Criminal Law
JUDICIAL LAW
• Criminal sexual conduct: Previous predatory crime qualifies for engrained offender sentencing enhancement if committed before sentencing. Appellant was convicted of second-degree criminal sexual conduct and the district court imposed an enhanced sentence, finding appellant was both a dangerous offender and an engrained offender. Appellant appealed his conviction and sentence.
To be considered a “dangerous offender” at sentencing, “at the time of sentencing,” the offender must have “two or more prior convictions for violent crimes.” The dangerous offender statute, Minn. Stat. §609.1095, defines “prior conviction” as one “that occurred before the offender committed the next felony resulting in a conviction and before the offense for which the offender is being sentenced.” The district court used a 2010 criminal sexual conduct conviction and 2017 second-degree assault conviction as the prior offenses. However, the 2017 conviction was based on an offense that occurred in 2016. The offense in this case occurred in 2015. Thus, appellant only had one prior conviction for a violent crime under section 609.1095 and the district court erred in determining he met the criteria to be sentenced as a dangerous offender.
But the district court’s finding that appellant should be sentenced as an engrained offender was found to be correct. An offender convicted of criminal sexual conduct is eligible for an enhanced offense as engrained offender if they are a “danger to public safety” and the factfinder determines “the offender’s criminal sexual behavior is so engrained that the risk of reoffending is great without intensive psychotherapeutic intervention or other long-term treatment or supervision extending beyond the presumptive term of imprisonment and supervised release.” Minn. Stat. §609.3455, subd. 3a(a).
An offender may be a danger to public safety if, among other possibilities, they previously committed a predatory crime. A “predatory crime” includes second-degree assault (appellant’s 2017 conviction), but not second-degree criminal sexual conduct (appellant’s 2010 conviction). Appellant argues his assault conviction does not qualify because it was committed after the 2015 criminal sexual conduct offenses. Section 609.3455 directs the district court to impose an enhanced sentence if it “determines” the offender is a public safety danger. The use of the present tense form of “determines” signifies that the time frame for assessing the offender’s danger “is the point in time when the fact finder makes that determination.” The court holds that the statute’s plain meaning “is that the predatory offense must have been committed before ‘the fact finder determines that the offender is a danger to public safety.’” Appellant’s assault offense was committed before the sentencing phase in this case, so the district court properly found he was a danger to public safety.
The court also finds ample support in the record for the district court’s determination that appellant’s criminal sexual behavior was so engrained as to warrant extended supervision. As the record also contains sufficient evidence to support his conviction, both appellant’s conviction and sentence are affirmed. State v. Balsley, A23-0133, 2023 WL 8361314 (Minn. Ct. App. 12/4/2023).
• Procedure: Reversal of conviction is not required for an unfulfilled promise in a plea agreement if the record does not clearly reveal the agreement’s terms. Appellant pleaded guilty to two counts of third-degree criminal sexual conduct, in two separate cases, pursuant to a plea agreement that resolved both cases and that, appellant argues, called for concurrent stayed prison sentences. He was instead sentenced to consecutive stayed prison sentences. The plea petition in each case stated the agreed-upon sentence in one case was as follows: “10 years of supervised probation. Guideline stay of execution with cap of 90 days jail.” Each petition also said the sentence in the second case was as follows: “10 years of supervised probation, guideline stay of execution with cap of 90 days jail, concurrent.” At the sentencing hearing, the prosecutor made conflicting and confusing statements about whether the agreement called for concurrent or consecutive sentences.
Where a promise made in a plea agreement is not fulfilled, “the defendant cannot be said to have voluntarily entered into the plea agreement.” A direct appeal challenging the validity of a guilty plea is appropriate where the record is complete. Here it is not. The record is not clear as to whether the parties agreed that appellant’s two 90-day probationary jail terms would be concurrent. The proper avenue for appellant’s challenge is a postconviction petition, as postconviction proceedings allow for the presentation and evaluation of matters not of record. Thus, appellant’s convictions are affirmed.
Court finds, however, that the district court erred by failing to state its reasons for imposing consecutive stayed sentences. Under the sentencing guidelines, the presumptive sentence is a concurrent stayed sentence, so the district court could impose a consecutive sentence only by departing from the guidelines. The district court never stated its intention to depart, nor did it state any reasons for a departure. The court affirms appellant’s convictions but reverses the sentences and remands for imposition of concurrent stayed prison sentences. State v. Arola Johnson, A23-0134, 2023 WL 8360167 (Minn. Ct. App. 12/4/2023).
• Right to a fair trial: New trial granted due to prosecutor’s statements during closing that appellant lost the presumption of innocence before deliberations. Appellant was charged with second-degree criminal sexual conduct following allegations that he abused his girlfriend’s 11-year-old daughter. At trial, during its rebuttal closing argument, the state told the jury, “[Appellant] no longer has that presumption… He no longer has that presumption of innocence. He has been proven guilty beyond a reasonable doubt… he no longer has that presumption of innocence.” The jury found appellant guilty of one count of second-degree criminal sexual conduct. The court of appeals affirmed appellant’s conviction.
The Supreme Court examines whether the state’s presumption of innocence statements deprived appellant of his 6th Amendment right to a fair trial. Because defense counsel did not object to the state’s closing argument, the Court applies the modified plain error test, which requires (1) appellant to demonstrate the prosecutorial misconduct was plain error; (2) the state to thereafter demonstrate the error did not affect appellant’s substantial rights; and (3) the reviewing court to determine if ensuring fairness and the integrity of the judicial system requires addressing the error. State v. Ramey, 721 N.W.2d 294, 300 (Minn. 2006).
The Court finds that the state’s statements were not consistent with Minnesota law. A defendant is not proven guilty until a jury has deliberated and reached the conclusion of guilt. Until this conclusion is reached, a defendant retains the presumption of innocence. This error was plain because it contravenes well-established law.
The Court also finds the evidence against appellant was not strong, as it consisted primarily of uncorroborated, inconsistent reports by the alleged victim regarding acts from many years prior. Although the trial court gave a pattern instruction on the presumption of innocence, the Court finds it was not specific enough to remedy the state’s error, as it failed to correct the state’s misstatement or clarify that appellant retained the presumption of innocence. The Court finds a reasonable likelihood that the state’s misstatement may have had a significant effect on the jury and, therefore, appellant’s substantial rights were affected.
Finally, the Court finds it is necessary to address the state’s error to ensure fairness and the integrity of the judicial proceedings. Remanding for further proceedings allows the state to still seek justice for the alleged victim, while enforcing the constitutional protections afforded to all criminal defendants. State v. Portillo, A21-1621, 2023 WL 8610196 (Minn. 12/13/2023).
• Firearms: Statute prohibiting possession of a firearm without a serial number is not unconstitutionally vague. The state appeals the dismissal of a charge against respondent of possessing a privately made firearm lacking a serial number. The Minnesota Court of Appeals finds the relevant charging statute, Minn. Stat. §609.667(3), not unconstitutionally vague and finds probable cause to support the charge, reversing and remanding to the district court.
Section 609.667(3) prohibits “receiv[ing] or possess[ing] a firearm that is not identified by a serial number.” “Serial number” is the number required under 26 U.S.C. §5842. Section 609.667(3) incorporates the definition of “serial number” used in the federal law, but it does not limit its application only to firearms required to have a serial number by federal law. Section 609.667(3) is not vague because it plainly “prohibits the possession of any firearm that is not identified by serial number, regardless of whether federal law would require a serial number for a particular firearm.” Section 609.667(3), then, applies to privately made firearms.
The record shows respondent knowingly possessed a firearm and that the firearm had no serial number. Thus, there was probable cause to support the charge against respondent. State v. Vagle, A23-0863, 2023 WL 8706087 (Minn. Ct. App. 12/18/2023).
Samantha Foertsch
Bruno Law PLLC
samantha@brunolaw.com
Stephen Foertsch
Bruno Law PLLC
stephen@brunolaw.com
Employment & Labor Law
JUDICIAL LAW
• Wage payment claim; non-employee not entitled to sue. A claim of failure to pay compensation under the state Payment of Wages Act, Minn. Stat. §181.79, failed because the claimant was not an “employee” of the nonprofit organization for which he performed services, while also being on its board of directors. The Minnesota Court of Appeals upheld a post-trial ruling of the Hennepin County District Court setting aside the jury verdict in favor of the employee. Pakonen v. Housing Alternatives, WL 2023 7292822 (Minn. Ct. App. 11/6/2023) (unpublished).
• Disability lawsuit; failure to state claim. A Dakota County employee’s disability discrimination lawsuit, which included breach of contract and negligence claims, was dismissed for failure to state a claim. The Minnesota Court of Appeals affirmed dismissal by the Dakota County District Court for failure to plead sufficient facts that the claimant had a “disability” recognized under the federal Americans with Disabilities Act or the parallel provision of the Minnesota Human Rights Act. Banks v. Dakota County Board of Commissioners, WL 2023 8178145 (Minn. Ct. App. 11/27/2023) (unpublished).
• Employment discrimination; summary judgment affirmed. An insufficient appeal doomed an employment discrimination claimant seeking to overturn summary judgment. The 8th Circuit held that the appeal did not preserve a challenge to the refusal to allow amendment of the complaint and that judgment was proper on the merits. Hossan v. Job Service of North Dakota, WL 2023 8232205 (Minn. Ct. App. 11/28/2023) (unpublished) (per curiam).
• Age bias retaliation; partial reversal. A woman who was fired after her employer offered her several alternatives, then changed its position and required her to accept either a demotion or a resignation with severance, lost her age discrimination claim. Affirming a lower court ruling, the 8th Circuit Court of Appeals held that the employers’ concern over the employee’s work performance was not pretextual. But it reversed and remanded dismissal of a retaliation claim due to the timing of the discharge, which supported an inference of retaliation. Lightner v. Catalent CTS, WL 2023 8885025 (8th Cir. 12/26/2023) (unpublished).
• Overtime pay; settlement bars appeal. An appeal of the settlement of an overtime wage claim under the Fair Labor Standards Act, 29 U.S.C. 201, et seq. barred an appeal by the employer of a pre-settlement order for partial summary judgment for the employee. The 8th Circuit dismissed the appeal because the settlement “dispensed” with the claims and, thus, the prior ruling was not a final order subject to appellate jurisdiction. Folta v. Norfolk Brewing, WL 2023 8858748 (8th Cir. 12/22/2023) (unpublished).
• Retaliatory termination; no pretext. The termination of multiple employees by a company that had a contract to maintain engines for the U.S. Air Force, after the employees had been discussing unionization and had met with union officials, did not constitute an improper retaliatory termination in violation of the National Labor Relations Act. The 8th Circuit Court of Appeals, granting a petition by the company, overruled the determination by the National Labor Relations Board (NLRB) that the claimed reason for the termination—poor performance by the employees—was a pretext for retaliation. There was insufficient evidence to demonstrate that management’s poor performance claim was a pretext for retaliation due to the consideration of unionization by the employees, the court reasoned in setting aside the NLRB decision. Strategic Technology Institute, Inc. v. National Labor Relations Board, 87 F.4th 900 (8th Cir. 2023).
• No return-to-work date; termination upheld. An employee who was out on short-term disability for nine months and did not respond to her employer’s request for a return-to-work date was properly terminated. The 8th Circuit, upholding a lower court ruling, held that the termination of the employee the day after she told her company that her doctor had not released her to return to work, did not constitute unlawful discrimination based upon disability. Johnson v. Midwest Division-RBH, LLC, WL 2023 8535262 (8th Cir. 2023) (unpublished).
• Discrimination claim; summary judgment upheld. An employee who did not establish any basis to reverse a trial court’s summary judgment on a discrimination claim lost an appeal. The 8th Circuit, upholding the lower court, ruled that summary judgment was appropriate and was not refuted by any cognizable arguments on appeal. Nahum v. LMI Aerospace, Inc., WL 2023 8469936 (8th Cir. 2023) (unpublished) (per curiam).
• Ride-sharing dispute; dismissal of contract claim upheld. A dispute between a driver for a vehicle ride-sharing company and the company was maintainable for breach of contract and breach of the implied duty of good faith and fair dealing regarding a refusal by the company to arbitrate. Affirming in part, reversing in part, and remanding a ruling of the Ramsey County District Court, the Minnesota Court of Appeals held that the claim for breach of contract was maintainable, although a number of other claims were properly dismissed. Mariano v. Raiser, WL 2023 8536448 (Minn. Ct. App. 12/11/2023) (unpublished).
Marshall H. Tanick
Meyer, Njus & Tanick
mtanick@meyernjus.com
Environmental Law
JUDICIAL LAW
• 8th Circuit orders EPA to revisit ban on chlorpyrifos pesticide. In “the latest round in the battle over chlorpyrifos,” the 8th Circuit found that the Environmental Protection Agency’s (EPA) ban on chlorpyrifos—a pesticide used in a variety of agricultural applications—was arbitrary and capricious in violation of the Administrative Procedures Act (APA).
Nearly two dozen agricultural groups petitioned the 8th Circuit to review whether the EPA violated the APA when it banned the use of chlorpyrifos for agricultural purposes in 2021. The ban was the result of a decade-long petition by various environmental groups, which the EPA recognized had “had raised ‘risk concerns’ about how chlorpyrifos impacted children, including through drinking water, but [] was not sure what to do about it.” Eventually, the environmental groups grew impatient awaiting the EPA’s decision and petitioned the 9th Circuit to require the EPA to respond. The 9th Circuit ordered the EPA to “revoke all chlorpyrifos tolerances or modify them if it could certify that the tolerances so modified were safe,” within 60 days following the court’s order. In response, the EPA revoked all tolerances, and ended the use of chlorpyrifos in the United States.
In the instant (8th Circuit) case, agricultural groups petitioned for review of the EPA’s decision ending the use of chlorpyrifos in the United States. They argued that the EPA acted “arbitrarily and capriciously” in violation of the Administrative Procedures Act when it revoked all tolerances of chlorpyrifos. The EPA, in turn, argued that in view of the short time frame to act given by the 9th Circuit, the EPA did not have time to modify tolerances of chlorpyrifos to levels it deemed safe, and therefore had no choice but to revoke all tolerances for all uses.
In beginning its review, the 8th Circuit recognized that “any tolerance the EPA ‘establish[es] or leave[s] in effect’ must be ‘safe.’” Said another way, the EPA was tasked with figuring out all the ways chlorpyrifos residue could reach people, sum them together, and then add the extra exposure from the tolerance under consideration. The court cited a report where “the EPA had uncovered 11 high-benefit agricultural uses that were likely to be safe if it revoked others.” This demonstrated that the EPA could modify tolerances. Therefore, the revocation order was arbitrary and capricious. The 8th Circuit remanded back to the EPA and instructed the EPA that “more than just modification is on the table. The agency remains free to exercise its discretion as long as it considers all ‘important aspect[s] of the problem’ and gives a reasoned explanation for whichever option it chooses.” Red River Valley Sugarbeet Growers Association v. Regan, 85 F.4th 881 (8th Cir. 2023).
• The Supreme Court declines to take up CERCLA contribution limitations case. The United States Supreme Court recently denied certiorari in a case finding that a declaratory judgment on liability was sufficient to trigger the three-year statute of limitations for seeking contribution under section (g)(f) of the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), 42 U.S.C. §9613(f). The issue in the case was whether CERCLA requires more, such as a decision that imposes recoverable costs or damages, to trigger the Section 113 statute of limitations.
The case involved the Kalamazoo Superfund site in Michigan, which was contaminated with polychlorinated biphenyls, or PCBs, from over a century of paper mills operating in the area. The U.S. EPA added the site to the National Priorities List in 1990, and the same year, Georgia Pacific and two other paper companies not at issue in the current case entered an administrative order on consent with the state of Michigan to clean up the site. Five years later, in 1995, Georgia Pacific and the two other companies brought cost recovery actions under CERCLA section 107, 42 US.C. §9607, against additional paper companies. The additional companies countersued. Following a trial, the district court in 1998 issued an order finding several companies, including Georgia Pacific, liable for the PCB contamination at the site. The 1998 liability order was a “bare bones” declaratory judgment on liability; it did not determine the amount of the costs or damages. Georgia-Pacific Consumer Products v. NCR Corporation, 32 F.4th 534 (6th Cir. 2022).
In 2010, Georgia Pacific filed an action under CERCLA section 113(f), seeking contribution for its response costs from three other companies—NCR Corporation, International Paper, and Weyerhaeuser. At issue was whether the 1998 liability order had triggered CERCLA’s three-year limitations period for section 113(f) contribution actions. 42 U.S.C. §9613(g)(3)(A) (providing that “[n]o action for contribution for any response costs or damages may be commenced more than 3 years after… the date of judgment in any action under this chapter for recovery of such costs or damages”). If so, Georgia Pacific’s contribution claims were time-barred. Georgia Pacific argued that even if the 1998 liability order started the limitations period for contribution claims against some potentially responsible parties, it did not do so for NCR Corporation, International Paper, and Weyerhaeuser, because they were not parties to the earlier litigation. In addition, Georgia Pacific argued that the bare-bones 1998 liability order did not trigger the section 113(g) three-year period because it was simply a determination of liability, not an action “for recovery of such costs or damages,” §113(g)(3)(A), as the judgment awarded no response costs or damages.
The 6th Circuit disagreed. First, the court held that “[i]t does not matter for §113(g)’s purposes whether the particular contribution action is pursued against a party to the liability-assigning judgment, or against a non-party to that judgment.” The statute focuses on “what was settled,” not “who settled the cost-recovery action” (emphasis in original) and thus bars actions beyond the statutory period against nonparties to the original judgment as well as parties. Second, the court was not troubled by the “bare bones” nature of the 1998 liability order. Acknowledging the lack of case law on the issue, the court looked to its 2007 decision on a closely related CERCLA provision, the three-year statute of limitations in 42 U.S.C. §9613(g)(3)(B) that begins to run by entry of a judicially approved settlement. In RSR Corp. v. Commercial Metals Co., 496 F.3d 552 (6th Cir. 2007), the court held that a consent decree settlement with EPA regarding CERCLA liability was sufficient to trigger the limitation period, even though the amount of the costs or the identities of the possible contributing parties were not yet known. Based on this precedent, the court held that in the current case, the 1998 liability order had commenced the limitation period and Georgia Pacific’s contribution claims were time-barred. The court summarized its holding as follows:
“[W]hen a party assumes an obligation to pay response costs, including future costs, the statute of limitations for contribution actions regarding those response costs begins to run. And that is the case even when the specific amount owed in response costs is not yet known, or when all parties who could face contributory liability are not yet identified…”
The significance of the Supreme Court’s decision to deny certiorari is that at least in the 6th Circuit, it leaves in place a requirement that parties held liable for Superfund response costs must bring actions for contribution even before the extent of the response costs is decided. Potentially responsible parties should thus consider bringing contribution actions against other potentially responsible parties at the earliest point possible after being found liable, without waiting until the payment of response costs is settled. Georgia-Pacific Consumer Products v. International Paper Company, No. 22-465, 601 U.S. __ (U.S. 10/2/2023).
n Not so fast: Minnesota Court of Appeals concludes that city did not adequately consider project’s potential effects on wildlife or cumulative potential effects. On 11/27/2023, the Minnesota Court of Appeals, for a second time, reversed and remanded the City of Eagle Lake’s determination that an environmental impact statement (EIS) was not required for a proposal to construct a motorsports park on agricultural land.
The Minnesota Environmental Policy Act (MEPA) establishes a formal process for investigating the environmental impacts of major development projects. The purpose of the review is to provide information about a project’s environmental impacts before approvals or necessary permits are issued. MEPA imposes a set of procedural requirements on responsible governmental units (RGUs) for the environmental review of major governmental actions. MEPA defines government action as “activities, including projects wholly or partially conducted, permitted, assisted, financed, regulated, or approved by units of government including the federal government.” Minn. Stat. §116D.04, subd. 1a(d).
MEPA requires distinct types of environmental review depending on the nature of the project being proposed. Under Minn. R. 4410.1000, an environmental assessment worksheet (EAW) must be prepared for any project that meets or exceeds the thresholds of any of the EAW categories listed in Minn. R. 4410.4300 or any of the EIS categories listed in Minn. R. 4410.4400. An EAW is defined as “a brief document which is designed to set out the basic facts necessary to determine whether an environmental impact statement is required for the proposed project.” Minn. Stat. §116D.04, subd. 1a(c).
Minn. Stat. §116D.04, subd. 2a(a), provides that, where there is potential for significant environmental effects resulting from any major governmental action, the action be preceded by a detailed EIS prepared by the RGU. The EIS provides detailed information about the extent of potentially significant environmental impacts of a proposed project, presents alternatives to the proposed project, and identifies methods for reducing adverse environmental effects. Minn. R. 4410.2000, subp. 1. The EIS is not meant to approve or deny a project, but instead to function as a source of information to guide approval and permitting
decisions.
The threshold question in determining whether a major government action requires an EIS is whether that proposed project has the potential to significantly affect the environment. Minn. R. 4410.1700, subp. 7, requires RGUs to consider the following factors when determining whether a project has the potential for significant environmental effects:
A) type, extent, and reversibility of environmental effects;
B) cumulative potential effects. The RGU shall consider the following factors: whether the cumulative potential effect is significant; whether the contribution from the project is significant when viewed in connection with other contributions to the cumulative potential effect; the degree to which the project complies with approved mitigation measures specifically designed to address the cumulative potential effect; and the efforts of the proposer to minimize the contributions from the project;
C) the extent to which the environmental effects are subject to mitigation by ongoing public regulatory authority. The RGU may rely only on mitigation measures that are specific and that can be reasonably expected to effectively mitigate the identified environmental impacts of the project; and
D) the extent to which environmental effects can be anticipated and controlled as a result of other available environmental studies undertaken by public agencies or the project proposer, including other EISs.
In February 2019, a developer proposed construction of a private three-mile motor sports driving track and related facilities on a site of approximately 230 acres in Eagle Lake, MN. In addition to the driving track, the project would include a track clubhouse, car condos, a restaurant, a 70-unit hotel, a golf course, and related parking lots.
The City of Eagle Lake is the RGU charged with determining what environmental review is required. Pursuant to Minn. R. 4410.4300, subp. 36, an EAW is required for projects that may convert 80 or more acres of agricultural land to a different use. Because of the nature and size of the project, the city hired a consultant to prepare an EAW. Several state and county agencies, as well as members of the public, submitted comments addressing the EAW. In May 2020, based on the EAW and related public comments, the city council determined that the project did not have the potential for significant environmental effects and therefore an EIS was not required for the project to move forward.
Citizens Against Motorsports Park (CAMP) and two individuals appealed the city’s initial negative declaration on the need for an EIS, arguing that the city’s decision was arbitrary and capricious and unsupported by substantial evidence. CAMP also challenged the city’s procedure and analysis of noise impacts on humans and wildlife, waste storage and disposal, land alterations, and wetlands. On 4/26/2021, in an unpublished opinion, the Minnesota Court of Appeals concluded that the city’s negative EIS declaration was arbitrary and capricious, and reversed and remanded for a new EIS determination. The court found that the city failed to rely on substantial evidence to determine the project’s potential effects on wildlife and failed to consider the project’s cumulative effects on climate change. The court reasoned that the city made no attempt to identify, survey, or catalog wildlife in the project area. The court also noted that the city failed to address the potential harm from the project’s vehicular and human traffic or automobile exhaust fumes, which were identified by state and county officials. The city further concluded that it was unlikely that noise-sensitive wildlife would be impacted by the project, though without having conducted a study of the project’s noise impact on wildlife. The court also found that the city failed to adequately respond to concerns regarding climate change and the project’s cumulative potential effects, as required by Minn. R. 4410.1700, subp. 4 (requiring specific responses to all substantive and timely comments on the EAW).
Following the court’s decision, the city’s consultant prepared a supplemental EAW to further evaluate whether the project has the potential for significant environmental effects. The supplemental EAW concluded that the project would not increase known wildlife disturbances to a level that would affect wildlife on Eagle Lake, and that the project’s contribution to greenhouse gas (GHG) emissions in the area would be “negligible.”
On 12/5/2022, the city council approved findings of fact and a decision on the need for an EIS. Based on the information generated through the supplemental environmental-review process, the city council again determined that the project did not have the potential for significant environmental effects and therefore an EIS was not required for the project to move forward.
CAMP appealed the city’s second negative declaration on the need for an EIS, arguing that the city’s decision was arbitrary and capricious and unsupported by substantial evidence because the city did not adequately consider the project’s potential effects on wildlife or cumulative potential effects. On 11/27/2023 the court, for a second time, reversed and remanded the city’s determination that an EIS was not required for the project.
The court found that the city’s second negative declaration on the need for an EIS was unsupported by substantial evidence in part because the city made no attempt to identify, survey, or catalog the wildlife in the project area. The court reasoned that neither the EAW nor the supplemental EAW contained a complete discussion of the species that use or inhabit the project site, a portion of which would be paved over to accommodate the track, track clubhouse, car condos, parking lots, and other elements of the project. The court noted that although the supplemental EAW did list some species that have been observed in or near Eagle Lake in the past, it failed to identify the species currently known to use or inhabit the area. The court explained that without knowing which species use or inhabit a project area, an RGU cannot ascertain the type, extent, and reversibility of environmental effects on wildlife in that area, and therefore cannot determine whether the project has the potential for significant environmental effects.
The court also found that the city’s second negative declaration failed to address the project’s potential for cumulative effects from GHG emissions. The supplemental EAW included a discussion of GHG emissions, and an estimate that the project would increase GHG emissions in the area by 35,221.87 metric tons of carbon dioxide-equivalent per year. Even though the supplemental EAW indicated that the project “needed to be near the Mankato Regional Airport” because it would be a “destination course,” the estimate did not include anticipated GHG emissions from visitors who would reach the project through the Mankato Regional Airport. The court stated that, by declining to consider how regional air travel to the project would affect the project’s overall GHG emissions, the city failed to address an important aspect of the problem and ignored evidence in the record.
The court did not express an opinion about whether an EIS is required. The project is no longer being pursued by the developer. In re Determination of the Need for an Environmental Impact Statement for the Mankato Motorsports Park, No. A23-0091 (Minn. Ct. App. 11/27/2023).
ADMINISTRATIVE ACTION
• MPCA issues site-specific standard framework for Class 4A wild-rice sulfate standard. In December 2023, the Minnesota Pollution Control Agency (MPCA) released its Framework for Developing and Evaluating Site-Specific Sulfate Standards for the Protection of Wild Rice. The framework is the agency’s latest step to address the implementation of Minnesota’s Class 4A 10 mg/L sulfate water quality standard in Minn. R. 7050.0224, subp. 2, adopted in 1973, which applies to Class 4A waters “used for production of wild rice during periods when the rice may be susceptible to damage by high sulfate levels.” MPCA undertook an expansive rulemaking in late 2017 to revise the wild-rice sulfate standard and identify waters subject to the revised standard.
However, following an adverse administrative-law-judge report, MPCA abandoned the rulemaking in 2018. Since then, MPCA has issued various statements regarding how the agency will implement the sulfate standard and has identified close to 2,400 waters MPCA has determined are “used for production of wild rice” and thus subject to the standard. This list includes 32 water bodies the U.S. EPA in 2021 added to Minnesota’s 2020 Impaired Waters List due to measured sulfate levels in excess of 10 mg/L. Presumably recognizing the current paucity of feasible sulfate-treatment technologies, the MPCA in 2023 initiated a series of public meetings to help the agency develop a framework for regulated parties seeking a less stringent site-specific standard (SSS) for sulfate in a particular waterbody.
MPCA’s framework (1) outlines the process of applying for a SSS, including state and federal review; (2) describes MPCA’s interpretation of the wild rice beneficial use protected by the sulfate standard; and (3) identifies the monitoring and other information that must be developed to support a SSS application. Each of these is discussed below.
Process involved in seeking an SSS: The framework indicates that MPCA will evaluate SSS applications under the standards of Minn. R. 7050.0220, subp. 7, which require the applicant to demonstrate that the proposed SSS is “more appropriate” then the existing sulfate standard and will protect the Class 4A wild-rice beneficial use. If MPCA determines a proposed SSS should be advanced, it will initiate a public notice and comment period and then send the SSS to the U.S. EPA for review under 40 C.F.R. §131.21. EPA must then approve (within 60 days) or disapprove (within 90 days) the proposed SSS based on the standards for approving state water quality standards, such as whether the SSS protects the designated use and is based on sound scientific rationale. 40 C.F.R. §131.11(a)(1). The SSS does not take effect until after it is approved by EPA.
MPCA’s interpretation of the wild rice beneficial use: In the framework, MPCA sets forth its interpretation of the beneficial use protected by the Class 4A sulfate standard. Under Minn. R. 7050.0224, subp. 2, Class 4A waters of the state “must be such as to permit their use for irrigation without significant damage or adverse effects upon any crops or vegetation usually grown in the waters or area.” The rule then creates a subclass of Class 4A waters to which the 10 mg/L sulfate standard applies—that is, “water used for production of wild rice during periods when the rice may be susceptible to damage by high sulfate levels.” MPCA’s interpretation of the key phrase “production of wild rice” is that it refers not only to the intentional cultivation of wild rice in agricultural paddies, but also to wild rice in naturally occurring stands; the 10 mg/L sulfate standard, MPCA indicates, is intended “to protect the continued generation of wild rice biomass, and any proposal for a site-specific modification of that standard must demonstrate that the continued generation of wild rice biomass will be protected.” MPCA’s interpretation does not address the standard’s seasonal component (“during periods when the rice may be susceptible to damage by high sulfate levels”). The framework notes that MPCA is “taking an expansive approach” to identifying waters that are “used for production of wild rice” and thus subject to the sulfate standard; for example, MPCA indicates that “documentation of current or historical wild rice presence—recorded observations, harvest histories, measurements of population extent or other wild rice growth metrics, or other reliable evidence—is sufficient to consider a waterbody to be a water used for the production of wild rice.”
Note that Minn. R. 7050.0224, subp. 1 creates a separate narrative nondegradation standard for “selected wild rice waters [that] have been specifically identified [WR]” in chapter 7050; the “quality of these waters and the aquatic habitat necessary to support the propagation and maintenance of wild rice plant species must not be materially impaired or degraded.” In the late 1990s, MPCA formally designated 24 waters as [WR] waters protected by this standard. See Minn. R. 7050.0470, subpart 1. In the framework, MPCA states that it interprets part 7050.0224 as making the 24 [WR] waters subject both to the narrative standard in part 7050.0224, subp. 1 as well as the 10 mg/L Class 4A sulfate standard.
Information needed to support an SSS application: The bulk of the framework focuses on the types of information MPCA will accept to support a successful SSS application. Much of the information relates to demonstrating that the beneficial use will be protected, which means that the proposed SSS “will allow wild rice to not only persist in the short term but also to sustain itself—undergo production across multiple growth cycles and generations—into the long-term future.” MPCA anticipates that the most SSS applicants will attempt to demonstrate that the existing ambient sulfate concentrations in a wild rice water above 10 mg/L supports wild rice and that this existing concentration should be the SSS. To make this demonstration, applicants must provide “long-term monitoring of both surface water sulfate concentrations and the wild rice population.” MPCA strongly recommends that “long term” wild-rice monitoring should involve collecting “consecutive annual population data spanning at least the most recent ten years or two boom-bust cycles, whichever is shorter.”
In the 2017 proposed wild rice rule, MPCA embraced a sediment-based equation to predict site-specific sulfate concentration values. The agency has now backed off that approach. The framework indicates that while the equation as well as other aspects of sediment and porewater chemistry analysis can be considered as part of an SSS application, MPCA “does not support their use as a primary means to derive” the SSS.
The framework directs SSS applicants to consider other types of wild rice information, including but not limited to:
- historical data and information concerning the water’s wild rice population and the local water chemistry;
- chemical, hydrological, and biological data from on-site monitoring and recent studies to demonstrate consistency with current scientific knowledge;
- sulfate levels within a larger geographic context; and
- non-sulfate confounding factors, both natural and anthropogenic, that may interfere with wild rice growth, such as modified hydrology, aquatic invasive species, competing vegetation, shoreline development, boat traffic, and climate change. Note, however, MPCA’s position that even if these types of confounding factors inhibit wild rice growth, this cannot be a basis for a less stringent sulfate SSS.
While the framework addresses primarily applications for an SSS that is less stringent than the 10 mg/L sulfate standard, it also notes that the framework can be used to seek a SSS that is more stringent, which could arise when the wild-rice beneficial use is not being met. In this case, the applicant would need to demonstrate that excess sulfate is a primary cause of the non-attainment.
Finally, MPCA emphasizes that the framework is simply guidance and should not be construed as a rulemaking proposal or as altering or superseding the statewide 10 mg/L Class 4A sulfate standard. For this reason, MPCA expects to “periodically update this document in response to new scientific findings or the emergence of other relevant information.” MPCA, Framework for Developing and Evaluating Site-Specific Sulfate Standards for the Protection of Wild Rice, available at www.pca.state.mn.us/sites/default/files/wq-s6-66a.pdf.
• EPA releases draft guidance on applying County of Maui functional-equivalent standard. On 11/21/2023, the EPA released draft guidance for applying the U.S. Supreme Court’s 2020 ruling in County of Maui v. Hawaii Wildlife Fund, 140 S. Ct. 1462 (2020).
In Maui, the Hawaii Wildlife Fund and several other environmental groups challenged the County of Maui’s wastewater reclamation facility’s practice of discharging partially treated sewage into groundwater. The polluted water then traveled through groundwater to the Pacific Ocean. The County of Maui asserted that it did not need a National Pollutant Discharge Elimination System (NPDES) permit for this discharge under the Clean Water Act (CWA) because the discharge was not an “addition of any pollutant to navigable waters from a point source.” See 33 U.S.C. §1311(a); 33 U.S.C. § 1362(12). The environmental groups asserted that this practice by the County of Maui was a discharge of a pollutant to the navigable waters from a point source, for which a permit is required under the Clean Water Act. See 33 U.S.C. §1311(a); Id. § 1362(12).
The Maui Court agreed with the petitioners that the discharge was a point source discharge that required an NPDES permit. In doing so, the Court held that the CWA could apply to discharges to groundwater that ultimately reached surface water, if the discharge to groundwater was the “functional equivalent” of a discharge to surface water. But the Court acknowledged that not all discharges to groundwater that ultimately reach surface waters would be point source discharges. To determine whether a discharge was the “functional equivalent” of a point source discharge that required a permit under the CWA, the Court identified seven non-exclusive factors that should be considered: “(1) transit time, (2) distance traveled, (3) the nature of the material through which the pollutant travels, (4) the extent to which the pollutant is diluted or chemically changed as it travels, (5) the amount of pollutant entering the navigable waters relative to the amount of the pollutant that leaves the point source, (6) the manner by or area in which the pollutant enters the navigable waters, (7) the degree to which the pollution (at that point) has maintained its specific identity.” The Court added that transit time and distance travelled are typically the most important factors.
The EPA’s draft guidance explains how operators of facilities that discharge to groundwater should evaluate whether a discharge to groundwater is the functional equivalent of a direct discharge that requires an NPDES permit.
For the most part, the EPA draft guidance reiterates the Supreme Court’s announcement that the functional equivalent analysis must be done on a case-by-case basis for each facility. The relevance of the factors and the weighing of the relevant factors are both highly dependent on site-specific considerations. In some cases, the EPA acknowledged, transit time and distance travelled may be the only considerations, whereas in others, more factors may come in.
The EPA draft guidance explains that the Maui factors should each be examined together and on a continuum. If it takes a long time for the discharge to reach the navigable waters, and/or if the discharge travels a long distance, then the discharge may not be the functional equivalent of a direct discharge. Conversely, if it takes a short time and/or if the discharge travels a short distance, then the discharge may be the functional equivalent of a direct discharge to the navigable waters. Similarly, the EPA draft guidance elaborates that a discharge through a porous subsurface material provides evidence that the discharge may be the functional equivalent of a direct discharge. And a higher mass of pollutant(s) reaching the navigable waters and/or a higher concentration of pollutant(s) reaching the navigable waters similarly provides evidence that the discharge may be the functional equivalent of a direct discharge. Unfortunately, for facility operators seeking certainty about whether their facility might be the functional equivalent of a direct discharge, the EPA draft guidance provides no insight into what distances or travel times are “short” or “long,” how porous subsurface material might have to be to support a finding that discharge is the functional equivalent of a direct discharge, nor how high the mass or concentration of pollutants must be to support a finding that discharge is the functional equivalent of a discharge to the navigable waters.
Amid this nebulous guidance, though, the EPA included several specific points. If the spread of pollutants from a source by groundwater moves in a contaminated zone—that is, a plume—it will be important to consider how the plume disperses before the pollutants reach groundwater. If the plume has minimal dispersion before entering a navigable water, that provides evidence that the discharge may be the functional equivalent of a direct discharge.
The EPA draft guidance also explains that evaluating constituent pollutants may be helpful to the functional equivalence analysis in some situations. A functional equivalent analysis may be based on an analysis of one constituent pollutant when that pollutant is a reasonable indicator for other constituent pollutants. If the analysis indicates that the discharge of an indicator pollutant is the functional equivalent of a direct discharge, then the facility must submit a permit application for that pollutant and the other pollutants with similar characteristics.
And the EPA outlines the information that may be provided for consideration in a functional equivalence analysis, emphasizing that this is merely an illustrative list and that this information is not all needed in any particular case. Potentially helpful information might include: discharge location, transit time, distance travelled, flow characteristics, shallow subsurface geology and hydrology characterization, a description of pollutant-specific dynamics along the groundwater flow path, treatment technologies, effluent characteristics, and an explanation of the permittee’s functional equivalent of a direct discharge analysis, among other information.
In concluding, the EPA identifies two factors that are not relevant to the functional equivalent analysis: intent of the discharger and whether or not a state groundwater protection program exists. Thus, according to the EPA guidance, it is not a defense to a failure to obtain an NPDES permit that the operator did not intend to pollute the navigable waters, and the existence of a state groundwater protection program does not obviate the need for an NPDES permit.
The EPA’s draft guidance on the application of the functional equivalence standards highlights that facilities that discharge from point sources to groundwater should examine what happens to the discharge after it reaches groundwater and consider whether the discharges might be considered the functional equivalent of a discharge to surface water.
Jeremy P. Greenhouse, Cody Bauer, Ryan Cox, Vanessa Johnson, Molly Leisen, and Shantal Pai — Fredrikson & Byron PA; Jake Beckstrom — Vermont Law School 2015
Federal Practice
JUDICIAL LAW
• Arbitration; delegation clause; impact of later contract. The Supreme Court recently granted certiorari on the following question: “Where the parties enter into an arbitration agreement with a delegation clause, should an arbitrator or a court decide whether that arbitration agreement is narrowed by a later contract that is silent as to arbitration and delegation?”
The federal appellate courts and multiple state courts are divided on this issue. Suski v. Coinbase, Inc., 55 F.4th 1227 (9th Cir. 2022), cert granted, 143 S. Ct. 521 (2023).
• Prior grant of certiorari; mootness. In May/June 2023, this column noted the Supreme Court’s grant of certiorari to resolve a circuit split on the issue of standing for an ADA “tester.” Following oral argument, the Court recently dismissed the case as moot. Acheson Hotels, LLC v. Laufer, 144 S. Ct. 18 (2023).
• Fed. R. Civ. P. 12(b)(2) and 12(g)(2); prima facie case; preponderance of the evidence; no waiver. Affirming the dismissal of an action for lack of personal jurisdiction, the 8th Circuit rejected appellant’s argument that the defendant had waived its personal jurisdiction defense by not raising it in its motion to vacate a default that had been entered against it. The 8th Circuit also found that if a district court decides a Fed. R. Civ. P. 12(b)(2) motion on a fully developed record, the plaintiff must establish personal jurisdiction by a preponderance of the evidence rather than only having to make a prima facie case. Hawkeye Gold, LLC v. China Nat’l Materials Indus. Import & Export Corp., ___ F.4th ___ (8th Cir. 2023).
• No conflict of interest for expert witness. Reviewing for abuse of discretion and affirming a district court’s denial of the plaintiffs’ motion to disqualify the defendants’ Minnesota-based expert witness who had participated in a lengthy conference call with plaintiffs and their counsel to explore the possibility of acting as their expert, but had never been retained, the 8th Circuit agreed that there was no evidence of a “confidential relationship” between plaintiffs and the expert, and criticized plaintiffs for failing to identify “specific confidential information” that they allegedly had conveyed to the expert. Tumey, LLP v. Mycroft AI, Inc., 84 F.4th 775 (8th Cir. 2023).
• Appeal dismissed for lack of jurisdiction; settlement; mootness. Where the parties settled an FLSA action after the district court ruled on cross-motions for summary judgment but before judgment was entered, and the settlement agreement claimed to preserve the defendant’s right to pursue a jurisdictional argument on appeal, the 8th Circuit dismissed defendant’s appeal for lack of jurisdiction, finding that the settlement rendered the appeal moot, and that parties “cannot avoid mootness by agreement.” Folta v. Norfolk Brewing Co., ___ F.4th ___ (8th Cir. 2023).
• Dismissal of complaint with prejudice; no abuse of discretion. Characterizing plaintiff’s claim of “unfair surprise” as “facetious,” the 8th Circuit found that a district court did not abuse its discretion in dismissing plaintiff’s amended complaint with prejudice where plaintiff never sought to further amend her complaint in the nine months between defendants’ filing of their motion to dismiss and the district court’s dismissal, and then failed to seek relief in the district court under Fed. R. Civ. P. 60(b). Hennessey v. Gap, Inc., 86 F.4th 823 (8th Cir. 2023).
• Fed. R. Evid. 201; Fed. R. Civ. P. 12(b)(6); requests for judicial notice granted and denied. A recent decision by Judge Wright granting in part and denying in part various parties’ request for judicial notice in conjunction with defendants’ Fed. R. Civ. P. 12(b)(6) motions should be required reading for counsel considering making or opposing similar requests. Kloss v. Argent Trust Co., 2023 WL 8603131 (D. Minn. 12/12/2023).
• Fed. R. Civ. P. 56(d); pre-discovery summary judgment not premature. Awarding pre-discovery summary judgment to defendants in a patent infringement case, Judge Tostrud rejected the plaintiff’s argument that summary judgment was “premature,” finding that the information the plaintiff claimed it needed was either “publicly available” or would “not help it oppose summary judgment.” Heartland, Inc. v. Povolny Specialties, Inc., 2023 WL 7168914 (D. Minn. 10/31/2023).
• Jurisdiction; pleading on information and belief; multiple cases. Where the plaintiff invoking CAFA jurisdiction amended her complaint to allege the citizenship of the defendant limited liability company on information and belief, Magistrate Judge Leung determined that the plaintiff’s jurisdictional allegations were sufficient. Hudgins v. Radius Global Solutions, LLC, 2023 WL 7299902 (D. Minn. 11/6/2023).
In contrast, Magistrate Judge Micko found that allegations regarding the citizenship of members of the defendant limited liability company made “upon information and belief” were insufficient to establish diversity jurisdiction, and ordered the plaintiff to amend its complaint within 14 days. Caerus Corp. v. ICON Med. LLC, 2023 WL 7299151 (D. Minn. 8/28/2023).
• Motion to compel; privilege log insufficient. Finding that defendants’ original and supplemental privilege logs were “insufficient” where they did not “identify any named individuals that are attorneys and failed to provide a meaningful description of the scope of each document,” Magistrate Judge Leung directed the defendants to “provide a sufficient privilege log that complies with all applicable rules and law.” Corning, Inc. v. Wilson Wolf Mfg. Corp., 2023 WL 8271691 (D. Minn. 11/30/2023).
• Fed. R. Civ. P. 12(f); motion to strike allegations in complaint denied. Magistrate Judge Brisbois denied plaintiffs’ motion to strike allegations in counterclaims, finding that the allegations at issue were minimally relevant, and that the plaintiffs “failed to demonstrate that they suffer sufficient prejudice” from those allegations. J. Swanson & Co. v. Rejuvenating Nutrition Coaching, LLC, 2023 WL 7299145 (D. Minn. 10/12/2023).
• Fed. R. Civ. P. 5.2; motion to redact hearing transcript denied. Finding that plaintiffs had failed to establish the required “good cause,” Judge Tostrud denied their motion to redact the transcript of a motion hearing. Ecolab Inc. v. IBA, Inc., 2023 WL 7091853 (D. Minn. 10/26/2023).
• Fed. R. Civ. P. 12(b)(3); 28 U.S.C. §1404(a); motion to transfer granted. Declining to reach defendant’s Fed. R. Civ. P. 12(b)(3) motion, and instead granting its motion to transfer pursuant to 28 U.S.C. §1404(a), Judge Frank found that a forum selection clause was “presumptively valid and enforceable,” was “not a contract of adhesion,” and that the plaintiff’s fraud allegations did not alter that analysis where there was no allegation that the forum selection clause was procured by fraud. LeRoy v. MAXmotive, LLC, 2023 WL 7412489 (D. Minn. 11/9/2023).
Josh Jacobson
Law Office of Josh Jacobson
joshjacobsonlaw@gmail.com
Intellectual Property
JUDICIAL LAW
• Patent: Failure to object at trial waives basis for new trial. Judge Wright recently denied plaintiff CellTrust Corporation’s motion for judgment as a matter of law and motion for new trial and to alter or amend judgment. CellTrust sued ionLake, LLC and its governing members for infringement of two patents related to a system to track mobile communications and meet audit compliance requirements. Following a jury trial, judgment was entered in favor of defendants, finding that no infringement occurred and that the asserted claims were invalid. CellTrust filed a motion for judgment as a matter of law and a concurrent motion for a new trial and to alter or amend judgment. In arguing for a new trial, CellTrust argued that defendants made improper arguments that warrant a new trial, including “accusing CellTrust of abusing the patent system, misleading the Patent Office, willfully deceiving Defendants, hiding evidence, being self-enriching outsiders, and threatening Defendants’ livelihoods.” Defendants argue that CellTrust failed to object to the complained-of statements, which constitutes waiver, and that the jury instructions cured any potential prejudice. The court’s review of the record found that CellTrust did not properly preserve objections to the comments it now complains of post-trial and that the court’s general instruction to the jury that attorney statements are not evidence weigh against a new trial. The court further found that CellTrust failed to show that any arguably improper statements permeated the entire trial or were so prejudicial to have clearly affected the verdict. Accordingly, in rejecting CellTrust’s arguments, including improper arguments at trial, the court denied CellTrust’s motion for a new trial. Celltrust Corp. v. Ionlake, LLC, No. 19-cv-2855 (WMW/DJF), 2023 U.S. Dist. LEXIS 217510 (D. Minn. 12/6/2023).
• Patent: Denial of motion to supplement claim construction record. Judge Nelson recently denied defendant Suncall Corporation’s motion to supplement the court’s record on the parties’ Markman claim construction briefing. Plaintiff Hutchinson Technology Inc. (HTI) sued Suncall for patent infringement related to patents for hard disk drive suspension assemblies. The court held a claim construction hearing on 10/18/2023. Thereafter, Suncall took the depositions of several HTI witnesses, including the named inventors on HTI’s asserted patents. On 12/13/2023, Suncall moved to supplement the motion record, and HTI opposed on the same day. Suncall argued that good cause existed to supplement the record because Suncall could not have elicited the testimony earlier due to HTI’s delays in disclosing documents related to the conception and reduction to practice of the asserted patents. HTI argued that the parties’ Joint Claim Construction Statement, including identification of extrinsic evidence, was due in April 2023, but that Suncall did not seek the inventor’s testimony until after the Markman briefing was completed. The court may grant a motion to supplement the record at its discretion, as part of its inherent power to manage its own docket. The court found Suncall lacked good cause to supplement the record because Suncall understood that its decision not to take the inventor depositions earlier would preclude the testimony from being submitted with the Markman briefing. The court also noted that as inventor testimony is extrinsic evidence, the additional testimony is unlikely to meaningfully assist the court with construction of the patent terms. Accordingly, the court denied Suncall’s motion to supplement the claim construction record. Hutchinson Tech. Inc. v. Suncall Corp., No.: 0:21-cv-02618-SRN-DLM, 2023 U.S. Dist. LEXIS 222403 (D. Minn. 12/14/2023).
Joe Dubis
Merchant & Gould
jdubis@merchantgould.com
Probate & Trust Law
JUDICIAL LAW
• District court not required to allow interested persons to present evidence or testimony in guardianship cases. The district court appointed the respondent’s significant other as her emergency guardian. The emergency guardian then petitioned for appointment as the respondent’s general guardian. The respondent’s daughter filed her own petition for the emergency appointment of a guardian for the respondent, which was denied. At the hearing on the emergency guardian’s petition for appointment as general guardian, the district court asked if there was any objection to the emergency guardian’s petition. The respondent’s daughter objected and was provided an opportunity to explain her objection. After hearing the daughter’s objection, the district court granted the emergency guardian’s petition and denied the daughter’s request for a continuance to consult an attorney. On appeal, among other things, the daughter argued that the district court erred by not receiving evidence at the hearing. The Minnesota Court of Appeals cited to the probate code and found that “the district court had discretion to decide whether to allow persons other than the petitioner and the respondent to participate in the hearing and to determine any conditions on their participation.” Because there is no statutory requirement to allow an interested person to present evidence at a guardianship hearing, the court of appeals found that the district court did not err when it did not take or receive evidence at the hearing. In re Guardianship of Jill Lee Osufsen, No. A23-0596, 2023 WL 8180379 (Minn. Ct. App. 11/27/2023).
Jessica L. Kometz
Bassford Remele
jkometz@bassford.com
State Appellate Practice
MN Supreme Court
• Notable decisions: An individual may bring a private action under Minn. Stat. §8.31, subd. 3a to compel a healthcare provider to disclose that individual’s medical records under the Minnesota Health Records Act, Minn. Stat. §144.292, subd. 5. But no private right of action to compel disclosure of health records exists under the Minnesota Health Care Bill of Rights, Minn. Stat. §144.651. A divided Minnesota Supreme Court revived four separate putative class action lawsuits against major healthcare providers, seeking redress for the alleged under-disclosure and/or untimely disclosure of medical records as required by the MHRA. Plaintiffs’ complaints sought to enforce the MHRA through Section 8.31, subd. 3a, the private attorney general statute, or the Minnesota Health Care Bill of Rights. Each complaint was dismissed at the Rule 12 stage for a failure to state a claim. The Minnesota Court of Appeals affirmed. The Supreme Court granted review and reversed, finding that (1) the MHRA provision governing disclosure of, and patient access to, healthcare records is a law prohibiting unfair practices in trade, business, or commerce and thus falls within the scope of those laws that the attorney general may investigate and enforce pursuant to section 8.31 and (2) failure to comply with the timely disclosure requirements of the Minnesota Health Records Act is an “unlawful practice[] in business, commerce, or trade” under section 8.31, subdivision 1 for which private citizens may seek equitable relief. The Court expressly declined to address whether under-disclosure of medical records was a “practice” or whether the plaintiffs’ claims could satisfy the “public benefit” requirement of any private action brought under Section 8.31, subd. 3a. But the Court affirmed the court of appeals as to the other aspect of plaintiffs’ claims, finding that the Minnesota Health Care Bill of Rights does not explicitly or implicitly provide a civil cause of action to enforce individual provisions. Justice Anderson dissented from the majority’s decision regarding the scope of the private attorney general statute on the grounds that the decision departed from existing “years of precedent narrowly interpreting the private attorney general statute.” Findling, et al. v. Group Health Plan, Inc., et al., A21-1518 (Minn. 12/6/2023).
• Notable petitions granted: Supreme Court to consider whether a client can recover legal fees to correct prior lawyer’s malpractice, even where malpractice did not result in dismissal of action. The Minnesota Supreme Court accepted review of a dispute between a client and his prior lawyer over whether the client can recover the legal fees incurred to correct the prior lawyer’s negligence, despite the fact that the client was ultimately successful in the underlying litigation. The district court dismissed portions of the legal malpractice complaint at the summary judgment stage. Both sides appealed. The court of appeals affirmed the dismissal of the malpractice claims but reversed the district court as to certain fraud claims raised in the complaint. The Supreme Court accepted review of the following issues: (1) Does Minnesota law allow a client to recover attorney’s fees as damages when incurred to “correct” a lawyer’s proven negligence, even though the client was ultimately successful in the underlying case? (2) Does breach of fiduciary duty—concerning a standard of conduct as opposed to a standard of care—require proof of but-for causation? (3) Can a client bring claims for breach of contract when an attorney’s negligence caused the client to incur additional fees, even though the client was ultimately successful in the underlying case? Craig A Reichel, et al. vs. Wendland Utz, LTD, et al., A23-0015 (Minn. Ct. App. 9/11/2023), rev. granted (Minn. 12/19/2023).
• Notable petitions granted: Minnesota to evaluate whether to formally recognize a claim for negligent selection of independent contractor. The Minnesota Supreme Court accepted review of a case arising out of an automobile accident, seeking to establish a claim for negligent selection of an independent contractor. Plaintiff’s claim is based on Restatement (Second) of Torts §411, which has never been expressly adopted by Minnesota courts. But at least one Minnesota federal district court has predicted the Minnesota Supreme Court would recognize a cause of action for negligent selection. The district court dismissed the claim at the summary judgment stage. On appeal, the Minnesota Court of Appeals affirmed the dismissal of the claim, assuming without deciding that the Supreme Court would recognize such a cause of action, and found that there was insufficient evidence of any breach of the standard of care in selecting the independent contractor. The Supreme Court accepted review of the following issues: (1) Whether the Minnesota Supreme Court should formally recognize a claim for negligent selection of an independent contractor. (2) Whether the district court erred in granting summary judgment by determining there was no genuine issue of material fact about whether respondents negligently failed to exercise reasonable care to select a competent and careful contractor. Pedro Alonzo, et al. vs. Richard Menholt, et al., A22-1796 (Minn. Ct. App. 9/25/2023), rev. granted (Minn. 12/27/2023).
• Notable petitions denied: Dismissal of intentional tort claims on statute of limitations grounds warranted based on application of the “some damage” rule. The Supreme Court declined to review a case involving the accrual date of intentional torts. Plaintiff was attacked by an unknown assailant in 2017 and commenced suit in 2020 after learning the identity of his attacker. The district court dismissed the action on statute of limitations grounds. On appeal, the court of appeals concluded that plaintiff forfeited any equitable tolling argument by failing to present that argument to the district court and that, under the “some damage” rule for the accrual of claims, his claims occurred on the date of injury, rather than the date he discovered the identity of his attackers. Mark J. Kallenbach vs. Fabrication Station, Inc., Affordable Cabinets and Granite of New Hope and Its Owners, James Lockhart Lang, Deniayous Caleb Buckner, John Doe and Mary Roe, No. A23-0046 (Minn. Ct. App. 9/11/2023), rev. denied (Minn. 12/27/2023).
MN Court of Appeals
• Notable precedential decision: Insured who obtained appraisal award did not prevail in a court action or arbitration proceeding so as to be entitled to additional interest under Minn. Stat. §60A.0811. North Star Mutual Insurance Company insured PSS Properties, LLC for a commercial building that partially collapsed in 2019. North Star initially paid PSS $97,285.31 as the actual cash value for the loss pursuant to the policy. PSS later demanded an appraisal under the terms of the policy. Following the appraisal in 2022, the appraisal panel awarded PSS a total of $319,342.50 as the actual cash value of the loss. North Star paid the difference, as well as interest under Minn. Stat. §549.09. PSS claimed it was entitled to additional interest pursuant to Minn. Stat. §60A.0811, which permits an insured who prevailed against an insurer in a court action or arbitration proceeding to recover additional interest. North Star denied it was liable for the additional interest, and the district court agreed. The court of appeals affirmed, noting that section 60A.0811 is limited to insureds who receive a decision in their favor from a “court action or arbitration proceeding,” which did not include an appraisal conducted pursuant to the terms of an insurance policy. The court of appeals concluded that because an appraisal is a “non-judicial method” to resolve disputes about the “amount of a loss” alone and does not determine whether the insurer should pay the loss, an appraisal is neither a “court action” nor an “arbitration proceeding” that could result in a final adjudication of a claim. Accordingly, an insured who successfully challenged the amount of a loss in an appraisal did not prevail in securing a final adjudication of a claim against an insurer to be entitled to additional interest under section 60A.0811. PSS Properties, LLC v. North Star Mutual Insurance Co., A23-0466 (Minn. Ct. App. 12/18/2023)
• Notable nonprecedential decision: The statute of limitations is not tolled under the doctrine of fraudulent concealment due to the concealment of facts that are not elements of a cause of action. In this legal malpractice claim, the Minnesota Court of Appeals affirmed the district court’s dismissal of the plaintiff’s complaint due to the statute of limitations. The plaintiff alleged claims for legal malpractice arising out of legal representation related to three matters that began in 2009. The court of appeals noted that the six-year statute of limitations for malpractice actions begins to run when the action has accrued. A malpractice claim accrues when all elements of the cause of action—(1) a duty; (2) breach of duty; (3) causation; and (4) damages—have occurred such that the claim could survive a motion to dismiss. Under the facts of plaintiff’s case, the court of appeals determined that her causes of action accrued in 2014 at the latest—outside of the six-year limitations period. Plaintiff argued that the attorney’s concealment of his methamphetamine addiction, for which he was later disbarred, tolled the accrual of her malpractice claims. The court of appeals disagreed, noting that “the reason for the deficient performance is not an element of legal malpractice.” Accordingly, because the alleged concealment of the attorney’s substance abuse did not relate to an element of plaintiff’s legal malpractice cause of action, the six-year statute of limitations barred plaintiff’s claims. Nerad v. Magnus, et al., A23-0508 (Minn. Ct. App. 12/11/2023).
• Notable nonprecedential decision: A facility’s speculative projections of future expansion in daily ore-processing rates are insufficient to overturn the MPCA’s approval of the facility’s application on the grounds of nondisclosure. As part of the ongoing saga surrounding Poly Met Mining, Inc.’s plans to build a copper-nickel-platinum mine and processing plant in northeastern Minnesota, the court of appeals considered an appeal by writ of certiorari from environmental advocacy organizations challenging the Minnesota Pollution Control Agency’s (MPCA) supplemental 2021 decision to issue an air-emissions permit to PolyMet for the project. PolyMet disclosed to Canadian regulators in 2018 that it not only had created projections for the project’s return on investment at the ore-processing rate included in PolyMet’s MPCA permit application, but also for the return at other, vastly increased rates. The organizations alleged that PolyMet’s failure to disclose these projections to the MPCA in 2018 demonstrated that PolyMet’s application at the lower processing and emissions rates constituted a “sham” permit, and were grounds for the MPCA to deny the PolyMet application for nondisclosure. The court of appeals affirmed the MPCA’s decision to issue the permit, noting that nondisclosure is grounds for denial only if the facility failed to disclose all information relevant to the permit. Because a facility’s potential future expansion was not relevant to the agency’s consideration of the facility’s present permit application under the MPCA’s regulatory mandate, and because a future expansion would be subject to additional permitting and review requirements, the failure to disclose projections for potential expansion did not constitute nondisclosure warranting reversal of the PolyMet permit. In re Issuance of Air Emissions Permit No. 13700345-101 for PolyMet Mining, Inc., A22-0068 (Minn. Ct. App. 12/18/2023).
• Notable special term order: A request for attorneys’ fees did not affect the finality of a judgment for purposes of appeal. In an appeal taken from entry of judgment for $352,831.47 following the district court’s grant of summary judgment, the Minnesota Court of Appeals considered whether the respondent’s request for attorneys’ fees following summary judgment deprived the court of appeals of jurisdiction to hear an appeal from the entry of judgment pursuant to the summary judgment order. The court noted that because 1) the fee request was not a “separate claim” which was “independent of the underlying claim,” and 2) attorneys’ fees were not part of the damages claimed in the underlying complaint, the fee request did not affect the finality of the judgment. The fee request therefore did not deprive the court of appeals of jurisdiction over the district court’s summary judgment decision. Star Bank v. Anderson, et al., A23-1802 (Minn. Ct. App. 12/26/2023).
n Notable special term order: An adverse party’s apparent failure to receive a notice of appeal served by mail did not deprive the court of appeals of jurisdiction over the noticed appeal. The district court entered judgment dismissing the plaintiff’s complaint on 9/15/2023. The appellant claimed to have timely served a notice of appeal upon respondent’s counsel by mail on 11/9/2023—within the bounds of the 60-day appeal period—but respondent’s counsel claimed not to have received any notice of appeal until 11/28, and that the appeal must be dismissed as a result. The court of appeals noted that “service by mail is considered complete upon mailing,” and that the 11/28 affidavit of service indicated the notice of appeal was mailed on 11/9. Accordingly, respondent’s alleged failure to receive the notice of appeal until the expiration of the 60-day appeal period did not deprive the court of appeals of jurisdiction over the judgment dismissing appellant’s complaint. Carl Green d/b/a Signature Capital v. Regus Group, et al., A23-1725 (Minn. Ct. App. 12/26/2023).
Pat O’Neill
Larson King, LLP
phoneill@larsonking.com
Sam Schultz
Larson King, LLP
sschultz@larsonking.com
Tax Law
JUDICIAL LAW
• Timely filing essential in property tax valuation appeals. In Dianne M. Fennell, Marvin A. Fennell v. County of Washington, the court instructs that individual taxpayers in Minnesota may challenge property tax valuations, but they must do so on or before April 30 of the year in which the taxes are due. If the taxpayer does not do so, the tax court loses jurisdiction. Here, in challenging Washington County’s assessment of the value of their property, plaintiffs provided documentation for two separate tax years. The tax court could not discern from the filings which year the taxpayers intended to appeal. If the earlier tax year, no jurisdiction. If the later tax year, the court would have jurisdiction. The taxpayers did not attend the hearing to explain which tax year they were contesting, but the court gave them 30 days to demonstrate the court has jurisdiction over the claim; otherwise the claim will be automatically dismissed. Fennell v. Cnty. of Washington, No. 82-CV-21-2025, 2023 WL 8854874 (Minn. Tax Dec. 21, 2023).
The court addressed a different timing issue in Hollydale Land LLC v. Hennepin County. A special statutory exception exists for changing valuations and classifications under Minnesota’s Open Space Law. Here, a golf course that previously qualified for lower property tax rates under the Open Space Law was sold, and Hennepin County sent a new tax valuation after the sale. Under the law, when the property no longer qualifies for the lower tax rates, the difference between the lower tax rate the property was paying and the property’s fair market value is taxed for the prior seven years. Instead of the typical April 30 deadline, petitioners have 60 days to initiate an appeal from the date of mailing of the notice of the change in exempt status, valuation, or classification, which allows taxpayers a remedy when the assessor makes changes to the property’s status after the typical April 30 deadline. The court found that the petitioners’ appeal was governed by the 60-day exception, since the sale ended the property’s participation in the Open Space Law. As a result, the plaintiffs’ petition was properly filed, and the court dismissed the county’s motion to dismiss for lack of jurisdiction. Hollydale Land LLC v. Cnty. of Hennepin, No. 27-CV-21-13386, 2023 WL 8360242 (Minn. Tax 12/1/2023).
• First application of Section 7451(b)(1) filing extensions. In a matter of first impression, the court denied the commissioner’s motion to dismiss for lack of jurisdiction in a dispute controlled by 7451(b)(1).
In August 2022, the commissioner mailed to the petitioner a notice of deficiency (NOD). Petitioners must file petitions challenging NODs within 90 days of the commissioner’s mailing of the NOD. In this case, the 90th day landed on Thanksgiving, a legal holiday. Subject to §7503, which states “[w]hen the last day prescribed under authority of the internal revenue laws for performing any act falls on… legal holiday, the performance of such act shall be considered timely if it is performed on the next succeeding day which is not a Saturday, Sunday, or a legal holiday.” The petitioner was thus entitled to file his petition on Black Friday. Although not a legal holiday, the tax court building was closed on Black Friday. But the electronic filing system was operational. The petitioner did not file his petition on Black Friday, but instead filed his petition on the following Monday. The court had to decide whether the Monday filing was timely.
Section 7451(b)(1) provides extension if “a filing location is inaccessible or otherwise unavailable to the general public on the date a petition is due.” “Filing location” is defined as including “the office of the clerk of the Tax Court, or any of the on-line portal made available by the Tax Court for electronic filing of petitions.” §7451(b)(2). If a filing location is inaccessible, the filing period is tolled by “the number of days within the period of inaccessibility plus an additional 14 days.” §7451(b)(1).
Finding that the office of the clerk of the tax court was closed on Black Friday, the court determined that the petitioner was entitled to an extension of 15 days under section 7451(b)(1) and denied the commissioner’s motion to dismiss for lack of jurisdiction. Sall v. Comm’r of Internal Revenue, 161 T.C. No. 13 (U.S. Tax Ct., 2023).
• “Timely mailed, timely filed”—but not if you use FedEx Ground. The petitioners shipped their petition seeking redetermination 89 days after receiving a notice of deficiency from the commissioner. The shipment, however, arrived on the 91st day, one day after the deadline. Respondents then filed a motion to dismiss for lack of jurisdiction and the petitioners objected to the motion, relying on the “timely mailed, timely filed” rule in section 7502.
Jurisdiction in deficiency cases, according to the court, “is predicated on a valid notice of deficiency and a timely filed petition.” The petitioners argued that although their petition arrived on day 91 (one day late), section 7502 preserved the court’s jurisdiction. Section 7502(a)(1) states a general rule that when petitions are “delivered by United States mail… the date of the United States postmark stamped on the cover… shall be deemed to be the date of the delivery.” §7502 (a)(1). Had petitioners mailed the petition through a “designated delivery service,” the court would retain jurisdiction. Unfortunately for petitioners, instead of using FedEx 2-Day delivery shipping (a “designated delivery service” under Section 7502(f)), petitioner used FedEx Ground.
Since FedEx Ground service is not a “designated delivery service” and the petition was not received within the 90-day period, the court declared that its hands were tied and dismissed the petition for lack of jurisdiction. Nguyen v. Comm’r, T.C. Memo. 2023-151 (U.S. Tax Ct., 2023).
• Scope of limited partner exceptions and inquiries in limited partner’s role in partnership level proceedings. The petitioner filed timely challenges to the commissioner’s notices of final partnership administrative adjustment and the court addressed cross-motions for summary judgment (or partial summary judgment). in Soroban Capital Partners v. Commissioner.
Petitioner Soroban is the general partner and tax matters partner of an investment firm organized as a limited partnership under Delaware law. The partnership also includes five limited partners, of which two are single-member LLCs. These two are disregarded for federal tax purposes, and therefore Soroban is considered to have three limited partners for federal tax purposes.
At issue is the fact that “Soroban included the guaranteed payments distributed to the [limited partners] in its net earnings from self-employment, but it failed to include their distributed shares of ordinary business income.” The respondent’s adjustment to Soroban’s net earnings included the distributive shares of ordinary business income of limited partners. The court therefore had to determine whether the limited partners were “limited partners, as such” as used in section 1402(a)(13) and whether they were properly entitled to the limited partner exception.
Generally, the code requires partners to include their distributive shares of partnership income in net earnings from self-employment (§1402(a)). But section 1402(a)(13) provides an exception for limited partners when “the distributive share of any item of income or loss of a limited partner, such as, other than guaranteed payments… to that partner for services actually rendered to or on behalf of the partnership to the extent that those payments are established to be in the nature of remuneration for those services.”
“[L]imited partners, as such” is not defined, but the legislative history suggests the exception was enacted to “exclude earnings that are of an investment nature.” (Id. at 4, See H.R. Rep. No. 95-702, pt. 1 at 11, as reprinted in 1977 U.S.C.C.A.N. at 4168.) The court determined the scope of the limited partner exception in a 2011 case, Renkemeyer v. Comm’r of Internal Revenue, 136 T.C. No. 7 (U.S. Tax Ct., 2011), and deemed the intent of section 1402(a)(13) “to ensure that individuals who merely invested in a partnership and who were not actively participating in the partnership’s business operations… would not receive credits towards Social Security coverage,” and further held that “[t]he legislative history… does not support a holding that Congress contemplated excluding partners who performed services for a partnership in their capacity as partners… from liability for self-employment taxes.” Renkemeyer, at 150.
In the instant case, the court agreed with respondent’s argument that a functional analysis test similar to that outlined in Renkemeyer should be applied. Yet before the court could analyze the roles of the limited partners, it first faced a jurisdictional conundrum. The current proceedings were conducted under the unified audit and litigation procedures enacted as part of the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA), which “provides a method for making adjustments at the partnership level.” Id. at 8. “The Tax Court has jurisdiction over a TERFRA partnership-level proceedings when the tax matters partner or another eligible partner timely petitions the Court for a readjustment.” §6221. Thus, a determination of jurisdiction to analyze the roles of the limited partners “turns on the question of whether [the] determination is a partnership item.”
Section 6221provides “the tax treatment of any partnership item (and the applicability of any penalty, addition to tax, or additional amount which relates to an adjustment to a partnership item) shall be determined at the partnership level. Further, [p]artnership items are those items that are more properly determined at the partnership level, whereas affected items are items that are affected by partnership items.” §6231(a)(3) and (5). The court reasoned that whether a partnership item is an item requires two determinations: first, that it is required to be considered for the partnership’s taxable year under subtitle A, and second, that regulations provide [the item] is more appropriately determined at the partnership level. Soroban, at 8.
Quickly determining that the guaranteed distributive shares are a partnership level item, the court concluded it had jurisdiction to analyze the limited partners’ roles in these TEFRA proceedings and that it must apply a functional analysis test to determine whether the limited partners are “limited partner[s], as such” under section 1402(a)(13). The petitioners’ motion for summary judgment was thus denied and the respondent’s motion for partial summary judgment was granted. Soroban Capital Partners v. Commissioner, 161 T.C. No. 12 (U.S. Tax Ct., 2023).
Morgan Holcomb
Leah Olm
Adam Trebesch
Mitchell Hamline School of Law