October 2001

Agency Review. The Minnesota Supreme Court reversed the Court of Appeals decision in In Re Excess Surplus State of Blue Cross Blue Shield of Minnesota, CS-99-1383 624 N.W.2d 264 (Minn. 4/12/01). The case began when Blue Cross/Blue Shield submitted a plan to the commissioner of commerce for correction of its excess surplus condition after a $469 million recovery in the Minnesota tobacco litigation. After a contested case hearing in which the Department of Commerce participated as a party in support of the plan, the administrative law judge recommended approval for the plan. The commissioner issued a final decision disapproving the plan because it failed to include a rebate to past Blue Cross members. The Court of Appeals then reversed the commissioner because he failed to provide reasons for striking the administrative law judges' findings and for contradicting the department's experts, and because he lacked authority to rewrite the plan. The Supreme Court determined that the commissioner's finding were supported by substantial evidence and that he clearly stated rational reasons for his decision. The Court noted that the agency decision-maker owes no deference to the department staff or its experts or to the recommendations of the administrative law judge. The Court remanded the case to the Department of Commerce for consideration of a revised plan to be submitted by Blue Cross, for approval by the commissioner.

Environmental Impact Statement. An EIS is required for any project that has the potential for significant environmental effects unless those effects are subject to mitigation by ongoing public regulatory authority. The Pollution Control Agency determined that an expansion of Boise Cascade's paper mill in International Falls did not require an EIS because of a generic EIS prepared in 1989-94 and because of the ongoing regulation under the Sustainable Forest Resources Act. After the district court affirmed the decision, the Court of Appeals reversed in Minnesota Center for Environmental Advocacy v. Minnesota Pollution Control Agency, C6-01-96, 632 N.W.2d 230 (Minn. App. 7/24/01). The court found that the record did not support the PCA's decision because the mitigation strategies in the earlier EIS were still in the planning stage and because the council established under the act does not truly perform a regulatory function. The court did not find assurances that reasonable mitigation measures would be in place before harm might be done. http://www.lawlibrary.state.mn.us/archive/ctappub/0107/c60196.htm

Notice. In 1986 the DNR sent a landowner a notice of hearing stating that it intended to appeal an administrative decision that the DNR had improperly classified part of the landowner's farm as wetland. The notice advised the landowner that the "petitioner will seek reversal of the Nicollet County Hearings Unit's Order concerning Zwingg Lake (52-12) and Unnamed Wetland No. 52-26W." The landowner argued that the notice was constitutionally inadequate because it did not specifically inform the landowner that a reversal of the hearings unit decision would result in the removal of his drainage system. In Bode v. MDNR, C9-01-321, 2001 WL 940877 the Court of Appeals found the notice of hearing sent to Bode adequate because Bode had participated in the hearings unit hearing in 1980, had been warned about draining the wetland and was involved in disputes with the DNR regarding the wetland between 1980 and 1986. The court observed that a notice document need not list every possible outcome of an appeal. http://www.lawlibrary.state.mn.us/archive/ctappub/0108/c901321.htm

Due Process; Substantial Evidence. The school district expelled a student for his alleged involvement in a bomb threat at school in In Re Expulsion of E.J.W. from I.S.D. No. 500, C2-01-273, 2001 WL 978045 (Minn. App. 8/28/01). The school district withheld the names of non-testifying student witnesses from the student, and the hearing officer based his decision on the (objected to) hearsay testimony of police officers stating what non-testifying students had told them. E.J.W. denied involvement at the hearing. On appeal the commissioner of children, families and learning determined that the student had been denied the right to confront and cross-examine the witnesses against him and that the district lacked a substantial basis to expel the student. She remanded the case for a new hearing. The Court of Appeals affirmed the commissioner. It held that the identity of witnesses to the incident was not private data and that the district denied the student's due process rights by refusing to disclose the witnesses' identity so that they could be called to testify at the hearing. The Court also found that the district's decision was not supported by substantial evidence since the only evidence of E.J.W.'s involvement in the bomb scare was the hearsay statements of police officers that relayed the contradictory allegations of the non-testifying witnesses. http://www.lawlibrary.state.mn.us/archive/ctappub/0108/c201273.htm

New OAH Rules. The Office of Administrative Hearings has recently adopted a range of largely technical amendments to its rulemaking, contested case, revenue recapture rules, and the award of attorney fees and cost rules (found in Vol. 25 of the State Register, p.1743). These rules contain new requirements for the expedited rulemaking procedure. For insomniacs, a dramatic reading of these revisions is highly recommended

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

UIM Benefits: Best Settlement. The Minnesota Supreme Court, in answer to reformulated questions of law certified to it by the United States District Court, held that where a plaintiff settles with a tortfeasor for 40 percent of the tortfeasor's liability limits, the plaintiff's underinsured motorist carrier may not deny the UIM claim on the ground that plaintiff failed to reach the "best settlement" with the tortfeasor.

The Court reviewed in detail the lengthy statutory and civil law developments relating to Minnesota no-fault insurance and UIM coverage. The Court then reviewed several alternative tests proposed to determine whether a plaintiff/insured had made the "best settlement". The Court refused to adopt any of the proposed tests and simply concluded that, under the facts submitted, the plaintiff's insurer could not deny the UIM claim. Dohney v. Allstate Ins. Co., C5-01-252, 2001 WL 923448 (Minn. 8/16/01). http://www.lawlibrary.state.mn.us/archive/supct/0108/c501252.htm

Landlord's Duty. The Minnesota Supreme Court reversed the Court of Appeals and reinstated the trial court's grant of summary judgment in favor of the landlord, holding that there was not a special relationship between the tenant and landlord or management company which gave rise to a duty on the part of the landlord to protect the tenant from the criminal acts of a third party.

The decedent was shot and killed by three unidentified intruders who entered his apartment. The design and condition of the front and rear building entrances were disputed questions of fact. The trustee for decedent's heirs claimed that the landlord was negligent in failing to repair the broken security door and intercom system. The trial court held that the evidence established no special relationship between the tenant and the landlord and, therefore, no duty to protect from the criminal acts of third parties. The Court of Appeals reversed. The Supreme Court determined that the landlord owed no legal duty to protect the decedent from his killers. Funchess v. Cecil Newman Corp., C8-00-90, 2001 WL 952827 (Minn. 8/23/01).
http://www.lawlibrary.state.mn.us/archive/supct/0108/c80090.htm

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

CRIMINAL LAW
Judicial Law

Discovery: Alibi, Notice: Preclusion of Defendant's Testimony. Appellant had been charged with aggravated robbery. During opening statement, appellant's counsel stated that appellant had not been anywhere near the scene of the robbery, but had instead been at his aunt's house at a separate location. Following opening statement, the prosecution objected, off the record, to the alibi reference. The court did not issue a corrective instruction. Defense counsel admitted that he had made a mistake, and did not know that the placement of appellant at another location constituted an alibi. Appellant was not allowed to testify as to his location at the time of the robbery.

Held, it was an abuse of discretion for the trial court to deny the appellant the right to testify on his own behalf without first considering whether a continuance would have rectified any prejudice that the state claimed it suffered as a result of the defense attorney's omission. In re M.P.Y., C7-99-2017, 630 N.W.2d 411 (Minn. 7/26/01).
http://www.lawlibrary.state.mn.us/archive/supct/0107/c7992017.htm

Procedure: Tab Charge: Amendment from Misdemeanor to Ordinance Appellant had originally been charged with Underage Consumption of Alcohol in violation of Minn. Stat. ¤ 340A.503, subd. 1. At a pretrial hearing, the state orally amended the tab charge from the statutory violation to an ordinance violation of the Duluth code, ¤ 8-27(c). The Duluth ordinance has no possibility of jail, but a maximum possible penalty of a $700.00 fine. Appellant objected to this amendment, claiming that his right to a jury trial was denied.

Held, Minnesota Rule of Criminal Procedure 23.04 was not implicated when the state moved to amend under these facts. That rule of criminal procedure requires the consent of the defendant, and leave of court for an amendment from a misdemeanor to a petty misdemeanor. Rule 23.04 concerns the state power to "designate" the offense as a petty misdemeanor, while in this case the state moved to amend. Although both statute and ordinance prohibit underage consumption, they each allow different affirmative defenses. As such, the statute and the ordinance prohibit different conduct and one cannot be "designated" as the other.

The court further holds that tab charges are effectively complaint substitutes and may be amended by the state, although the Rules of Criminal Procedure do not specifically allow that process. Furthermore, the state could have accomplished the same result in this case by simply dismissing the statutory violation and recharging the ordinance, without leave of court. State v. Blair Christian Weltzin, C5-00-127, 630 N.W.2d 406 (Minn. 7/26/01). http://www.lawlibrary.state.mn.us/archive/supct/0107/c500127.htm

Procedure: Jury Size: Alternate: Seven-Person Jury: Misdemeanors. The trial court impaneled seven jurors, the standard six plus one alternate, in a multiple misdemeanor case. The jurors were unaware that one of them was an alternate. All seven jurors participated in deliberations. Shortly before the jury returned its verdict, the appellant objected to the presence of the alternate. The trial court did not dismiss the alternate, and denied the appellant's motion for a new trial.

Held, the trial court erred by allowing the alternate juror to decide the case with the rest of the jury. Appellant is entitled to a new trial. In a situation like this, prejudice is presumed by such things as participation, body language, or mere presence, exerting a chilling effect on the regular jurors. The trial court did not give any specific instructions regarding the alternate or take any other curative measures. While the rules of criminal procedure allow parties with court approval to stipulate that a jury shall consist of a lesser number than provided by law, there is no applicable law authorizing a greater number of jurors. Finally, there was no waiver by the appellant. As with the rule allowing for a smaller jury, there must be express consent of the defendant for a jury of more than six members. State v. Tyree Duane Washington, C5-00-1696 Ct. App. 8/14/01, Minnesota Lawyer 8/20/01, p. A-32. http://www.lawlibrary.state.mn.us/archive/ctappub/0108/c5001696.htm

Procedure: Criminal Trial: Exclusion of Minors: Unconstitutional Statute. Minn. Stat. ¤ 631.04, which excludes minors under the age of 17 from criminal trials (except when they are a party, witness, or are directly interested) is unconstitutional because it encroaches upon a judicial function in violation of the separation of powers doctrine. This statute is one of "control and decorum," and is not a substantive law because it neither creates a new cause of action nor deprives a defendant of any defense on the merits. This case casts doubt upon the validity of Minn. Stat. ¤ 480.059, subd. 7 (2000) which states that statutes relating to procedure in criminal actions shall be effective until modified or superseded by "rule." This opinion states that the court's authority over procedure in criminal actions is not derived from any grant or authority by the Legislature, but from the court's inherent power.

In this case, however, the appellant was not deprived of the protections of a public trial, because the exclusion of the two children in question was a de minimis infraction. There was no suggestion that the public or press were absent from any stage of the trial. State v. Charles Edward Lindsey, C0-00-1167, 2001 WL 952719 http://www.lawlibrary.state.mn.us/archive/supct/0108/c0001167.htm

Procedure: Discovery Violation: Dismissal. At the pretrial conference, the prosecution had not provided to the defense a video tape. By a local Hennepin County "standing order," all discovery is to be completed five days prior to the pretrial conference. In response to this violation of the local rule, the district court granted the defense motion for a dismissal, which was made "without prejudice" (an irrelevant concept, because "without prejudice" is a civil, not a criminal, term). Thirteen days later, the state filed a new complaint. The appellant moved the trial court to dismiss the reissued complaint, arguing, for the first time, that the original dismissal had been for a curable defect in the original charging instrument. This motion was denied.

Held, Rule 17.06 is limited to defects in the charging instrument. Here, the dismissal was for a discovery violation; therefore, the seven-day time frame for reissuing complaints, required by Rule 17.06, does not apply. The imposition of sanctions for discovery rule violations is within the district court's discretion. State v. Beth Ann Burns, C6-00-1853, 2001 WL 1002383 (Minn. App. 9/4/01).
http://www.lawlibrary.state.mn.us/archive/ctappub/0109/c6001853.htm

Equal Protection: Crime for Benefit of a Gang. Minn. Stat. ¤ 609.229 (1998), which makes it a crime to commit certain offenses "for the benefit of a gang," does not violate the equal protection guarantees of the Minnesota Constitution. Minnesota has a more stringent rational basis test than the federal equivalent, providing a three-part test. All three prongs were met, notwithstanding the fact that 70 percent of Minnesota's 1,025 confirmed gang members are minorities, and that 35 out of 39 persons convicted of this crime were racial minorities. State v. William Allen Frazier, C8-00-2230, 631 N.W.2d 432 (Minn. App. 7/24/01).
http://www.lawlibrary.state.mn.us/archive/ctappub/0107/c8002230.htm

Right to Counsel: Invocation, Reinitiation of Conversation: Police Tactics. During a custodial interrogation, the appellant stated: "OK, I'll wait for my lawyer." The police then stated "it's up to you," and that if he had a "righteous story to tell," then "you're the one in charge here." Subsequently, appellant did make statements that were incriminating.

Held, it was error for the trial court to conclude that the appellant waived his right to counsel. Although, as the trial court found, the appellant is streetwise and has a prior felony record, this does not excuse police conduct reinitiating conversation in an attempt to elicit an incriminating response. It was error for the judge not to suppress appellant's statement. State v. William Jeffrey McDonough, C6-00-1626, 631 N.W.2d 373 (Minn. 8/2/01). http://www.lawlibrary.state.mn.us/archive/supct/0108/c6001626.htm

Patterned Sex Offender: Apprendi: Sentence Less Than Statutory Maximum: Spreigl Offenses. The patterned sex offender statute, under Minn. Stat. ¤ 609.108, does not violate due process unless a defendant is sentenced to a term that exceeds the prescribed statutory maximum. In this case, the statutory maximum was 40 years. Appellant received 144 months, which was four times the presumptive sentence of 36 months (the PSI had recommended 40 years). At trial, the district court ruled that Spreigl evidence (uncharged criminal sexual conduct type offenses) were inadmissible. However, at sentencing, the judge used the same uncharged misconduct to support its ruling that appellant qualified as a patterned sex offender.

Held, there is no Apprendi violation where the court sentences a defendant to a term that is less than the statutory maximum. Here, the appellant received less than half of the statutory maximum. Furthermore, although the Spreigl acts were found inadmissible for jury purposes, a sentencing judge has far broader reign with respect to consideration of factors being used for sentencing purposes, and the Spreigl evidence was appropriately considered. State v. John Ray McCoy, C9-01-349, 631 N.W.2d 446 (Minn. App. 7/31/01). http://www.lawlibrary.state.mn.us/archive/ctappub/0107/c901349.htm

Felon in Possession: Stipulation to Felony Status: Juror Question Regarding Felon Status: Mistrial. Appellant was charged with Felon in Possession of a Firearm, as well as Second-Degree Controlled Substance Sale and Possession. During voir dire, a prospective juror asked the prosecutor whether appellant was not able to possess a firearm because appellant was a felon, to which the prosecutor responded, "I cannot answer the question." At the end of voir dire, the defense moved for a mistrial, which was denied.

Held, it was not an abuse of discretion for the trial court to deny appellant's motion for mistrial. Any possible prejudice suffered by the appellant was cured by steps that the court took to minimize the harm. Further questions on this topic did not take place, and jurors were instructed that they must not speculate as to answers to questions not allowed by the court. Although a defendant is normally prejudiced by informing the jury that the defendant is a convicted felon, (see State v. Davidson, 351 N.W.2d 8, 11 (Minn. 1984)), the jury in this case was not so informed. State. v. Juan Marchbanks, C8-00-1823, 2001 WL 881312(Minn. App. 8/7/01). http://www.lawlibrary.state.mn.us/archive/ctappub/0108/c8001823.htm

Intoxication: Voluntary Intoxication: Explanation of Conduct: Jury Instruction. When first interviewed by police, appellant denied remembering anything about the alleged murder, stating that he was "coked up." During the same interview, appellant asked police officers to turn off the tape recorders, at which time he explained, in detail, how an accomplice had murdered the victim. There was, both in discovery and the trial, copious evidence that appellant and his accomplices had consumed significant quantities of alcohol, marijuana, and cocaine. Appellant's defense at trial was that his accomplice, and not he, murdered the victim. The trial court judge denied the intoxication instruction, stating that appellant had not met his burden of going forward with the defense.

Held, it was not an abuse of discretion for the trial court judge to deny the intoxication defense. In this case, appellant did not offer intoxication as an explanation for his actions. Instead, his defense was that the accomplice murdered the victim. Appellant's statement to the police lucidly and precisely recounted the behavior of his accomplice and, hence, was not an offer of intoxication as an explanation for his actions. State v. Rusttee A. Torres, C5-00-1603, 2001 WL 923464 (Minn. 8/16/01). HREF="http://www.lawlibrary.state.mn.us/archive/supct/0108/c5001603.htm">http://www.lawlibrary.state.mn.us/archive/supct/0108/c5001603.htm

Sentence: Modification: Conditional Release: Due Process: Defendant's Presence. At his original sentence for criminal sexual conduct and burglary, the appellant was given a 47-month term on the burglary and a 48-month concurrent term on the criminal sexual conduct charge. Although the respondent was subject to the five-year conditional release requirements of Minn. Stat. ¤ 609.346, there was no mention of conditional release either as part of plea negotiations or at the time of plea or sentencing. Two weeks following sentencing, the Department of Corrections requested clarification with respect to conditional release. The judge then clarified that he intended to impose the conditional release; appellant immediately filed a motion to have the conditional release removed from the sentence. The state did not oppose this motion and, in 1997, the sentencing court vacated the five-year conditional release term.

Subsequently, in two decisions, the Minnesota Supreme Court held that the imposition of a conditional release term is mandatory and nonwaivable. In 1999, the appellant was released from prison and placed on supervised release. In 2000, during the period of the appellant's supervised release, the sentencing court, without notice, ordered the appellant's sentence to be reimposed for the five-year conditional release term through an amended sentencing order.

Held, although there are due process limits on a court's ability to modify a sentence, the appellant's due process rights were not violated because he knew or should have known that the conditional release term was mandatory, and presumptively knows about Supreme Court decisions as well. This diminished expectation is true even though the appellant had been released for five months from prison. It is left to the individual court to determine whether a defendant should have a hearing on the imposition of conditional release to correct a prior sentence. State v. Thomas Wayne Calmes, CX-00-1273, 2001 WL 951709 (Minn. 8/23/01). HREF="http://www.lawlibrary.state.mn.us/archive/supct/0108/cx001273.htm">http://www.lawlibrary.state.mn.us/archive/supct/0108/cx001273.htm

Sentence: Stay of Adjudication: Abuse of Discretion. The respondent and his wife were both convicted of wrongfully obtaining public assistance. Respondent's wife received diversion. Respondent pleaded guilty to one of four counts, and the presentence investigation recommended a stay of imposition. At the sentencing hearing, respondent testified that he lacked an understanding about the requirements that led to his underreporting. The money he received from his business was used to pay employees and he did not consider it income. He admitted to poor record-keeping practices. Finally, the respondent stated that if he were a convicted felon, he would lose cleaning contracts when they performed criminal background checks. The district court, sua sponte, ordered a stay of adjudication. On the record, the trial court stated that the state may have had an uphill battle proving the elements, especially intent, beyond a reasonable doubt. The court also found that the respondent admitted his wrongdoing and there should be some consequences, and accordingly, ordered a stay of adjudication.

Held, it was a clear abuse of discretion for the trial court judge to defer adjudication without providing adequate reasons to support the decision. The Supreme Court has stated that a stay of adjudication should only be employed in a situation where the district court feels that the prosecutor is clearly abusing its discretion in the exercise of the charging function. That statement has been interpreted to mean that district courts may assess whether the state has sufficient evidence to prove that an offense occurred.

Accordingly, the stay of adjudication is reversed, with remand instructions to the trial court judge to state adequate reasons to support his stay of adjudication or to impose a sentence under the guidelines. State v. Stephen Daniel Angotti, C7-01-642, 2001 WL 1035312 (Minn. App. 9/11/01). http://www.lawlibrary.state.mn.us/archive/ctappub/0109/c701642.htm

Assault: Standard of Intent: Effect on Victim. Police entered the home of the appellant/child to execute a search warrant. At the time, only children were home, in ages ranging from 17 to 9. Appellant was age 13. Police entered using a "flash-bang" device, as well as using a "bunker," which is a large bullet-proof shield. Upon entry, police shot the dog. Only children were present at the time. As police proceeded down the hallway, they kicked in the bathroom door, at which point appellant came out of the bedroom pointing a .22 caliber rifle in the direction of the officers, but not specifically aimed at them. The appellant was not sighting the weapon, did not point the gun in a threatening manner directly at the officers, and did not indicate that he was going to shoot. After a short period of hesitation, appellant dropped the gun and lay down on top of it.

At trial, police officers testified that they originally omitted from their reports that the appellant pointed the gun toward them or hesitated in dropping the gun upon demand. Police officers testified that they were very frightened by the event.
In finding the appellant delinquent, the trial court judge focused entirely on how frightened police officers in this heightened state of awareness would be, and noted that the fear in a testifying officer was still palpable. Consequently, the appellant was found guilty of second-degree assault.

Held, the juvenile court applied the wrong standard of intent by resting its finding solely on the effect that the child's actions had on the police officer. The crime is in the act done with intent to cause fear, not in whether the intended result is achieved. The court's findings in the case do not indicate that the court considered the appellant's conduct, the character of the alleged assault, or the events occurring before and after the crime in order to gauge his intent. Adjudication is reversed. In re T.N.Y., C3-00-2166, 2001 WL 973942 (Minn.App. 8/28/01) http://www.lawlibrary.state.mn.us/archive/ctappub/0108/c3002166.htm

DWI/Implied Consent: Blood Draw: Medical Laboratory Assistant: Qualification. A medical laboratory assistant is a person qualified to draw blood under the implied consent laws contained in Minn. Stat. ¤ 169.123, subd.3 (1998). While that statute states that only a "laboratory assistant" (among other named professionals) may draw blood for the purpose of an implied consent revocation, a "medical laboratory assistant" is also a qualified individual. Here, the medical laboratory assistant testified that she has 19 years of experience and was certified by the Minnesota Society of Clinical Pathology. She further testified that she knew of no separate degree or certification required for a laboratory assistant as compared to a medical laboratory assistant, and did not know any laboratory assistants who were not also medical laboratory assistants. While the terms "medical laboratory assistant" is not specifically included in the statute, a medical laboratory assistant can be considered to be a specialized type of laboratory assistant, and is an appropriate person, under the statute, to draw blood. State v. Steven James Pearson, CX-01-361, C3-01-363, 2001 WL 1035168 (Minn. App. 9/11/01). http://www.lawlibrary.state.mn.us/archive/ctappub/0109/cx01361.htm

DWI/Implied Consent: Intoxilyzer 5000: Radio Frequency Interference: BCA Recommendations: Appellant was arrested for DWI, and submitted to an Intoxilyzer machine in a testing room adjacent to the sally port, where police vehicles enter. The first sample was successful, but the machine terminated before the second sample was analyzed due to the presence of radio frequency interference (RFI). The certified Intoxilyzer operator testified that a state patrol car had entered the sally port prior to the second test, and he suspected that a radio transmission may have caused the RFI. The operator then waited until the officer exited his vehicle before beginning the retest, which was successfully completed.

A defense expert testified that the source of the radio transmissions should have been removed, or the Intoxilyzer moved to a different location, according to BCA recommendations. The state expert, however, testified that the operator, waiting until the radio was turned off before beginning the retest, complied with BCA recommendations.

Held, the district court did not err by finding that the Intoxilyzer machine was in proper working order, or by concluding that the test was reliable. Broderick Roettger v. Commissioner of Public Safety, C1-01-328, 2001 WL 1035137 (Minn. App. 9/11/01). http://www.lawlibrary.state.mn.us/archive/ctappub/0109/c101328.htm

-- Frederic Bruno
Frederic Bruno & Associates

Vulnerable Adults Act. A licensed practical nurse was disqualified from working in a nursing home for stealing several blank checks from a 91-year-old resident. Financial exploitation of a vulnerable adult constitutes "maltreatment" under the Vulnerable Adults Act. The court upheld the decision of the commissioner of health disqualifying the nurse from work allowing direct contact with persons receiving services from licensed facilities or unlicensed personal-care-provider organizations. E.A.A. v. Commissioner of Health, (CX-01-5), (Minn. App. 7/10/01)(unpublished). http://www.lawlibrary.state.mn.us/archive/ctapun/0107/5.htm

Vulnerable Adults Act. The actions of a registered nurse were found to constitute "neglect" under Minn. Stat. ¤ 626.5572, subd. 17 (1996). A new nursing home patient died several hours after stating discomfort and repeatedly asking the nurse to call 911, her physician and family. The commissioner of the Minnesota Department of Health found that the nurse's failure to check vital signs and simply moving the patient to the lobby constituted "neglect" under the Vulnerable Adults Act. The nurse appealed, asserting defenses of acting in good faith, the single-mistake defense, and the therapeutic conduct defense. The Court of Appeals rejected all the defenses and upheld the commissioner's decision. JRB v. Dept. of Human Services (Blue Earth County), C3-01-346, 2001 WL 968999 (Minn. App. 8/21/01). http://www.lawlibrary.state.mn.us/archive/ctappub/0108/c301346.htm

Website for POMS. The Program Operations Manual System (POMS) can be found on the Social Security Administration website at http://policy.ssa.gov/poms.nsf. Changes in the last 7, 15, 30 days are available, but cumbersome to obtain.

PAS Name Change. The Preadmission Screening Program (PAS) has changed its name. The new name is Long Term Care Consultation Services (LTCC). See MDHS Bulletin No. 01-25-05 (7/27/01).

CAC, CADI & TBI Waivers. In order to provide community options to persons with extraordinary needs, a new procedure is provided to exceed waiver funding limits for all Community Alternative Care (CAC), Community Alternatives for Disabled Individuals (CADI), and Traumatic Brain Injury (TBI) waiver recipients based on needs. This procedure also replaces the current "Request to Exceed Case Mix" form. See MDHS Bulletin No. 01-56-18 (July 24, 2001).

"Income First" Case. The U.S. Supreme Court has agreed to hear an appeal from a Wisconsin state court decision holding that a state law applying the "income first" rule to increase monthly income of the community spouse (CS) up to the minimum monthly maintenance needs allowance (MMMNA) adopted by the state violates federal Medicaid law. Blumer v. Wisconsin Dep't of Health & Family Services, 237 Wis. 2d 910 (Wis. App. 2000), http://www.wisbar.org/WisCtApp2/2q00/99-1053.htm, review den., 239 Wis. 2d 309 (2000), cert. granted sub nom Wisconsin Dep't of Health & Family Services v. Blumer, 121 S. Ct. 2547 (6/25/01).

-- Tonya Zdon Gabbard
Garvey & Boggio, PA

At-Will Employment. An at-will employee in the private sector may be demoted at the discretion of management. In Bebo v. Delander, 2001 WL 881327 (Minn. App. 8/7/01), the appellate court upheld dismissal of a lawsuit by an at-will employee alleging wrongful demotion because he was an at-will employee, he could be demoted for any reason, or no reason at all, at the discretion of management. Further, he could not assert any claim of interference with contract because of his at-will status. The court also upheld dismissal of his defamation claim because vulgar statements made about him were not legally actionable. http://www.lawlibrary.state.mn.us/archive/ctappub/0108/c501199.htm

A public sector employee who cannot be fired without "just cause" under his city's personnel policy was unsuccessful in challenging his termination in In Re the Termination of Hensen, 2001 WL 882260 (Minn. App. 8/7/01) (unpublished). The employee, who was a municipal building official, was found to have engaged in a conflict of interest due to his outside work. The appellate court upheld his termination on grounds that he was accorded all of the due process to which he is entitled through pre-termination and post-termination hearings and there was sufficient evidence to sustain a "just cause" termination. http://www.lawlibrary.state.mn.us/archive/ctapun/0108/2080.htm

Discrimination. An African-American woman who was subjected to different "on-call" arrangements than white male coworkers is entitled to pursue a claim of racial discrimination under the federal Civil Rights Act. In Greer v. St. Louis Regional Medical Center, 2001 WL 856271 (8th Cir. 7/31/01), the 8th Circuit Court of Appeals reversed dismissal of a civil rights claim predicated upon the differential treatment of an "on-call" African-American woman hospital employee compared to white male colleagues working in other units of the facility. The woman was on-call continuously, 24 hours per day, seven days per week, while white men had preferential on-call arrangements and were paid for their on-call time. The differential treatment was not justified by the employer's contention that the employees were in different units of the hospital. Therefore, summary judgment was reversed and the case remanded for trial. http://caselaw.lp.findlaw.com/data2/circs/8th/001757p.pdf

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

Underground Storage Tanks; Federal and State Regulation. The Environmental Protection Agency (EPA) has tentatively approved Minnesota's underground storage tank program pursuant to Section 9004 of the Resource Conservation and Recovery Act. If final approval is given, the laws and regulations of Minnesota will govern in lieu of their federal counterparts, ensuring enforcement of a single set of requirements. The EPA will, however, retain authority to undertake enforcement actions and conduct inspections in Minnesota. The EPA has already approved approximately 28 other state programs. "Minnesota: Tentative Approval of State Underground Storage Tank Program," 66 Fed. Reg. 40954 (8/6/01).

-- Robert Devolve
Leonard, Street and Deinard PA

Custody. The statutory requirements for an ex parte temporary custody order are not applicable to an award of custody under the permanent award statute. Nor is the statutory requirement to set conditions a parent must satisfy to obtain custody applicable where 1) the district court exercises its discretion in protecting the child's safety by awarding temporary custody to grandparents, 2) the ex parte relief would not have been available under the ex parte statues, and 3) the court granted permanent custody to the grandparent in a contested proceeding under the permanent custody statute. Ramirez v. Ramirez, C8-00-2115, 630 N.W.2d 463 (Minn. App. filed 7/24/01). http://www.lawlibrary.state.mn.us/archive/ctappub/0107/c8002115.htm

Support. Because the decree reserved child support, a motion to set support is not a modification but an establishment of support, which cannot be retroactive. Legitimate business expenses of a self-employed obligor must be considered and the appropriate tax table must be applied. Where joint custody had been awarded, the <I>Hortis/Valento<P> formula also must be applied. Davis v. Haux, C1-01-40, 631 N.W.2d 822 (Minn. App. filed 7/31/01). http://www.lawlibrary.state.mn.us/archive/ctappub/0107/c10140.htm

Contempt. The 5th Amendment right against self-incrimination is available as a defense in a child-support contempt proceeding, but the court may take appropriate measures to prevent unfair prejudice to the obligee. The district court properly found that the obligor, by intentionally manipulating his assets to avoid paying support, had assets available to pay his support arrearages. It also found correctly that the statute does not require a written payment plan before finding an obligor in contempt. An obligee may not conceal assets by placing them in the name of his current wife as her individual property. March v. Crockarell, C2-01-94, 631 N.W.2d 829 (Minn App. filed 7/31/01). http://www.lawlibrary.state.mn.us/archive/ctappub/0107/c20194.htm

Visitation. It was not an abuse of discretion for the district court to issue a bench warrant for the mother's failure to appear in response to an order to show cause. By affirming earlier awards of unsupervised visitation, the court did not substantially modify visitation. No evidentiary hearing is required where the only intervening events are the custodian's efforts to prevent unsupervised visitation. Appointment of a parenting time expeditor must follow statutory procedures; however, the error was harmless in this case. Braith v. Fischer, CX-00-1967, 2001 WL 881321 (Minn. App. filed 8/7/01). http://www.lawlibrary.state.mn.us/archive/ctappub/0108/cx001967.htm

General Rules of Procedure. By order dated August 8, 2001, the Supreme Court amended the General Rules of Procedure, Title IV, Rules of Family Court, Form 3 -- Appendix A, effective immediately. The revised rules can be viewed on the Supreme Court website.

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

Daubert; Chemical Exposure. Plaintiff was twice exposed to a chemical solvent during her employment on an assembly line, and alleged that she incurred both physical and psychological injuries as the result of her exposure. The jury awarded the plaintiff $2.2 million, and the defendant appealed, primarily challenging the district court's admission of testimony by plaintiff's experts.

Defendant argued that the testimony of plaintiff's first medical expert should have been excluded because, among other things, there was no epidemiological support for his conclusions, and because he was unable to determine the level of the plaintiff's chemical exposure. The 8th Circuit rejected both arguments, finding that the temporal proximity of the chemical exposure to the onset of the plaintiff's symptoms reduced the need for epidemiological studies, and that it was not necessary to determine the precise level of the plaintiff's exposure.

Defendant also argued that testimony by the plaintiff's second expert should have excluded, primarily because his theories had not been published or peer reviewed. Noting that the defendant had not identified any theory or studies contrary to the expert's conclusions, the 8th Circuit found that the district court had not abused its discretion in admitting the testimony, and that it was up to the jury to determine whether the expert's opinion was the correct one.

While the testimony by plaintiff's experts withstood a Daubert challenge in this instance, there is arguably some inconsistency in recent 8th Circuit decisions involving chemical exposure and Daubert-related issues, meaning that future cases may not reach the same result on similar facts. Bonner v. ISP Technologies, Inc., 259 F.3d 924 (8th Cir. 2001). http://caselaw.lp.findlaw.com/data2/circs/8th/003458p.pdf

Daubert; Causation. Plaintiff suffered a stroke two weeks after giving birth, and blamed her stroke on the prescription medication Parlodel. Following a Daubert hearing, the district court excluded plaintiff's experts' testimony, finding it not scientifically valid, and entered
subsequently summary judgment for the defendant. Plaintiff appealed.

Both of plaintiff's experts conducted a "differential diagnosis," in which the physician first "rules in" all possible causes for an injury, and then "rules out" the least plausible causes until the most likely cause remains. The district court found (and the 8th Circuit agreed) that the experts lacked a proper basis for "ruling in" Parlodel as a possible cause for the plaintiff's stroke, because the experts did not rely on "scientifically convincing evidence" as a basis for "ruling in" Parlodel, whether that evidence was considered "in isolation" or in "aggregate."

This decision is not surprising, given the number of 8th Circuit cases which have strictly applied the Daubert standards. Glasstetter v. Novartis Pharmaceuticals Corp., 252 F.3d 986 (8th Cir. 2001). http://caselaw.lp.findlaw.com/data2/circs/8th/003087p.pdf

Summary Judgment; Sua Sponte Grant. Plaintiff sued defendant, alleging a litany of business torts. Defendant moved for summary judgment on one tortious interference claim. The district court denied summary judgment on that claim, but then, sua sponte, awarded summary judgment to the defendant on three other claims not addressed in the defendant's motion papers.

Citing its well-established rule barring sua sponte grants of summary judgment, the 8th Circuit "reluctantly" found that the district court's award of summary judgment without providing the plaintiff with notice and an opportunity to respond constituted "reversible error." However, the 8th Circuit noted that its decision "should not be read as expressing disagreement with the district court's legal reasoning on these three claims." American Red Cross v. Community Blood Center, 257 F.3d 859 (8th Cir. 2001). http://caselaw.lp.findlaw.com/data2/circs/8th/993667p.pdf

Other Noteworthy Decisions. Citing Fed. R. App. P. 4(a)(4)(B), the 8th Circuit found that the appellant had waived his right to appeal matters decided as a result of his post-judgment motions where his notice of appeal was filed prior to the decision on those motions and he failed to file an amended notice of appeal following the district court's decision. Miles v. General Motors Corp., 2001 WL 930568 (8th Cir. 2001). http://caselaw.lp.findlaw.com/data2/circs/8th/002602p.pdf

Judge Frank denied defendants' motion to recuse both himself and Magistrate Judge Nelson, finding that defendants' "wholly unsubstantiated accusation" of misconduct by Magistrate Judge Nelson was "offensive and entirely untrue," and that "to allow a party to raise the specter of partiality by leveling an entirely unfounded accusation at a judge would deal a serious blow to the integrity of the court system." ADC Telecommunications, Inc. v. Thomas & Betts Corp., 2001 WL 848559 (D. Minn. 7/25/01).

Judge Doty denied plaintiffs' motion for Rule 11 sanctions based on defendant's refusal to dismiss it counterclaims on which plaintiffs had obtained summary judgment, noting "concern" about the merits of the counterclaims, but finding that they were "not so far beyond the pale as to justify Rule 11 sanctions." Glenn v. Daddy Rocks, Inc., 2001 WL 842043 (D. Minn. 6/15/01).

Judge Doty denied plaintiff's motion to remand, finding that the plaintiff could not abandon its claim for damages following removal in an attempt to reduce the amount in controversy below the $75,000 threshold for removal. McNeilus Truck and Manufacturing, Inc. v. Hunt, 2001 WL 837940 (D. Minn. 7/23/01).

-- Josh Jacobson
Law Office of Josh Jacobson PA

Trademark; Geographic Scope; Market Penetration. In National Association for Healthcare Communications, Inc. v. Central Arkansas Area Agency on Aging, Inc., 2001 U.S. App. LEXIS 15481 (8th Cir. 7/11/01), the 8th Circuit Court of Appeals affirmed an injunction in Central Arkansas ("CA")'s favor, but reduced the geographic scope from a statewide injunction to a six-county area in Arkansas where CA actually used the trademark at issue. Both parties use the mark CARELINK for health-related services. Healthcom was the first to use the mark nationally, but CA first used the mark in the six-county Arkansas region. Both parties brought claims of trademark infringement against the other -- each claiming priority to the mark CARELINK.

Before addressing the injunction scope issue, the court first applied the Tea Rose/Rectanus doctrine in rejecting Healthcom's claim that it, not CA, was entitled to injunctive relief based on Healthcom's market penetration in Arkansas at the time CA began using the mark. Healthcom based its argument on a single sale in Arkansas prior to CA's first use (that sale occurring outside the above-described six-county region) and several sales after CA's first use of the mark. Healthcom had also continuously advertised in Arkansas both before and after CA's date of first use. The court, however, rejected Healthcom's priority argument holding that Healthcom had not penetrated the six-county Arkansas market populated by CA's mark because Healthcom had never made a single sale in that six-county region. The court expressly declined to decide the issue of whether Healthcom's prior advertising and subsequent sales demonstrated sufficient penetration in Arkansas areas other than the above-described six-county region. The court indicated that it might be possible to prove market penetration without any prior sales. In particular, the court left open the possibility that, in certain circumstances, "highly focused local advertising, followed by initial sales shortly after a later user enters the market" could satisfy the market penetration test.

Trade Secret Misappropriation; Design Disclosed in Patent. In Porous Media Corp. v. Midland Brake, Inc., Civ. 98-2510, 187 FDR 598 (D. Minn. 7/20/01), Judge Frank dismissed Porous Media's trade secret misappropriation claim against Midland. Porous Media alleged as its trade secret a "flow baffle" inside a desiccant canister that enhances air-drying capacity. It further alleged that Midland passed its trade secret to Baldwin, a non-party. The court, however, held that Porous Media had not "a scintilla" of evidence to support its claim for misappropriation and that the flow baffle concept was not a trade secret. The court found that the internal configuration of the canister concept was extremely similar to a 1994 European patent. Because one of the purposes of patents is public disclosure, stated the court, the general rule is that designs disclosed in patents cannot be trade secrets.

Consumer Protection; Lanham Act; Change of Venue In Radiator Specialty Co. v. Pennzoil-Quaker State Co., Civ. 01-184, ___ F.S.2d ___ (D. Minn. 6/29/01), Judge Frank granted Pennzoil's motion to transfer venue because Minnesota lacked substantial connection to the action. Both parties manufacture tire inflator products. RSC sued Pennzoil in Minnesota alleging violations of the Lanham Act and several consumer protection statutes. The court found, in part, that although Minnesota consumers were impacted by Pennzoil's alleged violations, consumers in other states were similarly impacted, making transfer to the venue having the key evidence and testimony appropriate.

-- Tony Zeuli
-- Deakin Lauer
Merchant & Gould

Public School Disciplinary Hearings; Due Process; Juvenile Witness Identities. The Court of Appeals recently issued a published opinion with important implications for suspension, exclusion, or expulsion hearings pursuant to the Pupil Fair Dismissal Act.

At a hearing on the posting of a bomb threat on the mirror in the boy's restroom of the high school, the principal, two police officers, and another student testified against E.J.W. The principal testified generally about events surrounding the threat, but had no first-hand knowledge of any individuals involved with the threat. The student testified that E.J.W. was standing in the hallway near the restroom where the threat was written. The police testified as to statements they had taken from three other students that implicated E.J.W. in the threat. E.J.W. objected to the hearsay evidence. The hearing officer found that E.J.W. was involved in the threat and recommended that E.J.W. be expelled for the remainder of the fall semester.

E.J.W. appealed, arguing that the school district's failure to call the student witnesses violated his due-process rights and that the school district lacked a sufficient basis for the expulsion.

The school district argued that the identity of the student witnesses were private data and should not have been disclosed pursuant to the Minnesota Government Data Practices Act, Minn. Stat. ¤ 13.01-13.99 (2000). The school district argued further that it was required to disclose only the names of witnesses who would actually testify at the hearing and that E.J.W. had the right to call the student witnesses once the names were disclosed at the hearing.

The Court of Appeals held that there was no evidence presented that withholding the identity of the witnesses was justified based on the subject matter of the investigation. In addition, the hearing was closed to the public pursuant to statute.

The court reiterated that education is a fundamental right and that a student is entitled to due process and equal protection in a dismissal proceeding. The court found that the sole basis for the expulsion was uncorroborated hearsay testimony by the police officers, and that there was no direct evidence connecting E.J.W. to the incident.

With respect to the school district's reliance on the argument that E.J.W. had the right to call the student witnesses once their names were disclosed, the court specifically held that "the burden to compel attendance at the hearing is on the school district and the failure to do so is excused only for a compelling reason. " In the Matter of the Expulsion of E.J.W. from Independent School District No. 500, C2-01-273, 2001 WL 978045 (Minn. App. 8/28/01). http://www.lawlibrary.state.mn.us/archive/ctappub/0108/c201273.htm

-- Amy L. Helsene
Walling & Berg, PA

Zoning. Gurtek applied to Chisago County (county) for a conditional use permit (CUP) to develop a seasonal recreational park, proposing to install 99 park-model cottages that he would sell to residents but retain ownership of the land and collect lot rentals. The property is zoned agricultural and the ordinance prohibits manufactured home parks in agricultural districts. By writ of certiorari, Sunrise Lake Association challenged the decision of the County Board to approve the CUP. The appellate court concluded that the county's decision did not contain an adequate explanation of its reasons to allow judicial review. Additionally, the units described in the application meet the definition of a manufactured home park that is prohibited under the zoning ordinances. Accordingly, the appellate court reversed the decision of the county on the basis that it was unreasonable and arbitrary. Sunrise Lake Association, Inc. v. Chisago County Board of Commissioners, C8-01-35, 2001 WL 1002495 (Minn. App. 9/4/01). http://www.lawlibrary.state.mn.us/archive/ctappub/0109/c80135.htm

Condemnation/Marketable Title Act. The Piches petitioned the district court for a writ of mandamus ordering Independent School District No. 621 (school district) to discharge two parcels of land, the first of which was acquired by eminent domain and the second by warranty deed. In 1957 the school district acquired the first parcel by eminent domain. In 1964, the Piches sold the second parcel to the to the school district. Both parcels have remained undeveloped for which the Piches sought an order directing the school district to discharge the land back to them. The district court found that the school district held a fee simple defeasible interest in both parcels limited to the public purpose of acquiring the site for a school; that the school district had abandoned its intent to use the land for a school, thereby triggering the Piches reversion in the second parcel, but that the Marketable Title Act barred the reversionary interest in the first parcel. Both parties appealed. The appellate court held that the school district acquired a fee simple absolute interest in both parcels, and in the alternative that the Marketable Title Act barred the Piches' claim to the first parcel. Affirmed in part, reversed in part. Piche v. Independent School District No. 621, Nos. C7-01-267 and C3-01-394, 2001 WL 977940(Minn. App. 8/28/01). http://www.lawlibrary.state.mn.us/archive/ctappub/0108/c701267.htm

Wetlands. In August 1980, Bode appealed the DNR's classification of a portion of his farmland as protected wetlands and won at the administrative level. The DNR appealed but its appeal was late. In 1986 the DNR sent Bode a notice of hearing but did not list him as a party to the action. Bode did not attend and the district court reversed, holding that a portion of his property was a wetland. Following the 1986 judgment, several lawsuits were brought by the Bodes against the DNR. In the present appeal, Bode argues that the 1986 notice was inadequate to grant the court personal jurisdiction because it did not specifically inform Bode that a reversal would result in the removal of his drainage system. The district court denied the motion to vacate the 1986 judgment. On appeal, the appellate court concluded that the notice received was constitutionally adequate and that Bode submitted to the district court's jurisdiction by participating in the proceedings. Affirmed. Commission of Natural Resources v. Nicollet County Public Water/Wetlands Hearing Unit, et al., C9-01-321 (Minn. App. 8/21/01). http://www.lawlibrary.state.mn.us/archive/ctappub/0108/c901321.htm

Tax Court. The property tax petitions of Northwest Airlines, Inc. (Northwest) were dismissed by the Tax Court for failure to provide income and expense information as required by Minn. Stat. ¤ 278.05. On appeal, Northwest asserted that the property in question is owned by the Metropolitan Airports Commission (MAC) and was not "income producing" and not subject to Minn. Stat. ¤ 278.05. The main base building is one of several parcels leased by MAC to Northwest pursuant to the original 1961 lease agreement in which the MAC agreed to finance and construct hangers, etc. for exclusive use by Northwest at the airport. In 1995 a new lease was negotiated which calculated rent based on fair rental value rather than a calculation of the amount necessary to amortize the MAC's bond costs. After discovery of the 1995 lease, Hennepin County moved to dismiss Northwest's property tax petitions under Minn. Stat. ¤ 278.05, subd. 6 asserting that Northwest has failed to submit income and expense information within the 60-day filing deadline. The Tax Court ruled that the property was "income producing" and, therefore, dismissed the petition. In a 5-2 decision, the Minnesota Supreme Court held that the Tax Court did not err in concluding that the property was income-producing property for purposes of Minn. Stat. ¤ 278.05 and did not err in dismissing Northwest's property tax petitions for failure to provide the information. Affirmed. Northwest Airlines, Inc. v. County of Hennepin, C7-00-1876, 632 N.W.2d 216 (Minn. 8/30/01). http://www.lawlibrary.state.mn.us/archive/supct/0108/c7001876.htm

Zoning. Hoskin petitioned the city of Eagan (city) to vacate its existing public utility and drainage easements so that he could subdivide his property. The city held two public hearings on the application. According to the minutes, the city took into account the broader impact that vacating the easements might have on the community, especially in light of the recent flood damage. The district court concluded that the petition for writ of mandamus should be treated as a declaratory judgment action and granted Hoskin summary judgment reasoning that the city did not have a rational basis for its decision. On appeal, the appellate court concluded that the city had a rational basis for refusing to vacate the public easements, and that its decision was not so arbitrary and capricious as to constitute a clear abuse of discretion. Significantly, it held that mandamus was an available remedy even though it was a legislative act involving the exercise of discretion. Reversed. Hoskin v. City of Eagan, C5-01-283, 632 N.W.2d 256 (Minn. App. 8/14/01). http://www.lawlibrary.state.mn.us/archive/ctappub/0108/c501283.htm

Condemnation/Interest. Pursuant to the quick-take statute, the city of Minneapolis acquired title to and possession of property belonging to Commers after depositing the amount of its approved appraised value into district court. When the commissioners entered an award for a higher amount, the city deposited the difference plus interest at the judgment rate into court. About seven months after the initial deposit, Commers petitioned to withdraw all of the deposited funds and the court approved the petition. Subsequently, Commers sought an order directing the city to pay judgment interest rather than court administrator interest on the entire amount from the date of possession until Commers petitioned to disburse the funds. The district court denied Commers' request for judgment interest because it found that the deposited funds were available. The Court of Appeals reversed concluding that the deposited funds were not available until the court issued its order for its disbursement. In a 4-3 decision, the Supreme Court reversed the Court of Appeals, holding that the district court need not order disbursement of funds for those funds to be considered available for purposes of the rule allowing judgment interest until the funds become available to the property owner. It also held that the district court's finding that the funds were available to Commers when deposited with the court was not clearly erroneous. Affirmed. In the Matter of Condemnation by the City of Minneapolis of Certain Lands in the City of Minneapolis for the Lyn/Lake Municipal Parking Lot Project, C5-99-1996, 2001 WL 923428 (Minn. 8/16/01). http://www.lawlibrary.state.mn.us/archive/supct/0108/c5991996.htm

Tax Court. Through a petition for a writ of prohibition, Rahr Malting Company (Rahr) sought an order prohibiting the Tax Court from holding a public trial in its appeal of a tax valuation of its malting facility. The Tax Court denied Rahr's motion to close portions of the trial to the public and to seal portions of the record to protect certain proprietary information. Rahr is privately held and operates a malting plant in Shakopee. It is one of four major malt producers and has only two main customers. If its proprietary information becomes available to its competitors and customers, it contends that the disclosure will have a devastating negative impact on its business. The Supreme Court agreed that Rahr had not presented facts that outweighed the strong presumption in favor of a public trial. However, because it is not clear from the record whether Rahr had an adequate opportunity to present facts in support of its motion in limine, the case was remanded for further proceeding to allow Rahr an adequate opportunity to fully present its case for closure of the trial. The hearing should be held in camerato to determine if the information meets the definition of a trade secret or otherwise merits protection. Petition denied, remanded for further proceedings. Rahr Malting Company v. County of Scott, CX-00-1676, 2001 WL 869350 (Minn. 8/2/01). http://www.lawlibrary.state.mn.us/archive/supct/0108/cx001676.htm

-- Chris Dietzen
Larkin Hoffman Daly & Lindgren Ltd.

Collection Due Process (CDP) Hearings; Recording. The IRS recommended that appeals not follow the more "formal" methods of recording CDP Hearings instructed by the district court in Mesa Oil, Inc. v. United States. The district court found the IRS records in that case inadequate for judicial review, remanded the case to the IRS and suggested methods for recording the new hearing. The IRS filed a nonacquiescence to the decision stating that the CDP Hearing process was intended to provide a more informal setting for taxpayers to reach a solution with the IRS, and this informal setting did not require verbatim documentation of the meeting. AOD-CC2001-05 and Mesa Oil, Inc. v. United States, 87 AFTR 2d (RIA) 486 (U.S.D.C. Colo. 12/14/2000).

Effective Date for Collection Activity. The taxpayer petitioned the Tax Court after a determination by the IRS to levy his property. The IRS alleged the Tax Court did not have jurisdiction since the liens were filed prior to the effective date of Sections 6320 and 6330. The Tax Court, however, held that since the IRS did not notify the taxpayer of its intent to levy until after the effective date of those sections, it did have jurisdiction over the case. The notification was actually the "initiation of collection action" described in the Restructuring and Reform Act of 1998. Parker v. Commissioner, 117 T.C. No. 6 (8/21/01).

Tax on Indian Community's Gaming Operations. The Supreme Court of Minnesota held that the Indian Gaming Regulatory Act did not prohibit the state from taxing income on gaming operations. The taxpayers lived outside of Indian country but intended to return to the reservation. The Court also found that the assessment of this tax did not impose on their tribal self-governance. Edward W. Jefferson v. Commissioner of Revenue, No. C6-01-308, 2001 WL 869336 (Minn. 8/2/01). http://www.lawlibrary.state.mn.us/archive/supct/0108/c601308.htm

WTO; Foreign Sales by Domestic Corporations; Subsidy. Although the U.S. had passed the FSC Repeal and Extraterritorial Income Exclusion Act of 2000 to exclude certain income earned from the foreign sales of domestic corporations, the European Union (EU) still alleged that the act subsidized American goods and services. The WTO agreed, and the EU could retaliate if the U.S. doesn't comply with the ruling. The U.S. has until October 19th to appeal the decision. Taxday, Item #M.1 (8/21/01).

Proceeds of Life Insurance Policy -- Community Property State. Louisiana state law governed life insurance policies under community property principles. The decedent had ownership interests in only half of the policies; therefore only this half was includable in the gross estate. Estate of William Blake Burris, TC Memo 2001-210 (8/8/01).

Property Taxes -- Assessor's Market Value Reduced. Since the assessor's analysis did not consider market differences and failed to provide sufficient evidence to support the increased value of the land, the estimated market value was reduced for real property tax purposes. The petitioner had evidence supporting the actual cost of his property. Dennis N. Hoheisel v. County of Morrison, No. CX-00-1413, 2001 Minn. Tax LEXIS 24 (Minn. Tax Ct. 7/11/01).

No Interest Abatement -- IRS's Late Detection of Error. The taxpayer erroneously deducted cash gifts over several years, but the IRS did not examine all of these returns. The IRS subsequently audited three of the later years and discovered the error and charged interest accordingly on the changes made to these returns. Although the error was a good faith misunderstanding of the law, the IRS did not have the responsibility to examine each return to have caught the error earlier and did not waive their right to correct the errors made. Nina H. Pettyjohn, TC Memo 2001-227 (8/16/01).

Interest on Overpayment Paid to Date Future Tax Liability Was Due. Taxpayer wanted the interest to be calculated up to the date the overpayment was actually applied to offset future tax liability. The court agreed with the IRS calculation using the due date of the future tax liability offset by the overpayment because of the predictability of this date. The court noted that procedures would have to be changed to calculate interest based on the taxpayer's arguments. Marsh & McLennan Cos. v. United States, No. 00-205T, 2001 U.S. Claims LEXIS 150 (U.S. Ct. Fed. Claims 8/6/01).

Discharge of Tax Liability; Compliance with Tax Law; Forms. The taxpayer filed two forms 1040 as part of an offer in compromise request. Since the substituted returns prepared by the IRS indicated a different amount than the subsequently filed forms 1040 and the debtor's offer in compromise request was based on doubt as to collectibility and not doubt as to liability, the debtor's submissions were not deemed as complying with the tax laws. However, the bankruptcy court held that each case having a difference in the forms submitted by the taxpayer and the forms prepared by the IRS should be reviewed independently of each other to determine whether the taxpayer made a reasonable attempt to comply with the tax laws and thus making the tax liability dischargeable. Rushing v. United States (In re Rushing), 2001 Bankr. LEXIS 958 (U.S. Bankr. Ct. Dist. Ariz. 7/10/01).

Overpayments; IRS's Discretion. Taxpayer returned a refund check with instructions stating what years to apply it to. The IRS applied the check to another year's unpaid tax liability. The Tax Court stated it did not have jurisdiction to review discretionary decisions of this type. The taxpayer also did not follow the proper procedures for submitted the funds as a deposit, if that was the case. Steinberg v. Commissioner of Internal Revenue, No. 00-70174, 2001 U.S. App. LEXIS 16541 (9th Cir. 7/10/01).

Failure to Request Appeals Conference-Denial of Litigation Costs. In a case of first impression, the Tax Court held that section 7430(b)(1) (concerning qualified offers) requires that a taxpayer exhaust all available administrative remedies to qualify for litigation costs. The court pointed out that the regulations to this section include the appeals process as part of the available administrative remedies. The taxpayers did not provide information regarding their decision to bypass the appeals process, and the court would not exclude this requirement. Therefore, no litigation expenses were awarded even though taxpayers prevailed. Haas & Associates Accountancy Corp. v. Commissioner, 117 T.C. No. 5 (8/10/01).

Acquisition; Capitalization of Damages Paid. Taxpayer purchased all of the assets and some liabilities of another business. Among the liabilities assumed was a patent infringement claim where the taxpayer was later found liable. The Tax Court held that the amount paid for this liability was a cost of acquiring the other assets and should be capitalized. The court considered that the taxpayer was aware of this claim and considered it in determining the purchase price of the assets. Illinois Tool Works, Inc. & Subsidiaries v. Commissioner, 117 T.C. No. 4 (7/31/01).

Frivolous Tax Arguments; Relevant Law. The IRS has created a summary of the six major types of frivolous tax arguments and the relevant law relating to each of these claims. The six arguments fall into the following categories: "voluntariness" of filing a return and paying taxes, meaning of "income," definition of "taxpayer," constitutionality of the federal income tax, legal status of IRS and tax forms, and ability to permanently avoid income taxes. The summary is available at the IRS website at www.irs.gov and www.treas.gov/irs/ci/index.htm. I.R. 2001-73.

Low-Income Housing; Casualty Losses; Tax Credit. Chief Counsel provided advice on the definition of casualty losses relating to low-income housing and the time period for restoring these losses. Chief Counsel also stated that if low-income housing is unavailable due to these casualty losses, the tax credit relating to these is also not available. CCA Letter Ruling 200134006.

Overpayment; Offer in Compromise; Interest Paid. Chief Counsel stated that the IRS does not pay interest unless there is an overpayment of a tax (I.R.C. ¤6611). The courts have defined an overpayment as the amount exceeding the liability amount. Since an offer in compromise amount is less than the amount of the tax liability, there cannot be an overpayment of taxes in an offer in compromise. Therefore, the IRS cannot pay interest on this overpayment of the offer amount. However, if the liability has already been adjusted due to the accepted offer, it's possible to get interest on the overpayment if no other tax liabilities exist. CCA Letter Rulings 200134024 and 200133045.

New Withholding Tables. Taxpayers expressed some confusion over the new withholding tables effective July 1st. The Treasury Department has assured the Finance Committee that it will clear up the confusion, arising from two sets of withholding tables in the same document. TAXDAY, Item #C.1 (8/20/01).

No Installment Agreement After Tax Liability Discharged.
An inquiry was made regarding the ability of the IRS to collect the value of exempted property in bankruptcy after the tax liability had been discharged but the lien remained. The IRS stated that the installment agreement provisions apply towards a tax liability, which is no longer the case here. While a similar, "informal" arrangement could be made, it is not proper to characterize it as an installment agreement as defined in Section 6159. CCA Letter Ruling 200133044.

Small Business/Self Employed Exam Process Reengineering Project. The IRS has posted information regarding changes to this exam process. The fact sheet for this project can be downloaded from the IRS website at www.irs.gov. TAXDAY, Item #I.5 (8/17/01).

Office of Indian Tribal Governments. The IRS has posted Publication 3747 describing this new office on its website. The publication contains information on educational materials and support staff available to the Indian tribes. TAXDAY, Item #I.7 (8/17/01).

Subchapter S Rental Income. The corporation, which was contemplating making a Subchapter S election, showed significant involvement in the management and control of its rental properties. Its officers' responsibilities ranged from negotiating leases to maintenance of the property grounds. The income was therefore generated from an "active trade or business of renting property" under Section 1.1362-2 and not taxable as passive investment income. Letter Ruling 200133019

Tax on Communication Services; Network Builders. Taxpayer purchased lines from local exchange carriers to build networks. The access to these networks is then sold to Internet service providers. The lines do not provide "telephonic quality" communications as defined in Section 4252 and the service is not a teletypewriter exchange service as described in Section 4252. Based on the above findings, the IRS stated the taxpayer was not subject to the excise tax on communications services. Letter Ruling 200133008.

Tax-Exempt Bonds. A new IRS website includes information returns, election forms, relevant Internal Revenue Manual provisions, and various training materials. The Tax-Exempt Bond Community page can be accessed through the IRS website (www.irs.gov HREF="http://www.irs.gov/">http://www.irs.gov/) under the "Tax Info for Business" tab. TAXDAY, Item #I.1 (8/16/01).

Real Estate Tax Abatement; Exchange for Services; Tax Liabilities. A state program that forgives real estate taxes for senior citizens performing certain services still gives rise to gross income for federal tax purposes and employment tax purposes. Also, if the employer did not withhold any FICA taxes because the abatement amount was too small but still paid FICA for the employee, the amount of FICA paid by the employer is also considered income to the individual. FSA Letter Ruling 200132035.

Rates for Current Plan Liability. The interest rates for tax years beginning in July 2001 to be used for purposes of the full funding limitation of Section 412(c)(7) have been released. See Notice 2001-48. TAXDAY, Item #I.1 (8/13/01).

Minnesta S Corp Banks; Corporate Income Tax. For tax years beginning after 2000, S corporation banks will be treated the same for state and federal income tax purposes. TAXDAY, Item #S.2 (8/29/01).

Foundation and Corporate Charitable Contributions. A bill has been introduced in the U.S. Senate that would get rid of the excise tax on net investment income of certain foundations, create an incentive for contributions to some S corporations, and increase the limit on corporate charitable contributions. S. 1300.

Income; Discharge of Indebtedness; Residential Mortgage. The text of Senate bill 1282 would exclude from gross income the discharge of debt forgiven for certain residential mortgage obligations. S. 1282.

Economic Growth and Tax Relief Reconciliation Act of 2001. The Congressional Research Service prepared a report discussing the ways federal estate, gift, and generation-skipping transfer taxes are affected by the act. The report discusses the phaseout and eventual repeal of the estate and generation-skipping transfer taxes, the lower gift tax, and the new basis rules for property received from a decedent. TAXDAY, Item #C.2 (8/29/01).

Minnesota Tax of Nondomiciliary Residents. Taxpayers filed for review of the Minnesota Supreme Court decision holding that the state does not violate the Commerce Clause of the U.S. Constitution by taxing income not generated in the state. While the Minnesota Supreme Court held that this tax was part of the cost of doing business in interstate commerce, the taxpayers disagree the state can tax income primarily derived out of state. Donald G. Stelzner, et ux., Petitioners v. Commissioner of Revenue of Minnesota, U.S. Supreme Court, Dkt. 00-1887, pet. for cert. filed 6/18/01).

Negotiations for Tax Treaty Between U. S. and Japan. The current income tax treaty is from 1972 and since then, significant changes have occurred in each of the two countries. The first set of negotiations is scheduled to take place in October 2001. Comments can be addressed to Barbara M. Angus, International Tax Counsel, Room 1000 Main Treasury, Washington, DC 20220 or faxed to (202) 622-0646. TAXDAY, Item #T.1 (8/13/01).

Streamlined Sales Tax Project. The states met in Minnesota and reviewed and commented on the various work groups' activities. Among the issues covered were the taxation of candy, soft drinks, vending machines, digital products, and telecommunications services. Standards for certifying and auditing the tax rates and taxable items were also discussed. Future meetings will be on September 27-28, 2001 at a location not-yet-determined and in Louisville, Kentucky on October 22-23, 2001. TAXDAY, Item #S.2 (8/28/01).

-- Kathryn J. Sedo
-- Yolanda Guzman
University of Minnesota Tax Clinic

UIM Coverage. In answering a certified question from United States District Court for the District of Minnesota, the Minnesota Supreme Court held that a plaintiff's insurer may not deny an underinsured motorist claim based upon the plaintiff's failure to reach the "best settlement" with the tortfeasor, where the plaintiff settles with the tortfeasor for 40 percent of the tortfeasor's liability limits and gives notice under Schmidt v. Clothier, 338 N.W.2d 256, (Minn. 1983). Justice Stringer and Justice Lancaster dissented. Dohney v. All State Insurance Company, C5-01-252, 2001 WL 923448 (Minn. 8/16/01). HREF="http://www.lawlibrary.state.mn.us/archive/supct/0108/c501252.htm">http://www.lawlibrary.state.mn.us/archive/supct/0108/c501252.htm

Contribution. A business tenant in a commercial building argued that as a matter of law it had no common liability with an electric heater manufacturer to the building owner and the fire insurer for fire damage to the building and its contents.

Citing United Fire and Cas. Co. v. Bruggeman, 505 N.W.2d 87 (Minn. App. 1993), rev. denied (Minn. 10/19/93), tenant argued that it had an insurable interest in the property. Under Bruggeman, rent payments are generally understood to include the cost of insurance, which is purchased to hold the insured harmless from its own negligence. The court held that the Bruggeman doctrine does not shield a tenant from liability for "nonstructural" losses and for other claimed losses in which the tenant had no insurable interest.
The case was remanded for jury trial on the issue of damages. The trial court had not allowed the damage question to go to the jury, instead ordering that damages were determined by a settlement between the owner and the subrogated fire insurer. Nuessmeier Electric, Inc. v. Weiss Mfg. Co., et al, C5-00-2184, 632 N.W.2d 248 (Minn. App 8/14/01).
http://www.lawlibrary.state.mn.us/archive/ctappub/0108/c5002184.htm

Apportionment of Medical Expenses. In March 1996 and May 1996, Scheibel was injured in two separate automobile accidents. He was insured by Illinois Farmers Insurance Company ("Farmers") for both accidents. A no-fault arbitrator found Scheibel's medical expenses and disability and income loss were causally related to both accidents, with 35 percent of loss attributable to the first accident and 65 percent attributable to the second accident.

Scheibel sought confirmation of the arbitration award, seeking payment of all claimed no-fault benefits with interest. Farmers claimed Scheibel was entitled to recover only no-fault benefits due to the second accident. On remand, Scheibel moved to enter judgment against Farmers for $6,953.93, plus interest. Because Scheibel had already been paid $3,558.00 attributable to first accident, the district court calculated that he had $6,953.00 of unreimbursed medical expenses and awarded that amount plus interest.

The Minnesota Court of Appeals affirmed, tacitly approving apportionment in no-fault cases involving the aggravation of preexisting injury from a prior accident. Scheibel v. Illinois Farmers Insurance Company, CX-01-165, 631 N.W.2d 428 (Minn. App. 7/24/01). http://www.lawlibrary.state.mn.us/archive/ctappub/0107/cx01165.htm

Respondeat Superior. In October 1991, Burmeister purchased Hagen's insurance agency and executed a consulting, confidentiality and noncompetition agreement. Hagen later went to work for another insurance agency, American. In January of 1995, Hagen solicited more than 200 of Burmeister's customers by letter. Burmeister argued respondeat superior against American. After two appeals, the narrow issue before the Minnesota Supreme Court was whether respondeat superior applies when the act is not foreseeable.

Justice Lancaster wrote that the standard of foreseeability is commonly proven, or a question of fact raised, when a party establishes that the conduct is a well known industry hazard. Burmeister's failure to introduce any evidence establishing that it is foreseeable for insurance industry employees to misappropriate trade secrets, and thus its failure to raise a fact question with respect to that issue, was fatal to its respondeat superior claim. Additionally, the trial court had found that American did not know or have reason to know that Hagen did not make appropriate arrangements with Burmeister before he sent out the letters. Thus, American was not vicariously liable for Hagen's violation of the Minnesota Uniform Trade Secrets Act. Hagen v. Burmeister & Associates, Inc., et al., C3-00-496, 2001 WL 869328 (Minn. 8/2/01). http://www.lawlibrary.state.mn.us/archive/supct/0108/c300496.htm

No Discount for No-Fault. Jason Stout injured both knees in a July, 1993 auto accident. AMCO Insurance Company contested liability, and medical assistance paid Stout's bills. The medical service providers accepted payments of $13,167.29 less than the total bills of $25,638.73. AMCO refused to pay the $20,000.00 policy limit. The trial court ruled AMCO had to pay the full amount and was liable for interest on the unpaid bills.

AMCO appealed and the Minnesota Court of Appeals affirmed. AMCO claimed that the amount due should have been the "discounted" amount. The Court of Appeals found that the intervening act of decreasing the bills was not an allowable offset or a penalty. Stout v. AMCO Insurance Company, et al., CX-01-246, 2001 WL 940664 (Minn. App. 8/21/01). http://www.lawlibrary.state.mn.us/archive/ctappub/0108/cx01246.htm

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