Criminal Law
JUDICIAL LAW
• Theft: Aluminum foil used to evade anti-theft security sensors is “shoplifting gear.” Appellant was arrested after being found in a retail store with a bag containing unpurchased items with aluminum foil wrapped around the anti-theft security sensors attached to the items. She was found guilty of possessing shoplifting gear and filed a postconviction petition, arguing there was insufficient evidence to support her conviction because aluminum foil is a common household item not designed to assist in shoplifting or defeat electronic article surveillance systems. The district court denied her petition and the court of appeals affirmed.
The Supreme Court holds that an “instrument designed to assist in shoplifting or defeating an electronic surveillance system,” under Minn. Stat. §609.521(b), “means any item produced with special intentional adaptation to assist the defendant in shoplifting or defeating an electronic article surveillance system.” The dispute in this case centers on the term “designed” in section 609.521(b) and whether aluminum foil used in a particular manner was “designed” as required by that section.
The Court notes that all definitions of “design” or “designed” put forth by the parties “share a common focus on the creation of an item or idea to effectuate a particular ‘end,’ ‘purpose,’ or ‘plan.’” The shoplifting gear statute “prohibits the possession of an item that is planned or produced with special intentional adaptation to the specific end of shoplifting.”
The Court disagrees with appellant’s argument that she merely used aluminum foil to shoplift, and that aluminum foil was not “designed” to assist in shoplifting or defeating an electronic surveillance system. Aluminum foil has a commercial design to act as a barrier to light, oxygen, moisture, and bacteria. However, it is sold in packaged rolls, a form rendering the foil useless as a barrier. It is only used for its designed purpose when molded and formed into a shape, so its use necessarily involves forming the raw foil material into a new object. Appellant did just this by fashioning foil into wrappings around sensors to defeat the store’s electronic surveillance system in order to shoplift. The evidence was sufficient to support her conviction. Douglas v. State, 986 N.W.2d 705 (Minn. 3/15/2023).
• 6th Amendment: No violation of right to counsel by state reviewing recorded calls between the defendant and his attorney because the defendant chose not to use an available unrecorded phone line. Appellant was incarcerated for murder and awaiting resentencing following an earlier appeal when he made a number of phone calls on a recorded jail phone line to his attorney and to a third party discussing defense strategies. The jail provided a process for communicating with counsel on an unrecorded line, but appellant never used this option. The state received and reviewed recordings of the calls. The district court ordered the state to establish a taint team to ensure the state did not listen to or use any privileged communications between appellant and his defense team. The Minnesota Court of Appeals subsequently granted the state’s petition for a writ of prohibition, concluding that there was no 6th Amendment violation and a taint team was not warranted.
In some situations, the state’s interference with the confidential relationship between a defendant and his attorney may implicate the right to counsel. But an intrusion into that relationship, on its own, does not constitute a 6th Amendment violation. The Supreme Court declines to articulate a full standard as to when such interference or intrusion amounts to a violation of the right to counsel. Instead, the Court holds “that the Sixth Amendment right to counsel is not implicated when the State provides an incarcerated defendant a process for communicating with counsel on an unrecorded phone line, and the defendant instead chooses to communicate with counsel or share defense strategies with a third party by a method the defendant knows is recorded.” Therefore, the district court was not authorized by law to order a taint team and the court of appeals did not err when it granted the state’s petition for a writ of prohibition. In re State (State v. Flowers), 986 N.W.2d 686 (Minn. 3/15/2023).
• Traffic: Statute prohibiting operating a motor vehicle with license canceled or denied as inimical to public safety is enforceable on private property. Respondent was found guilty of felony DWI and driving after cancellation (inimical to public safety), under Minn. Stat. § 171.21, subd. 5 (DAC-IPS statute), after police saw him driving a motor vehicle down a private driveway when respondent’s license was canceled as inimical to public safety. The court of appeals reversed, concluding the DAC-IPS statute is not enforceable on private property.
The DAC-IPS statute makes it a gross misdemeanor to “operat[e] in this state any motor vehicle, the operation of which requires a driver’s license, while the person’s license or privilege is canceled or denied,” if the license or privilege was canceled or denied under section 171.04, subd. 1(10), and they were given notice of or reasonably should have known of the cancellation or denial. Minn. Stat. §171.24, subd. 5.
The Supreme Court looks to prior versions of the DAC-IPS statute, which explicitly limited their application to the operation of motor vehicles “upon streets or highways in this state.” This limitation was removed in 1984, broadening the geographic reach of the statute and showing the Legislature’s intent for the statute to apply to drivers on non-public roads. The Court holds that the DPS-IPS statute is not limited to public streets and highways and may be enforced on private property. The Court also finds the district court properly denied respondent’s motions to suppress and dismiss. The court of appeals is reversed, and respondent’s convictions are reinstated. State v. Velisek, A21-0275, 986 N.W.2d 696 (Minn. 3/15/2023).
• Competency: Defendant bears burden of proof when asserting their own competence. Appellant was charged with second-degree murder and the district court ordered a competency evaluation of appellant. The district court found appellant was not competent and this appeal followed.
The Supreme Court held in State v. Curtis, 921 N.W.2d 342 (Minn. 2018), that “[w]here a defendant’s competency is disputed,” Minn. R. Crim. P. 20.01, subd. 5, creates a “presumption of incompetence,” which requires the party claiming competence to carry the burden of proof. Yet the question of who bears the burden of proof in a contested competency proceeding when a defendant asserts his own competence has not yet been resolved. The Court in Curtis stated that who bears the burden “can only be ascertained once a party affirmatively asserts that a defendant is competent to stand trial.”
The Minnesota Court of Appeals holds that, when a defendant asserts their own competence in a contested competency proceeding under Rule 20.01, the defendant bears the burden of proving competence. Here, the district court did not place the burden on either party, instead determining competency on the weight of evidence alone. This competency determination without allocation of the burden of proof to appellant was erroneous. The case is remanded to the district court for another competency hearing. State v. Thompson, A22-0737, __ N.W.2d __, 2023 WL 2564636 (Minn. Ct. App. 3/20/2023).
• Procedure: Order dismissing complaint for lack of probable cause is appealable if it is not based solely on a factual determination. Respondent was charged with four counts of second-degree criminal sexual conduct relating to alleged sexual abuse of a young girl in the United Kingdom and in Edina. He reported the incidents to child protection, wrote a letter of apology to the victim’s father, and acknowledged his offenses in a phone call to a detective. In a forensic interview of the victim, she described the incident in the United Kingdom but did not recall the Edina incident. The United Kingdom charges were dismissed for lack of subject matter jurisdiction and are not at issue in this appeal. The district court also granted respondent’s motion to dismiss the Edina charges for lack of probable cause. The district court found the only evidence supporting these charges were respondent’s confessions and determined that multiple confessions cannot corroborate themselves. The court of appeals dismissed the state’s appeal, finding the dismissal order not appealable, because it was based solely on a factual determination.
The Supreme Court reverses, finding the district court’s order was appealable because it was based on the district court’s interpretation of Minn. Stat. §634.03. Minn. R. Crim. P. 28.04, subd. 1(1), which allows the state to appeal a pretrial dismissal order based on questions of law, but not pretrial dismissal orders premised solely on a factual determination. The issue here is the italicized portion that rule. The Court determines that “if the basis for a district court’s probable cause dismissal is exclusively factual, then the probable cause dismissal is not appealable,” but “if the basis for... the dismissal is a construction of facts that is based on a legal conclusion, then the dismissal” is not appealable.
Here, the dismissal order was based on the district court’s legal conclusion regarding corroboration requirements—that is, the court interpreted section 634.03 (“A confession of the defendant shall not be sufficient to warrant conviction without evidence that the offense charged has been committed.”) to require the state to corroborate respondent’s confessions with evidence other than another confession. As it was based in part on a legal conclusion, the dismissal order here was appealable. The matter is remanded to the court of appeals to consider this case in light of State v. Dixon, 981 N.W.2d 387 (Minn. 2022) (holding that section 634.03 does not preclude a probable cause finding based on an uncorroborated confession) (decided while respondent’s appeal was pending). State v. Gray, 987 N.W.2d 563 (Minn. 3/22/2023).
• Restitution: The state is not required to prove a defendant’s ability to pay. Appellant was convicted of second-degree murder and ordered to pay restitution. He challenged the restitution order, arguing he was unable to pay, but the district court rejected his challenge. The court of appeals affirmed, but the case was remanded for the district court to establish a payment schedule.
Minn. Stat. §611A.045, subd. 3(a), places on an offender the burden of producing evidence to challenge the amount of restitution or specific items of restitution. The burden then shifts to the state to prove the amount of loss sustained by the victim and the appropriateness of a particular type of restitution. Then, the court is to resolve any dispute as to the proper amount or type of restitution by a preponderance of the evidence. In deciding whether to order restitution and the amount of restitution, subdivision 1(a) of the statute requires the court to consider (1) the amount of economic loss sustained by the victim as a result of the offense; and (2) the income, resources, and obligations of the defendant. Appellant argues these two subdivisions create a requirement that the state prove a defendant’s income, resources, and obligations. In other words, he argues the state’s burden of showing the appropriateness of a particular type of restitution requires the state to prove his ability to pay restitution.
The Supreme Court holds that section 611A.045 does not assign a burden of proof regarding a defendant’s ability to pay. Subdivision 3(a) requires the state to demonstrate not the general appropriateness of a restitution order, but the appropriateness of a particular condition—that being the “type of restitution.” Looking to the plain and ordinary meaning of this phrase, the Court notes that the focus of the term “type of restitution” is on the kind or category of restitution at issue. Put another way, the inquiry under subdivision 3(a) is whether the state has shown that the victim’s request for restitution consists of the type, kind, or categories of expenses that should be compensated through restitution. The court of appeals is affirmed. State v. Cloutier, 987 N.W.2d 214 (Minn. 3/22/2023).
• Controlled substances: Amendment changing definition of “marijuana” to exclude hemp mitigated punishment; amelioration doctrine applies. Appellant was convicted in 2020 of two marijuana-related fifth-degree controlled substance offenses, one for possessing three pounds of a plant material the state claimed was marijuana and the other for possessing vaporizer cartridges filed with a liquid mixture containing tetrahydrocannabinols. He argues the evidence was insufficient to support the jury’s guilty verdicts because of a 2019 amendment to the definition of marijuana, which excluded “hemp” and went into effect 10 days after appellant was charged but seven months before his trial. The court of appeals reversed appellant’s conviction for possession of the plant material but upheld his conviction for possession of the vaporizer cartridges.
Under the common law amelioration doctrine, an amended criminal statute applies to crimes committed before its effective date if: (1) there is no statement by the Legislature clearly establishing a contrary intent; (2) the amendment mitigates punishment; and (3) final judgment has not been entered when the amendment takes effect. The only requirement at issue here is the second—that is, whether the removal of certain conduct from the definition of a crime is a mitigation of punishment.
In previous cases, the amelioration doctrine has been considered in the context of the Legislature’s reduction of the penalty for a crime, but the Supreme Court finds it illogical to limit the scope of mitigation to only sentence reduction. The Court holds “that a statutory amendment mitigates punishment… when a change in the law either reduces the penalty for criminal conduct or redefines criminal conduct in a manner benefitting the defendant, including through the decriminalization of the conduct.”
Next, the Court considers whether the 2019 amendment decriminalized the possession of hemp. Before the amendment, the definition of marijuana in Chapter 152, which creates criminal penalties for possessing controlled substances, made no exceptions for hemp. After the 2019 amendment, the definition of marijuana explicitly excluded “hemp.” Thus, the amendment made it no longer a crime to possess hemp (the plant Cannabis sativa L. and its derivatives with a delta-9 tetrahydrocannabinol concentration of not more than 0.3 percent). By decriminalizing the possession of hemp, the amendment mitigated punishment.
Under the 2019 amendment, the only material difference between marijuana and hemp is the delta-9 THC concentration. Because the amendment effectively incorporates the delta-9 THC requirement into the definition of marijuana, the delta-9 THC concentration of a substance is a required element to be proven by the state. Thus, the state must prove beyond a reasonable doubt that a substance is marijuana by proving the delta-9 THC concentration exceeds 0.3 percent on a dry weight basis.
Here, the state did not test the delta-9 THC concentration of the plant material. Thus, the jury could reasonably infer that the circumstances proved either that the plant material in appellant’s possession had a delta-9 THC concentration greater than 0.3 percent or less than 0.3 percent. As such, the evidence was insufficient to support appellant’s conviction for possessing the plant material.
The state also never tested the concentration of the liquid in the vaporizer cartridges. However, the court of appeals found the evidence sufficient to sustain appellant’s conviction for possessing with intent to sell the cartridges under Minn. Stat. §152.025, subd. 1(1), on the basis that the liquid substance therein was illegal in any amount as a Schedule I controlled substance. However, hemp is now legal and defined based on its delta-9 THC concentration. Thus, section 152.025, subd. 1(1), no longer broadly criminalizes the sale of all tetrahydrocannabinols. The state did not test the liquid mixture here for the specific type of THC present nor the specific concentration of delta-9 THC. Therefore, again, the jury could rationally conclude that the liquid mixture had a delta-9 THC concentration of either greater than 0.3 percent or less than 0.3 percent. The evidence was insufficient to support appellant’s conviction relating to the vaporizer cartridges. State v. Loveless, 987 N.W.2d 224 (Minn. 3/22/2023).
• Exoneration compensation: Petition for declaration of eligibility is a postconviction proceeding requiring no filing fee or grant of in forma pauperis status. Appellant’s controlled substance conviction was overturned, and appellant sought compensation under Minn. Stat. §590.11 based on his exoneration. He filed a “civil complaint” with the district court, which was filed into a new file separate from his criminal case, as well as an affidavit to proceed in forma pauperis (IFP). His IFP application was denied and appellant appealed the denial.
The Minnesota Court of Appeals first finds that the exoneration compensation procedure is a postconviction process. Section 590.11, the exoneration compensation statute, establishes a framework for compensating individuals who served time in prison after a wrongful conviction. The court notes that section 590.11 is included in chapter 590, which governs postconviction relief and incorporates several postconviction procedures. Although appellant titled his petition “civil complaint,” the filing made clear his intent was to obtain an order declaring eligibility under section 590.11. Therefore, as a type of postconviction filing, no filing fee was required for the 590.11 petition. The district court erred in denying appellant’s IFP application. The matter is remanded for the district court to consider appellant’s request for a declaration of eligibility for exoneration compensation. Aery v. State, A22-1123, __ N.W.2d __, 2023 WL 2638240 (Minn. Ct. App. 3/27/2023).
Samantha Foertsch
Bruno Law PLLC
samantha@brunolaw.com
Stephen Foertsch
Bruno Law PLLC
stephen@brunolaw.com
Employment & Labor Law
JUDICIAL LAW
• Age and sex discrimination; claims dismissed. A woman who claimed wage inequity and discrimination had her claims dismissed on grounds that the employer established that the differences in her pay and that of two male colleagues was justified based on prior work experience. The 8th Circuit Court of Appeals, affirming summary judgment, also ruled that the claimant did not establish a prima facie case of sex discrimination because she did not show that the charge was more likely than not based upon intent to discriminate against her because of her gender. Mayorga v. Marsden Building LLC, 55 F.4th 1155 (8th Cir. 12/20/2022).
• Gender, race claims; settlement rescinded, claim dismissed. An employee who asserted race and gender discrimination claims against her employer was successful in rescinding a settlement agreement and re-opening it but failed on the merits of her claim. The 8th Circuit, affirming a lower court ruling of U.S. District Court Judge Eric Tostrud in Minnesota, held that the claimant did not establish discrimination based on her race and gender. Thomas v. Wells Fargo Bank, N.A., 2022 WL 17661148 (Minn. Ct. App. 12/14/2022) (unpublished) (per curiam).
• Union benefit funds; payment restriction upheld. A collective bargaining agreement regarding contributions to a union’s benefits fund was restricted to construction and highway workers, rather than all employees, regardless of the type of work. Affirming summary judgment for the employer, the 8th Circuit held that the collective bargaining agreement unambiguously required only contributions for “building construction” and “highway/heavy” work and did not extend to contributions for other types of work not listed in the agreement. Greater St. Louis Construction Laborers Welfare Fund v. RoadSafe Traffic Systems, Inc., 55 F.4th 609 (8th Cir. 12/9/2022).
• Bargaining unit; broader group required. A bargaining unit for sheriff’s office employees was properly expanded to include county-wide clerical and technical personnel. Affirming a ruling of the Bureau of Mediation Services, the court of appeals accepted the broader group proposed by Anoka County to represent those employees for collective bargaining purposes. Anoka County v. Law Enforcement Labor Services, 2023 WL 2564408 (Minn. Ct. App. 3/20/2023) (unpublished).
• Unemployment compensation; failure to be vaccinated. An employee who refused to be vaccinated for covid or wear a mask in the workplace was properly denied unemployment benefits. Upholding a decision of an unemployment law judge (ULJ), the Minnesota Court of Appeals held that the employee was ineligible for unemployment benefits because the discharge was due to “misconduct” in not complying with company policies. Sun v. Pepperl & Fuchs, Inc., 2022 WL 17748244 (Minn. 12/19/2022) (unpublished).
• Unemployment compensation; sexual harassment allegation. An employee who quit his job because the company did not investigate sexual harassment allegations against him that did not lead to disciplinary action was denied unemployment benefits. The court of appeals, affirming a decision of an unemployment law judge, held that the employee lacked a good reason to quit because he was accused of unfounded harassment. Mathieu v. University of St. Thomas, 2023 WL 2126134 (Minn. Ct. App. 2/21/2023) (unpublished).
Marshall H. Tanick
Meyer, Njus & Tanick
mtanick@meyernjus.com
Environmental Law
JUDICIAL LAW
• Lawsuits by state and local governments against petroleum companies remain in state court. In an action brought by the state of Minnesota under Minnesota law, the 8th Circuit is the latest court to find that petroleum companies cannot avoid state law claims addressing the climate change impacts of their products by removing the cases to federal courts in favor of federal common law disposition. The court held that federal common law on transboundary pollution did not completely preempt state law claims, federal question jurisdiction was not warranted, and removal authorized by specific federal statutes did not apply. In doing so, the 8th Circuit affirmed the remand of the case back to state court.
In keeping with a line of cases seeking to address Big Oil’s responsibility for climate change, Minnesota Attorney General Keith Ellison sued the American Petroleum Institute, Exxon Mobil and ExxonMobil Oil Corporations, Flint Hills Resources LP and Flint Hills Resources Pine Bend, and Koch Industries. Minnesota asserted that these defendants committed common law fraud and violated the state’s consumer protection statutes by knowingly misrepresenting the effect of fossil fuels on the environment. The state asks the defendants to publish research they possess about climate change and to fund a related public education campaign. It also asks for unspecified restitution and damages for “billions of dollars of economic harm due to climate change.”
In this and other similar cases brought by state and local governments around the country, the defendants have immediately removed the cases to federal court. The federal courts (including six federal circuit courts and 13 federal district courts) have held that the cases should remain in state court, as did the 8th Circuit.
The U.S. Supreme Court may ultimately decide whether these decisions are correct. In a 10th Circuit appeal, the Court has invited the U.S. solicitor general to file a brief on whether to grant certiorari. The Biden administration plans to assert that the case should remain in state court. Minnesota by Ellison v. Am. Petroleum Inst., 63 F.4th 703 (8th Cir. 2023).
ADMINISTRATIVE ACTION
• EPA proposes more stringent vehicle emissions standards. On 4/12/2023, the Environmental Protection Agency (EPA) proposed new, more stringent emissions standards designed to reduce air pollutant emissions from light- and medium-duty vehicles. The standards would begin with model year 2027 through model year 2032 vehicles. The overarching goal of the proposal is to significantly reduce greenhouse gas (GHG) emissions. Passenger cars and trucks are significant contributors to the problems caused by GHG, such as climate change and the health effects of impaired air quality, with transportation representing the single largest source of GHG in the U.S. The proposal aims to reduce light-duty vehicle fleet GHG emissions by 56%, and medium-duty fleet emissions by 44%, relative to existing standards.
Pursuant to the Clean Air Act, the EPA has the authority to regulate emissions of GHG and other pollutants from sources such as automobiles. The crux of EPA’s new proposal sets fleet average emissions of 82 grams of carbon dioxide emission per mile by model year 2032 for light-duty vehicles. Light-duty automobiles are those with a gross vehicle weight rating of less than 8,500 pounds. For medium-duty vehicles, the proposal sets an average of 275 grams of carbon dioxide emission per mile. Medium-duty vehicles are those with a gross vehicle weight of 8,501 to 10,000 pounds. The rule proposes a phase-in schedule containing certain milestones that manufacturers must meet each year through 2032.
The proposal also modifies emissions standards of other criteria pollutants such as nonmethane organic gases, nitrogen oxides, particulate matter, carbon monoxide, and formaldehyde. These standards also have multiple phase-in scenarios and contain early compliance options should manufacturers elect to do so.
The EPA also proposes more robust battery durability performance and monitoring requirements for light-duty plug-in hybrids (PHEV) and battery-powered electric vehicles (BEV). Manufacturers of these vehicles would be required to provide customers with a readable battery health system that reports the vehicle’s state of certified energy (SOCE). There would also be a minimum SOCE batteries must meet depending on certain year or mileage thresholds. For example, under the proposal, batteries used in light-duty PHEVs or BEVs with 5 years or 62,000 miles would need to have at least 80% SOCE. The proposals also include certain provisions that are available to small-volume manufacturers producing fewer than 5,000 vehicles per year. EPA will hold at least two public hearings in May 2023 to collect comments from stakeholders, interested parties, and members of the public.
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
• Standing; ADA “tester;” certiorari granted. The United States Supreme Court has granted certiorari on the question of whether an ADA “tester” has standing to challenge a public accommodation’s failure to provide disability accessibility information on its website even if she does not intend to visit the public accommodation. The circuits are badly divided, with the 1st and 11th Circuits finding standing, and the 2nd, 5th, and 10th Circuits rejecting standing. Laufer v. Acheson Hotels, LLC, 50 F.4th 259 (1st Cir. 2022), cert. granted, ___ S. Ct. ___ (2023).
• Arbitration; 9 U.S.C. §10(a)(3) AND (4); factual errors not reviewable. Affirming a district court’s grant of a motion to dismiss, the 8th Circuit found that appraiser’s alleged “factual errors” did not provide a basis for vacating an arbitration under 9. U.S.C. §10(a)(3) or (4). Martinique Props., LLC v. Certain Underwriters at Lloyd’s of London, 60 F.4th 1206 (8th Cir. 2023).
• Voluntary dismissal to create appellate jurisdiction criticized yet again. Where the partial grant of a motion to dismiss was appealed only after other claims were dismissed without prejudice, the 8th Circuit again criticized “the use of dismissals without prejudice to manufacture appellate jurisdiction in circumvention of the final decision rule.” Core & Main, LLP v. McCabe, 62 F.4th 414 (8th Cir. 2023).
• Remand for lack of federal question and CAFA jurisdiction affirmed. Affirming a decision by Judge Tunheim, and following similar decisions by the 1st, 3rd, 4th, 9th, and 10th Circuits, the 8th Circuit rejected defendants’ argument that environment-based claims asserted under Minnesota law were “completely preempted” by federal law or “necessarily raised” issues of federal law, and also rejected defendants’ “novel” argument in support of removal under CAFA. Minnesota v. Am. Petroleum Inst., 63 F.4th 703 (8th Cir. 2023).
• Collateral order doctrine; ex parte communications prohibited. Where a district court granted plaintiffs’ motion for an emergency protective order prohibiting certain ex parte communications, the defendants appealed, and the plaintiffs moved to dismiss the appeal for lack of jurisdiction but subsequently withdrew that motion, the 8th Circuit found that the district court’s order was neither an appealable collateral order or an injunction, and dismissed the appeal for lack of subject matter jurisdiction. Collins ex rel. J.Y.C.C. v. Doe Run Resources Corp., ___ 4th ___ (8th Cir. 2023).
• Denial of motion for preliminary injunction affirmed; delay. Affirming an order by Judge Nelson, the 8th Circuit found that the plaintiff’s 13-month delay in seeking a preliminary injunction was “unreasonable,” and belied any claim of irreparable harm. Ng v. Bd. of Regents, ___ F.4th ___ (8th Cir. 2023).
• Fed. R. Civ. P. 37; spoliation; adverse inference sanction imposed. Judge Wright adopted a report and recommendation by Magistrate Judge Leung that recommended the denial of plaintiff’s motion for a default judgment against the defendants as a sanction for their failure to preserve video from a jail camera, but also recommended that the defendants be subject to an adverse inference instruction and an award of attorney’s fees related to the expenses incurred as a result of defendants’ failure to preserve the video. Vogt v. MenD Correctional Care, PLLC, 2023 WL 2414551 (D. Minn. 1/30/2023), Report and Recommendation adopted, 2023 WL 2414531 (3/8/2023).
• Fed. R. Civ. P. 702; Daubert; class certification. Applying a “less stringent Daubert standard” at the class certification stage, Judge Tunheim denied defendants’ Daubert motions and then certified separate plaintiff classes in a price-fixing MDL. In Re: Pork Antitrust Litig., 2023 WL 2696497 (D. Minn. 3/29/2023).
• Fed. R. Civ. P. 702; Daubert; expert excluded. Judge Nelson granted defendants’ motion to exclude the opinion of plaintiffs’ industrial hygiene expert in an action arising out of plaintiffs’ alleged occupational exposure to chemicals, finding that the expert could not establish that he conducted tests using the same chemical that plaintiffs claimed they were exposed to. Cole v. Ecolab, Inc., 2023 WL 2609343 (D. Minn. 3/23/2023).
• L.R. 7.1(b) and 15.1; motion to amend complaint denied for failure to comply with rules. Where Judge Tunheim granted a motion to dismiss brought by a number of defendants but stayed entry of the judgment for 30 days to allow the plaintiff to file a motion to amend his complaint; the plaintiff filed a motion to amend, a first amended complaint, and a proposed order on the last possible day; filed a meet-and-confer statement two days later stating that he had not met and conferred because his motion was brought pursuant to Judge Tunheim’s order; and did not file a notice of hearing, a redlined version of the proposed amended complaint or a memorandum until 13 days later, Magistrate Judge Wright denied the motion without prejudice due to the plaintiff’s failure to comply with Local Rules 7.1(b) and 15.1(b). Mitchell v. Kurkowski, 2023 WL 2435168 (D. Minn. 3/9/2023).
• Motion to strike class allegations denied. Where it was undisputed that some members of the proposed class were subject to arbitration clauses, Judge Menendez denied defendants’ motion to strike class allegations, finding that the named plaintiff was not subject to an arbitration clause and that the presence of class allegations did not preclude the defendants from seeking to compel arbitration where warranted. Triple S Farms LLC v. DeLaval, Inc., 2023 WL 2333410 (3/2/2023).
• Video Privacy Protection Act; motion to dismiss for lack of standing denied. Agreeing with “every federal circuit court that has considered the issue,” Judge Tostrud found that the plaintiff’s allegations of “intangible harm” arising out of the “nonconsensual sharing of his private information” were sufficient to confer standing. Feldman v. Star Tribune Media Co., ___ F. Supp. 3d ___ (D. Minn. 2023).
• 28 U.S.C. §1927; attorney’s fees awarded. In October 2022, this column noted Judge Wright’s grant of the defendant’s motion for attorney’s fees pursuant to 28 U.S.C. §1927 in an amount to be determined. Judge Wright recently found plaintiff’s counsel to be liable for more than $12,000 in attorney’s fees. Ricketson v. Advantage Collection Profs., LLC, 2023 WL 2529211 (D. Minn. 3/15/2023).
• 28 U.S.C. §1292(b); motion for leave to appeal denied. Judge Frank denied the defendant’s motion to certify for interlocutory appeal his decision conditionally certifying an FLSA collective class, finding that the defendant was unable to meet any part of the controlling three-part test governing requests for 28 U.S.C. §1292(b) certification. Babbitt v. Target Corp., 2023 WL 2540450 (3/16/2023).
• Redactions for relevancy not permitted. While ultimately allowing a defendant to redact irrelevant “commercially sensitive and trade secret information,” Magistrate Judge Docherty recently added to the growing body of law in the District of Minnesota holding that a party “may not unilaterally redact information from responsive documents.” Chairez v. AW Distrib., Inc., 2023 WL 2071375 (D. Minn. 2/17/2023).
• Fed. R. Civ. P. 35; right to record physical examination. Where the parties agreed that the plaintiff’s physical condition was at issue, Magistrate Judge Docherty granted the defendant’s motion to compel the physical examination of the plaintiff but denied its motion to prevent the plaintiff from recording the examination. Silbernagel v. Westfield Ins. Co., 2023 WL 2264277 (D. Minn. 2/28/2023).
Josh Jacobson
Law Office of Josh Jacobson
joshjacobsonlaw@gmail.com
Indian Law
JUDICIAL LAW
• Indian tribe has standing to challenge land swap where lands are within ceded territory. The Fond du Lac Band of Lake Superior Chippewa filed suit against the United States Forest Service and others, seeking review of a land exchange between the Forest Service and PolyMet Mining, Inc., involving tracts within the territory ceded by the Band, along with other tribes, in the 1854 Treaty of LaPointe. The Band alleges the swap resulted in the loss of 6,650 acres of public land on which it will no longer be able to exercise its usufructuary rights reserved in Article 11 of the treaty. The district court rejected PolyMet’s argument that the treaty only reserved rights to individuals, finding instead the language in Article 11 was intended to create tribal rights, sufficient for the Band to have standing to challenge the land swap. Fond du Lac Band of Lake Superior Chippewa v. Cummins, ___ F. Supp. 3d ___, 2023 WL 2214533 (D. Minn. 2023).
• The habeas corpus relief provision of the Indian Civil Rights Act does not extend to an action barring an individual from running for tribal office. An enrolled member of the Leech Lake Band of the Minnesota Chippewa Tribe challenged a decision of the Minnesota Chippewa Tribe (MCT) Election Court of Appeals finding that he was ineligible to run for tribal office under both the MCT Constitution and the MCT Uniform Election Ordinance because of a prior felony conviction. The district court held that he could not maintain his suit against the named tribal defendants because the Indian Civil Rights Act’s habeas provision—one avenue for the requested relief—requires a “detention,” but the order barring him from running for elected office was not a detention under existing case law. The court also dismissed the member’s claims against the federal defendants for failure to exhaust administrative remedies and a lack of standing. LaRose v. United States Dep’t of the Interior, ___ F. Supp. 3d ___, 2023 WL 2333408 (D. Minn. 2023).
• Tribe’s inherent sovereign and federally delegated law-enforcement authority applies to all lands within the exterior boundaries of its reservation, and includes the authority to investigate violations of federal, state, and tribal law. The district court issued rulings resolving a number of pending motions in the long-running dispute between the Mille Lacs Band of Ojibwe and Mille Lacs County over the extent of the Band’s law-enforcement authority. Following a previous ruling that the Band’s reservation had not been diminished or disestablished, the court found that the Band’s inherent sovereign, as well as federally delegated (through the Tribal Law and Order Act, among other federal laws), law-enforcement authority extended to the entirety of the Mille Lacs Reservation. Reviewing a number of Supreme Court and 8th Circuit decisions addressing tribal criminal jurisdiction, the court found that the nature of this authority included the ability to investigate violations of federal, state, and tribal law, no matter whether the subject was Indian or non-Indian, or whether the alleged crime took place on lands held in trust by the United States for the benefit of the Band and its members, or was owned by non-Indians. The court did acknowledge that where the suspect was non-Indian, the Band’s inherent sovereign law-enforcement authority did not include the ability to arrest the suspect, but only to detain and investigate prior to turning the individual over to a jurisdiction with prosecutorial authority. While granting much of the declaratory relief requested by the Band, the court denied the prospective injunctive relief as advisory, given the not-yet-presented scenarios of future violations of the court’s rulings. Mille Lacs Band of Ojibwe v. County of Mille Lacs, Minn., ___ F. Supp. 3d ___, 2023 WL 146834 (D. Minn. 2023).
Leah K. Jurss
Hogen Adams PLLC
ljurss@hogenadams.com
Intellectual Property
JUDICIAL LAW
• Trade secret: DTSA does not apply to acts outside the United States. Judge Menendez recently granted defendant Hosokawa Micron BV’s (HMBV) motion for summary judgment against plaintiff Bepex International, LLC. Bepex sued Hosokawa alleging claims of trade secret theft under the Defend Trade Secrets Act, 18 U.S.C. §1836 (DTSA), and Minnesota’s Uniform Trade Secrets Act, Minn. Stat. §325C (MUTSA) related to the design and manufacture of custom industrial processing equipment. Bepex, a Minnesota limited liability company, alleged that HMBV, a corporation headquartered in the Netherlands, breached a license agreement that permitted HMBV to use Bepex’s proprietary and trade secret information to manufacture and sell Bepex products in certain European countries.
HMBV argued Bepex could not establish misappropriation because HMBV did not take acts in furtherance of the alleged misappropriation in the United States. The court found a plaintiff cannot sue for trade secret misappropriation occurring outside the United States unless the defendant is a citizen of the United States, an entity organized under its laws, or if “an act in furtherance of the offense was committed in the United States.” 18 U.S.C. §1837. The parties did not dispute that HMBV was not a United States citizen or organized under its laws. Analogizing to federal conspiracy law, the court found the act in furtherance of the misappropriation need not be the act of misappropriation itself but must be connected to the misappropriation. Actions by HMBV that occurred in the United States but were unrelated to the misappropriation were insufficient.
Because all the trade secrets were transferred and accepted as part of a years-long licensing agreement and business partnership, there were no acts in furtherance of the misappropriation within the United States. Royalty payments to United States bank accounts and sales to customers in the United States were also insufficient. Because there was no “act in furtherance of the offense” committed in the United States, the claims under the DTSA and MUTSA failed. Summary judgment on Bepex’s misappropriation claims was granted. Bepex Int’l, LLC v. Hosokawa Micron BV, No. 19-cv-2997 (KMM/JFD), 2023 U.S. Dist. LEXIS 66233 (D. Minn. 4/17/2023).
• Trademark: Rejection of fair use as defense to preliminary injunction. Judge Doty recently granted declaratory judgment defendant ServerLift Corporation’s motion for preliminary injunction. ServerLift manufactures and sells products that transport and position data center equipment such as computer servers. Declaratory judgment plaintiffs PHS West, LLC and R on I, LLC, are direct competitors. Plaintiffs filed an action requesting a declaration of noninfringement and cancellation of ServerLift’s trademarks. ServerLift moved for a preliminary injunction enjoining use of the phrases “server lift,” “server lifter,” and any phrase including any form of the word “server” followed immediately by any form of the word “lift.” After finding ServerLift established a likelihood of confusion, the court considered plaintiffs’ argument that the fair use doctrine applies. Under the fair use doctrine, the accused party has the burden of establishing: (1) use of the registered term or device is in a way other than as a trade or service mark; (2) the term or device is descriptive of the accused party’s goods; and (3) the accused party is using the term fairly and in good faith only to describe to users those goods and services. The court found plaintiffs could not meet their burden because the use of terms “server” and “lift” appeared to be used as trademarks and there was an open question as to whether the marks were used in good faith. Accordingly, the court granted ServerLift’s motion and enjoined plaintiffs from using “SERVER LIFT, SERVER LIFTER and any other phrase including any form of the word SERVER followed immediately by any form of the word LIFT.” PHS West, LLC v. ServerLift Corp., No. 22-1673 (DSD/TNL), 2023 U.S. Dist. LEXIS 31614 (D. Minn. 2/27/2023).
Joe Dubis
Merchant & Gould
jdubis@merchantgould.com
Probate & Trust Law
JUDICIAL LAW
• Rental option in a will is not unconstitutional. A will provided one child the option to rent farm property. The decedent’s second child moved the district court for a finding that the rental option was void under Article I, Section 15 of the Minnesota Constitution—a portion of the Constitution which finds that leases and grants of agricultural lands in excess of 21 years are void. The district court found that the rental option was not void. The court of appeals affirmed and specifically found that a rental option is neither a grant nor a lease. The court of appeals stated that because an option conveys no interest in land until it is exercised, it is not subject to Section 15 of the Constitution. Further, while the option can be used in an unconstitutional manner, that does not render the rental option itself unconstitutional. Brenda Legred v. Brent Legred, et al., A22-0543, A22-0545, A22-0547, 2023 WL 3047794 (Minn. Ct. App. 4/24/2023).
• Trustee breach of loyalty: Distinction between breach related to sale versus breach related to amount paid. The trustee (who was also a beneficiary) of a trust purchased two pieces of real property from the trust. The district court determined that the trustee purchased the properties for less than fair market value and that it was unreasonable for the trustee to do so. The remaining beneficiaries asked the district court to unwind the sale of the two properties. The district court refused and instead ordered the trustee to pay to the trust the difference between the fair market value and the amount she paid for the properties (less additional capital gains tax that the estate would otherwise have had to pay). The remaining beneficiaries appealed. The Minnesota Court of Appeals ruled that when a trustee commits a breach of the duty of loyalty, a district court can take any number of actions to remedy the breach. Because the terms of the trust allowed the trustee to purchase the two pieces of real property, the court of appeals found that unwinding the sales was not an appropriate remedy for the breach. Specifically, the breach related only to the amount paid for the properties and not for the actual sale. Therefore, the court affirmed the district court’s opinion. In re the Joan C. Ranallo Trust, A22-0767, 2023 WL 2637379 (Minn. Ct. App. 3/27/2023).
Jessica L. Kometz
Bassford Remele
jkometz@bassford.com
Tax Law
JUDICIAL LAW
• A question of timing: Delivery of check to attorney on December 27 does not entitle cash-method taxpayers’ deduction where attorney did not pass along check until the following calendar year. Petitioners were Oklahoma residents and cash-method taxpayers who entered into an $875,000 settlement with HUD following years of controversy surrounding foreclosures on several nursing homes. The parties eventually agreed to a settlement, and on 12/27/2012, the taxpayers purchased and delivered to their attorney a cashier’s check for $875,000. The taxpayers then claimed a business loss deduction of $900,000 (the payment and their legal fees) on their 2012 return. The commissioner issued a notice of deficiency (the commissioner conceded that the legal fees were properly deducted).
The taxpayers argued the $875,000 settlement was deductible as an ordinary and necessary business expenses and further that the timing of the deduction in 2012 was appropriate. The Service countered that the taxpayers got the timing wrong—the settlement was not paid in 2012 since the taxpayer’s attorney didn’t deliver the check until 2013—and further that the amount would not be deductible in any event, since the payment represented punitive damages. (Section 162(f) provides that “[n]o deduction shall be allowed under subsection (a) for any fine or similar penalty paid to a government for the violation of any law.” (26 U.S.C.A. §162(f)(West).
Judge Holmes sided principally with the Service, though the court determined that the taxpayers were not liable for any accuracy-related penalty. The taxpayers were not entitled to the deduction, the court reasoned, because cash-method taxpayers may take deductions only the year in which the amount is actually paid (not when liabilities accrue). Although the taxpayers handed the cashier’s check to their attorney in 2012, the check was not delivered to the government until 2013. The taxpayers argued, though, that Oklahoma law ought to apply and that under Oklahoma law, a payment is made when there is a tender of payment. Their purchase of the cashier›s check, delivery of that check to their attorney, and the attorney’s act of offering the check to the Assistant U.S. Attorney was a tender. (The AUSA refused to accept the check in 2012 because the settlement agreement had not been approved.) The court decided it did not need to evaluate the taxpayer’s state-law argument around Oklahoma tender law, because the court held that federal law applied and under federal law, tender did not amount to delivery for purposes of deductibility.
Because the court held that the payment was not deductible since it was not paid in 2012, the court did not need to decide the 162(f) question for purposes of the deductibility. However, whether the taxpayers’ position on the 162(f) issues was reasonable mattered to the penalty. The court’s discussion of whether the taxpayer’s settlement was an ordinary and necessary business expense provides useful background and guidance in distinguishing payments that are not deductible because they fall within 162(f) and payments that are deductible because they are “compensatory damages paid to the government.” Gage v. Comm’r, T.C.M. (RIA) 2023-047 (T.C. 2023).
• Whistleblower’s request for over-$1B nondiscretionary award properly denied. A whistleblower who assisted the DOJ and IRS in the investigations of two Swiss bankers petitioned for a nondiscretionary award of over a billion dollars.
In February 2011, the IRS announced its second iteration of the Offshore Voluntary Disclosure Initiative (OVDI), which followed the first initiative by the same name and ran for tax years 2003–2010. OVDI incentivized taxpayers to voluntarily disclose noncompliance to avoid criminal prosecution and receive reduced penalties. This second iteration followed the nationally covered case of the Swiss bankers whose guilty plea was announced in December 2010. The whistleblower alleged that his assistance in their arrests led to the success of the OVDI because the public trial and arrest “spurred U.S. taxpayers to enter into the voluntary disclosure program.” Shands v. Comm’r of Internal Revenue, No. 13499-16W, 2023 WL 2399912 at 2. As a result, the whistleblower requested an award from the IRS Whistleblower Office of 30% of the proceeds collected as a result of the February OVDI, which totaled over $1 billion.
The commissioner brought a motion to dismiss for lack of jurisdiction. The court has jurisdiction in whistleblower cases when the IRS “proceeds with any administrative or judicial action… based on information brought to [its] attention by a whistleblower.” 26 U.S.C.A. §7623(b)(1) (West). In this case, the IRS did not proceed with any action when it denied the whistleblower’s request. The court followed the reasoning in Li v. Commissioner, which states that a rejection “by nature means the IRS is not proceeding with an action.” Li v. Comm’r of Internal Revenue, 22 F.4th 1014, 1017 (D.C. Cir. 2022). While a rejection and denial are dissimilar, Li further “explains that the IRS may issue a denial where the IRS ‘did not proceed [with an action] based on the information provided by the whistleblower.’” Shands quoting Li. Since the IRS did not proceed with any action regarding the whistleblower’s information, the court granted the commissioner’s motion to dismiss for lack of jurisdiction. Shands v. Comm’r of Internal Revenue, No. 13499-16W, 2023 WL 2399912 at 2 (T.C. 3/8/2023).
• Casualty deduction arguments sinking faster than a leaky boat. In a deficiency case concerning casualty loss tax deductions, taxpayers’ claim for their vacation home and boat damage was disallowed by the commissioner.
In 2017, winter storm Stella swept through Cape May, New Jersey, flooding the city and causing millions in property damage. The taxpayers in this case claimed casualty losses of more than $820,000 for the damage to their vacation home and boat, resulting in a deduction of roughly $740,000.
As the notice of deficiency is presumed to be correct, the taxpayers bore the burden of proving their entitlement to a deduction. Welch v. Helvering, 290 U.S. 111, 115 (1933). While the couple testified that they had pictures of the damage to their vacation home and boat, they explained they were deleted in a phone software update and the only pictures presented were of the home during construction and the boat prior to any damage. The court found the taxpayers’ testimony to be not credible without evidence of any storm damage to the home. Further, after the storm, the taxpayers failed to submit insurance claims for damages to either the vacation home or the boat. Finally, the court rejected the calculus done for the loss of value for both the home and boat as the taxpayers failed to present sufficient evidence to substantiate the loss of value in each case.
The court concluded that the taxpayers failed to prove Stella caused the damages, failed to substantiate the values of their losses, and failed to file insurance claims on either the home or boat. When making deductions for your boat, as this decision advised, “absence of proof of damages causes [your] case to founder, and absence of proof of valuing that damage causes it to sink altogether.” Richey v. Comm’r of Internal Revenue, at *8 T.C.M (RIA) 2023-043 (T.C. 2023).
• Parcels in Woodbury shopping center undervalued. Tamarack Village Shopping Center challenged the county’s valuation of two parcels that are part of the Washington County shopping center. The court found the assessor’s estimated market values understated their market values as of the assessment date. The court considered the three traditional approaches to valuation—cost, income, and sales comparison—in determining market value. The court agreed with both appraisers that the income capitalization approach should be afforded predominant weight (approximately 70%). The court also considered the sales comparison approach but determined that the cost approach should be afforded no “genuine weight” in the court’s reconciliations. The most robust discussion was around the income capitalization approach, which included analysis of potential gross income, vacancy and credit loss, operating expenses, capitalization rate, and direct capitalization indication. The parties’ principal disagreements seemed to involve potential gross income, as well as vacancy and credit loss. The court ordered the assessed values of the two parcels increased in accordance with the court’s extensive findings of fact and conclusions of law. Tamarack Vill. Shopping Ctr., LP v. Cnty. of Washington, No. 82-CV-20-2003, 2023 WL 2669686, (Minn. Tax 3/28/2023).
• Hennepin County properties exempt from taxation as institutions of purely public charity. The Minnesota Constitution exempts from taxation “institutions of purely public charity.” Two entities dedicated to providing affordable housing for low- and very-low-income people in Minneapolis challenged their classification as taxable properties. The Minnesota Tax Court agreed with the taxpayers and held that the properties met the requirements for exemption as of the assessment date. Both entities were “institutions of purely public charity” as that term is defined by Minnesota statute and both entities’ use of the “propert[ies] is in furtherance of the tax-exempt charitable purpose of the organization[s].” The court provides a brief history of the purely public charity exemption in its memorandum opinion. All. Hous. Inc. v. Cnty. of Hennepin, No. 27-CV-20-7738, 2023 WL 2604570, at *6 (Minn. Tax 3/22/2023).
• Property tax: If a qualified farm property is disposed to a non-family member within three years after decedent’s death, the estate no longer qualifies for a deduction. The estate of a deceased taxpayer sought relief from the imposition of additional real estate taxes on the sale of qualified farm property. In 2018, the taxpayer transferred “certain property” to two brothers, reserving a life estate in each property for himself. After the taxpayer’s death in 2019, the life estates were automatically transferred to the two brothers as future interests, which, for estate tax purposes, should be included in the taxpayer’s estate. In late 2020, the estate filed form M706 listing the properties as qualified farm properties (QFP), which would allow them to qualify for the QFP deduction. In 2021, one of the brothers sold two of the stipulated properties—one to his brother and the other to a third party. Under Minnesota Statutes section 291.03, subdivision 11, taxpayers may still take advantage of a qualified small business and farm property deduction if the sale is a “disposition to a family member.” After the sale to the third party, the estate sent an amended Schedule A to substitute the QFP sold to the third party and filed an amended Minnesota estate tax return, “amending the list of assets it elected to have deducted from the Minnesota taxable estate as QFP.” The estate also filed a Minnesota Estate Tax Informational and Recapture Return, which stated that “no sales to a non-family member of the property on the Amended M706 had occurred within three years of the date of death” and paid a disputed recapture tax payment. The Department of Revenue (DOR) requested consent to change the tax liability, which the estate disputed. After the estate responded to a second request from the DOR, a tax order was issued. The estate appealed and both the estate and DOR filed cross-motions for summary judgment. Because only a portion of the QFP estate included property sold to a third party, the parties disputed “whether the recapture tax is imposed on the value of the specific QFP disposed, or the entire amount of the QFP exclusion.”
Regarding the first issue, the estate argued that the election of qualified farm property is revocable and that an estate can “substitute different QFP for which it did not initially make the election, and that its informational returns concerning disposition of property was accurate based on the substitution of property.” The commissioner disagreed, arguing that there are not exceptions: “If qualified farm property is sold to a non-family member before the end of the three-year holding period, then the estate does not retain the benefit of the subtraction....” The court agreed with the commissioner.
Next, the estate argued that “the statute is ambiguous and if the Commissioner may impose a recapture tax, it is limited to the specific QFP” that was sold to the third party. The commissioner argued that the additional estate tax should be imposed on all QFP excluded from the Minnesota taxable estate. The court agreed with the estate, denied the commissioner’s motion for summary judgment, and granted the estate’s motion for summary judgment. Est. of Enestvedt v. Commr. of Revenue, 9539-R, 2023 WL 2543142 (Minn. Tax 3/16/2023).
• Property tax: Once exemption status is granted, the status will likely remain intact unless a material change is present. Two taxpayer organizations challenged the assessed value and classification of 21 parcels of real property in Minneapolis. The taxpayers’ property previously held exempt status, but the designation was removed beginning 1/2/2021. The taxpayers challenged the assessor’s revocation of the exempt classification. Each organization is funded through charitable donations, gifts, or government grants for services to the public and services individuals who fall between 30% and 50% of the area median income. Prior to January 2020, 12 of the properties were classified as exempt, but the January 2021 assessment classified the 12 properties as Class 4a, 4b, or 4bb under Minn. Stat. §273.13, subd. 25(a) and the remaining nine properties as Class 4d, qualifying as low-income rental housing under Minn. Stat. §273.13, subd. 25(e). The properties submitted renewal applications in late 2018 to maintain exempt status but the applications were denied by the Minneapolis city assessor. The properties appealed, submitting “sufficient credible evidence to rebut the prima facie validity of the exempt status,” and the court deemed the properties exempt. All. Hous. Inc. v. County of Hennepin, 27-CV-20-7738, 2023 WL 2604570 (Minn. Tax 3/22/2023).
Morgan Holcomb
Brandy Johnson
Adam Trebesch
Mitchell Hamline School of Law