CRIMINAL LAW
JUDICIAL LAW
• Confrontation clause: Confrontation rights not violated by allowing a witness to testify via Zoom during covid pandemic. During appellant’s jury trial for third-degree sale of a controlled substance, held during the second wave of high covid infection rates, the lead investigator was permitted to testify via Zoom after the witness was forced to quarantine following a covid exposure. Appellant was convicted and argues on appeal her right to confrontation was violated when Zoom testimony was permitted. The court of appeals affirmed the district court’s decision to allow the testimony.
The Supreme Court holds that the proper test here for whether a confrontation clause violation has occurred is that set forth in Maryland v. Craig, 497 U.S. 836 (1990). In Craig, the issue was whether a statute allowing a child abuse victim to testify via one-way, closed-circuit television violated the defendant’s confrontation rights. The U.S. Supreme Court found a defendant’s right to confront witnesses may be satisfied without “a physical, face-to-face confrontation only where denial of such confrontation is necessary to further an important public policy and only where the reliability of the testimony is otherwise assured.” Id. at 850.
Here, a valid public policy interest was furthered by using remote technology for this one witness, given the “extraordinary context of courts trying to administer justice safely” during a pandemic. This was the only way to allow the trial to proceed while protecting the health and safety of those in the courtroom. This remote testimony was also reliable, because the witness was under oath and subject to cross-examination, and the jury was able to observe the witness’s demeanor during the testimony by watching the testimony on a large screen TV. Under the Craig test, appellant’s right to confrontation was not violated by allowing the lead investigator to testify via Zoom. Appellant’s conviction is affirmed. State v. Tate, 985 N.W.2d 291 (Minn. 2/8/2023).
• Probation violation: District court must issue order revoking stay of execution and issue a warrant or summons for the defendant to initiate probation revocation proceedings. Appellant was on probation after receiving stayed sentences for fifth-degree controlled substance convictions. During the stays, several probation violation reports were filed, and the district court issued warrants for appellant’s arrest. Before being arrested, appellant’s stays expired. More than six months later, appellant’s probation was revoked after a hearing. The Minnesota Court of Appeals holds the district court did not have authority to revoke appellant’s probation, because the court did not initiate revocation proceedings within six months after the stays expired.
Under Minn. Stat. §609.14, subd. 1, the district court may revoke a stayed sentence if probation conditions are violated. If the stay has expired since the time of the alleged violation, subdivision 1(b) provides that the district court must initiate probation revocation proceedings within six months after the expiration of the stay. Subdivision 1(a) provides how the court is to initiate the proceedings—the court must issue an order revoking the stay and direct that the defendant be taken into custody. Here, the district court issued warrants within six months of the expiration of appellant’s stayed sentence, but it did not issue a revocation order during the required time period. The district court’s probation revocation order is reversed. State v. Redford, A22-0696, 2023 WL 1948645 (Minn. Ct. App. 2/13/2023).
• Privilege: Protected medical information may not be disclosed for in camera review without the patient’s consent. Respondent was accused of criminal sexual conduct against a teenage boy. The district court granted respondent’s motion for an in camera review of the victim’s medical and mental health records. The state seeks a writ of prohibition to prohibit enforcement of the subpoena to obtain the records, which the state argues are privileged.
The court of appeals holds that the district court should have quashed the subpoena, as the records are statutorily privileged and may not be disclosed even for in camera review. A writ of prohibition may be issued where a district court “has ordered production of information clearly not discoverable and there is no adequate remedy at law.” In re Paul W. Abbott Co., 767 N.W.2d 14, 17 (Minn. 2009). The subpoenaed medical and mental health records in this case are protected by Minn. Stat. §595.02, subd. 1(d) and (g), which provides that medical and mental health records may not be disclosed without the patient’s consent.
In In re Hope Coalition, 977 N.W.2d 651 (Minn. 2022), the Supreme Court considered a similar privilege for sexual assault counselor records (Minn. Stat. §595.02, subd. 1(k)) and held that the statute plainly prohibits any disclosure of such records without the patient’s consent. While Hope Coalition interpreted only paragraph (k), the court of appeals applies the same analysis to paragraphs (d) and (g), because the privileges were designed in a substantively similar manner. Thus, because the victim here did not consent to disclosure of his medical or mental health records, the district court did not have authority to compel disclosure of the records.
These privileges do not violate the defendant’s rights to confrontation and due process. The court finds that these rights are outweighed by the state’s compelling interest in protecting patient privacy and preserving patient-provider relationships. Lack of access to these records also does not prevent respondent from confronting and cross-examining witnesses against him; the records are maintained by a private nonparty, and the records are protected by a statutory privilege subject only to narrow exceptions not relevant in this case. In re State, A22-1490, 2023 WL 1945629 (Minn. Ct. App. 2/13/2023).
• Sentencing: One custody status point to defendant who committed present offense while on probation after pleading guilty to another felony charge that resulted in a stay of adjudication. Appellant was found guilty by a jury of first-degree and third-degree criminal sexual conduct. The state argued the defendant should receive one custody status point in his criminal history score because he committed the criminal sexual conduct offenses while on probation after he pleaded guilty to a felony theft charge. Appellant argued he should not receive the custody status point, because the felony theft plea resulted in a stay of adjudication. The district court agreed with the state and imposed an executed 156-month sentence on the first-degree conviction.
In relevant portion, the sentencing guidelines direct the court to assign one custody status point if, at the time the current offense was committed, the offender was on probation after pleading guilty to a felony offense. Minn. Sent. Guidelines 2.B.2.a. Here, appellant was on probation for a felony offense to which he pleaded guilty when he committed the criminal sexual conduct offenses. An actual conviction for that prior felony offense is not required under the guidelines. The conditions for the application for one custody status point are satisfied even if the prior guilty plea resulted in a stay of adjudication. The district court’s sentence is affirmed. State v. Woolridge Carter, A22-0164, 2023 WL 1945674 (Minn. Ct. App. 2/13/2023).
--Samantha Foertsch
--Stephen Foertsch
Bruno Law PLLC
EMPLOYMENT & LABOR LAW
JUDICIAL LAW
• Police officer forced resignation; First Amendment reversal. A police officer who was forced to resign after texting satirical criticisms of Black Lives Matter protests to fellow officers was entitled to pursue a First Amendment retaliation claim against the municipal employer who compelled the resignation. The 8th Circuit Court of Appeals reversed and remanded the lower court’s dismissal of the lawsuit on a Rule 12 Motion, reasoning that the complaint adequately alleged he was acting as a “private person” on a matter of “public concern,” which clothed him with First Amendment rights, a determination that was grudgingly agreed with by Judge James Loken of Minnesota in a concurrence. Bresnahan v. City of St. Peter, 58 F.4th 381 (8th Cir. 1/19/20223).
• Retaliation rejected; witness testimony. A First Amendment retaliation lawsuit by a urologist at a university against a law professor at the same institution failed. Affirming a lower court ruling, the 8th Circuit held that the urologist’s failure to allege that the offensive action, which consisted of furnishing derogatory expert witness testimony in another case, was done under color of state law, which is a necessary element for a claim for First Amendment retaliation under the Civil Rights Act. 42 U.S.C. §1983. Brown v. Linder, 56 F.4th 1140 (8th Cir. 1/4/2023).
• Sexual assault; outside FTCA scope. An alleged sexual assault by a patient at a Veteran’s Administration Hospital against a nurse practitioner was properly dismissed under the Federal Tort Claims Act (FTCA). The 8th Circuit affirmed dismissal on grounds that the alleged perpetrator was pursuing “a personal desire,” outside the scope of his duties. Doe v. United States, 58 F.4th 955 (8th Cir. 1/24/2023).
• Hostile workplace; discrimination claim rejected. In an important ruling clarifying the “hostile work environment” doctrine for harassment and discrimination issues, the Minnesota Supreme Court rejected a pair of claims by a technician with the St. Paul School District who alleged wage-based discrimination after quitting her job. The Court held that the “hostile” claim failed due to a lack of sufficient evidence of “severe or pervasive” behavior by the employer or of “adverse employment action” to support a constructive discharge calm. But there was sufficient evidence of age discrimination to warrant trial on the issue upon remand. Henry v. Independent School District #625, ___ N.W.2d ____ 2023 WL 1807744 (Minn. 2/8/2022) (unpublished).
• Unemployment compensation; covid policy violations. An employee who did not abide by their employer’s covid vaccination or testing policy was denied unemployment compensation benefits. Confirming its practice, the court of appeals affirmed an administrative denial of benefits for covid policy noncompliance, holding that the employee lacked a sincerely held religious belief to satisfy noncompliance. Carson v. Minnesota State College System, Winona, 2023 WL 193984 (Minn. 1/17/2022) (unpublished).
LEGISLATIVE ACTION
• Noncompete agreements. A pair of companion bills to restrict use of noncompete contracts by employers are progressing through the Minnesota Legislature. The measures, H.F. 295 and S.F. 405, would limit their imposition to higher-than-average wage earners and require payment of one-half of the former wages while the noncompete is in effect.
The legislation, if enacted, would complement, or supplement, a prospective prohibition at the federal level by the Federal Trade Commission of most noncompete arrangements, fulfilling a 2020 campaign promise of President Biden.
--Marshall H. Tanick
Meyer Njus Tanick
ENVIRONMENTAL LAW
JUDICIAL LAW
• Minnesota Court of Appeals rejects no-EIS decision for Cohasset engineered wood facility. On 2/6/2023, the Minnesota Court of Appeals, in an opinion written by Judge Jesson, reversed the City of Cohasset’s determination that an environmental impact statement (EIS) was not required for Huber Engineered Woods LLC’s proposed oriented-strand-board manufacturing facility, to be built west of Cohasset.
Various environmental impacts were associated with construction of the proposed project, including the filling or excavating of 26 wetlands (two or which were “public water wetlands,” Minn. Stat. §103G.005, subd. 15a), stormwater impacts from increased impervious surfaces, timber harvesting, and the emission of nitrogen oxides and sulfur dioxide among other air pollutants. After preparing an environmental assessment worksheet (EAW), the city—the “responsible governmental unit” under the Minnesota Environmental Policy Act (MEPA), Minn. Stat. ch. 116D— determined that the proposed project did not require preparation of an EIS for two reasons: (1) it did not fall into one of MEPA’s mandatory EIS categories, and (2) it did not have the potential to cause significant environmental effects. The Leech Lake Band of Ojibwe appealed the city’s decision to the Minnesota Court of Appeals.
1. Mandatory EIS categories. Under Minn. R. 4410.4400, subp. 20, preparation of an EIS is mandatory when a project “will eliminate a public water or public waters wetland.” “Public waters wetlands” are defined as “all types 3, 4, and 5 wetlands... not included within the definition of public waters, that are ten or more acres in size in unincorporated areas or 2-1/2 or more acres in incorporated areas.” Minn. Stat. §103G.005, subd. 15a. The proposed project did not trigger a mandatory EIS under subpart 20, the city determined, because although the project would permanently fill part of each impacted public waters wetland, neither wetland would be completely filled and thus not “eliminated.”
The court rejected the city’s interpretation of “eliminated” in subpart 20 as referring to the complete filling or excavating of a public waters wetland. Rather, the court held, even when a public waters wetland is not completely filled or excavated, it still is “eliminated” if the remaining portion of the wetland no longer possesses either of its two qualifying characteristics under section 103G.005, subd. 15a—that is, if it no longer qualifies as a type 3, 4, or 5 wetland, or it no longer encompasses more than 10 acres in an unincorporated area or 2-1/2 acres in an incorporated area. The city argued the record showed the remaining parts of the two public waters wetlands would still meet these qualifications and thus not be “eliminated” under the court’s interpretation. However, the court agreed with the Band that the administrative record contained nothing more than conclusory statements that the wetlands would be unaffected, which fell short of the substantial-evidence standard. Accordingly, the court reversed the city’s decision not to require an EIS and remanded the case to the city to revisit its EIS decision consistently with the court’s holding.
2. Potential for significant environmental effects. The court also evaluated the Band’s alternative argument that even if the proposed project did not fall into a mandatory EIS category under MEPA, an EIS was still required because the project had “the potential for significant environmental effects.” 116.04, subd. 2a. The court first held the administrative record lacked substantial evidence supporting the city’s position that the proposed project would not cause significant environmental effects through wetlands removal. For example, the court held the city failed to properly investigate potential stormwater impacts from the proposed project on the nearby Blackwater wild-rice bed—concerns that were raised not only by the Band but also by the Minnesota Pollution Control Agency (MPCA) and the Minnesota Department of Natural Resources (DNR). This provided an additional basis, the court determined, for remanding the matter to the city for a revised decision on the need for an EIS.
The court did determine that substantial record evidence supported the city’s determination the proposed project did not have the potential for significant environmental effects from air emissions and timber harvesting. For example, air emissions from the project would be mitigated by the ongoing regulatory authority of the MPCA’s Clean Air Act permitting programs, Minn. R. 4410.1700, subp. 7(C). And the court cited record evidence that sufficient policies and practices were in place to address the potential effects that timber harvesting could have on other resources, such as wildlife habitat; water quality; aesthetics; soil erosion; historic/cultural resources; and rare, endangered, or threatened species. Judge Kevin Johnson concurred in part and dissented in part. In re City of Cohasset's Decision on Need for an Env't Impact Statement for Proposed Frontier Project, 985 N.W.2d 370 (Minn. Ct. App. 2023).
• Minnesota Court of Appeals finds Minnesota’s clean car rule valid. The court of appeals recently issued an opinion upholding the MPCA’s adoption of new vehicle emission standards across the state. The federal Clean Air Act (CAA) generally gives power to the federal government to establish and regulate standards for emission from new motor vehicles. The CAA also includes a carve-out that allows states to instead implement California’s standards, which are generally more stringent than those established by the U.S. EPA.
In 2019, the MPCA commenced rulemaking proceedings to adopt the more stringent California emission standards, and in 2021 adopted the clean car rule (CCR) implementing these standards. The CCR applies to new motor vehicles beginning with the 2025 model year. New motor vehicles sold in Minnesota will need to comply with California’s air pollutant emission standards and meet requirements for zero-emission vehicles. The CCR also allows for the amendment of Minnesota standards as they may be amended in California.
In June 2022, the Minnesota Automobile Dealers Association (MADA) challenged the CCR. MADA claimed (1) the CCR constituted an unconstitutional delegation of rulemaking; (2) MPCA did not have the authority to adopt emission standards on a statewide basis; and (3) Minnesota was ineligible to adopt California’s emission standards under the CAA.
The court found MADA’s first theory unavailing. The court reasoned that MPCA has broad authority to prevent pollution and manage Minnesota’s air quality. MPCA has authority to adopt air quality standards, “including maximum allowable standards of emission of air contaminants from motor vehicles,” as well as to adopt rules and standards to prevent, abate, or control air pollution. MPCA was “well within its authority when it incorporated by reference existing California regulations into the [CCR].”
The court also found MPCA was statutorily authorized to adopt statewide emission standards. In performing its statutory analysis, the court found that Minn. Stat. §116.07 allows MPCA to establish air quality standards having a statewide effect. Specifically, subd. 4 provides, “Any such rule or standard may be of general application throughout the state.” The plain language of this statute, the court reasoned, allowed MPCA to implement statewide vehicle emission standards.
Finally, the court rejected MADA’s third claim that Minnesota could not opt into the California standards. The court reasoned that Minnesota met Part D of the CAA, requiring plans for “nonattainment areas,” and that MADA’s argument was beyond the scope of review of MPCA’s rulemaking. After rejecting all three arguments from MADA, the court concluded that the CCR is valid in Minnesota. Minnesota Auto. Dealers Ass’n v. Minnesota Pollution Control Agency, No. A22-0796, 2023 WL 1094143 (Minn. Ct. App. 1/30/2023).
• Minnesota district court approves consent decree to restrict trapping in threatened lynx habitat. In February the U.S. District Court of Minnesota approved a consent decree between the Minnesota Department of Natural Resources (DNR) and the Center for Biological Diversity (CBD) to impose additional restrictions on fur-trapping activities in the Lynx management zone in northeastern Minnesota.
The Canada lynx has been listed as a “threatened” species under the Endangered Species Act (ESA) since 2000. 16 U.S.C. §1531 et seq. Northeastern Minnesota contains federally designated critical habitat that is essential to the conservation of the species, where approximately 50 to 200 lynxes are currently living.
Over the past several years, at least nine and perhaps as many as 16 lynxes have been captured or harmed in snares set by fur-trappers targeting bobcats, fishers, and other wildlife. It is illegal to harass, harm, trap, capture, or kill a species listed under the ESA, even if doing so happens unintentionally, like the instances mentioned above. In 2008, the district court ordered the DNR to apply for an incidental take permit from the Fish and Wildlife Service to cover the incidental captures of the threatened Canada lynx, but the state never obtained an incidental take permit.
Because of this, in 2020, the CBD filed suit against the DNR for violating the ESA. Over the next several months, however, both parties began working together on a framework for settlement. On 6/1/2022, both parties filed a joint motion for entry and approval of a consent decree, but not before three fur-trapper associations moved to intervene as a defendant in disapproval of the DNR’s actions.
The consent decree requires the DNR to add more trapping rules to further protect the Canada lynx in the lynx management zone. The additional restrictions ban the use of snares that cinch down tighter than a diameter of three-and-one-quarter inches, prohibit attachment of snares to fences or trees, restrict snares longer than seven feet in length, and ban the placement of foothold traps with a jaw-opening greater than six-and-one-half inches.
The trappers requested that the consent decree be denied. Among other arguments advanced, the trappers argued that the proposed regulations in the consent decree would not prevent further lynx mortality. The court rejected this argument by stating that consent decrees must be found to be fair, reasonable, and faithful to the law, and not "the best possible settlement that could have been obtained."
The trappers also argued that the regulations setting specific snare measurements and placement regulations were unreasonable because the measurement specifications were obtained during studies on non-lynx species, like wolves and coyotes, and that the additional regulations would be burdensome to the trapper and make trapping practically ineffective in the lynx management zone.
The court also was not persuaded by these arguments, noting that nearly one third of states include specific snare measurement requirements, that the types of injuries resulting from wolf and coyote studies “would be true for any species” caught in a snare trap, and that additional placement regulations may be challenging to trappers, but those challenges can be addressed and overcome, and therefore are not over-burdensome or unreasonable enough to reject the consent decree.
In summary, the court granted the consent decree between the DNR and CBD. The DNR is now required to educate the public and trappers on the new restrictions and must publish the additional trapping restrictions within 40 days. Ctr. for Biological Diversity v. Strommen, No. 20-CV-2554, 2023 WL 2136650 (D. Minn. 2/21/2023).
--Jeremy P. Greenhouse
--Cody Bauer
--Vanessa Johnson
Fredrikson & Byron P.A.
--Jake Beckstrom
Vermont Law School 2015
--Erik Ordahl
Barna, Guzy & Steffen
FEDERAL PRACTICE
JUDICIAL LAW
• Removal and remand; second removal; no “two bites at the apple.” Where defendants removed an action on the basis of diversity jurisdiction and CAFA, the action was remanded, the state court denied the plaintiff’s motion to dismiss, and defendants again removed, citing 28 U.S.C. §1446(b)(3) and asserting that the state court’s order constituted a “new paper,” the 8th Circuit rejected defendants’ “creative” argument, finding among other things that a second removal requires a “different factual basis” for removal. City of Creve Couer v. DirecTV LLC, 58 F.4th 1013 (8th Cir. 2023).
• Award of attorney’s fees reduced; multiple trials; plaintiff’s legal error. Affirming in part and reversing in part a district court’s award of attorney’s fees to a prevailing plaintiff in a FRSA action, the 8th Circuit found that the plaintiff was not entitled to attorney’s fees related to the first of several trials where the need for a second trial was the result of the district court’s adoption of the plaintiff’s proposed jury instruction, which misstated the law. Blackorby v. BNSF Rwy. Co., ___ F.4th ___ (8th Cir. 2023).
• Standing; no concrete injury in fact. The 8th Circuit reversed a district court’s grant of judgment as a matter of law to a plaintiff class on FDCPA and related state law claims, finding that a debt collection letter did not cause any concrete injury in fact to the plaintiff where she had waived any claim for individual damages, meaning that she lacked Article III standing. Bassett v. Credit Bureau Servs., Inc., ___ F.4th ___ (8th Cir. 2023).
• Fed. R. Civ. P. 12(b)(6); matters embraced by the pleadings; audio recordings. Where a plaintiff alleged in his complaint that certain of his telephone calls with one of the defendants had been recorded, Judge Tunheim refused to consider recordings of those calls submitted in support of defendants’ Rule 12(b)(6) motion, finding that the recordings were “outside the pleadings.” Glover v. Am. Credit Acceptance, 2023 WL 158198 (D. Minn. 1/11/2023).
• Motion to remand granted; failure to obtain all defendants’ consent to removal. Rejecting the removing defendant’s argument that the “defunct” defendant that had not consented to removal was a “nominal defendant,” Judge Wright instead found that the non-consenting defendant was the “principal alleged wrongdoer,” meaning that the failure to secure its consent to removal was a “defect” warranting remand. MOAC Mall Holdings LLC v. Walking Co., 2023 WL 166917 (D. Minn. 1/12/2023).
• Fed. R. Civ. P. 15(a); Minn. Stat. §549.191; punitive damages; Erie. Magistrate Judge Foster recently followed “nearly every” recent decision in the district in holding that Fed. R. Civ. P. 15(a) and not Minn. Stat. §549.191 governs motions for leave to amend to assert claims for punitive damages. McNamara v. Kuehne, 2023 WL 2189980 (D. Minn. 2/6/2023), report and recommendation adopted, 2023 WL 2189055 (D. Minn. 2/23/2023).
• 28 U.S.C. 1404(a); motions to transfer; multiple cases. Judge Wright denied the defendant’s motion to transfer an action to the Eastern District of Texas, assuming without deciding that the proposed venue was proper, but finding that the defendant could not meet its “heavy burden” to establish that transfer was warranted where “most” of the relevant factors weighed against transfer or were neutral. LG2, LLC v. Am. Dairy Queen Corp., 2023 WL 171792 (D. Minn. 1/12/2023).
Finding that the majority of the relevant factors were “neutral,” Judge Davis denied a motion to transfer the action to the Northern District of Iowa. Anderson Trucking Servs., Inc. v. Hadland, 2023 WL 1477635 (D. Minn. 2/2/2023).
• Personal jurisdiction; multiple cases. Judge Menendez granted defendants’ motion to dismiss for lack of personal jurisdiction in part, finding that one defendant’s relationship of “nearly two decades” with the plaintiff, its CEO’s travel to Minnesota, the purchase over $20 million in products, and a Minnesota forum selection clause all weighed in favor of jurisdiction.
However, Judge Menendez granted two other defendants’ motions to dismiss for lack of personal jurisdiction, finding no facts “suggesting that either directed any activities at Minnesota sufficient to support the exercise of personal jurisdiction.” Cortect Corp. v. Corpac GmbH & Co., 2023 WL 171791 (D. Minn. 1/12/2023).
Determining that the defendant had “fair warning of being sued in Minnesota,” Judge Tunheim denied its motion to dismiss for lack of personal jurisdiction, finding that its negotiations with the Minnesota plaintiff, the parties’ “multi-year contractual relationship,” the “quantity of contracts,” and the purchase of more than $5 million in product all weighed in favor of personal jurisdiction. Cambria Co. v. Disney Worldwide Servs., Inc., 2023 WL 203973 (D. Minn. 1/17/2023).
• Motion to stay granted; “considerations of comity.” Citing the prevailing three-part test, as well as “considerations of comity,” Judge Wright granted the defendant’s motion to stay the action pending a decision in a related action by the 10th Circuit. Ceska zbrojovka Defence SE v. Vista Outdoor, Inc., 2023 WL 171886 (D. Minn. 1/12/2023).
• Removal; federal question jurisdiction; no express federal claim. Where the plaintiffs alleged violations of unspecified “Debt Collection Practices Law” and referenced “factual allegations and terminology… somewhat unique to FDCPA cases,” and the defendants removed on the basis of federal question jurisdiction, Judge Tostrud found that the plaintiffs had done “enough to assert an FDCPA claim,” meaning that removal was proper. Wilkening v. Santander Consumer USA, 2023 WL 1785626 (D. Minn. 2/6/2023).
• Arbitration; preliminary injunction; absence of “qualifying contractual language.” Despite the absence of “qualifying contractual language” in an arbitration clause, Judge Frank relied on Minn. Stat. §572B.08(a) in entering a preliminary injunction requiring the plaintiffs to preserve evidence pending the arbitration. Computer Forensic Servs., Inc. v. BraunHagey & Borden LLC, 2023 WL 1767304 (D. Minn. 2/3/2023).
• Fed. R. Civ. P. 37(c)(1); motion to strike amended initial disclosures granted. Finding that the plaintiff’s disclosure of a new witness more than six years after the action was filed was not substantially justified or harmless, and that it prejudiced the defendant, Magistrate Judge Wright relied on Fed. R. Civ. P. 37(c)(1) in barring the newly disclosed witness from testifying. Watkins Inc. v. McCormick & Co., 2023 WL 1777474 (D. Minn. 2/6/2023).
• Fed. R. Civ. P. 30(b)(6); deposition notice seeking “discovery on discovery” rejected. Granting in part and denying in part the plaintiff’s motion to compel, Magistrate Judge Docherty found that the plaintiff’s attempt to take the Fed. R. Civ. P. 30(b)(6) deposition of one defendant on its document collection efforts was “improper” because the party’s document retention and discovery practices were “not at issue in the lawsuit.” Berry v. Hennepin Cnty., 2023 WL 1777467 (D. Minn. 2/6/2023).
--Josh Jacobson
Law Office of Josh Jacobson
INTELLECTUAL PROPERTY
JUDICIAL LAW
• Patent: Fees for Rule 11 violation reduced as excessive. Judge Wright recently assessed attorneys’ fees against defendants but reduced the award because the total number of hours worked by plaintiffs’ attorneys was unreasonable. Plaintiff Iceotope Group Limited sued LiquidCool Solutions, Inc. seeking a correction of inventorship for LiquidCool’s family of patents directed to liquid-cooling technology. The court previously granted LiquidCool’s motion to dismiss, finding that Iceotope had not plausibly alleged the facts to support its complete substitution of inventorship or joint inventorship claims. The court also found Iceotope knew or should have known that its joint inventorship claim was not warranted by law and lacked any evidentiary support. Therefore, the court awarded sanctions to LiquidCool in the form of its reasonable attorneys’ fees incurred by defending the joint inventorship claim.
Courts determine reasonable attorney fees by multiplying the number of hours reasonably expended by a reasonable hourly rate (known as the lodestar method). First, the court noted that there was no dispute that the rates charged by the lawyers in the case were reasonable. Next, to determine the number of hours reasonably expended on the joint inventorship claim, the court considered the proportion of the total case attributable to the joint inventorship claim. Accepting LiquidCool’s argument that work on the joint inventorship claim was implicated in a variety of general litigation tasks, the court determined that LiquidCool could recover 20% of its total attorneys’ fees in the litigation. However, the court then considered the total number of hours billed in the litigation, determining that this number was excessively high. The court found that the nearly 800 hours of attorney time was excessive for the six-month long case that was resolved on an early motion to dismiss. Thus, the court reduced the award by an additional 50%, awarding a total of $44,226.20. Iceotope Grp. Ltd. v. LiquidCool Sols., Inc., No. 20-cv-2644 (WMW/JFD), 2023 U.S. Dist. LEXIS 25364 (D. Minn. 2/15/2023).
• Trade secret: Speculative technical expert opinions inadmissible. Judge Tostrud recently granted summary judgment for defendants, based in part on finding that plaintiff’s technical expert opinions were inadmissible. Plaintiff Syngenta Seeds, LLC sued former employee Joshua Sleper and its competitor, Farmer’s Business Network (FBN), alleging that Sleper shared Syngenta’s trade secret information on plant seed production with FBN. Syngenta brought claims under the Defend Trade Secrets Act, which defines a “trade secret” as “information” that (1) is the subject of “reasonable efforts” to maintain its secrecy and (2) derives “independent” economic value from not being “generally known or readily ascertainable.” Syngenta relied on expert testimony from its technical expert, Dr. J. Stephen Smith, to demonstrate that the information shared by Sleper with FBN was a trade secret. Smith opined on a document disclosed by Sleper that included a list of 84 publicly available seed lines Sleper recommended for FBN. Of these 84 lines, eight were Syngenta lines. According to Dr. Smith, Sleper used Syngenta’s trade secrets to prepare the list. In support of this theory, Syngenta alleged that five of the eight Syngenta lines were listed in Syngenta’s confidential “best lines list.” The court found that while Sleper may have relied on the “best lines list,” as Dr. Smith contended, Sleper also could have merely selected these five lines based on chance, skill, or public information. Thus, the court found that Dr. Smith’s opinion was speculative and inadmissible. Syngenta Seeds, LLC v. Warner, No. 20-cv-1428 (ECT/DTS), 2023 U.S. Dist. LEXIS 32492 (D. Minn. 2/8/2023).
--Taylor Stemler
Merchant & Gould
PROBATE & TRUST LAW
JUDICIAL LAW
• Personal representative removal. A will named four children as equal heirs to their mother’s estate. Two of the children were generally aligned against the other two children, so the district court appointed a neutral third-party as personal representative. One of the children moved to remove the neutral, arguing, among other things, that the neutral did not address allegations of fraud committed by two of his siblings when they acted as power of attorney for their mother. The district court rejected this argument and specifically noted that the allegedly fraudulent conduct took place well before the neutral had been appointed.
Moreover, the district court noted that an audit had previously been conducted by a neutral party who found that every part of the estate was accounted for. The district court also noted that some of the property the siblings were accused of stealing was returned to the estate. The court of appeals agreed with the district court that removal was not necessary when the fraud occurred prior to the appointment of the neutral, the allegations were previously addressed, and certain of the property was included in the estate. On appeal, the neutral asked the court of appeals to exercise its discretion to award it damages and costs. The court of appeals declined, noting that while the objector’s conduct had impacted the estate and prolonged litigation, there was some merit to his claims of improper conduct. Therefore, an award of costs was not appropriate. In re Estate of Bicanich, A22-0624, 2023 WL 1956501 (Minn. Ct. App. 2/13/2023).
--Jessica Kometz
Bassford Remele
TAX LAW
JUDICIAL LAW
• Diabetes and early withdrawal from qualified tax retirement plans. The taxpayer in this case began withdrawing from his 401(k) retirement plan before the age of 59 and a half. Barring any exceptions, 401(k) distributions withdrawn before 59 and a half are subject to a 10 percent additional tax. The taxpayer contends that his diabetes qualified him for an exception to these additional taxes, but the exceptions require the taxpayer to be unable to engage in activity comparable to that which was engaged before the disability began. I.R.C. §72(m)(7). The taxpayer’s continued employment at the time of the withdrawals shows no indication of a reduced ability to engage in comparable activity and therefore did not “constitute a disability within the meaning of section 72(m)(7).” Lucas v. Comm’r of Internal Revenue, T.C.M (RIA) 2023-009 (T.C. 2023).
• Certification and liabilities under Section 7345. Sec. 7345 provides that if a taxpayer is seriously delinquent on their tax debt, their passports can be denied, revoked, or limited pursuant to the FAST Act. I.R.C §7345. In this case, the pro se taxpayer held a “seriously delinquent tax debt” as defined under §7345 and petitioned the court to redetermine the liabilities underlying the certification. Arguments raised by the taxpayer asked the court the same questions that had been raised in Ruesch, which was vacated for mootness on a jurisdictional question. Ruesch v. Comm’r of Internal Revenue, 154 T.C. 289, 297 (2020), aff’d in part, vacated in part, remanded¸25 F.4th 67, 71-72 (2d Cir. 2022). While Ruesch was vacated and is no longer precedential, the court viewed its reasoning as persuasive and readopted the holding, in which the court recognizes it lacks jurisdiction “to review liabilities underlying the certification of a seriously delinquent tax debt.”
The tax court’s ruling that it lacks jurisdiction to review liabilities underlying §7345 certifications has been cited in subsequent §7345 cases. Adams v. Comm’r of Internal Revenue, No. 1527-21P, 2023 WL 368464 (T.C. 1/24/2023).
• Individual income tax: “Additional newly discovered or previously unavailable evidence” as a matter of first impression in spousal relief determinations. In a case where a taxpayer petitioned for relief from unpaid joint and several tax liability, the court held the definition of "additionally newly discovered or previously unavailable evidence” as “recently obtained sight or knowledge of for the first time.”
When married couples elect to file joint federal income tax returns, their liability for any tax due is joint and several. In cases where the IRS finds it would be inequitable to hold one spouse liable for unpaid taxes, section 6015(f) permits the IRS to relieve the spouse. I.R.C. §6015(f). In 2019 Congress amended the statute to include a standard and scope of review that govern the IRS’s determination to relieve a spouse. I.R.C. §6015(e). This amendment included that such determinations “shall be based upon— any additional newly discovered or previously unavailable evidence.” I.R.C. §6015(e)(7).
With the addition of new evidence, the amendments were relevant, and the court had to determine the meaning of this amendment. In this case, after the death of her husband, the taxpayer asked for relief from unpaid joint and several liabilities. The IRS denied the request, and pursuant to section 6015(e), the taxpayer petitioned to determine appropriate relief under 6015(f). At trial, the commissioner proposed exhibits from the taxpayer’s blog that included information of the petitioner’s assets, lifestyle, and business that had not been a part of the administrative record. The taxpayer moved to strike those exhibits under her interpretation of “additional newly discovered… evidence.”
The taxpayer argued that while the evidence was newly introduced into the case, it was not evidence that had been previously unavailable, but rather it was readily available with a simple search of the petitioner’s name. The taxpayer argued that an interpretation like FRCP 60(b)(2) “provides an administrable standard for admitting newly discovered evidence, by requiring a showing that the party seeking admission has exercised reasonable diligence.” Fed. R. Civ. P. 60(b)(2). The court, however, found that the commissioner’s arguments were more favorable. The commissioner argued for an ordinary meaning interpretation of the statute and that the standard from FRCP 60(b)(2) was not appropriate because at the drafting of the 6015 amendments, Rule 60 was widely known, and Congress could have chosen a diligence standard from within Rule 60 but instead chose to not include such a standard.
The court concluded that the ordinary meaning of “newly discovered” was “recently obtained sight or knowledge of for the first time,” therefore, the proposed exhibits were “newly discovered… evidence” within the meaning of section 6015(e)(7)(B) and admissible into the record. Thomas v. Comm’r of Internal Revenue, No. 12982-20, 2023 WL 2127690, (T.C. 2/13/2023).
• Individual income tax: Racing costs as “ordinary and necessary expenses” for solo practitioners? Petitioner operated a “solo practice” as an attorney and became interested in cars and racing. He thought racing might be a way to meet potential clients. As his interest in the field grew, he began a one-man racing team of which his solo legal practice was the only sponsor. Petitioner deducted the sponsorship as advertising expenses under Section 162—deductions for ordinary and necessary business expenses. The commissioner challenged the deductions.
In determining whether the racing-related costs were deductible, the court focused on whether the costs were “ordinary and necessary expense[s] of the particular business in which [petitioner] was engaged.” Commissioner v. Lincoln Sav. & Loan Ass’n, 403 U.S. 345, 352 (1971). With an ordinary expense being one that is “of common or frequent occurrence in the [petitioner’s] type of business” and a necessary expense being “‘appropriate and helpful’ in carrying out the taxpayer’s profit-seeking activity,” the court found the racing-related costs were not ordinary and necessary. Deputy v. du Pont, 308 U.S. 488, 495 (1940); Welch v. Helvering, 290 U.S. 111, 113–14 (1933). As a result, the court found the petition failed the burden of proving the incurred sponsorship costs were deductible advertising expenses. Avery v. Comm’r of Internal Revenue, T.C.M. (RIA) 2023-018, (T.C. 2/21/2023).
• Property tax: Questions of material fact prevent summary judgment in rental income dispute. Minnesota residents Angeline and Frank Brozovich own a single-family home on Bainbridge Island in the state of Washington. The couple claimed to use the property as a rental property during two tax years at issue, and the couple deducted expenses associated with the property. The commissioner challenged those deductions. The Brozoviches moved for summary judgment, asking the court to determine that—as a matter of law—they correctly deducted losses associated with their rental property.
Numerous questions of material fact prevented the court from granting summary judgment. First, the court noted the couple’s inconsistent evidence around whether the couple qualified for the “nonpassive activity loss” deduction. The court further discussed that issues of material fact were presented as to whether the couple charged their adult child market rent when the adult child rented the property for a month. Finally, disputes around timing of certain payments and deductibility of credit card interest prevented the court from deciding the case at the summary judgment stage. Brozovich v. Commr. of Revenue, 9545-R, 2023 WL 379700 (Minn. Tax Ct. 1/24/2023).
• Property tax: No “prevailing party” in settlement. A taxpayer challenged the assessed value of property located in Nicollet County. After negotiating a settlement with the county to decrease the assessed value of the subject property from $3,913,000 to $3,688,000, the taxpayer filed a Notice of Application for Taxation of Costs and Disbursements, requesting a total of $1,108.70. At the district court’s suggestion, the taxpayer moved for an award of costs and disbursements. The county objected.
The taxpayer argued that “it [was] entitled to costs and disbursements as a prevailing party under Minnesota Statutes sections 549.02, subdivision 1 and 549.04.23 See Minn. Stat. §§549.02, subd. 1 (2022) (pertaining to “actions commenced in the district court”); 549.04 (2022) (providing for reasonable disbursements “[i]n every action in a district court”).
The court explained that because “the parties agreed voluntarily to reduce the valuation of the subject property by way of stipulated settlement” the taxpayer is not a prevailing party and as such, denied the taxpayer’s motion for costs and disbursements. St. Peter Hosp., LLC v. County of Nicollet, 52-CV-21-16, 2023 WL 2028201 (Minn. Tax 2/15/2023).
• Property tax: Failure to respond and failure to serve will lead to dismissal. A taxpayer challenged a special assessment for taxes payable in 2020 but failed to identify which property was the subject of the petition and failed to serve the petition. The county moved to dismiss for failure to file timely.
While Minn. Stat. §278 (2022) establishes how a taxpayer may challenge an assessment, it “expressly excludes claims to contest the validity or amount of any special assessment made pursuant to chapters 429, 430, any special law or city charter.” Minn. Stat. §278.01, subd. 3 (providing that the procedures in section 278.01 are “not available” for special assessment disputes); Minn. Stat. §429.081 (2022) (providing that procedure for appeal to district court “provides the exclusive method of appeal from a special assessment levied pursuant to this chapter”); Sievert v. City of Lakefield, 319 N.W.2d 43, 44 (Minn. 1982) (observing that amendment to section 429.081 in 1978 “clarified legislative intent that there be no other avenue of contesting special assessments”).
The taxpayer filed a petition on 3/26/2022. The county informed the taxpayer that she failed to sign the petition and did not show that she had served the county. The notice went on to instruct the taxpayer how she could rectify the issues, but the county received no response. The county again notified the taxpayer of the petition’s deficiencies and directed her to speak with the county’s housing navigators for further guidance.
The taxpayer failed to respond to the county’s communications and motion and failed to appear for the hearing. The court, therefore, granted the motion and dismissed the case. Ahmed v. Hennepin County, 27-CV-22-4159, 2023 WL 2091002 (Minn. Tax 2/16/2023).
• Property tax: Failure to file timely will lead to dismissal. A taxpayer challenged the commissioner’s Notice of Determination on Appeal regarding tax and interest changes. The commissioner, in turn, filed a motion to dismiss for failure to appeal within the statutory deadline.
Taxpayers are allowed to challenge an appeal regarding “any tax, fee, or assessment… including the imposition of interest….” Minn. Stat. §271.06, subd. 1 (2022). “[W]ithin 60 days after the notice date of an order of the commissioner of revenue, the appellant... shall serve a notice of appeal upon the commissioner and file the original, with proof of such service, with the Tax Court administrator....” Minn. Stat. §271.06, subd. 2.
The commissioner’s Notice of Determination on Appeal was noticed on 8/30/2022. Any appeal was required to be filed by 10/31/2022. The taxpayer filed an appeal on 12/5/2022. The taxpayer argued that his failure to file was a direct result of his repeated failed attempts to contact the tax court and the tax court’s failure to guide or assist him with filing via by mail or in person. The court reasoned that Tax Court Form 1 gives explicit instructions on how to file an appeal via mail or in person and determined that the court could not “conclude that communication problems prevented timely filing” and dismissed the case. Beavers v. Comm’r of Revenue, 9563-R, 2023 WL 2147293 (Minn. Tax 2/21/2023).
• Property tax: Failure to serve will lead to dismissal. Taxpayers filed a petition challenging the assessed value of property located in Minneapolis but failed to serve the petition on the county. The county, in turn, filed a motion to dismiss for failure of service.
Taxpayers are allowed to challenge real property assessments. Minn. Stat. §278.01, subd. 1 (2022). However, the “petition must be served on the county's auditor, treasurer, attorney, and assessor.” Kmart Corp. v. Cnty. of Clay, 711 N.W.2d 485, 490 (Minn. 2006) (citing Minn. Stat. §278.01, subd. 1(a)).
The taxpayer filed the petition in person with the district court administration and alleges that a staff member told her, “She did not need ‘backup paperwork’ to file the petition” and to “wait ‘for someone to call you to set up a court date’.” The taxpayer contacted the government center several times, receiving the same response, and the taxpayer even communicated with the assessor, who advised her that “the case had been filed… but there was an administrative hold he could not explain.” Eventually, the taxpayer communicated with county attorneys who informed her of their intention to file a motion to dismiss due to her failure to file a second copy. Taxpayers argue that they “tried to complete the steps necessary to correctly file the petition but was stymied by incorrect instructions provided to her.”
The county presented evidence of email correspondence where it informed the taxpayers that their petition was filed “without the requisite proof of service” and advised how service could be completed prior to the deadline. The notice went on to advise the consequences that would result if the taxpayers failed to correct the issue. The county argued that due to failure to serve the petition, taxpayers “failed to invoke the court’s jurisdiction” and therefore the case should be dismissed.
Taxpayers used Minnesota Tax Court Form 7, which explicitly instructs “you must file the original petition with any attachments, proof of service… and filing fee… on or before April 30th of the year the tax becomes payable.” Because taxpayers failed to present evidence of service, the court dismissed the case for lack of jurisdiction. Zwicky v. County of Hennepin, 27-CV-20-15145, 2023 WL 2146468 (Minn. Tax 2/21/2023).
Property tax: All North Star factors must be satisfied to qualify for an exemption. A single-member limited liability taxpayer (whose sole member was a Minnesota nonprofit corporation) challenged the accuracy of a property’s assessed commercial classification and property tax. On 6/24/2019, the taxpayer purchased a small box building located on a parcel in Woodbury. The taxpayer specifically purchased the property to take advantage of Minnesota Statute §272.02, subd. 38(a)-(b), which allowed for an entire tax year of exempt status if purchase was made before July 1 of the tax year. Though the taxpayer did not begin its nonprofit services until December 2019, it did begin converting the space into a layout that would meet its service needs.
To successfully challenge an assessment and seek an exemption, a taxpayer must first overcome the presumption that “the assessor’s classification of real property is prima facie valid. Minn. Stat. §271.06, subd. 6(a) (2022),” then it must show “concurrent ownership and use of the subject property toward the charitable purpose. Living Word Bible Camp v. Cnty. of Itasca, 829 N.W.2d 404, 412-13 (Minn. 2013) (citing Christian Bus. Men's Comm. of Minneapolis, 38 N.W.2d at 808).”
The taxpayer successfully overcame the prima facie validity by introducing exhibits and presenting testimony. But a dispute remained regarding whether the property qualified for a property tax exemption. The nonprofit was a company that provided free development services and job training to underprivileged individuals—services that otherwise would be borne by the government. While there was no dispute that the nonprofit owned or used the property, the county argued that the nonprofit “fail[ed] to satisfy two of the six statutorily required North Star factors, Minn. Stat. 272.02, subd. 7(a); North Star Research Inst. v. Cnty. of Hennepin, 306 Minn. 1, 6, 236 N.W.2d 754, 757 (Minn. 1975)” in its efforts to demonstrate that the nonprofit “uses the subject property for a charitable purpose.”
The two requirements that were allegedly unmet consisted of “(3) establishing that a material number of the recipients receive benefits at reduced or no cost, or whether the organization alleviates a government burden, and (5) whether the beneficiaries are restricted or unrestricted, and if restricted, if the class of persons to whom the charity is made available is reasonably related to the charitable objectives. Minn. Stat. §272.02, subd. 7(a)(3), (5).”
On 1/2/2019 and 1/2/2020, the nonprofit corporation occupied the property while providing free development services and job training to youth, adults, and members of the public, which satisfied the exemption requirements under Minn. Stat. §272.02, subd. 7(a)(3) (2022). Further, due to the services being provided to a “restricted class of persons,” and the objective to “promote environmental sustainability,” the nonprofit also satisfied the exemption requirements under Minn. Stat. §272.02, subd. 7(a)(5).
The court therefore classified the property as “exempt as an institution of purely public charity” for both 2019 and 2020 and ordered a refund of any real estate taxes paid. GW Rest. Holdings LLC, Petr., v. County of Washington, Respt., 82-CV-20-1872, 2023 WL 2317604 (Minn. Tax 3/1/2023).
--Morgan Holcomb
--Brandy Johnson
Mitchell Hamline School of Law