference and the noncompete agreement was not void as a matter of law. A dissent by Judge Stras would have upheld dismissal of the lawsuit on grounds that “the court should not put the brakes on legitimate competition.” CRST Expedited, Inc. v. TransAm Trucking, Inc., 2020 WL 2745547 (8th Cir. 5/27/2020) (unpublished).

• Sex harassment; ‘severe and pervasive’ remanded. The Minnesota Supreme Court reiterated the “severe and pervasive” standard for adjudicating sex harassment claims under the Minnesota Human Rights Act, but remanded a case for reconsideration in light of changes in societal attitudes toward what is acceptable behavior in the workplace. Reversing rulings of the Hennepin County District Court and the court of appeals, the Court did not address the substance of the claims in the lawsuit, but stated that the claimant had provided sufficient evidence to overcome summary judgment and proceed to trial in order to show that the claimed impropriety was “both objectively and subjectively offensive [to] the person… and the victim, in fact, perceived it to be so.” The case will help claimants in pursuing sexual harassment cases and make it more difficult for employers to obtain summary judgment in many cases. Kenneh v. Homeward Bound, 2020 WL 2893352 (S.Ct. 6/3/2020). 

• Sick leave; Minneapolis ordinance upheld. A Minneapolis ordinance requiring employers to provide sick leave and safe time off to employees working within the city was upheld. The Supreme Court, affirming the court of appeals, rejected a preemption claim by a business group challenging the measure. Minn. Chamber of Commerce v. City of Minneapolis, 2020 WL 3067712 (S.Ct. 6/10/2020).

• Sheriffs’ salaries; board decision upheld. A decision by the Freeborn County Board of County Commissioners setting the salary for the county sheriff was proper. The Minnesota Court of Appeals, overruling the Freeborn County District Court, held that the board did not act arbitrarily or without sufficient basis in setting the sheriff’s salary, which the district court had ruled was too low and should be increased. In re Year 2019 Salary of Freeborn County Sheriff, 2020 WL 2643728 (8th Cir. 5/26/2020) (unpublished).

•  Wage claim; corporate veil pierced. A rare instance of piercing the corporate veil in an employee’s wage claim action was upheld by the court of appeals. Affirming a ruling of the Hennepin County District Court, it held that the employer had improperly withheld wages from an employee, approved double damages under Minn. Stat. §181.03, and permitted the piercing of a corporate veil to pursue and seek to hold personally liable the individual owner. Mallberg v. Gustafson, 2020 WL 2643393 (8th Cir. 5/26/2020) (unpublished).

• Unemployment compensation; refusal to do work. A staff accountant for a hotel management company was denied unemployment compensation benefits because he refused to provide a financial statement for one of the company’s facilities. The court of appeals held that the failure to do the work constituted disqualifying “misconduct.” Grew v. Island Investors, Inc., 2020 WL 2644493 (8th Cir. 5/18/2020) (unpublished).

Marshall H. Tanick
Meyer, Njus & Tanick
mtanick@meyernjus.com

 

FAMILY LAW

JUDICIAL LAW

• Parent’s execution of a recognition of parentage required notice to father of any adoption, even where the recognition was signed after mother’s consent to the adoption became irrevocable. Five days after the birth of D.J.R., mother consented to the child’s adoption. Father did not join the consent, and instead registered with the Minnesota Father’s Adoption Registry. Shortly thereafter, mother and father executed a recognition of parentage, establishing father as D.J.R.’s parent. Adoptive parents first sought to terminate father’s parental rights, and when that proceeding was dismissed, they attempted to finalize the adoption without father’s consent. The district court dismissed the adoption petition, holding that father’s consent was required either based on his execution of a recognition of parentage or his substantial compliance with the requirements of the Minnesota Father’s Adoption Registry. Adoptive parents appealed, arguing mother lacked the authority to sign the recognition of parentage after consenting to the child’s adoption. Additionally, adoptive parents argued the district court should not have excused father from strict compliance with the Father’s Adoption Registry requirements. 

The court of appeals affirmed, finding no statutory impediment to mother executing a recognition of parentage after consenting to the adoption. Instead, the court held that ongoing adoption proceedings do not prevent biological parents from executing a valid recognition of parentage, citing to the Minnesota Supreme Court’s recent decision in T.G.G. v. H.E.S. 946 N.W.2d 309 (Minn. 2020). Because the parties’ recognition of parentage was valid, the statute mandated that the adoption be dismissed in the absence of father’s consent. Minn. Stat. §259.49, subd. 1(b)(7), §25924, subd. 1(a). Because the court determined father was entitled to notice based on a valid recognition of parentage, it did not reach adoptive parents’ arguments regarding the adoption registry. 

Note: The court of appeals notes that a recognition of parentage “created a presumption of father’s paternity,” citing Minn. Stat. § 257.55, subd. 1(e). However, subd. 1(e) addresses acknowledgments of paternity under Minn. Stat. §257.34, not recognitions of parentage under Minn. Stat. §257.75. Though similarly named, these two devices should not be confused. Recognitions of parentage differ from acknowledgements of parentage (which can no longer be used) in that recognitions have “the force and effect of a judgment… determining the existence of a parent child relationship.” In re the Petition of M.J.R. and C.L.R. to Adopt D.J.R, No. A20-0202, -- N.W.2d -- (Minn. Ct. App. July 20, 2020). [Disclosure: Author Michael Boulette served as counsel for one of the parties in this case.]

• Cohabitation criteria in Minn. Stat. §518.552, subd. 6 must be considered in determining whether the maintenance recipient’s cohabitation renders maintenance unreasonable or unfair. The parties divorced in 2014 after 23 years of marriage, and stipulated wife would receive spousal maintenance of $4,800 per month until husband reached age 65. Husband moved to terminate or reduce his maintenance obligation in 2018, based on wife’s increased income and cohabitation. The district court granted husband’s motion in part, decreasing maintenance by $1,270 per month (the amount by which wife acknowledged her housing expenses had been reduced due to cohabiting). Husband appealed, arguing maintenance should have been reduced further or terminated entirely. On appeal husband assigned two principal errors: first, mistaken findings as to wife’s increased income since the divorce; second, an error of law in the district court’s application of the cohabitation provisions of Minn. Stat. §518.552.

The court of appeals rejected both arguments and affirmed. With respect to wife’s income, the court agreed that the district court incorrectly determined wife’s income. Instead of an 11.5% increase as found by the lower court, the appellate court agreed with husband that the increase was closer to 21%. But the court of appeals declined to reverse the district court, holding that a 21% increase alone was insufficient to render husband’s obligation unreasonable and unfair. 

The appellate court then turned to husband’s cohabitation arguments under Minn. Stat. §518.552, subd. 6. After noting the absence of any published case law regarding the interplay of Minn. Stat. §518.552, subd. 6 and Minn. Stat. §518A.39, subd. 2, the court of appeals sought to reconcile the two statutes. To do so, the court held that long-term cohabitation arising after the decree may constitute changed circumstances akin to the other enumerated changes in Minn. Stat. §518A.39, subd. 2. However, changed circumstances alone are insufficient to support a modification. Courts must also determine whether the change results in an unreasonable or unfair maintenance obligation. Where cohabitation is at issue, the four factors in Minn. Stat. §518.552, subd. 6 guide a court’s analysis of this second prong. 

Note: Sinda marks the second case in 2020 to apply the presumptions in Minn. Stat. §518A.39, subd. 2(b)(5) to a maintenance modification. See also In re Marriage of Warrington, No. A19-0482, 2020 WL 1501972, at *1 (Minn. Ct. App. 3/30/2020). But neither case directly addresses the language in subdivision 2(b) limiting the presumptions only to a “current support order” as distinguished from a spousal maintenance order. Compare Minn. Stat. §§518A.39, subd. 2(a) (addressing the terms of an “order respecting maintenance or support”) with 518A.39, subd.2(b) (addressing only the terms of a “current support order”); see also Li-Kuehne v. Kuehne, No. A17-1462, 2018 WL 3014670, at *2, n. 3 (Minn. Ct. App. 6/18/2018) (refusing to apply subdivision 2(b) presumptions to a maintenance modification). In re the Marriage of Sinda vs. Sinda, No. A19-1291, ___N.W.2d ___ (Minn. Ct. App. 8/10/2020).

•  District court’s reliance on dictionary definitions of “self-support” in a child support matter was not clear error. Bender and Bernhard are the parents of an adult child. Prior to the child’s graduation from high school, Bender moved the district court to continue child support beyond the child’s high school graduation. The CSM continued support until the child’s 21st birthday but denied her request to continue it indefinitely. The district court concluded that the child was not capable of supporting himself at the time. The child then graduated from high school and attended college in South Dakota on an academic scholarship and played basketball. Bender moved to South Dakota with the child because he did not like “bad smells or unexpected noises in the residence halls.” The child withdrew from college and underwent three surgeries on his right hip due to pain. He applied to additional colleges and received offers but declined them in order to focus on rehabilitating his hip for basketball. As his 21st birthday approached, Bender moved the district court again to continue child support as well as for repayment of uninsured and unreimbursed medical expenses.

The child was assessed prior to the motion and an autism diagnosis was confirmed. The assessment stated, in sum, that the child needs his mother to manage his life but could attend counseling and qualify for certain social services. The district court noted that “self-support” is not statutorily defined, so it turned to the dictionary definitions provided by the parties. Bender cited to Merriam-Webster, “lacking capacity, ability, or qualification for the purpose” of being “independent, self-sufficient, and self-reliant” and Bernhard cited to American Heritage Dictionary, “lacking the necessary ability, capacity, or power [to] support[] oneself, especially financially, without the help of others.” The district court denied Bender’s motion to continue child support, concluding that the child "was not incapable of self-support by reason of physical or mental condition” as defined by either dictionary definition. 

Bender appealed, contending that the district court erred in its interpretation of the statutory definition of the phrase “incapable of self-support.” The court of appeals reviewed this finding for clear error, noting the district court made findings regarding the child’s academic successes, that part of his assessment indicated his need for “low intensity community-based services,” and that the child made choices about continuing with college and expressed interest in pursuing certain jobs. The court of appeals concluded that the district court did not commit clear error and interpreted the phrase consistently with the definitions provided by the parties; thus, its findings were supported by the record. The court of appeals affirmed. Rebecca Ellen Bender v. Peter Howard Bernhard, A19-1611, 2020 WL3409243 (Minn. Ct. App. 6/22/2020) (unpublished).

• Dismissal of child’s emancipation claim upheld. S.K.’s appeal was filed following the dismissal of her action pursuant to Minnesota Rule of Civil Procedure 12. The court of appeals affirmed. In April 2019 S.K., then 16 years old, filed a petition seeking “emancipation from” her mother. In her petition, S.K. alleged, among other things, that her mother was “verbally and emotionally abusive” toward her, she “refused to provide financial support for several of her musical activities,” and “she prefers to live full-time with father.” Mother moved the district court to dismiss on the grounds that the petition fails to state a claim upon which relief can be granted because Minnesota does not recognize emancipation from a parent as a cause of action.

The district court granted the motion to dismiss upon both procedural and substantive grounds, noting in relevant part that “the petition does not state a claim for emancipation under Minnesota law because it does not allege that [S.K.] is married, mother agreed to her emancipation, or mother’s conduct implies an intent to relinquish her custodial rights.” 

The court of appeals ultimately concluded that while Minnesota has long recognized the common law concept of emancipation, case law in Minnesota does not authorize a district court to order emancipation at the request of the minor child. Rather, emancipation is the “act of the parent” as it refers to severing the ties, rights, and obligation between parent and child, and unique to the facts of each case.

S.K. presented additional arguments that the court of appeals should recognize a new cause of action, which the court declined to do, noting that the task of extending existing laws falls to the Supreme Court and the Legislature. The court of appeals affirmed. Sara Corinne Kysylyczyn v. Teresa MacNabb and John Michael Kysylyczyn, A19-1628, 2020 WL 3494429 (Minn. Ct. App. 6/29/2020) (unpublished).

•  Frivolous litigant designation reversed; not filed within the temporal restrictions of the rule. Mr. Kedrowski filed an appeal following a district court order deeming him a frivolous litigant pursuant to Minnesota General Rule of Practice 9. Mr. Kedrowski, a self-represented litigant, has a long history of motions, requests for reconsideration, and appeals following the final entry of the parties’ dissolution decree in 2017. On 8/8/2019, the district court entered an order deeming him to be a frivolous litigant pursuant to Rule 9 and requiring security from him, as well as imposing preconditions prior to his filing any new claims, motions, or requests. 

The Minnesota Court of Appeals’ analysis hinged on the timing of the district court order. It was careful to note that it was not analyzing Mr. Kedrowski’s conduct, but instead whether there was “any action or proceeding pending in any court of this state, at any time until final judgment is entered” in accordance with the language of the rule.

Specifically, the court of appeals focused its review on the words “final judgment” and “pending.” The court’s analysis of “final judgment” took into consideration the continuing jurisdiction the district court has over cases that include child custody, parenting time, spousal maintenance, or child support, concluding that “final judgment” includes “final orders” and “final decisions” because they share “traits that render judgment final,” and a final order is dispositive of the entire case.

Next, the court turned to an analysis of “pending.” Pursuant to the rule, a request, claim, or motion must be “pending” when initiating the proceedings in order to give the purported frivolous litigant the opportunity to withdraw or correct their request. Additionally, the district court must consider whether there is a reasonable probability that the frivolous litigant will prevail on their claim, motion, or request. This analysis also requires a pending motion, claim, or request. 

The court of appeals concluded that the district court’s order from 4/5/2019 was a final order disposing of all of Mr. Kedrowski’s pending motions, thus rendering its 8/8/2019 frivolous litigant order a violation of the temporal restriction of Rule 9. The court of appeals reversed. In re the Marriage of David Michael Kedrowski v. Olga Kedrowski, A19-1610, 2020 WL 3638787 (Minn. Ct. App. 7/6/2020) (unpublished).

Michael Boulette
Barnes & Thornburg LLP
mboulette@btlaw.com

Amy Krupinski
Collins, Buckley, Sauntry & Haugh PLLP
akrupinski@cbsh.net



FEDERAL PRACTICE

JUDICIAL LAW

• Fed. R. Civ. P. 12(b)(6); “plausibility” of allegations. A recent 8th Circuit decision reversing Judge Frank’s dismissal of a defamation claim pursuant to Fed. R. Civ. P. 12(b)(6) includes an analysis of the “plausibility” element of Iqbal, with the majority of the panel finding that the plaintiff had “pled just enough to proceed beyond the motion to dismiss stage.” 

Judge Erickson dissented, concluding that the complaint failed to cross the line between “possibility” and “plausibility.” Tholen v. Assist Am., Inc., ___ F.3d ___ (8th Cir. 2020). 

• Sanctions; inherent powers. The majority of an 8th Circuit panel affirmed a district court’s imposition of inherent powers sanctions against the plaintiff, even where the district court had failed to consider whether sanctions could be imposed under the Federal Rules of Civil Procedure. Judge Stras dissented from that portion of the panel’s opinion, concluding that the use of inherent powers sanctions “should always be a last resort,” and would have vacated and remanded the sanctions issue for further consideration. Schlafly v. Eagle Forum, ___ F.3d ___ (8th Cir. 2020). 

• Removal; subject matter jurisdiction; lack of standing; remand required. While agreeing with Judge Nelson that the plaintiff in a previously removed ADA action lacked standing to pursue his claims, meaning that the district court lacked subject matter jurisdiction, the 8th Circuit reiterated that when subject matter jurisdiction is lacking in a removed action, it must be remanded to state court rather than being dismissed. Dalton v. JJSC Props., LLC, ___ F.3d ___ (8th Cir. 2020). 

• Presidential election-related litigation. In a series of July 2020 opinions in a case challenging Minnesota’s “ballot order” statute: 

Judge Nelson denied a motion brought by the Trump campaign and related parties to intervene as of right pursuant to Fed. R. Civ. P. 24(a), and granted their motion for permissive intervention pursuant to Fed. R. Civ. P. 24(b). Pavek v. Simon, 2020 WL 3960252 (D. Minn. 7/12/2020). 

Judge Nelson granted plaintiffs’ and defendants’ joint motion to stay further proceedings pending the conclusion of the 2021 legislative session. Pavek v. Simon, 2020 WL 4013982 (D. Minn. 7/16/2020). 

Judge Nelson denied a motion by the Trump campaign and related intervenors pursuant to Fed. R. Civ. P. 62(d) to stay a previously entered preliminary injunction that had enjoined enforcement of the ballot order statute, finding that the intervenors had failed to make the “strong showing” that they were likely to prevail on the merits or that other relevant factors merited a stay. Pavek v. Simon, 2020 WL 4013984 (D. Minn. 7/16/2020). 

Barely two weeks later, the 8th Circuit issued a stay of the preliminary injunction, finding that the intervenors would be “irreparably injured” absent a stay, and that—based on a “preliminary review”—the intervenors were likely to prevail on the merits. Pavek v. Simon, ___ F.3d ___ (8th Cir. 2020). 

• 28 U.S.C. §1292(b); motion to certify denied; request for stay denied. Last month this column noted Chief Judge Tunheim’s denial of a motion to dismiss an action arising out of the receipt of unsolicited text messages and the denial of a motion to compel arbitration. 

Chief Judge Tunheim recently denied the defendant’s request to certify his order for interlocutory appeal under 28 U.S.C. §1292(b), finding that there not a “substantial ground for difference of opinion” on either of the legal issues identified by the defendant. 

Chief Judge Tunheim also denied the defendant’s requests for mandatory and discretionary stays pending resolution of its interlocutory appeal of its motion to compel arbitration, finding that the appeal did not divest the district court of jurisdiction, meaning that a mandatory stay was not required, and that the relevant factors did not favor a discretionary stay. Pederson v. Donald J. Trump for President, Inc., 2020 WL 4288316 (D. Minn. 7/26/2020). 

• Motions to dismiss for lack of personal jurisdiction denied. Chief Judge Tunheim denied defendants’ motion to dismiss for lack of personal jurisdiction, finding that their attendance at multiple conventions in Minnesota was sufficient on its own to establish specific personal jurisdiction. Ahlgren v. Fejes, 2020 WL 3839810 (D. Minn. 7/8/2020). 

Judge Nelson denied a motion to dismiss for lack of personal jurisdiction brought by two defendant guarantors, finding that agreements they executed included valid forum selection clauses. Hitachi Capital Am. Corp. v. McCollum, 2020 WL 3977229 (D. Minn. 7/14/2020). 

• First-filed doctrine does not apply to cases pending in the same district. While denying a motion for settlement approval without prejudice in an FLSA action, Judge Magnuson denied an intervenor’s motion to dismiss the action under the first-filed rule, finding that the rule does not apply when both actions are pending in the same court. Gray v. CJS Solutions Grp., LLC, 2020 WL 4476440 (D. Minn. 8/4/2020). 

• Fed. R. Civ. P. 12(f); motion to strike portion of complaint denied. While agreeing with the defendant that a portion of the plaintiff’s complaint contained “irrelevant and immaterial matter,” Judge Brasel denied the defendant’s motion to strike where the defendant made “no attempt to demonstrate how” the disputed portion of the complaint was “prejudicial to it.” Bishop v. St. Jude Med. S.C., Inc., 2020 WL 4352682 (D. Minn. 7/29/2020). 

• Fed. R. Civ. P. 11 AND 37; motion for sanctions denied. While criticizing plaintiff’s counsel’s conduct, Judge Frank denied the defendant’s motion for sanctions under Rule 11 for failure to comply with the rule’s safe harbor provision, and also denied the defendant’s request for Rule 37 sanctions where the defendant had “not identified any discovery order with which the Plaintiff has failed to comply.” Marshall v. Smith & Nephew, Inc., 2020 WL 4339221 (D. Minn. 7/28/2020). 

• Objections to order compelling video depositions overruled. Describing video depositions as the “new normal” in the face of covid-19, Judge Nelson overruled the plaintiff’s objections to an order by Magistrate Judge Bowbeer that required depositions to be conducted remotely. Grupo Petrotemex, S.A. DE C.V. v. Polymetrix AG, 2020 WL 4218804 (D. Minn. 7/23/2020). 

• Fed. R. Civ. P. 30(e); motion to strike untimely deposition errata sheet. While finding that the defendant’s motion to strike errata sheet “lack[ed] a basis in the rules,” Magistrate Judge Thorson recommended that the third-party defendant’s request to extend the deadline to submit the errata sheet be denied where the third-party defendant waited more than six months before raising the issue with the court. No objections were filed to the report and recommendation, and it was adopted by Judge Davis. Anderson v. NAES Corp., 2020 WL 3848107 (D. Minn. 6/8/2020), Report and Recommendation adopted, 2020 WL 3839803 (D. Minn. 7/8/2020). 

Josh Jacobson
Law Office of Josh Jacobson 
joshjacobsonlaw@gmail.com 

 

IMMIGRATION LAW

JUDICIAL LAW

• Dream on: DACA, the Supreme Court, and more. On 6/18/2020, the U.S. Supreme Court rejected the government’s effort to end the Deferred Action for Childhood Arrivals Program (DACA) and remanded the case for further consideration, not because the Department of Homeland Security (DHS) had no authority to do so, but because it failed to provide a reasoned explanation for this. In a 5 to 4 majority opinion authored by Chief Justice John G. Roberts, Jr., the Court ruled that the Court held jurisdiction to review DHS’s rescission of DACA under the Administrative Procedure Act (APA). The majority ruled that DHS’s action violated the APA by being “arbitrary and capricious,” specifically by its failure to consider whether to continue only the deferred action part of the DACA program without benefits and that “omission alone renders Acting Secretary Duke’s decision arbitrary and capricious.” In addition, the Court found DHS had failed to address the considerable reliance interests created by the DACA program on those DACA applicants and their families if DACA was ended. “It [DHS] was required to assess whether there were reliance interests, determine whether they were significant, and weigh any such interests against competing policy concerns.” DHS v. Regents of the University of California, 590 U.S. _____, No. 18-587, slip op. at 23, 26 (2020). https://www.supremecourt.gov/opinions/19pdf/18-587_5ifl.pdf 

On 7/17/2020, Judge Paul W. Grimm (U.S. District Court for the District of Maryland), following the U.S. Supreme Court’s DACA decision, vacated DHS’s rescission of DACA and returned DACA policy to its pre-9/5/2017 status. He further enjoined DHS from implementing or enforcing the rescission and from taking any other action to end DACA not in compliance with applicable law. Casa de Maryland, et al., v. DHS, et.al., No. 8:17-cv-02942-PWG (D. Md. 7/17/2020). https://www.courtlistener.com/recap/gov.uscourts.mdd.403497/gov.uscourts.mdd.403497.97.0.pdf 

On 7/28/2020, DHS Acting Secretary Chad Wolf issued a memorandum (“Reconsideration of the June 15, 2012 Memorandum Entitled ‘Exercising Prosecutorial Discretion with Respect to Individuals Who Came to the United States as Children’”) that rescinded the 2017 and 2018 memoranda revoking DACA. Acting Secretary Wolf noted that while DACA policy is under review, DHS will reject all first-time DACA requests; adjudicate all pending and future properly submitted DACA renewal requests (and associated applications for employment authorization) from current beneficiaries; limit the period of any deferred action granted to one year; and reject all pending and future applications for advance parole from beneficiaries of the DACA policy. https://www.dhs.gov/sites/default/files/publications/20_0728_s1_daca-reconsideration-memo.pdf 

ADMINISTRATIVE ACTION

• President Trump suspends entry of immigrants and nonimmigrants alike. On 6/22/2020 (and 6/29/2020), President Trump issued Proclamation 10052 (and an Amendment) (“Suspension of Entry of Immigrants and Nonimmigrants Who Present a Risk to the United States Labor Market During the Economic Recovery Following the 2019 Novel Coronavirus Outbreak”), continuing his 4/22/2020 Proclamation 10014 that suspended entry of immigrants into the United States while, at the same time, expanding it to include nonimmigrants. The proclamation went into effect on 6/24/2020 at 12:01am (EDT). Those affected include the following individuals seeking entry:

  1. H–1B or H–2B visa holder, and any foreign national accompanying or following to join;
  2. J visa holder, to the extent that (s)he is participating in an intern, trainee, teacher, camp counselor, au pair, or summer work travel program, and any foreign national accompanying or following to join; and 
  3. L visa holder, and any foreign national accompanying or following to join.

The suspension applies only to those:

  1. outside the United States on the effective date of the proclamation;
  2. not in possession of one of the aforementioned nonimmigrant visas that is valid on the effective date of the proclamation and through which the foreign national seeks entry; and
  3. without an official travel document other than a visa (such as a transportation letter, an appropriate boarding foil, or an advance parole document) that is valid on the effective date of the proclamation or issued on any date thereafter permitting him or her to travel to the United States and seek entry or admission.

The proclamation does not apply to:

  1. lawful permanent resident of the United States;
  2. foreign national who is the spouse or child of a United States citizen;
  3. foreign national seeking to enter the United States to provide temporary labor or services essential to the United States food supply chain; and
  4. foreign national whose entry would be in the national interest as determined by the secretaries of State and Homeland Security.

Other key points: 

  1. The Secretary of State shall implement the proclamation as it applies to issuance of nonimmigrant visas, with consular officers determining, in their discretion, whether a nonimmigrant has established eligibility for an exception;
  2. The Secretary of Homeland Security shall implement the proclamation as it applies to the entry of nonimmigrants;
  3. The Secretary of Health and Human Services shall, as necessary, provide guidance to the secretaries of State and Homeland Security for implementing measures that could reduce the risk that foreign nationals seeking admission or entry to the United States may introduce, transmit, or spread SARS–CoV–2 within the United States;
  4. The Secretary of Labor shall, in consultation with the Secretary of Homeland Security and consistent with applicable law, consider promulgating regulations or take other appropriate action to ensure that the presence of foreign nationals who have been admitted or otherwise provided a benefit, or who are seeking admission or a benefit, pursuant to an EB–2 or EB–3 immigrant visa or an H–1B nonimmigrant visa, does not disadvantage United States workers in violation of section 212(a)(5)(A) or (n)(1) of the INA (8 U.S.C. 1182(a)(5)(A) or (n)(1)); 
  5. The Secretary of Homeland Security shall take steps, consistent with applicable law, to prevent certain foreign nationals with final orders of removal; inadmissible or deportable from the United States; or arrested for, charged with, or convicted of a criminal offense in the United States, from obtaining eligibility to work in the United States; and as soon as practicable, and consistent with applicable law, consider promulgating regulations or take other appropriate action regarding the efficient allocation of visas pursuant to section 214(g)(3) of the INA (8 U.S.C. 1184(g)(3)) and ensuring that the presence in the United States of H–1B nonimmigrants does not disadvantage United States workers.
  6. Nothing in the proclamation shall be construed to limit the ability of an individual to seek asylum, refugee status, withholding of removal, or protection under the Convention Against Torture and Other Cruel, Inhuman or Degrading Treatment or Punishment, consistent with the laws of the United States.
  7. The proclamation shall expire on 12/31/2020, and may be continued as necessary. Within 30 days of the effective date, and every 60 days thereafter, while the proclamation is in effect, the Secretary of Homeland Security shall, in consultation with the secretaries of State and Labor, recommend any modifications as may be deemed necessary. 85 Fed. Reg. 38,263-267 (6/25/2020). https://www.govinfo.gov/content/pkg/FR-2020-06-25/pdf/2020-13888.pdf. 85 Fed. Reg. 40,085-086 (Amendment) (7/2/2020). https://www.govinfo.gov/content/pkg/FR-2020-07-02/pdf/2020-14510.pdf 

R. Mark Frey
Frey Law Office
rmfrey@cs.com

 

INTELLECTUAL PROPERTY

JUDICIAL LAW

• Trademark: TRO barring use of plaintiff’s trademarks in sale of N95 respirators. Judge Nelson recently granted 3M Company’s motion for a temporary restraining order against defendants Matthew Starsiak, AMK Energy Services LLC, and John Does 1 through 10 related to the use of 3M’s trademarks in the sale of 3M N95 respirators. 3M sued defendants alleging defendants falsely claimed to represent 3M and used 3M’s name and trademarks without authorization in a false and deceptive scheme to sell 3M N95 respirators during the global covid-19 pandemic. During the outbreak of covid-19, 3M increased its production of 3M-brand respirators to ensure that an adequate supply was available while also pledging to not increase prices on its N95 respirators and to work to eliminate fraud and price-gouging by third parties. Defendants contacted 3M to purchase N95 respirators. Defendants claimed that Sir Richard Branson, founder of the Virgin Group, and the Gates Foundation wished to purchase 900 billion respirators for underserved populations in the world. While defendants were trying to purchase billions of 3M-branded N95 respirators from 3M, they were simultaneously trying to find buyers willing to purchase them at a higher price. Defendants identified themselves as 3M’s “number one sales team” and as a “3M authorized distributor,” claiming to have “hundreds of millions of [N95 respirator] stock available.” To determine whether injunctive relief, in the form of a TRO, is warranted, a court weighs: (1) the likelihood of success on the merits; (2) the threat of irreparable harm to the movant in the absence of relief; (3) the balance between that harm and the harm injunctive relief would cause to the other litigants; and (4) the public interest. The court found 3M was likely to succeed on its Lanham Act and related state law claims based on the presented evidence of the validity and strength of 3M’s trademarked name and marks and defendants’ conduct. The court further found plaintiff established irreparable harm; defendants, who had no affiliation with 3M, were unlikely to be harmed by issuance of a TRO; and the public has a strong interest in protecting trademarks. Accordingly, a TRO was issued enjoining defendants from using the standard character “3M” mark and 3M design mark, and any other word, name, symbol, device, or combination thereof that is confusingly similar to the 3M marks. 3M Co. v. Starsiak, No. 20-cv-1314 (SRN/TNL), 2020 U.S. Dist. LEXIS 112387 (D. Minn. 6/26/2020).

• Trademark: Default judgment. Judge Tostrud recently entered default judgment and awarded plaintiff attorneys’ fees and costs. Allied Medical Training sued Knowledge2SaveLives LLC and Monique Doward, alleging defendants infringed Allied’s registered mark KNOWLEDGE SAVES LIVES. Allied provides training to current and aspiring emergency medical responders to maintain or obtain Emergency Medical Responder (EMR) or Emergency Medical Technician (EMT) certification. Defendant Doward enrolled in one of Allied’s training courses. She subsequently formed and registered a business organization named Knowledge2SaveLives LLC that offers services identical to those offered by Allied under its KNOWLEDGE SAVES LIVES mark to the same types of consumers. In adjudicating a default-judgment motion, the factual allegations of the complaint, except those relating to the amount of damages, are taken as true. Then, the court must determine whether the taken-as-true factual allegations of the complaint constitute a legitimate cause of action. The court found the taken-as-true allegations constitute a legitimate action of infringement of the Lanham Act and violation of the Minnesota Deceptive Trade Practices Act. The court found Knowledge 2 Save Lives is for all practical purposes equivalent to Knowledge Saves Lives. In seeking an injunction, Allied established a likelihood of success, irreparable harm, that the balance of harms favors Allied, and that the public disfavors infringing activity. Accordingly, the court entered a permanent injunction enjoining defendants from use of Knowledge 2 Save Lives or any mark confusingly similar to Knowledge Saves Lives. Allied Med. Training, LLC v. Knowledge2SaveLives LLC, No. 19-cv-3067, 2020 U.S. Dist. LEXIS 114658 (D. Minn. 6/30/2020).

Joe Dubis
Merchant & Gould
jdubis@merchantgould.com

TAX LAW

JUDICIAL LAW

• Summary judgment denied where commissioner could not establish taxpayer had an “opportunity” to challenge liability. In a dispute stemming from unpaid employment taxes, the tax court rejected the Service’s request for summary judgment because the court was not persuaded Mr. Barnhill had an opportunity to challenge his liability. Mr. Barnhill was a director at a company called Iron Cross. The company failed to file any returns, and the company failed to remit either the employer share or the employee share required to withhold from employee wages and pay over. The commissioner argued that Mr. Barnhill was precluded from challenging his liability, because his previous receipt of Letter 1153 concerning that liability afforded him a prior “opportunity,” for purposes of section 6330(c)(2)(B), to challenge that liability. In the course of its decision, the tax court wrestled with the term “opportunity” in this context. Viewing any factual material and inferences in the light most favorable to the nonmoving party, the court reasoned that although taxpayer filed a protest with IRS Appeals Office in response to Letter 1153, he did not receive IRS’s ensuing Letter 5157, which both explained next steps and scheduled his Appeals Office conference. Rather than reschedule the case, the Service closed it. The court construed these facts as creating an incomplete appeal, which did not qualify as prior opportunity to dispute his underlying liabilities under IRC §6330(c)(2)(B). Summary judgment that the taxpayer was precluded from disputing that liability at his CDP hearing was therefore inappropriate. Barnhill v. Comm’r, No. 10374-18L., 2020 WL 4194614 (T.C. 7/21/2020).

• Emails and Marine Corps manual constitute “written separation agreement” for purposes of alimony deduction. Prior to the Tax Cuts & Jobs Act (TCJA) of 2017, alimony payments were deductible to the payor and included in the gross income of the recipient (these rules still apply to most divorce agreements that were entered into prior to the effective date of the TCJA). To qualify for the deduction, however, the payments must be made pursuant to a written separation agreement—a term that is not defined in the Code. In this dispute, taxpayer-husband claimed he was entitled to a deduction for payments made to his former spouse. The Service disagreed, arguing that emails and the couple’s intention to accept the Marine Corps Manual family support policy constitute a written separation agreement for purposes of section 71(b)(2)(B). Winslow v. Comm’r, No. 8755-18S., 2020 WL 4456606 (T.C. 8/3/2020).

• Additional conservation easement decisions. The Service continues to prevail in challenges to charitable deductions made for donations of conservation easements. E.g., Red Oak Estates, LLC v. Comm’r, T.C.M. (RIA) 2020-116 (T.C. 2020) (holding that because “the deed granting the conservation easement reduces the donee’s share of the proceeds in the event of extinguishment by the value of improvements made by the donor,” the contribution “does not satisfy the perpetuity requirement of section 170(h)(5)(A)” and further rejecting the challenge to the validity of the proceeds regulations) (citing Oakbrook Land Holdings, LLC v. Comm’r, 154 T.C. at –––– (slip op. at 26–33)); Cottonwood Place, LLC v. Comm’r, T.C.M. (RIA) 2020-115 (T.C. 2020) (holding that the easement does not satisfy the perpetuity requirements because “[t]he deed granting the conservation easement reduces the donee’s share of the proceeds in the event of extinguishment by the value of improvements made by the donor” and granting partial summary judgment to commissioner); Belair Woods, LLC v.Comm’r, T.C.M. (RIA) 2020-112 (T.C. 2020) (noting that petition in this case proffers in support of its position several arguments not previously addressed but rejecting those novel arguments).

• Property tax: Several dismissals for failure to comply with mandatory disclosure rules. In a series of cases out of Washington County, the tax court dismissed petitions for failure to comply with the mandatory disclosure rules set out in Minnesota Statutes section 278.05, subdivision 6. Wal-Mart Real Estate Bus. Tr. v. Washington Co., No. 82-CV-18-1654, 2020 WL 4527894 (Minn. T.C. 7/31/2020) (granting county’s motion to dismiss the petition for failure of the trust to comply with mandatory disclosure rules); Wal-Mart Stores, Inc. v. Washington Co., No. 82-CV-18-1593, 2020 WL 4528476 (Minn. T.C. 7/31/2020) (similarly dismissing petition for failure to comply with mandatory disclosure); Wal-Mart Real Estate Bus. Tr. v. Washington Co., No. 82-CV-18-1588, 2020 WL 4496032 (Minn. T.C. 7/30/2020); Wal-Mart Real Estate Bus. Tr. v. Washington Co., No. 82-CV-18-1587, 2020 WL 4496058 (Minn. T.C 7/30/2020); Wal-Mart Real Estate Bus. Tr. v. Washington Co., No. 82-CV-18-1587, 2020 WL 4459041 (Minn. T.C. 7/29/2020). In a separate case, the tax court denied Walmart’s petition to transfer a property valuation dispute to district court. Walmart Inc. v. Anoka Co., No. 02-CV-20-721, 2020 WL 4459044 (Minn. T.C. 7/29/2020).

• Property tax: Pipeline dispute results in overstated valuation. Minnegasco, a division of the natural gas distribution business of CenterPoint Energy Resources Corp., owns and operates a natural gas distribution pipeline system, which consists of pipelines, mains, and related equipment located in 40 Minnesota counties. The Commissioner of Revenue estimated the subject property’s unit value as of 1/2/2017 at $994,717,400. Minnegasco filed an administrative appeal with the commissioner, who affirmed her assessment. Minnegasco’s appraiser estimated a unit value of $760,000,000 using the income and cost approaches to value. The commissioner’s appraiser estimated a unit value of $1,213,000,000, also using the income and cost approaches. Neither appraiser relied on a market or sales comparison approach.

The parties disagreed about the composition of the income figure to be capitalized under the income approach. Minnegasco contends that deferred income tax (DIT), Conservation Improvement Program (CIP) incentive payments, and off-system sales should be excluded from net operating earnings, the figure to be capitalized under Minnesota Rule 8100.20. Minnegasco argues that because these three items are not earnings of the pipeline system, and/or are not included in Minnegasco›s regulatory rate base (the assets on which it can earn a return), the earnings should not be included. Minnegasco further reasons, under the income capitalization approach, that if potential purchasers focus on future cash streams, and items excluded from rate base do not contribute to cash stream, then including them in net operating earnings improperly inflates its value. The commissioner disagrees and contends that all three items must be included in net operating earnings. 

Minnesota Rule 8100’s cost approach is based on net book value, which is the original cost of a pipeline’s operating assets, less book depreciation. See Minn. R. 8100.0300, subp. 3. Regulatory rate base, however, is net book value minus accumulated deferred income tax (ADIT). As a result of the MPUC›s regulatory decision to exclude ADIT from rate base, Minnegasco may not earn a return on the ADIT portion of its net book value. Minnegasco contends that this regulatory prohibition on its ability to earn a return on ADIT (or assets purchased with ADIT) causes external obsolescence under the cost approach. The commissioner disagrees. 

The commissioner assesses “[t]he personal property, consisting of the pipeline system of mains, pipes, and equipment attached thereto, of pipeline companies and others engaged in the operations or business of transporting products by pipelines.” Minn. Stat. §273.33, subd. 2 (2018). A utility property is valued using the unit method set forth in Rule 8100.0200. The rule relies primarily on the income and cost approaches to value and affords the commissioner and the courts the authority “to exercise discretion whenever the circumstances of a valuation estimate dictate the need for it.” See Minn. R. 8100.0300. See also, Comm’r of Revenue v. Enbridge Energy, LP (Enbridge I), 923 N.W.2d 17, 21 (Minn. 2019).

In a lengthy analysis, the court determined that the CIP incentive payments received by Minnegasco are not earnings from Minnegasco’s system plant. Additionally, the court determined that revenues from Minnegasco’s off-system sales and exchanges are not earnings from Minnegasco’s system plant. The court further stated that the MPUC’s exclusion of ADIT from Minnegasco’s rate base caused the subject property to suffer from external obsolescence of $232,390,100 as of 1/2/2017. Therefore, the court found that the commissioner overstated the unit value of Minnegasco’s pipeline operating system, and the unit value shall be reduced to $771,511,000. CenterPoint Energy Resources Corp. v. Comm’r of Revenue, 2020 WL 4045620 (Minn. T.C. 7/15/20).

• Petitioner fails to meet requirements of appeal; court grants commissioner’s motion to dismiss. On 9/14/2018, the Commissioner of Revenue denied Mr. Abdullahi’s claim for the Minnesota Working Family Credit for tax year 2016. Mr. Abdullahi subsequently requested a 30-day extension to the tax court to appeal the commissioner’s denial. The court granted Mr. Abdullahi’s request. 

Mr. Abdullahi initially submitted an appeal by U.S. mail, which the court received on 12/10/2018. The next day, the court returned the submission together with a deficiency notice indicating that Mr. Abdullahi had filed the appeal without the necessary filing fee. On 12/21/2018, Mr. Abdullahi hand-delivered his appeal documents, with the filing fee, but without proof of service on the commissioner. 

On 8/26/2019, the commissioner filed a motion to dismiss Mr. Abdullahi’s appeal, but the case was temporarily stayed. After the stay was lifted, the commissioner filed an amended motion to dismiss, arguing that the court does not have jurisdiction to hear the matter because 1) the appeal was untimely filed, and 2) Mr. Abdullahi did not serve the commissioner. The commissioner’s motion was accompanied by an affidavit from a paralegal in the Minnesota Department of Revenue Appeals and Legal Services Division attesting to the lack of service on the commissioner. Mr. Abdullahi did not file a written response. A hearing was scheduled on 4/29/2020, but because Mr. Abdullahi was not present, the court continued the hearing to 5/11/2020 to allow Mr. Abdullahi the opportunity to argue against the motion.

In relevant part, Minn. Stat. §271.06, subd. 2 (2018) states that within 60 days following a notice date of an order of the Commissioner of Revenue, the appellant shall serve a notice of appeal upon the commissioner and file the original, with proof of such service, with the tax court administrator—provided that the tax court, for cause shown, may extend the time for appealing for an additional period not exceeding 30 days. Additionally, the appellant shall pay to the court administrator of the tax court an appeal fee upon filing. Id., subd. 4.

Failure to timely file an appeal deprives the court of subject matter jurisdiction. See Langer v. Comm’r of Revenue, 773 N.W.2d 77, 80 (Minn. 2009). Because Mr. Abdullahi failed to meet the requirements of the appeal set by Minn. Stat. §271.06, subd. 2, the court was required to grant the commissioner’s motion to dismiss the appeal. Abdullahi v. Comm’r of Revenue, 2020 WL 4380970 (Minn. T. C. 7/28/20).

• Party-imposed deadlines are not enough to hold petitioner in contempt of court. On 5/13/2019, the court granted the county’s motion to compel discovery and gave the county 30 days to file and serve a declaration setting forth its expenses, including attorney fees. See IRC Riverdale Commons, LLC v. Cty. of Anoka, No. 02-CV-17-2007, 2019 WL 2167324, at *1 (Minn. T.C. 5/13/2019). On 9/17/2019, the court granted the county’s request for expenses, including attorney fees, incurred in connection with its motion to compel in the amount of $9,460. See IRC Riverdale Commons, LLC v. Cty. of Anoka, No. 02-CV-17-2007, 2019 WL 4607064, at *1 (Minn. T.C. 9/17/2019). On 4/22/2020, the county filed a motion to hold IRC Riverdale Commons in contempt of court for its failure to pay the awarded expenses. 

One of the factors to be considered in evaluating a contempt motion is that “[t]he decree of the court clearly defined the acts to be performed.” Hopp v. Hopp, 279 Minn. 170, 174, 156 N.W.2d 212, 216 (1968). The county asserted that the September 2019 order was unambiguous and plainly ordered IRC to pay a defined amount of attorneys’ fees. The court, however, stated that although the order plainly created a liability in favor of the county, it did not expressly command IRC to pay the amount awarded; it did not order the act of payment. Additionally, the order did not command IRC to pay the amount by any particular date. Although the county has attempted to impose several payment deadlines, IRC’s violations of party-imposed deadlines are not contempt of court. Therefore, the court denied the county’s motion. IRC Riverdale Commons, LLC v. Anoka Cty, 2020 WL 4669433 (Minn. T. C. 8/7/20).

ADMINISTRATIVE ACTION

• Final Regs on workarounds for contributions to charities in lieu of state and local taxes. The Tax Cuts & Jobs Act (TCJA) limited, but did not eliminate, taxpayers’ ability to deduct state and local real estate, personal property, and either income or sales taxes. The TCJA capped the total SALT deduction at $10,000 for tax years 2018 through 2025. In response to this limitation, some taxpayers considered tax planning strategies to avoid or mitigate the effect of the limitation. For example, some jurisdictions offer SALT credit programs under which states provide tax credits in return for contributions to certain charitable entities. The contributions are then deducted by the payor as charitable deductions authorized by Section 170. The Final Regs address these work-arounds, and supplant proposed regs from 2018. The Service characterizes the import as follows: These Final Regs “require taxpayers to reduce their charitable contribution deductions by the amount of any state or local tax credits they receive or expect to receive in return… taxpayers may treat payments they make in exchange for these credits as state or local tax payments. This allows some taxpayers to deduct certain of the payments as taxes.” TD 9907; Reg §1.162-15, Reg §1.164-3, Reg §1.170A-1, Reg §1.170A-13.

Morgan Holcomb
Mitchell Hamline School of Law
morgan.holcomb@mitchellhamline.edu 
Sheena Denny
Mitchell Hamline School of Law sheena.denny@mitchellhamline.edu

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