CRIMINAL LAW
JUDICIAL LAW
• Evidence: Impeachment evidence is misused if the party who called a witness was aware the witness would recant before the witness took the stand. Appellant was convicted of aiding and abetting second-degree murder, attempted murder, and assault, charges that arose from a gang-related drive-by shooting from a car driven by appellant. At trial, J.G., appellant’s cell mate, testified. J.G. previously told investigators appellant knew the shooting would take place and had given J.G. a letter stating the opposite for J.G. to give to police as his own writing. J.G. gave that letter and a second letter, written by J.G. on appellant’s behalf and consistent with the first letter, to the investigator. J.G. also told investigators he witnessed an argument between appellant and the shooter after the shooting, during which appellant yelled at the shooter because he was supposed to get out of the car before shooting. At trial, however, J.G. denied making these statements and testified he had not met appellant before they shared a jail cell. Over the defense’s objection, the district court permitted the state to continue questioning J.G. to elicit what the court characterized as “proper impeachment evidence.” The investigator to whom J.G. spoke testified about J.G.’s statements, and the letters that J.G. gave to the investigator were also admitted into evidence. The jury was instructed that J.G.’s testimony was impeachment, not substantive, evidence, and that the content of the letters was to be used to ascertain the author of the first letter. Appellant appeals from the denial of his postconviction petition, arguing the state violated State v. Dexter, 269 N.W.2d 721 (Minn. 1978), which precludes calling a witness for the sole purpose of impeaching the witness. The parties agree the state did not know J.G. would recant his statements to police when called to testify, but appellant argues the district court should have stopped questioning J.G. once it was clear J.G. had chosen to recant.
The court of appeals concludes that no Dexter violation occurred. The court holds that a Dexter violation occurs only if the witness signifies an intent to recant prior to taking the stand. Here, there is no indication the state was aware J.G. would recant or called J.G. for the sole purpose of impeaching him. The appellate courts have not extended Dexter to include situations in which a party’s witness does recant at trial but is still questioned thereafter, and the court of appeals declines to do so. Thus, the district court did not err by allowing the state to continue questioning J.G. after his recantation.
The court also finds that J.G.’s prior inconsistent statements to police were not given under oath and, therefore, were not admissible as substantive evidence. However, Minn. R. Evid. 607 permits their admission for impeachment purposes only. The court agrees with the postconviction court that J.G.’s out-of-court statements were admitted for impeachment, rather than substantive, purposes. The court also affirms the postconviction court’s admission of the first letter J.G. gave to police for the jury to use in ascertaining who wrote the letter. The letter was authenticated and relevant, and the jury was instructed not to use the contents of the letter as substantive evidence.
The court also concludes that the state misstated the law regarding the presumption of innocence, but that appellant’s substantial rights were not affected. The court then rejects appellant’s arguments regarding the improper admission of other evidence and the exclusion of the testimony of two defense witnesses, finding the postconviction court did not abuse its discretion. The denial of appellant’s postconviction petition is affirmed. Moore v. State, A19-1522, 2020 WL 2517081 (Minn. Ct. App. 5/18/2020).
• DWI: Missouri v. McNeely applies retroactively to challenges of final convictions for test refusal under Birchfield v. North Dakota. In 2011, after crashing his vehicle into a median, appellant was taken to the hospital, where police asked him to submit to a blood or urine test. Appellant refused and ultimately pleaded guilty to third-degree test refusal. In his 2017 postconviction petition, appellant argued his conviction was unconstitutional under Birchfield v. North Dakota, 136 S.Ct. 2160 (2016), because it was based on his refusal to submit to a warrantless blood or urine test in the absence of an exception to the warrant requirement. The district court denied appellant’s petition and he appealed, but his appeal was stayed pending the Minnesota Supreme Court’s decision in Johnson v. State, 916 N.W.2d 674 (Minn. 2018). In Johnson, the court held Birchfield announced a substantive rule that applies retroactively to convictions that were final before the rule was announced. However, the district court was left to determine whether a warrant or an exception to the warrant requirement existed at the time of the test refusal. The district court found that the per se exigent circumstances exception (based on the dissipation of alcohol) applied and that, although this exception was invalidated in Missouri v. McNeely, 569 U.S. 141 (2013), McNeely does not apply retroactively.
The Minnesota Court of Appeals finds that, in the test refusal context, McNeely’s rule is substantive and should be applied retroactively. “[T]he requirement that law enforcement secure a warrant or establish an exception to the warrant requirement has a critical ‘bearing on the accuracy of the underlying determination of guilt,’” and the driver cannot be convicted of test refusal “[w]ithout constitutional justification for the blood or urine test.”
The state acknowledged that no warrant existed for the requested blood or urine tests, but asserted that the per se exigency exception applied. However, because the court of appeal concludes here that the per se exigency exception does not apply to appellant’s case, the district court erred in concluding that an exception to the warrant requirement applied. Thus, appellant’s conviction was unconstitutional and is reversed. Hagerman v. State, No. A19-1526, 2020 WL 2828783 (Minn. Ct. App. 6/1/2020).
• Harassment restraining order: Violation of a harassment restraining order requires proof of knowledge of facts that would cause defendant to be in violation of order. Appellant was prohibited by a harassment restraining order (HRO) from having contact with M.L.B. or from being within 100 feet of her residence, but her address was not disclosed in the HRO. He was convicted of violating the HRO after walking within 100 feet of M.L.B.’s apartment building. Before the district court and on appeal, appellant argued the state did not prove appellant knew the location of M.L.B.’s residence. The district court found him guilty but specifically found credible his explanation that he was walking in the area of M.L.B.’s apartment for the purpose of going to lunch and that the state did not prove beyond a reasonable doubt that appellant had notice or knowledge of the location of M.L.B.’s residence.
Knowledge of the location from which a defendant is prohibited from being is not required by Minn. Stat. §609.748, subd. 6(a), (b). However, the general common law rule is that proof of mens rea is required unless one of two exceptions apply: (1) the statute clearly sets forth a strict liability offense, or (2) the statute creates a “public welfare offense.”
Section 609.748, subd. 6, is void of any language concerning mens rea, including any language clearly evidencing the Legislature’s intent to dispense with mens rea. Thus, the first exception to the common law mens rea rule does not apply. As to the second exception, Minnesota’s appellate courts “have recognized that certain crimes arising from regulatory schemes fall within the ‘public welfare’ or ‘regulatory’ category,” such as keeping an open bottle of liquor in an automobile, DWI, serving alcohol to a minor, failing to provide proof of vehicle insurance, etc. Section 609.748, subdivision 6, is neither regulatory nor concerned with public welfare, but is, instead, concerned with physical or sexual assault and repeated incidents of intrusive or unwanted acts, words, or gestures. Thus, the court holds it is not a public welfare offense.
As neither exception to the common law rule that proof of mens rea is required applies, a conviction under 609.748, subd. 6, requires proof that the defendant had knowledge of the facts that would lead him or her to her to be in violation of an HRO. In this case, those facts included M.L.B.’s address. The record shows the state failed to meet this burden, and, therefore, the evidence is insufficient to sustain appellant’s conviction. State v. Andersen, No. A19-0923, 2020 WL 3041277 (Minn. Ct. App. 6/8/2020).
• Procedure: Defense counsel’s concession of some of the elements of the crimes is not a concession of guilt warranting a new trial. Respondent, a 26-year-old, was charged with first- and third-degree criminal sexual conduct for sexually penetrating a 12-year-old and a 13-year-old. Evidence presented at trial included DNA evidence, cell phone records showing communications between respondent and the two victims and videos of one of the assaults, and statements from the victims identifying respondent. In written arguments to the district court following a bench trial, defense counsel conceded the victims’ ages, respondent’s age, the age differential between the parties, and venue in Steele County. The district court found respondent guilty on both counts, making specific findings as to the parties’ ages, the age differential, and the county of the crimes. The court of appeals reversed on the grounds of ineffective assistance of counsel, finding that defense counsel’s concessions of elements of the crimes conceded guilt without respondent’s consent or acquiescence.
The Minnesota Supreme Court reversed the court of appeals. Where ineffective assistance of counsel based on counsel’s concession of guilt without the client’s consent or acquiescence is claimed, a new trial is warranted without a showing of prejudice. That is, if such an improper concession was made, counsel’s performance is considered deficient and prejudice is presumed.
Here, however, respondent’s counsel conceded various elements of the offense, not respondent’s guilt. While an analysis of whether guilt was conceded necessarily requires an analysis of whether elements have been conceded, the Court clarifies that an uncontested-to concession on any single element does not necessarily amount to a concession of guilt. On the other hand, a concession on each and every element of the crime is not necessarily required. In this case, counsel conceded fewer than all of the elements of the offenses against respondent, and the elements conceded were undisputed at trial. Counsel never conceded the highly contested question of whether respondent sexually penetrated either victim. Thus, respondent’s trial counsel was not ineffective and a new trial is not warranted. State v. Huisman, 944 N.W.2d 464 (Minn. 6/10/2020).
Samantha Foertsch, Bruno Law PLLC
Stephen Foertsch, Bruno Law PLLC
EMPLOYMENT & LABOR LAW
JUDICIAL LAW
• Covenant not to compete; mootness after injunction expired. A two-year noncompete clause, which had been subject to an injunction, was moot because the employee challenged the injunction after it had already expired. The 8th Circuit Court of Appeals, in a decision written by Judge James Loken of Minnesota, dismissed the appeal and remanded the case because the appeal was brought after the two-year noncompete period and the corresponding injunction had ended. Perficient, Inc. v. Munley, 973 F.3d 914 (8th Cir. 9/3/2020).
• ERISA challenge; government plan not covered. An employee who challenged an adverse determination against his recovery of benefits under ERISA lost his case because he was in a government plan and was not subject to ERISA. The 8th Circuit, in a per curiam opinion, deemed the plan not subject to ERISA and furthermore an additional breach of contract claim also failed because the claimant had elected a refund of his plan contributions, which ended his participation in it. Hampton v. Standard Insurance Co., 2020 WL 4557654 (8th Cir. 8/7/2020) (unpublished).
• Overtime claim barred; employer exempt as common carrier. A flight paramedic lost his claim for unpaid overtime wages when he challenged his company’s policy prohibiting overtime unless he worked more than 84 hours over a two-week period. The 8th Circuit, in a decision written by Justice David Stras of Minnesota, held that the claim under the federal Fair Labor Standards Act (FLSA) was not actionable because the employer qualified for exemption under the FLSA as a “common carrier.” Riegelsberger v. Air Evac. EMS, Inc., 970 F.3d 1061 (8th Cir. 8/17/2020).
• PAC data not accessible; two statutes inapplicable. Two individual personal care assistants (PCAs) were unable to gain access to a list of contact information for PCA home supervisors in an effort to de-certify the union as their exclusive bargaining representative. The Supreme Court held that the list containing contact information was not available under either the Public Employment Labor Relations Act, Minn. Stat. §179A.54, subd. 9, or the Minnesota Government Data Practices Act, Minn. Stat. §13, and that the nondisclosure did not violate the Government Data Practices Act. Greene v. Minnesota Bureau of Mediation Services, 2020 WL 5539815 (Minn. Ct. App. 9/16/2020) (unpublished).
• Collateral workers compensation; collateral tag barred after failure to intervene. A health care provider that did not intervene after receiving notice of an employee’s pending workers compensation proceeding cannot later attack the award on collateral challenge. The Supreme Court held that the voluntary declination to intervene after receiving timely and adequate notice of the right to do so bars a subsequent collateral attack on a compensation award. Koehnen v. Flagship Marine Co., 947 N.W.2d 448 (Minn. 8/12/2020).
• Retaliation claim rejected, no causal connection found. A former custodian failed in his attempt to pursue a retaliatory discharge claim against his former school district employer under the Minnesota Whistleblower Statute and the Occupational Safety & Health Act. Affirming a lower court ruling, the Minnesota Court of Appeals held that the claimant did not establish a prima facie case with a causal connection between reporting air and water quality concerns and her termination, noting that the employee had disobeyed directives from the school’s principal regarding locking the school’s fire doors. Slaughter v. Independent School District No. 833, 2020 WL 4579014 (Minn. Ct. App. 8/10/2020) (unpublished).
• Missing work while in jail; misconduct upheld, but not aggravated. An employee’s challenge to denial of unemployment compensation benefits on grounds that he missed work when he was in jail for two days was upheld on grounds of disqualifying “misconduct.” The court of appeals upheld that determination, but also concluded that the employee was not discharged for “aggravated” employment misconduct, which would have resulted in a longer period of further disqualification. Leuze v. Minn. Valley Alfalfa Producers, 2020 WL 4743505 (Minn. Ct. App. 8/17/2020) (unpublished).
• Unemployment reconsideration; jurisdiction terminated when deadline expired. An employee who challenged denial of unemployment compensation benefits after an unemployment law judge (ULJ) amended some details of the decision after the deadline for reconsideration had expired lost his appeal. The court of appeals held that the ULJ’s jurisdiction terminated when the reconsideration request deadline expired, resulting in invalidation of any of the judge’s rulings after that date and leading to vacation of the post-reconsideration determination. Carroll v. Minn. Apts., LLC, 2020 WL 4280999 (Minn. Ct. App. 7/27/2020) (unpublished).
Marshall H. Tanick, Meyer, Njus & Tanick
FEDERAL PRACTICE
JUDICIAL LAW
• 28 U.S.C. §1447(d); scope of review on appeal; certiorari. While most remand orders cannot be appealed, 28 U.S.C. §1447(d) permits appeals from remand orders involving cases removed under 28 U.S.C. §§1442 and 1443. At least six circuit courts—including the 8th Circuit—have held that such an appeal is limited only to consideration of the propriety of the removal under these provisions, while opinions in three circuits have held that appellate review extends to any issue encompassed by the remand order. The Supreme Court recently granted certiorari on the question of whether 28 U.S.C. §1447(d) permits a court of appeals to undertake this broader review. Mayor and City Council of Baltimore v. BP p.l.c., 952 F.3d 452 (4th Cir.), cert. granted, ___ S. Ct. ___ (2020).
• Fraudulent joinder; motion to remand denied. Where the defendants removed the action based on diversity jurisdiction and alleged fraudulent joinder of the non-diverse defendant, Chief Judge Tunheim found that there was “no reasonable basis” for any of the claims asserted against that defendant, found that the defendant had been fraudulently joined, and denied the plaintiff’s motion to remand. Protege Biomedical. LLC v. Duff & Phelps Secs., LLC, 2020 WL 5798516 (D. Minn. 9/29/2020).
• Fed. R. Civ. P. 65(b); temporary restraining order denied. Where the plaintiffs sought an ex parte temporary restraining order and preliminary injunction, Judge Tostrud denied the request for a preliminary injunction on the merits, and noted that the plaintiffs had failed to comply with the requirements for the TRO where they did not file the affidavit or verified complaint required by Fed. R. Civ. P. 65(b)(1)(A), and also failed to certify any efforts made to provide notice to the defendants as required by Fed. R. Civ. P. 65(b)(1)(B). Minnesota RFL Republican Farmer Labor Caucus v. Freeman, ___ F. Supp. 3d ___ (D. Minn. 9/14/2020).
• Fed. R. Civ. P. 30(b)(4); motion to compel remote depositions granted. Applying a “legitimate reason” standard rather than a “good cause” standard, Magistrate Judge Thorson found that the covid-19 pandemic provided a “legitimate reason” for remote depositions and that the plaintiffs had failed to establish any particularized “prejudice or hardship,” and granted the defendant’s motion to compel the remote depositions of specified witnesses. H & T Fair Hills, Ltd. v. Alliance Pipeline L.P., 2020 WL 5512517 (D. Minn. 9/14/2020).
• Fed. R. Civ. P. 8; short and plain statement; failure to cure deficiencies. Having previously found that the plaintiff’s complaint failed to provide a “short and plain statement” of the claims against each defendant in an action arising out of the alleged improper use of confidential information, Judge Davis granted the plaintiff 30 days to amend its claims with “clarity and brevity.” The plaintiff subsequently dropped its claims against two defendants, and incorporated into its amended complaint a chart that, it asserted, provided sufficient notice of the alleged conduct by each defendant. However, Judge Davis found that the chart provided “neither clarity nor brevity,” found that the amended complaint continued to violate Rule 8, and denied the plaintiff’s request that it be allowed another chance to amend to cure its pleading deficiencies. C.H. Robinson Worldwide, Inc. v. Traffic Tech, Inc., 2020 WL 5569986 (D. Minn. 9/17/2020).
• Multiple frivolous actions; passage of time; injunction not warranted. Overruling the plaintiff’s objections to a report and recommendation by Magistrate Judge Wright, Judge Brasel dismissed the pro se plaintiff’s “thought control” claims with prejudice, but agreed with Magistrate Judge Wright that an injunction against future litigation and sanctions was not warranted when more than two decades had elapsed since the filing of the plaintiff’s last frivolous lawsuits. Sykes v. Klemp, 2020 WL 5768919 (D. Minn. 9/28/2020).
• Motion to remand; removal based on federal defenses rejected. In a case arising out of an alleged failure to warn how to properly fit and wear military-issue earplugs that had been removed based on three federal defenses, Chief Judge Tunheim cited his previous decision in rejecting the defendants’ reliance on the federal contractor defense; rejected the combatant activities exception, finding that 3M had not been “integrated into combatant activities;” and rejected the federal enclave defense where none of the plaintiffs alleged that they suffered injuries on a federal enclave. Accordingly, plaintiffs’ motion to remand was granted. Copeland v. 3M Co., 2020 WL 5748114 (D. Minn. 9/25/2020).
• Motion to dismiss; impact of amended complaint. Where defendants filed a motion to dismiss and the plaintiffs amended their complaint while the motion was pending, Judge Brasel held that the defendants were not required to file a new motion, and that she could consider the motion as being addressed to the amended complaint. Halla v. LikeZebra, LLC, 2020 WL 5517492 (D. Minn. 9/14/2020).
• Request for reconsideration denied; failure to comply with L.R. 7.1(j). Where the defendant sought reconsideration of Judge Wright’s claim construction ruling but failed to file a letter requesting permission to file a motion for reconsideration in accordance with L.R. 7.1(j), Judge Wright found that the motion was “not properly before the Court” and denied the request on that basis. Niazi Licensing Corp. v. St. Jude Med. S.C., Inc., 2020 WL 5512507 (D. Minn. 9/14/2020).
Josh Jacobson, Law Office of Josh Jacobson
IMMIGRATION LAW
JUDICIAL LAW
• No likelihood of torture based on ethnic minority group membership. The 8th Circuit Court of Appeals held that the Board of Immigration Appeals (BIA) correctly found the petitioner—a derivative member (through his parents) of the Sudanese minority tribes Yambara and Pojulu—must show more than a mere pattern of general ethnic violence in South Sudan to meet the requirement under the Convention Against Torture (CAT) that he would more likely than not be tortured either by or with the consent of South Sudanese officials if he were returned to the country. “The fact that Lasu is a member of one of sixty ethnic minority tribes that ‘could be’ tortured does not compel the conclusion that he is more likely than not to be tortured.” Lasu v. Barr, 18-3550, slip op. (8th Cir. 7/31/2020). https://www.ca8.uscourts.gov/sites/ca8/files/opinions/183550P.pdf
• No CAT relief for HIV-positive member of the Begedi Clan in Somalia. The 8th Circuit Court of Appeals upheld the Board of Immigration Appeals’ (BIA) denial of the petitioner’s application for deferral of removal under the Convention Against Torture (CAT), when it found the immigration judge committed error with a prediction that the petitioner (a member of the minority clan Begedi) would more likely than not be tortured if returned to Somalia. More precisely, the immigration judge mistakenly relied upon testimony lacking adequate foundation, country reports addressing human rights violations at too high a level of generality, and cited treatment of people with HIV in Somalia that either fell short or was insufficiently widespread to show the petitioner would likely suffer torture. Abdi Omar v. Barr, 18-3351, slip op. (8th Cir. 6/26/2020). https://www.ca8.uscourts.gov/sites/ca8/files/opinions/183351P.pdf
• Obstruction of legal process is not categorically a crime involving moral turpitude (CIMT). The 8th Circuit Court of Appeals held that the Board of Immigration Appeals (BIA) committed error when it found the petitioner’s Minnesota conviction for obstruction of legal process under Minn. Stat. Ann. §609.50, subdiv. 2(2) to be categorically a crime involving moral turpitude (CIMT). Most importantly, it concluded there was a “realistic probability that Minnesota would apply its obstruction of legal process statute to cases lacking the requisite degree of scienter necessary to constitute a crime of moral turpitude,” and “the level of harm required to complete the offense was insufficient to constitute a crime of moral turpitude.” Accordingly, it granted the petition for review and vacated the BIA’s order of removal. Ortiz v. Barr, 19-1285, slip op. (8th Cir. 6/23/2020). https://ecf.ca8.uscourts.gov/opndir/20/06/191285P.pdf
• District court issues preliminary injunction halting president’s proclamation that sought to suspend entry of certain nonimmigrants. On 6/22/2020 and 6/29/2020, the president 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”) suspending the entry of certain groups until 12/31/2020, with discretion to extend it further, “as necessary.” Section 2 of the proclamation relates to certain nonimmigrant worker visa holders subject to the suspension: (1) L visas: intra-company transfers to non-citizens already employed by American businesses; (2) H-1B visas: highly skilled workers coming to America temporarily to perform services in a specialty occupation for which they are uniquely qualified; (3) H-2B visas: seasonal laborers responding to proven domestic labor shortages; and, (4) J visas: cultural exchange visitors in a variety of work-study programs nationwide.
On 7/22/202, the plaintiffs filed their complaint seeking to invalidate the proclamation based on the grounds that 1) it exceeds the authority of the executive branch (or constitutes ultra vires conduct) and 2) for violation of the Administrative Procedures Act (APA).
On 7/31/2020, the plaintiffs filed a motion for a preliminary injunction.
On 10/1/2020, focusing on the first ground, the U.S. District Court (N.D. Cal.) issued a preliminary injunction finding the plaintiffs had standing; were likely to prevail on the merits; and had proven irreparable harm should the injunction not be granted. Accordingly, the court issued a preliminary injunction, observing that “the Court finds that the public interest is served by cessation of a radical change in policy that negatively affects Plaintiffs whose members comprise hundreds of thousands of American businesses of all sizes and economic sectors. The benefits of supporting American business and predictability in their governance will inure to the public.” The plaintiffs affected by the preliminary injunction include: Intrax, Inc. (a leading operator of culture exchange programs in the United States), National Association of Manufacturers, U.S. Chamber of Commerce, National Retail Federation, and TechNet. 85 Fed. Reg. 38,263-267 (6/25/2020) (Proclamation). https://www.govinfo.gov/content/pkg/FR-2020-06-25/pdf/2020-13888.pdf ; 85 Fed. Reg. 40,085-086 (Proclamation Amendment) (7/2/2020) https://www.govinfo.gov/content/pkg/FR-2020-07-02/pdf/2020-14510.pdf ; National Association of Manufacturers, et al., v. U.S. Department of Homeland Security, et al., No. 20-cv-04887-JSW (N.D. Cal. 10/1/2020). https://www.courthousenews.com/wp-content/uploads/2020/10/Natl-Manufacturers-v.-Homeland-Security.pdf
ADMINISTRATION ACTION
• DOL issues interim final rule on prevailing wages. The Department of Labor (DOL) issued an interim final rule (“Strengthening Wage Protections for the Temporary and Permanent Employment of Certain Aliens in the United States”), with comments due by 11/9/2020, amending regulations having to do with the computation of prevailing wages for permanent labor certifications and labor condition applications (LCAs). 85 Fed. Reg. 63,872-915 (10/8/2020). https://www.govinfo.gov/content/pkg/FR-2020-10-08/pdf/2020-22132.pdf
• DHS issues interim final rule on “specialty occupation” and more. The Department of Homeland Security (DHS) issued an interim final rule (“Strengthening the H-1B Nonimmigrant Visa Classification Program”), with comments due by 11/9/2020, revising the definition of “specialty occupation” (with other changes addressing third party worksites and employer-employee relationships, among others) in the regulations devoted to H-1B worker visas. 85 Fed. Reg. 63,918-65 (10/8/2020). https://www.govinfo.gov/content/pkg/FR-2020-10-08/pdf/2020-22347.pdf
• DOJ reaches settlement with sports manufacturing company WinCraft, Inc. The U.S. Department of Justice (DOJ), Civil Rights Division, Immigrant and Employee Rights Section, reached a settlement agreement with WinCraft, Inc., a Minnesota-based sports manufacturing company, that resolved claims it violated the Immigration and Nationality Act by requiring lawful permanent residents to provide specific work authorization documentation, because of their immigration status, without legal justification—in short, engaging in a pattern or practice of citizenship discrimination. The agreement involved a civil fine of $5,400, revision of the company’s employment policies, and training regarding employer obligations under 8 U.S.C. §1324b (Unfair Immigration-Related Employment Practices). https://www.justice.gov/opa/pr/justice-department-settles-minnesota-based-company-resolve-discrimination-claims-under
R. Mark Frey, Frey Law Office
INTELLECTUAL PROPERTY
JUDICIAL LAW
• Patent law: Expert not excluded for lack of patent law knowledge. Judge Wright recently denied a motion to exclude a technical expert on the basis that the expert lacked knowledge related to patent law principles. Plaintiff Niazi Licensing Corporation (NLC) sued St. Jude Medical S.C., Inc. for patent infringement related to NLC’s patent directed to a catheter system that can be inserted into the coronary sinus of the heart. The parties filed cross motions to exclude expert testimony. St. Jude moved to exclude Dr. Martin Burke on the basis that Dr. Burke did not understand the difference between direct and indirect infringement. Under Rule 702, a witness who lacks the relevant technical expertise for the proffered testimony does not meet the standard of admissibility. Conversely, however, a challenge to the infringement expert’s expertise in patent law does not undermine the expert’s qualifications related to the subject matter of the proffered testimony. Dr. Burke was offered as an expert in electrophysiology to opine on the medical procedure for implanting permanent pacing leads into the coronary sinus. His qualifications related to these matters were not disputed. NLC did not offer Dr. Burke as an expert on patent law. The court identified no case law suggesting that a technical expert must be capable of reciting the difference between direct and indirect infringement or that such an inability is an appropriate basis for exclusion. The court denied St. Jude’s motion to exclude. Niazi Licensing Corp. v. St. Jude Med. S.C., No. 17-cv-5096 (WMW/BRT), 2020 U.S. Dist. LEXIS 167562 (D. Minn. 9/14/2020).
• Patent law: Pleading standard for inequitable conduct. Judge Frank recently granted in part and denied in part defendants’ motion to dismiss claims of inequitable conduct. Plaintiff Corning Inc. sued defendants Wilson Wolf Manufacturing Corp. and John R. Wilson seeking declaratory judgments of patent non-infringement, invalidity, and unenforceability of Wilson Wolf’s patents. Corning alleged four grounds of inequitable conduct. Pleading inequitable conduct in patent cases, subject to Rule 9(b), requires identification of the specific elements (who, what, when, where, and how) of the material misrepresentation or omission committed before the Patent Office. The pleading must also allege facts sufficient to give rise to a reasonable inference of scienter, including both (1) knowledge of the withheld material information or of the falsity of the material misrepresentation, and (2) specific intent to deceive the Patent Office. The court dismissed without prejudice three of Corning’s four inequitable conduct charges. The court found Corning’s charge that test data did not support the patent claims (i.e. not that the data was incorrect or falsified) failed to sufficiently plead the knowledge requirement. Corning’s charge that the patentee failed to disclose adverse data was dismissed because allegations related to “other data” lacked the particularity to state a claim for inequitable conduct. Corning’s charge that patentee failed to disclose the Corning-Wilson interference proceeding was dismissed because Corning only identified several documents it believed should have been disclosed but did not further plead where in those references the material information was found. The court, however, denied the motion to dismiss with respect to the charge that patentee submitted a biased expert declaration. Corning’s charge sufficiently pleaded facts that patentee filed an expert declaration that failed to disclose the expert’s relationship to the company, facts that the examiner relied on the declaration, the claims and claim limitations that the biased declaration were relevant to, and facts sufficient to infer intent. Corning Inc. v. Wilson Wolf Mfg. Corp., No. 20-700 (DWF/TNL), 2020 U.S. Dist. LEXIS 185103 (D. Minn. 10/6/2020).
Joe Dubis, Merchant & Gould
REAL PROPERTY
JUDICIAL LAW
• Cartway damages award order. A district court order awarding damages for landowners affected by a township’s grant of a petition for a cartway constitutes a civil judgment that may be renewed pursuant to the renewal process set forth in Minnesota Statutes section 541.04. At issue in this decision were efforts by defendants in this action to earlier obtain access to their property located at the tip of a peninsula. In 2003, they petitioned South Harbor Township for a cartway. The township granted the petition in 2006 and awarded general damages to the affected landowners. The affected landowners appealed to the district court and obtained a 2008 district court order affirming a township’s decision to grant the petition but ordering specific damages to affected landowners. The order was not reduced to a judgment. The petitioning landowners never opened the cartway and therefore did not pay the special damages. In 2018, the affected landowners instituted an action to renew the order awarding the special damages. The parties cross-moved for summary judgment and the district court granted it in favor of the defendants, deciding that the 2008 order was not a renewable judgment and that litigation between the 2008 order and the 2018 litigation barred the 2018 lawsuit. The court of appeals reversed, holding that because the 2008 order established that the defendants could open the cartway as soon as they pay the special damages awarded, it was a “final determination of the rights of the parties in an action or proceeding” as Rule 54.01 defines a judgment, and therefore was subject to renewal under section 541.04 of Minnesota Statutes. Ratfield v. South Harbor Twp., No. A20-0135, 2020 WL 5507875 Minn. App. 9/14/2020).
• Easement grantor rights. The terms of the grant of a non-exclusive easement define the rights of the easement holder, not the rights of the easement grantor, whose rights depend on its ownership of the burdened parcel and the common law prohibition on unreasonable interference with the easement holder’s use of the easement. Furthermore, the party alleging a violation of the easement agreement sufficient to obtain an order preventing the use must submit evidence to show not only an interference, but that the interference is unreasonable. In this decision, the plaintiffs commenced an action to quiet title and obtain a declaration that a driveway easement and a road agreement between tenants-in-common owners of a vacated road did not prevent them from using the road and modifying and using a driveway. The parties made cross-motions for summary judgment. The district court held that the driveway easement and the road agreement prohibited the plaintiffs’ use and therefore did not decide whether the use constituted an unreasonable interference. The court of appeals reversed and also decided that the defendants failed to supply evidence that the use was an unreasonable interference and therefore remanded for the entry of judgment in favor of the plaintiffs. Dunkley v. Hueler, No. A19-2047, 2020 WL 5507847 (Minn. App. 9/14/2020).
Julie N. Nagorski, DeWitt LLP
Patrick C. Summers, DeWitt LLP
TAX LAW
JUDICIAL LAW
• Motion to dismiss granted for lack of subject matter jurisdiction. Mr. Cano filed a notice of appeal challenging the Commissioner of Revenue’s 1/28/2020 notice of determination on appeal. Mr. Cano did not serve a copy of his appeal on the commissioner. The commissioner moved for dismissal for lack of subject matter jurisdiction. Mr. Cano orally opposed the motion during a telephone hearing.
A taxpayer wishing to appeal an order of the commissioner must follow statutory filing and service requirements. Within 60 days after the notice date of an order of the commissioner, the appellant shall serve a notice of appeal upon the commissioner and file the original, with proof of such service, with the tax court. See Minn. Stat. §271.06, subd. 2 (2018). When an extension is granted, an appellant must within 90 days serve the notice of appeal on the commissioner and file the original notice, with proof the commissioner received a copy, and the filing fee with the court. See Naji v. Comm’r of Revenue, No. 8955-R, 2017 WL 811940, at *1 (Minn. T.C. 1/20/2017).
Timely service requirements are prescribed by legislation. When the process and timeline are not followed, the court cannot acquire jurisdiction. See Auto Motion Sales, L.L.C., 2015 WL 2018321, at *1. After receiving an extension, Mr. Cano had until 4/27/2020 to correctly file his appeal. Although Mr. Cano timely filed his appeal with the tax court on 3/27/2020, he never served the commissioner. Because Mr. Cano did not serve a copy of his notice of appeal on the commissioner, the court lacked subject matter jurisdiction and granted the commissioner’s motion to dismiss. Cano v. Comm’r of Revenue, 2020 WL 5509737 (Minn. TC 9/9/20).
• Petitioner requests continuance pending outcome of MN Supreme Court case; court denies motion. Previously, the court denied petitioner Chambers Self-Storage Oakdale, LLC’s motion for leave to amend its petition to add two constitutional claims: one under the Minnesota Constitution’s uniformity clause, and one under the federal Constitution’s equal protection clause. See Chambers Self-Storage Oakdale, LLC v Cty. of Washington, No. 82-CV-17-1685 et al., 2020 WL 4459046, at *8-10 (Minn. T. C. 7/29/2020). The court denied the motion because 1) justice did not require a late-stage amendment that would not entitle Chambers to any additional remedy and, 2) Chambers failed to state a claim upon which relief could be granted. The trial date was then set for 9/15/2020.
In an unrelated matter, Walmart, Inc., is requesting that the Minnesota Supreme Court review a recent Minnesota Court of Appeals decision, Walmart Inc. v. Winona County, Nos. A19-1877 & A19-1878, 2020 WL 3956251 (Minn. App. 7/13/2020). If accepted for review, Walmart, Inc.’s issues for consideration are: 1) “does chapter 278 provide the exclusive means for making all property-tax challenges such that an aggrieved taxpayer targeted for intentional, arbitrary or systematic discrimination has no recourse to vindicate its federal and state constitutional rights to equal treatment, and 2) does a complaint alleging a violation of Walmart’s federal and state constitutional rights to equal protection and uniformity in taxation based on ‘intentional, arbitrary or systematic’ discrimination satisfy the notice-pleading standard [the supreme court] affirmed in Walsh?”
Chambers requested that the tax court continue the trial pending outcome of the petition for review of Walmart Inc. v. Winona County, arguing that should the Walmart case be reversed, Chambers’ previously denied motion for leave to amend must be reconsidered. Washington County opposes the motion, arguing the Walmart petition for review is “entirely distinguishable” from the present cases. The county asserts that Walmart’s petition for review deals with Walmart›s Section 1983 and Section 1988 claims, neither of which have been alleged here. See 42 U.S.C. §§1983, 1988 (2012). The county also argues that, although Walmart›s petition also deals with equal protection claims, any constitutional unequal assessment relief continues to be already encompassed by its timely pled statutory claims.
The court noted that even if Walmart’s petition for review is accepted for a formal appeal, the outcome will have no bearing on their conclusion that justice did not require amendment on a late-filed motion to amend where Chambers could not identify any additional remedy. Because good cause did not exist to continue the trial, the court denied Chambers’ motion for continuance. Chambers Self-Storage Oakdale, LLC v. Washington Co., 2020 WL 5520639 (Minn. TC 9/10/20).
• Property tax: court denies petitioner’s motion to amend petition. On 5/11/2020, petitioner Mark R. Smith filed a property tax petition in Washington County challenging the county assessor’s estimated market value for 8 parcels of real property located in Forest Lake. “Box 6 of Smith’s Minnesota Tax Court Form 7 petition reads: ‘Assessment Date: January 2, 2020, for taxes payable 2021.’ The underlined terms appear as blanks on the form, and Smith hand-wrote ‘2020’ and ‘2021’ in the two blanks, respectively.” The acknowledgement and waiver of service of tax petition that Mr. Smith obtained from the county identified the tax payable year as 2021, which was also handwritten by Mr. Smith.
Box 5 of the Form 7 petition provides: “’You must ATTACH to this petition… ONE OF THE FOLLOWING: (a) the contested notice of valuation, (b) property tax statement, or (c) legal description of the property (including the Property I.D. Number).” Seven of eight parcels that Mr. Smith identified in his petition had attached a tax statement pertaining to 2019 assessment values, instead of the 2020 assessments dates identified in Box 6.
On 6/12/2020, Mr. Smith filed a motion for leave to amend his petition as follows: “On the real property tax petition line 6. Change the assessment date: January 2, 2020 for taxes payable in the year 2021 to: assessment date: January 2, 2019 for taxes payable in the year 2020. In addition the acknowledgement and waiver of service of tax petition the tax payable year: should read 2020.”
Mr. Smith explained that he intended to file challenges pertaining to the 2019 assessment date. The county filed a memo asking the court to decline Mr. Smith’s request for leave to amend, stating that Mr. Smith 1) failed to meet the statutory requirement to clearly identify the assessment date when the May 2020 petition reflected an appeal of real estate taxes for assessment year 2020/pay year 2021, and 2) Mr. Smith untimely requested to amend the petition to reflect the appeal period of assessment year 2019/pay year 2020, for which the deadline was 5/30/2020.
Minnesota Statutes section 278.02 states that a Chapter 278 property tax petition need not be in any particular form, but shall clearly identify the property and the assessment date, and clearly assert the claim, defense, or objection. Additionally, no petition shall include more than one assessment date. A tax court rule requires a property tax petition to specify the assessment date at issue. See Minn. R. 8610.0050, subp. 2 (2019). On its website, the tax court makes available to taxpayers the Minnesota Tax Court Form 7, Real Property Tax Petition. To assist taxpayers in satisfying statutory pleading requirements, Box 5 of Form 7 requires taxpayers to describe the subject property by attaching to the petition “(a) the contested notice of valuation, (b) property tax statement, or (c) legal description of the property (including the Property I.D. Number),” and Box 6 requires specifying the assessment date.
Minnesota Rule of Civil Procedure 15.01 states in relevant part “a party may amend a pleading once as a matter of course at any time before a responsive pleading is served… otherwise a party may amend a pleading only by leave of court or by written consent of the adverse party; and leave shall be freely given when justice so requires.” See Minn. R. Civ. P. 15.01. The Minnesota Supreme Court has emphasized that a “motion to amend… should be freely granted, except where to do so would result in prejudice to the other party.” See Marlow Timberland, 800 N.W.2d at 640 (quoting Fabio v. Bellomo, 504 N.W.2d 758, 761 (Minn. 1993)).
The tax court stated in its analysis that Mr. Smith’s Form 7 petition unambiguously identifies the assessment date as 1/2/2020, but Mr. Smith now requests leave to amend his petition to instead identify the assessment date as 1/2/2019. The court concluded that allowing Mr. Smith to amend his petition would be equivalent to letting him file a brand new Chapter 278 claim with respect to the 2019 assessment date. Because Mr. Smith did not request leave to amend his petition until 6/12/2020, after the Legislature’s extended deadline of 5/30/2020 due to the pandemic, the court denied Mr. Smith’s motion for leave to amend his property tax petition. Smith v. Washington Co., 2020 WL 5887224 (Minn. TC 9/30/2020).
• Written approval by supervisor required before penalty assessment. Taxpayers Dr. Sunil S. Patel and Laurie McAnally Patel had deficiencies totaling $1,700,000 and penalties of just under $400,000 were assessed. In cross-motions for summary judgment, the court addressed the Patels’ argument that the Service did not secure timely written supervisory approval for the penalties at issue as required. The court granted in part and denied in part the motion.
Taxpayers who underpay can be subject to various statutory penalties. For example, if a taxpayer underpays due to their “[n]egligence or disregard of rules or regulations” or “[a]ny substantial understatement of income tax,” or both, that taxpayer faces an accuracy-related penalty equal to 20% of the portion of an underpayment. See IRC Sec. 6662(a); (b)(1); (2). Similarly, if a taxpayer engages in a transaction lacking economic substance, that taxpayer faces a penalty equal to 20% of the portion of an underpayment attributable to the transaction. IRC Sec. 6662(a) and (b)(6). An even stiffer 40% penalty applies to taxpayers whose underpayment is attributable to one or more “nondisclosed noneconomic substance transactions.” Sec. 6662(i).
Before such penalties may be assessed, however, the Service must satisfy certain internal processes, including review by a supervisor. Importantly, that review must culminate in written supervisory approval. IRC Sec. 6751(b)(1) (proving no penalties may be assessed unless the initial determination of such assessment is personally approved in writing by the immediate supervisor of the individual making such determination or such higher level official as the secretary may designate). Recent tax court case law requires that the section 6751(b)(1) approval must be completed before the first formal communication to the taxpayer that demonstrates that an initial determination has been made (e.g., Belair Woods, LLC v. Comm’r, 154 T.C. ––––, ––––(slip op. at 24-25), 2020 WL 58313 (Jan. 6, 2020); Clay v. Comm’r, 152 T.C. 223, 249 (2019)).
In this case, the Service was able to demonstrate compliance with the approval requirement for some, but not all, of the penalties at issue. No deductions, large or small, for hair care. “Grooming expenses (e.g., hair and nail maintenance) are inherently personal expenses, and amounts expended for grooming are not deductible regardless of whether an employer requires an employee to be well groomed.” Armstrong v. Comm’r, No. 23698-18S, 2020 WL 5569699 (T.C.S. 9/17/2020) (denying, among other claimed unreimbursed business expenses, petitioner’s $1,775 deduction for grooming expenses). Patel v. Comm’r, T.C.M. (RIA) 2020-133 (T.C. 2020).
• Numerous whistleblower decisions. The tax court issued multiple decisions relating to whistleblower claims. The majority of the reported decisions this month resulted in no relief for the whistleblowers. E.g., Stevenson v. Comm’r, T.C.M. (RIA) 2020-137 (T.C. 2020) (granting summary judgment to IRS because the IRS Whistleblower Office did not abuse its discretion in rejecting petitioner’s claim on the ground that he did not provide information regarding any federal tax violation); Neal v. Comm’r, T.C.M. (RIA) 2020-138 (T.C. 2020) (rejecting whistleblower’s challenge to the sufficiency of the administrative record and holding that on the basis of the administrative record as certified by the IRS, the WBO did not abuse its discretion when it denied petitioner’s claim of a whistleblower award); Damiani v. Comm’r, T.C.M. (RIA) 2020-132 (T.C. 2020) (holding that, “[o]n the basis of this record, we have no difficulty concluding that the Office did not abuse its discretion in rejecting petitioner’s claims for failure to allege any Federal tax issue” and therefore granting summary judgment the commissioner); Friedel v. Comm’r, T.C.M. (RIA) 2020-131 (T.C. 2020) (granting summary judgment after having “no difficulty concluding that the Office did not abuse its discretion in rejecting petitioner’s claims”).
In two cases, however, the Service’s motion for summary relief was rejected in whole or in part: Doyle and Moynihan v. Comm’r, T.C.M. (RIA) 2020-139 (T.C. 2020) (rejecting the Whistleblower Office’s determination that its own criminal investigation did not “proceed[ ] with any… action” for purposes of I.R.C. sec. 7623(b)(1) was not supported by the administrative record and thus constituted an abuse of discretion and therefore denying commissioner’s motion for summary judgment); Worthington v. Comm’r, T.C.M. (RIA) 2020-141 (T.C. 2020) (denying whistleblower’s motion for summary judgment in which he asked the court to “order strict compliance with the intent of congress and the IRS manual, to ‘require the whistleblower office to analyze whistleblower claims’ and analyze them under the proper IRS codes supported by form 211” but also rejecting the commissioner’s motion for summary judgment because the WBO’s final determination letter was equivocal as to whether it constituted a threshold “rejection” based on the face of the whistleblower’s claim or a substantive “denial” making a decision not to audit after performing research outside the claim).
• Kentucky nonprofit corporation not entitled to elect S Corp status. In 2012 Waterfront Fashion Week, Inc. was organized under Kentucky law as a nonstock, nonprofit corporation. The organization was established for the purpose of holding the Fashion Week event and distributing proceeds from the event to qualified recipients, including Waterfront Park. Unfortunately, Waterfront was not able to find sufficient sponsors or contributors to break even, and eventually the president (the petitioner in this case) decided to assume “complete control” over planning Waterfront Fashion Week, abandoned plans for Waterfront to obtain federal tax-exempt status, and began treating Waterfront as a “for-profit business that [he] owned entirely.” He contributed over $275,000 to Waterfront representing over 85% of the total cost of Waterfront Fashion Week.
In 2014, in his capacity as Waterfront’s president, petitioner filed an election for Waterfront to be treated as an S corporation, effective retroactively to the date of its incorporation in 2012. Petitioner later filed untimely individual income tax returns for his taxable years 2012 and 2013, claiming Waterfront’s reported operating losses as offsets against his individual taxable income. By notice of deficiency respondent disallowed these claimed pass-through losses.
In granting the commissioner’s motion for summary judgment, the tax court considered the intersection of S Corp shareholder requisites and Kentucky’s nonprofit corporations law. The court concluded that the “petitioner, as an officer and director of Waterfront, subject to the constraints of the Act and Waterfront’s articles of incorporation, lacked ownership rights in Waterfront equivalent to those of a shareholder for purposes of applying subchapter S.” Noting that “[t]axpayers are generally bound by the form of the transaction they choose,” the court similarly rejected the petitioner’s substance-over-form argument. The petitioner argued the court should regard Waterfront as, in substance, a for-profit entity because petitioner “intended Waterfront to be a for-profit entity and ‘objectively operated’ it ‘consistently with it being a for-profit entity that he owned entirely.’” Finally, the court held that Waterfront’s failure to seek federal tax-exempt status had no bearing on its nonprofit status under state law. Deckard v. Comm’r, No. 11859-17, 2020 WL 5569696 (T.C. 9/17/2020).
ADMINISTRATIVE ACTION
• IRS guidance. In response to a federal district court opinion, the IRS has updated its guidance on the Economic Impact Payment Eligibility. In Scholl v. Mnuchin, the court held that the IRS cannot deny an Economic Impact Payment to someone who is incarcerated if that individual otherwise satisfies the criteria for receiving a payment. The court enjoined the Treasury from “withholding benefits pursuant to 26 U.S.C. §6428 from plaintiffs or any class member on the sole basis of their incarcerated status.” Scholl v. Mnuchin, No. 20-CV-05309-PJH, 2020 WL 5702129 (N.D. Cal. 9/24/2020). The Service has requested a stay of the district court’s preliminary injunction, and while the request for the stay is pending, the case is moving forward at the district court.
Morgan Holcomb, Mitchell Hamline School of Law
Sheena Denny, Mitchell Hamline School of Law