September 2000

In this month's "Notes & Trends":

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

Rule 60.02 Motion; Time for Appeal. The Minnesota Supreme Court recently clarified that a motion under Minn. R. Civ. P. 60.02(a) and (f) to vacate a judgment and supplement the record with evidence known to exist before the judgment was entered is a "proper" motion under Rule 60, such that the time to appeal under Minn. R. Civ. App. P. 104.01 is tolled. Appellate Rule 104.01 states that the time to appeal is tolled if a "proper and timely motion" under Minn. R. Civ. P. 60 is filed. Here it was undisputed that a Rule 60 motion had been timely filed. The only question was whether the motion was "proper" because it sought to vacate a judgment to allow introduction of evidence that was known to exist before the judgment was entered. The Court of Appeals held that the Rule 60 motion was not proper and therefore the Rule 60 motion did not toll the running of the time to appeal under Minn. R. Civ. App. P. 104.01 subd. 2. As a result, the Court of Appeals dismissed the appeal, concluding it was time-barred. The Minnesota Supreme Court reversed, holding that the test for a "proper" Rule 60 motion "should not be dependent on the success of the motion." Madson v. Minn. Mining and Mfg. Co., 612 N.W.2d 168 (Minn. 2000).

Dismissal; Failure to Prosecute. The Minnesota Court of Appeals recently reaffirmed that a condition precedent to a proper dismissal for failure to prosecute is a court order requiring the parties to proceed to trial. The appellate court further held a party’s failure to settle its action did not, without more, warrant dismissal of the case. Minn. Humane Soc'y v. Minn. Federated Humane Societies, 611 N.W.2d 587 (Minn. App. 2000).

Procedural Requirements Enforced. The Minnesota Court of Appeals recently reaffirmed that the procedural requirements of Minn. Stat. §549.211 are mandatory, such that sanctions may not be awarded if the procedural requirements are not met. The appellate court explained that the procedural requirements -- including the requirement that a motion under Minn. Stat. §549.211 must be served 21 days before it is filed -- are intended to give the opposing party notice and a reasonable opportunity to respond and withdraw or correct an unfounded position. Peterson v. Albert, 2000 WL 720011 (Minn. App. 6/6/00).

"General" Personal Jurisdiction. A nonresident Wisconsin corporation is subject to "general" personal jurisdiction in Minnesota because it advertises in Minnesota publications, including Minnesota Monthly and newspapers in Duluth, St. Paul and Minneapolis; it mails advertisements to Minnesota residents; it buys goods and services in Minnesota; and company employees have traveled to Minnesota to attend annual meetings, training seminars, and the like. The court characterized the defendant’s contacts as continuous and systematic general business contacts that indicate the defendant has generally subjected itself to jurisdiction in the state. Marshall v. Inn on Madeline Island, 610 N.W.2d 670 (Minn. App. 2000).

In this month's "Notes & Trends":

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

Expungement; Insanity; Inherent Judicial Authority. The Supreme Court reverses the Court of Appeals in this case. For purposes of expungement under Minn. Stat. §609A, the verdict of not guilty by reason of insanity is not a resolution in favor of a petitioner seeking expungement. The apparent scope of resolutions "in favor of" a petitioner is limited to verdicts of not guilty and voluntary dismissals. The core reason for this decision is that although a person may be found "not guilty" by reason of insanity, that person has been found to have committed the act of which he or she was accused (in the first stage of the bifurcated trial procedure).

Second, the district court did not abuse its discretion in not expunging the record using its inherent power. The benefits to the respondent do not outweigh the disadvantages to the public from elimination of the criminal record. The district court found that such expungement would override the very purpose of background checks, the public has a compelling interest in maintaining the respondent’s record of such a violent incident (first-degree murder), and the respondent is currently gainfully employed. Given these reasons, the district court did not abuse its discretion in denying the expungement. State v. Ambaye, 2000 WL 862744 (Minn. 6/29/00).

DWI/Implied Consent; Right to Counsel. Appellant was involved in a severe two-car accident. When he regained consciousness, he had intravenous tubes in both arms, was fitted with a neck brace, had at least three medical personnel attending him, and a helicopter was enroute to transport him to another hospital. The responding officer read the appellant the implied consent advisory and then advised the appellant that it was impossible for him to consult with counsel about taking the test. Appellant agreed to take the test without speaking to counsel.

Held, the right to counsel of a driver prior to taking a blood test is not violated if the driver’s need for medical treatment makes it impossible for the driver to use the telephone. Groe v. Commissioner of Public Safety, 2000 WL 821501 (Minn. App. 6/27/00).

DWI; Right to Counsel; Waiver. Immediately upon his arrest, the appellant invoked his right to counsel, although he laughed and smiled at the time. In response to each question from the implied consent advisory, the appellant remained silent but would smile and roll his head. When the police officer asked the appellant three times if he wanted a lawyer, the appellant refused to respond. When asked to submit to a blood, urine, or breath test, the appellant again refused to reply. En route to jail, the appellant told the arresting officer that he was going to "make things difficult" for him and that the officer would "pay for this." The district court judge affirmed the revocation of his license, concluding that the appellant’s failure to respond to the officer’s question amounted to a retraction of his request for an attorney and a refusal to test.

@BODY:Held, the appellant’s behavior during the reading of the implied consent advisory frustrated the process and constituted a retraction of his request for an attorney. It was reasonable for the officer to complete the statutorily mandated duty of informing the appellant of his rights and duties pursuant to the implied consent law before granting access to an attorney. Citing McCann v. Commissioner, 361 N.W.2d 169 (Minn. App. 1985), drivers have no absolute right to immediate access to an attorney. The appellant’s further silence when asked whether he wanted an attorney, following invocation of the advisory, constituted a retraction of his request for counsel. Busch v. Commissioner of Public Safety, 2000 WL 979127 (Minn. App. 7/18/00).

Incendiary Device; First Amendment. Minn. Stat. §609.668, subd. 2, prohibits certain persons, including minors, from possessing incendiary devices. The appellant in this case built and burned two wooden crosses, about three feet tall, on Minneapolis school property, causing approximately $100 in damage to the lawn. The district court adjudicated the appellant delinquent for committing felony possession of incendiary devices.

Held, a burning wooden cross, ignited with pieces of rags soaked in a flammable liquid, is an incendiary device within the meaning of 609.668 , subd. 2. The crosses were made to burn and do not fall within the statutory exceptions.

Second, the court rejects the contention that the crosses do not fall within the definition of incendiary devices because they were made to produce a special form of symbolic speech. This argument is rejected as leading to an absurd result. Finally, Minn. Stat. §609.668, subd. 2, as applied to the appellant in this case, is not unconstitutional. What is being punished are the acts of igniting the cross and the potential and actual damage, rather than the idea it expresses. In re C.P.K, C6-99-2090 (Minn. App. 6/27/00).

Controlled Substance; Potency Defendants were prosecuted for possession of khat, a plant containing the controlled substance cathinone. Khat is a plant native to East Africa that is illegally imported to the United States. Defendants maintained that the amount of cathinone in the khat deteriorates rapidly by the time it reaches America. The testing methods used by the state do not quantify the amount of cathinone present or determine whether it is in the form of the negative or positive isomer. The negative isomer of cathinone is reportedly more potent.

In answering this certified question, the Supreme Court determines that the state is not required to prove that cathinone is present in a quantity "having a stimulant effect" in order to support a controlled substance charge for possession. Minn. Stat. §152.025, subd. 2(1), uses the term "having a stimulant effect" to modify the term "substance" in general, and not the individual chemicals. State v. Ali, 2000 WL 945296 (Minn. App. 7/11/00).

Rule 20 Examination. In a prosecution for second-degree murder, a Rule 20 competency examination was completed. The defense did not raise the issue of mental deficiency at trial. During cross-examination, the prosecutor impeached the appellant’s credibility by showing that the appellant lied to the examiner. Although there was a discussion at the bench, it was off the record, and there is no record of any objections by the defense.

Held, this is plain and reversible error. Rule 20.02, subd. 5, prohibits such use of the Rule 20 material. As such, it was plain error and the error substantially impacted the jury verdict, since it went to the heart of the appellant’s credibility in this self-defense case. State v. Villalobos, 2000 WL 943561 (Minn. App. 7/11/00).

Restitution. In a post-conviction motion, appellant challenged the court order of restitution. The appellant’s affidavit did not address with specificity his objection to certain items in the restitution order. The court denied the motion.

Held, by not submitting an affidavit which specifically identified the nature of the challenged items and the reason justifying differing amounts of dollar restitution, the appellant waived his right to challenge the items of restitution. Minn. Stat. §611A.045, subd. 3, places the burden of both pleading and production on the offender. Such burdens were not met in this case, and thus the appellant is barred from challenging other items of restitution. State v. Thole, 2000 WL 959872 (Minn. App. 7/11/00).

Parole Hearings; Separation of Powers. The authority of the Commissioner of Corrections under Minn. Stat. §243.05 to regulate parole does not violate the separation of powers clause. It is not unconstitutional infringement upon the role of the judiciary. State v. Schwartz, 2000 WL 871191 (Minn. App. 6/26/00).

Departure: Criminal History. After being found guilty by a jury of third-degree criminal sexual conduct, the respondent faced an 88-month sentence based on a four-point criminal history. The district court, however, decided that a criminal history of four "overstated" the defendant’s criminal history and that a two-point criminal history would be the appropriate way to take his prior history into account. Accordingly, the judge sentenced the respondent to six to eight months in prison, based on a criminal history of two, rather than 88 months in prison, based upon a criminal history of four.

Held, the sentencing court erred in disregarding two of the respondent’s four prior criminal history points. Although a judge has the ability to find aggravating or mitigating factors in determining a departure, "it simply disregarded two criminal history points. . . . [A] district court cannot ignore criminal history points." State v. Reece, 2000 WL 979177 (Minn. App. 7/18/00).

Search and Seizure. Appellant drove with an expired license plate on the front of his motor vehicle, as well as a valid "in transit" plate on the rear of his vehicle. He was pulled over on the basis of the expired front plate and later arrested for DWI.

Held, because the appellant violated Minn. Stat. §169.79 by displaying an expired license plate on the front of vehicle he was driving, police had a reasonable suspicion of a driving violation, notwithstanding the valid "in transit" license at the rear of the vehicle. State v. Kittridge, 2000 WL 948939 (Minn. App. 7/11/00).

Juror Misconduct. Following a guilty verdict, defense counsel received a juror’s typed and signed response to the post-verdict questionnaire that had been sent by the county attorney: "I wanted more from [defense counsel] in presenting the defense. I know a person is supposed to be innocent until proven guilty, but in reality it didn’t work that way." The juror also stated that she did not believe the testimony of the codefendants, she believed the appellant, wanted him to be not guilty, and did not feel that he was a threat to society. The trial court denied the defense request for a Schwartz hearing. The defense specifically argued that the juror must have lied on voir dire when she said that she would uphold the law as instructed by the judge.

Held, the Schwartz hearing was properly denied. Minn. R. Evid. 606(b) allows inquiry only into extraneous prejudicial information that may have been improperly considered by the jury or violence or violent acts brought to bear on the jurors from any source. In this case, the statement from the juror directly referred to the verdict via thought processes of that juror. As such, it may not be received in evidence. State v. Pederson, 2000 WL 994325 (Minn. 7/20/00).

Self Defense; Duty to Retreat.The appellant and his girlfriend got into an argument at the appellant’s home. His girlfriend testified that the appellant was the aggressor, while the appellant testified to the reverse. At trial, the appellant asserted the affirmative defense of self-defense relating to these charges of domestic assault and fifth-degree assault. The district court instructed the jury that "the legal excuse of self defense . . . includes the duty to avoid the danger if reasonably possible." At the time of the offense, the appellant and his girlfriend had been living together for eight days, and their intention was to reside together permanently at the appellant’s home.

Held, it was error for the trial judge to give the duty-to-retreat instruction. This case involves self-defense between coresidents of the same dwelling and is not a "defense of dwelling" case that applies to force against intruders, and is not available between coresidents. Citing State v. Carothers, 594 N.W.2d 897 (Minn. 1999), an instruction on the duty to reasonably retreat from the danger should not be given to a jury on a self-defense claim occurring between coresidents. Even though defense counsel did not object at trial, the verdict is reversed because the instructions were misleading or confusing on fundamental points of law. State v. Glowack, 2000 WL 978743 (Minn. App. 7/18/00).

Stay of Adjudication; Post-Conviction Relief. The appellant was convicted of fifth-degree possession of a controlled substance. On stipulated facts, the district court found the appellant guilty but stayed adjudication under Minn. Stat. §152.18. Appellant appealed her "conviction" to the Court of Appeals, challenging the denial of her motion to suppress her statement to the police and the evidence discovered. The appeal was dismissed pursuant to State v. Verschelde, 595 N.W.2d 192 (Minn. 1999). Appellant then filed a petition for post-conviction relief.

Held, the court properly denied the petition for post-conviction relief. Construing Minn. Stat. §590.01, subd. 1, a stay of adjudication is not considered to be a conviction. It is, in effect, a continuance for dismissal and, for purposes of appellate review, is treated as a pretrial order. Should the appellant violate her probation and a conviction be entered against her, she will then have the right to raise the constitutional claim in a direct appeal. Smith v. Minnesota, 2000 WL 979126 (Minn. App. 7/18/00).

Constructive Possession of Firearms. In executing a search warrant of the appellant’s residence, police found a loaded pistol in a kitchen closet. In searching a detached garage, officers discovered eight and one-half pounds of marijuana. Two unloaded shotguns were lying across the garage rafters, although there was no shotgun ammunition found anywhere. In a car parked inside the garage, officers found gun stocks and gun parts in a trunk and about a quarter of a pound of marijuana in a plastic bag behind the license plate. Another vehicle parked in the yard yielded two unloaded assault rifles in a gun case in the back seat and a scale under the hood. In a post-Miranda statement, appellant denied ownership of any firearms but did admit placing them where they were found in order to keep them for a friend. Under those stipulated facts, he was found guilty of fifth-degree possession, but was given the three-year mandatory minimum firearm enhancement required by Minn. Stat. §609.11, subd. 5.

Held, the district court correctly sentenced appellant under the firearm enhancement statute. Under 609.11, subd. 5, the term "had in possession" includes both actual and constructive possession of firearms. An individual has constructive possession of a firearm if he consciously exercises his dominion and control over it, which facts are present in this case. Furthermore, such weapons increase the risk of violence related to drug offenses. The court rejects a proposed bright line rule to require spatial proximity between a firearm, drugs, and defendant. This is merely one of several nonexclusive factors enumerated in State v. Royster, 590 N.W.2d 82 (Minn. 1999). Salcido-Perez v. Minnesota, 2000 WL 979669 (Minn. App. 7/18/00).

In this month's "Notes & Trends":

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

Whistleblowing. A whistleblower claim by an employee under Minn. Stat. §181.932, subd. 1(a), is not actionable unless the reported impropriety implicates a violation of a federal or state law. In Obst v. Microtron, 2000 WL 967979 (Minn. 2000), the state Supreme Court held that a $340,000 jury verdict for a quality control manager was improper because the whistleblower did not act in good faith, since the problems about testing of parts he reported were already known by the manufacturer and the testing deficiencies did not violate any particular laws.

Indemnification. The district court lacks subject matter jurisdiction over a declaratory judgment action challenging a decision by the Commissioner of Public Safety regarding indemnification of department employees. In State v. Tokheim, 611 N.W.2d 375 (Minn. App. 2000), the appellate court vacated a trial court ruling upholding the commissioner's refusal to indemnify two state highway patrol officers who were sued by a woman for rape. The court ruled that the commissioner's decision was quasijudicial and could only be reviewed by certiorari to the appellate court and not by a declaratory judgment action in district court. The court also held that statements made during an investigation into workplace wrongdoing are privileged from defamation if based on reasonable grounds and made without malice.

Construing Delaware law, the appellate court held that an employee who successfully defends against a sexual harassment claim is entitled to indemnification. In Rudebeck v. Paulson, 2000 WL 821490 (Minn. App. 2000), the court required the Minnesota employer, which was incorporated in Delaware, to pay the legal expenses incurred by the exonerated employee.

Discrimination Cases. The 8th Circuit Court of Appeals recently upheld dismissal of four discrimination and harassment claims under Title VII of the Federal Civil Rights Act, while remanding one claim based on retaliation.

In Buettner v. Arch Coal Sales Co., 2000 WL 815664 (8th Cir. 2000), the court rejected a claim of wage discrimination by an in-house woman on grounds that her male counterpart, who was paid more, had more extensive and broader experience, which justified a higher salary. The court also rejected the contention that the biased remarks of the president of the company reflected a discriminatory discharge because the comments were made three months before a reduction in force that also effected a male colleague.

In Phillips v. Union Pac. R.R., 2000 WL 815661 (8th Cir. 2000), the racial and gender discrimination claims of a woman employee who was suspended after she threatened to kill two coworkers and occasionally carried a gun were dismissed. The female employee was not similarly situated to a disruptive male employee who was not suspended because he had never made death threats or was shown to be likely to intentionally harm co-workers.

A hostile work environment claim by a woman electrician was dismissed in Stuart v. General Motors, 2000 WL 815940 (8th Cir. 2000), because she did not timely complain about sexually offensive comments and written materials in the workplace. The employee was properly fired after she engaged in a sex act on the job with a coworker.

A retaliation claim by a woman employee was remanded, while her sexual harassment claim was dismissed, in a Minnesota case, Hocevar v. Purdue Frederick Co., 2000 WL 798101 (8th Cir. 2000). The harassment claim was not actionable because the gender-based sexual language the woman complained of was directed to both men and women and used by the plaintiff as well. But her retaliation claim should be tried because she was fired soon after filing an EEOC charge that triggered heightened scrutiny of her job performance.

Unemployment Cases. Claims of illness were insufficient in one case but permissible in another seeking reemployment compensation benefits. In Harms v. Rosepoint Senior Community, 2000 WL 821653 (Minn. App. 2000)(unpublished), the appellate court upheld denial of benefits for an employee who walked off work after receiving a "final" disciplinary warning, claiming she was sick. Since she did not report that she was sick and had no permission to leave in the middle of a work shift, her action constituted disqualifying "misconduct."

An employee who quit because her allergies and asthma were aggravated by others' smoking in the workplace was granted a new reemployment hearing in Altmann v. United Healthcare Serv., 2000 WL 821628 (Minn. App. 2000)(unpublished). The reemployment insurance judge ruled against the claimant because she had not presented a note from her doctor to management before she quit. The court remanded the matter to determine whether the employee had a serious illness that made it "medically necessary" for her to quit and made "reasonable efforts" to try to maintain her job.

Workplace Investigations. A Tennessen warning is not required to be given to a public sector employee during an investigation of incidents that occur with the scope of employment. In Kobluk v. Univ. of Minn., C1-99-1932, 2000 WL 871190 (Minn. App. 2000), the Court of Appeals rejected a University of Minnesota employee's claim that investigative reports about allegations against him were wrongfully placed in his personnel file, which resulted in a denial of tenure. The court ruled that Tennessen warnings under the Minnesota Government Data Practices Act, Minn. Stat. §13.05, subd. 4, were not required because the employee's statements were given during an investigation of workplace wrongdoing.

Defamatory statements made about a private sector employee during an investigation of allegations of workplace wrongdoing are privileged from suit. In Rudebeck v. Paulson, C1-99-1574, 2000 WL 821490 (Minn. App. 2000), the appellate court applied a qualified privilege to such statements, when based on reasonable or probable cause and made without malice.

An employee's claim of defamation when his boss told other personnel of the company that he was fired because he was dishonest was rejected by the appellate court in Hunt v. Bergstrom Jewelers, Inc., 2000 WL 955599 (Minn. App. 2000)(unpublished). The court held that the statement was true and, therefore, not actionable because the employee lied about the reason he needed to take time off work. The court also rejected a claim of disability discrimination by the employee, who was dyslexic, because there was insufficient evidence to show his dyslexia materially limited his ability to work.

ADA. An employee need not bypass a bona fide security system to accommodate a disabled worker under the Americans with Disabilities Act. In Boersig v. Union Elec. Co., 2000 WL 891741 (8th Cir. 2000), the 8th Circuit Court of Appeals denied a disability discrimination claim of failure to promote because the position the claimant sought was not available under the company security system established in a collective bargaining agreement.

Family Leave. The 8th Circuit also recently ruled on a pair of significant cases under the Family and Medical Leave Act (FMLA).

The regulation promulgated by the Department of Labor requiring an employer to notify an employee that it is invoking family leave law before the employee is given time off, 29 CFR §700(a), is invalid. Addressing an issue that has split the courts, the 8th Circuit Court of Appeals in Ragsdale v. Wolverine Worldwide, 2000 WL 943787 (8th Cir. 2000), held that an employee is not entitled to the additional 12 weeks of unpaid leave under the act after a seven-month leave granted by the employer, because the employee was not told that the time off was designated as family leave.

An employee's "serious health condition" for three days for purposes of invoking family leave is to be determined with reference to the current job, not a job that the employee later takes. In Stekloff v. St. John's Mercy Health Systems, 2000 WL 959613 (8th Cir. 2000), the 8th Circuit upheld a family leave claim by a nurse who left work, was certified as disabled by her doctor, and then took a different part-time job seven days later.

In this month's "Notes & Trends":

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

Cost Recovery. On June 14, 2000, the 8th Circuit Court of Appeals affirmed a judgment against a property owner attempting to recover its contamination cleanup costs. Union Pacific remediated its property of contamination allegedly caused by its former tenant, Reilly Industries, as part of the sale of its property. Once completed, Union Pacific sued Reilly Industries to recover these cleanup costs under CERCLA, MERLA and state common law.

In its decision, the 8th Circuit affirmed the district court grant of partial summary judgment to the defendant, Reilly Industries, regarding the Union Pacific CERCLA claims. Under the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA), a private party cannot recover its reasonable and necessary response costs from a responsible party unless it complies with the National Contingency Plan (NCP). The district court found Union Pacific failed to "substantially comply" with the NCP when it gave the public less than the required 30 days to participate "meaningfully" in the selection of the response action. The court rejected the Union Pacific argument that extensive involvement by the Minnesota Pollution Control Agency in the remediation selection process satisfied this requirement. Furthermore, Union Pacific deviated from the NCP when it selected the remediation method before conducting a formal remedial investigation and feasibility study.

The 8th Circuit also upheld the district court decisions on the other Union Pacific claims. Union Pacific argued the statute of limitations on its Minnesota Environmental Response and Liability Act (MERLA) claim began when it commenced the cleanup. The district court determined the claim instead began to run when Union Pacific first knew or reasonably should have known of the contamination. Because Union Pacific filed against Reilly Industries more than six years after becoming aware of the contamination, the court dismissed the MERLA claim. The Union Pacific indemnity claim failed because the court found neither an express contractual relationship nor an implied legal duty between the parties. And the district court found no basis to grant the Union Pacific equitable claim of contribution, given its failure to invoke its MERLA rights in a timely fashion. Union Pac. R.R. Co. v. Reilly Indus., Inc., 2000 WL 764780 (8th Cir. Minn.).

Final TMDL Rules. On July 11, 2000, the Environmental Protection Agency (EPA) issued the final version of its revised Total Maximum Daily Load (TMDL) rules. Under §303(d), the Clean Water Act, states are required to establish TMDLs for waters that do not meet applicable water quality standards. The state must then establish and enforce discharge controls from point and nonpoint pollutant sources as necessary to achieve these standards. States have nonetheless been slow to establish TMDLs, due largely to the difficulty in regulating nonpoint sources.

Under the new EPA rules, states must establish TMDLs for all impaired waters within ten years. The EPA may grant up to five years of additional time "where necessary." In addition to setting the limits themselves, states must also provide EPA with a plan as to how each TMDL will be implemented. Implementation plans may vary based on whether the water body is impaired only by point sources subject to National Pollutant Discharge Elimination System (NPDES) permits, only by "other sources" (including nonpoint sources) or by both. The new rules set a goal of five years for implementing management measures or control actions to achieve load allocations and ten years for attaining water quality standards. 65 Fed. Reg. 43,585 (2000).

Environmental Review Process. At its July 20, 2000 meeting, the Minnesota Environmental Quality Board (EQB) approved the creation of a committee to advise the EQB on changes in the state environmental review of rules and statutes. EQB Chair Gene Hugoson will appoint an unspecified number of committee members from four groups: environmental organizations, businesses, local governments and the public. Suggestions for appointees may be submitted to Jon Larsen at Minnesota Planning, 658 Cedar St., St. Paul, MN 55155 or by email to eqb@mnplan.state.mn.us.

In this month's "Notes & Trends":

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

Child Support Overpayment. The father continued to pay child support after the child turned 18. The magistrate judge ordered the county to withhold the overpayment, after satisfaction of his arrearages, from the mother’s wages. The Court of Appeals reversed after concluding that the withholding statute limited the trial court authority to reducing support arrearages and to using any remaining overpayment to reduce future support payments by no more than 20 percent. It said that no statutory authority existed to withhold against an obligee’s wages either before or after emancipation. Goplen v. Olmsted County, C4-99-1679, 610 N.W.2d 686 (Minn. App. 5/23/00).

Clerical Error, Motion Voluntarily Withdrawn. The magistrate judge denied the mother’s motion to increase child support. On the motion for review, she corrected what she termed was a clerical error, under Rule 371.01, based on a finding that the child’s health insurance cost was $175 per month, not $87.50. However, there was nothing obvious in the original record to justify the new finding and the result was a substantive change in the first order, according to the Court of Appeals. It found that the original error was not a clerical error because it was not apparent on the face of the record and could not be corrected by referring only to the original record. The rule could not be used in this manner because it changed the prevailing party on the initial motion.

At the initial hearing, the father voluntarily withdrew his motion for reimbursement of support overpayments before the mother responded, but the magistrate judge dismissed his motion with prejudice. The Court of Appeals found no justification in her order and reversed the dismissal as an abuse of discretion. Brazinsky v. Brazinsky, C0-99-1954, 610 N.W.2d 707 (Minn. App. 5/30/00).

Hortis/Valento/Tweeton Formula; Sole Physical Custody. The mother was awarded sole physical custody and the parties stipulated that the father’s visitation schedule placed the children with him 39 percent of the time. The trial court refused to apply the Hortis/Valento formula to his child support obligation. The Court of Appeals examined the Tweeton (equal division of time) and Rogers (55/45 split) decisions, but declined any further modification of the guidelines. It concluded that the use of a strict percentage rule as a guidelines approach is contrary to the assumption that support and visitation are separate and distinct issues, which is basic to dissolution law. Next, the appellate court noted that the Tweeton decision was partially based on the assumption that either parent could be an obligor and that the Legislature amended the definition in 1998 to provide that "a person who is designated as the sole physical custodian of a child is presumed not to be an obligor for purposes of calculating current support under section 518.551 unless the court makes specific written findings to overcome this presumption." It said that this provision suggests that the guidelines, except for joint physical custody, are presumed to apply without a Tweeton adjustment. In the present case, the father presented no evidence of unduly increased expenses or prejudice to the welfare of the children while in his care. The trial court refusal to reduce the father’s support obligation was affirmed, with the following pronouncements:

We now limit the use of the Hortis/Valento/Tweeton guidelines modification to cases logically comparable to those cases, when parties have joint physical custody or when the non-custodial parent provides a nearly equal amount of physical care, as in Tweeton and Rogers. In all other cases, the statutory guidelines are presumed to apply without a Hortis/Valento modification only by making written findings justifying the adjustment as a deviation.

Rumney v. Rumney, C9-99-1838, 611 N.W.2d 71 (Minn. App. 6/6/00).

Unvested Military Pension. The trial court held that a spouse is not entitled to division of a military pension unless the service member completed ten years of creditable military service during the parties’ marriage. The Court of Appeals found that the federal statute governs only the method of payment and does not preclude the division of military pensions where the ten-year requirement has not been met. It concluded that respondent’s currently nonvested and unmatured pension may be classified as marital property. Deason v. Deason, C2-99-1650, 611 N.W.2d 369 (Minn. App. 6/6/00).

Appeal Period, Post-trial Motion. For coverage of Madson v. Minn. Mining and Mfg. Co., CX-99-1508, 612 N.W.2d 168 (Minn. 6/15/00), see "Civil Litigation," supra.

Paternity; Res Judicata. Mower County brought a paternity action on behalf of a child. Blood tests showed a 96.56 percent likelihood of paternity, but the state failed to establish paternity. The county brought a second action on behalf of the mother, which the court dismissed as barred by res judicata and collateral estoppel based on the dismissal of the child’s prior action.

On appeal, the county argued that a mother and child are not in privity and have independent rights to bring suit. The Court of Appeals said that a separate cause of action is available to a child unless the child’s specific interests were addressed on the merits in a paternity action. Case law also provides that a mother has a definite financial interest in a child support award, and due process requires that she have an opportunity to be heard and present evidence. The appellate court found that the mother had the assistance of legal counsel, who represented her child in the prior action, and that she attended and testified at the hearing. It concluded that her interests were addressed and she was in privity with her child for purposes of res judicata. The Court of Appeals went on to conclude that collateral estoppel also barred relitigation of the paternity determination because: 1) the issue is identical; 2) there was a final judgment on the merits; 3) the mother was in privity with the child in the prior action; and 4) she was given a full and fair opportunity to be heard on the issue of paternity. In addition, it concluded that the Parentage Act operated as a bar to the mother’s claim because of the prior adjudication determining the nonexistence of the parent-and-child relationship. Mower County v. Graves, C6-99-2008, 611 N.W.2d 386 (Minn. App. 6/13/00).

Married Woman’s Act. In affirming the district court, the Court of Appeals found that the Minnesota Married Woman’s Act: 1) was originally enacted to abolish the common law concept of legal unity of husband and wife; 2) clearly applied to property a wife acquires separately before the marriage and also to property acquired on her individual credit after the marriage; and 3) the question before the court is whether the statute applies to property that a husband and wife acquire jointly during the marriage. The court concluded that the act did not apply to property jointly acquired during the marriage. It held that an option given by two joint offerors (husband and wife) is not effectively accepted by performance that is not contemplated by the option and that knowingly benefits only one joint offeror (the husband). Abrahamson v. Abrahamson, C7-99-2163, 2000 WL 821666 (Minn. App. 6/27/00).

Pensions, Dissolution. For coverage of Estate of Rock, C5-99-2081, 612 N.W.2d 891 (Minn. App. 7/3/00), see "Probate & Trust Law," infra.

Interim Expedited Child Support Rules. On June 19, 2000, the Supreme Court issued an order extending the termination date of the Interim Rules of the Expedited Child Support Process from June 30, 2000, to June 30, 2001. The advisory committee shall submit its final report by December 15, 2000. Minnesota Supreme Court Order, C4-99-404 (6/19/00).

In this month's "Notes & Trends":

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

Rule 30(B)(6) Deposition Notices. In Prokosch v. Catalina Lighting, Inc., 193 F.R.D. 633 (D. Minn. 2000), plaintiffs alleged that defendants manufactured and/or sold a torchiere-style halogen lamp that caused a fire in plaintiffs’ home. Plaintiffs served defendant American Lighting Industry, Inc. with a Rule 30(b)(6) deposition notice and indicated that they were seeking deposition testimony relating to product history, manufacturing processes, and any other claims relating to similar lamps. American identified Huy Ly as its Rule 30(b)(6) designee. However, in the course of Mr. Ly’s deposition, he testified that he lacked knowledge or information on these subjects. Following the deposition, plaintiffs moved for sanctions, arguing that American had failed to live up to its obligation to designate a suitably prepared witness to testify on its behalf.

Magistrate Judge Erickson noted that Rule 30(b)(6) imposes "reciprocal obligations" on parties. First, the requesting party must "reasonably particularize" the subjects it intends to cover at the deposition, to allow the responding party to select the most suitable deponent. In turn, the responding party is obligated to produce a witness "suitably prepared to respond to questioning with that scope of inquiry." The magistrate found that plaintiffs had "adequately designated . . . the subject areas" they intended to cover in the deposition, but that Ly, American’s designated witness, "was both unprepared and unresponsive" to the questions posed and was "abjectly uninformed" on numerous topics. The magistrate directed the parties to reconvene American’s 30(b)(6) deposition and directed American to designate a "proper" deponent and to prepare the deponent "to respond fully on American’s behalf." Finally, plaintiff’s motion for sanctions and for an award of attorneys' fees and costs relating to the renewed deposition were taken under advisement.

Prokosch details precisely what is expected of parties either serving or responding to Fed. R. Civ. P. 30(b)(6) deposition notices. As such, it serves as a valuable guide for all attorneys dealing with such notices.

"Misnomer" Principle. In Roberts v. Michaels, 2000 WL 987767 (8th Cir. 2000), Roberts commenced a Title VII action against her former employer. However, Roberts’s complaint incorrectly named "Ron Michaels d/b/a Mid-South Vending" as the defendant, rather than "Midsouth Food Vending Service, Inc.," the legal name of the employer. More than 120 days after being served, defendant Michaels moved for summary judgment, arguing that Roberts had sued the wrong party. Roberts then moved for leave to amend her complaint to name Midsouth Food Vending Service, Inc. as a defendant. The trial court denied Robert’s motion, finding that she had failed to demonstrate good cause for her failure to serve the correct party, and granted summary judgment to Michaels. Though the denial of Robert’s motion to amend was without prejudice, the statute of limitations had expired in the interim, effectively precluding Roberts from commencing a new action against Midsouth Food Service Vending, Inc. Not surprisingly, Roberts appealed.

The 8th Circuit found that the district court had erred in failing to consider "the well-recognized distinction between a complaint that sues the wrong party and a complaint that sues the right party by the wrong name." Applying both what it labeled the "misnomer principle" and Fed. R. Civ. P. 15(c)(3), the 8th Circuit found that the district court had erred in denying Robert’s motion to amend and remanded the action to the district court, with instructions to allow Roberts to amend her complaint to name Midsouth Food Service Vending, Inc. as a defendant, and with the amended complaint relating back to the date of her original filing.

Other Decisions of Note. Judge Montgomery’s decision in Blaylock v. Hynes, 2000 WL 796928 (D. Minn. 2000), includes a short but detailed analysis of the important difference between "complete" preemption, which creates an exception to the "well-pleaded complaint" rule, and "ordinary" preemption, which serves merely as a defense to the claims asserted. Judge Montgomery notes that the two concepts are "analytically different," but acknowledges that the 8th Circuit opinions evidence "confusion" regarding the interrelation of these doctrines.

This opinion should be read by anyone who regularly deals with the preemption issue, or anyone involved in a case that has been removed on the basis that claims asserted are preempted by federal law.

In Larsen v. Mayo Medical Center, 2000 WL 968506 (8th Cir. 2000), the 8th Circuit affirmed a decision dismissing a medical malpractice claim as time-barred. The 8th Circuit decision includes a discussion of the well-established (but often misunderstood) rule set forth in Walker v. Armco Steel Corp., 446 U.S. 740 (1980), which provides that in a diversity action, it is state law -- and not federal law -- that will determine when an action has been commenced for purposes of the statute of limitations.

In Capitol Indem. Corp. v. Haverfield, 2000 WL 968527 (8th Cir. 2000), the 8th Circuit found that a district court had abused its discretion in refusing to stay a declaratory judgment action when a parallel state court action was pending between the same parties that raised the same state law issues. Judge Loken dissented, arguing that the district court had not abused its discretion in retaining jurisdiction over the action.

In Scheidecker v. Arvig Enterprises, Inc., 193 F.R.D. 630 (D. Minn. 2000), Magistrate Judge Erickson reiterated that parties seeking to amend pleadings after the date established in a scheduling order must satisfy the standards established by Fed. R. Civ. P. 15(a) and Fed. R. Civ. P. 16(b). The magistrate did acknowledge in a footnote that several recent 8th Circuit opinions might lead some to question the "vitality" of Rule 16(b)’s "good cause" requirement.

In this month's "Notes & Trends":

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

Termination of Parental Rights; Waiver of Right to Counsel. In this case, the Supreme Court reversed the Court of Appeals decision (604 N.W.2d 97, Minn. App. 1999; see March 2000 Bench & Bar, Notes & Trends, Juvenile Law), which had reversed the termination of parental rights by the trial court, based on the fact that the trial court had not applied the procedures outlined in Minn. R. Crim. P. 5.02, subd. 1(4), in accepting the parent’s voluntary waiver of her right to counsel.

At the Court of Appeals, appellant Jackson challenged the district court termination of her parental rights (TPR), alleging that the court abused its discretion by denying her the right to counsel. Jackson fired her public defender on the first day of the TPR trial. After brief questioning, the court allowed Jackson to represent herself. Minn. Stat. §260.155, subd. 2, grants a parent confronting a TPR proceeding the right to counsel. A parent can choose to waive this statutory right to counsel if the waiver is voluntary, intelligent, and on the record. Minn. R. Juv. P. 50.01. The Court of Appeals held that because the statutory right to counsel in TPR proceedings is analogous to a criminal defendant’s right to counsel, it applied a modified version of Minn. R. Crim. P. 5.02, subd. 1(4), and required the trial court to conduct an on-the-record explanation of the nature of the statutory grounds for termination and the evidentiary burdens; the possible consequences and implications of a TPR proceeding; the advantages and disadvantages of self-representation; and all other facts essential to a broad understanding of the consequences of waiver of the right to counsel, prior to accepting the parent’s waiver of the right to counsel.

Finding that the trial court had failed to thoroughly and adequately advise Jackson on all these issues, the Court of Appeals held that the trial court erred in failing to establish that Jackson knowingly and voluntarily waived her right to counsel and reversed the termination of her parental rights.

The Supreme Court reversed the Court of Appeals, determining that the analogy between waiver of the right to counsel in TPR proceedings and in criminal proceedings fails to recognize that the creation of a statutory right (as in the statutory right to counsel in Minnesota TPR proceedings), while deserving of protection, is not the same as a constitutional right. The court noted that in the criminal context, United States Supreme Court rulings establish a constitutional right to counsel only when the accused faces potential deprivation of physical liberty, and that unlike criminal proceedings, TPR proceedings cannot deprive the parent of physical liberty.

The Supreme Court held that based on the inherent differences between constitutional and statutory rights, and case precedent relating to each, the determination of a parent’s valid waiver of the statutory right to counsel in TPR proceedings does not necessitate the application of the procedure set forth in Minn. R. Crim. P. 5.02, subd. 1(4). The determination of whether a parent’s waiver of counsel in a TPR proceeding is voluntary and intelligent can be based on the surrounding circumstances of the case. After reviewing the facts of the case at bar, the court determined that the circumstances surrounding the parent’s waiver demonstrated that it was voluntary and intelligent and therefore valid. In re G.L.H, C8-99-1345, 2000 WL 994323 (Minn. 7/20/00).

Delinquency: Incendiary Devices; Right to Free Expression. See coverage of In re C.P.K., No. J89958572, 2000 WL 823352 (Minn. App. 6/27/00) under "Criminal Law," supra.

In this month's "Notes & Trends":

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

Appealability of Final Order in Special Proceeding. On the motion of an estate beneficiary, the district court disqualified an attorney for a personal representative because he had the appearance of a conflict of interest. The personal representative appealed, but the Court of Appeals dismissed on the ground that Minn. Stat. §525.71 exclusively controls appeals from probate proceedings and does not authorize appeal from an order removing a personal representative’s attorney. The Supreme Court reversed, noting that cases interpreting 525.71 as an exclusive list of appealable probate orders predated the consolidation of probate courts into district courts of general jurisdiction and the creation of the Minnesota Court of Appeals. After the creation of the Court of Appeals, its authority to hear appeals is governed by the constitution and by the rules of the Supreme Court.

Minn. R. App. P. 103.03(g) provides that unless precluded by statute, a "final order, decision or judgment affecting a substantial right made in an administrative or other special proceeding" may be appealed to the Court of Appeals. The district court order removing the attorney constitutes a final order because it finally determines the appellant’s substantial legal right, the right of the personal representative to be represented by his attorney of choice. The order is one made in a special proceeding that is defined as "a remedy that is not part of the underlying action and that is brought by motion or petition, upon notice, for action by the court independent of the merits of the underlying action." Estate of Janacek, 610 N.W.2d (Minn. 5/18/00).

IRA Beneficiary Designation after Divorce. Decedent named his wife primary beneficiary of his IRAs and his children secondary beneficiaries. The couple divorced, and the judgment awarded each "all right, title and interest" to his or her retirement plans, but did not expressly revoke the designation of the wife as beneficiary of decedent’s plans. Decedent never changed his designation of his wife as beneficiary before his death. Under these circumstances, the dissolution decree is ambiguous on the question of whether it revoked the beneficiary designation. Therefore, the court must look to the facts to determine whether the decree divested the wife of her interest as beneficiary. Here, the former spouses agreed to retain each other as beneficiaries of retirement plans to care for the children; this was an indication that at the time of the decree the parties did not intend that it revoke the beneficiary designations. Estate of Rock, C5-99-2081, 2000 WL 894741 (Minn. App. 7/3/00).

Intent: Beneficiary in Life Insurance Policy. Decedent owned a life insurance policy payable to the bank as primary beneficiary to secure business indebtedness. He named his brother, who was his business partner, as secondary beneficiary. The brothers had a falling out, and while a proceeding for judicial dissolution of the partnership was pending, decedent died. His personal representative claimed that decedent intended that any insurance proceeds in excess of that needed to satisfy the debt become either an asset of the estate or of the partnership. The court held that although it could give effect to an intent to change a beneficiary despite the insured’s failure to comply with the specific requirements of the policy, the intent to change must be clear and unambiguous. In this case it was not, and the brother was entitled to the proceeds. Johnson v. Johnson, C1-00-30, 2000 WL 781370 (Minn. App. 6/20/00).

Designation of "Spouse" in Trust Instrument. Decedent executed a revocable trust when he was married to Grace, providing for creation of A and B trusts at his death. In each trust he named his "spouse" as income beneficiary. Grace died, and he met Vera. He then amended the B trust to delete the income interest to his "spouse" and also to add Vera as a remainder beneficiary at his death. Later, he married Vera and then died. The district court held that decedent, in using the term "spouse", meant to refer to any person who might have that status, but the Court of Appeals said that the proper rule of construction interprets the reference to be to the person who has that status at the time of execution of the trust. Although evidence may show that decedent intended the term to apply to any spouse, here the amendment to the trust deleting the income interest to his "spouse" supported application of the rule of construction. In re Trust Instrument of Nolan, C8-99-2074, 2000 WL 782034 (Minn. App. 6/20/00)(unpublished).

Quantum Meruit Claim; No Written Contract. Son filed a claim against his father’s estate based on work that he had done on the family farm over many years. The district court dismissed his claim because he had no written contract, but the Court of Appeals reversed and remanded on the ground that a claim in quantum meruit was an equitable remedy to prevent unjust enrichment and did not require a writing. Estate of Dahlheimer, C9-99-1998, 2000 WL 963991 (Minn. App. 7/11/00) (unpublished).

Signature on Will; Reasonable Time. Minn. Stat. Section 524.2-502, requires that witnesses to a will must sign within a reasonable time after the testator signs for the will to be valid. In this case the facts were much in dispute, but the court found that the signature of the witness was made a year after the testator signed and held that this was not within a reasonable time. Estate of Snow, C0-99-1484, 2000 WL 688708 (Minn. App. 5/30/00).

In this month's "Notes & Trends":

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

Drainage Ditch Cost-Benefit Analysis. Certain property owners requested the replacement of a portion of a drainage system constructed in 1914. The drainage authority concluded that the benefits of replacement exceeded the costs and ordered the replacement. The drainage authority assessed all the property owners benefited by the entire drainage system. Objecting property owners appealed the assessments. The trial court, Court of Appeals and Supreme Court all affirmed the assessment of all property owners because the work was for a repair benefiting all the owners, rather than an improvement of a separate improvement benefiting certain properties. Petition for Improvement of Murray County Ditch No. 34, CX-98-2194, 2000 WL 1030344 (Minn. 7/27/00).

Special Assessment Property Valuation. The city appealed the trial court reduction of a large special assessment on an apartment complex. The district court applied the "discounted cashflow" appraisal model to determine the value of the assessed improvement to the property. The Court of Appeals affirmed the trial court use of the appraisal model. Eagle Creek Townhomes v. City of Shakopee, C4-99-2010, 2000 WL 979110 (Minn. App. 7/18/00).

Redemption from Mortgage Foreclosure; Equitable Estoppel. A junior creditor attempted to redeem from the sheriff’s certificate holder, but the certificate holder was out of the country. The trial court determined that the junior creditor’s attempt to pay the certificate holder was in substantial compliance with statutory requirements and allowed the junior creditor to redeem from the sheriff after the redemption period had expired. The Court of Appeals reversed, because the junior creditor had not redeemed in a timely manner, but remanded to the trial court for a determination of whether the doctrine of equitable estoppel should apply. Sieve v. Rosar, C7-00-50, 2000 WL 948940 (Minn. App. 7/11/00).

Drainage Ditch Condemnation Awards. A property owner stipulated with the drainage authority about the value of the drainage improvements to the property. The property owner appealed regarding the value of the improvements to property owned by others. The Court of Appeals concluded that the stipulation was not global and did not preclude the appeal, but the property owner did not have standing to appeal valuation issues related to property owned by others. Petition for Improvement of County Ditch No. 86, C7-99-2051, C4-99-2105, 2000 WL 1015821 (Minn. App. 7/25/00).

Negligent Furnace Repair; Breach of Contract. A fire insurer sued the furnace company for negligence and breach of contract when the furnace caused a fire. The jury found for the insurer, but the trial court granted the furnace company a judgment notwithstanding the verdict. The Court of Appeals held that the jury verdict was supported by the record and reversed the JNOV. St. Paul Fire & Marine Ins. v. Honeywell, C0-99-1324, 611 N.W.2d 51 (Minn. App. 5/30/00).

Nuisance; Easement. A lakeshore property was burdened by an easement for access to the lake, benefiting a neighbor. The owner of the burdened property constructed obstructions to the easement holder’s use on the easement area. The district court enjoined the obstructions, but the owner of the burdened property continued to impede the use of the easement. The Court of Appeals affirmed the trial court award of nuisance damages against the owner of the burdened property. However, the court reversed the trial court award of attorneys' fees because the owner of the burdened estate acted against the easement, not in bad faith in the litigation. Hanson v. Thom, C1-99-1378, 2000 WL 685008 (Minn. App. 5/30/00).

Landlord-Tenant: Lease Termination. The tenant appealed the trial court construction of a lease termination notice provision against the tenant. The tenant also argued that the landlord breached the lease by failing to renegotiate the lease in good faith and appealed the trial court award of attorneys' fees against the tenant. The Court of Appeals concluded that the lease provisions were unambiguous, that the lease only obligated the tenant to renegotiate in good faith, and that the attorneys' fees award was not an abuse of discretion. Midway Warehouse Ltd. Partnership v. Ramsey Action Program, Inc., C3-99-1821, 2000 WL 687763 (Minn. App. 5/30/00).

In this month's "Notes & Trends":

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

Nonpublic, Sealed Records. The tax court ruled that a taxpayer request for a protective order was denied since the tests of Minneapolis Star Tribune v. Schumacher, 392 N.W.2nd 197 (Minn. 1986) (whether there is proprietary or confidential information and clear proof of the nature and harm anticipated) were not met and the presumption of public access to court proceedings found in Minn. Stat. §271.06, subd. 6, and Minn. Rule 8610.0120, subp. 1 outweighed the taxpayer's privacy concerns. Rahr Malting Co. v. County of Scott, 99-03807, 00-01171, 2000 WL 967457 (Minn. T.C. 7/15/00). See also Minn. v. Philip Morris Inc.,, 606 N.W.2d 676 (Minn. App. 2000) (district court has discretion to modify a protective order issued under Minn. R. Civ. P. 26.02(c); did not abuse its discretion by not reviewing each of the documents for claims of attorney-client and work-product doctrine; and there was not an unconstitutional taking of property upon release to the public).

Sales and Use Tax; Railroad Fuel. The Minnesota Supreme Court ruled that the Minnesota sales and use tax on transportation fuel used by rail carriers was not discriminatory nor in violation of 49 U.S.C. Section 11501(b)(4). Burlington N. R.R. Co. v. Commissioner, 606 N.W.2d 54 (Minn. 2000).

Accountant Malpractice. An accountant cannot be held liable under Restatement (Second) of Torts §552 for negligent misrepresentation to a securities broker who relied on the accountant's report to extend margin credit. The Restatement limits the accountant's negligence to those to whom he intends to supply the information or knows will rely upon the transaction. Noram Inv. Serv., Inc. v. Stirtz Bernards Boyden Surdel & Larter, P.A., 611 N.W.2d 372 (Minn. App. 2000). See also TCF Banking & Sav. v. Arthur Young & Co., 706 F. Supp. 1418 (D. Minn. 1988) and Bonhiver v. Graff, 248 N.W.2d 291 (Minn. 1976).

Statute of Limitations: Accountant Negligence. A cause of action against an accountant for malpractice accrues when the claim could have withstood a motion to dismiss and not when it was discovered or the penalty became apparent. The court applied the rule of Bonhiver v. Graff, 248 N.W.2d 291 (Minn. 1976) and Hermann v. McMenomy & Severson, 590 N.W.2d 641 (Minn. 1999). Reid Enter., Inc. v. Deloitte & Touch, C8-99-1801, 2000 WL 665684 (Minn. App. 5/23/00).

Child Support: Withholding against Delinquent Parent. The Minnesota Court of Appeals ruled that there was no statutory authority under the provisions of Minn. Stat. §518.642 (1998) and §518.6195(a) (1998) to permit Olmsted County to institute income-withholding to recover child support payments from a delinquent parent. Goplen v. Olmsted County Support and Recovery Unit, 610 N.W.2d 686 (Minn. App. 2000).

Waiver of Personal Jurisdiction Defense. The Minnesota Supreme Court ruled that a defendant waives the defense of insufficient service of process, despite asserting the defense by answer, by affirmatively invoking the jurisdiction of the district court to obtain partial summary judgment without earlier or simultaneously moving to dismiss the claim for insufficient service of process under Rule 12.08(a). Patterson v. Wu Family Corp., d/b/a Nankin Café, 608 N.W.2d 863 (Minn. 2000).

Tax Based on Spouses' Domiciliary. Minnesota cannot, as a matter of law, presume public health service officers are domiciled in the state solely because their spouses are considered to be domiciled in the state. United States v. Minn., 97 F.Supp. 2d 973 (D. Minn. 2000).

Valuation Testimony; Special Assessment Appeal. The Minnesota Court of Appeals held, in a special-assessment appeal under Minn. Stat. §429.05, that the market value of the benefited improvement to the property could be obtained by using a discounted cash flow upon the assumption that townhouses would be built on the land, and the district court properly admitted such evidence. Eagle Creek Townhomes v. City of Shakopee, C4-99-2010, 2000 WL 979110 (Minn. App. 7/18/00).

No Offsetting Income and Loss from Separate Rental Activities. A taxpayer may not offset income realized on his rental of an office building to his Subchapter C law firm by the loss he realized on his rental of a building to his Subchapter C health club. Krukowski v. Commissioner, 114 T.C. No. 25, 2000 WL 656711 (5/22/00). See also Connor v. Commissioner, 99-3324, 2000 WL 876931 (7th Cir. 7/5/00) (rental income generated by a lease of taxpayer-wife's office building to taxpayer-husband's personal services C corporation during 1993-94 was not passive activity income).

Forgiveness of Indebtedness; Gift Tax. Forgiveness of indebtedness does not qualify for $10,000 per donee exclusion from gift tax because it was not gift of present interest. Stinson Estate v. United States, 214 F.3d 846 (7th Cir. 2000).

Reimbursements for Business Use. The reimbursements for business use of employee's vehicles did not meet the accountable-plan business connection requirement because the driver-employees did not substantiate expenses or return payments in excess of actual expenses. The court also rejected the employer's argument that the workers were independent contractors. Trans-Box Systems, Inc. v. United States, 85 AFTR 2d 2000-5005, 2000 WL 714559 (9th Cir. 4/14/00).

Annual Card Fees: Ratable Inclusion in Income. The commissioner did not abuse his discretion in determining that the annual fees collected by American Express from the holders of its credit cards were payments for credit, rather than for contingent services, and that the fees therefore were not eligible for ratable inclusion in gross income over 12 months. Amer. Express Co. v. United States, 97-624T, 2000 WL 968675 (Fed. Cl. 6/30/00).

Attorney-Client Privilege. In deciding whether documents in possession of accountants as agents of a taxpayer's attorney are subject to attorney-client privilege, the court must consider the totality of the circumstances to determine if the documents were transmitted for preparation of tax returns or solely for obtaining legal advice. In re Grand Jury Proceedings involving Thullen and Dvorak, 99-3131, 99-3317, 2000 WL 987704 (7th Cir. 5/18/00).

Contingent Fee Portion of Award Includable. Taxpayers are not entitled to exclude from gross income the portion of a punitive damages award retained by their attorney pursuant to a contingent fee agreement. The legal expenses are miscellaneous itemized deductions and, as such, are not allowed as deductions for the purposes of computing alternative minimum tax liability. Benci-Woodward v. Commissioner, 99-70136, 2000 WL 977676 (9th Cir. 7/18/00). See also Kenseth v. Commissioner, 114 T.C. No. 26 (5/24/00) for same result.

Warrants in lbo: Valuation. Warrants issued by an acquisition company to a lender in connection with a leveraged buyout must be valued as of the time of issuance under the original issue discount rules, but the fact that the strike price of the warrants was equal to the price paid for stock by other investors does not render the warrants valueless for purposes of claiming a deduction. Custom Chrome Inc. v. Commissioner, 98-71378, 2000 WL 914168 (9th Cir. 2000).

Loss Reserve Estimates not Sustainable. The U.S. Tax Court held that the use by Minnesota Lawyers Mutual Insurance Company, a professional liability insurer, of reserve estimates for unpaid losses was not fair and reasonable. Minn. Lawyers Mut. Ins. Co. v. Commissioner, T.C. Memo 2000 – 203, 2000 WL 889739 (6/30/00).

No Equitable Tolling for Third-Party Wrongful Levy Claims. The nine-month time limit in Section 6532(c) of the IRC for filing of third-party wrongful levy actions against the IRS is a jurisdictional bar that is not subject to equitable tolling. Becton Dickinson and Co. v. Wolckenhauer, 85 AFTR 2d 2000-1994, 215 F3d 340 (3d. Cir. 6/6/00).

Petition Invalid: Corporation Lacked Capacity. The tax court ruled that a suspended corporate taxpayer lacked the proper capacity to file a petition when the 90-day period ended before the suspension was revoked. Dung Le, Inc. v. Commissioner, 114 T.C. 18, 2000 WL 387659 (4/18/00).

Tax on Transactions with Taxable, Nontaxable Charges. The Department of Revenue provided guidance on the items needed to overcome the general rule that where a transaction includes both taxable and nontaxable goods or services purchased from the same retailer, the total consideration received from the purchaser is subject to tax, unless the nontaxable goods or services are separately stated. This Revenue Notice limits the Minnesota Tax Court holding in Southern Exposure of Eagan, Inc., 7046, 1999 WL 968774, 1999 WL 1116802 (Minn. T.C. 10/20/99 and 12/2/99) (nontaxable weight training fees included with a gym membership fee were not subject to sales tax, even though the fees were not separately stated). Rev. Notice No. 00-04 (5/15/00).

Separately Stated Membership Charges Exempt. The Department of Revenue issued guidance on Minnesota sales taxation of golf and country clubs and clarified that charges or penalties assessed when a member does not meet minimum spending requirements at a facility are not taxable if separately stated from any taxable charges. Rev. Notice No. 00-05 (5/22/00).

MinnesotaCare Tax. The Department of Revenue interpreted the term "hospital" and specified which gross revenues were considered to be hospital revenues for purposes of the MinnesotaCare tax. Rev. Notice No. 00-07 (6/19/00).

Employer Deduction: Payroll Taxes. The IRS ruled that if the employer does not contest the employment tax audit and chooses to pay the employees' portion of withholding and FICA on the amount determined to be compensation (as well as its own share of FICA), the employer could deduct the payment as an "ordinary and necessary" business expenses under IRC 162. Chief Counsel Advice 200025002.

New Form for Political Organizations. The IRS released new Form 8871 ("Political Organization Notice of Section 527 Status"), enabling affected political organizations to comply with the new disclosure rules. Form 8871 (July 2000).

Accelerated Appeals Program. The IRS launched a new initiative to accelerate resolution of the largest cases in the appeals process. The program to be known as "Mutually Accelerated Appeals Process" will, if taxpayers agree to a specific audit schedule and to a certain commitment of their own resources, accelerate the pace of appeals for the largest cases involving $10 million or more in disputed tax dollars. I.R.-2000-42.

Continuous Levy Program. The IRS is implementing the continuous levy program, effective July 20, 2000. The Taxpayer Relief Act of 1997 added IRC Section 6331(h), which provided for a continuous levy of up to 15 percent of payments received by a taxpayer. I.R.-2000-45 (6/29/00).

"De Minimis" Bank Gifts Exempt. The IRS, for administrative convenience, will not require a bank depositor who receives a de minimis gift premium ($10 to $20 in value) to include it in income, reduce basis, or require an interest Form 1099. Rev. Proc. 2000-30, I.R.B.-28.

New Law for Nonprofit Political Organizations. A new law, H.R. 4762, requires groups organized under IRC Section 527 of the IRC to disclose their contributions and expenditures. The new law requires IRC Section 527 organizations to file quarterly reports showing their contributors of more than $200 annually and expenses of more than $500 annually. These reports are to be made public by the IRS. The first reports are due to the IRS by October 15, 2000. Public Law 106-230, H.R. 4762, "Underground Campaign Disclosure Act of 2000".

Congress Faces Full Agenda on Taxes. Lawmakers in Washington have a full slate of tax issues for potential resolution by the Fall. These include:

• Marriage Tax Relief. Tax relief for the marriage tax penalty has been proposed. See H.R. 6; S. 2346.
• Estate Tax Repeal. A bill to phase out estate, gift and generation skipping taxes and an outright repeal in 2010 was floated. See H.R. 8.
• Small Business Tax Relief. The Small Business Tax Fairness Act increases the minimum wage, along with several tax breaks aimed at mitigating the impact such an increase would have on small business. Among other things, the legislation reinstates the installment method of accounting for accrual basis taxpayers and accelerates full deductibility of health insurance costs for the self-employed. See H.R. 3081; S. 833.
• Taxpayer Bill of Rights. The Taxpayer Bill of Rights 2000 is aimed at increasing taxpayer rights and makes several changes to disclosure, penalty, and interest provisions in the IRC. See H.R. 4163.
• Internet Tax Moratorium. Legislation would extend the existing moratorium on Internet access and discriminatory taxes on electronic commerce by five years. See H.R. 3709. Other bills would extend the moratorium but create a set of bright-line nexus activities or include authority for states to require tax collection on out-of-state sales. See H.R. 4267; H.R. 4460; H.R. 4462; S. 2775.
• Telephone Excise Tax Repeal. Bills that would phase out the three percent federal telecommunications tax by October, 2002 have been proposed. See H.R. 3916; S. 2330.
• Private Pension Reform. The pension reform initiatives include several tax breaks aimed at strengthening the employer-sponsored pension system, expanding some IRAs, and increasing portability, vesting, etc. See H.R. 1102; S. 649; S. 741.
• Wireless Taxes. Legislation was introduced to streamline confusing and often overlapping state and local taxation of wireless phone users, who move around and are assessed on different location criteria depending on location. See H.R. 3489; H.R. 4391; S. 1755; S. 2326.

Sleepers in Omnibus Tax Bill. The Legislature approved and the governor signed the Omnibus Tax Bill, Chapter 490 (H.F. 4127). A number of "sleeper" provisions are listed below:

• Authorization for Streamlined Sales Tax System. Minnesota now has authority to participate in the "Streamlined Sales Tax System for the 21st Century Act," model legislation recommended by the National Conference of State Legislatures. The object is to create a uniform, simplified sales tax statute that would take the burden off vendors in remitting and collecting the sales and use tax.
• Motor Vehicle Excise Tax Exemptions Expanded. The motor vehicle excise tax (Chapter 297B) did not previously contain the broad exemptions of the sales tax (Chapter 297A), but the legislation in 2000 now makes the exemptions of the motor vehicle excise tax the same as the sales tax exemptions. This statutory change will save time and effort, including fees, for taxpayers.
• "Wages" Income of Nonresidents. The Legislature overruled the Minnesota Supreme Court decision in Benda v. Commissioner, 592 N.W.2d 452 (Minn. 1999). Consequently, all wages earned by employees who work in Minnesota will be assigned to Minnesota regardless of the type of work performed. However, nonqualified deferred compensation paid to the employee is nontaxable in Minnesota for any year in which he is not a Minnesota resident for any part of the year. The Benda changes are effective for "wages" received after May 16, 2000; however, the effective date on withholding for nonresident employees performing services in Minnesota is for "wages" paid after December 31, 2000.
• No Change on Definition of "Domicile." The Legislature chose to do nothing on the dispute between the Department and taxpayers and left the term "domicile" undefined. Therefore, taxpayers will be able to argue for the "business situs" test if the need should arise.
• Decrease in June Accelerated Sales Tax Payment. Beginning in June 2002, the percentage of June sales tax liability that must be remitted by retailers required to use electronic funds transfer (annual liability of $120,000 in tax) before the end of June is reduced from 75% to 62%.
• Electronically Filing Returns. Preparers filing Minnesota returns would be required to do so electronically, if they prepare 500 in 2000; 250 in 2001; and 100 in 2002 and later. If the client requests, no filing is required.

"Catch the Cheats". DOR officials plan a stepped-up enforcement campaign early this fall to persuade -- or force -- those people not filing tax returns to file, to pay up their back taxes, if they have filed and owe them, and to keep paying future taxes. The Department estimates that there could be 100,000 nonfilers per year and thinks that it may be able to recoup $40 million in lost tax revenue in the tax compliance effort.

In this month's "Notes & Trends":

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

Legal Duties: Motor Vehicle Seller. Plaintiff, as trustee for decedents who were victims in a motor vehicle accident, brought an action against the driver of the other vehicle, the purchaser of the other vehicle, and the motor vehicle dealer who sold the other vehicle. Plaintiff alleged that the motor vehicle dealer breached its duty to determine whether prospective drivers were licensed and insured. Plaintiff further alleged that the motor vehicle dealer was vicariously liable as the owner under the Safety Responsibility Act and was liable for negligent entrustment. The trial court granted summary judgment to the motor vehicle dealer on all causes of action.

The Court of Appeals affirmed, holding that sellers of motor vehicles have no duty to check the license and insurance status of prospective drivers. The court further held that an action for negligent entrustment would not lie against the motor vehicle dealer when the prospective driver's negligence was not reasonably foreseeable and when the dealer had no control of the vehicle on the day the accident occurred. Lastly, the Court of Appeals held that because title had passed from the motor vehicle dealer to the purchaser, the dealer could not be held vicariously liable under the Safety Responsibility Act as the owner of the motor vehicle. Johnson v. Johnson, d/b/a Litehouse Motors, C5-00-94, C7-00-95, 611 N.W.2d 823 (Minn. App. 6/20/00).

Whistleblower Statute. For coverage of Obst v. Microtron, Inc., CX-98-798, 2000 WL 967979 (Minn. 6/29/00), see "Employment & Labor Law," supra.

Civil Damages (Dram Shop) Act: Minority Tolling. The minority tolling provision does not apply to actions brought under the Minnesota Civil Damages Act. Whitener v. Dahl, C7-99-2177, 612 N.W.2d 188 (Minn. App. 6/27/00).

Uninsured Motorist Coverage. Plaintiff was involved in an accident with an uninsured vehicle. Plaintiff filed an uninsured motorist claim with his insurance company, which was denied. Plaintiff then brought suit and was awarded judgment against the uninsured motorists. The insurance company did not intervene in the lawsuit and refused to pay the judgment, citing an exclusionary clause in plaintiff's policy that provided that the insurance company was not bound by a judgment between its insured and uninsured motorist unless it consented to the suit.

Plaintiff filed suit against the insurance company, seeking uninsured motorist benefits in the amount he had been awarded at trial, and then moved for summary judgment. The district court denied plaintiff's motion, but certified the issue as important and doubtful. The Court of Appeals affirmed the denial of summary judgment. The court held that the insurance company could enforce an exclusionary clause that stated that it was not bound by a judgment against an uninsured motorist to which it did not consent. The court, however, also stated that plaintiff could bring a breach of contract claim against his insurer to obtain uninsured motorist benefits to which he is entitled to under the policy. Kwong v. Depositors Ins. Co., C5-00-242, 612 N.W.2d 184 (Minn. App. 6/27/00).

Miller-Shugart Protections. A Canadian Pacific train derailed and caused an explosion that resulted in property damage and substantial burns to a 16-year-old boy. The family brought suit against Canadian Pacific for having failed to maintain the track properly. The Canadian Pacific insurance policy allowed the company to assist in the defense and control of any claim. The policy did not state that Canadian Pacific needed the consent of its insurer before settling the claim.

After several estimates of possible jury verdicts for compensatory damages and after researching punitive damages possibilities, Canadian Pacific, its insurer and the injured parties participated in a day-long mediation with a magistrate judge. Canadian Pacific and the injured parties agreed to resolve the case for approximately $24 million, but the insurer would only agree to contribute $20 million, believing that any additional amount was not reasonable.

The insurer brought this declaratory judgment action to preclude enforcement of the agreement, arguing that pursuant to the Minnesota Supreme Court decision in Miller v. Shugart, the amount of the settlement was excessive and did not bind the insurer. After the insurer refused to admit that the insurance agreement allowed Canadian Pacific to settle the claim without the consent of the insurer, the court granted summary judgment to Canadian Pacific and ordered a $25,000 sanction against the insurer.

The Court of Appeals affirmed, holding that the case was not controlled by Miller v. Shugart because the insurer had never denied all coverage and in fact was involved in the settlement process. The court also held that, consistent with the language of the policy, Canadian Pacific could settle the claim without the consent of the insurer. Finally, the appellate court found that the $25,000 sanction was within the discretion of the trial court. Zurich Reinsurance (UK) Ltd. v. Canadian Pac. Ltd., C5-99-1870, CX-99-1878, 2000 WL 871189 (Minn. App. 7/3/00).

Underinsured Motorist Coverage. A minor was seriously injured while riding in a van his mother had borrowed. Plaintiff brought suit to recover underinsured motorist coverage (UIM) on his father's insurance policy because his damages exceeded the amount collected under several liability policies. The insurer denied UIM benefits, claiming that providing coverage would "convert" the UIM policy on the van into a liability policy providing third-party coverage for the acts of the driver of the van.

The Court of Appeals reversed, holding that the van satisfied the insurance policy definition of an underinsured motor vehicle. The court found that in the absence of an applicable exclusionary provision in the policy, plaintiff was entitled to UIM coverage when he had no control over the amount of direct coverage. The court held that protecting those who have no control over other parties' coverage deficiencies is the exact purpose of having UIM coverage, and it is not against public policy to award such coverage if it is explicitly found in the policy. Lynch v. Amer. Family Mut. Ins. Co., C9-99-2102, 612 N.W.2d 887 (Minn. App. 7/3/00).

No-Fault. After an Americar Rental Systems (Americar) rental car was involved in an accident, Americar claimed its vicarious liability as an owner of the vehicle was limited to $105,000 under the provisions of Minn. Stat. §65B.49, subd. 5a(i)(2) (1996) (capping vicarious liability of rental companies, as owner of the vehicle, in exchange for maintaining certain levels of liability coverage). Americar argued that it complied with the statute by maintaining liability coverage as the owner up to a maximum of $1 million. The district court ruled that Americar did not meet the statutory requirements because its policy purported to limit bodily injury liability coverage to renters to the minimum limits required by law. The Court of Appeals reversed, holding that the statute requires only that the "owner" maintain a certain level of liability coverage.

Americar also claimed that amounts paid by American Family, the personal insurer for the driver, satisfied its limited liability exposure because the purpose of the vicarious liability cap is to ensure that an injured party gets at least $105,000 of coverage, as the injured party did in this case. The Court of Appeals disagreed, holding that the payments to the insured from American Family were not based upon vicarious liability of Americar but, rather, were based upon the active fault of the driver. Thus, Americar could not receive the benefits of those payments. Americar Rental Systems v. Mitchell, C0-99-2151, 2000 WL 944626 (Minn. App. 7/11/00).

No-Fault. Defendant, who resided with her mother at the time of the accident and was a resident relative of her mother under a Progressive insurance policy, was involved in an automobile accident while driving an uninsured, nonowned vehicle. When an injured party sued, Progressive refused to defend and indemnify defendant, arguing that resident relatives were not afforded liability coverage while driving a nonowned vehicle. The district court ruled that the Progressive policy provisions violated the No-Fault Act and that it must provide liability coverage to defendant.

The Court of Appeals affirmed, holding that Minn. Stat. §65B.49, subd. 3 (2), requires residual coverage for the insured (defendant here qualified as an "insured") for the use of "a" motor vehicle and does not limit coverage to the use of the named insured's vehicle. Thus, since the Progressive policy attempted to restrict liability coverage to its insured while operating a nonowned vehicle, its provisions violated the minimum coverage requirements under the No-Fault Act and were therefore void. Progressive Specialty Ins. Co. v. Widness, C7-00-33, 2000 WL 944891 (Minn. App. 7/11/00).