Criminal Law
JUDICIAL LAW
• Controlled substances: Uncorroborated admission to possession of marijuana is sufficient to establish probable cause. During a traffic stop, police smelled marijuana in appellant’s vehicle and appellant admitted he had a small amount of marijuana in the car. During a search of the car, police found a substance they believed to be marijuana. A field test of the substance detected THC, but no additional tests were conducted to determine the THC concentration. Appellant was charged with fifth-degree possession, but he moved to dismiss the charge, arguing his statement that he possessed marijuana could not be used to establish probable cause to believe he possessed marijuana, as opposed to hemp, because his statement was not corroborated by testing that showed that the statutory threshold concentration of THC was present. The district court granted appellant’s motion, but the court of appeals reversed.
The Supreme Court accepted review to answer the question of whether the state must obtain a chemical test showing that the THC concentration of suspected marijuana exceeds the legal limit to survive a motion to dismiss a marijuana possession charge for lack of probable cause. The Court decides that such a test is not required in this case, because appellant admitted the substance was marijuana and his statement did not need to be corroborated to survive a motion to dismiss at the probable cause stage.
Under Minn. Stat. §634.03, a confession alone cannot support a conviction—additional independent evidence is needed. However, this rule does not apply to a probable cause challenge. Based on the language of section 634.03 and prior case law, the Court holds that a finding of probable cause can be based on an uncorroborated confession. Here, appellant admitted the substance in his vehicle was marijuana, an admission that is direct evidence of guilt. While this admission alone would not sustain a conviction, it is enough to survive a motion to dismiss for lack of probable cause. The district court erred when it granted appellant’s motion to dismiss. State v. Dixon, 981. N.W.2d 387 (Minn. 11/9/2022).
• Juveniles: When examining a juvenile’s culpability in making a certification determination, the court may consider only the child’s level of participation in planning and committing the offense and the sentencing guidelines’ mitigating factors. Appellant, a 15-year-old, was charged in juvenile court with aiding and abetting second-degree murder and first-degree aggravated robbery. The district court denied the state’s motion to certify appellant as an adult. The court of appeals reversed, finding the state met its burden and certification was required.
Certification of a juvenile under the age of 16 is permissible only if the state proves “by clear and convincing evidence that retaining the proceeding in the juvenile court does not serve public safety.” Minn. Stat. §260B.125, subd. 2(6)(ii). Six factors must be considered by the court: (1) the seriousness of the alleged offenses; (2) the culpability of the child in committing the alleged offenses; (3) the child’s prior record of delinquency; (4) the child’s programming history; (5) the adequacy of punishment or programming available in the juvenile system; and (6) the dispositional options available for the child. Id. at subd. 4. Greater weight is to be given to the first and third factors. Id.
Appellant argues the court of appeals erred in concluding that only those mitigating factors recognized by the sentencing guidelines may be considered when analyzing the second factor (culpability). He also argues that, while factors one and three weigh in favor of certification, the remaining four factors do not and the district court properly denied the state’s motion for certification.
As to the second public safety factor, the district court must consider “the culpability of the child in committing the alleged offense, including the level of the child’s participation in planning and carrying out the offense and the existence of any mitigating factors recognized by the Sentencing Guidelines.” Id. at subd. 4(2). Here, the district court considered other mitigating factors, including scientific and social-scientific research, appellant’s mental health diagnosis, and U.S. Supreme Court cases discussing child brain development.
The Minnesota Supreme Court first discusses the language of section 260B.125, subd. 4(2), noting that “the context strongly suggests that the word ‘including’ is a limitation” on what may be considered by the Court. This section’s legislative history and the Court’s previous narrow interpretations of the public safety factors also support this interpretation. Thus, the Court holds that section 260B.125, subd. 4(2), “limits a district court’s consideration of the existence of any mitigating factors under the second public safety factor to those facts enumerated after the word ‘including,’ which includes the level of the child’s participation in planning and carrying out the offense and the existence of any of the mitigating factors set forth in the sentencing guidelines, which are listed at Minn. Sent. Guidelines 2.D.3.a.” Here, the district court improperly considered other mitigating information. Looking only at the factors permitted by statute, the second public safety factor weights in favor of certification.
Ultimately, the Supreme Court finds the district court abused its discretion when it determined the state had not met its burden of proving that retaining appellant in the juvenile system would not serve public safety. The Court finds the first four public safety factors all favor certification, which outweigh the only two other factors weighing against certification. The court of appeals’ determination that the district court should have found certification was required is affirmed. Matter of Welfare of H.B., No. A20-0954, 2022 WL 16954540 (Minn. 11/16/2022).
• Evidence: Factfinder is not required to apply circumstantial evidence standard of review when determining guilt. Appellant was found guilty after a court trial of one count of petty misdemeanor use of a controlled access highway as a pedestrian. The charge arose from appellant’s participation in a group of demonstrators who walked onto I-94. Appellant appealed, arguing there is insufficient evidence to support the court’s finding of guilt.
Where circumstantial evidence is used to prove an element of an offense, as in this case, a heightened standard of review applies, which requires the appellate court to determine the circumstances proved, disregarding evidence inconsistent with the verdict, and then requires the appellate court to determine whether the circumstances proved are consistent with guilt and inconsistent with any rational hypothesis other than guilt. Appellant argues the district court erred by not applying this test for circumstantial evidence before finding her guilty.
However, the court of appeals notes that the Supreme Court has previously recognized the different roles of a factfinder at trial and at the appellate court on review when it comes to how direct and circumstantial evidence is to be considered. The court of appeals finds that “it is clear that although an appellate court prefers direct evidence to circumstantial evidence when reviewing a determination of guilt on appeal, a factfinder does not prefer one form of evidence over the other when determining guilt at trial.”
The court of appeals rejects appellant’s argument that the district court was required to apply the circumstantial evidence standard at trial, holding that this test is to be applied only by the appellate court. The court of appeals applies the circumstantial evidence test itself to determine if the evidence was sufficient to support the district court’s finding of guilt. The court determines that the circumstances proved make it reasonable to infer that appellant was among the group of demonstrators that walked on I-94. The court finds no reasonable inference inconsistent with guilt that can be drawn from the circumstances proved. The district court is affirmed. State v. Olson, A21-1742, 2022 WL 17086778 (Minn. Ct. App. 11/21/2022).
• Firearms: Unassembled shotgun parts able to be assembled constitute a “firearm.” Police saw a car and a van parked near a known drug house and saw someone inside the van injecting heroin. A baggie of suspected controlled substances was found on one occupant of the van. A search of the van revealed a backpack containing unassembled shotgun parts, as well as a prescription box and pay stub both labeled with appellant’s name. An occupant of the van told police the backpack belonged to appellant. The backpack contained all the parts necessary to assemble a functional shotgun, aside from the stock bolt and stock bolt washer. Appellant had a previous conviction for a crime of violence, so he was charged with unlawful possession of a firearm under Minn. Stat. §609.165, subd. 1b(a). Appellant was found guilty after a jury trial.
On appeal, appellant argues the evidence was insufficient to sustain his conviction, because unassembled shotgun parts do not constitute a “firearm.” “Firearm” is not defined in section 609.165, subd. 1b(a), but it has been defined and interpreted in case law. In 2020, the Supreme Court held that “a ‘firearm’ is an instrument designed for attack or defense that expels a projectile by the action or force of gunpowder, combustion or some other explosive force.” State v. Glover, 952 N.W.2d 190, 191 (Minn. 2020). The court has not previously considered whether an unassembled firearm fits this definition, but it has repeatedly found that the operability of a firearm is immaterial, because even an inoperable firearm still maintains its apparent ability to inflict injury.
Consistent with these decisions, the court of appeals concludes “that the potential use of an unassembled firearm is sufficient to bring such a firearm within the meaning of prohibited possession under Minn. Stat. §609.165, subd. 1b(a), so long as it is possible to assemble the firearm.” The court points out that it cannot write an exemption for unassembled firearms into the statute where the Legislature could have chosen to do so but did not.
Whether a particular group of parts constitutes a “firearm” is a question of fact. Here, although two small parts were missing, it was possible to obtain those missing parts to assemble the firearm. In this case, the state proved it was possible to assemble the firearm parts into a firearm, and the district court properly instructed the jury that a firearm “[m]eans a device, whether operable or inoperable, loaded or unloaded, designed to be used as a weapon from which can be expelled the projectile by the force of any explosion or force of combustion.” Thus, the evidence was sufficient to prove the unassembled shotgun parts constituted a firearm.
The court also finds that the circumstances proved in this case are consistent with the jury’s finding that appellant constructively possessed the firearm. The circumstances proved do not support any reasonable inference other than guilt, and appellant’s conviction is affirmed. State v. Stone, A21-1648, 2022 WL 17244596 (Minn. Ct. App. 11/28/2022).
• Procedure: Guilty plea is invalid if plea petition is not signed and there is no record of voluntary, intelligent plea. Appellant was charged with third-degree driving while impaired. Pursuant to Minn. R. Crim. P. 15.03, subd. 2, at a Zoom hearing, his defense counsel indicated a plea petition would be filed and that he would obtain appellant’s permission to sign the petition on his behalf. The district court questioned appellant on the record about the plea agreement and plea petition, and told appellant he could permit his attorney to sign the petition for him. Appellant confirmed he understood. A plea petition was filed, which appellant’s attorney signed on his behalf, and accepted by the district court. Appellant appeals his conviction, arguing his plea was not voluntary and intelligent.
The Minnesota Court of Appeals notes that Rule 15.03, subd. 2, which permits the entry of a guilty plea to a misdemeanor or gross misdemeanor charge via the filing of a plea petition, explicitly requires that the petition be signed by the defendant. A constitutionally valid plea is accurate, voluntary, and intelligent, and is established in a proper factual basis on the record. This record can include a verbatim recording of the proceedings and/or a plea petition signed by the defendant and filed with the court.
A plea petition signed by the defendant is prima facie evidence of a voluntary and intelligent guilty plea. Without the defendant’s signature, the record must contain other evidence to establish the validity of the plea. Here, the record does not show appellant was advised of and forfeited his constitutional rights or that he understood and agreed to the terms set forth in the plea agreement. Reversed and remanded to allow appellant to withdraw his guilty plea. State v. Lawrence, A22-0080, 2022 WL 17409571 (Minn. Ct. App. 12/5/2022).
• Criminal sexual conduct: Aggravated sentence for an offense occurring within the victim’s zone of privacy is permitted when the offense is committed in the victim’s bedroom. Appellant was convicted of third-degree criminal sexual conduct against a physically helpless victim after entering the victim’s bedroom while she was sleeping and engaging in sexual penetration with her. The jury also found the offense was committed in the victim’s zone of privacy, which the district court relied on to impose an upward durational departure from the sentencing guidelines.
The sentencing guidelines’ list of aggravating factors that may support an upward sentencing departure include “[t]he offense was committed in a location in which the victim had an expectation of privacy” (zone of privacy factor). A single aggravating factor may support upward departure, “[b]ut even when the jury finds the presence of one or more of these factors, the district court must then determine that it constitutes a ‘substantial and compelling’ circumstance that renders the offense significantly more serious than a typical offense.”
Here, the evidence at trial established that appellant was not allowed in the victim’s room when she was sleeping without her permission due to a prior incident and she had her door closed on the day of the offense. The court also finds the district court did not err in finding that the commission of the offense within the victim’s “zone of privacy” constituted a substantial and compelling ground for making the offense significantly more serious than a typical offense. Here, the victim had to repeatedly return to the location of her assault, her own bedroom, making appellant’s conduct more serious than a typical “physically helpless victim” criminal sexual conduct offense, which generally occur outside of the victim’s zone of privacy. Appellant’s sentence is affirmed. State v. Vanengen, A22-0105, 2022 WL 17747774 (Minn. Ct. App. 12/19/2022).
Samantha Foertsch
Bruno Law PLLC
samantha@brunolaw.com
Stephen Foertsch
Bruno Law PLLC
stephen@brunolaw.com
Employment & Labor Law
JUDICIAL LAW
• Teacher licensure; immorality standard narrowed. The denial of a substitute teaching license for a former police officer who shot and killed a Black male vehicle driver six years ago was reversed and remanded by the Minnesota Court of Appeals. The appellate court held that the statutory language of “immoral character or conduct” is too “nebulous” and “vague” to support licensure denial to Jeronimo Yanez, who was acquitted after he killed Philando Castile, and the case was remanded to the Professional Education Licensing and Standard Board, with a “narrowing contribution” limiting the determination to whether and how that incident “relates to Yanez’s fitness to teach in the public schools.” In Re Yanez, 2022 WL 17244835 (Minn. Ct. App. 11/28/2022) (unpublished).
• Wrongful termination claim dismissed. An employee who was not entitled to an on-site inspection of her employer’s facility had her wrongful discharge lawsuit dismissed. The 8th Circuit upheld a lower court determination that her breach of fiduciary duty claim was not actionable. Phox v. 21c Management, LLC, 2022 WL 16847603 (Minn. Ct. App. 11/20/2022) (unpublished).
• Retaliation rejected; legitimate reason to terminate. A community law enforcement agency had legitimate reasons to fire a Black male officer. Affirming a lower court ruling, the 8th Circuit rejected his racial retaliation claim because the record reflected that he failed to properly respond to a medical emergency as part of his job as a first responder. Thompson v. University of Arkansas, 52 F.4th 1039 (8th Cir. 11/10/2022).
• Unemployment compensation; quitting employees split cases. A pair of decisions of the Minnesota Court of Appeals yielded different outcomes in unemployment compensation cases.
An employee was denied benefits when he quit because his work location was switched, which impeded his transportation there. The employee’s refusal to accept the new position did not constitute “good reason attributable to the employer” to quit. Winne v. J & G Holdings, Inc., 2022 WL 16910585 (Minn. Ct. App. 11/14/2022) (unpublished).
But an employee who was forced to sign a separation agreement on her last day of work before a planned leave of absence was granted benefits because she did not make a “free will choice” to quit or be given the opportunity to continue working. Walker v. St. Paul Public Library, 2022 WL 16910615 (Minn. Ct. App. 11/14/2022) (unpublished).
• Workers compensation; standard for additional attorney’s fees. An award of additional attorney’s fees to a claimant under Minn. Stat. 176.081 subd. 7 is distinct from ordinary contingent fees under Subdivision 1(c) and must be analyzed and decided separately. Reversing a ruling of the Workers’ Compensation Court of Appeals, the state Supreme Court reversed and remanded for consideration of the additional fee prong independently from the chief contingency award. Lagasse v. Horton, 2022 WL 7332366 (Minn. 2022).
Marshall H. Tanick
Meyer, Njus & Tanick
mtanick@meyernjus.com
Environmental Law
JUDICIAL LAW
• Minnesota Court of Appeals upholds summary judgment against Minneapolis 2040 Plan. The Minnesota Court of Appeals dealt another blow to the City of Minneapolis’s 2040 Comprehensive Plan with its December 2022 order. Since the plan’s passage in 2018, three groups (collectively referred to as “Smart Growth”) sued the city, arguing the plan could cause environmental harm and suggesting the city conduct an analysis under the Minnesota Environmental Rights Act (MERA) before any implementation of the plan. The recent court of appeals decision, following an appeal from the Minnesota Supreme Court’s 2021 remand, upheld the district court’s grant of Smart Growth’s motion for summary judgment, while reversing the grant of injunctive relief and remanding back to the district court for further proceedings. See State by Smart Growth Minneapolis v. City of Minneapolis, 954 N.W.2d 584, 587-88 (Minn. 2021).
Under the burden-shifting framework of MERA, Smart Growth was required to present a prima facie case showing (1) the existence of a protectable natural resource; and (2) that the city’s conduct is likely to cause the impairment of that resource. If met, the city then must rebut Smart Growth’s case or present an affirmative defense. The city acknowledged that the plan does implicate protectable natural resources, but asserted that Smart Growth failed to establish the second element—namely that Smart Growth’s allegations relied on an assumption of a full build-out of the Plan, and not a gradual implementation on a project-by-project basis. The district court found for Smart Growth and granted its motion for summary judgment, relying on an expert report that suggested a full build-out would cause material adverse environmental effects. The court also required the city to “immediately cease all present action in furtherance of the 2040 Plan,” until the city satisfied its MERA obligation of rebutting Smart Growth’s prima facie case or prevailed under an affirmative defense.
Following the 2021 Minnesota Supreme Court decision, the appellate court found the district court appropriately based its MERA analysis on a presumption of a full build-out under the plan. Smart Growth therefore met its burden under MERA, and the city failed to rebut the expert report, properly granting Smart Growth’s motion for summary judgment. However, the appellate court reversed the injunction. The court reasoned that the district court’s injunction and order that the city revert to the 2030 plan was made with “limited analysis” and without proper findings of fact on the necessity and scope of injunctive relief. The court remanded the matter back to the district court for further proceedings concerning the injunction. State by Smart Growth Minneapolis v. City of Minneapolis, No. 27-CV-18-19587, 2022 WL 17957328 (Minn. Ct. App. 12/27/2022).
ADMINISTRATIVE ACTION
• EPA and the Corps issue revised definition of “waters of the U.S.,” incorporating both jurisdictional tests from Rapanos. On 12/30/2022, the U.S. Environmental Protection Agency (EPA) and the Army Corps of Engineers issued a final rule defining “waters of the United States” (WOTUS). The definition of WOTUS is significant because it prescribes the reach of federal jurisdiction under the Clean Water Act (CWA), including the NPDES and 404 permit programs. Recall that a set of 1986 rules defining WOTUS had been subject to numerous fractured interpretations by the Supreme Court of the United States, including the Court’s decision in Rapanos v. United States, 547 U.S. 715 (2006). In that case Justice Scalia, in a plurality opinion, articulated a jurisdictional test that the CWA extends only to waters that are “relatively permanent, standing or continuously flowing” or to wetlands that are immediately adjacent to such waters. But Justice Kennedy, in a partially concurring opinion, said federal “jurisdiction over wetlands depends upon the existence of a significant nexus between the wetlands in question and navigable waters in the traditional sense.”
EPA during the Obama era adopted a new definition of WOTUS, incorporating the more broad “significant nexus” approach of Justice Kennedy in Rapanos. That definition was repealed by the Trump EPA and replaced by the Navigable Waters Protection Rule (NWPR), which found CWA jurisdiction primarily under Justice Scalia’s more narrow “relatively permanent” standard. In 2021, federal district courts in both Arizona and New Mexico vacated the NWPR. Subsequently, EPA and the Corps announced that they would stop implementing NWPR and rely on the 1986 rule, and, in December 2021, the agencies issued an interim rule defining WOTUS. 86 Fed. Reg. 69372 (12/7/2021).
The agencies describe the final rule issued on December 30 as a return to a “reasonable and familiar framework founded on the pre-2015 definition [of WOTUS] with updates to reflect existing Supreme Court decisions, the latest science, and the agencies’ technical expertise.” Notably the rule codifies aspects of both the “relatively permanent” and “significant nexus” tests from Rapanos.
In short, the rule defines WOTUS to include:
• traditional navigable waters, interstate waters, the territorial seas, and their adjacent wetlands;
• most impoundments of WOTUS;
• tributaries to traditional navigable waters, interstate waters, the territorial seas, and impoundments that meet either the relatively permanent standard or the significant nexus standard;
• wetlands adjacent to impoundments and tributaries, that meet either the relatively permanent standard or the significant nexus standard; and
• other intrastate lakes and ponds, streams, or wetlands that meet either the relatively permanent standard or the significant nexus standard.
The new rule includes eight exceptions to the WOTUS definition, including the two exceptions codified in the 1986 rule (waste treatment systems and prior converted cropland) and six other exceptions that the agencies have applied by practice: ditches, artificially irrigated areas, artificial lakes or ponds created by excavating or diking dry land to collect and retain water, artificial reflecting or swimming pools or other small ornamental bodies of water, waterfilled depressions created in dry land incidental to construction activity, and swales and erosional features (e.g., gullies, small washes) characterized by low volume and infrequent or short-duration flow.
Notably, the agencies issued the new rule as the U.S. Supreme Court is set to issue a decision in Sackett v. EPA, which is likely to address the CWA jurisdictional standard for wetlands. Revised Definition of “Waters of the United States” (33 CFR Pt. 328 & 40 CFR Pt. 120), ___ Fed, Reg. ___ (2022).)
• EPA issues environmental justice principles for air-permitting decisions. In December the EPA’s Office of Air and Radiation issued a guidance document featuring eight principles for addressing environmental justice during Clean Air Act permitting decisions. The guidance document cross-references an FAQ document issued under the EPA Office of General Counsel and Office of Policy in August 2022 titled Environmental Justice and Civil Rights in Permitting Frequently Asked Questions (EJ FAQs).
The guidance document notes that Title VI of the Civil Rights Act of 1964 mandates that state and local permitting programs, as well as all other recipients of EPA financial assistance, must “not discriminate—either intentionally or in effect—against persons on the basis of race, color, national origin, disability, sex, and age.” The EPA is also directed to achieve environmental justice and equity by three executive orders (EOs) issued across two administrations: EO 14008 “Tackling the Climate Crisis at Home and Abroad” (1/27/2021); EO 13985 “Advancing Racial Equity and Support for Underserved Communities through the Federal Government” (1/20/2021); EO 12898 “Federal Actions to Address Environmental Justice in Minority Populations and Low-Income Populations” (2/11/1994).
With the goal of assisting EPA regions and state and local authorities during air-permitting decisions, the guidance document does not issue a “one-size-fits-all” methodology for addressing environmental justice, but rather offers multiple principles to be considered on a case-by-case basis.
The eight principles are as follows: 1) Identify communities with potential environmental justice concerns. 2) Engage early in the permitting process to promote meaningful participation and fair treatment. 3) Enhance public involvement throughout the permitting process. 4) Conduct a “fit for purpose” environmental justice analysis. 5) Minimize and mitigate disproportionately high-end adverse effects associated with the permit action to promote fair treatment. 6) Provide federal support throughout the air-permitting process. 7) Enhance transparency throughout the air-permitting process. 8) Build capacity to enhance the consideration of environmental justice in the air-permitting process.
The guidance document offers a thorough explanation of each principle, as well as cross-references to the August 2022 EJ FAQs. This December 2022 guidance document follows the May 2022 publication of the EPA Legal Tools to Advance Environmental Justice (EPA Legal Tools) document, the creation of the Office of Environmental Justice and External Civil Rights in September 2022, and the announcement from the EPA Office of Land in Emergency Management finalizing the “EJ Action Plan: Building up Environmental Justice in EPA’s Land Protection and Cleanup Programs” that same month.
Like the December 2022 principles, the EJ action plan was created to identify and “address the nation’s environmental justice challenges.” It has four main goals: 1) strengthening compliance with cornerstone environmental statutes; 2) incorporating environmental justice considerations during the regulatory development process; 3) improving community engagement in rulemaking, permitting decisions, and policies; and 4) implementing Pres. Biden’s Justice40 Initiative, the goal of which is to deliver at least 40 percent of the overall benefits from federal investments in climate and clean energy to disadvantaged communities. Principles for Addressing Environmental Justice in Air Permitting, EPA Office of Air and Radiation (12/22/2022), available at https://www.epa.gov/system/files/documents/2022-12/Attachment%20-%20EJ%20in%20Air%20Permitting%20Principles%20.pdf
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
• Attorney-client privilege; “dual-purpose” communications; grant of certiorari. The Supreme Court heard argument on 1/9/2023 on the issue of “whether a communication involving both legal and non-legal advice is protected by attorney-client privilege when obtaining or providing legal advice was one of the significant purposes behind the communication.” The 9th Circuit held that the “primary purpose” test applies to “dual purpose” communications, and that the communications at issue were not privileged. In Re Grand Jury, 23 F.4th 1088 (9th Cir.), cert. granted, 143 S. Ct. 80 (2022).
• Nationwide preliminary injunction pending appeal; failure to address relevant injunction standard. Reversing a district court’s determination that the plaintiff states lacked standing to pursue claims arising out of the student loan forgiveness program, the 8th Circuit found that Missouri had standing and issued a nationwide injunction pending appeal.
Notably from a procedural perspective, the court failed to address whether the states’ request for injunction relief was to be considered under the traditional Dataphase test or whether the higher standard applicable to government actions applied.
The Supreme Court granted certiorari before judgment and is scheduled to hear argument in February. It is unclear whether the injunctive relief standard will be addressed in the course of that appeal. Nebraska v. Biden, 52 F.4th 1044 (8th Cir.), cert. granted, ___ S. Ct. ___ (2022).
• ERISA; arbitration; no federal question. Relying on the Supreme Court’s intervening decision in Badgerow v. Walters (142 S. Ct. 1310 (2022)), the 8th Circuit reversed a district court’s confirmation over 177 arbitration awards, finding that plaintiffs’ claims were not sufficiently ERISA-related to establish federal question jurisdiction, and remanded for a determination of which claims, if any, were subject to diversity jurisdiction. Hursh v. DST Systems, Inc., 54 F.4th 561 (8th Cir. 2022).
• Younger abstention rejected. Finding that none of the required “exceptional circumstances” were present, the 8th Circuit reversed a district court decision to abstain under Younger. 375 Slane Chapel Road, LLC v. Stone County, 53 F.4th 1122 (8th Cir. 2022).
• Award of attorney’s fees affirmed. Affirming an order by then-Chief Judge Tunheim and rejecting defendants’ argument that the plaintiff should recover “nothing” in attorney’s fees, the 8th Circuit affirmed an award of almost $250,000 in attorney’s fees. Parada v. Anoka County, 54 F.4th 1016 (8th Cir. 2022).
• Trademark: attorney’s fees; exceptional case. Finding no abuse of discretion in the district court’s determination that a Lanham Act case was “exceptional,” the 8th Circuit also found no abuse of discretion in the district court’s decision to reduce requested hourly rates and award plaintiff’s counsel only a quarter of the lodestar. Pocket Plus, LLC v. Pike Brands, LLC, 53 F.4th 425 (8th Cir. 2022).
• Fed. R. Civ. P. 12(f); motion to strike affirmative defenses denied; intra-district split. Acknowledging an intra-district split as to whether the Twombly/Iqbal plausibility standard applies to affirmative defenses, Judge Menendez denied plaintiff’s motion to strike affirmative defenses and found that the defenses “should not be stricken based on an absence of specific factual allegations.” Hollie v. Essentia Health Moose Lake, 2022 WL 17076751 (D. Minn. 11/18/2022).
• Motion to dismiss unjust enrichment claim granted; common practices criticized. Bemoaning both “the practice of many plaintiffs’ attorneys to include an unjust-enrichment claim in every civil complaint” and “the practice of many defense attorneys to bring a motion to dismiss in every case,” Chief Judge Schiltz granted defendant’s motion to dismiss one of four claims. Strategic Import Supply, LLC v. Meyers, 2022 WL 16718673 (D. Minn. 11/4/2022).
• Proposed depositions of counsel; work product objections sustained; protective order issued. In a lengthy opinion, Magistrate Judge Wright rejected the plaintiff’s motion to compel the depositions of experts and an investigator retained by defense counsel in a related criminal case, finding that the work product privilege attached to the work of non-attorneys, including their recollections of non-privileged interviews, and entered a protective order barring any further attempts to depose these individuals. Evans v. Krook, 2022 WL 17176186 (D. Minn. 11/23/2022).
• Motions for contempt granted and denied; multiple cases. Adopting a report and recommendation by Magistrate Judge Wright, Judge Wright granted plaintiff’s motion to have the defendants held in contempt, with defendants being ordered to pay a fine of $100 a day (increasing to $500 a day a week later) until they purge their contempt by complying with the court’s prior order, and also ordered defendants to pay plaintiff’s reasonable attorney’s fees incurred in seeking defendants’ compliance with the prior order. Powerlift Door Consults., Inc. v. Shepard, 2022 WL 16822179 (D. Minn. 8/17/2022), Report and Recommendation Adopted, 2022 WL 16821500 (D. Minn. 11/8/2022).
Judge Davis denied defendant’s motion to have plaintiff school district held in contempt, fined, and the school superintendent taken into custody due to the school district’s failure to comply with a prior order, finding that the defendant was “making every good faith effort” and that defendant’s actions were “not the act of a party attempting to circumvent a Court Order.” Osseo Area Schools, Indep. School Dist. No. 279 v. A.J.T. ex rel. A.T. and G.T., 2022 WL 17082826 (D. Minn. 11/18/2022).
• Motions for contractual attorney’s fees denied; multiple cases. While granting plaintiff’s motion for default judgment, Judge Wright denied the related motion for an award of attorney’s fees where plaintiff sought more than $9,000 in attorney’s fees and costs but did not provide billing records or identify the attorneys who worked on the case, their hourly rates, or the hours each attorney worked. Judge Wright declined plaintiff’s offer to submit billing records for in camera review, finding “no justification” for its failure to submit those records with its motion. Huntington Nat’l Bank v. Dignity Senior Living, LLC, 2022 WL 16638346 (D. Minn. 11/2/2022).
Judge Wright also denied a request for more than $16,000 in attorney’s fees and costs in a second case decided the next day, again criticizing counsel for the failure to submit appropriate billing records to the court. Huntington Nat’l Bank v. TNT Trucking LLC, 2022 WL 16700298 (D. Minn. 11/3/2022).
Josh Jacobson
Law Office of Josh Jacobson
joshjacobsonlaw@gmail.com
Intellectual Property
JUDICIAL LAW
• Copyright: Denial of attorneys’ fees where litigation not frivolous or unreasonable. Judge Tostrud recently denied prevailing defendants’ motion for attorneys’ fees under the Copyright Act. Plaintiff MPAY Inc. sued defendants Erie Custom Computer Applications, Inc. and Payroll World, Inc., for breach of the parties’ agreements regarding source code for payroll-processing software and ensuing copyright infringement. After a seven-day trial in June 2022, the jury found no breach of the agreement. Without any breach, MPAY could not establish its related copyright infringement claims as a matter of law, and judgment was entered in favor of the defendants. Defendants then moved for an award of attorneys’ fees pursuant to the parties’ Software Development and License Agreement (SDLA) and under the Copyright Act. After the court found the SDLA was no longer in effect and did not provide a basis for attorneys’ fees, the court considered the demand for fees under the Copyright Act. Section 505 of the Copyright Act allows for but does not mandate an award of attorneys’ fees to the “prevailing party.” The discretion to award fees considers factors such as whether the lawsuit was frivolous or unreasonable, the losing litigant’s motivations, the need in a particular case to compensate or deter, and the purposes of the Copyright Act. The court found MPAY’s claims were not frivolous or objectively unreasonable because many of MPAY’s claims survived summary judgment and defendants’ motion for judgment as a matter of law at the close of evidence. The court further found awarding fees would not advance the Copyright Act’s purpose to protect creative works. MPAY Inc. v. Erie Custom Comput. Applications, Inc., No. 19-cv-704 (ECT/LIB), 2022 U.S. Dist. LEXIS 229311 (D. Minn. 12/21/2022).
• Patent: Indefiniteness requires resolution of factual issues. Chief Judge Schiltz recently refused to find a claim limitation indefinite at the claim-construction stage, delaying the determination until at least the summary judgment stage. Plaintiffs Vascular Solutions LLC, Teleflex LLC, Teleflex Life Sciences Limited, and Arrow International LLC (Teleflex) sued Medtronic, Inc. and Medtronic Vascular, Inc. (Medtronic) alleging infringement of a family of patents directed to guide-extension catheters used in interventional cardiology procedures. Medtronic counterclaimed for declarations of non-infringement and invalidity. During claim construction, Medtronic argued that certain claims were indefinite because they require comparing a “material” to a “structure.” A patent is invalid for indefiniteness if its claims (read in light of the specification delineating the patent, and the prosecution history) fail to inform, with reasonable certainty, those skilled in the art about the scope of the invention. The court first found that Teleflex’s contention that the claims require a structure-to-structure comparison would read words out of the claim. At the claim construction hearing, Teleflex newly contended that the claim called for a material-to-material comparison arguing that a flexural modulus is a material property that is independent of shape and that can be determined by testing a structure, thus allowing for a material-to-structure comparison. The court therefore found that there was a factual dispute concerning whether flexural modulus can be determined independent of structure. Accordingly, the court deferred the issue of indefiniteness to the summary judgment stage. The court acknowledged that while indefiniteness is a matter of law, a jury may be required to resolve factual disputes before a court can reach that legal conclusion. Vascular Sols. LLC v. Medtronic, Inc., No. 19-CV-1760 (PJS/TNL), 2022 U.S. Dist. LEXIS 231581 (D. Minn. 12/27/2022).
Joe Dubis
Merchant & Gould
jdubis@merchantgould.com
Real Property
JUDICIAL LAW
• Decision to grant variances was legally valid. When the county’s zoning ordinance provides that a variance may only be granted upon compliance with Minnesota Statutes Ch. 394, the county’s decision is not arbitrary if the board of adjustments uses a checklist with contents that correspond with Minn. Stat. §394.27, subd. 7, even if the board does not specifically mention the ordinance in its written findings granting the variances. In Behrends v. Jackson Cnty., the owner of a parcel adjacent to four properties on which windmills were located instituted a declaratory judgment action to challenge variances granted by Jackson County to allow the continued use, with modifications, of the wind turbines. The district court granted summary judgment dismissing the action and the court of appeals affirmed. The county’s ordinance required that an applicant for a variance demonstrate that “extraordinary circumstances” exist for the subject property. The plaintiff, therefore, asserted that the board of adjustments’ decision was legally invalid since it did not make a finding concerning this factor. But the court of appeals held that the board’s consideration of the second requirement of Minn. Stat. §394.27, subd. 7—which requires that “the plight of the landowner is due to circumstances unique to the property not created by the landowner”—constituted sufficient compliance with the ordinance. Behrends v. Jackson Cnty., No. A22-0797, 2022 WL 17956776 (Minn. App. 12/27/2022).
• Marketable Title Act did not extinguish recorded easement. Misuse of an easement can constitute continuous use for purposes of the Marketable Title Act’s possession exception. In Matter of Sharifkhani, a landowner instituted a Torrens registration proceeding and sought an adjudication that an easement recorded in 1933 had been terminated. The fee owner of the benefitted parcel, which had been in residential use at the time of the easement grant but was converted to commercial use in 1999, appeared and filed an answer in opposition. The parties stipulated to certain facts, including that the possession exception was fulfilled from 1973 until 1999. The examiner of titles held a trial regarding the use of the easement through the time of the filing of the action. The examiner found continuous use since 1973, satisfying the MTA possession exception and precluding the termination of the easement, and the district court adopted the examiner’s recommendation. It is “well settled” that easements cannot be “expanded beyond the objects originally contemplated or expressly agreed upon by the parties.” The applicant, therefore, argued that such expanded use could not be used to show continuous possession sufficient to defeat the conclusive presumption of abandonment under the MTA arising from failure to record a notice within 40 years of creation of the interest. The court of appeals declined to apply an equitable determination of easement misuse to the MTA possession exception. Matter of Sharifkhani, No. A22-0617, 2022 WL 17747896 (Minn. App. 12/19/2022).
Julie N. Nagorski
DeWitt LLP
jnn@dewittllp.com
Tax Law
JUDICIAL LAW
• Supreme Court’s reasoning in Boechler does not apply to the 90-day deadline of section 6213(a) deficiency cases. In Boechler, the Supreme Court held that “[s]ection 6330(d)(1)’s three-day time limit to file a petition for review of a collection due process determination is an ordinary, nonjurisdictional deadline subject to equitable tolling.” Boechler, P.C. v. Comm’r, 142 S. Ct. 1493, 1501 (2022). After missing by one day the 90-day filing deadline applicable to deficiency matters, taxpayer Hallmark Research Collective argued that the Court’s reasoning in Boechler applies with equal force to the 90-day filing deadline in section 6213(a). The tax court embraced the opportunity to review the Boechler opinion. After a meticulous review, the court concluded that the Supreme Court’s reasoning in Boechler does not apply to the 90-day deadline of section 6213(a). Judge Gustafson’s opinion was joined by all 16 of his fellow tax court judges. Hallmark Rsch. Collective v. Comm’r, No. 21284-21, 2022 WL 17261546 (T.C. 11/29/2022).
• Tax court declines to second-guess hardworking farmers’ use of 40 tractors to work 482 acres. Taxpayers Steven and Judy Hoakison have been farming in central Iowa since 1971. Mr. Hoakison has a high school education and, in addition to farming, has worked full-time as a UPS delivery driver for about two decades. Mrs. Hoakison plays an important role in managing the business side of the family’s farming business. She also worked as a receptionist at a veterinary clinic during the tax years at issue. The Hoakisons survived the 1980s farm crisis. Since that time, the couple “conducted both their personal lives and their farm operation with determined frugality.” “By working tirelessly and managing their financial affairs in this way,” the tax court observed, the Hoakisons “have been able to weather downturns in the farm economy and by [the tax year at issue] owned 422 acres of land debt-free.” Those 422 acres were noncontiguous tracts of land on which the Hoakisons grew row crops and ran a cow-calf operation. Both these types of farming operations require significant physical labor. Mr. Hoakison did the majority of this challenging physical work before and after his UPS shifts. Mr. Hoakison continued to work the farm even after a heart attack and triple-bypass surgery in 2011, although the couple made some accommodations to account for his health.
The Hoakisons’ 2013, 2014, and 2015 returns were selected for examination and the Service determined that they were not entitled to a number of claimed deductions and expenses for each of the years. In particular dispute was the treatment of a number of tractors for which the Hoakisons had claimed depreciation, as well as depreciation claimed on several pick-up trucks. The Hoakisons claimed depreciation and section 179 deductions totaling approximately $270,000 for the three tax years at issue. The Service disallowed just under $200,000 of the $270,000 of claimed depreciation.
The court addressed the dispute surrounding the pick-up trucks to determine whether the trucks were subject to Section 274(d)(4)’s strict substantiation requirements. This section provides that no deductions shall be allowed for “listed property” (usually pick-up trucks would be “listed property”) unless substantiation requirements are met. The Hoakisons kept careful records but could not meet the strict substantiation requirements for the pickups (e.g., no mileage logs or other record of the vehicles’ use). However, the court held that only one of the couple’s many pick-ups was subject to the 274(d)(4) requirement. The other trucks were “qualified nonpersonal use vehicles” and as such the strict substantiation requirement was not applicable to them. A “qualified nonpersonal use vehicle” is “any vehicle which, by reason of its nature, is not likely to be used more than a de minimis amount for personal purposes.” The Hoakisons had customized nearly all the pickups for specific uses on the various farm properties. As such, all but one of the pickups were “qualified nonpersonal use vehicles.”
The court also addressed the parties’ dispute surrounding claimed depreciation for the couple’s 40 tractors. The commissioner argued that Mr. Hoakison acquired most of the tractors for personal reasons (the commissioner suggested “nostalgia” motivated the purchases). The court criticized the commissioner’s position as “gloss[ing] over or ignor[ing] many critical details of Mr. Hoakison’s situation.” The court concluded that “[t]he type or number of tractors whether new or used in the farm operation is within petitioners’ business judgment, and it is not respondent’s or the Court’s role to second-guess that judgment or substitute its own unless the facts and circumstance require us to do so…. The evidence shows, and the Court so finds, that petitioners purchased the tractors for use in their farming business and did so use them in the years at issue.” The Hoakisons were entitled to most of the claimed depreciation for the tractors.
The court also addressed depreciation claimed on a machine shed and certain disallowed Schedule F expenses (utilities, fuel, gasoline, repairs, and maintenance). Finally, the court addressed accuracy-related penalties and held the Hoakisons responsible for a small portion of those penalties but concluded that the couple had reasonable cause and acted in good faith with respect to most of the underpayment. Hoakison v. Comm’r, T.C.M. (RIA) 2022-117 (T.C. 2022).
• IRS listed transaction notice concerning syndicated conservation easements violated Administrative Procedure Act. Syndicated conservation easements involve several investors forming an entity to purchase land that is then donated for a charitable deduction. These easements have long been an IRS enforcement concern. In 2017, the IRS designated “syndicated” conservation easements as “listed transactions.” Notice 2017-10. By designating these easements as listed transactions, the Service imposed upon taxpayers an obligation to provide the IRS with information and documentation related to the transactions. In Green Valley Investors, the tax court held that Notice 2017-10 is a legislative rule, improperly issued by the IRS without notice and comment as required under the Administrative Procedures Act. The court further held that Notice 2017-10 will be set aside by the court, and additionally prohibited the imposition of I.R.C. §6662A penalties in these consolidated cases. The lengthy opinion was a 15-2 decision, with Judge Gale and Judge Nega dissenting separately. Green Valley Investors, LLC, et al., v. Comm’r, No. 17379-19, 2022 WL 16834499 (T.C. 11/9/2022).
• Mayo Clinic entitled to nearly $12 million in UBIT refunds. Tax-exempt entities generally do not pay income tax—hence, the “tax-exempt” label. However, as the IRS explains, “[e]ven though an organization is recognized as tax exempt, it still may be liable for tax on its unrelated business income.” UBI is income from a trade or business that is not substantially related to the charitable, educational, or other purpose that is the basis of the organization’s exemption. The Mayo Clinic is a 501(c)(3) tax-exempt organization, albeit one with a complicated, extensive, and evolving organizational structure. Following an audit in 2009, the IRS concluded that Mayo owed UBIT on certain investment income it received from the investment pool it manages for its subsidiaries. Mayo challenged this decision in Federal District Court for the District of Minnesota, and the court granted summary judgment to Mayo. The government appealed and the 8th Circuit reversed the grant of summary judgment and remanded. Mayo Clinic v. United States, 997 F.3d 789, 791 (8th Cir. 2021) (the Service issued a nonacquiescence: 2021-47 I.R.B. 725 (IRS ACQ 2021)). A bench trial followed the remand, and the trial court was tasked with determining whether Mayo’s overall purpose and operations establish that it is organized and operated exclusively for educational rather than other purposes. If so, Mayo would be entitled to the UBIT refund. The trial court issued extensive findings of fact (350 discrete findings) and concluded that Mayo met the criteria for the exemption and was entitled to full refund of the UBIT paid for tax years 2003, 2005-2007 and 2010-2012. Readers interested in the history of the Mayo might find the opinion particularly worthwhile. Mayo Clinic v. United States, No. 16CV03113ECTECW, 2022 WL 17103262 (D. Minn. 11/22/2022).
• Anesthesiologist’s frivolous arguments rejected. Dr. Christopher J. Wendell received over $1 million in wages from his work in Minnesota for Associated Anesthesiologists, P.A. over two tax years. Dr. Wendell and his spouse nonetheless reported $0 in federal adjusted gross income and $0 in Minnesota taxable income in each of the two tax years. There was no dispute as to material facts, and the Minnesota Tax Court held that the Department was entitled to judgment as a matter of law for tax year 2019 and for tax year 2020 in most respects. The court also upheld the commissioner’s imposition of a frivolous claim penalty. The court reasoned that “[t]he Wendells’ unsupported assertion that ‘neither of the Wendells was an ‘employee’ who received ‘wages,’ as those terms are relevantly defined in the IRC[ ]’ does not make it so.” The court found no basis in Dr. Wendell’s briefing or in the attachments to his submissions to conclude otherwise. Wendell v. Comm’r of Revenue, No. 9488-R, 2022 WL 17747903 (Minn. Tax 12/15/2022).
Morgan Holcomb
Mitchell Hamline School of Law
morgan.holcomb@mitchellhamline.edu
Brandy Johnson
Mitchell Hamline School of Law
brandy.johnson2@mitchellhamline.edu
Torts & Insurance
JUDICIAL LAW
• Insurance coverage; repairs & code compliance. Plaintiff suffered storm damage to a building, including the building’s drywall. Defendant insurer agreed to cover repair costs for the damaged property, including removal and replacement of the damaged drywall. When the damaged drywall was removed, cracks in the masonry were discovered. Because the cracks in the masonry violated the city’s building code, the city would not allow plaintiff to replace the drywall without also repairing the masonry. Plaintiff then requested that insurer reimburse it for the cost of repairing the masonry, and the insurer declined. After plaintiff filed suit, the district court ordered an appraisal, which found: (1) $77,969 was necessary to address the code upgrades; and (2) the “deteriorated conditions, cracks and out-of-plumb condition” of the masonry were not caused by the storm. The district court then granted summary judgment in favor of the insurer, holding that the insurer was only required to provide the minimum coverage set forth in Minn. Stat. §65A.10, subd. 1, and that no coverage existed to repair the code violations because they were not caused by the storm. The court of appeals affirmed.
The Minnesota Supreme Court affirmed. Minn. Stat. §65A.10, subd. 1. generally requires replacement cost insurance to cover the cost of repairing any “damaged property in accordance with the minimum code as required by state or local authorities.” In “the case of a partial loss,” replacement cost insurance is required to cover only “the damaged portion of the property.” Id. The Court interpreted the statute to require the insurer, in the event of a partial loss, to pay only for “repairs necessary to bring up to code that part of the property that was damaged in the insured event.” In so holding, the Court rejected the plaintiff’s contentions that payment was required under §65A.10 “when there is a ‘direct connection’ between the repairs required by the code and any diminution in value caused by the insured event” or because the two were parts of a single damaged item—a wall. The Court noted that it found nothing in the limited and narrow language of the statutory test that supported these positions. Finally, the Court affirmed the district court’s decision that nothing in the insurance policy provided coverage beyond that required by Minn. Stat. §65A.10.
Justice Hudson filed a dissenting opinion that was joined by joined by Justices Chutich and McKeig. The dissent would have found coverage because the drywall and masonry were part of the same wall. St. Matthews Church of God and Christ v. State Farm Fire & Cas. Co., No. A21-0240 (Minn. 11/23/2022). https://mn.gov/law-library-stat/archive/supct/2022/OPA210240-112322.pdf
Jeff Mulder
Bassford Remele
jmulder@bassford.com