December 2001

Sanctions. In CUP Foods, Inc. v. City of Minneapolis, C2-01-399, 633 N.W.2d 557 (Minn. App. 9/11/01) the city adopted the findings and conclusions of an administrative law judge that found violations of the city licensing provisions, including a finding of drug sales on the premises. But the City Council imposed a significantly more severe penalty than that recommended by the ALJ. The ALJ recommended a conditional license and the City Council imposed a revocation that was stayed if the licensee convenience store closed for six months. The Court of Appeals decided that substantial evidence supported the decision and that due process was satisfied. But the court reversed because it concluded that the City Council's failure to explain why it rejected the ALJ's recommended sanction rendered the decision arbitrary and capricious. www.lawlibrary.state.mn.us/archive/ctappub/0109/c201399.htm

Statutory Authority. The commissioner of commerce issued a temporary cease and desist order against an insurance company based upon his determination that the company was in an unsafe financial condition. The order prevented the company from transacting new business in Minnesota. A contested case hearing was then held after which the commissioner made the order permanent. In In Re Certificate of Authority of Mutual Protective Insurance Co., C1-01-314, 633 N.W. 2d 567 (Minn. App. 9/18/01) the Court of Appeals reversed because it determined that the commissioner should have issued an order to show cause under Minn. Stat. ¤ 60A.052 (an insurance regulation statute) rather than a cease and desist order under the commissioner's general authority in Minn. Stat. ¤ 45.027. The court decided that Mutual Protective's "unsafe or unsound" financial condition did not constitute a "violation of law" sufficient to trigger the commissioner's general cease and desist power. Under the show cause procedure, the department must prove its allegations at a hearing before it issues an order affecting the company's operations. www.lawlibrary.state.mn.us/archive/ctappub/0109/c201399.htm

Error of Law. In D.R.W., LPNv. State of Minnesota Department of Health, C5-01-526, 2001 WL 1188092 (Minn. App. 10/9/01)(unpublished) the Minnesota Department of Health Office of Health Facility Complaints investigated the treatment leading to a patient's death; concluding with a finding of maltreatment. After a denial of a request for reconsideration, an evidentiary hearing was held with the referee recommending reversal, finding the LPN's actions constituted a "single mistake." The commissioner rejected the referee's findings. On appeal to the district court, the maltreatment determination was affirmed. The Court of Appeals reversed. Providing no deference to the district court, the Court of Appeals found the commissioner had inappropriately narrowed the "therapeutic treatment" exemption under the facts in this case, thereby creating an error of law. www.lawlibrary.state.mn.us/archive/ctapun/0110/526.htm

-- Hon. George Beck
Office of Administrative Hearings
-- Michael Ahern
Dorsey & Whitney

Statutory Immunity. The Court of Appeals held that a school district is statutorily immune from claims of negligent hiring, training and supervision of its employees. But the court said that the school district had not sustained its evidentiary burden of producing facts sufficient to warrant summary judgment on all immunity issues. Therefore, the matter was remanded for trial.

The action was one for personal injury to a child who fell from a snow pile on a school playground. The school district placed the snow on the playground, because it was the only open space that could accommodate the large amount of snow that was plowed from the adjoining parking lot. The child was injured during a recess that was supervised by school employees. Fear v. Independent School District 911, C8-01-486, 634 N.W.2d 204 (Minn. App. 9/18/01). www.lawlibrary.state.mn.us/archive/ctappub/0109/c801486.htm

Emotional Distress. The Court of Appeals refused to expand the emotional distress cause of action to allow claims arising from witnessing an injury to a family member.

Plaintiff's son was struck by defendant's vehicle when it went out of control and left the roadway. Initially, plaintiff feared that she herself and her vehicle would be struck by defendant, but the car missed plaintiff and instead struck plaintiff's son.

The parties agree that plaintiff has a valid cause of action for negligent infliction of emotional distress for the damages she suffered based on her fear for her own safety. In reviewing Stadler v. Cross and Carlson v. Illinois Farmers Insurance Company, the court refuses to extend a duty to protect a person within the zone of danger from witnessing harm to a family member. Engler v. Wehmas, C9-01-528, 633 N.W.2d 868 (Minn. App. 9/25/01). www.lawlibrary.state.mn.us/archive/ctappub/0109/c901528.htm

Workers' Compensation Subrogation. The Supreme Court answers certified questions from the United States District Court regarding an employer's right to bring claims against a former asbestos manufacturer for workers' compensation benefits paid to employees or which it may in the future be obligated to pay to employees who might later make claims.

The Court holds that the employer may bring subrogation claims only on behalf of identified employees who have a compensable injury and to whom the employer has a present duty to pay workers' compensation benefits. The Court specifically finds that the employer does not have a cause of action for employees who have not yet manifested symptoms of asbestos-related disease. For similar reasons, the Court finds that the employer has no cause of action for the potential claims of former employees who have developed asbestos-related illness, but have not yet sought workers' compensation benefits. Finally, the Court states that the employer may not assert a subrogation claim on behalf of a category of individuals or claims, but must instead make employee-specific claims. Conwed v. MacArthur Company, CX-00-2200, 634 N.W.2d 401 (Minn. 10/4/01). www.lawlibrary.state.mn.us/archive/supct/0110/cx002200.htm

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

Forfeiture: Conspiracy: Overt Acts. The claimant to the vehicle had been involved in a conspiracy to commit murder, which was monitored by police after a coconspirator informed. On four occasions, the claimant drove to meetings with his coconspirators in the 1987 Jeep, but all four meetings took place inside another vehicle. On the last meeting, the claimant drove to the meeting in his Jeep and brought with him a drill, drill bit, and wire which were to be used to carry out part of the murder plan. After this final meeting, the claimant and the coconspirator drove to the home of one of the planned victims and attempted to rig the window for later reentry. Subsequently the claimant was arrested.

The district court granted the county's motion for summary judgment, finding that the claimant had used the vehicle to transport himself to and from the meetings and to transport tools in furtherance of the conspiracy for first-degree murder.

Held, the motion for summary judgment was correct. Minn. Stat. ¤ 609.5312, subd. 1 (2000) allows forfeiture for "designated offenses." Conspiracy to commit first-degree murder is a designated offense. Here, the underlying predicate crime for the forfeiture is conspiracy, which requires an agreement plus overt acts. The claimant drove to the meetings in the Jeep and transported a tool. This is sufficient to facilitate the crime and provides sufficient acts to warrant forfeiture of the vehicle. Michael K. Riley Sr. v. 1987 Station Wagon, C8-01-21, 634 N.W.2d 434 (Minn. App. 10/02/01). www.lawlibrary.state.mn.us/archive/ctappub/0110/c80121.htm

Harassment: Patterned: Overlapping Predicate Acts. Minn. Stat. ¤ 609.749, subd. 5 (2000), which concerns patterned harassment, does not prohibit the prosecutor from overlapping predicate acts to charge a defendant with multiple counts of patterned harassment. In other words, one act for one count can also be used as a predicate act for a different count. State v. Richard Richardson, C2-00-1817, 633 N.W.2d 879 (Minn. App. 10/02/01). www.lawlibrary.state.mn.us/archive/ctappub/0110/c2001817.htm

Search and Seizure: Illegal Arrest: Resisting Arrest: Intervening Circumstance. Police arrested the appellant on the mere possibility that a search warrant existed for his arrest -- without checking his driver's license, inquiring as to his middle name, or his date of birth. Once handcuffed and brought toward the vehicle, the appellant resisted violently, to an extent that the parties stipulated that probable cause existed to arrest him for obstruction of legal process. During the subsequent pat-down, police retrieved a baggie of methamphetamine.

Held, the act of resisting arrest constituted obstruction of legal process, an intervening circumstance sufficient to purge the initial illegal arrest. A violent response to arrest is not a "predictable and common response," such as attempting to dispose of evidence. As such, it is a new crime, and the appellant may have been searched incident to the arrest. State v. Michael Jon Olson, C0-01-191, 634 N.W.2d 224 (Minn. App. 10/2/01). www.lawlibrary.state.mn.us/archive/ctappub/0110/c001191.htm

Search and Seizure: Fish House: Administrative Inspection Exception. A conservation officer ("CO") approached a fish house to determine whether it was properly registered and whether the occupants had fishing licenses. The owner of the fish house and a guest were present when the CO knocked on the door, identified himself, and then opened the door without waiting for a response to his knock. When he entered, he saw the owner attempting to hide something in a tackle box. The CO then asked for the owner's fishing license. The CO then saw what appeared to be a marijuana pipe on the tackle box, where he found a controlled substance. Also, the guest attempted to drop cocaine through the hole in the ice.

Held, the CO's entry into the fish house violated the 4th Amendment of the United States Constitution. There is no dispute that the owner had a subjective expectation of privacy in the fish house. This expectation is bolstered by the fact that this particular house had solid walls, heightening the expectation of privacy.
The Court of Appeals rejects the state's argument that a warrantless inspection is allowed under the administrative regulation of an activity which is traditionally subject to regulatory schemes. The appellant's ice fishing was not a business activity, it was a personal recreational activity. State v. Troy Allen Krenz, C7-01-558, 634 N.W.2d 231 (Minn. App. 10/02/01). www.lawlibrary.state.mn.us/archive/ctappub/0110/c701558.htm

Sentence: Probation Violation: Consecutive vs. Concurrent to Later Sentence. In 1999, in Hennepin County, appellant pleaded guilty to gross misdemeanor DWI and received 45 days in jail, with 320 days suspended, subject to probationary conditions. In September 2000, the appellant pleaded guilty to gross misdemeanor driving after cancellation and gross misdemeanor refusal to submit to testing, in Sherburne County, where he received 365 days for each offense, to be served concurrently.

In March 2001, the Hennepin County District Court determined that the appellant's alcohol-related conditions in Sherburne County violated the terms of the Hennepin County probation, and executed the remaining 320 days of the appellant's stayed sentence, but ordered it to be served consecutively to Sherburne County's later imposed sentence.

Held, Minn. Stat. ¤ 169A.28, which requires consecutive sentences on probationary violations, does not apply in this case. The controlling statute is Minn. Stat. ¤ 609.15. The Hennepin County District Court's actions violated this statute because it provides that the later sentencing court shall make the decision as to whether the sentencing shall be consecutive or concurrent. Therefore, the Hennepin County Court erred by making its sentence consecutive to the sentence imposed by Sherburne County. State v. Rodney Lyle Gilbert, C5-01-803, 634 N.W.2d 439 (Minn. App. 10/2/01). www.lawlibrary.state.mn.us/archive/ctappub/0110/c501803.htm

Sentence: Upward Departure: Drive-By Shooting: Zone of Tranquility. The appellant and his friends drove by a group of basketball players, asking them what gang they were in, and accusing them of being in the "Oriental Loks." Immediately after, someone in the car pointed a handgun out of the window and shot eight times into the group of players, striking one person in the back who later died. The appellant was the driver of the vehicle. The sentencing court departed upward to a prison term of 477 months, from the presumptive 318 months.

Held, the upward departure was appropriate. Aggravating circumstances supporting the departure were the "zone of tranquility" that playgrounds represent and the randomness of the shooting. State v. Tze Thao, Cl-00-2022, 634 N.W.2d 245 (Minn. App. 10/16/01). www.lawlibrary.state.mn.us/archive/ctappub/0110/c1002022.htm

Evidence: Impeachment: Criminal Sexual Conduct: Staleness. The appellant was on trial for first- and third-degree criminal sexual conduct involving unwitnessed contact with children. Prior to trial, the appellant gave notice of intent to testify, and made a motion to preclude the state from impeaching his testimony by evidence of a 1984 conviction of second-degree criminal sexual conduct. Following briefing, the district court announced the decision to use the conviction for impeachment purposes. The court, however, did not undertake on the record the five-factor analysis required by Minnesota Rule of Evidence 609(b). These factors are: (1) impeachment value on the prior crime, (2) date of conviction and defendant's subsequent history, (3) similarity of past crime with the charged crime, (4) importance of defendant's testimony, and (5) centrality of the credibility issue.

Held, it was harmless error for the court to not make the above findings on the record. The Court of Appeals then discusses the above five factors, finding that they have been substantially satisfied. State v. Michael Daniel Vanhouse, C8-01-66, 634 N.W.2d 715 (Minn. App. 10/16/01). www.lawlibrary.state.mn.us/archive/ctappub/0110/c80166.htm

DWI/Implied Consent: Digital PBT: Right to Counsel: Brady Violation. Following his arrest for DWI, the appellant spoke with his attorney prior to taking the chemical test. Appellant's attorney asked the appellant to find out what the digital preliminary breath test (PBT) result was. The arresting officer stated that it was a digital PBT, but declined to provide the actual numerical readout, and did not place this information in the police report. Nonetheless, the appellant submitted to the breath test.

Held, failure to inform a driver of the digital PBT result is not a denial of meaningful consultation with an attorney. The appellant's limited right to counsel was vindicated. Second, the police officer's failure to disclose or preserve the results of the digital PBT result was not a Brady violation in this case, because implied consent hearings are civil proceedings and Brady is thus inapplicable. Ryan Charles Hartung v. Commissioner of Public Safety, C4-01-419, 634 N.W.2d 735 (Minn. App. 10/23/01). www.lawlibrary.state.mn.us/archive/ctappub/0110/c401419.htm

Bail: Non-Conditional "Money-Only" Bail. The trial court refused to allow unconditional, money-only bail for the appellant on a charge of gross misdemeanor DWI. The judge set bail at either $3,000.00 bond or $750.00 cash, with various conditions, including abstention from the use of alcohol and random testing.

Held, it was error for the district court to set money-only bail. Minnesota Rule of Criminal Procedures 6.03, subd. 1 states that the court must set an amount of monetary bail, without imposing conditions: "In any event, the court shall also fix the amount of money bail without other conditions upon which the defendant may obtain release." The suggested procedure for courts is to set one type of bail including conditions, and an alternative money-only nonconditional bail. The court may still impose nonmonetary conditions as part of the alternative bail, and comply with Minn. Stat. ¤ 169A.44(b), which requires that certain nonmonetary conditions be imposed for certain DWI defendants. State v. Levi William McMains, C1-01-1270, 634 N.W.2d 733 (Minn. App. 10/23/01). www.lawlibrary.state.mn.us/archive/ctappub/0110/c1011270.htm

-- Frederic Bruno
Frederic Bruno & Associates PA

Vicarious Liability. An employee is not liable for a breach of a nonsolicitation agreement between a new employee and his former employer if the employer was unaware of the prohibition and it was not "foreseeable" that it would occur. In Hagen v. Burmeister & Associates, C3-00-496, 633 N.W.2d 497 (2001), the Minnesota Supreme Court held that a new employer is not vicariously liable for the breach absent some evidence that the employer knew, or should have know, of the violation. The Court indicated that expert witness testimony of the likelihood of the breach within a particular industry can satisfy the "foreseeability" standard, but there was no such evidence present in this case, and the record did not reflect any actual or constructive knowledge by the employer of the employee's failure to abide by the nonsolicitation agreement with his previous employer. www.lawlibrary.state.mn.us/archive/supct/0108/c300496.htm

An employer is not vicariously liable for tortious conduct of its employee in a road rage incident. In Wilson v. Stock Lumber, Inc., C3-01-623, 2001 WL 1182796 (Minn. App. 2001) (unpublished), the appellate court held that assaultive behavior by a delivery driver was not attributable to his employer because the misconduct was not foreseeable by the employer since road rage could not be "expected" and was not "a well-known hazard in the delivery business." www.lawlibrary.state.mn.us/archive/ctapun/0110/623.htm

Workers' Compensation. The exclusivity provision of the Workers Compensation Act, Minn. Stat. ¤ 176.031 bars common law tort claims by an employee who works for a closely held corporation owned and operated by a sole individual. In Gunderson v. Harrington, C7-00-999, 632 N.W.2d 695 (Minn. 2001), the Supreme Court ruled that the statute applies to individual owners of closely held companies and also found insufficient evidence that the employer acted with "conscious and deliberate intent to inflict 'injury"" to overcome the exclusivity bar. www.lawlibrary.state.mn.us/archive/supct/0109/c700999.htm

An employer who exercises the right not to carry workers' compensation may pursue a subrogation claim to recover payment of lost wages to an employee-shareholder injured by a third-party tortfeasor. In Olson v. Blesener, C3-01-377, 633 N.W.2d 544, 2001 Minn. App. LEXIS 994 (Minn. App. 9/4/01), the injured employee was a sole owner of the company. Thus, it was not required to obtain workers' compensation insurance, and it chose not to do so. But the appellate court held that the company was entitled to seek investigation through a third party, where negligence injured the sole shareholder, to recover lost wages that the company voluntarily paid the injured employee. www.lawlibrary.state.mn.us/archive/ctappub/0109/c301377.htm

Hostile Environment. The 8th Circuit Court of Appeals recently rejected hostile environment cases involving race and sex discrimination claims. In Willis v. Henderson, 99-4257, 262 F.3d 801 (8th Cir. 2001), a claim of racial bias creating a hostile work environment and constructive discharge by an African-American employee, who contended that he was harassed by two white coworkers and became distraught and was forced to quit, was rejected by the court. Although the evidence showed that the two coworkers generally hassled a number of employees, their behavior was not severe, and the employer was not reasonably aware of the misconduct. http://caselaw.lp.findlaw.com/data2/circs/8th/994257p.pdf

The placement of a seminude photograph of a woman who resembled an employee on one of the computers in the workplace by the employer did not give rise to a hostile environment claim based upon sex in Rheineck v. Hutchinson Technology, 00-3270, 261 F.3d 751 (8th Cir. 2001). Supervisory personnel searched all the office computers promptly and removed the image when it was found. The employees who were connected with the circulation and possession of the photograph were required to take sexual harassment training. Although the employer concluded that the image is not a likeness of the claimant, and there were some lingering rumors regarding the identity of the person in the photograph, the claimant stated that she did not feel harassed after the image was removed. Under these circumstances, her claims of hostile work environment were properly rejected by the trial court. http://caselaw.lp.findlaw.com/data2/circs/8th/003270p.pdf

Disability Discrimination. Two disability discrimination claimants also recently lost appeals in the 8th Circuit.

In McConnell v. Pioneer Hi-Bred Int'l, Inc., 00-1616, 260 F.3d 958 (8th Cir. 2001) the court upheld the dismissal of a disability termination claim under the Americans with Disabilities Act (ADA) based upon the employer's reason that the employee did not communicate well with other employees and did not properly supervise his subordinates. A dissenting opinion stated that the case should not have been dismissed because there were supporting affidavits from other employees that contradicted the employer's assertions. http://caselaw.lp.findlaw.com/data2/circs/8th/001616p.pdf

A 40-pound lifting restriction was insufficient to constitute a disability under the ADA in Brunko v. Mercy Hospital, 00-2989, 260 F.3d 939 (8th Cir. 2001). The lifting limitation prevented the claimant from performing her job as a hospital staff nurse. However, the employer encouraged the employee to apply for other positions in the hospital, which had a 75-pound lifting requirement for staff nurses and the nurse was able to obtain a variety of other jobs despite the lifting limitation. Therefore, both federal and state disability discrimination claims lacked merit. http://caselaw.lp.findlaw.com/data2/circs/8th/002989p.pdf

The U.S. Supreme Court has a heavy docket of employment law cases on its agenda during its current term, which began in October. Workplace-related cases include one from the Minnesota Supreme Court as well as another from the 8th Circuit Court of Appeals, which deal with the statute of limitations for age discrimination under the Federal Age Discrimination Employment Act (ADEA) and the notification requirements imposed upon employers under the Federal Family Medical & Leave Act (FMLA). The employment cases that have been accepted for review as of the beginning of the term include the following:

• Where a federal statute tolls the statute of limitations on a state-law claim against a state, does this violate the 11th Amendment? Raygor v. Regents of the University of Minnesota, 00-1514, cert. granted 6/4/01. Ruling below: 620 N.W.2d 680 (Minn. 2001).
• Where an employer failed to notify an employee that her paid disability leave and FMLA leave would run concurrently, can it fire her for failing to return after her paid leave expired? Ragsdale v. Wolverine Worldwide, 00-6029, cert. granted 6/25/01. Ruling below: 218 F.3d 933 (8th Cir. 2000).
• Can the Postal Service fire a worker based on previous disciplinary actions that the worker is appealing? Gregory v. U.S. Postal Service, 00-758. cert. granted 2/20/01. Ruling below: 212 F.3d 1296 (Fed. Cir. 2000).
• Even though some racial discrimination occurred more than 300 days before the plaintiff filed a Title VII claim, can the suit still be brought under a "continuing violation" theory? National Railroad Passenger Corp. v. Morgan, 00-1614, cert. granted 6/25/01. Ruling below: 232 F.3d 1008 (9th Cir. 2000).
• Where an EEOC regulation permits a discrimination charge to be amended after the statute of limitations has expired, is this valid? Edelman v. Lynchburg College, 00-1072, cert. granted 6/25/01. Ruling below: 228 F.3d 503 (4th Cir. 2000).
• Is carpal tunnel syndrome a disability under the ADA? Toyota v. Williams, 00-1089, cert. granted 4/16/01. Ruling below: 224 F.3d 840 (6th Cir. 2000).
• Must an employer accommodate a disabled worker under the ADA even if doing so would violate its seniority rules? US Airways, Inc. v. Barnett, 00-1250, cert. granted 4/16/01. Ruling below: 228 F.3d 1105 (9th Cir. 2000).
• Where an employee has signed an arbitration agreement with his employer, can the EEOC still sue the employer on the employee's behalf in federal court? EEOC v. Waffle House, 99-1823, cert. granted 3/26/01. Ruling below: 193 F.3d 805 (4th Cir. 1999).

Marshall H. Tanick
Mansfield, Tanick & Cohen, PA

CERCLA; Cost Recovery; EPA Costs. The 8th Circuit Court of Appeals recently held that the U.S. Environmental Protection Agency (EPA) may recover its oversight and indirect costs and attorneys' fees associated with private party cleanups under the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA).

The EPA identified Dico, Inc. (Dico) as a potentially responsible party under CERCLA in connection with contamination of the Des Moines public water supply. The EPA issued a cleanup order and Dico complied. The EPA incurred more than $4 million in costs in connection with Dico's cleanup and brought a cost recovery action against Dico. The costs which the EPA sought to recover included indirect and oversight costs, attorneys' fees and litigation costs. The district court ruled in favor of the EPA and Dico appealed.

The 8th Circuit affirmed the district court's ruling on both Dico's liability and the amount of the award. In doing so, the 8th Circuit rejected the earlier ruling of the 3rd Circuit in United States v. Rohm & Haas Co., 2 F.3d 1265 (3d Cir. 1993), that the "clear statement doctrine" established in National Cable Television Ass'n v. United States, 415 U.S. 336 (1974), precluded recovery of the <H>epa<P>'s costs in private party removal actions under CERCLA. Following the 10th Circuit's decision in Atlantic Richfield Co. v. American Airlines, 98 F.3d 564 (10th Cir. 1996), the 8th Circuit ruled that the 3rd Circuit erred in Rohm by failing to recognize the difference between agency costs in CERC;A cleanups and the user fees that were being charged by the FCC in National Cable. The 8th and 10th circuits distinguished National Cable on grounds that National Cable involved the imposition of user fees on innocent members of industries regulated by the FCC, while CERCLA is a remedial statute designed to hold parties responsible for contamination they cause. United States of America v. Dico, Inc., 00-2430, 266 F.3d 864, 2001 WL 1094944 (8th Cir. 2001). http://caselaw.lp.findlaw.com/data2/circs/8th/002430p.pdf

CERCLA; Cost Recovery; Passive Migration. The 9th Circuit Court of Appeals recently held that leaching of a hazardous substance through soils will not support a CERCLA cost recovery action against a former owner who did not otherwise cause or contribute to the contamination. Passive soil migration does not constitute a "disposal" within the meaning of CERCLA, according to the court.

Carson Harbor Village, Ltd., as the current owner of a mobile home park, incurred cleanup costs in connection with contamination related to production of petroleum on the site decades earlier. Carson Harbor sought to recover these costs from the petroleum producer, the prior owner of the mobile home park and others. The prior owner of the mobile home park had taken no affirmative action which would associate them with the contamination. The district court granted summary judgment in favor of the prior owner and Carson Harbor appealed, arguing that leaching of the contaminants during the prior owner's ownership of the property constituted a "disposal" of hazardous substances for which the prior owner was liable.

After analyzing the rulings of several other circuit courts with respect to passive migration, the 9th Circuit affirmed the district court's grant of summary judgment in favor of the prior owner of the mobile home park. The 9th Circuit held that the plain meaning of the statutory terms used to define "disposal" compelled such a ruling because the passive movement of contamination through soils cannot be characterized as a "discharge, deposit, injection, dumping, spilling, leaking, or placing" of hazardous substances on the property. The court held that this conclusion was also consistent with CERCLA's statutory purpose and legislative history. The court left open the possibility that other types of passive migration might constitute a "disposal" under CERCLA. The 8th Circuit has not yet ruled on this issue. Carson Harbor Village v. UNOCAL, 98-55056, ___ F.3d ___ (9th Cir. 10/24/01). http://caselaw.lp.findlaw.com/data2/circs/9th/9855056p.pdf

Clean Air Act; New Source Review; Cogeneration. The EPA has made available the preliminary draft of its pending guidance on source determinations for combined heat and power (CHP) facilities under the Clean Air Act's new source review and Title V programs. The guidance is intended to clarify the Clean Air Act's requirements for constructing CHP facilities in order to speed permitting and ensure that the environmental benefits of cogeneration are fully realized. For more information, visit http://www.epa.gov/fedrgstr/EPA-AIR/2001/October/Day-15/a25864.htm 66 Fed. Reg. 52,403 (10/15/01).

-- Robert F. Devolve
Leonard Street and Deinard PA

FEDERAL PRACTICE
Judicial Law

Diversity; Amount in Controversy; Aggregation of Claims. Plaintiff filed a putative class action in the Arkansas courts. The complaint sought damages "not exceeding $75,000 per plaintiff," plus punitive damages, restitution, and attorney fees. Defendants removed the case, and the plaintiff then brought a motion to remand the case for lack of subject matter jurisdiction, or, in the alternative, for voluntary dismissal under Fed. R. Civ. P. 41(a). The district court granted the motion for voluntary dismissal without first ruling on the motion to remand. Some defendants appealed, arguing that the district court was obligated to reach the issue of subject matter jurisdiction before addressing the dismissal motion. One defendant argued on appeal that the district court had subject matter jurisdiction.

Deciding to reach the jurisdictional issues in "the interest of judicial economy," the 8th Circuit cited its recent decision in Trimble v. Asarco, Inc. for the proposition that "individual class members' distinct claims for actual damages may not be aggregated to satisfy the $75,000 amount-in-controversy requirement for diversity jurisdiction." The 8th Circuit then joined "a growing number of circuits" in holding that "punitive damages ordinarily may not be aggregated" for jurisdictional purposes. Not surprisingly, the 8th Circuit then applied the same logic to the plaintiff's claims for restitution and attorney fees. Finding that there was no federal jurisdiction, the matter was remanded to the Arkansas courts.

Like Trimble before it, this decision will make it much more difficult for defendants to remove most consumer class actions to the federal district courts within the 8th Circuit. Crawford v. F. Hoffman-La Roche Ltd., 00-2951, 267 F.3d 760 (8th Cir. 2001). http://caselaw.lp.findlaw.com/data2/circs/8th/002951p.pdf

Consent to Juridiction; Compelling Arbitration. Plaintiff insured and performed claims handling services for the defendant, a Texas corporation, under a contract in which the parties agreed that any disputes would be resolved through arbitration to be conducted in Saint Paul. After defendant failed to pay a $512,000 invoice, plaintiff invoked its arbitration rights, and eventually brought a Petition to Compel Arbitration in the District of Minnesota. Defendant moved to dismiss for lack of personal jurisdiction, arguing that it lacked sufficient contacts with Minnesota.

The 8th Circuit held that by agreeing to the arbitration-related forum selection clause, defendant had "impliedly consented to be sued in Minnesota to compel arbitration of such disputes," and that such implied consent was "necessary to implement the statutory requirement" than an arbitration hearing must be held within the district in which the petition to compel the arbitration is filed. The 8th Circuit concluded that unless the district court had personal jurisdiction over the recalcitrant party, "the agreement to arbitrate would be effectively unenforceable, contrary to the strong national policy in favor of arbitration."

The 8th Circuit's failure to cite to a single decision on point strongly suggests that this is an issue of first impression in the Circuit. St. Paul Fire and Marine Ins. Co. v. Courtney Enterprises, Inc., 00-3236, 2001 WL 1268493 (8th Cir. 2001). http://caselaw.lp.findlaw.com/data2/circs/8th/003236p.pdf

Other Noteworthy Decisions. The 8th Circuit affirmed a forum non conveniens dismissal substantially for the reasons set forth in the district court's opinion, but specifically noted that an American corporate plaintiff may have its choice of forum preference "discounted" if it does extensive business abroad. EFCO Corp. v. Aluma Systems USA, Inc., 268 F.3d 601 (8th Cir. 2001).

The 8th Circuit found that Judge Rosenbaum abused his discretion in his cy pres distribution of unclaimed settlement proceeds in a class action, where the distribution (made to Minnesota law schools and charities) was in no way related to the "origin" of the class action. In Re Airline Ticket Commission Antitrust Lit., 268 F.3d 619 (8th Cir. 2001).

The 8th Circuit held that a district court had abused its discretion in applying the Younger abstention doctrine to avoid ruling on the merits of an international child custody dispute. Silverman v. Silverman, 267 F.3d 267 (8th Cir. 2001).
Judge Montgomery denied a defendant's request for sanctions under 28 U.S.C. ¤ 1927 without prejudice pending the outcome of the plaintiff's appeal, but ordered plaintiff to post a $1,000 bond for costs on appeal pursuant to Fed. R. App. P. 7, finding "sufficient concern about the willingness and ability of the Plaintiff to pay the costs of the appeal to require the posting of a bond. Phillips v. Grendahl, 2001 WL 1110370 (D. Minn. 9/19/01).

-- Josh Jacobson
Law Office of Josh Jacobson PA

Copyright; Derivative Work. In U.S. v. Washington Mint, LLC, et al., Judge Tunheim held that the Washington Mint violated a copyright assigned to the federal government by offering for sale a replica of the Sacagawea dollar coin. The Washington Mint admitted copying the Sacagawea dollar coin but claimed non-infringement because it did not copy the Sacagawea sculpture that was copyrighted. This raised an interesting issue of first impression in this circuit: whether copying a "derivative work," in this case the Sacagawea dollar coin, is infringement of the original copyrighted work, the sculpture of Sacagawea. The Court concluded, relying on other circuits' law, that the Sacagawea dollar coin copied by Washington Mint, included "substantial" portions of the sculpture design and, therefore, the Washington Mint was liable for infringement. In comparing the Sacagawea dollar coin -- not the replica coin -- to a photograph of a copyrighted sculpture, the Court found the following similarities substantial: the head of Sacagawea was the same proportionally and turned at the same angle with the same expression on her face. In both designs, she carries a baby on her back, wears identical clothing and wears her hair exactly the same way. Thus, concluded the court, the Washington Mint reproduced significant portions of the original copyrighted design (the sculpture) by copying the dollar coin derived from it. The Washington Mint also challenged the validity of the government's copyright based on section 105 of the Copyright Act, which states that copyright protection is not available "for any work of the United States Government." However, an exception exists for copyrights transferred to the government by assignment. Finding infringement of a valid governmental copyright transferred by assignment, the court entered a permanent injunction against the Washington Mint prohibiting the sale of its replica coin. U.S. v. the Washington Mint, LLC, et al., Civ. No. 99-1768, 115 F.Supp.2d 1089 (D. Minn. 9/5/01); see also 115 F.Supp. 1089 (D. Minn. 2000).

Patent; First-to-File Rule. In Taylor Corp., et al., v. Microthin.com, Inc., a patent holder for ultra-thin computer mouse pads, asked the court to dismiss the Minnesota lawsuit in favor of an Illinois lawsuit filed two days later. Judge Magnuson denied the motion holding that the first-to-file rule applied to patent cases.

Believing that plaintiffs were infringing its patent, Microthin sent a cease-and-desist letter on April 26, 2001. Five days later, plaintiffs filed a declaratory judgment action in the District Court of Minnesota, seeking declarations, inter alia, of noninfringement. Microthin filed a patent infringement action in the Northern District of Illinois two days later.

Microthin asserted that the Supreme Court in Wilton v. Seven Falls Co., 515 U.S. 277 (1995) overruled Genentech, Inc. v. Eli Lilly & Co., 998 F.2d 931 (Fed. Cir. 1993), which held that courts in patent cases should maintain the forum of the first-filed action unless considerations of economy and justice require otherwise. However, Judge Magnuson stated that "Wilton did not overrule, or even discuss, that part of the holding in Genentech that is relevant to the instant case, namely the Federal Circuit's decision that the first-filed rule should apply in patent cases. ... Thus, the relevant holding in Genentech is still good law." Finding that plaintiffs were the first to file, Judge Magnuson maintained the forum plaintiffs chose. Taylor Corp., et al. v. Microtin.com, Inc., Civ. No. 01-762, ___ F.Supp.2d ___ (D. Minn. 9/11/01).

Trademark; Prior Use. In an unpublished decision, the 8th Circuit Court of Appeals affirmed and adopted the decision of Judge Frank that a prior user of the BNSF mark did not have superior rights under common law despite using the mark for more than a year before the railway company of the same name began using the mark. Purdy v. Burlington Northern Santa Fe Corp., et al., 00-1918, (8th Cir. 10/24/01).

-- Anthony R. Zeuli
-- Keith Campbell
Merchant & Gould

No Ademption by Extinction. Son lived with mother and provided her with care. Mother's will gave son an option to purchase the home on Quinn Street for its fair market value ... less "$500 per month credit for his care for me at home from July 1992. ... If [respondent] does not purchase the house, he shall still receive credit for his care for me at home ... before the remainder of the sale proceeds are distributed in equal shares to all my children." (Emphasis added in court opinion.) This will was prepared in 1992 when the home on Quinn Street was purchased. In 1996, mother sold the home and purchased a new one, but did not change her will. At mother's death, son claimed his "care credit." The Personal Representative, who is another son, denied the claim. The district court found, and the appellate court agreed, that the option to purchase the home on Quinn Street was adeemed by extinction, but the $500 monthly care credit remained valid. A legacy is specific when the testator intends the legatee to receive the very thing bequeathed, so a specific legacy fails if the thing given is not in the estate at the time of death. In comparison, a demonstrative legacy is a gift that is directed to be paid out of a particular fund, but payable even if the fund fails. The testator's intent is relevant in determining if a devise is a specific or demonstrative bequest. Courts disfavor specific bequests, so the intent to create a specific legacy must be especially clear. Based upon the language in the mother's will, the court determined that it is reasonable to conclude that the mother intended the care credit be given to son regardless of the source. In re Estate of Anita Ann Lund, C6-01-390, 633 N.W.2d 571 (Minn. App. 9/25/01). http://www.lawlibrary.state.mn.us/archive/ctappub/0109/c601390.htm

-- Tonya Zdon Gabbard
Garvey & Boggio, PA

Municipal Immunity. Jessica Lishinski died as a result of injuries sustained while in-line skating on a blacktop pathway in Duluth's Leif Erickson Park. Her heirs filed this wrongful death action against the City of Duluth (city). The city asserted a defense of recreational immunity pursuant to Minn. Stat. ¤ 466.03, subd. 6e (1998), and moved for summary judgment. The district court denied the motion and this appeal followed. On appeal, the appellate court affirmed concluding that Lishinski presented evidence to suggest the particular hazard claimed to exist was hidden or concealed in nature rather than obvious upon reasonable inspection. The jury must determine the material fact of whether the condition of the path was hidden from Lishinski. Affirmed. Lishinski v. City of Duluth, CX-01-747, 634 N.W.2d 456 (Minn. App. 10/16/01). www.lawlibrary.state.mn.us/archive/ctappub/0110/cx01747.htm

Township Law. West Circle Properties (WCP) brought a mandamus action in district court to compel Olmsted County (Olmsted) to record the plat of WCP. Before the district court addressed the issue, Olmsted passed a resolution not to record the plat. WCP challenged the resolution by writ of certiorari naming Olmsted and Cascade Township (Cascade) as respondents. The district court denied CPW's request for writ of mandamus and entered summary judgment. WCP appealed the decision and moved to consolidate the certiorari proceeding which was granted. On appeal, WCP argued that it had received approval of the township to record the plat and no county approval was necessary. The appellate court concluded that the decision not to record the plat is quasijudicial and, therefore, certiorari review is appropriate. However, the plat was defective as a matter of law because it did not have county approval as required by Minn. Stat. ¤ 505.03, subd. 1. Although Cascade adopted Olmsted's ordinances, the appellate court concluded that its application of the county standards was different and, therefore, inconsistent. Affirmed. West Circle Properties LLC v. Daniel Hall, et al., C9-01-156 and C5-01-591, 634 N.W.2d 238 (Minn. App. 10/16/01). www.lawlibrary.state.mn.us/archive/ctappub/0110/c901156.htm

Mechanic's Lien Law. JDC hired Ryan to perform certain construction activities for the Fairway Hills residential development in Chaska. JAG is the owner of the property. In April, 1998, Ryan served and filed a mechanic's lien against the property to recover amounts allegedly due from JDC listing its last day of work as December 16, 1997. On December 4, 1998, Ryan filed a lawsuit to foreclose on its lien and served JDC but not JAG. JAG served an answer asserting lack of personal jurisdiction because Ryan failed to serve JAG within the one-year time limit imposed by Minn. Stat. ¤ 514.12, subd. 3. On December 28, 1998, GMH, also named as a defendant, filed an answer and cross claim against JAG in an attempt to foreclose its own mechanic's lien. GMH mailed a copy of its answer to JAG's attorney. On motions for summary judgment, the district court held that it had personal jurisdiction over JAG even though it was never served on the basis that JAG participated in the district court proceeding, and that JDC and JAG were a joint venture so service on JDC was effective service on JAG. The Court of Appeals agreed holding that service of process on JAG was effective because JAG's joint venture partner (JDC) was properly served, JAG received actual notice, and JAG was not prejudiced.

In a five-two decision, the Supreme Court reversed, holding that the district court did not have personal jurisdiction over JAG and neither Ryan's or GMH's lien action. The Supreme Court concluded that the one-year time limit on service of process in Minn. Stat. ¤ 514.12, subd. 3 begins to run on a lienholder's last day of work listed in its recorded lien statement, and that Ryan failed to affect service of process on JAG within the time limit. Ryan Contracting, Inc. v. JAG Investments, Inc., et al, C5-99-1688 634 N.W.2d 176 (Minn. 10/11/01). www.lawlibrary.state.mn.us/archive/supct/0110/c5991688.htm

--Chris Dietzen
Larkin Hoffman Daly & Lindgren Ltd.

Transfer of Realty Not a Gift;Tax Lien Enforceable. The 8th Circuit Court of Appeals upheld the district court's decision that a transfer of realty by a delinquent taxpayer was not a valid inter vivos gift under state (Arkansas) law and thus the government's lien against the property for back taxes was enforceable. The government presented convincing evidence based on promissory notes and testimony of taxpayer's son that taxpayer has an interest in the property to which the lien could attach. Similarly, the court rejected the argument that taxpayer's right to enforce a promissory note and mortgage had expired. The court rejected other arguments because they were not raised below. J. Jepson, CA-8, 2001-2 USTC ¦50,698 (2001 TAXDAY, 10/26/01).

Investment Partnership Legitimate. The U.S. District Court for the District of Columbia rejected the Internal Revenue Service's contention that the Boca Investerings Partnership was a sham. The district court found that the four basic attributes of a partnership were present. In addition, the court rejected the IRS's determination that the partnership transactions, involving the purchase and sale of private placement notes (PPN) and London Interbank Offer Rate (LIBOR) notes, lacked economic substance. The partnership presented credible evidence that although tax benefits were a consideration the transactions were based on potential financial benefits. Boca Investerings Partnership v. United States, 2001 WL 1217230 (D.D.C. 2001).

Improper Notice of Auction Sale Deemed Substantial Compliance. The 3rd Circuit found the improper notice of seizure and auction by the IRS to be in substantial compliance with Code Section 6335, thereby upholding the sale of the taxpayers' real property to third parties. Courts have interpreted Section 6335 to require hand delivery of seizure and sale notices, allowing delivery by mail only when hand delivery has failed. See Goodwin v. United States, 935 F.2d 1061, 1064 (9th Cir. 1991). While in this case notice by certified mail was held improper, the taxpayers received actual notice and were unable to prove that notice by certified mail caused them prejudice or damages. Kabakjian v. United States, 2001 WL 1153712 (3rd Cir. 2001).

Payments to S Corp Officer; Wages; Dividend Distributions. The president and sole shareholder of an S corporation was deemed an employee for tax purposes. The individual provided substantial services to the corporation and received all of the corporation's income. As a result, the court denied the corporation's characterization of payments made to the individual as dividend distributions from accumulated earnings and profits. The payments were compensation for services and were therefore subject to FICA and FUTA taxes. Veterinary Surgical Consultants, P.C. v. Commissioner, 117 T.C. No. 14 (10/15/01); see also Yeagle Drywall Co., Inc. v. Commissioner, T.C. Memo. 2001-284 (10/15/01).

Same-Sex Partners; Joint Return Filing Status. The taxpayer was denied "married filing joint returns" status with regard to his long-time same-sex partner. The taxpayer did not qualify under Code Section 6013 because he was not considered a husband or wife. The court did not agree with the taxpayer that treating married couples and unmarried economic couples differently violated the Constitution. Additionally, the Defense of Marriage Act did not aid the taxpayer because he was an unmarried individual. Mueller v. Commissioner, T.C. Memo. 2001-274 (10/10/01).

Falsified Returns; Preparer; Penalty. Penalties were upheld against a tax return preparer for the preparation of falsified income tax returns by her husband. Although her husband conducted consultations with the clients and made the tax calculations, the taxpayer's signature and social security number appeared on the returns as certification. Since the taxpayer had taken a return preparer's course, the court found that she was aware of the obligations imposed on paid income tax preparers and was therefore deemed a statutory preparer. Further, she was unable to claim good faith reliance on her husband's tax preparations because her signature constituted a declaration that she had examined the returns and that they were true to the best of her knowledge. Bui v. United States, 2001 WL 1244754 (W.D. Wash. 2001); TAXDAY, Item # J.9 (10/11/01).

Ambiguous Form 1040 Instructions; Deduction Disallowed. Taxpayers were denied a deduction for the additional 10 percent tax imposed on the early distribution from the husband's qualified retirement plan. Although the instructions to Form 1040 were alleged to be unclear, the unambiguous statutory language was controlling. Code Section 275 clearly states that deductions are not allowed for federal income taxes. Trace v. Commissioner, T.C. Summary Opinion 2001-165 (10/16/01).

Taxpayer Residing with Parents; Dependency Exemption; Child-Care Credits; Head-of-Household Status. In a summary opinion, the tax court dismissed the government's assessment of deficiencies and allowed the single parent taxpayer to claim the dependency exemption, head-of-household filing status, and child care expenses even though the taxpayer lived with her parents. The taxpayer was able to prove that she provided over one-half support of her child, contributed over one-half of household expenses, and paid for the child-care expenses. The court denied her request for the earned income credit under Code Section 32 and determined that her parents could claim the credit instead. Obriot v. Commissioner, T.C. Summary Opinion 2001-162 (10/11/01).

Substantial Understatement Penalty; Jojoba Farm Tax Shelter. Taxpayer was liable for the substantial understatement penalty in relation to his investment in a jojoba farm tax shelter. The investor was unable to prove he had a profit motive due to his cursory reading of the offering memorandum, his lack of expertise in jojoba farming, and his inability to show that his advisors were able to provide him with informed advice. He was further unable to show that he had substantial authority for his treatment of the partnership loss. Lopez v. Commissioner, T.C. Memo. 2001-278 (10/10/01).

Challenged Basis Increase; Loss Pass Through. The tax court upheld the taxpayers' transfers from their mining company to their farm, both S corporations, as increases in the taxpayers' basis in their farming operations. The government felt these purported loans, capital contributions, and gifts were actually intercompany loans based on the evidence that the funds were transferred directly from one company's account to the other. The court disagreed and found this direct transfer to be immaterial; the taxpayers merely skipped the added steps of transferring the funds to the husband, depositing the funds in their joint account, and writing a check to the farming operation. As a result, the taxpayers' could increase their basis and claim a net operating loss deduction for the farm operation. Yates v. Commissioner, T.C. Memo 2001-280 (10/11/01).

State Tax Liabilities and Interest; Specified Liability Losses; IRC 172(F)(1)(b). The 6th Court of Appeals held that the corporation and its subsidiaries could carry back for ten years certain expenses, i.e., state tax liabilities and interest on federal and state tax liabilities if the expenses qualified as specified liability losses under Section 172(F)(1)(b) and remanded the case to the Tax Court to determine if the expenses were "specified liability losses". The United States Tax Court, on remand, held that the corporation's state tax liabilities and interest on federal and state tax liabilities qualify as "specified liability losses. The government had argued for a narrow interpretation of the statute that would have limited carry back deductions to tort and product liability expenses. Intermet Corporation & Subsidiaries v. Commissioner, 117 T.C. No. 13 (2001).

Indirect Audit Method; Sales and Use Tax Assessment. The Minnesota Tax Court upheld the assessment of additional sales and use taxes against the owner of a bar using a unit volume (i.e., amount of liquor per drink or "drink pour") method of indirect audit for a test year and applying the result to the whole six-year audit period. New Corner Bar, Inc., 2001 WL 1007811 (Minn. Tax, No. 7221 R, 8/29/01).

Collection Of IRS Debts From Social Security Benefits. The Taxpayer Relief Act of 1997 authorized the Treasury Department to collect tax debts from Social Security benefits; however, the IRS, Treasury Department's Financial Management Services, and the Social Security Administration had not coordinated their systems to get this task accomplished. The systems are now ready to notify the taxpayer before the garnishment takes place in order to minimize the number of mistakes. The collection will be up to 15 percent of the Social Security benefits and will continue until other payment arrangements are made or the collection statutory period expires. Lawrence J. Holbrook, TAXDAY, 10/24/2001, Item #T.1.

Leave-Based Donation Programs; Employee Income. The IRS announced that vacation, sick, or personal leave foregone by employees in exchange for the employer to make a donation to a charity would not be considered income to the employee. The payments have to be made before January 1, 2003, and the employee can also not deduct these as charitable contributions. The IRS is requesting comments on this announcement and on leave-based donation programs. Comments can be submitted to notice.comments@m1.irscounsel.treas.gov. TDNR PO-720, Notice 2001-69 (10/24/01).

IRS Hours of Operation; Toll-Free Numbers. The IRS is reducing the hours of operation for its toll-free number (1-800-829-1040) from 24 hours a day to 7 a.m. to 10 p.m., Monday through Friday. Even though the hours are reduced, the IRS will provide more IRS representatives during peak times. Saturday hours will also be available during tax season. TAXDAY, 10/23/2001, Item #I.4.

Taxpayer Advocate Services; IRS Employee Training. The Treasury Inspector General for Tax Administration (TIGTA) released a report stating that IRS employees need additional training in identifying Taxpayer Advocate Services (TAS) cases. The TAS did developed agreements to assist IRS employees in identifying these cases. The report is available at www.treas.gov/tigta. TIGTA Report: The National Taxpayer Advocate Needs to Ensue Operations Employees Receive Training to Identify Cases (10/19/01).

Information Document Request; Issues Under Consideration Established. The Information Document Request issued as part of an examination, even if the deficiencies have not yet been assessed, does bring up the issues that are under consideration. The taxpayer's IDR identified the accounting method as an issue, and therefore, the taxpayer could not subsequently file a Form 3115 to change its accounting method. Letter Ruling 200142001 (Dec. 14, 2000).

Donation of Online Shopping Rebate; Charitable Contribution. The taxpayer is allowed to deduct the rebate it received through online shopping as a charitable deduction where the corporation paid the rebate directly to the charitable organization at the taxpayer's request. The corporation is seen as the agent for the taxpayer in making the donation. The rebate was not includable in the taxpayer's gross income, but is allowed as a deduction under section 170. Letter Ruling 200142019 (7/24/01).

Extension of Time to Make Section 855(A) Election. The tax manager representing the regulated investment company reasonably believed that an extension had been filed for making the election to treat dividends paid at the close of the tax year as having been made during the tax year. Due to an error in the tracking system of due dates and extensions, the tax manager reasonably believed the extension had been filed. Upon discovering that the extension had not been filed, the tax manager quickly applied for relief before the IRS discovered the failure. The circumstances surrounding the mistake and the actions by the tax manager upon discovery of the failure to file demonstrated good faith and supported the decision to grant relief. Letter Ruling 200142016 (7/25/01).

Release of Information to Grand Juries. Chief Counsel issued a memorandum addressing grand jury investigations in four different scenarios. These scenarios address questions such as the extent FBI agents can participate in meetings, the inclusion of FBI agents in meetings, and procedures for providing tax return information. CCA Letter Ruling 200142023 (10/23/01).

Mid-Quarter Convention; Property Placed in Service in Tax Year Including September 11. The IRS has announced that it will allow taxpayers to use the mid-year convention on all property, not including section 168(d)(2) property, for their 2001 tax year. The IRS believed this relief was necessary since many taxpayers' acquisition plans were affected by the terrorist attacks of September 11th. The taxpayer must write "Election Pursuant to Notice 2001-70" on top of Form 4562. TDNR PO-701 (10/18/01).

Catch-Up Contributions Guidelines; Economic Growth and Tax Relief Act of 2001. A proposed regulation sets details for the additional contributions to retirement plans by people age 50 and over. These regulations clarify who is entitled to these catch-up contributions, which plans are allowed to have these provisions, and what is a catch-up contribution. The regulation would apply to contributions made on or after January 1, 2002. TAXDAY, 10/23/2001, Item #I.1.

Proposed Legislation; Deductible Travel Expenses. A bill was introduced in the House to encourage travel. The bill would increase the 50 percent meal and entertainment expense to 80 percent for business travelers and also provide for a deduction for certain personal travel expenses. Freedom to Travel Act of 2001, HR 3143.

Anti-Money Laundering Measure; Form 8300 Availability. The House allowed Form 8300, Report of Cash Payments Over $10,000 Received in a Trade or Business, to be accessible to other government agencies. Previously the form was restricted to IRS use and law enforcement did not have access to it. The form will also now be on file with the Treasury's Financial Crimes Enforcement Network. HR 3004 (10/17/01).

Tax Exemption for Response to Terrorist Attacks. A bill was introduced in the House to provide assistance to the firefighters, police officers, and rescue personnel who are also putting themselves at risk while responding to the terrorist attacks. The bill seeks to exclude from income the basic pay these individuals earn while responding to a terrorist attack -- similar to the benefits received by military personnel. A similar proposal was also introduced in the Senate. HR 3137, Terrorist Response Tax Exemption Act (10/16/01).

Early Withdrawal Penalty Waiver; National Emergency. The Senate introduced legislation that would add another category to the list of distributions not subject to the early withdrawal penalty. The penalty would be waived for people called to active duty during the national emergency declared by the President as a result of the terrorist attacks. Sen. 1531, Military Call-Up Relief Act (10/11/01).

Institute on Current Issues in International Taxation. The fourteenth annual institute will be held December 13-14 at the J.W. Marriott Hotel in Washington DC. The topics will include items such as foreign and U.S. taxation of partnerships, hybrid business organizations, outbound and inbound issues, and transfer pricing issues. For more information, contact George Washington University, Conference Management Services, at (202) 973-1110 or online at www.gwu.edu. TAXDAY, 10/24/2001, Item #I.4.

-- Jessica Knowles
-- Yolanda Guzm‡n
-- Kathryn Sedo
University of Minnesota Law School

Recreational-Use Immunity. On May 18, 1999, Jessica Lishinski went in-line skating with a friend in a Duluth city park. The park path led to a stone stage and the path surface changed from blacktop to pavement stone. Lishinski's friend heard a crash and saw people running to the stage, but did not see Lishinski fall. Lishinski died from her injuries.

Lishinski's parents brought a wrongful death action as trustees. The city moved for summary judgment pursuant to the recreational-use immunity provisions of Minn. Stat. ¤ 466.03, subd. 6e (1998). The district court denied the motion because evidence existed showing the hazard was hidden or concealed. The Minnesota Court of Appeals affirmed, ruling that the jury must determine whether the condition of the park path was hidden and whether a brief inspection would have revealed the condition. Lishinski v. City of Duluth, CX-01-747, 634 N.W.2d 456 (Minn. App. 10/16/01). www.lawlibrary.state.mn.us/archive/ctappub/0110/cx01747.htm

Duty to Defend Revisited. In 1998, Jack Elder and Erwin Lichte sued LaCrescent Concrete, Inc. which operated a concrete mixing plan near their homes. They claimed it disturbed their peace and quiet and exposed them to harmful conditions. Reliance National Indemnity Company ("Reliance") insured LaCrescent under a commercial lines policy. Reliance sought a declaratory judgment action regarding coverage, and, after its second motion for summary judgment, Judge Fabian granted summary judgment in favor of Reliance.

The Minnesota Court of Appeals reversed and remanded. It found that Reliance did not show that all parts of Elder and Lichte's claims fall outside the scope of the policy's coverage, interpreting American Family Ins. Co. v. Walser, 628 N.W.2d 605, 609 (Minn. 2001). LaCrescent Concrete, Inc. v. Reliance National Indemnity Co., C1-01-264, (Minn. App. 10/16/01)(unpublished). www.lawlibrary.state.mn.us/archive/ctapun/0110/264.htm

Motion In Limine; Summary Judgment. Ming Xiu Lou alleged she suffered permanent knee damage when she feel three separate times on an outdoor stairway at Chang's residence, where she rented the basement. Lou alleged the stairway was "poorly maintained and lacked sufficient lighting". On the day the trial was to begin, the court granted a motion in limine suppressing evidence about the falls because Lou's lack of specificity was fatal to her claim. The deposition revealed many factual disputes about liability, causation and damages. The matter was dismissed.

The Minnesota Court of Appeals reversed and remanded, finding the granting of the motion was essentially a summary judgment order. There was competent evidence that there were three falls, that inadequate lighting caused all three, and the Changs were in control of the premises at all times. The appellate tribunal reasoned it was not necessary to know which of the three falls caused the actual knee damage. Thus, there was evidence to create issues of fact for trial. Lou v. Chang, C4-01-405, (Minn. App. 10/16/01)(unpublished). www.lawlibrary.state.mn.us/archive/ctapun/0110/405.htm

Damages; "Perverse" Verdict. Joann Carlson walked across a street on a dark and rainy April night after waiting in a bar doorway. Jackman's car struck her. Jackman said she waited one minute to make a left hand turn onto the street, but did not see Carlson until she was in front of the car. The jury found Carlson 75 percent at fault and Jackman 25 percent at fault. A companion of Carlson's told a police officer Carlson was running, and Carlson made a statement at the emergency room that she was "running across the street" when a car hit her. The jury found no damages.

Carlson appealed, arguing the verdict was perverse. The appellate court agreed that the find of no damages was unsupported by the evidence, but that because the finding of negligence was supportable, the verdict was not perverse. Carlson v. Jackman, C5-01-543, (Minn. App. 10/16/01)(unpublished). www.lawlibrary.state.mn.us/archive/ctapun/0110/543.htm

Negligent Infliction of Emotional Distress. Geralyn Engler pulled over on a gravel road when her four-and-a-half-year-old son Jeffrey stated he needed to go to the bathroom. He walked to the tree line of the ditch. Tragically, Wehmas lost control of her vehicle nearly hitting Geralyn, and struck Jeffrey, who was severely injured. Since the accident, Geralyn claims depression, posttraumatic stress disorder and other physical and mental ailment.

Geralyn claimed negligent infliction of emotional distress. The trial court denied the motion for summary judgment on the issue but certified the question to the Court of Appeals because the question is "important and doubtful". The Minnesota Court of Appeals ruled it would be creating new law if it allowed a family member to recover damages as a result of witnessing her son's injuries. Justice Klaphake dissented, noting Geralyn was within the "zone of danger", and sustained damages based on her fears and those she sustained for her child. Engler v. Wehmas, C9-01-528, 633 N.W.2d 868 (Minn. App. 9/25/01). www.lawlibrary.state.mn.us/archive/ctappub/0109/c901528.htm

Single Indivisible Injury Rule. In this case plaintiff Bondy was injured when she was hit by a car driven by Allen. Respondent Gold Cross Ambulance was also sued by Bondy because, during transport to the hospital, a paramedic unfastened two straps on the gurney holding Bondy, and movement of the ambulance caused Bondy's leg to slip off the gurney and touch the floor, causing Bondy to scream with pain.

The case was set for trial, and after the jury was selected and opening statements were given, the Bondys settled with Allen for the policy limits. Gold Cross, the remaining defendant, then moved to exclude all evidence relating to damage caused by Allen, arguing that the evidence should be limited to damage caused by Gold Cross. The court reconsidered sua sponte its earlier denial of Gold Cross motion for summary judgment and granted summary judgment against the Bondys.

The Court of Appeals affirmed the district court in all respects. The Court of Appeals agreed with the district court that there was not sufficient evidence to support a verdict against Gold Cross for aggravation of a preexisting injury. The Court of Appeals also rejected the plaintiff's claim that the Single-Indivisible-Injury Rule (SII Rule) applied. Under the SII Rule, joint and several liability is imposed when two or more persons acting independently cause harm to a third person through consecutive acts of negligence closely related in point of time, and the harm is incapable of division. The Court of Appeals noted that no Minnesota cases applied the SII Rule to hold a medical defendant jointly and severally liable with a tortfeasor who caused the original injury for which treatment was provided. Instead, Minnesota and other jurisdictions have held that a negligent medical defendant is a subsequent tortfeasor who can be held liable only for aggravating the original injury.

Finally, the Court ruled that an ambulance service is not subject to the common carrier standard of care when the ambulance personnel are performing medical treatment, which requires professional judgment. Bondy v. Allen and Gold Cross Ambulance Service, Inc., C0-01-28, 2001 WL 1262966 (Minn. App. 10/23/01). http://www.lawlibrary.state.mn.us/archive/ctappub/0110/c00128.htm

-- Thomas J. Baudler
-- Lee Bjorndal
Baudler Baudler Maus & Blahnik PA