August 2000

Arbitration. What constitutes "evident partiality" on the part of an arbitrator? The parties agreed to submit their dispute regarding responsibility for the poor quality of alfalfa to binding arbitration and to proceed without counsel. The arbitrator was selected and a hearing date scheduled. When respondent realized that he was going to be late for the hearing, he phoned the arbitrator who, despite receiving the message, proceeded to conduct appellant's portion of the hearing in the absence of respondent. When respondent arrived, the arbitrator summarized appellant's evidence and then asked respondent to present respondent's evidence, which he did. Subsequently, the arbitrator personally gathered evidence that she presented to the parties at subsequent hearings. Eventually, she provided a written decision determining that appellant was not liable for the damage to respondent's alfalfa crop.

Thereafter, appellant sued respondent in district court for damages. Respondent counter-claimed and moved to vacate the arbitration award. The district court did vacate the award, and this appeal followed.

Minn. Stat. ¤ 572.19, subd. 1 (1998), states that "upon application of a party, the court shall vacate an arbitration award where: . . . (2) there was evident partiality by an arbitrator appointed as a neutral; . . . (4) the arbitrators refused to postpone the hearing upon sufficient cause being shown therefore or . . . otherwise so conducted the hearing . . . as to prejudice substantially the rights of a party . . .."

The court notes that the standard for "evident partiality" is very high and that an arbitrator is required not merely to avoid it, but to avoid even the appearance of evident partiality. In this case, the conversation between appellant and the arbitrator certainly created the impression of possible bias and is a basis for vacating the award. Moreover, the arbitrator went ahead and took appellant's evidence even though she had been informed that respondent would be late. Respondent was not allowed to hear the other party's testimony but was only provided with a summary through the arbitrator. Respondent was denied his statutory right to effective cross-examination, and this is another sufficient basis for vacating the award. <I>Greenway Coop. Serv. Co. v. Frontier Commodities, Inc.<P>, C6-00-105, 2000 WL 665387 (Minn. App. 5/23/00).

Timing for Appeals; Pending Motions. Plaintiff was a 19-year employee of 3M who alleged claims of discrimination and retaliation in violation of the Minnesota Human Rights Act. She commenced a civil action. After the close of discovery, 3M moved for summary judgment. The court granted the 3M motion, which was entered on May 19, 1999, and sent a letter to plaintiff on May 20 stating that the record for summary judgment was closed and that appellant could move the court to reopen it. On May 28, plaintiff moved the court to vacate the judgment pursuant to Minn. R. Civ. P. 60.02(a) and (f), which allow the district court to relieve a party from judgment and grant such other relief as may be just where there are "mistakes, inadvertence . . . or for any other reason justifying relief." Plaintiff specifically asked the court to reopen the record to admit additional evidence regarding her resignation date. On June 18, the district court denied her motion to reopen. Plaintiff then filed the June 18 order on August 17, serving notice of the filing of the order on the same date.

On September 1, plaintiff sought review in the Minnesota Court of Appeals of both the summary judgment entered on May 19 and the order filed on August 17 denying her motion. The Court of Appeals held that it lacked jurisdiction to review the summary judgment decision because the time for appeal lapsed on July 19 -- 60 days after the summary judgment was entered. The Court of Appeals did note that the running of the time for appeal can be tolled under Minn. R. Civ. App. P. 104.01, subd. 2, if any party serves and files a "proper and timely" motion of a type specified in the rule, which includes timely motions under Rule 60. But the court reasoned that the Rule 60.02 motion was not "proper" because the basis for plaintiff's appeal was not one permitted under the rule.

The Supreme Court opinion contains a helpful summary of the 1998 amendments to Rule 104.01, including a discussion of the plain language and purpose behind the amendments. In essence, the reason for the changes to Rule 104.01 was to "simplify practice" in the hope of creating less confusion about the timing of appeals. The new subdivisions were intended to make it clear that an appeal is not necessary until the "proper" motion is decided.

Here the Supreme Court explained that first the court must determine whether a motion timely filed is "proper." In order to be "proper," it must be in compliance with the Rules of Civil Procedure. It must state the grounds for the motion with particularity, set forth the relief sought, and be properly supported, served, and filed. Secondly, the post-trial motion must be "authorized." Here the test is to determine whether on the face of the document the party has filed a motion that is expressly allowed under subdivision 2. The filing of a proper and timely post-trial motion by any party tolls the time for appeal for all parties. All parties are entitled to rely on timely motions that on their face are authorized.

The Supreme Court concluded that plaintiff's motion was proper. It was both timely and authorized and, therefore, the Court of Appeals erred in dismissing her appeal. Madson v. 3M, CX-99-1508, 2000 WL 768537 (Minn. 6/15/00).

-- Steven J. Kirsch
-- Andrew T. Shern
Murnane Conlin White & Brandt PA

DWI/Implied Consent: Blood Draw: Qualified Individual: Paramedic. The appellant's blood was drawn by a Cottage Grove police officer, who is also an emergency medical technician paramedic. Minn. Stat. ¤ 169.123, subd. 3(a) (1998) provides that: "Only a physician, medical technician, physician's trained mobile intensive care paramedic, registered nurse, medical technologist or laboratory assistant acting at the request of a peace officer may withdraw blood for purposes of determining the presence of alcohol, controlled substances, or hazardous substances." The police officer in this case does not fit under any category, and cannot reasonably be construed to be brought into this exclusive list. Although he is a paramedic, he is not a "physician's trained mobile intensive care paramedic." The revocation is rescinded. Mark Allan Bortnem v. Commissioner of Public Safety, C4-99-1598, ___ N.W.2d ___ (Minn. App. 5/23/00).

Search & Seizure: Involuntary Confession: Threats and Promises by Police. The appellant was almost 17 years old at the time of his statement to the police. The suspect in a burglary, he was questioned at the police station, in the presence of his mother, and the conversation was recorded. During the conversation, police promised the appellant that if he confessed he would go home that evening with his mother, but if he did not confess he would be shipped away to a secured detention facility for several days. He was told that if he had an uncooperative attitude, the court could "ship you away." He was told that they could deal with him in a "hard ass" manner, or he could tell the truth. They told the juvenile that they would tell the prosecutor "what kind of a guy" he was, implying lenient treatment. The police officers also said that it is possible he would be certified as an adult and sent to prison: "[I]t's sort of like murder . . . you can go to prison for life."

Held, the subsequent statements gained from the appellant were involuntary and were the subject of improper threats and promises made by the police. The court quotes State v. Thaggard, 527 N.W.2d 804 (Minn. 1995), which states that police "proceed on thin ice and at their own risk" when they use deception or trickery to obtain a confession. Although the use of deceit, threats, or promises does not automatically render a confession involuntary, the totality of the circumstances can lead to suppression in a case where hope is implanted for escaping punishment. In this case, the threats and promises by the police overwhelmed other factors such as the juvenile's prior experience in the criminal justice system. In this case, the appellant's criminal history consisted only of petty misdemeanors. Suppression is the appropriate sanction. In re D.S.N., C1-99-1493, ___ N.W.2d. ___ (Minn. App. 6/2/00).

Search & Seizure: Automobile: Pornography Videotapes: Residence Nexus. The employees at a Firestone garage noted child pornography videotapes and soft-cover material in the appellant's vehicle while they were doing repairs. The Minneapolis police were subsequently called. A search warrant was prepared that included both the appellant's vehicle and residence. The vehicle contained no child pornography, but the appellant yielded to the police photographs that he had downloaded from the Internet, which constituted child pornography.

The search warrant authorizing the search of the residence simply stated that on the basis of the affiant's training and experience, "pedophiles" normally keep, maintain, and collect such pornographic materials at their home. The trial court, however, discounted those conclusionary statements, and the state did not challenge that ruling.

In this case, one of first impression, the Minnesota Court of Appeals declines to find a sufficient nexus between videotapes in a vehicle and the search of a residence. The court finds no basis for finding that the videotapes would be viewed at a person's residence, as opposed to some other location. The court also notes that the videotapes specifically could have been in the car to be transported someplace else. The district court is reversed. State v. James Paul Secord, CX-99-1721, ___ N.W.2d. ___ (Minn. App. 6/20/00),.

Sentence: Modification: Post Sentence: Conditional Release. Several years after his conviction and sentence, the respondent moved the court under Rule 27.03, subd. 9 ("the court may at any time correct a sentence not authorized by law") to modify his sentence. The basis of the motion was that the court caused a conditional release to run after his release from prison. Conditional release may not run consecutively to a period of supervised release, hence the sentence was not authorized by law, and the judge had the discretion to modify the sentence. State v. Mark Anthony Koperski, CX-99-2044, ___ N.W.2d ___ (Minn. App. 6/6/00).

Firearms: Possession at School: Intent. See Juvenile Law, infra for coverage of In re C.R.M., C6-98-2285, 2000 WL 768531 (Minn. 6/15/00).

Criminal Vehicular Homicide: Causation: Contributory Negligence of Victim. Appellant drove his car through a red light. The victim, who had just alighted from a school bus, ran unexpectedly against the "don't walk" signal, and was killed by the appellant. The appellant was charged under the current homicide law, prohibiting leaving the scene of an accident after causing the death of a human being.

Held, the act of the decedent in running against the "don't walk" signal, is not an intervening, superseding cause of the accident. Causation was established by proof that the appellant's conduct was a "substantial causal factor" in bringing about the death of the decedent. For an intervening cause to be considered a superseding cause, it must satisfy the four elements of McCarthy, 567 N.W.2d 496 (Minn. 1997). Here, the appellant's original negligence combined with the victim's original negligence, without any other act or force intervening to turn that sequence aside. There was no superseding cause. Furthermore, the record supports the conclusion that the accident was a foreseeable consequence of each act of negligence. State v. Scott Douglas Hofer, C1-99-1106, ___ N.W.2d ___ (Minn. App. 6/13/00.

Harassment: Third Party: Notice. Appellant had a restraining order against him prohibiting contact or harassment of S.B. Appellant then applied for a life insurance policy, naming S.B. as a beneficiary. Appellant provided the insurance agent with S.B.'s phone number and directed the agent to contact S.B. for information needed to process the application. Appellant does not contest that this behavior was "harassment," but challenges that this contact was prohibited, because the restraining order did not specifically mention contact instigated by the appellant but completed by a third party.

Held, under Minn. Stat. ¤ 609.748, a restraining order need not specifically mention "third party contact" in order to prohibit the conduct of this case. In other words, there is no difference between conduct completed by appellant versus conducted instigated by him and completed by another. State v. John William EggeC3-99-1415, ___N.W.2d ___ (Minn. App. 6/13/00).

Double Jeopardy: Serialized Prosecution: Retrial Following Finding of Unconstitutionality. Appellant was tried under criminal harassment charges involving three minor victims. The trial court acquitted the appellant of offenses relating to one victim, while the jury returned guilty verdicts as to offenses involving the other two victims. Prior to sentencing, the Minnesota Supreme Court held portions of the criminal harassment statute to be unconstitutional. State v. Machholz, 574 N.W.2d 415 (Minn. 1998). The state then filed an amended complaint, charging the appellant under portions of the harassment statute which were not held to be unconstitutional, and this amended complaint concerned the victims as to which the guilty verdicts were returned. The amended complaint is held to not be retaliatory, because it did not change the severity of the offenses.

Held, neither the double jeopardy clause of the Minnesota nor United States constitutions, nor the prohibition against serialized prosecution contained in ¤ 609.035 bars retrial. With respect to double jeopardy, Minnesota follows the reasoning of the Maine Supreme Court in State v. DeRoehn, 510 A.2d 1076 (Me. 1986). With respect to serialized prosecution, the convictions are not deemed to be "final." State v. Randy Lee Schmidt, C5-99-346, ___ N.W.2d ___ (Minn. 6/22/00).

Evidence: Domestic Abuse: Prior Acts. Under Minn. Stat. ¤ 634.20, evidence of similar prior conduct by the accused against the victim of domestic abuse is admissible unless the probative value is substantially outweighed by the danger of unfair prejudice, confusion of the issue, misleading the jury, or by considerations of undue delay, waste of time, or needless presentation of cumulative evidence. In this case, the trial judge allowed introduction of prior assaults upon the victim by the defendant. In allowing the evidence, the trial judge apparently did not require the prosecution to prove such misconduct by the clear and convincing standard.

Held, the evidence of prior abuse was correctly admitted. The statutory language tracks Rule 403, and not the Spreigl exception in Rule 404(b). Therefore, the rule has evinced a legislative intent to remove the requirement that such similar conduct be proven by clear and convincing evidence. State v. Michael Bruce Waino, CX-99-1315, ___ N.W.2d ___ (Minn. App. 6/20/00).

Jury Instruction: Flight: Consciousness of Guilt. Following a shooting in a nightclub, the defendant ran out of the door and fled in a car, as well as took a cab from his home more than two hours later and was arrested in Chicago approximately a month after the homicide. The judge gave this instruction: "Evidence of flight -- of the flight of the defendant prior to his arrest -- is a factor that may be considered by you as evidence of the consciousness of guilt."

Held, it was error for the trial court to give this instruction. The first evidence of flight, fleeing from the scene, tended to prove the defendant's guilt directly, and not to an inference or a consciousness of guilt. There is no need to instruct the jury about this evidence. The second type of flight evidence, the cab ride and the apprehension in Chicago, have only a slight tendency to prove consciousness of guilt and do not warrant a flight instruction. The Minnesota Supreme Court has discouraged the trial courts from giving instructions on particular kinds of evidence, especially with respect to "inferences." There is only a limited support in the record for giving an instruction on evidence of flight. Although this was error to give such an instruction, it was harmless in view of the strength of the state's evidence. State v. Lovell Nahmor Oates, C9-99-1533, ___ N.W.2d ___ (Minn. App. 6/20/00).

-- Frederic Bruno
Frederic Bruno & Associates

Medical Assistance Lien. Liens filed against real property will be effective for a ten-year period and renewable for an additional ten years. Liens filed under the prior statute will continue to be enforceable for three years after the death of the medical assistance recipient or the surviving spouse, whichever is later, pursuant to Minn. Stat. ¤514.981, subd. 6. However, it should be kept in mind that the underlying claim under Minn. Stat. ¤ 256B.15 does not expire.

Elective Share. A guardian or conservator for a medical assistance recipient is now required to make an elective share claim against a deceased spouse's estate if it will result in the surviving spouse receiving a greater share than under the will or intestate succession. Various time limits are extended for making the claim. If a party petitions to establish a guardianship or conservatorship for the surviving spouse, the decedent's estate may not close until entry of the final order granting or denying the petition. Notwithstanding any contract, agreement or waiver of the right of election, the surviving spouse who is a medical assistance recipient (or guardian or conservator) may still exercise these rights. However, it appears that a valid antenuptial agreement will be enforceable in this situation. See Minn. Stat. ¤ 542.2-215 for more details.

Decree of Descent. Minn. Stat. ¤ 525.312 is amended to provide that a final decree of descent cannot be issued until a medical assistance certificate is filed. This requirement applies to all decree-of-descent proceedings, whether or not the decedent received medical assistance. If the property needs to be sold during the proceeding, a partial decree of descent may be obtained to allow the sale of the property free and clear of any medical assistance claim, pursuant to Minn. Stat. ¤ 525.313

Notice Requirements. Notice to the Commissioner of Human Services is not sufficient as notice to a county collection unit with a known medical assistance claim. If the county will have a medical assistance claim against the estate, then the county collection unit must be served with notice of the probate proceeding, according to Minn. Stat. ¤ 524.3-881.

• Statewide Average Payment for a Skilled Nursing Facility (SAPSNF) for Medical Assistance (MA): $3,343
• Statewide Average Payment for a Skilled Nursing Facility (SAPSNF) for General Assistance Medical Care (GAMC): $2,719
• Minimum monthly maintenance needs allowance: $1,407
  Amount for determining excess shelter allowance: $422 (30% of $1,407)
• Special Income Standard Elderly Waiver (SIS EW) maintenance needs allowance: $700

Recovery Against Annuities. A January 24, 2000, letter from HCFA Region IX to the California Department of Health Services rules that a state has the option to recover Medicaid expenditures for the annuity policyholder from the surviving beneficiary of an annuity. However, recovery could not begin until 90 days after HCFA amended Section 3810 of the state Medicaid manual and until California submittted a State Plan Amendment detailing that annuities will be included in its expanded definition of estate. However, no recovery can be made when there is a surviving spouse or a child who is a minor, blind or permanently and totally disabled.

North Dakota Traces Assets. The North Dakota Supreme Court allowed recovery from the community spouse's estate for assets conveyed to the community spouse before the medical assistance recipient's death. However, the court did not allow recovery of assets owned solely by the community spouse. In re Wirtz, 990275 (2000 N.D. 59).

--Tonya Zdon Gabbard
Garvey, Mathison & Boggio PA
(with thanks to Julian Zweber for the legislative update)

ADA Cases. The 8th Circuit Court of Appeals recently ruled upon three employment cases under the Americans With Disabilities Act, finding potential liability in one of them and offering dismissal in two others. In Cravers v. Blue Cross and Blue Shield, (8th Cir. 2000), the court held that a veteran employee with carpal tunnel syndrome who could no longer operate a keyboard was entitled to participate in an "interactive process" with her employer to determine if she was entitled to transfer to a new position. In Allen v. Interior Constr. Servs., 2000 WL 709499 (8th Cir. 2000), the court held that a carpenter who was injured on duty was not entitled to be called back to work because the employer did not have "an affirmative duty to contact him whenever it had work available." In Taylor v. Nimock's Oil Co., 2000 WL 709496 (8th Cir. 2000), the court ruled that a convenience store manager who suffered a heart attack and recovered within three months was not entitled to her job back because she was not sufficiently impaired in any "major life activities" to qualify for coverage under the act.

Antinepotism Policy. The Minnesota Court of Appeals upheld an antinepotism policy in the St. Paul school district that prohibited a spouse from seeking a position where her husband would be her supervisor. In Belton-Kocher v. St. Paul School Dist., 610 N.W.2d 374 (Minn. App. 2000), the appellate court held that the prohibition is a bona fide occupational qualification that is exempt from the marital status discrimination provision of the Minnesota Human Rights Act.

Defamation; Privacy. An employee who incurred a work-related injury cannot maintain claims of defamation and invasion of privacy against his employer because of the workers compensation case-manager's conduct towards him. In Walker v. 3M, 2000 WL 520254 (Minn. App. 2000) (unpublished), the Court of Appeals held that statements made by the caseworker about the employee's malingering constituted frivolous "medical opinion" concerning the employee's work-related restrictions. The court also rejected a breach of privacy claim based on the caseworker providing information from the employee's medical records to his supervisor, as well as accompanying the employee to his medical appointments. Although calling the conduct "petty and unprofessional," the court declined to find a privacy invasion, reasoning that courts are not empowered to provide remedies for all "boorish" behavior.

Veterans Preference. The Veterans Preference Act, Minn. Stat. ¤ 197.46, requires that a public employee who is a veteran and is recommended for discharge is entitled to continuation of salary payments until a formal decision is made on the discharge by a hearing under the Act. In Tombers v. City of Brooklyn Center, 2000 WL 665724 (Minn. App. 2000), the appellate court held that the salary must be continued unless the veteran is physically unable to work. It also ruled that workers compensation and PERA benefits may be an offset for damages.

Arbitration. An arbitrator's award upholding a reprimand to a police firearm instructor for violation of the sexual harassment policy of the department was upheld in Police Officers Fed'n of Minneapolis v. City of Minneapolis, 2000 WL 719860 (Minn. App. 2000). The Court of Appeals rejected a contention by the employee's union that the arbitrator manifestly disregarded the law, holding that the "manifest disregard" standard has not been adopted for review of arbitration awards in Minnesota.

Reemployment Compensation. An employee who resigned from his job as part of a settlement of a workers compensation claim is not entitled to reemployment compensation. In Edward v. Sentinel Management Co., 2000 WL 719593 (Minn. App. 2000), the appellate court held that an employee who retained the option of remaining employed and continuing to pursue a claim does not quit for good reason caused by the employer in order to be eligible for reemployment benefits.

The U.S. Supreme Court has agreed to hear three important cases involving arbitration of workplace-related disputes. During its upcoming term, the Court will decide the case of Circuit City Stores v. Adams, 99-1375, 120 S. Ct. 2004, which raises the issue of the enforceability of mandatory arbitration agreements that employers require employees to sign as a condition of employment.

These agreements, which require arbitration rather than litigation, govern about ten percent of the workforce. The high court will decide during its upcoming term whether such agreements are enforceable under the Federal Arbitration Act, which governs arbitration in interstate commerce but which contains a specific exclusion for employment contracts.

The case is one of three arbitration-related matters pending before the Supreme Court. Other cases concern use of the "public policy" doctrine to overturn arbitration awards during the collective bargaining agreements process in Eastern Assoc. Coal Corp. v. UMW, 99-1038, 120 S. Ct. 2241, and the validity of boilerplate arbitration agreements in consumer transactions, Green Tree Fin. Corp. v. Randolph, 99-1235, 120 S. Ct. 1552. All three cases are likely to have significant impact on the use of arbitration in Minnesota and elsewhere.

--Marshall H. Tanick
Mansfield, Tanick & Cohen PA

Insufficient Service Defense. The defendant lived with his parents in 1995 but moved to another residence in 1996. Service of process was made at his parents' home in 1997, and he raised the defense in his answer but did not move to dismiss the complaint. He appeared and raised his defense, requesting a continuance, which was granted; obtained a partial summary judgment; and thereafter moved to dismiss. The district court found that: a) service was improper; b) his defense was raised properly; and c) his participation did not result in a waiver of his defense. The Court of Appeals affirmed, holding that he had not waived his defense by participating in the litigation because he had raised the defense in his answer and asserted it at the beginning of the litigation (94 N.W.2d 540).

The Supreme Court granted review of the issue of defendant's waiver of the defense of insufficient service of process. It cited the provision of Rule 12 of the Rules of Civil Procedure directing waiver of the defense of insufficient service if it is omitted from an answer or if omitted from a motion to dismiss. The court found that the defendant did not file a motion to dismiss but a motion for summary judgment, which contravenes the goal of Rule 12 to prevent piecemeal assertion of defenses. His participation in the litigation was determinative because he failed to provide the court with an opportunity to rule on the defense before affirmatively invoking jurisdiction on the merits of the claim. The Supreme Court held that by failing to move for dismissal before or simultaneously with the summary judgment motion, defendant affirmatively invoked the jurisdiction of the district court and, by implication, waived the defense of insufficient service of process. Reversed. Patterson v. Wu Family, C0-98-1961, 608 N.W.2d 863 (Minn. 4/13/00).

Maintenance. The husband moved for modification of permanent maintenance based on his loss of income and the wife's increased income and reduced expenses. The trial court reduced his obligation from $900 to $500 per month. The Court of Appeals found that the court based the reduction on its conclusion that the wife was unable to meet her expenses solely on her income. However, it said, the trial court findings were clearly erroneous. In particular, that court: a) failed to consider any dividend income received from her margin account; b) determined income solely on two pay stubs and one deduction from standard tax tables, even though she itemized deductions; c) rejected, without comment, the husband's calculations based on her 1997 tax return with an effective rate of 22 percent; and d) accepted her voluntary contribution to her retirement plan at 19 percent of gross income without deciding whether it was reasonable. In addition, her budget included a $630 payment of a loan against her stock margin account, which is temporary and in the nature of an investment that cannot be included in monthly expenses. Finally, the Court of Appeals said it is undisputed that the husband had little ability to pay maintenance, and it appears that the wife may have additional income and resources (property) available to meet her reasonable monthly expenses. Absent a demonstrated need, the husband's continuing maintenance obligation should be terminated. Reversed and remanded. Kemp v. Kemp, C6-99-1814, 608 N.W.2d 916 (Minn. App. 4/18/00).

COLA and Guidelines Income Limit. The Supreme Court has ordered that: a) the Minneapolis - St. Paul CPI-U figure for the last half of 1999 shall be used to adjust the child support guidelines; and b) the new dollar amount of the income limit for application of the child support guidelines shall be $6,280. This order shall be effective from July 1, 2000, to June 30, 2002. Minnesota Supreme Court Order, C9-85-1134, 4/19/00.

Tax Court Discretion. A Minnesota Tax Court action involved the valuation of a parcel of real estate. The parties had informally agreed to exchange relevant information on value prior to trial. The Supreme Court found that the tax court had abused its discretion by admitting as evidence a final review appraisal where the county refused to permit petitioners to review it prior to trial. The court also found that the necessary showing that the ruling materially prejudiced the appealing party had been made. Gale v. Hennepin County, C5-99-1349, 609 N.W.2d 887 (Minn. 5/11/00).

Unilateral Withdrawal from Stipulation. The pro se husband and wife met at her attorney's office, where he was served and the partied negotiated for four hours. Both signed a stipulation, and the husband signed a waiver of counsel. Two days later, the husband had misgivings and employed counsel. The court ordered him to file a motion to vacate, which was followed by a hearing. The court found no mistake, duress or fraud; denied relief; and conducted a default hearing. It accepted some provisions of the stipulations and reserved the other issues pending an evidentiary hearing. The husband appealed the final judgment and alleged abuse in the denial of his motion to vacate.

The Court of Appeals said that stipulations are accorded the sanctity of binding contracts. A party cannot withdraw without the consent of the other party, except by leave of court for cause shown. Because the wife did not consent, a motion to vacate was required. In assessing fraud and duress, it found that the critical findings of the trial court were that: a) the parties signed the stipulation in order to save money; b) they extensively negotiated multiple issues; c) the husband experienced a stipulation in a prior divorce; d) he also signed a waiver of counsel simultaneously; and e) there was no fraud, duress, or mistake in the negotiations; and these findings were not clearly erroneous. Affirmed. Toughill v. Toughill, C2-99-1485, 609 N.W.2d 634 (Minn. App. 5/9/00).

Divestiture of Maintenance Jurisdiction. The district court evaluated the wife's earnings and awarded her $500 per month spousal maintenance for 52 months, based on the parties' intent to have her work at home until their son reached school age. The husband was temporarily living with his mother, and the court was unable to evaluate his expenses if he moved. The trial court divested itself of continuing jurisdiction over maintenance.

The Court of Appeals affirmed the maintenance award but found the failure to evaluate the husband resulted in the practical effect of requiring him to pay maintenance as if he had artificially low expenses, even if he moved out of his mother's home. Because each party resided with family, the appellate court concluded that the divestiture prevented each from seeking modification of the spousal maintenance award if they established their own residences. The divestiture was reversed. Toughill v. Toughill, C2-99-1485 (Minn. App. 5/9/00).

Paternity. Respondent brought an action to establish that he was the father of a child born to a married woman living with her husband. The mother and husband, who both refused to sign a release to allow genetic testing, moved for dismissal. The mother conceded that she had sexual relations with respondent about the time of conception. The district court denied the motion to dismiss and ruled that respondent had the right to genetic testing. It ordered testing, sealed the results, and certified the issue as important and doubtful.

The Court of Appeals found that the respondent was properly a party under the Parentage Act and that he was entitled to an order for genetic testing under the act. It concluded that a paternity action should not be dismissed before the putative father has had an opportunity to obtain genetic testing. The appellate court specifically stated that it expressed no opinion on how the conflict of presumptions should be resolved if the test shows the respondent to be the biological father. One judge dissented. Witso v. Overby, C6-99-1618, 609 N.W.2d 618 (Minn. App. 5/9/00).

Disqualification of Attorney. A district court order disqualified an attorney as the personal representative in a probate proceeding. The Court of Appeals dismissed the personal representative's interlocutory appeal of the disqualification order. It stated that the Probate Code (M.S. 525.71) contains an exclusive list of appealable orders; therefore, the order was not appealable even if appealable under the Rules of Civil Appellate Procedure. The Supreme Court recognized that the issue must be examined in light of the 1983 amendment that removed jurisdiction of probate appeals from the district courts and placed it in the Court of Appeals. The amended statute does not preclude an appeal of a disqualification order; it merely identifies appeals that may be taken and contains no mandatory terms or limitations. The issue is whether such an order is a final order in a special proceeding. The court said that it has defined a final order as one that ends the concern of the court in the proceedings or finally determines some positive legal right. Because the disqualification order finally determined the personal representative's right to counsel of his choice, it concluded that the order was a final order. Next, the Supreme Court stated that it had previously explained that a special proceeding is a generic term for a remedy that is not part of the underlying action and is brought by motion or petition for action independent of the merits of the underlying action. It found that the determination of the subject order was made under the Rules of Professional Conduct and was not dependent on the merits of the probate proceeding. The court concluded that the disqualification of an attorney for a conflict of interest is a final order in a special proceeding within the context of the appellate rules; therefore, it held that the disqualification order was an appealable interlocutory order. Reversed and remanded to the Court of Appeals. Estate of Jancek, C2-99-1437, 610 N.W.2d 638 (Minn. 5/18/00).

Homestead Exemption Requires Contiguous Real Estate. The sheriff attached 20 acres of appellant's land in satisfaction of a judgment. He moved for an injunction to stop the sale because the land was subject to the homestead exemption. The district court rejected the motion because his residence was not located on land that is contiguous with the 20 acres. On appeal, appellant asserts that the homestead exemption should be construed to apply to noncontiguous land that is homestead for property tax purposes. The Court of Appeals rejected the assertion because the exemption statute specifically states that "the home is exempt together with the land upon which it is situated." It suggested that appellant's common-sense argument is suited for presentation to the Legislature. Affirmed. Michels v. Kozitza, C6-99-1411, 610 N.W.2d 368 (Minn. App. 5/16/00).

--Hon. Eugene L. Kubes
Referee Judge, 2nd District, Ret.

Standards; Motions for JMAL. In February, this column noted the Supreme Court grant of certiorari in Reeves v. Sanderson Plumbing Products, Inc., 197 F.3d 688 (5th Cir.), cert. granted, 120 S. Ct. 444 (1999), which was intended to, among other things, clarify the standards applicable to motions for judgment as a matter of law (JAML) under Fed. R. Civ. P. 50(a). On June 12, the Supreme Court reversed the 5th Circuit entry of JAML for the defendant employer on Reeves' ADEA claim and, in doing so, clarified the standards applicable to JAML motions. Reeves v. Sanderson Plumbing Products, Inc., 120 S. Ct. 2097 (2000).

Addressing a circuit split it described as "semantic," a unanimous Court held that "in entertaining a motion for judgment as a matter of law, the court should review all of the evidence in the record," rather than focusing only on that evidence favoring the nonmovant. However, the Court held that a court faced with a JAML motion "must draw all reasonable inferences in favor of the nonmoving party, and it may not make credibility determinations or weigh the evidence." In summary, "although the court should review the record as a whole, it must disregard all evidence favorable to the moving party that the jury is not required to believe."

Finding that the 5th Circuit had erred when it "disregarded critical evidence favorable to petitioner" and that it had "failed to draw all reasonable inferences" in Reeves' favor, the Court found that the 5th Circuit had "impermissibly substituted its judgment concerning the weight of the evidence for the jury's."

Commentators have not hesitated to declare Reeves a favorable decision for employment discrimination plaintiffs. Nevertheless, the impact of the clarification of the JAML standards should be felt in all facets of federal civil litigation.

Stays Pending Appeal. Requests by losing defendants for stays pending appeal are often made but seldom result in published decisions. But in a strange bit of timing, judges Davis and Tunheim issued published opinions on this issue just five days apart.

Judge Davis's May 25, 2000, decision in United States v. City of St. Paul, 2000 WL 718354 (D. Minn. 2000), denied the city's request, pursuant to Fed. R. Civ. P. 62(c), to stay his grant of permanent injunctive relief to the Department of Housing and Urban Development (HUD) during appeal. Applying a well-established four-part test, Judge Davis held that the city had not made a sufficient showing regarding its likelihood of success on the merits, that there was no evidence that the city would suffer irreparable harm, that HUD would be irreparably injured by a stay, and that stay would work against the public interest. Accordingly, the city's request for a stay was denied.

Judge Tunheim applied the same four-part test in his May 30, 2000, opinion in Enterprise Leasing Co. v. Metropolitan Airports Comm'n, 2000 WL 713792 (D. Minn. 2000). Judge Tunheim found that the Metropolitan Airport Commission (MAC) had demonstrated only a "possibility" of success on the merits rather than the required "strong showing" that it would prevail on appeal. In addition, Judge Tunheim found "little evidence of irreparable harm to MAC," the possibility of "substantial harm" to Enterprise, and that the public interest favored neither party. Accordingly, the MAC request for a stay of injunctive relief pursuant to Fed. R. Civ. P. 62(c) was also denied.

Other Decisions of Note. In Gilbert v. Monsanto Co., ___ F.3d ___ (8th Cir. 2000), the 8th Circuit held that the district court had retained jurisdiction to enforce the terms of the parties' oral settlement agreement, despite the fact that the parties' stipulation of dismissal provided that the trial court would retain jurisdiction only over the terms of an "executed" settlement agreement.

In Country Club Estates, L.L.C. v. Town of Loma Linda, 2000 WL 764757 (8th Cir. 2000), the 8th Circuit held that the district court had erred in converting defendant's "motion to dismiss" (which had incorporated documents outside the pleadings) to a motion for summary judgment without providing notice to the plaintiffs of its intent to convert the motion. Noting that 8th Circuit decisions require "strict compliance" with the conversion procedure and that defendant's motion papers made no mention of either "Rule 56" or "summary judgment," the 8th Circuit reversed the district court entry of summary judgment for the defendant and remanded the case to the district court for further proceedings.

--Josh Jacobson
The Law Office of Josh Jacobson PA<P>

Delinquency; Mens Rea. Appellant, a minor attending Anoka County Juvenile Day School, challenged his felony conviction for possessing a dangerous weapon on school property, arguing that Minn. Stat. ¤ 609.66, subd. 1d, is not a strict liability crime; rather, it requires proof of mens rea. Reversed.

Appellant was charged when a folding knife with a four-inch blade was found in his coat pocket at school. At trial, appellant argued that he had been whittling over the weekend and had forgotten to remove the knife from his pocket. He moved for a directed verdict, arguing that general intent requires knowledge of possession. Accepting the prosecution argument that the statute is a strict liability statute and does not require knowledge or intent, the district court found appellant guilty of the felony offense. The Court of Appeals affirmed, finding that "[t]here is sufficient evidence that appellant should have known that the knife was in his coat." The court further found that appellant was "aware that he had a duty to avoid bringing a weapon to school." On appeal, the Minnesota Supreme Court analyzed the legislative intent of the statute and the historical significance of mens rea and acknowledged that, "[T]he existence of mens rea is the rule of, rather than the exception to, common law crimes." The court further stated that if the purpose of the Legislature was to convict a student for the unknowing possession of a knife on school property, it should have "directly and unequivocally" said so. Because there was no clear legislative intent to dispense with proof of mens rea and because a knife is not so inherently dangerous that appellant should have been on notice that its mere possession would be a crime, appellant's conviction was reversed and the case remanded. In re C.R.M., C6-98-2285, 2000 WL 768531 (Minn. 6/15/00).

Permanent Placement; Modification of Custody. Appellant-mother challenged the district court award of custody to respondent-father under Minn. Stat. ¤ 260C.20, arguing that the court should have applied Minn. Stat. ¤ 518.18, which requires the father to prove change in circumstance and endangerment. Affirmed.

Appellant mother was granted sole physical custody of the parties' minor child, pursuant to a judgment and decree dissolving the parties' marriage in 1990. In 1997, the mother voluntarily placed the child in foster care. On June 5, 1997, the child was adjudicated CHIPS. One and a half years later, in January, 1999, the county brought a motion to cease reunification efforts based upon the mother's failure to utilize many of the services offered by the county, the county's failed efforts at reunification despite having made reasonable efforts, and the child's special needs. The court maintained the CHIPS adjudication and ordered the child to remain in placement with her father without further attempts to reunify with her mother. In July 1997, the county sought an order placing permanent custody of the child with the father under Minn. Stat. ¤ 260C.201, subd. 11(e)(1). The district court granted the motion and awarded permanent custody to the father, effectively modifying the terms of the parties' dissolution decree. Upon appeal, the court held that chapter 518 "explicitly contemplates that custody determinations can be made in CHIPS proceedings, (See Minn. Stat. ¤ 518.003, subd. 3(f), (g) (1998))." Likewise, chapter 260 allows for a permanent custody determination to be made under that chapter or chapter 518. Consequently, if there is a CHIPS proceeding and efforts to reunite the child with his or her custodial parent are futile, a party may petition the court under chapter 260 effectively to modify a judgment and decree custody determination without meeting the criteria for modification under chapter 518. In re A.R.M., C4-99-1553, 611 N.W.2d 43 (Minn. App. 5/30/00).

--Jody M. Alholinna
Walling & Berg PA

Interest; Condemnation. On November 3, 1998, the City of Minneapolis (city) took possession of Parcel 13 owned by Commers in a quick-take condemnation under Minn. Stat. ¤ 117.042. The city deposited the quick-take amount in district court. After the commissioners issued their final award, the court ordered distribution of the award, including interest, to Commers. Commers requested that interest be recalculated to provide interest at the judgment rate from the date of taking. The district court denied Commers' motion. On appeal, the Court of Appeals held that when the government takes possession of property under the quick-take statute and deposits the approved appraised property value with the court, rather than paying the landowner directly, the landowner is entitled to interest on the funds at the judgment rate. In re Condemnation by the City of Minneapolis, C5-99-1996, 609 N.W.2d 923 (Minn. App. 5/9/00).

Permits; Drainage Authorities. This case arises from a dispute between two drainage authorities. CD7, the upstream drainage authority, drains land in Lyon County and runs downstream into JD10. CD7 made an improvement to its ditch but did not apply for a permit from JD10. The district court determined that CD7 was required to apply for a permit under Minn. Stat. ¤ 103E.401, subd. 2, but denied the JD claim for permanent injunctive relief. On appeal, the appellate court affirmed the trial court determination that the improvement did not drain any new land. Because the improvement did not drain into any new land, CD7 was not required to seek an outlet permit from the downstream authority. Therefore, the Court of Appeals reversed, holding that a permit was not required under the facts of this case. Stensrud v. Lyon County Ditch #7, C1-99-1316, 609 N.W.2d 286 (Minn. App. 4/25/00).

Discovery Agreement; Production of Appraisal. The Gales petitioned the tax court, challenging the property tax assessment against their property. Based on an informal discovery agreement, the Gales demanded that the county provide a copy of its appraisal before trial. The county refused and was allowed to present the testimony at trial. Based on the appraisal, the tax court increased the fair market value of the property from $65,000 to $134,000. In a four-three decision, the Minnesota Supreme Court reversed, holding that the tax court abused its discretion in allowing the county to withhold its appraisal until trial, and that the Gales were prejudiced by the admission of the appraisal. Gale v. County of Hennepin, C5-99-1349, 609 N.W.2d 887 (Minn. 5/11/00).

Res Judicata; Collateral Estoppel; Subsequent Tax Assessment. See Tax Law, infra for discussion of Care Institute, Inc.-Roseville v. County of Ramsey, C7-99-1868, 2000 WL 730406 (Minn. 6/8/00).

City Council Proceedings. Appellant owns two buildings in downtown Minneapolis. The City of Minneapolis (city) designated the exteriors of both buildings for heritage preservation. Handicraft argued that the decision was arbitrary and filed a writ of certiorari to the Court of Appeals. The Court of Appeals determined that the decision was not quasi-legislative and not reviewable by writ of certiorari. On appeal, the Supreme Court reversed, holding that the proceedings of the city in designating the building for heritage preservation were quasi-judicial and that the Court of Appeals had jurisdiction to review the proceedings. This case is important in clarifying earlier appellate decisions and carefully analyzing the three indicia of quasi-judicial actions. Handicraft Block Ltd. Partnership v. City of Minneapolis, C2-98-2237, 611 N.W.2d 16 (Minn. 6/1/00).

Permits; 60-Day Rule. On December 18, 1998, appellant filed an application for a special use permit for a landfill. On April 12, 1999, the Duluth City Council heard testimony on the application and then voted on and rejected a resolution approving the permit. On May 24, 1999, the council passed a resolution denying the permit that set forth simultaneous written reasons for its denial. Appellant asserts that Duluth violated Minn. Stat. ¤ 15.99 because it failed to approve or deny the permit within the statutory time period. The district court granted summary judgment in favor of Duluth. On appeal, the Court of Appeals reversed, holding that the rejection of a resolution approving the permit did not equate to a denial of the permit application. The statute requires the agency to provide written reasons for its denial at the time it denies the request. Since that did not occur within the 60-day time period, the council violated the statute, and the district court erred in refusing to grant the petition for a writ of mandamus. Demolition Landfill Servs., LLC v. City of Duluth, C6-99-1635, 609 N.W.2d 278 (Minn. App. 4/25/00).

Quiet Title Action; Adverse Possession. This case involves a disputed triangle of lakefront property that Johnson claims title to by adverse possession. In 1989, the owners executed a mortgage in favor of Ford, Johnson's predecessor in interest. In 1993, Carlson commenced a quiet title action but did not name Ford. The Court of Appeals affirmed the district court holding that although Johnson was not bound by the judgment in the earlier quiet title action that extinguished the property owner's right to assert an adverse possession claim, it could not satisfy the continuity requirement of adverse possession in a later action merely by having held a nonpossessory mortgage lien on the property owner's interest. Ford Consumer Finance Co. v. Carlson and Breese, Inc., C2-99-1602, 611 N.W.2d 75 (6/2/00).

Landlord Duty to Tenant. In a subrogation claim, United Fire tried to recover from the tenant, Kluender, payments already made to the landlord, Bigos. At issue is whether the district court erred in granting summary judgment, ruling that Kluender was negligent per se in causing a fire loss and that Bigos did not owe Kluender a duty of care. On appeal, the Court of Appeals held that no special relationship existed between the landlord, Bigos, and the tenant, Kluender, and, therefore, the landlord owed no special duty to tenant to inspect and correct the tenant's fire code violations. The case was affirmed in part, reversed in part and remanded. Bigos v. Kluender, C7-99-2065, 2000 WL 719732 (Minn. App. 6/6/00).

60-Day Rule Violation; Conditional Use Permit. Shetka applied to Aitkin County for a conditional use permit (CUP) allowing part of the property to be used for a temporary/portable hot mix facility. On the 60th day, the county planning commission took action that could be interpreted as approving the CUP application subject to the adoption of conditions that would be addressed later. The planning commission later approved certain conditions, and a residents' group appealed the approval to the Board of Commissioners and then to the Court of Appeals. On appeal, the Court of Appeals concluded that the CUP application was approved either by affirmative action of the planning commission on the 60th day, or the application was approved as a matter of law under Minn. Stat. ¤ 15.99, subd. 2, because the commission failed to deny the application within 60 days. This case is important because it follows the Demolition Landfill case, supra, and because the 60-day violation was not raised by Shetka in his notice of review. Gun Lake Ass'n v. County of Aitkin, C7-99-1630, 2000 WL 821498 (Minn. App. 6/20/00).

-- Chris Dietzen
Larkin Hoffman Daly & Lindgren Ltd.

Public Charity; Local Property Taxes. The court concluded that res judicata was inapplicable because relator was unable to litigate the issue of whether respondent, Care Institute, Inc.-Roseville (CIIR), an Indiana nonprofit corporation exempt from federal and state income tax, owner and operator of Rosewood Estates of Roseville (RER), an assisted living facility for the elderly, was a purely public charity during the previous litigation. The court also concluded that collateral estoppel was inapplicable because the controlling law had changed since the time of the judgment in the previous litigation. Summary judgment based on res judicata and collateral estoppel reversed and remanded for further proceedings consistent with this opinion. Care Institute, Inc.-Roseville v. County of Ramsey, 2000 Minn. lexis 332, 2000 WL 730406 (6/8/00).

Homestead Exemption; Noncontiguous Land. Court concluded that Minn. Stat. ¤ 510.01 defining homestead exemption unambiguously did not include land that was noncontiguous to the land on which appellant's home was situated. Michels v. Kozitza, 610 N.W.2d 368, 2000 Minn. App. lexis 459 (Minn. App. 5/16/00).

Bankruptcy; Burden of Proof. Taxpayer bears the burden of proof on a tax claim in bankruptcy court when the substantive law creating the tax obligation puts the burden on the taxpayer (in this case, the trustee) in bankruptcy. Raleigh v. Illinois Dep't of Revenue, 120 S. Ct. 1951, 2000 U.S. lexis 3623, 68 U.S.L.W. 4445, 2000 Cal. Daily Op. Service 4155, 2000 Daily Journal DAR 5567, 13 Fla. Law W. Fed. S. 362 (5/30/00).

Tax Clause in Contract. Summary judgment for plaintiff seller was affirmed because defendant buyer failed its burden to prove that the tax clause in the parties' contract, a contract term allocating liability to the buyer for an excise tax, materially altered the contract, and the trial court properly admitted evidence concerning petroleum industry custom and practice. Bayway Ref. Co. v. Oxygenated Mktg. & Trading A.G., 99-7743, 2000 U.S. App. lexis 12562, 2000 WL 732216 (6/8/00).

Discharge of Indebtedness Income; Basis. The United States Court of Appeals for the 6th Circuit affirmed the tax court decision because no identifying event occurred from which the court could determine that appellant taxpayers' corporation's debt was discharged during the relevant tax year, and, thus, appellants' corporation did not realize any discharge of indebtedness income. Friedman v. Commissioner, 98-2378, 2000 U.S. App. lexis 12489, 2000 fed App. 0195P (6th Cir. 6/8/00).

Suspended and Ordinary Losses; Cancellation of Debt Income. Cancellation of Debt (COD) income was tax-exempt income but appellants were not entitled to deduct suspended and ordinary losses because those losses were offset at the corporate level by the COD income realized by the corporation. Appellants were not entitled to a bad debt deduction because the debt was guaranteed by appellants' valid and enforceable shareholder guaranty agreement. Gaudiano v. Commissioner, 2000 U.S. App. lexis 12490, 2000 fed App. 0196P (6th Cir. 6/8/00).

Basis; Cancellation of Debt Income. Petitioner was entitled to increase the basis in his S corporation stock by his pro rata share in the S corporation's cancellation-of-debt income under 26 U.S.C.S. ¤ 1366(a)(1). Petitioner is entitled to increase the basis even when the shareholder possesses no suspended losses to offset the COD income. Pugh v. Commissioner, 2000 U.S. App. lexis 12200, 2000 WL 718215 (11th Cir. 6/5/00).

Burden of Proof. The 9th Circuit Court of Appeals upheld the decision that because petitioners presented insufficient evidence to substantiate petitioner husband's entitlement to more than a minimum commission, they failed to carry their burden of proving a bona fide debt. Also, petitioners' 1990 expenses related to nondeductible startup expenses, not ordinary and necessary expenses paid or incurred in a trade or business. Koenig v. Commissioner , 2000 U.S. App. lexis 11873, 2000 WL 679264 (9th Cir. 5/4/00).

Burden of Proof; Reasonable Costs. The 9th Circuit Court of Appeals explained that the issue of awarding reasonable costs is whether the position of the United States was not substantially justified rather than whether the position was substantially justified. The burden was on the United States to establish that its litigating position was substantially justified under I.R.C. ¤ 7430. Therefore, the trial court erred in misallocating the burden of proof on appellants. Egenberger v. Commissioner, 2000 U.S. App. <H>lexis<P> 11784, 2000 WL 574747 (5/22/00).

Loan Origination Expenses. Loan operations were the primary method of income production for petitioners, the subject banks, and the costs at issue were deductible as ordinary and necessary expenses of the banking business. PNC Bancorp v. Commissioner, 2000 U.S. App. lexis 11084, 2000-1 U.S. Tax Cas. (CCH) P50, 483 (3rd Cir. 5/19/00).

Settlement Proceeds; Attorneys Fees. Settlement proceeds from a federal age discrimination claim received by petitioner husband were includable in gross income, and the amount paid for attorneys fees, payable pursuant to a contingency fee agreement, was allowable as an itemized deduction. Kenseth v. Commissioner, 2000 U.S. Tax Ct. lexis 32, 114 T.C. No. 26, 82 Fair Empl. Prac. Cas. (BNA) 1812 (5/24/00).

Innocent Spouse Relief. Relying on its inherent equitable powers, the court held that the interests of justice would have been ill-served if petitioner husband's rights differed from those of petitioner wife according to the procedural manner in which the issue of relief was requested. Corson v. Commissioner, 2000 U.S. Tax Ct. lexis 30, 114 T.C. No. 24, 2000 WL 637480 (5/18/00).

Settlement Proceeds. The parties to the settlement agreement acknowledged that the settlement represented compensation to petitioner for resigning his position and relinquishing his tenure rights at Case Western Reserve University as a tenured full professor of operations research in the Weatherhead School of Management. Thus, the settlement agreement was entered into to settle an employment dispute, not to settle tort-type claims. Income tax excludability is afforded only when the underlying cause of action was based upon tort or tort-type rights and the damages were received on account of personal injury or sickness. Riesman v. Commissioner, T.C. Memo 2000-173, 2000 Tax Ct. Memo lexis 212, 79 T.C.M. (CCH) 2075 (5/25/00).
*SS* Alimony Payments. The divorce decree indicated that the alimony payments were a "property settlement." Under I.R.C. ¤ 71(b)(1), payments are taxable alimony if the decree did not designate them as nontaxable or nondeductible under I.R.C. ¤¤ 71 and 215. The court held petitioner taxpayer's former husband's military retirement payments as taxable alimony because the divorce decree characterized the payments as a property settlement and did not designate them as nontaxable or nondeductible. The term "property settlement" did not designate that the payments would not be taxable under I.R.C. ¤ 71 nor deductible under I.R.C. ¤ 215. Baker v. Commissioner, T.C. Memo 2000-164; 2000 Tax Ct. Memo lexis 204; 79 T.C.M. (CCH) 2050 (5/22/00).

"Common Household" Prohibition. Internal Revenue Code ¤ 71(b)(1)(C), which states that individuals legally separated under a decree of divorce or of separate maintenance may not claim an alimony deduction if the payee spouse and the payor spouse are members of the same household, applied only to those under a decree of divorce or of separate maintenance. Since petitioner's alimony payments were pursuant to a written separation agreement, the court allowed the deduction of payor spouse's alimony. Benham v. Commissioner, T.C. Memo 2000-165, 2000 Tax Ct. Memo LEXIS 205, 79 T.C.M. (CCH) 2054 (5/22/00).

Representational Nexus. A North Carolina furniture dealer must register to collect Maryland use tax on the sale of furniture for delivery in Maryland. Activities performed by dealer's primary carrier establish nexus within the meaning of the Commerce Clause. Also, for purposes of applying the safe harbor from nexus of National Bellas Hess, Inc. v. Dep't of Revenue, 386 U.S. 753 (1967), a common carrier is a carrier that holds itself out to provide its services to the public on a nondiscriminatory, arms' length basis, that controls the time, manner and means of delivery, and does not negate in substantial contacts with the receiving party, such as by providing post-delivery service. Comptroller v. Furnitureland South, Inc., Circuit Court for Anne Arundel County, C-97-37872 OC (8/13/99).

Guidance for Qualified Intermediaries. This announcement provides guidance for financial institutions that are considering the qualified intermediary regime of Revenue Procedure 2000-12, 2000-4 I.R.B. 387, that sets forth a qualified intermediary (QI) withholding agreement that governs the withholding and information-reporting obligations of certain financial institutions. 2000 IRB lexis 173, 2000-23 I.R.B. 1, Announcement 2000-48 (6/5/00).

Definition of Eligible Rollover Distribution; Hardship Distributions. This notice provides permanent relief to sponsors of qualified plans where records pertaining to pre-1989 contributions are unavailable and also provides transition relief to sponsors of both qualified plans and ¤ 403(b) annuities from certain other requirements of Notice 99-5. 2000 IRB lexis 198, 2000-26 I.R.B. 1, Notice 2000-32 (6/8/00).

New Reporting Method for IRA Recharacterizations and Reconversions. Notice 2000-30 specifies a new method to be used by IRA trustees, issuers and custodians (hereinafter "trustees") for reporting IRA recharacterizations and reconversions occurring after 2000. The new method is similar to current reporting practices and is designed to ensure consistent reporting among trustees. This notice does not otherwise affect the reporting rules governing conversions, contributions to or distributions from IRAs. The new method is in response to concerns that, in many cases, plan records were inadequate to comply with the requirement that amounts treated as ineligible for rollover by reason of RRA 98 be limited to the amount described in ¤ 1.401(k)-1(d)(2)(ii), particularly with respect to pre-'89 401(k) amounts. In addition, it was stated that, in light of the extensive revisions to computer systems required to prevent "Y2K" problems, plan sponsors and record-keepers were unable to modify their systems to comply with certain other requirements of Notice 99-5 by January 1, 2000, the date transition relief under Notice 99-5 became no longer available. 2000 IRB lexis 191, 2000-25 I.R.B. 1, Notice 2000-30 (6/5/00).

Comments on Federal Income Tax Treatment. Notice 2000-29 invites public comment on the federal income tax treatment of the exercise of an option to acquire a partnership interest, the exchange of convertible debt for a partnership interest, and the exchange of a preferred interest in a partnership for a common interest in that partnership. 2000 IRB lexis 171, 2000-23 I.R.B. 1241, Notice 2000-29 (6/5/00).

Valuation Method of Farm Property. The 2000 interest rates to be used in computing the special use value of farm real property for which an election is made under section 2032A of the Code are listed for estates of decedents. This revenue ruling contains a list of the average annual effective interest rates on new loans under the Farm Credit Bank system. This revenue ruling also contains a list of the states within each Farm Credit Bank District. Rev. Rul. 2000-26 (5/30/00).

Nontaxable Export of Coal. This notice provides guidance relating to the coal excise tax imposed by ¤ 4121 of the Internal Revenue Code. The notice provides rules under the Code for making a nontaxable sale of coal for export or for obtaining a credit or refund when tax has been paid with respect to a nontaxable sale of coal for export. 2000 IRB lexis 180, 2000-21 I.R.B. 1116, Notice 2000-28 (5/22/00).

Announces Tax Forums. IRS and SSA announce year-end training on a wide variety of year-end wage and tax filing topics, such as: new filer information, electronic filing, backup withholding and IRP penalties, Form 1042-S, and Form W-2 filing. 2000 IRB lexis 181, 2000-21 I.R.B. 1118, Announcement 2000-47 (5/22/00).

Inventory Price Indexes Issued. Indexes for March 2000 were issued by the Bureau of Labor Statistics. The indexes are accepted by the Internal Revenue Service, under ¤ 1.472-1(k) of the Income Tax Regulations and Rev. Proc. 86-46, 1986-2 C.B. 739, for appropriate application to inventories of department stores employing the retail inventory and last-in, first-out inventory methods for tax years ended on, or with reference to, March 31, 2000. 2000 IRB lexis 176, 2000-20 I.R.B. 1006, Rev. Rul. 2000-25 (5/15/00).

IRS Selects New Executive Leadership Team. The IRS announced that David Mader will serve as assistant deputy commissioner of operations, Larry Rogers will be the chief financial officer, and Judith Tomaso will lead the new Office of Tax Administration Coordination. 2000 I.R.B. lexis 174, I.R. 2000-30 (5/15/00).

The Internet Tax Debate. State lawmakers led by the National Conference of State Legislatures (NCSL) continue to lobby the Senate to allow states to tax the Internet. Two Senate committee markups of a five-year Internet tax moratorium extension failed and are almost universally acknowledged as "dead" in the Senate. However, legislation still is pending for September and in a June 15 letter to Sen. John McCain (R-Ariz), the Internet Tax Fairness Coalition has reaffirmed its support for expeditious action by the Commerce Committee on legislation to extend the moratorium on taxation of the Internet and its transactions. 2000 STT 120-38, 2000 STT 120-36 (6/21/00).

Indiana Governor Declares Emergency, Suspends Gasoline Tax. Indiana Gov. Frank O'Bannon (D) has declared an "energy emergency" and will suspend the five percent state sales tax on gasoline for 60 days, drawing national attention as the first governor to take such action since fuel prices began their rise this year. 2000 STT 121-15 (6/21/00).

-- Kathryn J. Sedo
-- Andrew G. Beckford
University of Minnesota Law School

Defamation; Fair Reporting Privilege. The Crookston Times newspaper published an article that reported a defamatory statement made by a citizen at a local city council meeting concerning a local police officer. The Supreme Court ruled that the fair and accurate reporting privilege extended to protect the accurate and complete report or a fair abridgment of events of a city council meeting. This privilege is not defeated by a showing of malice but is defeated by showing that the report is not fair and accurate. This case was remanded to determine whether additional material in the article, beyond the recital of the defamatory statement, conveyed a defamatory impression, thus defeating the privilege. Moreno v. Crookston Times Publishing Co., C6-98-2421, 610 N.W.2d 321 (Minn. 5/22/00).

Insurance Coverage. Becker was injured while in the course of employment, and she received workers compensation benefits. The other driver had only a $20,000 bodily injury liability limit and few assets. Becker settled for the $20,000, such that the other driver was considered an uninsured/underinsured driver under Minnesota law. She obtained um/uim benefits from her insurer's coverage, but her covered damages exceeded the limits from the occupied vehicle. She thus sought excess coverage from her personal automobile policy.

The Minnesota Supreme Court, Justice Gilbert writing for the panel, ruled that Becker could seek um/uimcoverage under her personal policy, consistent with Minn. Stat. ¤ 65B.49, subd. 3a(5). Becker v. State Farm Mut. Auto. Ins. Co., C6-99-288, 611 N.W.2d 7 (Minn. 5/25/00).

Lying to Insurers. Enevoldsen's mother obtained insurance for her son's vehicle, though she was neither owner nor operator. She purchased it because he could not obtain insurance because of his awful driving record. The son later was involved in an accident, killing one person and injuring another. The insurer brought a declaratory judgment action in federal court, and the court ruled the policy invalid because the mother had no insurable interest.

The trustees brought a wrongful death action against the mother and son, with a misrepresentation claim against the mother. The certified question to the Court of Appeals was whether the mother's misrepresentation to the insurer of the truck created liability to third parties caused by her son's negligent operation of the vehicle. The Court of Appeals answered in the negative because no one other than the insurer was induced to act in reliance on the misrepresentation. Norman v. Enevoldsen, C3-99-1849; C0-99-2084, 2000 WL 687770 (Minn. App. 5/30/00).

Slippery Sidewalks. Frykman fell on ice as she left the University of Minnesota-Duluth (UMD) campus and sued UMD. The trial court instructed jurors on the elements of negligence for a possessor of land. The jury returned a verdict for Frykman, finding UMD negligent.

UMD moved for a jnov, claiming that ice-creating conditions existed at the time of the fall such that there was insufficient time to clear the ice before the fall. The trial court denied the motion, finding that these were disputed fact questions properly submitted to the jury. The Minnesota Court of Appeals affirmed because evidence existed to sustain the verdict. Frykman v. Univ. of Minnesota-Duluth, C6-99-1733, 611 N.W.2d 379 (Minn. App. 6/13/00).

Sidewalks and Slippery Slopes. Otis left a school, slipped and fell on a one-foot by three-foot patch of thin clear ice that had accumulated on the sidewalk. The school district moved for summary judgment, arguing that under the "mere slipperiness" doctrine, it was not liable where accumulated snow on an adjacent area melted, ran into a sidewalk and melted. The district court granted summary judgment. The Minnesota Court of Appeals affirmed, analyzing in detail the "mere slipperiness" rule. Otis v. Anoka-Hennepin School Dist. No. 11, No. C5-99-2064, 611 N.W.2d 390 (Minn. App. 6/13/00).

--Thomas C. Baudler
--Lee Bjorndal
Baudler Baudler Maus & Blahnik