September 1999

In this month's "Notes & Trends":

• Civil Litigation
• Criminal Law
• Family Law
• Federal Practice
• Juvenile Law
• Tax Law
• Torts & Insurance
  

Substituted Service. Two months ago, this column reported on a decision by the Minnesota Court of Appeals addressing substituted service of process (Lundgren case), in which the appellate court held that substituted service of process on a defendant's soon-to-be ex-wife at the defendant's former residence was ineffective because "strict" compliance with Minn. R. Civ. P. 4.03(a) was required. (See July 1999 Bench & Bar Civil Litigation Notes and Trends column.) In another decision addressing a different issue regarding the substituted service of process rule, the Minnesota Court of Appeals recently held that "substantial compliance" was required to achieve service of process under Rule 4.03(a). O'Sell v. Peterson, 595 NW2d 870 (Minn. App. 1999).

In O'Sell, the plaintiff attempted to commence an action against the defendant by serving defendant pursuant to the substituted service of process provision of Rule 4.03(a), which provides that service may be achieved by "leaving a copy of the summons and complaint at the individual's usual place of abode with some person of suitable age and discretion then residing therein." The process server left the summons and complaint at the defendant's home with the defendant's stepson, who was there for a six-day, non-custodial visit. The stepson usually resided in Iowa with his custodial parent. Thereafter, the defendant received the summons and complaint from his stepson and challenged the sufficiency of the service of process. The trial court denied defendant's motion to dismiss for ineffective service of process and the defendant appealed.

The appellate court analysis focused on the meaning of the phrase "then residing therein" and whether the stepson, who was merely visiting the defendant for six days, actually resided in defendant's home for purposes of Rule 4.03(a). The court stated that

there must be a nexus between the individual and the defendant that establishes some reasonable assurance that notice would reach the defendant. For example, a relationship of confidence, including but not limited to a familial relationship, may establish a nexus and support the conclusion that notice would reach the defendant. Id.

The court also stated that the "frequency of presence, or the intent to return" may establish a nexus between the individual and the defendant. Finally, the court found that evidence that the defendant actually received the service strongly supported the conclusion that service was valid.

This case, and the court's conclusion that substantial compliance is necessary to achieve effective service of process, should be compared to the decision in Lundgren v. Green, (C3-98-7295), wherein the court held that strict compliance is required. In Lundgren, the issue was whether the place of service was actually the defendant's usual place of abode. In O'Sell, it was undisputed that the place of service was the defendant's usual place of abode. The issue was whether the person who accepted service resided therein. These cases read together appear to suggest multiple traps for the unwary when using substituted service of process. When practitioners use substituted service of process, they should be sure that the place of service is in fact the defendant's usual place of abode, and they should be convinced that there is a nexus between the person with whom the summons and complaint is left and the defendant.

 
In this month's "Notes & Trends":

• Civil Litigation
• Criminal Law
• Family Law
• Federal Practice
• Juvenile Law
• Tax Law
• Torts & Insurance

Evidence; Impeachment of Witness; Prior Felony. In State v. Ihnot, 575 N.W.2d 581, 584 (Minn. 1998), the Supreme Court established a bright line rule for determining the time period for use of convictions to impeach witnesses. In Ihnot, the Court stated that the date of the charged offense is an appropriate end point for computing the time period. The Supreme Court expressed concern with using either the date of the current trial or the date of the witness’s testimony as an appropriate end point, because these things are subject to manipulation.

In this case, however, it was the appellant’s brother who was the witness against him, and subject to impeachment. The brother had served 18 months in jail for a November 1986 conviction of making a false statement. Under the Ihnot rule, the brother’s conviction was not stale. Under a rule that would use the date of the start of his trial, or the date of his testimony, the conviction would be stale. Held, the Ihnot rule should be used only for defendant witnesses and will not be extended to other witnesses. Hence, the trial court’s ruling that the conviction was stale is upheld. State v. Rickford Munger, C0-98-1524 (Minn. App. 6/29/99).

Evidence; Computer-Generated Illustration; Admissibility. In this murder case, the trial court allowed a forensic medical doctor to display a poster which he had made using Adobe Photo Shop. The poster digitally combined two photographs: one of a hinge contained on a brace of the appellant, and the other showing an image of a wound on the deceased. The technique was "an exact overlay comparison." The images were edited by removing all portions of the brace other than the hinge. Rulers, scale and depth indicators were added.

Held, the court did not err by introducing this poster as illustrative evidence. The trial court declined to received the poster as substantive evidence. Held, this was a proper use of illustrative evidence. A competent witness properly verified it. The prejudicial value did not exceed its probative value. State v. Vincent Stephen Bauer, C3-98-786 (Minn. 7/29/99).

Self Defense; Deadly Force; Abode/Dwelling. The appellant was convicted of Second Degree Felony Murder after killing a person who entered the trailer and confronted the appellant in a bellicose manner. The victim was six feet tall and weighed 260 pounds; the appellant is five feet eight inches tall and weighs 150 pounds. Over the objection of the defense, the trial court instructed the jury that for both self-defense and self-defense in one’s abode, the appellant had the duty to retreat if reasonably possible.

Held, there is no duty to retreat before using deadly force to defend one’s place of abode. Similarly, there is no duty to retreat before using deadly force in self-defense within the home. The distinctions between "defense of dwelling" and "self-defense in an abode" do not make sense, as they appear to value property over life. The existence of a duty to retreat should not "turn on the label attached to the defense." In any case, juries should still be instructed as to the reasonableness of the action of a defendant who elects to use self-defense. State v. Tony Lamaur Carothers, C8-98-86 (Minn. 6/17/99).

Search and Seizure; Guests; Drug Dealing. Under Article I, Section 10 of the Minnesota Constitution, the appellants enjoy no further rights than under the Fourth Amendment to the United States Constitution. The appellants had been temporary visitors to a friend’s hose for the purpose of processing cocaine for sale. The police officer had illegally searched by peering through the blinds from the outside. Although the search was illegal, the appellants do not have a legitimate expectation of privacy to challenge this search. This case distinguishes the overnight guest who may claim Fourth Amendment standing, also notes that the expectation of privacy "in commercial property" is less than that in a home. The Supreme Court declines to extend the Minnesota Constitution to grant greater protection for Minnesota citizens. State v. Carter and Johns, CX-95-1368, C9-95-1765 (Minn. 7/22/99).

Gangs; Crime Committed for Benefit. Minn. Stat. §609.229, Crime Committed for the Benefit of Gang, is a separate substantive offense, and not a sentence enhancement factor.

Relevant evidence of gang activity is completely probative and outweighs the danger of unfair prejudice. In this case, it was appropriate for a police officer from the gang strike force to testify about the nature of the gang, naming members, and describing activities such as attempted murder, robbery, and carrying guns. The police officer testified that in his expert opinion, one of the primary objectives of the "Royal Bloods" was the commission of violent crimes. This type of evidence is necessary for the state to prove one of the elements of the offense, namely, that the gang includes members who individually or collectively have engaged in the pattern of criminal activity. Sate v. Phoeu Chuon, C7-98-1861 (Minn. App. 6/29/99).

Expunction; Not Guilty by Reason of Mental Illness. In 1973, the appellant was indicted for First Degree Murder. He was found not guilty by reason of insanity. He was committed to the security hospital for six years and rehabilitated himself. Although he obtained a professional degree, and has had no significant criminal history since his release, the appellant was terminated for different professional positions, and had been denied an apartment lease. The trial court denied the expunction under Section 609A.02, finding that the insanity acquittal was not a disposition that was resolved in his favor.

Held, a verdict of not guilty by reason of mental illness is a disposition "resolved in favor of the petitioner." Because such a verdict at least approaches the status of an acquittal for double jeopardy purposes, it is sufficiently favorable to qualify a petitioner for expunction. Next, under the facts of this case, the petitioner is entitled to such an order. The state did not meet its burden of proof under the statute by showing clear and convincing evidence that the public interest requires maintenance of the 1974 records. State v. Ammanuel Ambaye, C9-98-2221 (Minn. App. 6/29/99).

Weapons; Permit; Proximity. The respondent was at the Minneapolis-St. Paul Airport enroute from his home in Victoria, Minnesota, to attend a staff meeting at the headquarters of his employer in Portsmouth, Rhode Island. While he was at the airport, the x-ray scanner detected a handgun in his carry-on suitcase. Respondent was unable to produce a permit for the gun. The trial judge dismissed the charge for lack of probable cause, based upon the fact that the respondent was indeed traveling between his employer and his residence. Minn. Stat. §624.714, subd. 9(c) exempts travel between a person’s home and place of employment from the handgun permit requirement.

Held, the trial court’s interpretation of the exception was legally incorrect. The exception implies that a person’s home and business must be within reasonable proximity to each other. In this case, to allow a person to possess a handgun without a permit would contradict the state’s prohibition against guns in public places, such as airports. The statute suggests short trips between home and employment, and does not contemplate air travel. State v. Ronald Clifford Linville, C8-99-308 (Minn. App. 7/6/99).

Sentence; Life; Criminal Sexual Conduct. Appellant was charged by complaint with Attempted Criminal Sexual conduct in the First Degree. His two previous convictions were also for Attempted First Degree Sexual Conduct. Minn. Stat. §609.346, subd. 2A(a)2(iii) (1996), which was repealed and then recodified at §609.109 (1998) provides that if an individual is convicted of First Degree Criminal Sexual Conduct and has two previous qualifying sex offense convictions, an individual shall be sentenced to life imprisonment.

For purposes of enhancement, the prior convictions may be for either the completed offense or an attempt to commit an offense, and therefore the two previous convictions for attempt were appropriately used. The statute is silent on whether the present conviction may be for an attempt or for a completed offense.

Held, looking at the statutes as a whole, the Legislature intended that a present conviction for an attempt to violate First Degree Criminal Sexual Conduct qualifies for enhancement.

Next, Minn. Stat. §609.17, subd. 4, which limits the length of sentence for attempts, does not operate to relieve the appellant from a life sentence. The new enhanced sentence law is a more specific statute, and controls the general attempt provisions.

At the time of sentence and conviction, the appellant was under the old law, which did not require prosecution by grand jury indictment. Since then, the Legislature amended this enhancement statute to require a grand jury indictment before the mandatory life imprisonment provision can be applied. However, the Court finds that there was no such requirement for a grand jury indictment at the time of the appellant’s conviction, Rule 17.01 of the rules of Criminal Procedure notwithstanding. The provisions of the prior law were sentencing considerations, and not elements of a crime to be proved at trial. State v. Richard Thomas Renquist, C4-97-1502 (Minn. 7/22/99).

Sentence; Restitution; Hmong Ceremony. The appellant was convicted of Second and Fifth Degree Assault for his stabbing attack on a Hmong citizen. In addition to receiving 17 months in prison, the appellant was required to make restitution in the amount of approximately $1,900.00, the bulk of which was for a Hmong healing ceremony called "Hu Plig." This ceremony involves the sacrificial use of a cow, a pig, and two chickens, in addition to using a shaman for the ceremony. Food is also served to guests.

Held, courts have discretion under Minn. Stat. §611A.04 to order restitution for the cost of the Hu Plig. Next, such an order does not violate the establishment clauses of the United States Constitution or the Minnesota Constitution, because the appellant has not demonstrated that Hu Plig is a religious ceremony. An expert anthropologist, also a native Laotian, called by the appellant declined to characterize Hu Plig as a religious ceremony. rather, it appears to be more of a cultural or traditional rite, something that has not yet been institutionalized. Hence, the appellant did not meet his burden of proof that it was a religious ceremony. Court of Appeals v. Anthony Tenerelli, C3-98-318 (Minn. 8/5/99).

Firearms; Felony Conviction; Shotguns. The respondent had been convicted of two felonies for controlled substances (cocaine possession) in 1993 and 1995. Minn. Stat. §624.713, subd. 1(b) prohibits possession of pistols or "any other firearm" if a person has been convicted of a crime of violence. "Crime of violence" includes drug convictions.

In 1998, a St. Paul police officer was executing a search warrant at the respondent’s home and found a .28 shotgun and four shells. Respondent was then charged with being a felon in possession under state law. The trial court dismissed the charges based upon a conflict in the law. While Section 624.713, subd. 1(b) prohibits possession of "any other firearm," a policy statement contained in Section 624.711 states that it is not the intent of the Legislature to regulate shotguns and other long guns.

This conflict is resolved by using the principle of statutory construction that the clause last in order of date of enactment shall prevail. Because the prohibition against "any other firearm" was added in 1994, and the general "policy" statement dates from 1975,t he latter prohibition controls. Hence, the respondent may not have legally possessed a shotgun and the complaint is reinstated. State v. Samuel Earl Dendy, C4-99-287 (Minn. App. 7/20/99).

 
In this month's "Notes & Trends":

• Civil Litigation
• Criminal Law
• Family Law
• Federal Practice
• Juvenile Law
• Tax Law
• Torts & Insurance

Substituted Service. The sheriff attempted to serve a summons and complaint at the home of a husband who was not present. Following Rule 4.03(a), he left the documents with the husband's 14-year-old stepson, who was staying there during a regular and planned five-day visitation. The stepson, who usually resides in Iowa with his custodial parent, gave the documents to the husband. For the past four or five years, the stepson stayed at the residence every other weekend for one or two days and up to two weeks per visit. In affirming, the Court of Appeals concluded that substituted service on a 14-year-old child who was a member of the household during regular and planned non-custodial visitation stays is sufficient for purposes of Rule 4.03(a). He was "then residing therein" for purposes of service of process. O'Sell v. Peterson, 595 NW2d 870 (Minn. App. 1999).

Right of Intervention; Dissolution. The wife of the putative father initiated dissolution of their marriage, and the spouses executed a marital termination agreement. They submitted it to the court for approval. Earlier, the child had been adjudicated to be the father's child in a paternity action brought by Itasca County and the natural mother. The county and the mother moved to intervene in the dissolution on behalf of the child "as a matter of right." Their purpose was to prevent dissipation of marital assets available to the father for payment of his child support obligation. Their motions were granted and the district court ordered a temporary injunction staying the dissolution. The wife of the putative father appealed.

The Court of Appeals reversed, stating that the mother and the county could not properly intervene as of right because they do not have an interest in the dissolution or the spouses' marital property. It found that there was no legal authority to support the contention that a child born out-of-wedlock is entitled to a portion of the father's marital property for purposes of child support. Case law establishes that even children born during a marriage do not have an absolute right to the marital property of their parents. As to the county, the court found that it had not provided any support to the child, and that its interest was purely futuristic and speculative. Further, it said, the record shows no impairment of the father's ability to pay. Luthen v. Luthen, 596 NW2d 278 (Minn. App. 1999).

The following two unpublished opinions of the Court of Appeals may be cited only after the requirements of Minn. Stat. § 480.08, subd. 3 (1996), have been satisfied:

Maintenance Termination Reversed. In 1989, the wife was awarded spousal maintenance of $6,750 per month, and in 1993 the award was reduced to $1,800, retroactive to March 1992. In September 1994, she moved pro se for enforcement of the $1,800 order, and the husband moved for termination of maintenance. The motions were still pending in March 1997 when the wife again moved for enforcement and the husband countered for reduction. The district court conducted an evidentiary hearing on the husband's ability to pay. Thirteen months later, on April 6, 1998, the court issued its order awarding $23,400 in arrearages and granting the husband's motion to terminate maintenance effective October 14, 1994, which was the date of the husband's original countermotion.

On appeal, the wife, still pro se, raised the issue of abuse of discretion by termination of maintenance but did not address the issue in her brief, thereby waiving that issue. The husband cited the wife's failure to request a reservation or amended findings. Nevertheless, the Court of Appeals exercised its discretion to address any issue required in the interests of justice after noting that the wife had appeared pro se and that a reservation places no liability on the husband. It referenced: 1) legal opinions upholding reservations for inability to earn and poor health, 2) prior evidence, dating to the original decree, showing that the husband had withheld information from the court, and 3) the possibility that the drastic drop in the husband's $200,000 annual income in a short period could reverse itself in the future. The court modified the termination decision by reserving jurisdiction over spousal maintenance. Stern v. Gordon, 1999WL326193 (Minn. App. 1999) (unpublished).

Rule 11 Sanctions: Prior Notice. Following summary judgment, the appellant moved for Rule 11 sanctions, which were denied for failure to provide proper notice. The Court of Appeals said that a party must have fair notice of both the possibility of a sanction and the reason for its proposed imposition and an opportunity to respond to the notice. Because one of the primary purposes of the rule is to deter litigation abuse, notice should be given as early as possible, providing an opportunity to correct future conduct. Only in very unusual circumstances may a court wait until the conclusion of the litigation to announce that sanctions will be considered or imposed. The Court of Appeals found that, before granting summary judgment, the district court told counsel that, unless he was "able to come up with something very substantial," the court would grant summary judgment. But the court did not otherwise indicate the danger of being sanctioned. The appeals court concluded that the trial court's comment was not sufficient to put respondent on notice. Reversed on other grounds. Ung v. Bradley, 1999WL431115, (Minn. App. 1999)(unpublished).

New Judicial Child Support Procedure Rules. On June 23, 1999, the Supreme Court issued interim rules for implementing the new judicial Expedited Child Support Process that replaced the executive administrative law judge process on July 1, 1999. The Court had found the executive branch process to be unconstitutional, and the Legislature transferred that process to the judicial branch (Chapter 196 and S.F. 23). At the end of one year, the Court will determine if any modifications of its rules are necessary.

The Expedited Child Support Process Rules apply to all child support matters pending on July 1, 1999, in the executive branch process and to all matters commenced under the new judicial branch process on or after July 1, 1999. The rules are divided into 25 divisions, each containing from one to as many as 12 subdivisions for a total of 80 subdivisions or individual rules. These rules supersede the provisions of all other court rules that are inconsistent. Nothing in the rules is intended to alter the requirements of statutes concerning enforcement of support. Duties that non-attorney county employees perform are enumerated in the rules and do not constitute the unauthorized practice of law. Orders may be reviewed by motion in the district court or appealed directly to the Court of Appeals within 60 days. Magistrate judges will hear the cases. District and referee judges "may" serve as magistrates. Discovery is simplified and the rules of evidence are relaxed. Minn. S. Ct. Order C4-99-404, 6/23/99.

Welfare Records Confidential in Expedited Child Support Process. Welfare records released by the public authority to state court and district court administrators for verification of Expedited Child Support Process status and other relevant documents shall not be accessible to the public. The conclusion that the matter may be processed in the Expedited Process is accessible. This Supreme Court order does not affect similar types of records independently collected by the courts. Minn. S. Ct. Orders C4-85-1848 and C4-99-4O4, 6/29/99.

Uniform Child Custody Jurisdiction and Enforcement Act. The Uniform Child Custody Jurisdiction Act (UCCJA), chapter 518A.0l through .25, will be replaced by the UCCJEA, Chapter 518D.101 through .317, effective January 1, 2000. The format of the Act has been completely revised and expanded to include provisions for enforcement of child custody determinations. Child custody proceedings under the Indian Child Welfare Act are not subject to this chapter to the extent governed by that Act; however, a custody determination made by a tribe in substantial conformity with the jurisdiction standards of the new act must be enforced. A foreign country is treated as if it were a state of the United States. Chapter 74 and S.F. 129.

ADR Notices Required in Summons. The summons statute, Chapter 518.091, now requires ADR notices. Chapter 104 and S.F. 1017.

Ex-parte Temporary Custody with Relatives Expanded. A second presumption has been enacted that it is in the best interest of a child to be placed temporarily in the custody of a relative who has permanent custody of a sibling of the child residing with the relative. A number of conditions apply. Chapter 219 and S.F. 346.

 
In this month's "Notes & Trends":

• Civil Litigation
• Criminal Law
• Family Law
• Federal Practice
• Juvenile Law
• Tax Law
• Torts & Insurance

Laches; Lanham Act. Hubbard Feeds sued Animal Feed Supplement (AFS) in late 1997, alleging violations of the Lanham Act and seeking a preliminary injunction. Judge Davis denied Hubbard's request for a preliminary injunction, finding that Hubbard had known of an alleged trademark infringement by AFS for nine years prior to filing its suit and that the request for a preliminary injunction was barred by laches.

Citing previous 8th Circuit decisions as well as the law of several other circuits, the 8th Circuit held that the "defense of laches is applicable to an action to enforce an incontestable trademark," and "should be considered in evaluating the likelihood of success on the merits of a trademark infringement claim." Finding that Hubbard had offered no excuse for its delay in filing suit, the 8th Circuit affirmed Judge Davis' finding that Hubbard's request for a preliminary injunction was barred by laches.

This decision illustrates the importance of prompt action on the part of the plaintiff when seeking a preliminary injunction. Hubbard Feeds, Inc. v. Animal Feed Supplement, Inc., 1999WL455671 (8th Cir. 1999).

Counterclaim; Amount in Controversy; Removal. Al-Cast Mold & Pattern filed suit in the Minnesota courts, seeking to recover $17,345 from Perception. Several weeks later, Perception asserted a counterclaim seeking "in excess of $50,000," and then removed the suit to the District of Minnesota on the basis of diversity jurisdiction. After reviewing the pleadings, Judge Rosenbaum issued an Order to Show Cause, directing the parties to address the issue of whether the court should dismiss the action for lack of subject matter jurisdiction.

Noting an absence of 8th Circuit authority and a split among the other federal courts as to whether a compulsory counterclaim can supply the required amount in controversy to support removal, Judge Rosenbaum held that counterclaims cannot be used to satisfy this requirement. Judge Rosenbaum also held that an allegation in a Notice of Removal that more than $75,000 is at stake cannot trump the allegations contained in the pleading that cumulatively sought less than $75,000. Al-Cast Mold & Pattern, Inc. v. Perception, Inc., 1999WL427555 (D. Minn. 1999).

Failure to Supplement Expert Disclosures. Tenbarge sued Ames Taping Tool Systems (Ames), alleging that he suffered carpal tunnel syndrome (CTS) from using a drywall taper manufactured by Ames. During his deposition, the expert witness for Ames declined to rule out arthritis as the source of Tenbarge's CTS, but he also declined to identify the arthritis as the cause of the CTS "within a reasonable degree of medical certainty." However, at trial, the expert testified that the arthritis was the "major cause" of the CTS. The district court overruled Tenbarge's objections to the surprise change in the expert testimony, and denied also a request to depose the expert during lunch recess. After Ames' motion for judgment as a matter of law was granted, Tenbarge appealed, arguing that he had been prejudiced by the expert's change in testimony.

Noting that "discovery of expert opinion must not be allowed to degenerate into a game of evasion," and that Fed. R. Civ. P. 26(e) requires parties to "supplement the testimony of their expert witnesses to inform the opposing party of any changes or alterations," the 8th Circuit found that Ames had breached its "duty to inform Tenbarge of any changes or additions" in the expert's testimony, resulting in a "fundamental unfairness" requiring an order for a new trial.

This decision illustrates the risk inherent in failing to supplement expert disclosures in accordance with Fed. R. Civ. P. 26(e). Tenbarge v. Ames Taping Tool Systems, Inc., 128 F3d 656 (8th Cir. 1999).

Other Decisions of Note. In Ortiz v. Fibreboard Corp., 119 SCt 2295 (1999), the Supreme Court struck a significant blow against mandatory (non-opt-out) limited-fund class-action settlements under Fed. R. Civ. P. 23(b)(1)(B), finding that funds must be truly "limited," and that each of the subclasses affected by the settlement are entitled to separate representation in the course of the settlement.

In Kimbrough v. Loma Linda Development, Inc., 1999WL493275 (8th Cir. 1999), the 8th Circuit approved a lump-sum award of damages in a Title VII case that appeared to award punitive damages at a 10:1 ratio to the award of compensatory damages, finding the punitive damages award to be not "excessive as a matter of law."

In Enterprise Rent-A-Car Co. v. Rent-A-Wreck of America, Inc., 1999WL437253 (8th Cir. 1999), the 8th Circuit affirmed a district court order finding that the parties' attorneys had entered into a binding oral settlement agreement.

In Scusa v. Nestle U.S.A. Co., 1999WL415439 (8th Cir. 1999), the 8th Circuit held that the appellant had waived any right to appeal a district court order striking an affidavit from the record by failing to identify the issue in her Notice of Appeal or appellate brief, as required by Fed. R. App. P. 28(a)(5) and 28(a)(9)(A).

 
In this month's "Notes & Trends":

• Civil Litigation
• Criminal Law
• Family Law
• Federal Practice
• Juvenile Law
• Tax Law
• Torts & Insurance

Right of Intervention; Dissolution. The Minnesota Court of Appeals held that neither the mother of a child born out-of-wedlock nor the county is entitled to intervene as a matter of right pursuant to Minn. R. Civ. P. 24.01 in the marriage dissolution of the child's father. In this case, the parties to a dissolution action had three children together. The man also fathered a child by another woman, which woman sought to intervene in the dissolution proceeding to ensure that she would be able to collect future child support by obtaining a favorable property division for the man in the dissolution proceeding. The court found that neither the mother nor the county had any interest in the marital property to be divided, nor did the intervenors have a legal interest in the dissolution. Rather, the claims of the intervenors were, at best, speculative future claims to child support. Moreover, the court found that the father had the ability to pay child support. In reversing the district court's decision, the Court of Appeals stated:

We can conclude only that allowing the mother of a child born out-of-wedlock to intervene as a matter of right in the proceedings dissolving the marriage of the child's father is problematic, troublesome, and an unwarranted inference [sic] with the rights of a spouse . . . to her share of the marital assets. Marital property is to be equitably and reasonably divided between the divorcing parties. (Emphasis in original, citations omitted.) Luthen v. Luthen and Itasca County Health and Human Services and Linda G. Longrie, 199WL486893 (Minn. App. 1999).

Written Findings; Right to Privacy; Delinquency Adjudication. J.L.Y. constructed a pop-bottle bomb from instructions he found on the Internet and set off the bomb in an alley behind a store. The delinquency petition alleged possession of an explosive or incendiary device, which is a felony under Minn. Stat. § 609.668, subds. 2 and 6(a)(1998). J.L.Y. admitted the petition. J.L.Y. had been diagnosed with Attention Deficit Hyperactivity Disorder (ADHD) in 1995 and had some behavior difficulties in school. He began taking Ritalin in 1995, which initially helped his concentration, but was eventually taken off the drug by his parents, in consultation with their doctor, when the medication ceased to help him. The district court adjudicated J.L.Y. delinquent, placed him on indefinite probation, and as terms and conditions ordered, among other things, that he consult with a physician and take any prescribed medications. The disposition order consisted of a form and stated that the findings of fact in support of the disposition were "contained in the transcript of these proceedings and incorporated herewith." The Court of Appeals held that while there is no statutory requirement for particularized findings in the decision to impose or withhold adjudication of delinquency, the district court erred by not making specific written findings in the disposition order, particularly since the court ordered J.L.Y. to meet with a physician and to take any medications prescribed. The court held that because neither the evidence nor the law supported inclusion of the medication provision, this provision unconstitutionally infringed on J.L.Y.'s right to privacy. The court stated that a juvenile who is ordered to take psychiatric medication as part of probation must be afforded the judicial safeguards set forth in Jarvis v. Levine, 18 NW2d 139 (Minn. 1988). In re the Matter of the Welfare of J.L.Y., 1999WL508429 (Minn. App. 1999).

Custody Determination; Primary Caretaker Factor not Determinative. The parties had never been married in this case, but had two children together and lived together intermittently in Minnesota, Missouri, and Tennessee. The district court adjudicated paternity and awarded custody of the children to the father. The mother appealed. The district court found that the children had been shuttled between their parents' homes, sometimes as often as monthly, and between states on many occasions. Although the district court found that most of the best interest factors weighed evenly between the parties and found that the mother had been the children's primary caretaker, the court weighed more heavily "the strong interests of the two children in securing a stable environment that will provide consistent guidance, structure, and discipline." The district court found that although the children had close and loving relationships with both parents, the father had been better able to create a stable living environment for the children. The Court of Appeals held that the district court did not abuse its discretion in determining that the best interests factors weighed in favor of sole physical custody by the father. In Re the Custody of K.E.C. and M.D.C., 1999WL486966 (Minn. App. 7/13/99) (unpublished).

Petty-Offender Adjudication: Standard of Proof; Disorderly Conduct: Constitutionality. Duluth police were called to a disturbance after receiving conflicting reports of an incident. Upon arrival, a police officer proceeded to follow two males, one of which was L.O.W. The officer observed L.O.W.'s companion pick up a long stick with nails in it. When the officer stopped L.O.W. and his companion and began questioning them, L.O.W. began yelling and using profanity. During this altercation, more than 20 other individuals gathered in the area and approximately 10 police cars arrived. When another officer approached L.O.W. and informed him that if he used profanity once more, he would be arrested for disorderly conduct, L.O.W. threw his hands up in the air, put them on the squad car and, according to the first officer, said, "You might as well f---in' arrest me . . . because you're not f---in' doing anything." The officers then arrested L.O.W. for disorderly conduct in violation of a Duluth ordinance. The district court determined that L.O.W. had violated the ordinance. The Court of Appeals reversed, holding that the district court had applied the correct standard of proof for the petty offense of disorderly conduct -- beyond a reasonable doubt -- albeit without making this precise statement in its written order, but the state failed to prove beyond a reasonable doubt that L.O.W.'s conduct was disorderly. The court found that L.O.W. was arrested for his use of profanity, not for his conduct. Citing In re Welfare of S.L.J., 263 N.W.2d 412, 419 (Minn. 1978), which examined the issue of words as disorderly conduct, the court stated that for L.O.W.'s words to be considered disorderly conduct, his words must have constituted "fighting words." The court found that, based on all the circumstances, L.O.W.'s words were not "fighting words" (those words which are "inherently likely to provoke violent reaction" or those "which by their very utterance inflict injury or tend to incite an immediate breach of the peace.") See S.L.J., at 418. In the Matter of the Welfare of L.O.W., 1999WL451442 (Minn. App. 7/6/99) (unpublished).

Temporary Relative Ex Parte Custody. Chapter 219 expands the circumstances under which it is presumed to be in the best interests of a child for the court to grant temporary custody to a relative to include situations where the relative has permanent custody of a sibling of a child and (1) the child is currently residing with the relative and the parent either (i) has no contact with the child on a regular basis or (ii) the parent, during the time the child resided with the relative, has refused or neglected to comply with the duties imposed on the parent by the parent-child relationship; or (2) the application alleges an immediate and present danger to the physical safety of the child in the home of the parent.

Open Adoption; Communication or Contact Agreements. Chapter 122 expands the parties who may participate in a contact agreement to include foster parents and states that a contact order may be sought at any time before a decree of adoption is filed -- which amends the former requirement that a contact order had to be sought at the time a petition for adoption was filed.

Family Reunification; Reasonable Efforts. Minn. Stat. §260.012 (a) has been amended to strengthen the court's role in determining when reasonable efforts to reunify a child with his or her family should cease. Under the old version of the statute, the court had the discretion upon motion and a hearing to order the cessation of reasonable efforts for reunification. The new version eliminates the need for a motion or a hearing and allows the court to proceed in its own discretion.

Minn. Stat. §260 underwent substantial amendment in the last legislative session. Please refer to S.F. 2225 and H.F. 2412 for detailed information.

 
In this month's "Notes & Trends":

• Civil Litigation
• Criminal Law
• Family Law
• Federal Practice
• Juvenile Law
• Tax Law
• Torts & Insurance

Section 357(c) Tightener Enacted. President Clinton signed into law a miscellaneous trade and technical corrections bill, H.R. 435, that includes a provision amending Section 357(c) to prevent excessive basis increases from transferring properties subject to a single debt to different corporations.

Tax Liens. The 8th Circuit held that state tax liens did not have priority over federal tax liens because the state liens became choate upon processing of the state tax returns, which occurred after the federal tax assessments, rather than upon filing of the returns as the district court held. Minnesota Department of Revenue v. United States, 84 AFTR2d Par. 99-5006, No. 98-1927 (8th Cir. 1999).

Sub S Stock Basis Increase; Excludable DOI. The 10th Circuit affirmed two U.S. Tax Court decisions holding that Subchapter S shareholders may not increase their stock basis for discharge of indebtedness income excluded by the corporation under Section 108, reasoning that the DOI income does not flow through to the shareholders. Nelson v. Commissioner, 84 AFTR2d Par. 99-5016, No. 98-9014 (10th Cir. 1999); Gitlitz v. Commissioner, Nos. 98-9009, 98-9010, 1999WL455370 (10th Cir. 1999).

Postpetition Inheritance; Prepetition Tax Lien. The 4th Circuit held that a federal tax lien did not attach to a debtor’s inheritance acquired after bankruptcy commenced and limited the IRS’ secured claim to the value of the debtor’s interest in the inheritance as of the bankruptcy filing date. United States v. Gold (In re Avis), Nos. 97-2683, No. 97-2755 (4th Cir. 1999).

Profit Motive. The 6th Circuit reversed a U.S. Tax Court finding that relied on "amateurish record keeping practices" in holding that taxpayers were engaged in farming activity with an intent to generate profits and were therefore allowed to deduct losses unlimited by Section 183. Holmes v. Commissioner, 83 AFTR2d Par. 99-974, No. 98-1286; No. 98-1295 (6th Cir. 1999).

Exempt Status; For-Profit Control. The U.S. Tax Court held that the IRS properly denied tax-exempt status under Section 501(c)(3) to Redlands Surgical Services because it effectively handed control over its sole activity to its for-profit partners and a for-profit management company, apparently approving the theory adopted in Rev. Rul. 98-15, 1998-12 I.R.B. 1. Redlands Surgical Services v. Commissioner, 113 T.C. No. 3, No. 11025-97X, 1999WL513862 (7/19/99).

Equitable Recoupment. The U.S. Tax Court, in a divided opinion, held that it has the power to allow an estate equitably to recoup an income tax overpayment by a residual interest legatee arising from stock gains. Estate of Frank A. Branson v. Commissioner, 113 T.C. No. 2, No. 10028-95, 1999WL492477 (7/13/99).

Retroactive Estate Tax Increase. The Court of Federal Claims held that the retroactive increase in the maximum estate tax rate enacted in 1993 is not unconstitutional. NationsBank of Texas v. United States, 84 AFTR2d Par. 99-5001, No. 98-21T (Fed. Cl. 1999).

Downsizing Payments. The Court of Federal Claims held that payments based on salary and years in service made by IBM to employees who resigned, retired, or took leaves as part of downsizing efforts were not excludable under Section 104(a)(2) as damages for personal injury, although employees were required to sign a general release. Abrahamsen v. United States, 84 AFTR2d Par. 99-5072, No. 96-787T (Fed. Cl. 7/9/99).

Assessment of Employer -- Only FICA. A U.S. District Court distinguished 11th Circuit authority in holding that the IRS may not assess employer FICA liability without individual employee determinations of unreported tip income. Quietwater Entertainment Inc. v. United States, 84 AFTR2d Par. 99-5002, No. 3:98cv160/RV (N.D. Fla. 1999).

Debtors’ Offers-in-Compromise. A U.S. bankruptcy court held that the IRS’ policy of refusing to consider otherwise-qualifying offers-in-compromise of bankruptcy debtors while considering all qualifying offers of nondebtors is prohibited by bankruptcy and tax statutes. Chapman v. United States (In re Chapman), 84 AFTR2d Par. 99-5068, Adv. No. 98-0078, No. 97-30555 (Bankr. S. D. W. Va. 1999).

Regulations Issued. The Service issued regulations in the following areas, among others: (1) offers-in-compromise for taxpayers suffering "economic hardship" (temporary, T.D. 8829 (7/19/99); proposed, REG-116991-98 (7/19/99)); (2) withdrawal of notices of federal tax liens (proposed, 64 F.R. 35102-35105 (6/30/99)); (3) consolidated group deductions and losses (final; T.D. 8823, 64 F.R. 36092-36116 (7/2/99)); the application of loss limitations to consolidated groups (T.D. 8824, 64 F.R. 36116-36175 (7/2/99)); and the application of loss limitations to controlled groups (T.D. 8825, 64 F.R. 36175-36181 (7/2/99)).

IRB Page Numbering Changed. The IRS announced that page numbers in the Internal Revenue Bulletins for a given year will no longer start at "1" with each bulletin but will pick up where the previous bulletin left off. IRB 1999-28 will therefore start at page 19 rather than page 1. IRBs will be bound together to form Cumulative Bulletins, so that the numbering in each for any given item will be the same. Ann. 99-69 (7/12/99).

 
In this month's "Notes & Trends":

• Civil Litigation
• Criminal Law
• Family Law
• Federal Practice
• Juvenile Law
• Tax Law
• Torts & Insurance

UIM Coverage. Danielle Jirik (Danielle) was severely injured when a car driven by her mother (Teresa) collided with a parked, unoccupied truck (owned by Switzer and last driven by Bierman). As a result of the accident, four policies came into play. First, Teresa’s car had $1,000,000 in liability coverage and $500,000 in underinsured motorist (UIM) coverage. Second, Switzer’s truck had $250,000 in liability coverage. Third, Bierman had $100,000 in liability coverage. Fourth, Danielle’s father carried $100,000 in UIM insurance through Auto-Owners Insurance Company on a vehicle not involved in the accident.

Switzer’s and Bierman’s carriers paid their liability policy limits. Teresa’s carrier paid $750,000 of its liability limits and its entire UIM benefits. Danielle then claimed to be an "insured" under her father’s Auto-Owners policy as a resident relative of her father’s household, even though her mother and father were divorced and Danielle was living with her mother.

The trial court granted summary judgment in favor of the father’s insurer. The Court of Appeals affirmed, ruling that Danielle’s claim failed because she qualified as an "insured" under the primary policy, pursuant to Minn. Stat. §65B.43, subd. 5(3) (defining "insured" to include a minor in the custody of a named insured and residing in the named insured’s household.) As an "insured," Danielle was limited to the maximum amount of UIM benefits available for the vehicle in which she was injured and did not qualify for additional UIM coverage. See Minn. Stat. §65B.49, subd. 3a(5). Jirik v. Auto-Owners Ins. Co., 595 NW2d 219, (Minn. App. 1999).

Insurance Subrogation Rights. After plaintiff was involved in an automobile accident, his insurance company paid him the market value of his classic car as compensation for the loss. Claiming that the car was in fact worth much more to him than just market value, plaintiff entered into an agreement for additional compensation with the other driver’s insurance company contingent upon plaintiff’s insurer releasing its subrogation rights. Plaintiff then brought a declaratory judgment action to compel his insurance company to release its subrogation interest and to declare that plaintiff had not been fully compensated.

The trial court granted summary judgment in favor of the insurer. The Court of Appeals affirmed, holding that the insurance company was entitled to assert a subrogation interest because plaintiff had been fully compensated. The court based its decision on the fact that plaintiff’s vehicle had an ascertainable market value, and the insurance company had paid plaintiff the market value. The court reasoned that once plaintiff received the market value of the car, he had been fully compensated, thereby giving the insurance company a right of subrogation. Giacomino v. Tri-State Ins. Co., 595 NW2d 530, (Minn. App. 1999).

Marital Dissolution: Interspousal Tort Claims; Res Judicata. Husband and Wife were married in 1988 and had two children. The wife commenced an action for marital dissolution in 1996. During the dissolution proceedings, the husband discovered that he was not the father of either child. After the divorce was finalized, the husband sued the wife in tort for misrepresenting the paternity of the children. The district court granted summary judgment for the wife, stating that res judicata (claim preclusion) and collateral estoppel (issue preclusion) barred the subsequent tort action, and also because the tort action was against public policy.

The Minnesota Court of Appeals reversed. It held that collateral estoppel does not bar a tort action not addressed in a dissolution judgment. It also held that res judicata does not bar an interspousal tort claim filed contemporaneously with or subsequent to a dissolution proceeding. The court noted that any tort claims brought by Husband in the marital dissolution would have merely been permissive counterclaims. There is no res judicata penalty for not raising a permissive counterclaim. The court also held the tort claims were not against public policy because interspousal immunity does not apply to recognized torts in Minnesota. The husband’s claim of negligent misrepresentation was dismissed because such a claim has been recognized only in the context of a business or commercial transaction. The remaining claims were remanded for consideration by the trial court. G.A.W. v. D.M.W., 596 NW2d 284, (Minn. App. 1999).

Insurer’s Contractual Duty to Defend. Dahlberg, Inc. (Dahlberg) manufactured and distributed Miracle-Ear hearing aid devices throughout the United States. Dahlberg allegedly misrepresented the product’s capabilities, and class action lawsuits were instituted against Dahlberg in California, Alabama, and Minnesota. St. Paul Mercury Insurance Company (St. Paul Mercury) insured Dahlberg for commercial liability exposures.

St. Paul Mercury agreed to defend Dahlberg in the California class action under a reservation of rights; however, St. Paul Mercury declined to defend Dahlberg in both the Alabama and Minnesota lawsuits. The St. Paul Mercury policy expressly stated that it would defend Dahlberg against claims involving "covered injury," which included "bodily injury" and "mental anguish." The California complaint against Dahlberg included causes of action for injuries including emotional distress. Neither the Alabama complaint nor the Minnesota complaint contained the words "bodily injury" or "mental anguish."

The Minnesota Court of Appeals held that St. Paul Mercury did not breach its contractual duties to Dahlberg because Dahlberg failed to demonstrate grounds for coverage through facts in the complaints or extrinsic evidence. Knowledge of claims made in an earlier California lawsuit, which were not pleaded in the Alabama and Minnesota class action lawsuits, is insufficient to trigger St. Paul Mercury’s contractual duties to Dahlberg. St. Paul Mercury Insurance Co. v. Dahlberg, Inc., 1999WL507844, (Minn. App. 1999).

Physician Malpractice: Res Judicata; Statute of Limitations. John Paulos (Paulos) sustained injuries to his nose and ears from an assault. Harry Johnson, Jr., M.D., (Johnson) performed plastic surgery on Paulos to correct the injury. After surgery, Paulos sued Johnson in negligence based upon dissatisfaction with the results. The trial court dismissed the case with prejudice for Paulos’ failure to provide an affidavit of expert review pursuant to Minn. Stat. §145.682. The Minnesota Court of Appeals affirmed. After appeal, Paulos sued Johnson for misrepresentations regarding his status as a board-certified cosmetic surgeon.

The Minnesota Court of Appeals concluded that res judicata barred Paulos’ later misrepresentation claim against Johnson. Res judicata absolutely bars a second suit where a final judgment was entered in the first action and the second suit involves the same parties, same causes of action (despite the labels attached to the lawsuits), and same operative nucleus of facts. The court held that Paulos’ current claims were rooted in the same facts and circumstances as his past medical negligence suit; therefore, Paulos’ current claims were barred. Alternatively, the court noted that even if res judicata did not apply, Paulos’ current claims were barred by the two-year statute of limitations pursuant to Minn. Stat. §541.07(1)(subjecting all malpractice actions against health care professionals to two-year statute of limitations). Paulos v. Johnson, 1999WL507854, (Minn. App. 1999).

Renter’s Policy; "Resident of Residence Premises;" Exclusion. Neumann rented one-half of his duplex and sublet one room to Brenny. After Neumann’s dog bit Brenny, Brenny sued Neumann for compensatory damages. Neumann promptly submitted the claim to her insurer, Illinois Farmers. Illinois Farmers commenced a declaratory judgment action, seeking a determination that the policy provided no coverage for the dog-bite claim pursuant to a "resident of residence premises" exclusion. The district court granted Illinois Farmers’ motion.

The Minnesota Court of Appeals affirmed. It held that intent to live in a residence and physical presence there are of primary importance in determining whether a person is a "resident of a residence premises." Brenny paid rent to Neumann and spent more time living there than at any other place. Brenny was a resident of Neumann’s residence premises and was therefore excluded from coverage.

Illinois Farmers Insurance Co. v. Neumann, 1999WL507678, (Minn. App. 1999).