CRIMINAL LAW
JUDICIAL LAW
• Arson: State must prove a fire was started without authorization. Appellant reported his house was on fire, prompting both police and insurance investigations, which concluded the fire was set intentionally. After a jury trial, appellant was convicted of first-degree arson. First-degree arson makes it a crime to “unlawfully by means of fire or explosives, intentionally destroy[] or damage[] any building that is used as a dwelling at the time the act is committed…” Minn. Stat. §609.561, subd. 1. The court of appeals rejected appellant’s argument that “unlawfully” creates an element of the offense, holding that appellant carried the burden of proving he had some permit, license, or other authorization to start the fire, as provided in section 609.564.
The Supreme Court disagrees. “Unlawfully” is not defined in the arson statute, but Black’s defines “unlawful” as “not authorized by law.” The statute itself does not modify or limit the reach of “unlawfully,” but the court of appeals’ interpretation adds language to the statute that limits “unlawfully” to lack of authorization under section 609.564. The Supreme Court disagrees that this is the only way to show a fire was authorized. The Court looks to the text and structure of section 609.561 as clues that the Legislature intended for “unlawfully” to be an element of first-degree arson, rather than an exception to criminal liability. “Unlawfully” is not set apart from the other elements of the offense and was intentionally added by the Legislature to a prior iteration of the statute.
From the circumstances proved at trial, the Supreme Court finds that the state met its burden of proving each element of the offense, including that appellant set the fire unlawfully. Appellant’s conviction is affirmed. State v. Beganovic, A21-0477, A21-0480, 2023 WL 3985540 (Minn. 6/14/2023).
• Orders for protection: DANCO cannot serve as basis for issuance of subsequent OFP. Appellant was convicted in the early 2000s of sexually abusing respondent, his stepsister, and a DANCO was issued that expired in August 2021. In February 2022, appellant went to a restaurant where, unbeknownst to appellant, respondent worked as a server. Respondent later petitioned for an OFP against appellant, claiming fear of appellant hurting or harassing her now that he knew where she worked. Although the district court found the contact between the parties to be accidental, it issued a “subsequent” OFP, based on the initial expired DANCO and respondent’s fear.
The Minnesota Court of Appeals considers whether the district court abused its discretion by treating the expired DANCO as an OFP for purposes of issuing a subsequent OFP. Under Minn. Stat. §518B.01, subd. 4., an OFP may be issued if the petitioner shows domestic abuse by a preponderance of the evidence. Under subd. 6a, if the petitioner has an existing or prior OFP, the OFP may be extended or a subsequent OFP may be issued.
The court of appeals holds that a DANCO may not be treated as an existing or prior OFP for purposes of issuing a subsequent OFP under subd. 6a. Section 518B.01 states that OFP proceedings are in addition to other civil or criminal remedies, including a DANCO, which is a remedy granted by separate statute only in criminal proceedings. The OFP statute does not reference DANCOs and the DANCO statute only references OFPs when it provides that DANCOs may be issued in OFP violation proceedings. DANCOs and OFPs also have substantive differences. As a DANCO is not an OFP and cannot serve as the basis for issuing a subsequent OFP, the district court abused its discretion by issuing the OFP against appellant. Isenhower v. Isenhower, A22-1225, 2023 WL 4167078 (Minn. Ct. App. 6/26/2023).
• Predatory offender registration: Registration requirements do not amount to a continuing violation tolling the statute of limitations for §1983 claims. Appellant was originally required to register as a predatory offender for a 10-year period following a conviction in 2009. His registration period was repeatedly extended, ultimately to 2031, due to additional convictions and supervised release violations. In 2020, he filed a civil action under 42 U.S. §1983, and various constitutional provisions, alleging that subjecting him to continuing predatory offender registration requirements violated his constitutional rights. Respondent, the superintendent of the BCA, filed a motion to dismiss, which the district court granted, finding that appellant’s arguments were barred by the six-year statute of limitations for his claims, as more than six years had passed since appellant was initially required to register. The court of appeals affirmed.
Under Minn. Stat. §243.166, a person required to register as a predatory offender must initially register and thereafter file yearly reports with specific information until their registration period expires. Suits under section 1983 must be brought within the state’s personal injury action statute of limitations, which in Minnesota is six years. A statute of limitations begins to run when the cause of action accrues—that is, when all the elements of the action have occurred.
Appellant does not argue his claim did not accrue in 2009, when he was initially required to register, but argues the statute of limitations should be extended under the continuing violation doctrine. He argues the violation of his constitutional rights over the years, via the ongoing registration requirements, was effectively a single discriminatory act. The key question is whether any present violation exists within the statute of limitations period. The Supreme Court agrees with respondent that the registration requirements are a continued consequence of his initial registration, but the act itself (the BCA’s initial determination that appellant must register as a predatory offender) is not ongoing or continuing. “[T]he registration requirements are a residual burden resulting from the BCA’s initial, single determination that [appellant] must register, meaning no present Bicol action exists within the statute of limitations period.” The court of appeals is affirmed. Franklin v. Evans, A21-1378, 2023 WL 4218095 (Minn. 6/28/2023).
--Samantha Foertsch
--Stephen Foertsch
Bruno Law PLLC
EMPLOYMENT & LABOR LAW
JUDICIAL LAW
• Arbitration award; vacated decision reversed. The Minnesota Supreme Court reversed a ruling of the court of appeals that overturned an arbitration award in favor of a pair of Hennepin County unions. An arbitrator’s award that the county health system violated the collective bargaining agreements by maintaining temporary staffers for more than six months, the maximum allowed under the union agreement, had been vacated by the appellate court on grounds that the arbitrator exceeded his authority. But the Supreme Court overturned that ruling in a divided decision, holding that the arbitration award properly “drew its essence” from the underlying contracts and, therefore, was proper under the Uniform Arbitration Act, Minn. Stat. § 572B.23(a)(4). Hennepin HealthCare System, Inc. v. AFSCME, 990 N.W.2d 454 (Minn. 2023).
LEGISLATIVE ACTION
Federal
· The Federal Speak Out Act, 42 U.S.C. §§19401-19404, prohibits nondisparagement agreements in connection with matters of sexual assault and harassment claims under federal, state, or tribal laws.
- A ruling by the National Labor Relations Board (NLRB) restricts use of nondisparagement clauses in most severance and settlement agreements in McLaren Macomb and Local 40 RN Staff Council, Office and Professional Employees, International Union (OPEIU), AFL–CIO, Case No. 07–CA–263041, 372 NLRB 58 (2/21/2023).
- The Federal Trade Commission (FTC) has proposed a regulation that would bar most noncompete agreements under 16 C.F.R. 910, although it has not yet gone into effect and will undoubtedly attract considerable litigation.
- The Pregnant Workers Fairness Act, which went into effect this summer, supplements the Americans with Disabilities Act, 42 U.S.C. §§2000gg-2000gg-6, by requiring employers with 15 or more employees to engage in an “interactive dialogue” and provide “reasonable accommodations” to employees due to pregnancy, childbirth, or other “known” medical limitations.
- The Pump for Nursing Mothers Act, 29 U.S.C. §218d, requires that employees be provided with a “reasonable break time” to produce breast milk for a nursing child for up to one year after a child’s birth. Facilities with less than 50 employees are exempt if doing so would impose an “undue hardship.”
State
- A new Minnesota law bars most noncompete agreements, except in connection with the sale or dissolution of a business. It was effective 7/1/2023 and is not retroactive. It does not proscribe certain nonsolicitation and confidential data protections. Minn. Stat. §181.988.
- New Minnesota legislation provides paid sick and safe leave for most employees under Minn. Stat. §181.032, §181.9445-181.9488. Effective 1/1/2024, it will allow employees to be paid to a maximum of 48 hours per year, based upon one hour earned for every 30 hours worked. The measure is modeled after similar laws in Minneapolis, St. Paul, and Duluth.
- The state’s new paid Family and Medical Leave Act will allow most employees to be paid from a state-created fund for up to 12 weeks of leave of absence for personal and family health-related reasons, effective 1/1/2026, under Minn. Stat. §268B.01-268B.29. Employers will need to begin submitting wage information in mid-2024.
- Some employers receiving state financial aid for certain home-building activities must pay “prevailing wage” to their employees under Minn. Stat. §116J.871, subds. 1 and 2. Minn. Stat. §181.165, subd. 2 also makes contractors liable for payment of wages and benefits to employees of subcontractors in most circumstances.
- The Minnesota Peace Officer Standards and Training (POST) Board has issued new regulations relating to revocation of law enforcement officer licenses for violators of its professional standards of conduct. The new rules, at Minn. Rules 6700.0700 and 6700.1600, go beyond prior provisions that required a criminal felony or gross misdemeanor conviction to warrant loss of licensure.
- Public school employees who are paid on an hourly basis, such as staff and paraprofessionals, are now eligible for unemployment insurance when not working in the summer between academic terms under Minn. Stat. §268.085, subd. 7, the first measure of its kind in the nation.
- A 12-month post-birth period for employers to provide time at work for nursing mothers to express milk has been extended to an unlimited time after the baby’s birth, and employers must provide a “clean, private and secure” room for the practice under Minn. Stat. §181.939.
- Restrictive solicitations and hiring agreements are curtailed in franchise agreements under Minn. Stat. §181.991.
- Employers will need to change drug and alcohol testing policies to conform with the new permissibility of recreational cannabis, and they are barred from conducting pre-employment or random testing for cannabis, with some specific exceptions.
- Employees who decline to attend employer-sponsored meetings to discuss religion or political topics may not be disciplined under Minn. Stat. §181.531.
- A number of other measures were enacted during the past legislative session addressing workplace safety for nursing home employees as well as employees at health care facilities and warehouse distribution centers.
--Marshall H. Tanick
Meyer Njus Tanick
FAMILY LAW
JUDICIAL LAW
• An award of attorneys’ fees through the court’s inherent authority must be necessary to preserve the judicial function. Husband and wife agreed in a binding settlement agreement that husband would transfer their daughter’s college savings account to the daughter when she turned 21 years old. When the daughter turned 21, husband took no action to transfer the account. Wife’s attorney then began corresponding with husband regarding transferring the account. After eight months of correspondence, wife’s attorney requested a hearing date from the court. Husband ultimately transferred the account without a hearing. Wife moved for conduct-based fees under Minn. Stat. §518.14. The district court denied wife’s request for fees under Section 518.14 because the behavior did not take place during the litigation process, but granted wife attorneys’ fees under the court’s inherent authority.
The Minnesota Court of Appeals affirmed. On review, the Minnesota Supreme Court reversed and remanded. The Supreme Court distinguished their decision in Patton v. Newmar Corp., 538 N.W.2d 116 (Minn. 1995). There, the district court used its inherent authority to exclude evidence lost by an expert before the litigation began. Although a district court may in some circumstances use its inherent authority to address conduct that occurred outside of litigation, the Supreme Court reasoned that since this matter did not proceed to a hearing, husband’s conduct did not defy the authority of the district court itself. Therefore, the conduct did not warrant the district court relying on its inherent authority to award attorneys’ fees. Buckner v. Robichaud, ___ N.W.2d ___, No. 21-1549, 2023 WL 4340153 (Minn. 7/5/2023).
• A domestic abuse no contact order may not be treated as an order for protection for purposes of a subsequent order for protection. In 2011, Jeffrey pled guilty to sexually abusing his stepsister, Natasha, and the court issued a 10-year domestic abuse no contact order (DANCO). The DANCO expired in August 2021. In February 2022, Jeffrey went to lunch at a restaurant where, unbeknownst to Jeffrey, Natasha worked as a server. Natasha later petitioned for an order for protection (OFP). Relying on Minn. Stat. §518.01, subd. 6a, the district court granted Natasha a “subsequent” OFP based on the expired DANCO and Natasha’s fear of seeing Jeffrey.
On appeal, the court of appeals reversed, holding that a DANCO cannot be used as an OFP for purposes of issuing a subsequent OFP. The court reasoned that under the plain language of the Domestic Abuse Act, OFPs are additional and distinct remedies from DANCOs, so DANCOs could not be used to support the issuance of a subsequent OFP. The court also distinguished DANCOs from OFPs, noting that DANCOs are issued in criminal or juvenile delinquency proceedings, issued at the request of a prosecutor or sua sponte, and without the right to a hearing to contest the DANCO. In contrast, an OFP is a civil remedy requested by the victim and with the opportunity for the respondent to contest the OFP at a hearing. Because of the differences, the court held that a DANCO cannot be used to issue a subsequent OFP. Isenhower v. Isenhower, ___ N.W.2d ___, A22-1225, 2023 WL 4167078 (Minn. Ct. App. 6/26/2023).
--Michael Boulette
--Laura Kvasnicka
Taft Stettinius & Hollister LLP
FEDERAL PRACTICE
JUDICIAL LAW
• Personal jurisdiction; due process; corporate consent by registration. Since 2017, this column has noted a number of unsuccessful due process challenges to Minnesota laws that make a foreign corporation subject to general personal jurisdiction in Minnesota if it has registered to do business in the state.
The Supreme Court recently rejected a challenge to a similar (but not identical) Pennsylvania statute. Finding that the issue was controlled by its 1917 decision in Penn. Fire Ins. Co. of Phila. v. Gold Issue Min. & Milling Co. (243 U.S. 93 (1917)), the Supreme Court held 5-4 that the statute did not violate the due process clause.
Justice Barrett, writing for four dissenters, rejected the majority’s focus on corporate “consent,” and would have instead focused on whether the corporate defendant was “at home” in the state. Based on this decision, challenges to similar Minnesota statutes (Minn. Stat. §§303.10, 303.13) and the 8th Circuit’s decision in Knowlton v. Allied Van Lines, Inc. (900 F.2d 1196 (8th Cir. 1990)) will be unsuccessful. Mallory v. Norfolk Southern Rwy. Co., ___ S. Ct. ___ (2023).
• 9 U.S.C. §16(a); appeal of denial of motion to compel arbitration; stay required. Resolving a circuit split, the Supreme Court, relying primarily on Griggs v. Provident Consumer Discount Co. (459 U.S. 56 (1982)), held 5-4 that district courts must stay proceedings while the denial of a motion to compel arbitration is appealed pursuant to 9 U.S.C. §16(a).
Justice Jackson’s dissent focused on the absence of mandatory stay language in the statute and criticized the majority’s reliance on Griggs. Coinbase, Inc. v. Bielski, ___ S. Ct. ___ (2023).
• Legislative privilege; petition for writ of mandamus granted; dissent. The 8th Circuit granted most of a petition for a writ of mandamus brought by current and former members of the North Dakota Legislature under the Voting Rights Act, finding that the petitioners met all three conditions for the writ to protect their claims of legislative privilege.
Judge Kelly dissented, arguing that privilege may have been waived with regard to many of the documents, and that the petitioners could shield any privileged documents by utilizing a privilege log. In Re: N. Dakota Legis. Assembly, 70 F.4th 460 (8th Cir. 2023).
• Denial of post-dismissal motion to amend complaint affirmed. Affirming a district court’s dismissal of Sherman Act claims, the 8th Circuit also affirmed the district court’s denial of the plaintiffs’ post-dismissal motion to amend their complaint, finding that there was no abuse of discretion where “the information in the amended complaint was previously available” to the plaintiffs “and should have been pleaded before the judgment was entered.” Par v. Wolfe Clinic, P.C., 70 F.4th 441 (8th Cir. 2023).
• Denial of motion to amend complaint affirmed; failure to comply with local rules. The 8th Circuit continues its virtually unbroken streak of affirming the denial of motions to amend pleadings where the motion fails to comply with local rules.
Most recently, the 8th Circuit affirmed the denial of two motions to amend where, in both instances, the plaintiff “incorporated prior pleadings by reference” instead of reproducing an entire new pleading.
While this appeal arose from the Northern District of Iowa, D. Minn. L.R. 15.1 includes similar requirements regarding the form of a proposed amended complaint. Muff ex rel. Muff v. Wells Fargo Bank NA, ___ F.4th ___ (8th Cir. 2023).
• Motion to remand denied; federal question despite only state law claims. Where the state brought state law claims arising out of defendants’ sales of firearms, the defendants removed based on the alleged existence of a federal question, and the state moved to remand, Judge Tunheim, applying the so-called Grable factors (Grable & Sons Metal Prod., Inc. v. Darue Eng’g & Mfg., 543 U.S. 308 (2005)), found that the action fell “under the small subset of cases where a federal issue is so pervasively involved in the Complaint as to justify federal jurisdiction.” State of Minnesota v. Fleet Farm LLC, ___ F. Supp. 3d ___ (D. Minn. 2023).
• Summary judgment; sham affidavit doctrine; declaration disregarded. Finding that a plaintiff’s declaration “contradicts his prior testimony and constitutes an unexplained revision of his testimony,” Judge Frank applied the so-called “sham affidavit” doctrine and “disregard[ed]” the declaration “as it cannot be used to create an issue of fact where none existed based on his deposition testimony.” Christian Labor Ass’n v. City of Duluth, 2023 WL 3996240 (D. Minn. 6/14/2023), appeal filed (8th Cir. 6/16/2023).
• Fed. R. Civ. P. 37(c)(1); motion to exclude untimely expert disclosures denied. While “not condon[ing]” the plaintiff’s disclosure of expert reports five months after the deadlines established in the pretrial scheduling order, Judge Nelson denied the defendant’s motion to exclude both reports, finding that they were “highly important,” and that the defendant had not been “sufficiently prejudiced or harmed” by the late disclosures “to justify striking” the expert. Hernandez v. Ecolab, Inc., 2023 WL 3984815 (D. Minn. 6/13/2023).
• Motion to compel arbitration granted; arbitration clause not “unreadable.” Judge Frank granted a motion to compel arbitration despite the plaintiff’s argument that arbitration clause was “unreadable” where it appeared on the back side of contract in an “extremely small font,” finding that the arbitration clause was “valid and enforceable” where the heading of the arbitration clause was underlined and in capital letters, and that the arbitration clause was “not unreadable.” Acuity Ins. v. Vivint, Inc., 2023 WL 4186303 (D. Minn. 6/26/2023).
• Motions for leave to serve pre-Rule 26 conference subpoenas granted. In a series of recent decisions, Magistrate Judge Foster has applied the so-called Arista Records factors (Arista Records, LLC v. Doe, 604 F.3d 110 (2d Cir. 2010)) and granted motions for leave to serve pre-Rule 26 Conference subpoenas on internet service providers in an attempt to identify 47 John Doe defendants. Strike 3 Holdings, LLC v. Doe, 2023 WL 4074544 (D. Minn. 6/20/2023); Strike 3 Holdings, LLC v. Doe, 2023 WL 3336809 (D. Minn. 5/10/2023); Strike 3 Holdings, LLC v. Doe, 2023 WL 2728821 (D. Minn. 3/31/2023).
--Josh Jacobson
Law Office of Josh Jacobson
IMMIGRATION LAW
JUDICIAL LAW
• Exhaustion requirement does not require request to reconsider an unfavorable BIA decision. On 5/11/2023, a unanimous U.S. Supreme Court ruled that INA §242(d)(1) is not jurisdictional and, furthermore, a noncitizen need not request discretionary forms of administrative review, such as reconsideration of an unfavorable BIA determination, in order to satisfy §242(d)(1)’s exhaustion requirement. The Court accordingly vacated the 5th Circuit’s determination that the petitioner—a transgender woman from Guatemala seeking withholding of removal and Convention Against Torture (CAT) relief—was required to seek reconsideration from the BIA before pursuing judicial review. The case was remanded for further proceedings. Santos-Zacaria v. Garland, 598 U.S. ___, No. 21-1436, slip op. (2023). https://www.supremecourt.gov/opinions/22pdf/21-1436_n6io.pdf
• Offense “relating to obstruction of justice” does not require pending investigation or proceeding under INA §101(a)(43)(S). On 6/22/2023, the U.S. Supreme Court issued a decision involving a conviction for “obstruction of justice.” It noted that an aggravated felony may include federal or state offenses “related to obstruction of justice” under INA §101(a)(43)(S) and that noncitizens convicted of an aggravated felony are removable from the United States. The question addressed by the Court was whether an offense could “relate to obstruction of justice” if it did not require that an investigation or proceeding be pending. The Court held an offense may “relat[e] to obstruction of justice” even if the offense does not require an investigation or proceeding to be pending. Pugin v. Garland, 599 U.S. ___, Nos. 22-23 and 22-331, slip op. (2023). https://www.supremecourt.gov/opinions/22pdf/22-23_d18e.pdf
• Biden administration’s immigration enforcement priorities upheld. On 6/23/2023, the U.S. Supreme Court observed this case to be “extraordinarily unusual.” It noted that the states of Texas and Louisiana challenged the Biden administration’s 2021 Guidelines for the Enforcement of Civil Immigration Law—a memorandum seeking to prioritize the arrest and removal of noncitizens who are suspected terrorists or dangerous criminals or recent and unlawful entrants to the country. The Court noted that the two states in effect “want a federal court to order the Executive Branch to alter its arrest policies so as to make more arrests. Federal courts have not traditionally entertained that kind of lawsuit.…” The Court found that both states clearly lacked Article III standing to challenge the 2021 guidelines. Beyond the standing issue, the Court expounded on the Executive Branch’s authority to develop its enforcement priorities. “In light of inevitable resource constraints and regularly changing public-safety and public-welfare needs, the Executive Branch must balance many factors when devising arrest and prosecution policies.” There is nothing unusual in the Court’s decision here. As it pointed out, this decision “does not alter the balance of powers between Congress and the Executive, or change the Federal Judiciary’s traditional role in separation of powers cases.” United States, et al. v. Texas, et al., 599 U.S. ___, No. 22-58, slip op. (2023). https://www.supremecourt.gov/opinions/22pdf/22-58_i425.pdf
• Provision of the Immigration and Nationality Act (INA) criminalizing the encouragement of illegal immigration is not unconstitutionally overbroad. On 6/23/2023, the U.S. Supreme Court held that INA §274(a)(1)(A)(iv), which criminalizes acts “encouraging or inducing” illegal immigration (in the instant case, U.S. citizenship obtained through an “adult adoption” program run by Hansen), forbids only the purposeful solicitation and facilitation of specific acts known to violate federal law, and is thus not unconstitutionally overbroad under the 1st Amendment. Citing United States v. Williams, 553 U.S. 285, 292 (2008), the Court opined that the provision “does not ‘prohibi[t] a substantial amount of protected speech’—let alone enough to justify throwing out the law’s ‘plainly legitimate sweep.’” United States v. Hansen, 599 U.S. ___, No. 22-179, slip op. (2023). https://www.supremecourt.gov/opinions/22pdf/22-179_o75q.pdf
• Proposed social group (witnesses who cooperate with law enforcement) is not socially distinct. On 6/5/2023, the 8th Circuit Court of Appeals held that the Board of Immigration Appeals (BIA) did not err when it concluded the Guatemalan petitioner’s proposed social group, “witnesses who cooperate with law enforcement,” was not socially distinct. Consequently, the petitioner was deemed ineligible for asylum and withholding of removal. Oxlaj v. Garland, No. 22-1734, slip op. (8th Circuit, 5/3/2023). http://media.ca8.uscourts.gov/opndir/23/05/221734P.pdf
• Asylum based on sexual orientation denied. On 6/5/2023, the 8th Circuit Court of Appeals held that substantial evidence supported the Board of Immigration Appeals’ (BIA) finding that the petitioner failed to demonstrate a well-founded fear of persecution based on his membership in the particular social group “married homosexual males in Mexico.” At the same time, the court found his alternative particular social group, “homosexual men in Mexico,” was prohibited by the one-year bar under INA §208(a)(2)(B). The court further found the petitioner failed to preserve for review his third proposed particular social group, “Mexicans perceived to be against Catholicism.” Pacheco-Moran v. Garland, Nos. 21-3779 and 22-2383, slip op. (8th Circuit, 6/5/2023). http://media.ca8.uscourts.gov/opndir/23/06/213779P.pdf
• Removable under INA §237(a)(2)(B)(i) for Kansas conviction involving possession of methamphetamine. On 6/14/2023, the 8th Circuit Court of Appeals denied the petition for review, holding that the Board of Immigration Appeals (BIA) correctly found that the petitioner’s Kansas conviction for possession of methamphetamine in violation of Kan. Stat. Ann. §21-5706(a) made him removable from the United States for having committed a controlled substance offense under INA §237(a)(2)(B)(i). Rincon Barbosa v. Garland, No. 22-1655, slip op. (8th Circuit, 6/14/2023). http://media.ca8.uscourts.gov/opndir/23/06/221655P.pdf
• BIA’s evaluation did consider hardship to petitioner’s relatives. On 6/14/2023, the 8th Circuit Court of Appeals concluded that the Board of Immigration Appeals (BIA) properly evaluated the hardship to the Sierra Leonean petitioner’s relatives as one of her positive equities when it reviewed and denied a waiver of inadmissibility. At the same time, the court found that it lacked jurisdiction to review the BIA’s balancing of equities, specifically in relation to how it weighed the petitioner’s crimes. King v. Garland, No. 22-2166, slip op. (8th Circuit, 6/14/2023). http://media.ca8.uscourts.gov/opndir/23/06/222166P.pdf
• Adverse credibility determination damages asylum claim. On 6/16/2023, the 8th Circuit Court of Appeals held that sufficient evidence warranted the immigration judge’s adverse credibility determination. The petitioner, a citizen of Burkina Faso with an asylum claim based on fears due to his political opinions and affiliation with the Congress for Democracy and Progress, was not credible because the immigration judge had identified specific and cogent reasons to disbelieve his testimony. As such, the Board of Immigration Appeals (BIA) did not commit error when it affirmed the immigration judge’s denial of both asylum and withholding of removal. As to the question of relief under the Convention Against Torture (CAT), the court ruled it had no jurisdiction since no arguments relating to CAT had been raised earlier before the BIA. Zongo v. Garland, No. 21-3847, slip op. (8th Circuit, 6/16/2023). http://media.ca8.uscourts.gov/opndir/23/06/213847P.pdf
• No violation of due process when immigration judge continued, rather than terminated, the case. On 6/27/2023, the 8th Circuit Court of Appeals found that the Honduran petitioner was not prejudiced by the continuation, rather than termination, of her case when the immigration judge determined her humanitarian parole would expire in two months. At the same time, the court concluded the Board of Immigration Appeals (BIA) articulated the appropriate standard for evaluating “past persecution” and did not commit error when it concluded that threats from the MS-13 gang did not rise to the level of past persecution. [“(T)he threats were telephonic, sporadic, and over a period of four years.”] The court also found no error in the BIA’s finding that the petitioner failed to establish a “well-founded fear of future persecution.” Brizuela v. Garland, No. 22-1738, slip op. (8th Circuit, 6/27/2023). https://ecf.ca8.uscourts.gov/opndir/23/06/221738P.pdf
ADMINISTRATIVE ACTION
• “Asylum transit ban” final rule promulgated. On 5/16/2023, the Departments of Homeland Security (DHS) and Justice (DOJ) published a final rule (“Circumventing Lawful Pathways,” aka asylum transit ban) establishing a rebuttable presumption of asylum ineligibility, with a few exceptions, for certain noncitizens who enter the United States (between 5/11/2023 and 5/11/2025) at the southwest border without documentation while travelling through a country that is a signatory to the 1951 Refugee Convention or its 1967 Protocol. (The category includes Colombia, Panama, Costa Rica, Nicaragua, Honduras, Guatemala, Belize, and Mexico.) In short, these individuals neither availed themselves of a lawful, safe, and orderly pathway to the United States nor sought asylum or other protection in a country through which they traveled. 88 Fed. Register, 31314-452 (5/16/2023). https://www.govinfo.gov/content/pkg/FR-2023-05-16/pdf/2023-10146.pdf
The ACLU, ACLU of Northern California, Center for Gender and Refugee Studies, and National Immigrant Justice Center have filed a complaint in the U.S. District Court for the Northern District of California on behalf of the East Bay Sanctuary Covenant, American Gateways, Central American Resource Center, Immigrant Defenders Law Center, National Center for Lesbian Rights, and the Tahirih Justice Center. East Bay Sanctuary Covenant, et al. v. Biden, et al., No. 4:18-cv-06810-JST (N.D. Cal. 5/11/2023). https://www.aclu.org/documents/complaint-east-bay-sanctuary-covenant-v-biden
--R. Mark Frey
Frey Law Office
INDIAN LAW
JUDICIAL LAW
• The Indian Child Welfare Act does not exceed Congress’s powers under Article I of the Constitution and does not violate the 10th Amendment’s anticommandeering principle. Consolidating three separate child-custody proceedings involving the participation and intervention of several states, hundreds of Indian tribes, and dozens of advocacy groups, the Supreme Court issued a 7-2 decision upholding the Indian Child Welfare Act from numerous constitutional challenges. The Court first held that the law itself does not violate Congress’s Article I authority in the Indian Commerce Clause, the Treaty Clause, and the trust relationship, and that the law does not impermissibly encroach on the family law authority of the states. Next, the Court held that the law’s requirements of active efforts prior to termination, searches for preferred-order placements, and record-keeping responsibilities do not violate the 10th Amendment’s anticommandeering principle. The case also involved equal protection and non-delegation doctrine challenges to the law’s placement preferences, but the Court held that no parties in the case had standing to raise those challenges. Haaland v. Brackeen, ___ U.S. ___, 143 S. Ct. 1689 (2023).
• The Bankruptcy Code unequivocally abrogates the sovereign immunity of federally recognized Indian tribes. After a debtor filed for Chapter 13 bankruptcy, he challenged the alleged actions by his creditor Lendgreen, a business owned by a federally recognized Indian tribe, for violating the automatic stay requirement of the Bankruptcy Code. Over the tribe’s arguments that Congress did not explicitly and unambiguously abrogate the sovereign immunity of Indian tribes in the law as required by Supreme Court precedent, the Court held that the phrase “other foreign or domestic government[s]” in the law includes tribal nations in this instance. Lac du Flambeau Band of Lake Superior Chippewa Indians v. Coughlin, ___ U.S. ___, 143 S. Ct. 1689 (2023).
• Federal court ruling on tribal court jurisdiction premature when tribal appellate court ruling on subject of jurisdiction had not yet been issued. Following a finding of jurisdiction over a contract dispute involving smoking on right-of-way land within the Fort Berthold Indian Reservation, the non-Indian company filed an injunctive action in federal district court. The 8th Circuit reversed the district court’s finding that the tribal court did not have jurisdiction over the dispute, because the tribal court’s opinion was still under review by the Mandan, Hidatsa, and Arikara Nation Supreme Court. The 8th Circuit reaffirmed that the tribal court exhaustion doctrine includes review by tribal appellate courts. WPX Energy Willison, LLC v. Jones, ___ F.4th ___, 2023 WL 4308905 (8th Cir. 2023).
--Leah K. Jurss
Hogen Adams PLLC
INTELLECTUAL PROPERTY
JUDICIAL LAW
• Trademark: Limiting Rogers test to non-source identifying marks. The Supreme Court unanimously reversed a 9th Circuit decision holding that defendant VIP’s parody use of Jack Daniel’s trademarks and trade dress was protected from trademark liability. Jack Daniel’s owns trademarks on the Jack Daniel’s bottle and many of the words and graphics on the bottle label. VIP sells dog chew toys under the trademark “Bad Spaniels,” with the chew toy resembling a Jack Daniel’s bottle’s shape, font, and label. While Jack Daniel’s label identifies the whiskey as “Old No. 7 Brand Tennessee Sour Mash Whiskey,” Bad Spaniels identified the chew toy as “The Old No. 2 On Your Tennessee Carpet.” VIP sued Jack Daniel’s, seeking declaratory judgment, and Jack Daniel’s counterclaimed for trademark infringement and dilution. The district court found a likelihood of confusion between the Bad Spaniels toy and the Jack Daniel’s bottle as well as reputational harm to Jack Daniel’s. The 9th Circuit reversed, holding that VIP’s product was protected speech under the 1st Amendment. Specifically, the 9th Circuit applied the Rogers test because Bad Spaniels argued its products were an expressive work that communicates a humorous message, regardless of commercial use. The Supreme Court ignored the 9th Circuit’s application of the Rogers test, making no ruling on its applicability in other contexts. The Court held that the Rogers test only applies when the infringer uses the trademark in a non-source identifying way. VIP had admitted in its complaint that Bad Spaniels was its own mark and trade dress for dog toys. Therefore, VIP represented the Bad Spaniels mark and trade dress as an identification of source, so the Rogers test does not apply. Jack Daniel’s Properties, Inc. v. VIP Products LLC, No. 22-148 (U.S. 6/8/2023).
• Trademark: Lanham Act provisions are not extraterritorial. The Supreme Court unanimously reversed the 10th Circuit’s affirmance of judgment against Abitron. Hetronic makes and sells radio remote controls for construction equipment. Hetronic licensed five companies and one individual, collectively known as Abitron, for product distribution. After Abitron reverse-engineered Hetronic’s products, Abitron claimed they had the rights to most of Hetronic’s intellectual property, including the trademarks at issue. Abitron sold most of the products in Europe, with some direct sales into the United States. Hetronic sued Abitron in the United States for trademark violations under Sections 1114(1)(a) and 1125(a)(1) of the Lanham Act. Section 1114(1)(a) prohibits unauthorized “use in commerce [of] any reproduction… of a registered mark in connection with the sale, offering for sale, distribution, or advertising of any goods or services” when “such use is likely to cause confusion.” Section 1125(a)(1) prohibits the “us[e] in commerce” of a protected mark, whether registered or not, that “is likely to cause confusion.” The district court rejected Abitron’s argument of impermissible extraterritorial application of the Lanham Act, awarding Hetronic $96 million as well as giving a worldwide permanent injunction against Abitron from using Hetronic’s mark anywhere. The 10th Circuit affirmed, narrowing the injunction to only select foreign countries. The Supreme Court ruled that these two provisions of the Lanham Act are not extraterritorial. The Court reasoned that there is a presumption against exterritoriality that, when applied, involves a two-step framework. The first step involves requires the Court to determine whether Congress has affirmatively and unmistakably instructed that the provision at issue should apply to foreign conduct. The second step involves determining the “focus” of congressional concern and whether the conduct relevant to the statute’s focus occurred in the United States. In this case, the Court determined that despite the Lanham Act’s broad definition of “commerce,” neither provision is extraterritorial. For the second step, both provisions’ “use in commerce” is relevant for conduct relevant to the focus. Abitron Austria GmbH v. Hetronic International, Inc., No. 21-1043 (U.S. 6/29/2023).
--Joe Dubis
--Mitchell Gross
Merchant & Gould
PROBATE & TRUST LAW
JUDICIAL LAW
• Devise to heirs of testator’s ex-spouse nullified. A testator executed a will naming his then-wife, if she survived him, as the primary residual beneficiary of his estate. In the event his then-wife did not survive him, the residue of his estate was to be split between his heirs at law and his wife’s heirs at law. The couple divorced, and the testator died without updating his will. The testator’s brother sought to probate the will and asked the district court to determine that the testator’s heirs were the sole residuary beneficiary of the estate. The testator’s ex-wife’s parents, who would have been her heirs had she pre-deceased the testator, objected and claimed that they were wrongfully omitted as devisees in the petition. The district court found that the devise to the testator’s ex-wife’s heirs failed as a matter of law because the testator did not have a wife at the time he died and, therefore, the devise to “my wife’s” heirs failed.
A divided panel of the Minnesota Court of Appeals reversed in a precedential opinion. The court of appeals held that the residual beneficiary terms of the will unambiguously devised one-half of the residual estate to the former spouse’s heirs. While many would agree that such a devise should be revoked on divorce, the court of appeals would not make such a finding because “the legislature has not adopted a statute reflecting that policy.” The Minnesota Supreme Court reversed the court of appeals decision. Specifically, the Supreme Court found that the use of the phrase “my wife’s heirs-at-law” was not used in operative portions of the will as a descriptor of any named individual(s), but rather signaled an intention to describe beneficiaries as members of a group identified by familial ties. Because the testator had no wife at the time of his death, his “wife’s heirs-at-law” no longer existed and any gift to them failed. The Supreme Court further found that it was unreasonable to conclude that the Legislature intended to revoke a devise to a former spouse, but not a devise to the relatives of the former spouse, especially to the detriment of the testator’s own heirs. Matter of Estate of Tomczik, ___ N.W.2d ___, A21-1420, 2023 WL 4340196 (Minn. 7/5/2023).
--Jessica L. Kometz
Bassford Remele
TAX LAW
JUDICIAL LAW
• Forgery in tax returns; what is needed to refute a signature in instances of forgery. The petitioner received a notice of deficiency for his 2013 taxes and while preparing for trial, began to question whether the return corresponding to the notice was his return at all. The return in question included two signatures, one for the CPA who signed as the preparer of the return and another under the petitioner’s name.
The petitioner argued that since he did not personally sign the return, the return cannot be valid. Although Section 6064 “provides that an individual’s name signed on a return is ‘prima facie evidence for all purposes that the return… was actually signed by him,” earlier case law establishes that the presumption of validity can be overcome with sufficient evidence. Soni v. Commissioner, 122 T.C.M. (CCH) 358, at 367 (T.C. 2021).
Through the use of a forensic document examiner who opined “that it is highly probable that the signature on the 2013 Form” was not the petitioner’s and the production of various exemplars of the petitioner’s signature, the court concluded its decision for the taxpayer. The 2013 tax forms were invalid. Parducci v. Comm’r of Internal Revenue, T.C.M. (RIA) 2023-075 (T.C. 2023).
• Petitioner narrowly avoids frivolous argument penalties after pretrial arguments that as a “citizen,” he is not an “individual” subject to tax. Over a period of eight years, the petitioner in this case contended that he did not receive any taxable income as he is not an “individual.” With deficiencies totaling $1,566,802, the petitioner argued that since “person” is defined as an “individual” under section 7701(a)(1), and “citizen” and “person” are listed together in various Code sections, the two must be mutually exclusive. 26 U.S.C.A. §7701(a)(1).
The court, unsurprisingly, was not persuaded by petitioner’s argument. Section 1 defines individuals subject to tax as any “individual who is a citizen or resident of the United States.” 26 C.F.R. §1.1-1(a). Further, citizens are defined as “[e]very person born or naturalized in the United States and subject to its jurisdiction.” See id. para. (c). Given that the petitioner was born in the United States and is subject to its jurisdiction and regulations, the court concluded he was subject to income tax. As a result, the commissioner’s determination that the petitioner received unreported income was upheld. After a determination on the petitioner’s substantive argument, the court then examined the record to see if there was sufficient evidence to establish additional penalties for fraudulent failure to file. After examining the petitioner’s background, education, shady payment practices, and other record evidence, the court found there was sufficient evidence to establish that the petitioner acted with fraudulent intent and thus to increase the amount due as a penalty for fraudulent failure to file under Section 6651(f). Sanders v. Comm’r of Internal Revenue, T.C.M. (RIA) 2023-071.
• A cautionary tale of last-minute e-filing. A North Carolina resident filed a petition seeking redetermination after receiving a notice of deficiency. The resident first attempted to file his petition at 11:00 pm the night it was due, and perhaps learned an important lesson about procrastination. From the outset, the petitioner struggled in using the court’s electronic filing system (DAWSON). After unsuccessfully attempting to upload from his phone for nearly an hour, he switched to his desktop to file his petition.
The clock struck midnight a mere 11 seconds before the petitioner was able to successfully upload his petition. DAWSON updated the automatically generated coversheet to reflect the new day. The commissioner moved to dismiss for lack of jurisdiction, arguing the petition was not timely filed. Following the motion, the court invited briefs from amici curiae and received one from the Center for Taxpayer Rights (founded by former national taxpayer advocate Nina Olson, the Center for Taxpayer rights is a nonprofit organization dedicated to furthering taxpayer rights in the U.S. and internationally). The center’s main argument focused on the timeliness question.
The court recognized the center’s argument as analogous in part to the timely mailing rule (26 U.S.C.A. §7502(a)), which deems a document to be considered filed on the day it is postmarked. The court was not persuaded that the analogy was controlling in this case, however. Even if the timely mailing rule applied to electronic filings, which it does not, the record showed the petitioner began to upload the petition nine seconds after midnight—still past the filing deadline.
Additionally, the petitioner alleged that this late upload was a result of the DAWSON being inaccessible. Two years after DAWSON, Congress enacted section 7451(b), providing that if a “filing location is inaccessible or otherwise unavailable to the general public on the date a petition is due, the relevant time period for filing such petition shall be tolled for the number of days within the period of inaccessibility plus an additional 14 days.” Agreeing that DAWSON is a filing location, the court then had to distinguish whether the system was inaccessible (which would excuse the 11-second delay), or whether the petitioner suffered from user-specific issues (which would strip the court of jurisdiction). Upon finding DAWSON was operational at all relevant times, the court concluded the problems facing the petitioner in accessing DAWSON were not shared by the general public, but rather involved a series of user errors, and dismissed the case for lack of jurisdiction. Sanders v. Comm’r of Internal Revenue, No. 25868-22 WL 4078722 (T.C. 6/20/2023).
• Commissioner not responsible for reasonable administrative or litigation costs. Section 7430(a) states that “[i]n any administrative or court proceeding which is brought by or against the United States in connection with the determination… of any tax… the prevailing party may be awarded a settlement for (1) reasonable administrative costs… (2) reasonable litigation costs.” 26 U.S.C.A. §7430(a). The petitioners prevailed in the action at hand, but the court dismissed their motion for costs because the Service had established that its position was “substantially justified.” 26 U.S.C.A. §7430(c)(4)(B)(i).
The commissioner argued that its previous positions were “substantially justifiable” under the circumstances because when the petitioners were selected for an audit in 2012, banking information showed deposits totaling over $1 million from the previous four years. What the commissioner was not aware of at the time of the audit was that in 2007, one of the petitioners (a dual citizen of Japan and the United States) and the other (a citizen of Japan working on a visa in the United States) had sold their U.S. assets and returned to Japan. These deposits, the petitioners asserted, were not a U.S. source of income, but instead income from a Japanese corporation.
While the commissioner was incorrect in its assumption that the deposits in the petitioner’s banks were U.S.-based income, that mistake does not mean the commissioner’s position was not justified. The court found the commissioner’s position reasonable in light of the evidence available at the time. Given the large deposits of money, one petitioner’s citizenship in the United States, and the petitioners’ failure to update their lawful permanent residence, the court found it reasonable to assume the petitioners remained liable for U.S. tax on their income. Since the court found the respondent’s position substantially justified, it concluded that the petitioners are not entitled to an award of costs. Yamada v. Commissioner of Internal Revenue, T.C.M. (RIA) 2023-070 (T.C. 2023).
• Flurry of settlement officer abuse of discretion cases. This past month, the tax court failed to find in a series of cases that settlement officers (SO) abused their discretion. In these cases, petitioners’ cases failed because, among other reasons, they all failed to provide necessary evidentiary support for their arguments.
In determining whether an SO has abused their discretion, the court considers three points: (1) whether the SO properly verified that the requirements of applicable law or administrative procedure have been met; (2) any relevant issues raised by petitioners; and (3) weighing “whether any proposed collection action balances the need for efficient collection of taxes with the legitimate concern of [petitioners] that any collection action be no more intrusive than necessary.” 26 U.S.C.A. §6330(c).
When petitioners are given a reasonable opportunity to present evidence with respect to their issues and fail, they fail to properly raise an issue before the court. 26 U.S.C.A §301.6320-1(f)(2). If petitioners want to be successful, they must start properly raising their issues before the courts, with evidentiary support sufficient to establish the SO abused their discretion. Dietz v. Comm’r, T.C.M. (Ria) 2023-069 (T.C. 2023), Hyde v. Comm’r, T.C.M. (RIA) 2023 -076 (T.C. 2023), and Seggerman v. Comm’r, T.C.M (RIA) 2023-078 (T.C. 2023).
• Tax court’s valuation of pipeline system affirmed. The Minnesota Supreme Court affirmed the tax court’s valuations of Minnesota CenterPoint Energy Resources Corp’s (Minnegasco) natural gas distribution pipeline system for the two tax years at issue. Following a three-day trial, the tax court issued findings of fact and conclusions of law; ultimately, the tax court’s valuations differed from both the commissioner’s and that of Minnegasco. The commissioner appealed, asserting error related to the tax court’s treatment of the income-capitalization approach as well as its cost approach analysis. In particular, the commissioner asserted that the tax court erred by disregarding the capitalization-rate opinions of the commissioner's expert in its income-capitalization approach. Relating to the cost approach, the commissioner asserted that the tax court erred as a matter of law by shifting the burden to the commissioner to contradict Minnegasco's prima facie showing of external obsolescence and, separately, that the lower court clearly erred in its external-obsolescence conclusions.
In analyzing the challenge related to the income-capitalization approach, the court rejected the commissioner’s argument that the tax court had inappropriately relied on the commissioner’s own initial assessments. The discrepancy arose because the commissioner’s trial expert (as well as Minnegasco’s trial expert) advocated for capitalization rates that differed from the rates the commissioner published in his annual studies. In finding the tax court’s references to the initial assessment proper, the Supreme Court distinguished prior case law that had held that “the assessed value of property for tax purposes is not relevant to the question of that same property’s market value.” Comm’r v. CenterPoint Energy Resources Corp. (quoting EOP-Nicollet Mall, L.L.C. v. County of Hennepin, 723 N.W.2d 270, 283 (Minn. 2006)). The tax court’s use of the initial assessment—to bolster the tax court’s decision to give more weight to one trial expert over the other—was not error. The court also rejected the commissioner’s argument that the tax court abused its discretion when considering the conflicting expert testimony.
Turning to the first issue in the external-obsolescence discussion, the court reiterated its determination that even “after a taxpayer presents a prima facie case demonstrating that the property’s value has been impacted by external obsolescence, the taxpayer retains the burden of proving, by a preponderance of the evidence, the amount of that external obsolescence” (quoting Enbridge Energy, Ltd. P’ship v. Comm’r, 945 N.W.2d 859, 868-69 (Minn. 2020). The commissioner pointed to a phrase in the tax court opinion that, the commissioner argued, demonstrated that the tax court improperly shifted the burden to the commissioner. While implying that, out of context, the tax court’s statement might have suggested an impermissible burden shift, the reviewing court held that “it is clear the court applied the correct burden of proof when evaluating external obsolescence.”
The commissioner’s final argument—that the tax court’s external-obsolescence determinations were clearly erroneous—fared no better. Reviewing the tax court’s determinations for clear error, the Supreme Court concluded that “there [was] sufficient evidence in the record to support the tax court’s decision that Minnegasco’s property suffered external obsolescence.” Comm'r v. CenterPoint Energy Res. Corp., No. A22-1069, 2023 WL 3985221 (Minn. 6/14/2023).
--Morgan Holcomb
--Brandy Johnson
--Adam Trebesch
Mitchell Hamline School of Law
TORTS & INSURANCE
JUDICIAL LAW
• First party insurance; pre-award interest. After suffering damage to his home as a result of fire, plaintiff notified defendant insurer. Defendant promptly investigated the claim and made a payment to plaintiff of what it considered the amount of the actual cash value of the damaged property, less required holdbacks. After the parties disagreed as to the amount of the repair costs, plaintiff demanded an appraisal. The appraisal panel determined that the actual cash value of the loss was less than already paid by defendant, but that the repair costs exceeded the amount paid. Following the award, plaintiff demanded pre-award interest on the entire amount of the repair costs awarded from the date notice was provided until the award was issued. The district court denied plaintiff’s request for pre-award interest. The court of appeals reversed and remanded.
The Minnesota Supreme Court reversed the decision of the court of appeals. The Court began by noting that Minn. Stat. §549.09, subdivision 1(b), the statute governing the award of pre-verdict, pre-award, and pre-report interest, states in relevant part: “Except as otherwise provided by contract or allowed by law, preverdict, preaward, or prereport interest on pecuniary damages shall be computed… from the time of the commencement of the action or a demand for arbitration, or the time of a written notice of claim, whichever occurs first[.]” (emphasis in original). As a result, the question for the Court was whether the insurance policy precluded an award of pre-award interest from the date notice was provided until the date of the award. The insurance policy provided in relevant part: “Loss will be payable five business days after we receive your proof of loss and: a. reach agreement with you; b. there is an entry of a final judgment; or c. there is a filing of an appraisal award with us. No interest accrues on the loss until after the loss becomes payable.” (Emphasis in original.) Because the loss did not become payable until five days after the award was issued, and because the policy provided that no interest accrued prior to the loss becoming payable, the Court held that plaintiff was not entitled to pre-award interest. Wesser v. State Farm Fire & Cas. Co., No. A21-1587 (Minn. 4/26/2023). https://mn.gov/law-library-stat/archive/supct/2023/OPA211587-042623.pdf
--Jeff Mulder
Bassford Remele