October 2000

In this month's "Notes & Trends":

• Administrative Law
• Alternative Dispute Resolution
• Civil Litigation
• Criminal Law
• Elder Law
• Employment & Labor Law
• Environmental Law
• Family Law
• Federal Practice
• Juvenile Law
• Probate & Trust Law
• Real Property
• Tax Law
• Torts & Insurance

Exclusive Agency Jurisdiction. In State v. Am. Family Mut. Ins. Co., 609 N.W.2d 1 (Minn. App. 2000), American Family asserted that the commissioner of commerce had exclusive jurisdiction over the insurance industry so as to preclude the attorney general from bringing an action himself in district court under consumer protection law. In denying the insurance company appeal, the Court of Appeals found that the attorney general had broad common law and statutory authority to bring lawsuits to protect Minnesota citizens. It noted that the Legislature did not describe the commissioner’s authority as exclusive and that the existence of a comprehensive regulatory scheme in one area does not necessarily constrain the authority of others.

Data Practices: Attorney Fees. In Washington v. I.S.D. No. 625, 610 N.W.2d 347 (Minn. App. 5/16/00), the plaintiff sued the school district for wrongful discharge and asked the district for the investigative data that led to his discharge. The school district claimed that the data was not public. After an in-camera review, the district court ordered the data produced and awarded the plaintiff $7,000 in attorney fees. The Court of Appeals reversed the attorney fee award because the statute only allows an award to an "aggrieved person." The court reasoned that the plaintiff was not yet aggrieved (in that his rights were not yet infringed) since the data was not accessible under the Data Practices Act without a court order.

Appellate Jurisdiction. Two state troopers accused in a civil suit of nonconsensual sexual relations were denied a legal defense and indemnification by the commissioner of public safety on the grounds that their actions were not within the scope of their employment. The commissioner investigated the request and then offered a hearing to the troopers, but the troopers chose to submit written arguments only. The commissioner then applied Minn. Stat. §3.736, subd. 9, and issued a written determination. In State v. Tokheim, 611 N.W.2d 375 (Minn. App. 6/13/00), the Court of Appeals held that the commissioner’s refusal to indemnify the troopers was a quasijudicial determination subject to challenge only by writ of certiorari. It therefore declared that the district court lacked subject matter jurisdiction to hear a declaratory judgment action concerning the commissioner’s decision.

Substantial Evidence. The Court of Appeals reversed a determination of the commissioner of human services in Hazelton v. Comm'r, ___ N.W.2d ___ (Minn. App. 7/3/00). The court found that the record lacked substantial evidence to indicate that a public assistance recipient had concealed the fact that her son had left the household. The agency had the burden of demonstrating a violation by clear and convincing evidence. The court criticized two DHS forms filled out by Hazelton as unclear and confusing and criticized the commissioner’s reliance on testimony of "standard agency practice" to support adverse action in individual cases. In dicta, the court also expressed concern over a credibility determination concerning the recipient that was made as a result of a telephone hearing.

Right to a Hearing. The commissioner of human services disqualified two registered nurses and one qualified mental retardation professional from direct care positions on the grounds that they failed to report the maltreatment of a child by another nurse. The commissioner’s decision was made after an investigation and was followed by a response to a written request for reconsideration. But at no time were the employees given the opportunity to present oral testimony, to cross-examine or to subpoena witnesses. In Fosselman v. Comm'r, 612 N.W.2d 468 (Minn. App. 7/3/00), the Court of Appeals held that disqualification proceedings are subject to Due Process requirements because the employees clearly have a property interest in working in direct contact positions, and their good names and reputations are at stake. In a thoughtful opinion, the court decided that the employees had a Due Process right to a hearing before a human services referee where they could have subpoena power, present oral testimony, and confront and cross-examine witnesses. The court also held that a statute making the commissioner’s order on whether maltreatment occurred conclusive in other proceedings was unconstitutional as applied to the employees, because it excluded consideration of an element essential to the agency decision, and therefore denied due process.

Appellate Jurisdiction. The district court denied a request for a writ of mandamus by a teacher denied a license in <I>Lund v. MNSCA, 2000 WL 1146062 (Minn. App. 8/9/00), on the grounds that there was an adequate legal remedy. The Court of Appeals determined that the MNSCA action was quasijudicial in nature since it comprised an investigation and weighing of facts, application of facts to a standard, and a binding decision. The court decided that a policy interpretation in a handbook was a sufficient standard for the purpose of this determination. Since the decision was quasijudicial, the appropriate form of review is certiorari, and the district court lacked jurisdiction to issue a writ of mandamus.

In this month's "Notes & Trends":

• Administrative Law
• Alternative Dispute Resolution
• Civil Litigation
• Criminal Law
• Elder Law
• Employment & Labor Law
• Environmental Law
• Family Law
• Federal Practice
• Juvenile Law
• Probate & Trust Law
• Real Property
• Tax Law
• Torts & Insurance

Recent cases have reexamined mediation confidentiality, disclosure of conflicts by ADR neutrals, and the need for arbitrators to abide by the terms of arbitration clauses. Federal subject matter jurisdiction over challenges to arbitration awards also has been addressed. Finally, the National Conference of Commissioners on Uniform State Laws has adopted the Uniform Arbitration Act (2000), previously referred to in draft as the Revised Uniform Arbitration Act.

Mediation Confidentiality. The Western District of Pennsylvania became the second federal district court to recognize a mediation privilege under Federal Rule of Evidence 501, which empowers the federal courts to recognize evidentiary privileges under "the principles of the common law as they may be interpreted . . . in the light of reason and experience." (Sheldone v. Pennsylvania Turnpike Comm’n, 2000 WL 1010590 (W. D. Pa. 7/17/00) (following Folb v. Motion Picture Indus. Pension & Health Plans, 16 F. Supp. 2d 1164 (C.D. Ca. 1998).) The issue arose in a suit by a local union against an employer alleging violation of the Fair Labor Standards Act. The plaintiff union noticed the deposition of a representative of the employer regarding the prior mediation of a grievance when the employer purportedly made a significant admission. In response, the employer filed a motion for a protective order to preclude such discovery.

In granting the protective order motion, the court held that a mediation privilege was rooted in the imperative need for confidence and trust in mediation, that such a privilege would serve the public ends of encouraging settlement and reducing court dockets, that such a privilege would cause modest evidentiary detriment and that denial of such a privilege would frustrate a parallel privilege adopted by the states.

The confidentiality of mediation or settlement conference communications was also involved in Davis v. Kansas City Fire & Marine Ins. Co., 195 F.R.D. 33 (N.D. Ok. 2000). There a debtor filed a motion for reconsideration of an order to abstain in favor of state court litigation, and the movant attached to the motion an adversary’s settlement conference statement. In reliance upon the local court rules and the federal Alternative Dispute Resolution Act of 1998, the court held that such settlement conference statements are confidential and that filing same with the court breached that confidentiality. As a result, the debtor’s attorneys were found to have engaged in sanctionable conduct and were fined $1,500, and the decision was published and circulated to all the judges of the court as notice of the improper conduct.

Disclosure of Conflicts by ADR Neutrals. It is well established that arbitrators and other ADR neutrals have a duty to disclose professional or business relationships with any of the parties at the commencement of the ADR proceeding and while it is pending. But the issue arose in an unusual context in Valrose Maui, Inc. v. Maclyn Morris, Inc., 2000 WL 944497 (D. Ha. 4/13/00). An arbitration award was vacated for "evident partiality" when the arbitrator did not disclose that during the course of the arbitration one of the party’s attorneys asked the arbitrator if he or she would be able to serve as a mediator in an unrelated case and subsequently engaged the arbitrator as the mediator. The award, which was based upon 21 days of hearings, therefore, was nullified even though, the court held, there was no evidence that the attorney was trying to bias the arbitrator or otherwise act with an improper motive or that the arbitrator was actually biased. Lesson for ADR neutrals: be careful about taking on new neutral assignments from parties involved in a pending ADR proceeding.

Abiding by Terms of Arbitration Clauses. The law has been clear that arbitration is a matter of agreement and that a party cannot be compelled to arbitrate what he has not agreed to arbitrate. This principle was at the heart of Coady v. Ashcraft & Gerel, 2000 WL 1072386 (1st Cir. 8/8/00), which vacated an arbitration award. The arbitration clause in an agreement between a law firm and an attorney authorized arbitration only of "ambiguities or questions of interpretation of this contract." The arbitrators issued an award that made factual findings concerning the attorney’s bonus and calculated the amount of the bonus that was due. This, the court held, was clearly beyond the scope of the arbitration clause. In contrast to the narrow clause in Coady, broader arbitration clauses were held to encompass claims other than breach of contract. (Marsh v. First USA Bank, N.A., 103 F. Supp. 2d 909 (N.D. Tex. 2000) (provision for arbitration of "any claim, dispute or controversy . . . arising from or relating in any way to this Agreement or your [credit card] account" covered Truth in Lending Act claims); Norcom Electronics Corp. v. CIM USA Inc., 104 F. Supp. 2d 198 (S.D. N.Y. 2000) (provision for arbitration of "any controversy or claim arising out of or relating to this [distributorship] Agreement or breach thereof" covered distributor’s tortious interference, Lanham Act, uniform competition and conspiracy claims).) Lesson for drafters of arbitration clauses: be wary of the danger of narrow arbitration clauses -- the risk of successful challenges to an arbitration award on the ground that it was beyond the scope of the clause. Also be wary of the danger of broad arbitration clauses: arbitration of claims other than breach of contract claims.

Abiding by Terms of Arbitration Clauses Redux. An arbitrator or arbitration organization can also exceed its powers if the arbitrator is not selected in accordance with the arbitration clause or the arbitration rules of an organization. This was the issue in Hugs & Kisses, Inc. v. Aguirre, 98-4027, 220 F.3d 890 (8th Cir. 8/11/00), where the 8th Circuit, reversing the district of Minnesota court, vacated an award. The arbitration clause did not adopt any rules or specify a method for selecting an arbitrator, and a subsequent stipulation to stay a lawsuit stated that the parties "shall negotiate in a good faith effort to reach an agreement on . . . the arbitrator." Although the parties did not reach such an agreement, one of the parties commenced an arbitration under the Code of Procedure of the National Arbitration Forum, and when the other party refused to participate in the arbitration, an arbitrator was selected. The 8th Circuit said that the claimant should have moved the district court, under 9 U.S.C. §4 (1994), to compel arbitration. Lesson for drafters of arbitration clauses: have an agreement on a set of arbitration rules that covers such things as appointment of arbitrator when one of the parties defaults or have a hand-tailored clause that addresses all the issues covered by such rules.

An example of the latter approach to drafting an arbitration clause, as the 8th Circuit noted in Hugs & Kisses, was Val-U Construction Co. v. Rosebud Sioux Tribe, 146 F.3d 573, 575 (8th Cir. 1998). There, the arbitration clause incorporated American Arbitration Association rules that, after notice, allowed an arbitration to proceed in a party’s absence. Thus, an award was confirmed even though the respondent did not participate in the arbitration.

Federal Subject Matter Jurisdiction; Challenges to Awards. In Greenberg v. Bear, Stearns & Co., 2000 WL 1092135 (2d Cir. 8/700), the appellate court held that there was federal question subject matter jurisdiction over an attack on a 10(b)5 award on the ground that it was in manifest disregard of federal law. The court then held that there was no such manifest disregard. This holding should be less important in Minnesota because the 8th Circuit has not expressly adopted manifest disregard of the law as a basis for vacating an arbitration award. (E.g., PaineWebber Group, Inc. v. Zinsmeyer Trusts Partnership, 187 F.3d 988 (8th Cir. 1999), cert. denied, 146 L.Ed.2d 313 (2000).)

Uniform Arbitration Act (2000). The Uniform Arbitration Act (UAA) was adopted by the Conference in 1955 and has been enacted in Minnesota and 48 other jurisdictions. The UAA closely tracks the provisions of the Federal Arbitration Act (FAA) that was adopted in 1925. Neither the UAA nor the FAA has been amended since enactment. Therefore, for all practical purposes, U.S. arbitration statutes have not been revised over the past 75 years.

This summer, after a five-year effort, the Conference adopted the UAA (2000). Its prime objective is to advance arbitration as a desirable alternative to litigation, but not to make arbitration simply another form of litigation. To this end, the UAA (2000) endeavors to render the arbitration process efficient, expeditious, and economical in a manner that is fair to the parties and that promotes finality of the decision of the dispute submitted to arbitration. In accomplishing this goal, prime recognition is given to the agreement of the parties in the agreement to arbitrate. The new act also recognizes that not only are more issues being submitted to arbitration, but they also have become increasingly complex, often involving higher monetary amounts. The new act contains statutory coverage for a number of important issues that were not addressed in the original UAA. The new act also reflects aspects of arbitration practice as it has developed over the years. However, the UAA (2000) is a default act on matters not covered by the agreement to arbitrate except for certain fundamental provisions that cannot be waived so as to insure fairness.

The UAA (2000) probably will come before the 2001 session of the Minnesota Legislature. The UAA (2000) and drafts of same are available at the Conference Web site: www.law.upenn.edu/bll/ulc.

In this month's "Notes & Trends":

• Administrative Law
• Alternative Dispute Resolution
• Civil Litigation
• Criminal Law
• Elder Law
• Employment & Labor Law
• Environmental Law
• Family Law
• Federal Practice
• Juvenile Law
• Probate & Trust Law
• Real Property
• Tax Law
• Torts & Insurance

Medical Negligence; Expert Affidavit. The Supreme Court found an exception to the expert affidavit requirement of Minn. Stat. §145.682, subd. 4, where the standard of care, the breach of that standard, and the chain of causation were within the general knowledge and experience of lay persons. Tousignant v. St. Louis County, C-8-99-826, 2000 WL 1030348 (Minn. 7/31/00).

Plaintiff, who was 86 years old and recovering from surgery for a fractured right hip and wrist, was admitted to defendant’s nursing home. Because of her confusion and risk of reinjury, the care plan provided that plaintiff was to have a vest restraint on at all times. Plaintiff was left unattended in her room after admission, unrestrained and in a wheelchair. Three hours after admission she fell and sustained another fracture to her right hip. She was found on the floor of her room.

Plaintiff’s expert affidavit was found by all courts to be untimely and insufficient to comply with the statutory requirements. However, the Supreme Court held that under the exceptional facts of the case, expert testimony was not necessary and the statute was inapplicable.

Duty. The Court of Appeals held that the landlord owed decedent tenant a common law duty, a statutory duty, and a contractual duty to maintain the security locking mechanism on the back door of his apartment building and that it was inappropriate for the trial court to grant defendant’s motion for summary judgment. Funchess v. Cecil Newman Corp., C8-00-90, 2000 WL 1100213 (Minn. App. 8/14/00).

The decedent was murdered in his apartment. His mother, as trustee, commenced a wrongful death action against the owner of the apartment building, alleging that the assailants gained entrance to the building through a security door that had a broken lock.

The Court of Appeals recognized the general rule that a person has no duty to control the conduct of a third person to prevent that person from causing injury to another. The court also summarized the "special relationship" exception to the general rule. Here, the court found that the landlord did have a duty to maintain the security measures that it had already undertaken for the protection of its tenants. Since the landlord provided a secured back door to the building, it assumed the duty to maintain the locking mechanism on that door. The court held that where a person voluntarily assumes a duty, it must exercise that duty with reasonable care.

The Court of Appeals also found that there were questions of fact as to whether a statutory duty existed and was breached and whether the landlord breached a contractual lease obligation of maintaining the common areas and facilities in safe condition.

Daubert Test. The Supreme Court was asked to adopt the Daubert test for admission of expert testimony and scientific evidence. In Goeb v. Tharaldson, CX-98-2275, 2000 WL 1161013 (8/17/00), plaintiff asked the court, among other things, to abandon the Frye-Mack standard for admissibility and to adopt what at least some commentators have suggested is a more liberal standard.

Shortly before plaintiffs moved into their leased home, defendant Tharaldson applied insecticides to control an ant-infestation problem. One of the insecticides applied was Dursban, manufactured by defendant Dow. As soon as plaintiffs entered the home, they noticed a chemical smell and, at the suggestion of the landlord, they opened the doors and windows to air it out. Plaintiffs also contended that they immediately began to experience symptoms of nausea, diarrhea, lightheadedness, and lack of balance. Plaintiffs eventually moved out of the rental unit.

Plaintiffs sued the pest control service and Dow, alleging permanent injuries as a result of their exposure to Dursban. The trial court granted Dow’s motion for summary judgment after it excluded plaintiffs’ expert’s opinions. The district court concluded that the proposed experts’ testimony did not meet the threshold requirement of reliability under either the Frye-Mack or Daubert test. The Minnesota Court of Appeals affirmed.

The Supreme Court reviewed the two-part standard for admissibility of scientific evidence. Under Frye, scientific evidence will be admissible only if the scientific principles are generally accepted within the applicable community. In Mack, Minnesota added the requirement that the particular evidence offered must also have foundation that is scientifically reliable.

The Supreme Court evaluated the strengths and weaknesses of both tests and elected to continue with Frye-Mack. It held, therefore, that the plaintiffs’ proffered expert testimony did not satisfy the reliability requirement of Frye-Mack.

In this month's "Notes & Trends":

• Administrative Law
• Alternative Dispute Resolution
• Civil Litigation
• Criminal Law
• Elder Law
• Employment & Labor Law
• Environmental Law
• Family Law
• Federal Practice
• Juvenile Law
• Probate & Trust Law
• Real Property
• Tax Law
• Torts & Insurance

Evidence: Excited Utterance. In this first-degree murder case, the decedent had a confrontation with the appellant approximately two or three minutes before the actual shooting. Upon seeing the appellant again, the decedent stated: "I think they gonna get me," "I got to go," and "[T]hat's the dude C.K. that I got into it with." A foot pursuit ensued, at which time shots were heard. The trial judge let in the above statements of the decedent over defense objection.

Held, there was no violation of the Confrontation Clause. Under the "excited utterance" exception of the hearsay rule, Minn. R. Evid. 803(2), the startling event or condition was the recognition of the appellant, and not the past event. "[I]t is startling to be confronted by someone who claims that you once fired a gun at him. That Teasley was actually alarmed by the sight of Gates is supported by evidence that his eyes got big when he recognized Gates and he fled." State v. Gates, 2000 WL 1060511 (Minn.).

Search and Seizure: Warrant; Knock and Announce. Appellant was arrested following execution of a no-knock search warrant. The residents had been the object of a search warrant approximately three months earlier, at which time weapons and drugs were found on the premises. In the affidavit supporting the warrant, the deputy stated that the nighttime and no-knock entry was sought because of the weapons found on the premises earlier and the affiant's knowledge and experience that those involved with controlled substances often attempt to destroy their substances if in jeopardy of confiscation. Police entered through an unlocked door, shouting "police," with drawn guns, helmets, and camouflage.

Held, the district court properly denied the motion to suppress based on the no-knock issue. The applying officer substantiated the need for a no-knock warrant. While a blanket rule allowing an exception to the knock-and-announce requirement in all felony drug cases would violate the U.S. Constitution, Richards v. Wisconsin, 520 U.S. 385 (1997), as presumably would the boilerplate language used in this search warrant, the affidavit in this case does point to specific objective pieces of information that support the no-knock request. The standard for issuance of such a warrant is "reasonable suspicion," as opposed to probable cause for the warrant itself. State v. Wasson, 2000 WL 1060509 (Minn. 8/3/00).

Discovery: Witness Incompetency; Rule 20 Disclosure. The primary witness against the appellant had moved for a Rule 20 competency exam in both his own and the appellant's cases. The examination took place July 15, 1998. Trial began August 3, 1998. The witness testified against the appellant, resulting in a conviction. On the day before final arguments, the prosecutor's office received the Rule 20 psychologist's report, which concluded that the witness was not competent to stand trial. The individual prosecutor in this case did not focus his attention on the report that week. Following guilty verdicts, on August 6, 1998, the prosecutor "digested" the contents of the report and called defense counsel, suggesting she make a motion to compel discovery to preserve the record on appeal.

Meanwhile, in the witness' own case, the court had ordered an adverse competency evaluation, which in September of 1998 found the witness to be competent to aid in his own defense. At the same time, the witness signed an affidavit saying he had deliberately tricked the first examiner into thinking he was incompetent in order to avoid being returned to Wisconsin.

Held, it was reversible error for the prosecutor not to have disclosed this competency report, under both the Minnesota Rules of Criminal Procedure and Due Process guarantees. It is of no moment that the witness was later found competent. The state's case rested largely on the testimony of this witness. The nondisclosure of the competency report would have greatly increased the opportunity of the defense to impugn his ability to relate facts accurately and honestly. Concluding that the appellant suffered prejudice from nondisclosure, the conviction was reversed. It was also of note that the individual prosecutor did not receive copies of the report during the trial; rather, another prosecutor in the office did, but by the rule of imputed knowledge, the trying prosecutor was responsible for this knowledge. State v. Hunt, 2000 WL 1060504 (Minn. 8/3/00).

Competency: Dismissal and Reissuance of Complaint. A misdemeanor charge that was dismissed based on a court psychologist's finding of incompetence may be reissued at a later time. Although Rule 20.01 is silent as to whether misdemeanor offenses may be recharged, as is provided for felonies and gross misdemeanors, jeopardy has not attached, and the recharging is not specifically prohibited by any rule or statute. State v. Breuhl, 2000 WL 1051922 (Minn. App. 8/1/00).

Stay of Adjudication: Special Circumstances: Mitigating Circumstances. Neither loss of a job, nor inability to pay restitution, nor a clean record, nor cooperation with the police support a stay of adjudication. These are not the "special circumstances" contemplated by Krotzer. There was no injustice to avoid by the prosecutor's clear use of discretion in the exercise of the charging function. State v. Leming, 2000 WL 1052160 (Minn. App. 8/1/00).

DWI/Implied Consent: Nonalcoholic Beer. The undisputed facts in this case are as follows: Appellant had a B-card. He was stopped for speeding and admitted that he had consumed several cans of Sharp's, a "nonalcoholic" beer. He displayed no indicia of intoxication other than the odor of alcohol. On the PBT, he blew a steady green light, indicating the presence of alcohol from 0.004 percent to 0.055 percent. The party stipulated that Sharp's contains 0.37 percent alcohol.

Held, the cancellation of the appellant's license was appropriate. The evidence clearly shows that Sharp's contains alcohol, and that is all that is necessary for a cancellation. The case of Plaster v. Comm'r, 490 N.W.2d 904 (Minn. App. 1992) is distinguished, because in that case, the commissioner failed to show that the "nonalcoholic" beer contained alcohol. Igo v. Comm'r, 2000 WL 1052155 (Minn. App. 8/1/00).

Criminal Procedure: Joinder; Spreigl Analysis. The defendant stabbed three individuals, separated by a period of two hours. The first stabbing was over an argument concerning money; the second stabbing did not result in any theft from the victims. Both offenses were joined at trial.

Held, it was error to join both offenses at trial. Although there was an approximate unity of time and place (two hours and four miles apart), there must also be a single criminal objective. The state theory that the appellant was motivated by a "willingness to react with deadly force when faced with little or no provocation" does not satisfy that requirement, i.e., a propensity to use violence is not sufficient.

The error, however, was harmless, because under a Spreigl analysis, each crime would have been admitted at the trial of the other. The court agrees with the state that the crimes are similar enough in modus operandi to be relevant. State v. Jackson, 2000 WL 1100076 (Minn. App. 8/8/00).

In this month's "Notes & Trends":

• Administrative Law
• Alternative Dispute Resolution
• Civil Litigation
• Criminal Law
• Elder Law
• Employment & Labor Law
• Environmental Law
• Family Law
• Federal Practice
• Juvenile Law
• Probate & Trust Law
• Real Property
• Tax Law
• Torts & Insurance

Medical Assistance Liens. A Medical Assistance recipient was permanently disabled in a motor vehicle accident. Recipient’s mother brought a personal injury action against the city of Rochester and others. The state filed a lien under Minn. Stat. §256B.015 against the action to secure reimbursement for Medical Assistance benefits paid for the recipient. The statute allows a lien against "any and all causes of action." In comparison, 42 U.S.C. §1396p(a)(1)(1994) provides that "no lien may be imposed against the property of any individual prior to his death on account of medical assistance paid or to be paid on his behalf under the State plan … ." However, another federal provision directs the states to require that an individual assign his rights to "payment for medical care from any third party." 42 U.S.C. §1396k(a)(1)(A) (1994). The court found that Minnesota has a right to bring a subrogation claim, and the claim may be protected by a lien. Since compliance with both state and federal law is possible, the court allowed the lien. Martin v. City of Rochester, C3-00-398, 2000 WL 1146813 (Minn. App. 8/15/00).

Effective Dates for New Legislation. The Minnesota Department of Human Services issued Bulletin #00-19-01, dated August 4, 2000, which explains effective dates for the 2000 legislative changes. Please see the summary in the Probate and Trust Law section of "Notes and Trends."

In this month's "Notes & Trends":

• Administrative Law
• Alternative Dispute Resolution
• Civil Litigation
• Criminal Law
• Elder Law
• Employment & Labor Law
• Environmental Law
• Family Law
• Federal Practice
• Juvenile Law
• Probate & Trust Law
• Real Property
• Tax Law
• Torts & Insurance

Reemployment Compensation. The failure of an employer to investigate a complaint of sexual harassment constitutes "good reason" for an employee to quit. In Peppi v. Phyllis Wheatley Community Center, 2000 WL 1015859 (Minn. App. 2000), the Court of Appeals upheld a claim for reemployment compensation benefits for an employee who resigned after her employer did not carry out its "affirmative duty" to investigate her sexual harassment claim.

The failure to mail notice of unemployment tax liability to the proper address tolls the time period to appeal. In Perovich v. Bituminous Consulting & Contracting Co., 2000 WL 1015832 (Minn. App. 2000), the Department of Economic Security twice sent notices of personal liability for unemployment taxes to the business address of a corporation, but not to the "last known address" of the individual the department sought to hold responsible for the taxes. The appellate court held that the department erred in holding the individual's appeal untimely because the notices did not comply with the statutory requirement under Minn. Stat. §268.063(a) that they be sent to the "individual's last known address."

The failure of an employee to seek suitable employment barred reemployment compensation benefits in Henry v. Computer Products and Repair, 2000 WL 1015823 (Minn. App. 2000) (unpublished). The employee did not respond to offers by his former employer for a full-time job comparable to one he had quit less than two weeks earlier due to a reduction in hours because of a business slow-down.

An employee who turned down a suitable job offer was entitled to reemployment compensation because the offer predated the time of her unemployment. In Johnson v. Dolphin Staffing, 614 N.W.2d 252 (Minn. App. 2000), the Court of Appeals reversed a disqualification ruling by the commissioner of economic security on behalf of an employee who refused to take a permanent position while working as a temporary employee. She later lost her temporary position and sought reemployment benefits. The court ruled that she was eligible for benefits because she still was working when she turned down the permanent job.

A driver who transported people to and from medical appointments was not entitled to reemployment benefits after his discharge because he was an independent contractor rather than an employee. In Knox v. Key Transportation, Inc., 2000 WL 978738 (Minn. App. 2000) (unpublished), the appellate court ruled that the driver was an independent contractor because the employer lacked control over "when and how much he worked," which the driver determined on his own behalf.

Defamation. A statement that an employee "knew nothing" about his type of work was not defamatory when the circumstances indicate that the remark was not believed by the listener and was considered "mere rhetorical hyperbole." In Harman v. Heartland Food Co., 2000 WL 978994 (Minn. App. 2000), the appellate court held that the statement made in anger by a turkey producer to a turkey grower concerning the producer’s former manager was not actionable since it could not reasonably be considered to constitute a factual assertion. It also could not support a claim for interference with contract because the producer had a "legitimate economic interest to protect" in making the remark.

University of Minnesota Cases. The scope of certiorari proceedings led to the dismissal of two wrongful discharge claims by University of Minnesota employees. In Maye v. Univ. of Minn., 2000 WL 1051995 (Minn. App. 2000), the Court of Appeals upheld dismissal of a lawsuit because certiorari was the only way to assert a breach of contract claim for the failure of the institution to promote an employee, allegedly in violation of the terms of a settlement agreement between the parties. Because the action challenged was a "quasi-judicial decision," it must be pursued through certiorari to the appellate court and not through a lawsuit in district court.

In Stephens v. Bd. of Regents, 2000 WL 1052013 (Minn. App. 2000), the court discharged a writ of certiorari by a fired employee who claimed the dismissal violated her rights under the Federal Bankruptcy Act. The employee, a financial officer at the school, sought to overturn her discharge after she filed for bankruptcy. The court held that because there is a federal statute allowing redress for a bankruptcy-related discharge, 11 U.S.C. §525, certiorari was inappropriate. The employee's claim also was not cognizable because she had not exhausted all available internal remedies at the University.

A race discrimination claim by a University employee was rejected by the 8th Circuit Court of Appeals in Scroggins v. Univ. of Minn., 2000 WL 1056145 (8th Cir. 2000), where there was insufficient evidence of disparate treatment based on race. The firing of the employee after filing a discrimination charge with the Equal Employment Opportunity Commission (EEOC) was not retaliatory because the supervisors who made the discharge were not aware of the existence of the EEOC charge at the time of termination.

Race Discrimination. The 8th Circuit upheld dismissal of two other race discrimination cases. In Ahmed v. Am. Red Cross, 218 F.3d 932 (8th Cir. 2000), a race discrimination claim was rejected as part of a reduction in force. The court also held that a four-year lapse between the filing of the EEOC charge and a subsequent discharge was too tenuous to support a retaliation claim.

An African-American employee validly waived her right to a jury trial in Clark v. Runyon, 2000 WL 1029113 (8th Cir. 2000). The employee's history of threats and violence constituted a legitimate basis for her discharge.

But the court overturned dismissal of a race discrimination claim by African-American firefighters in Mens v. City of St. Paul, 2000 WL 106044 (8th Cir. 2000). Reversing a ruling of the federal district court in Minnesota, it held that evidence of a "severe or pervasive ... hostile work environment" warranted reversal of summary judgment.

Sexual Harassment. Failure of a company to reassign a harassing employee to another work area or shift, coupled with an inadequate investigation of harassment claims, warranted a jury verdict for a female production worker in Henderson v. Simmons Foods, Inc., 217 F.3d 612 (8th Cir. 2000). The court ruled that "indifference" by management to the harassment complaints of the production worker about a coworker justified a $175,000 verdict, including $100,000 for punitive damages.

A "same sex" harassment award of nearly $1.75 million was upheld, although the amount was reduced by $650,000, by the Minnesota Court of Appeals in Jones v. Yellow Freight Systems, Inc., 2000 WL 1052167 (Minn. App. 2000) (unpublished). The failure to discipline the offender was a significant factor in the conclusion by the court that the employer failed to take timely corrective action "reasonably calculated to arrest the hostile environment" that permeated the workplace.

In this month's "Notes & Trends":

• Administrative Law
• Alternative Dispute Resolution
• Civil Litigation
• Criminal Law
• Elder Law
• Employment & Labor Law
• Environmental Law
• Family Law
• Federal Practice
• Juvenile Law
• Probate & Trust Law
• Real Property
• Tax Law
• Torts & Insurance

Property Tax Assessment: Contaminated Property; Stigma. The term "contamination value," as used in Minn. Stat. § 273.11 (1998), providing for the valuation of property, does not include any reduction in market value caused by stigma. The reduction for stigma, therefore, may exceed the cost of a response action plan, asbestos abatement plan, or management program on the property. Dealers Mfg. Co. v. County of Anoka, 2000 WL 1129203 (Minn. 2000).

Section 273.11 of the Minnesota Statutes provides that, with few exceptions, "all property shall be valued at its market value." In determining property values, section 273.11, subdivision 17, requires assessors to reduce the market value of the property by the "contamination value" of the property. According to the statute, "[t]he contamination value is the amount of the market value reduction that results from the presence of the contaminants, but it may not exceed the cost of a reasonable response action plan or asbestos abatement plan or management program for the property."

In Dealers Mfg. Co., the Minnesota Pollution Control Agency (MPCA) placed plaintiff’s property on the State Superfund list in 1988. Plaintiff implemented a response action plan and by 1998 had spent $350,000 of a projected $560,000 cleanup cost. In 1997, plaintiff’s appraiser concluded that the specter of future cleanup costs, liability, and lack of mortgageability stigmatized the property, reducing its market value by $500,000 or more. Plaintiff challenged the assessment of its property for failure to consider the reduction in market value for stigma. Anoka County argued that stigma is included in the "contamination value" under section 273.11 and therefore could not be used to reduce the market value in excess of the cost of the response action plan.

The tax court granted plaintiff’s partial motion for summary judgment on the meaning of section 273.11, concluding that because the statute does not mention "stigma" and concerns only market reductions caused by the actual presence of contaminants, devaluation caused by fears and perceptions is not subject to the limitations the statute imposes.

In affirming the tax court ruling, the Minnesota Supreme Court relied partly on Westling v. County of Mille Lacs, 543 N.W.2d 91 (Minn. 1996), in its discussion of stigma devaluation as a legitimate factor in determining market value. The court emphasized that stigma devaluation must be separable from devaluation based on contamination because stigma can affect value whether contamination has ever been or will ever be present. Like the tax court, the Supreme Court concluded that the plain language of section 273.11 does not apply to stigma devaluation and noted that the legislative history of the statute supports this interpretation.

In a vigorous dissent joined by Justices Page and Anderson, P., Chief Justice Blatz argued that stigmatic devaluations are comprehended by devaluations for contamination under the plain language of the statute and that the legislative history supports this interpretation. Moreover, the dissenting justices asserted that the separability of devaluation due to stigma and contamination need not have been addressed in this case as the record was incomplete and what stigma exists on the property involved clearly was related to actual, not fancied, contamination.

Statute of Limitations; CERCLA. In United States v. Findett Corp., 2000 WL 1060452 (8th Cir. 2000), the 8th Circuit addressed a complicated question involving settlement negotiations, the tolling of the statute of limitations, and the distinction between "initial" and "subsequent" cost recovery actions under CERCLA.

In March 1990, the United States filed suit against Findett, resulting in a consent decree in which Findett agreed to a remediation plan. In the consent decree, Findett did not admit liability, and the government retained the right to seek further remediation costs. In October 1996, the United States and Findett agreed to toll the statute of limitations from October 21, 1996, until October 21, 1997, on cost recovery actions. In July of 1997, the United States again filed suit against Findett. Findett claimed the suit was time-barred.

The 8th Circuit Court of Appeals observed that resolution of the statute of limitations issue depends on whether the second suit by the EPA in 1997 counts as an initial or a subsequent cost recovery action, where the 1990 filing was resolved by a consent decree explicitly refraining from issuing declaratory judgment on Findett's liability. In response to the Findett argument, the 8th Circuit stated that "we have considered CERCLA’s goal of expediting remediation of hazardous waste sites and the concern for avoiding unnecessary litigation that is inherent in the policy favoring consent decrees. Having done so, and also calling on common sense, we conclude that Congress did not intend that the ‘declaratory judgment’ language be used to define an initial action for purposes of determining whether a later action against the same party and pertaining to the same site is subsequent for CERCLA statute of limitations purposes…."

Because the court considered the 1997 suit to be a subsequent cost recovery action, it was not time-barred because CERCLA, 42 U.S.C. § 9613(g)(2) (1994), requires subsequent actions to "be commenced no later than three years after the date of completion of all response action." In this case, the response action was ongoing at the time the 1977 suit was commenced.

In this month's "Notes & Trends":

• Administrative Law
• Alternative Dispute Resolution
• Civil Litigation
• Criminal Law
• Elder Law
• Employment & Labor Law
• Environmental Law
• Family Law
• Federal Practice
• Juvenile Law
• Probate & Trust Law
• Real Property
• Tax Law
• Torts & Insurance

Standard for Fee Award. Pursuant to statute (Minn. Stat. §518.175, subd. 6), the district court awarded reasonable attorney fees against the mother, who wrongfully failed to comply with an order for visitation by the child’s father. The court found that the statute did not contain a standard for the award, and it functionally applied the standard for conduct-based fee awards (Minn. Stat. §518.14, subd.1). The Court of Appeals agreed that there was no standard and affirmed the use of the conduct-based standard. It cited the mother’s extreme conduct in pleading guilty to making a false allegation of abuse, bad-faith conduct in making other allegations of abuse, and trying to subvert the father-child relationship. The court also affirmed a change of custody to the father based on the denial of visitation and the foregoing conduct. Sharp v. Bilbro, C6-00-38, 614 N.W.2d 260 (Minn. App. 7/18/00).

Civil Contempt Incarceration. The district court held the husband in civil contempt for nonpayment of maintenance, stayed a 90-day sentence, and set conditions for staying the sentence. On a subsequent motion, the court lifted the stay and again set conditions for staying the sentence. The husband appealed but served the sentence during the pendency of his appeal. In an unpublished opinion, the Court of Appeals upheld the civil contempt order because it contained conditions for purging the sentence, and it also upheld the rejection of the husband’s uncontradicted testimony of inability to pay as not credible. It further rejected his argument that contempt was not available because the court had granted the wife judgment for the maintenance arrearages because that rationale is limited to cases where there is no current maintenance obligation (and distinguished the Lieder and Zieman opinions). However, the appellate court cited Hopp v. Hopp and found that: 1) the district court finding that the father "had" income sufficient to pay all maintenance obligations did not meet the requirement for a finding of current ability to pay at the time of incarceration, and 2) the district court did not "formally" determine that incarceration was likely to produce compliance. It remanded to address these aspects of the case and to make any alterations in the purge conditions necessary to ensure that they are reasonable. (Note that the court failed to recognize that the 90-day sentence had been served completely, which made these issues moot. Counsel should have requested a stay of incarceration until disposition of the appeal.) Tait v. Tait, C5-99-1867, 2000 WL 979014 (Minn. App. 7/18/00) (unpublished).

No Pension to Surviving Wife. The pension statute for the Minneapolis Police Department provides that the spouse of a member is entitled to survivor benefits if the spouse is legally married to and resides with the decedent at the time of the member’s death. The spouses separated without a divorce in 1979. They sold their home and the husband moved into the house of another woman, where he lived until he died. He never indicated that he planned to resume living with his wife but they continued to file joint income tax returns. The pension plan denied benefits to the wife because she acknowledged that she was not residing with her husband on the day of his death. The district court granted summary judgment to the pension plan provider because the Legislature used the present tense of "reside", which means residing at the time of death. It also rejected her Equal Protection argument, concluding that the purposes of the statute are to support marriage, prevent sham marriages, and reward spouses who remain in cohabitation, which are legitimate goals. The Court of Appeals reversed the district court, but the Supreme Court reversed the Court of Appeals. It agreed with the district court interpretation of the word "reside" and cited its previous consistent opinions. It added that the requirement of residence at death is further supported by the specific statutory exclusion of spouses who are not dependent on the husband at the time of his death. The Supreme Court concluded that "it is clear that plaintiff cannot qualify under a meaning of the statute …" and that there was no Equal Protection violation on the basis of sex. Scott v. MPRA, C7-99-1191, 2000 WL 1060514 (Minn. 8/3/00).

Maintenance; Affluent Lifestyle. The 50-year-old parties were married for 20 years. He is an attorney earning $200,000 and she is a teacher with a master’s degree earning $63,000 per year. The husband had out-of-ordinary income totaling $335,000 in 1994 and $426,000 in 1996. The Court of Appeals described their standard of living as follows: "To say that the parties experienced an affluent lifestyle is an understatement of the facts." Their Lake Minnetonka home sold for $1.3 million, they had $900,000 in additional assets, and their debts consisted of $100,000 in consumer debts, $100,000 in delinquent income taxes, and the home mortgage. The district court awarded the wife $2,400 per month in permanent maintenance and one-half of the marital assets. The husband appealed the permanent nature and the amount of the maintenance award. The Court of Appeals said that, in 1984, the statute was read as not favoring permanent awards -- an exceptional case was prerequisite -- but the statute had been amended several times since. In 1985, the marital standard of living was inserted as a required consideration in three places, and an additional amendment required that any uncertainty about the need for maintenance shall be resolved in favor of a permanent award. In 1997, a Supreme Court opinion reminded counsel that each dissolution is unique and that an appellate decision does not enunciate an immutable rule of law. The Court of Appeals went on to say that its analysis includes two parts: First, the wide discretion of the court and second, the amount of maintenance. It found that the district court correctly focused on the standard of living of the parties and made findings that the husband’s income was sufficient for payment of permanent maintenance (he had a $6,000 monthly surplus after the court compared the needs of each party). The Legislature expanded the definition of reasonable needs, as well as adequate self-support, to include specifically a consideration of the standard of living established during the marriage. The appellate court said, "What is at issue in this case, and what is unresolved by the statutory language and the decisions of the appellate courts of Minnesota, is whether the permanent-maintenance ‘factors’ are equal in terms of the weight to be assigned to each or whether some should be more significant than others." The court concluded its analysis by saying, "It is our conclusion that, absent further direction from the legislature or the supreme court, the long-standing affluent lifestyle of the parties is an appropriate factor for the district court to consider, and given the court’s findings regarding appellant’s income and the wide discretion afforded the district court, we affirm the award of permanent maintenance in this case."

As to the amount of the award, the Court of Appeals found that the district court properly discarded numerous unreasonable spending claims of the wife. Nevertheless, it allowed her $2,000 per month for housing although she had: 1) at least $150,000 for a down payment on a home; 2) the need for quarters for a single person because the youngest child was approaching majority; 3) other substantial assets; and 4) another $150,000 from higher-than-anticipated proceeds from the sale of the home. The appellate court concluded that, while the record supported a housing allowance as a component of permanent-maintenance, the award was excessive. It reversed and remanded.

The following additional issues were affirmed: 1) the marital appreciation on the husband’s premarital Keogh plan, administered by an investment advisor, was a nonmarital asset that may be awarded to the wife; 2) the wife was awarded the proceeds from the sale of her premarital townhouse; 3) the wife was ordered to share in the payment of the husband’s delinquent income taxes.

The wife’s request for attorney fees on appeal was denied on a finding that she had sufficient resources to pay her fees. Chamberlain v. Chamberlain, C5-99-1934 & C9-00-115, 2000 WL 1100150 (Minn. App. 8/8/00).

Property Division; Tax Consequences. The trial court awarded most of the farm assets to the husband and awarded $100,139 cash equalization to the wife, payable by the husband in four annual installments. He testified that he would have to sell the crops or use them to secure a loan, which would require early sale of the crops to satisfy the loan. The trial court found the need to sell the grain was speculative and refused to consider tax consequences. The Court of Appeals recognized that the marital estate would be reduced significantly if the grain had to be sold and that the property division would no longer be equal. It concluded that the matter must be remanded to determine if there was an absolute need to sell the grain. The court found an inexplainable failure by counsel to produce more information and felt that an innocent client should not be punished. It said that the circumstances established an unusual equity in favor of consideration of appellant’s tax consequences. Lund v. Lund, C3-00-112, 2000 WL 1146017 (Minn. App. 8/15/00).

Puerto Rican Support Order; UIFSA. Ramsey County was requested to enforce an existing child support order entered in Puerto Rico. It proceeded under the Public Welfare statute to establish the father’s support obligation and reimbursement. The district court found that the county was obligated to proceed under UIFSA (518C) and denied the request. The Court of Appeals affirmed. Rivera v. Ramsey County, C4-00-99, 2000 WL 1146822 (Minn. App. 8/7/00).

In this month's "Notes & Trends":

• Administrative Law
• Alternative Dispute Resolution
• Civil Litigation
• Criminal Law
• Elder Law
• Employment & Labor Law
• Environmental Law
• Family Law
• Federal Practice
• Juvenile Law
• Probate & Trust Law
• Real Property
• Tax Law
• Torts & Insurance

Unpublished Opinion Rule. In a decision that garnered immediate attention in the local and national legal press, the 8th Circuit held that 8th Circuit Rule 28A(i), which declares 8th Circuit unpublished opinions not to be precedent, is unconstitutional, as it violates Article III of the United States Constitution.

In Anastasoff v. United States, 2000 WL 1182313 (8th Cir. 2000), Anastasoff appealed the district court denial of her request for a refund of overpaid federal income tax. On appeal, Anastasoff acknowledged the existence of a previous 8th Circuit decision directly on point, but argued that the court was not bound by that decision because it was unpublished. However, Judge Richard Arnold, writing for a three-judge panel that included Judge Magnuson (who was sitting by designation), traced the history of the doctrine of precedent from pre-Colonial days to the present and then found that "the portion of Rule 28A(i) that declares that unpublished opinions are not precedent is unconstitutional under Article III, because it purports to confer on the federal courts a power that goes beyond the ‘judicial,’ in that it allows the 8th Circuit "to avoid the precedential effect of [its] prior decisions [and] purports to expand the judicial power beyond the bounds of Article III." In a one-paragraph concurrence, Judge Heaney commented that Judge Arnold had "done the public, the court, and the bar a great service by writing so fully and cogently on the precedential effect of unpublished opinions."

The national legal press took note of this decision almost immediately, with some commentators predicting that the 8th Circuit will review the matter en banc.

Fed. R. Civ. P. 12(f). In Stanbury Law Firm v. IRS, the plaintiff brought suit under the Freedom of Information Act to force release of certain tax records containing the names of contributors to a charitable foundation founded by Justice Alan Page. Judge Davis rejected the FOIA claim and, sua sponte, struck the Stanbury complaint and memorandum in opposition to the motion to dismiss on the basis that both documents contained information that was "not relevant to the FOIA request and that could only have been included to impugn Justice Page."

On appeal, the 8th Circuit affirmed Judge Davis’s rejection of the FOIA claim, but reversed that portion of the decision that had stricken the pleadings. Noting that the striking of pleadings is "viewed with disfavor" and is "an extreme measure," the 8th Circuit found that the allegations discussing the relationship between Justice Page and the foundation provided "important context and background" for the lawsuit and were therefore "not irrelevant" to the issues before the district court.

Motions to strike are a rarely utilized tool of civil procedure and are the subject of appellate opinions even less frequently. It is for these reasons that litigators may want to take the time to review this opinion.

Other Decisions of Note. In Wal-Mart Stores, Inc. v. Barton, 2000 WL 1146054 (8th Cir. 2000), the 8th Circuit affirmed an award of $116,217.82 in attorney fees and costs in a Title VII case where the plaintiff recovered only $25,000 on her claims.

In Page v. Arkansas Dep't of Corrections, 2000 WL 1195488 (8th Cir. 2000), the 8th Circuit found that a Title VII plaintiff’s filing of a right-to-sue letter and EEOC charge with the district court within 90 days of her receipt of the right-to-sue letter was sufficient to initiate her federal action within the applicable statute of limitations, as the documents described the alleged discriminatory conduct and invoked Title VII.

In St. Paul Fire and Marine Ins. Co. v. Courtney Enterprises, Inc., 2000 WL 1141017 (D. Minn. 2000), Judge Montgomery denied the respondent’s motion to dismiss for lack of personal jurisdiction, finding that it had sufficient contacts with Minnesota and that it had implicitly consented to jurisdiction in Minnesota by entering into a series of agreements that contained Minnesota forum selection clauses.

In Imageware, Inc. v. U.S. West Communications, 219 F.3d 793 (8th Cir. 2000), the 8th Circuit reversed a civil contempt order entered against Imageware and one of its officers for disclosing certain documents that had been the subject of a protective order, but only after those documents were introduced as evidence in open court. The 8th Circuit held that the underlying protective order was ambiguous, and that "No one should be held in contempt for violating an ambiguous order."

Amendments to the Federal Rules of Civil Procedure and Evidence. Barring congressional intervention, a number of amendments to the Federal Rules of Civil Procedure and the Federal Rules of Evidence will take effect on December 1, 2000.

Among the amendments to the civil rules practitioners are most likely to encounter are amendments to Rule 26(b)(1), which has been narrowed from allowing discovery of "any matter relevant to the subject matter involved in the action" to "any matter, not privileged, that is relevant to the claim or defense of any party," and amendments to Rule 30, which now presumptively limits a deposition to "one day of seven hours." A concise summary of these and other amendments to the Federal Rules of Civil Procedure is available at 68 U.S.L.W. 2637. Among the more important amendments to the Federal Rules of Evidence are an amendment to Rule 103, which will no longer require litigants to renew evidentiary objections during trial so long as the court has made a "definitive" ruling on a motion in limine prior to trial, and amendments to Rule 702 intended to codify the standards. For an excellent summary of some of these amendments, see Gregory P. Joseph’s evidence column in the July 31, 2000 National Law Journal.

In this month's "Notes & Trends":

• Administrative Law
• Alternative Dispute Resolution
• Civil Litigation
• Criminal Law
• Elder Law
• Employment & Labor Law
• Environmental Law
• Family Law
• Federal Practice
• Juvenile Law
• Probate & Trust Law
• Real Property
• Tax Law
• Torts & Insurance

Certification Cases in Juvenile Court. The interplay of childhood and criminal behavior creates an uncomfortable tension as courts are caught between the need to recognize the seriousness of the offense that the juvenile has committed, the suffering of the victim and the recognition that juveniles are not adults, nor do they become adults merely by having committed a serious crime. However, over the past six years, 43 states have instituted legislation facilitating the transfer of children to the adult court. This legislation enables the courts to move away from the original purpose of diversion, rehabilitation and treatment in the juvenile courts towards one of punishment and public safety.

The Juvenile Justice and Delinquency Prevention Act prohibits teens under the jurisdiction of the juvenile court from being within "sight or sound" of adult inmates. This provision, however, does not cover those teens under the jurisdiction of an adult criminal court, thereby allowing teenagers prosecuted as adults to be incarcerated with adult offenders in prisons, the consequences of which are devastating for the teen.

In re J.L.L., CO-00-178, 2000 WL 1219415 (Minn. App. 8/29/) (unpublished), highlights the position of Minnesota courts that in presumptive certification cases, not only are the charges against the child presumed to be true, but once the presumption is established, it may only be overcome by clear and convincing evidence that retaining the proceeding in juvenile court serves the public safety.

In this month's "Notes & Trends":

• Administrative Law
• Alternative Dispute Resolution
• Civil Litigation
• Criminal Law
• Elder Law
• Employment & Labor Law
• Environmental Law
• Family Law
• Federal Practice
• Juvenile Law
• Probate & Trust Law
• Real Property
• Tax Law
• Torts & Insurance

Life Insurance Beneficiary. Husband and wife were divorced nine years when husband died. Wife was still named as beneficiary on his insurance policy. Husband’s fiancée sued, arguing mistake and unjust enrichment. The court looked for intent to change the beneficiary or any affirmative action to show intent. Based on the evidence, the court was able to draw inferences supporting both sides. Therefore, the named beneficiary received the proceeds. Cich v. Rieck, C9-00-146, 2000 WL 1100054 (Minn. App. 8/8/00).

Effective Dates for New Legislation. The Minnesota Department of Human Services issued Bulletin #00-19-01, dated August 4, 2000, which explains effective dates for the 2000 legislative changes. The bulletin provides a new form for the Application for Certificate of Clearance for medical assistance claims, which is now required for all Decree of Descent proceedings when the petition is filed on or after August 1, 2000, regardless of the date of death. The revisions to the elective share statute are effective for decedents dying on or after August 1, 2000. Effective August 1, 2000, if a county is a known and identified creditor, the county must be served with supplemental notice. A ten-year lien will be filed for any medical assistance lien filed on or after August 1, 2000, regardless of the date of death.

In this month's "Notes & Trends":

• Administrative Law
• Alternative Dispute Resolution
• Civil Litigation
• Criminal Law
• Elder Law
• Employment & Labor Law
• Environmental Law
• Family Law
• Federal Practice
• Juvenile Law
• Probate & Trust Law
• Real Property
• Tax Law
• Torts & Insurance

Landowner/Tenant. After third parties entered an apartment and killed a tenant, the tenant’s trustee sued the landlord, alleging that the landlord’s negligence contributed to the tenant’s death. The district court granted the landlord’s motion for summary judgment and the tenant appealed, alleging that a Minneapolis Housing Ordinance required the landlord to repair the door to the apartment, the landlord had an independent common law duty to make sure the apartment was secure, and the lease required the landlord to repair the door. In a 2-1 decision, the Court of Appeals reversed and remanded, holding that when a landlord installs a security mechanism, whether voluntarily or in compliance with a statutory mandate, the landlord has a duty to ensure that the security mechanism remains in proper working condition. Funchess v. Cecil Newman Corp., C8-00-90, 2000 WL 1100213 (Minn. 8/8/00).

Property Tax. Taxpayer petitioned the tax court for a reduction in the assessment of its contaminated property on the basis that the county failed to take into account the stigma effect of contamination on the market value of the property. On cross-motions for partial summary judgment, the tax court granted taxpayer’s motion, concluding that Minn. Stat. § 273.11, subd. 17, does not apply to reductions in market value due to stigma. On appeal, the Supreme Court affirmed in a 4-3 decision, holding that contamination value as defined by Minn. Stat. § 273.11, subd. 17, does not include stigma and, therefore, taxpayer is entitled to partial summary judgment as a matter of law. The majority based its decision on the plain language of the statute, the legislative history, and that all property is to be valued at its market value. The dissent argued that the holding was premature because there was no evidence of stigma impact, and the statute clearly contemplates that stigma be included in contamination value. Dealers Mfg. Co. v. County of Anoka, No. C9-99-1869, 2000 WL 1129203 (Minn. 8/10/00).

Quiet Title. In a complicated case factually and procedurally, Hughes sued Fidelity for slander of title and to quiet title, claiming that Fidelity’s refusal to release its security interest in the property caused him to incur attorney fees and costs. Fidelity moved for summary judgment, claiming that Hughes could not prove the special damages required for an action for slander of title. The district court granted Fidelity’s motion, and the Court of Appeals affirmed. The Supreme Court reversed, holding that reasonable attorney fees that are a direct consequence of an action to quiet title resulting from slander of title constitute special damages. Paidar v. Hughes, C6-98-2192, 2000 WL 1060502 (Minn. 8/3/00).

Mortgage Reformation. Trustee Ode redeemed trust property by obtaining a loan secured by a mortgage on the trust property. Ode signed the note and mortgage as an individual and not trustee. Later Ode was asked to sign a backdated quitclaim deed that would have transferred the trust property in his capacity as trustee and not individually, which he refused. In the foreclosure action, Norwest sought reformation of the chain of title or, in the alternative, reformation of the mortgage to show that the mortgage was executed by Ode in his capacity as trustee. The district court reformed the mortgage and granted the decree of foreclosure. The beneficiaries appealed. The Court of Appeals reversed, holding that reformation is not available where the evidence does not clearly and convincingly show that the parties entered into a valid agreement not expressed in the written contract between the parties. Norwest Bank v. Ode, C0-00-133, 2000 WL 1051901 (Minn. 8/1/00).

In this month's "Notes & Trends":

• Administrative Law
• Alternative Dispute Resolution
• Civil Litigation
• Criminal Law
• Elder Law
• Employment & Labor Law
• Environmental Law
• Family Law
• Federal Practice
• Juvenile Law
• Probate & Trust Law
• Real Property
• Tax Law
• Torts & Insurance

Educational Foundation; Confidentiality of Tax Records. Motion to dismiss for lack of jurisdiction was proper, as the educational foundation was a public charity and its tax records identifying contributors to the foundation could therefore not be released in response to a request under the Freedom of Information Act. Stanbury Law Firm v. IRS, 99-3138, 2000 U.S. App. LEXIS 19066, 2000 WL 1121518 (8/9/00).

Tax Costs; Dividing Marital Estate. If husband had to sell grain to make the court-ordered payments to wife, the tax costs to husband in making payments had to be considered in dividing the marital estate because the marital estate was significantly reduced by tax costs. Lund v. Lund, C3-00-112, 2000 Minn. App. LEXIS 854, 2000 WL 1146017 (8/15/00).

Levied Property; Duty of Good Faith. Appellant leased appellee's property. Before the second year's rents were due, appellant received a notice of levy from plaintiff, the Internal Revenue Service (IRS), regarding taxes owed by appellee. Plaintiff (IRS) seized the property, and appellant bought the property at a tax sale. Appellant was unjustly enriched by its failure to make rent payments to appellee or to plaintiff under tax levies against appellee. United States v. Gaechter Outdoor Advertising Inc., 99-2201 & 99-2212, 2000 U.S. App. LEXIS 17411, 2000 WL 985863 (7/18/00).

Commuting Not Deductible. Commuting expenses between a taxpayer's home and place of business are personal expenses and thus not deductible. The fact that a taxpayer chooses to live a substantial distance from his place of business provides no exception to this general rule. In addition, the living expenses incurred as a result of this decision are also nondeductible personal expenses. Knelman v. Comm'r, 8397-99, T.C. Memo 2000-268, 2000 WL 1204752 (8/24/00).

Fiduciary Duty to Former Employee. Company breached its fiduciary duty to an agent when it did not pay taxes allegedly owed to Taiwan government, which resulted in its agent not being allowed to leave Taiwan. Shen v. Leo A. Daly Co., 99-3174/99-3333, 2000 U.S. App. LEXIS 18358, 2000 WL 1056230 (8/2/00).

Licensing Patents: Substantial Asset Transfer. Trustee for holders of corporate convertible notes raised genuine issues of fact on claim that corporation, in licensing patents for medical technology, effected a substantial asset transfer without making a repurchase offer. Trial court reversed in part, because appellant raised genuine issues of material fact on its claim for breach of the indenture; therefore, summary judgment was premature. Affirmed in part, because appellant did not demonstrate that it lacked an adequate legal remedy or that it would suffer irreparable harm. U.S. Bank Nat'l Ass'n v. Angeion Corp., 2000 Minn. App. LEXIS 859, 2000 WL 1146245 (8/15/00).

Swap Transaction Recharacterized. In field service advice, the Service concluded a swap transaction should be recharacterized as a series of loans from foreign subsidiaries to their U.S. parent. FSA 200031023 (4/28/00).

New Reporting and Disclosure Requirements for Political Organizations. IRS Announcement 2000-72 includes the proposed revenue ruling providing guidance on the new reporting and disclosure requirements for §527 political organizations. 2000-35 I.R.B. (8/28/00).

Availability of 527 Disclosures. IRS News Release 2000-53 announces that information disclosed by 527 political organizations is available on the IRS web site at www.irs.gov/bus_info/eo/8871.html. IR-2000-53.

Comprehensive Case Resolution Pilot Program. IRS News Release 2000-55 announces that the agency is implementing the Comprehensive Case Resolution pilot program to aid in the resolution of disputes between the IRS and large business taxpayers. The program creates IRS teams composed of representatives from the Large and Mid-Sized Business Division, Appeals, and Chief Counsel to handle each case. Participating taxpayers will work with one team from the IRS rather than several separate agencies. The pilot program will involve eight to ten large business taxpayers who currently have an open cycle in Coordinated Examination and at least one cycle docketed in Counsel or Appeals. The IRS will solicit applications through September 29, 2000, and select participants by October 31, 2000. IR-2000-55.

Hayworth Bill: Public Power Firms; Exempt Status. H.R. 4971 would let public power companies participate in state "open access" restructuring plans without jeopardizing the exempt status of their bonds. The Hayworth bill was introduced by Ways and Means Committee member J.D. Hayworth, R-Ariz. H.R. 4762, "Electric Power Industry Tax Modernization Act."

Grams: "Farmer-Owned Cooperatives Never Intended to be Excluded". Sen. Rod Grams, R-Minn., has introduced S. 2884, which would correct an inconsistency in the 1990 Omnibus Budget Reconciliation Act. The bill would expand the definition of small ethanol producer to include facilities with up to 60 million gallons in annual capacity and allow more farmer-owned cooperatives access to the small ethanol producer credit.

Taxation of Mobile Telecommunication Services. Amendment to Title 4 of the United States Code to establish nexus requirements for state and local taxation of mobile telecommunication services. Mobile Telecommunications Sourcing Act became Public Law (P.L. 106-252) on July 28, 2000.

Marriage Tax Penalty Relief Reconciliation Act Vetoed. A bill to provide for reconciliation pursuant to section 103(a)(1) of the concurrent resolution on the budget for fiscal year 2001 was presented to the President on July 27, 2000, and vetoed by the President on August 5, 2000. 2000 Bill Tracking H.R. 4810; 106 Bill Tracking H. R. 4810.

Nussle Bill: Small Insurance Companies. H.R. 5076 would provide a clarification on the exemption from tax for small property and casualty insurance companies. The bill, whose principal cosponsor is Jim Nussle, R-Iowa, would modify the antiabuse rule and increase the premium limitations to reflect inflation since they were first imposed.

Senate Debates Marriage Tax Penalty Relief Reconciliation Act. H.R. 4810, the Marriage Tax Penalty Relief Reconciliation Act, would reduce the marriage penalty by providing for adjustments to the standard deduction, the 15 percent and 28 percent rate brackets, and the earned income credit.

Resolutions from Multistate Tax Commission. At its 33rd annual meeting, the Multistate Tax Commission decided: 1) to support the "principles embodied" in the "Internet Tax Moratorium and Equity Act" (S. 2775) (sponsored by U.S. Sen. Byron L. Dorgan, D-N.D.); and 2) to oppose the "New Economy Tax Simplification Act," or NETSA (S. 2401) (sponsored by U.S. Sens. Judd Gregg, R-N.H., and Herb Kohl, D-Wis.).

In this month's "Notes & Trends":

• Administrative Law
• Alternative Dispute Resolution
• Civil Litigation
• Criminal Law
• Elder Law
• Employment & Labor Law
• Environmental Law
• Family Law
• Federal Practice
• Juvenile Law
• Probate & Trust Law
• Real Property
• Tax Law
• Torts & Insurance

Insurance Policy is Personal to Contracting Party. Lowell Saunders and his spouse moved into a home pursuant to an oral agreement and consented to paying the remaining mortgage balance. The owner then conveyed the property to herself and seven siblings. Lowell Saunders built an addition onto the home and purchased flood insurance once he learned the potential for flood damage. He received the proceeds and intended to build on the same site, but was prevented from doing so by flood zoning restrictions. He kept the proceeds.

The "owners" sued Saunders for conversion. The district court ruled that Saunders was entitled to keep the insurance proceeds, and the Minnesota Court of Appeals affirmed. <I>Saunders v. Saunders<P>, C4-00-135, 2000 WL 1100044 (Minn. App. 8/8/00).

Subrogation. Hoff was seriously injured in an auto accident. His mother applied for Medical Assistance on his behalf. She then brought a tort claim, on which the state filed a lien pursuant to Minn. Stat. §256B.015. The district court held that the statute was invalid as it conflicted with 42 U.S.C. §§1396K and 1396P.

The Minnesota Court of Appeals reversed, finding the tort settlement was subject to the state subrogation lien. Martin v. Minnesota, C3-00-398, 2000 WL 1146813 (Minn. App. 8/15/00).

Entitlement of Indemnity. Anderson, a Minnesota resident, was injured in Nevada when Thiemen rear-ended Anderson’s truck. Anderson was insured by State Farm under a Minnesota policy. State Farm paid Anderson no-fault medical expenses and wage loss benefits. Thiemen was a Nebraska resident and drove a Nebraska vehicle insured by Great West under a Nebraska policy. State Farm sought indemnification from Great West and moved to district court to compel Great West to arbitrate. The arbitrators awarded State Farm $30,111, and the district court affirmed the award.

The Minnesota Court of Appeals affirmed. It found that indemnification was appropriate pursuant to Minn. Stat. §65B.53 because no language restricted it to accidents within Minnesota. State Farm Mut. Ins. Co. v. Great West Casualty Co., C9-00-566, 2000 WL 1146819 (Minn. App. 8/15/00).

No-Fault Wage Loss Reimbursement. The Minnesota No-Fault Act prohibits insurers from providing coverage for wage loss reimbursement to someone who has reached the age of 65 if he or she will not reasonably be able to receive a benefit from the coverage. The burden is on the insurer to inquire of their insureds who are 65 years of age or older at each renewal of the policy as to whether they want to accept or deny work loss benefits.

American Family failed to inquire at each renewal of its insured as to whether the insured would reasonably be expected to recover wage loss reimbursement if injured in an accident. Therefore, the insured, who was not offered the opportunity to accept or exclude wage loss coverage, was entitled to wage loss reimbursement even though his policy excluded it. Am. Family Ins. Group vs. Schroedel, C7-99-428, 598 N.W.2d 704 (Minn. 8/28/00).

Breach of Promise to Marry. Plaintiff sued defendant under several tort theories, including negligent and intentional infliction of emotional distress and fraud. Plaintiff claimed that she suffered psychological and emotional damage because defendant coerced her into having an unwanted abortion by promising that he would marry her when his divorce was final.

The Court of Appeals affirmed the dismissal of plaintiff’s claim because the essence of her action was that defendant had promised to leave his wife and marry her to have a baby with her in the future. Minnesota law bars not only specific claims for breach of promise to marry, it also bars any other claim for damages that is predicated on a promise to marry. See Minn. Stat. §553.01. M.N. v. D.S., C9-00-437, 2000 WL 1182815 (Minn. App. 8/28/00).

Timely Proof of Loss; Condition Precedent. Reversing the Court of Appeals and the district court, the Minnesota Supreme Court held that the Minnesota standard fire insurance policy requirement that a proof of loss be submitted within 60 days is not a condition precedent to recovery, nor does a failure to submit a timely proof of loss necessarily operate as a complete bar to recovery. Leamington Co. v. Non Profits’ Ins. Ass'n, C9-98-2056, 2000 WL 1060521 (Minn. 8/7/00). See also Nathe Brothers, Inc. v. Am. Nat'l Fire Ins. Co., C5-98-2328, 2000 WL 1060522 (Minn. 2000).