Minnesota State Bar Association

-- Hon. George Beck
Office of Administrative Hearings

-- Michael Ahern
Dorsey & Whitney

CIVIL LITIGATION
Judicial Law

Attorney-Client Relationship. The Minnesota Supreme Court recently held that a law firm, hired by an insurer to defend its insured, did not have an attorney-client relationship with the insurer and could not be sued by the insurer for legal malpractice.

Pine Island sold and installed a milk metering system. The farmer who purchased the milk metering system sued Pine Island when several cows in his herd became contaminated with bacteria. Pine Island tendered the defense of the claim to its liability carrier, Farmland Mutual, which retained defendant law firm to represent Pine Island. Following a jury trial in which Pine Island was found to be 90 percent at fault and judgment entered against it for more than $1 million, the farmer and Farmland Mutual entered into a settlement while various appeals were pending.

After settlement of the underlying damage claim, both Farmland and Pine Island sued the law firm for legal malpractice, alleging that both had an attorney-client relationship with the law firm. The district court held, among other holdings, that there was no attorney-client relationship between Farmland and the law firm, but that Farmland could maintain an action for legal malpractice against the law firm under the doctrine of equitable subrogation.

The Court of Appeals affirmed the district court's conclusion that there was no attorney-client relationship between the law firm and Farmland, but it also reversed the district court, and held the doctrine of equitable subrogation to be inapplicable to the facts of the case.

The Supreme Court affirmed the Court of Appeals, but on different grounds. The Court analyzed the unique characteristics of the tripartite relationship between defense counsel, insurance companies, and their insureds and it established a bright-line rule to determine whether or not, in a given case, defense counsel represents the insurer as well as the insured. That rule requires consultation between defense counsel and the insured, and the express consent of the insured to dual representation. Held, there was no attorney-client relationship between Farmland and defense counsel. The Court declined to apply the doctrine of equitable subrogation and allow Farmland to sue in the name of Pine Island, because Pine Island had already brought suit against the law firm and that matter was pending for trial. Pine Island Farmers' Coop v. Erstad and Riemer, 649 N.W.2d 444 (Minn. 2002). http://www.lawlibrary.state.mn.us/archive/supct/0208/c101670.htm

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

CRIMINAL LAW
Judicial Law

Search and Seizure: Conservation Officers: Boat: Fish Inspection. Although Minn. Stat. ¤97A.251, subd. 1(3) requires, on its face, that individuals may not refuse to allow inspection of motor vehicles, boats or other conveyances, while used in transporting or taking wild animals, including fish, the Court of Appeals construes this statute to first require that such an inspection be predicated on probable cause to request such an inspection. This construction preserves the constitutionality of the statute. The court also rejects the state's argument that probable cause is not necessary because of the "regulated activity exception." The Minnesota Court of Appeals has already rejected the state's argument that such an exception should be applied to recreational fishing in Minnesota. State v. Krenz, 634 N.W.2d 231 (Minn. App. 2001). Finally, the appellant's refusal to consent, together with the knowledge that fish are being transported, does not amount to probable cause. State v. John Mark Colosimo, C7-01-2181, (Minn. App. 07/23/02). http://www.lawlibrary.state.mn.us/archive/ctappub/0207/c7012181.htm

Automobile Stop: Lane Change: Signal: Street Versus Highway. The Court of Appeals rejects the district court's interpretation of Minn. Stat. ¤169.19, subd. 4, as only requiring lane change signals to take place on highways, versus city streets. The statute contains some slightly ambiguous language concerning roadways and highways, but it does not necessarily follow that ambiguity should be construed strictly in favor of the defendant. The lane change conditions of Minn. Stat. ¤169.19, subd. 4, as applied in this case, call for only a petty misdemeanor violation. As such, because petty misdemeanors are not crimes, it is not a penal statute subject to the rule of strict construction. Instead, "we ... interpret a petty misdemeanor traffic violation as we would interpret a public health and safety statute, that is, liberally to "effect [its] purpose." State v. Arthur Jab Jones, Jr., C4-02-561, (Minn. App. 08/13/02). http://www.lawlibrary.state.mn.us/archive/ctappub/0208/c402561.htm

Felony Murder: Continuous Transaction: Intent to Commit Underlying Felony: Aggravated Robbery. The appellant and his friends were ordered to beat up the victim for violation of a gang rule (stealing beer without paying). The victim was struck in the head three times with a car jack, resulting in multiple lacerations and skull fractures. After leaving the victim in a ditch and walking approximately 50 yards, the appellant returned to retrieve the victim's identification, to give to the gang leader as proof that the beating had been carried out. The jury acquitted the appellant of first-degree premeditated murder, but returned guilty verdicts on first-degree felony murder during commission of aggravated robbery, second-degree intentional murder, and second-degree murder during the commission of an assault. The court entered a conviction for first-degree felony murder (aggravated robbery), and sentenced the appellant to life in prison.

The conviction for first-degree felony murder during the commission of an aggravated robbery is reversed. The state failed to prove beyond a reasonable doubt that the appellant had the necessary intent to take the identification before or during the time the appellant killed the victim. Although the act which constitutes the underlying felony may occur before, during, or after the killing, where two crimes have been committed at about the same time and place, Minnesota jurisprudence indicates that the "one continuous transaction" requirement of felony murder will not be satisfied absent a finding that the actor performed a requisite felonious intent before, or during the act resulting in death. Here, the appellant did not set out to rob the victim of his identification; rather, it appeared to be an afterthought for proof of the attack to the gang leader. State v. Elizer Eugene Darris, C8-01-1587, (Minn. 07/25/02). http://www.lawlibrary.state.mn.us/archive/supct/0207/c8011587.htm

Child Support: Nonpayment: "Without Lawful Excuse": Element of Offense: Jury Instruction. Appellant was charged with felony nonpayment of child support. Over the course of four years, appellant made no payments, but suffered from severe depression, very sporadic employment, and lived with his mother. The trial court prohibited the appellant from calling a psychologist to testify as to his I.Q. and intellectual abilities. Also, the trial court issued an advisory letter prohibiting a vocational rehabilitation psychologist from testifying. Finally, the trial court instructed the jury, with respect to the issue of having a lawful excuse, as follows: "third, defendant had no lawful excuse. Mental incapacity is a lawful excuse ... defendant has the burden of proving this mental incapacity by the greater weight of the evidence."

Held, it was plain and reversible error for the trial court to give the above instruction. The language "without lawful excuse" is an element of the offense of nonsupport of a child. As such, due process requires the state to prove the absence of a lawful excuse beyond a reasonable doubt. In dictum, the Supreme Court also questions why a trial court would have excluded the appellant's proffered expert psychological testimony regarding his ability to pay child support. State v. Douglas Jerard Burg, C6-00-1822, (Minn. 08/01/02). http://www.lawlibrary.state.mn.us/archive/supct/0208/c6001822.htm

Evidence: Character Evidence: Prior Contacts with Police: Spreigl. During the state's direct examination of an accomplice, the accomplice testified that she was afraid of the appellant because earlier in the evening he had told her that he had kicked in doors and he had once killed someone in a fight. Also, the prosecutor elicited testimony from the arresting police officer that he recognized the appellant because of "prior contacts and incidents." Apparently no Spreigl notice had been given. Also, the defendant did not put his character in evidence.

Held, the defendant was denied a fair trial by the introduction of this character evidence. He did not put his character in issue, and the character attack was improper. This evidence was highly prejudicial and should have been excluded under Rule of Evidence 403. The accomplice's motivation for participating in the charged offense was not relevant to the determination of the charges against the appellant. Therefore, her fear or state of mind was irrelevant. State v. Douglas Alan Strommen, C9-00-1930, (Minn. 08/08/02). http://www.lawlibrary.state.mn.us/archive/supct/0208/c9001930.htm

Homicide: first-Degree Murder: Past Pattern of Child Abuse: One Element Versus Several Elements: Proof Beyond a Reasonable Doubt. The Minnesota Supreme Court rejects the defendant's proposed jury instruction that under Minn. Stat. ¤609.185(5), each alleged incident of child abuse that comprises the "past pattern of child abuse" must be proved beyond a reasonable doubt. Instead, the Court reaffirms its holding from State v. Cross, 577 N.W.2d 721 (Minn. 1998), that it is not necessary for the jury to find beyond a reasonable doubt that the appellant committed each of the acts which constitute the past pattern, but only that the state must prove, beyond a reasonable doubt, that the appellant engaged in a past pattern of child abuse. The Court rejects application of Richardson v. U.S., 526 U.S. 813 (1999) which, in a prosecution under the Continuing Criminal Enterprise statute, 21 U.S.C. ¤848(a), the government must prove each violation of the series beyond a reasonable doubt. The Court notes language from Richardson discussing the special difficulties of proving underlying acts of criminal sexual conduct, as opposed to the crimes addressed under the C.C.E. law. State v. Kyle John Kelbel, C8-01-1699, (Minn. 08/08/02). http://www.lawlibrary.state.mn.us/archive/supct/0208/c8011699.htm

Sentence: Upward Departure: "Zone of Tranquility": Public Park. The Supreme Court rejects a traditionally created "zone of tranquility" departure to justify an upward sentence, as an improper extension of the "aggravating zone of privacy" factor. The Court of Appeals and the trial court were incorrect to refer to a public park as within a victim's zone of privacy, and by calling it a "zone of tranquility." The "zone of privacy" factor has generally been limited to a victim's home and curtilage. The "zone of tranquility" has no such definition, and is a subjective and an ephemeral concept. Hence, any departure with respect to a "zone of tranquility" in the public park is reversed, and remanded. State v. Tze Thao, C1-00-2022, (Minn. 08/08/02). http://www.lawlibrary.state.mn.us/archive/supct/0208/c1002022.htm

Sentence: S.T.S. Credit. The appellant participated, while on probation, in a sentence-to-serve (S.T.S.) program. Under that program, he earned two days off his sentence for each day he worked. Accordingly, he worked 30 days, and received 60 days off his sentence. In a probation violation, involving a new offense, the district court granted the appellant 30 days off his sentence as credit for time served, but declined the appellant's request that he be given 60 days credit. The Court of Appeals rejects the appellant's position, and holds that calculation of jail credit should be based on a ratio of one day credit for each day or portion of a day spent in custody, even though a local correction program, such as S.T.S., awards two days off the sentence for every day served. State v. Michael John Arend, C2-02-672, (Minn. App. 08/06/02). http://www.lawlibrary.state.mn.us/archive/ctappub/0208/c202672.htm

Juvenile Law: Guilty Plea: Withdrawal Rule 8.04, subd. 2(B) of the Minnesota Rules of Procedure allows a juvenile, at any time, to withdraw a plea of guilty in order to correct a manifest injustice. Here, additionally, the juvenile's admission to criminal sexual conduct was invalid because it was inaccurate, and the court erred by denying the juvenile's motion to withdraw his plea of guilty. Both the written plea agreement and the colloquy in court admitted only "nonconsensual contact" but not whether it was within an intimate area and made with sexual or aggressive intent: "The omission of factual basis for a plea destroys the accuracy of the admission." In the Matter of the Welfare of J.J.R., C7-01-1998, (Minn. App. 08/06/02). http://www.lawlibrary.state.mn.us/archive/ctappub/0208/c7011998.htm

Criminal Sexual Conduct: Drugged Victim: Personal Injury: Mental Impairment: Elements of Offense. The appellant was convicted for drugging the victim's beverage with a barbiturate, and then having sexual intercourse with her while she was in a state of impairment. Shortly after the incident, the victim's husband brought her to the hospital where a doctor thought she had been drugged and raped. She was disoriented, and her motor functions were slow, she was groggy; however, there was no evidence of trauma, including the intimate areas. Held, the victim's disorientation and drugged condition rendered her sufficiently impaired so as to constitute personal injury under the statute. Also, the state may use the same series of acts (impairment and personal injury) to prove more than one element of the first-degree criminal sexual conduct statute. State v. Carl James Jarvis, (Minn. App. 08/13/02). http://www.lawlibrary.state.mn.us/archive/ctappub/0208/c2011097.htm

-- Frederic Bruno
Frederic Bruno & Associates

EMPLOYMENT & LABOR LAW
Judicial Law

Job Terminations. The Minnesota Jury Instruction Guide definition of "cause" applies to tort claims for wrongful termination. In Hilligoss v. Cargill, Inc., 649 N.W.2d 142 (Minn. 2002), the Supreme Court held that the terms "just cause," "good cause," or "cause" are equivalent and mean "some cause or ground that a reasonable employer, acting in good faith in similar circumstances would regard as a good and sufficient basis ... [for] the standards of job performance that [the employer] established and wrongfully applied." The Court upheld the instruction in a claim of breach of contract by a terminated employee.

Severance payments to an employee upon termination of employment may be divided as marital property in a divorce. In Grigsby v. Grigsby, 648 N.W.2d 716 (Minn. App. 2002), the Court of Appeals held that a lump sum payment made to a spouse after the valuation date in a divorce was marital property because it pertained to prior employment and there was insufficient evidence to apportion any of it to a nonmarital period.

An insurance agent is not entitled to severance benefits upon termination because of efforts to induce policyholders to switch insurers. In Marson v. Mutual Service Cas. Ins. Co., 2002 Minn. App. lexis 943 (Minn. 2002) (unpublished) the appellate court held that the agency's employment agreement properly barred termination benefits due to improper solicitation by the agent.

Disability Cases A diabetic pharmacist who regularly closed down his facility for a half hour at noon to take an insulin shot and eat lunch is not protected from discharge under the Americans with Disabilities Act (ADA). In Orr v. Wal-Mart Stores, 297 F.3d 720 (8th Cir. 2002), the 8th Circuit held that the employee did not establish that the disability impaIRS "a major life activity" to qualify for coverage under the ADA. A dissent by Judge Donald Lay would have found that eating and working are the type of activities that are covered by the Act.

An employer is not required to substantially change job duties to accommodate a disabled employee under the ADA. In Dropinski v. Douglas County, 298 F.3d 704 (8th Cir. 2002), the 8th Circuit held that an employee who, due to injury, was not able to perform physically exerting work was not protected under the ADA when he could not perform his new job, which included some physically demanding tasks.

A pair of employees who were not collegial with their coworkers failed in challenging the terminations of their jobs in a pair of recent rulings by the Minnesota Court of Appeals. In Rojina v. City of Chanhassen, 2002 WL 1461815 (Minn. App. 2002) (unpublished), a municipal machine operator was terminated because of poor interaction with other employees. He challenged his termination on grounds that it constituted disability discrimination under the state's Human Rights Act because he had been diagnosed with an anxiety disorder that affected his interpersonal relations. The court rejected that claim, noting that his affliction did not impair activities that are "central to daily life," which is the standard for a discrimination claim under the Americans With Disabilities Act, and decided earlier this year by the Supreme Court in Toyota Motor Mfg. v. Williams, 534 U.S. Ct. 184 (2002). The court also rebuffed the employee's claim that his difficulties sleeping constituted a disability, which the court also felt did not meet the requisite standard of impairment.

A salesman who did not get along with his boss could not pursue a claim for defamation after he was terminated for "insubordination" in Fahrmann v. Fredd, 2002 WL 1467451 (Minn. App. 2002) (unpublished). Although the accusation was false, the employer had a qualified privilege from defamatory statements made in connection with the termination of an employee, and there was insufficient evidence of common law malice, or ill will, to overcome the privilege.

Discrimination Claims. A claim of age discrimination by a 64-year-old discharged woman was rejected in Calder v. TCI Cablevision, 298 F.3d 723 (8th Cir. 2002) because of the employee's poor work performance. Although there were a few age-related remarks, the claim was not actionable because the employee had failed to meet performance standards for three years and the comments about age took place more than a year before she was fired.

A claim by a male employee of sex discrimination when he was rejected for a promotion and was demoted was rejected in Edmund v. Midamerican Energy, 299 F.3d 679 (8th Cir. 2002). His work record reflected resistance to management directives and obstructive behavior that warranted the employer's action.

Workers Compensation. A union plumber covered under an ERISA plan is not entitled to workers compensation benefits for injuries incurred in a nonemployment situation. In Meyer v. Duluth Bldg. Trades Welfare Fund, 299 F.3d 686 (8th Cir. 2002), the court held that workers compensation was inapplicable for injuries plaintiff suffered while doing a brief, unpaid task at his wife's business since he was not an "employee."

Whistleblower. A report by an employee to police that a coworker was abusing children during nonwork hours at housing furnished by the employer to the suspected perpetrator constitutes an actionable claim under the whistleblower statute, Minn. Stat. ¤181932. In Mahazu v. Becklund Home Health Care, Inc., 2002 Minn. App. lexis 922 (Minn. App. 2002) (unpublished), the appellate court reversed dismissal of the whistleblowing claim on grounds that the statute is not confined to reporting of illegal behavior by an employer.

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

FAMILY LAW
Judicial Law

Spousal Maintenance -- IRA Distribution. The parties dissolved their marriage in 1989. Wife was awarded spousal maintenance and husband was awarded an IRA. In 1999, wife move for a modification of spousal maintenance. The district court found that husband's 1999 gross income was $269,896 and that much of this income ($203,658) came from a distribution from the IRA. Rejecting husband's argument that no part of the IRA money should be included as income because he had redeposited all but $50,000 which was retained to pay the tax liability on the transfer, the district court included the entire IRA distribution as income and modified spousal maintenance upward. Following an appeal and remand, the district court found that the IRA distribution that was immediately placed in another IRA was not income. However, the district court maintained that the money retained to pay the tax liability was still income for spousal maintenance purposes.

On appeal, the Court of Appeals agreed that an obligor cannot be ordered to pay maintenance out of pension payments until the obligor has received pension payments in the amount of the pension's original value as determined at the original property distribution. Once that amount has been exceeded, however, subsequent payments may be considered as income for spousal maintenance purposes. Therefore, part of the IRA distribution was income to husband. Nevertheless, the Court of Appeals went on to conclude that the district court erred in characterizing the IRA money as income but not treating it as an expense when it was used to pay the tax liability caused by the transfer. The court held that the district court's asymmetric treatment of husband's transfer tax as income but not as an expense was inconsistent with Minnesota caselaw and against logic and the facts on the record. Reversed and remanded. Levey v. Levey, C5-02-407 (Minn. App. 09/03/02) (unpublished). http://www.lawlibrary.state.mn.us/archive/ctapun/0209/407.htm

Parenting Time; Removal of Children from Minnesota Respondent mother and appellant father were married in 1993 and divorced in 2000. They have two children, twin girls born on December 31, 1993. In its original judgment and decree, the district court awarded the parties joint legal custody, with sole physical custody awarded to mother and reasonable and liberal visitation to father. Two days after the judgment and decree was filed, mother moved with the children to Gaylord, Minnesota. After post-trial motions by father, the court issued an order amending the judgment and decree to incorporate a revised visitation schedule consistent with the children's change of residence to Gaylord. Essentially, the district court eliminated father's visitation during the week, as well as four unrestricted weeks during the year. The district court, however, granted father additional visitation during the summer months. In 2001, mother moved the court for permission to relocate with the children to Alpena, Michigan, about 600 miles from the Twin Cities. Mother stated that she wished to be closer to her family, in particular her father, who had been diagnosed with cancer. She also stated that she could return to college in Alpena and obtain her degree, and that her parents would be able to help her with daycare while she was attending college one night a week. In her motion, mother also requested that appropriate visitation times be established. In response, father moved for an order requiring a custody study and a change in physical custody of the minor children to him. He made no request for amendment of the visitation provision of the judgment and decree.

At the subsequent hearing, counsel for both parties presented arguments about the possible relocation, but neither party argued for amendment of the visitation schedule. The district court granted mother permission to move the children to Michigan, but did not address the issue of visitation. Father appealed, arguing that the district court erred by: (a) granting mother's motion to remove the parties' minor children out of state without holding an evidentiary hearing; (b) failing to modify his visitation schedule to reflect its grant of mother's motion to remove the children out of state; and (c) allowing removal without modifying father's visitation, thus improperly restricting his visitation without the required statutory findings.

As to (a), the Court of Appeals held that because father never requested a hearing at the district court level, the court generally would not consider the matter. However, even if the court were to consider the issue, father's evidence did not make a prima facie case against removal. The court agreed that mother's evidence in support of removal was weak but concluded that she was not required to show much, given the implicit statutory presumption favoring a custodial parent's request for removal. In doing so, the court relied on Auge v. Auge, 334 N.W.2d 393 (Minn. 1983), and Silbaugh v. Silbaugh, 543 N.W.2d 639 (Minn. 1996). However, the court cautioned that its holding did not mean that, in every case, the district court must grant the removal request of a custodial parent. The guiding standard for removal should remain the best interests of the child, not merely the wishes of the custodial parent. Here, while the record reflected mother's strong desire to be near her family during her father's illness, she should have presented more substantive evidence regarding the positive effect of her move on the children's well-being. Nonetheless, the Auge presumption left the Court of Appeals reluctant to interfere with the district court's decision.

As to (b), although father did not raise this issue at the district court level, the Court of Appeals nonetheless held that an appellate court has an obligation to decide cases in accordance with existing law when there is nothing "novel or questionable" about the relevant law. Under Auge, when removal is permitted, the district court must modify visitation, if reasonable and necessary to maintain a good relationship between the noncustodial parent and the child. Because the district court did not do that, the Court of Appeals remanded so that a new visitation schedule could be established. Finally, as to (c), the court declined to address the issue because the court had already remanded on the parenting time issue. Affirmed in part and remanded. Stewart v. Stewart, CX-02-547 (Minn. App. 08/27/02) (unpublished). http://www.lawlibrary.state.mn.us/archive/ctapun/0208/547.htm

-- Stephen R. Arnott
Past Chair, Family Law Section, MSBA

FEDERAL PRACTICE
Judicial Law

Fed. R. Civ. P. 7(b)(1) and 59(e); Particularity Requirements. Plaintiff filed an action seeking judicial review of a decision by the commissioner of social security denying his application for disability insurance. The district court awarded summary judgment to the defendants, and the clerk of court entered judgment on April 1, 2002.

On April 10, 2002, plaintiff filed a motion pursuant to Fed. R. Civ. P. 59(e) seeking to alter or amend the judgment. Plaintiff's motion alleged that the court had "misapprehended Plaintiff's arguments" without further stating the grounds for the motion or citing authority. Plaintiff also sought an extension of time to file his memorandum in support of the motion. Defendant then moved to strike plaintiff's motion on the basis that it failed to meet the particularity requirements of Fed. R. Civ. P. 7(b)(1), and because plaintiff's motion for an extension of time was an attempt to avoid the jurisdictional time limit governing Rule 59(e) motions.

Judge Tunheim granted the defendant's motion to strike on both grounds. first, relying on a 7th Circuit decision finding that a motion which merely stated that there were "several reasons" for reconsideration failed to comply with Rule 7(b)(1)'s requirement that the motion "state with particularity the grounds therefor," Judge Tunheim found that the motion violated Fed. R. Civ. P. 7(b)(1) because the statement that the court had "misapprehended Plaintiff's argument" was similarly "devoid of specificity." Judge Tunheim also found that plaintiff's late submission of his memorandum was barred by the ten-day jurisdictional deadline in Rule 59(e), which cannot be extended under Fed. R. Civ. P. 6(b).

Attorneys engaged in motion practice before Judge Tunheim should take note of not only this decision, but also SICK, Inc. v. Motion Control Corp., 2002 WL 832609 (D. Minn. 04/30/02) (Tunheim, J.) (discussed in the July, 2002 Bench & Bar), as it appears that Judge Tunheim is requiring strict adherence to the motion procedures set forth in both the Local Rules and the Federal Rules. Montgomery v. Barnhart, 2002 WL 1752206 (D Minn. 07/26/02).

Other Noteworthy Decisions. Judge Tunheim denied a motion to strike the testimony of a survey expert in a trademark case under Daubert, finding that any flaws in the survey went to the weight of the survey evidence rather than its admissibility.

Minnesota Specialty Crops, Inc. v. Minnesota Wild Hockey Club, LP, 2002 WL 17639999 (D. Minn. 07/26/02).

The 8th Circuit affirmed Judge Kyle's dismissal of a securities fraud action, finding that plaintiffs' allegations failed to state a claim under the PSLRA, but also finding that the pleading requirements of Fed. R. Civ. P. 9(b) had been superseded in securities fraud cases by the pleading requirements set forth in the PSLRA. In Re Navarre Corp. Sec. Lit., ___ F.3d ___ (8th Cir. 2002).

Judge Tunheim denied the defendant's motion to stay all discovery while its appeal of the denial of its motion to compel arbitration was pending, finding that the information sought by the plaintiffs would likely be discoverable whether or not the action was ultimately found to be arbitrable. Bailey v. Ameriquest Mortgage Co., 2002 WL 1835642 (D. Minn. 08/05/02).

Judge Davis rejected the report and recommendation of Magistrate Judge Lebedoff and granted the plaintiff's motion to enforce the settlement agreement between the parties. Minnesota Mining and Manufacturing Co. v. Shurtape Technologies, Inc., 2002 WL 1791987 (08/02/02).

-- Josh Jacobson
Law Office of Josh Jacobson pa

INTELLECTUAL PROPERTY LAW
Judicial Law

Patent; "Contiguous"; Choice of Definition. The Court of Appeals for the Federal Circuit reversed Judge Frank's construction of the patent-claim term "contiguous," finding that it was too narrow. Without faulting Judge Frank because the patent was so poorly written, the Federal Circuit held that the inventor's own, broader definition of "contiguous" -- offered during prosecution of the patent -- had not been given enough weight. The patent, owned by Honeywell, protects a passive-type autofocus camera. The invention is an opaque member -- an aperture mask -- that protects sensitive electronic circuitry from light while permitting the light to reach other circuitry. The claim terms at issue were "an opaque member ... placed contiguous [to] the transparent member." Judge Frank construed the term "contiguous" to mean "next in succession [of each other] without any intervening structure." The district court's definition was supported by the most common meaning of "contiguous" : actual contact, not general proximity.

The Federal Circuit construed the term more broadly, however, to include not only structure in actual contact but also structure "near, though not in contact." The broader definition, also taken from a standard English dictionary, was used by the inventor during the patent application process. The appellate court found that the inventor had acted as the proverbial lexicographer by offering a definition broader than that which the term normally received. Using the broader definition of "contiguous" and a sandwich analogy, the court ruled that a completely intervening element would avoid the literal scope of the claim, much like American cheese completely intervenes between the meat and bread in a bologna sandwich. One slice of bread and the bologna could not be contiguous. If the American cheese was replaced with Swiss, however, the contiguity element may be satisfied, depending on the resulting proximity between the bread and bologna through the holes of the cheese. Honeywell, Inc. v. Victor Co. of Japan, Ltd., Civ. No. 01-1436 (Fed. Cir. 08/01/02)

Trademark Infringement; Reverse Confusion. In this trademark infringement lawsuit, Judge Tunheim grappled with the reverse-confusion doctrine. Reverse confusion occurs when a larger, more powerful company uses the trademark of a smaller, less powerful entity and thereby causes confusion as to the source of the smaller entity's goods or services. Since 1990, Minnesota Specialty Crops ("masc.") has sold food products, wine, and related clothing and gift items under the mark Minnesota Wild. It sued the Minnesota Wild hockey team ("Wild") for trademark infringement, relying on the doctrine of reverse confusion. Although not certain that the 8th Circuit has adopted the reverse confusion doctrine, the district court denied the Wild's motion for summary judgment because a consumer survey created an issue of material fact as to whether MSC could prove a likelihood of confusion.

The likelihood-of-confusion test has six parts. The court found in the Wild's favor on five of six of the test parts, including determining that the two marks are not similar. Nevertheless, the court refused to enter summary judgment in the Wild's favor because MSC had introduced a consumer survey as evidence of actual confusion -- the sixth part of the likelihood-of-confusion test. The survey appeared to be all that MSC needed to survive summary judgment. Minnesota Specialty Crops, Inc. v. Minn. Wild Hockey Club, LP, Civ. No. 00-2317 (D. Minn. 07/26/02).

-- Tony R. Zeuli
-- Todd Werner
Merchant & Gould

PROBATE AND TRUST LAW
Judicial Law

TOD Accounts; Language Sufficient to Create; Revocation. In 1988 the decedent opened an IRA account and signed an "Account Registration Form" containing the words: "In the even of my death, pay the balance of my IRA to _______." The blank space contained the handwritten name of one of his sons. In 1996 he opened five mutual fund accounts designating his three sons as beneficiaries. The statements for all six accounts were issued in decedent's name with no indication that they were TOD accounts or any mention of beneficiaries. In his will the decedent did not mention any of the accounts but did include a provision adjusting devises to his two adult sons if their nonprobate assets exceeded a certain amount.

The court held that the language used in the forms was sufficient to create a TOD account. Minn. Stat. ¤524.6-305 requires only that the security owner name a beneficiary who will own the account when the owner dies. The statute does not mandate that the words "transfer on death" be used nor does it require that the periodic statements for the account list the beneficiary or indicate that it is a transfer on death account.

Once a TOD account is established, it passes to the beneficiary at the decedent's death unless the TOD designation is revoked by the owner during his life or by provision in his will specifically referring to the account. In this case the decedent did not change the accounts during his lifetime, and his will did not have the specific reference to the accounts required to change them at death. In re Estate of Gloege, C8-01-1802 (Minn. App. 2002). http://www.lawlibrary.state.mn.us/archive/ctappub/0208/c8011802.htm

-- Curt Stine
William Mitchell College of Law

REAL PROPERTY
Judicial Law

Regulatory Taking. Beginning in 1983, the city of Minneapolis (city) and the MCDA established a TIF district and sought to redevelop the Nicollet Mall which efforts included a redevelopment agreement with LGSI. Johnson and Siegel (Johnson) owned properties and buildings on Nicollet Mall. By 1989, negotiations between the city and LGSI over the design of the project failed and negotiations were terminated. In 1994 Johnson sued alleging an unjust taking. Initially, the district court dismissed Johnson's claim, but that order was reversed. On remand, the case was tried to the court with an advisory jury. The district court found a taking and that the city abused its eminent domain powers by acting in bad faith. This appeal followed. On appeal, the appellate court concluded that no taking occurs under federal or state standards unless a governmental authority exerts significant control over the owner's use of the property. In the absence of governmental control that significantly interferes with an owner's use of the property, the government's actions, even if they adversely affect the property, do not implicate constitutional protections. Also, the appellate court concluded that the city suffered no prejudice by the district court's exclusion of certain evidence and admission of other evidence. Affirmed in part and reversed in part. Johnson, Siegel, et al. v. City of Minneapolis, C7-01-1676, C4-01-1683 (Minn. App. 08/22/02). http://www.lawlibrary.state.mn.us/archive/ctappub/0208/c7011676.htm

-- Chris Dietzen
Larkin Hoffman Daly & Lindgren

TAX LAW
Judicial Law

Minnesota AMT Provisions Regarding Charitable Contributions Unconstitutional. A Minnesota law allowed a taxpayer to take a deduction for purposes of determining the alternative minimum tax if a contribution was made to a charitable organization that was located and carried on substantially all of its operations within the state of Minnesota. The Minnesota Supreme Court held that this portion of the statute was unconstitutional because it violated the Commerce Clause, in that it discriminates against interstate commerce. Under severance principles, the language allowing a deduction for Minnesota charities, but not other charities, was severed from the rest of the statute. Since due process requires some sort of backwards-looking relief, the case was remanded to the tax court, to decide whether those who incurred additional liability because of the Minnesota-only provision should have this liability forgiven, or if additional tax should be assessed against those who previously benefited from the Minnesota-only provision. Chapman, et al. v. Commissioner, C5-02-245 (Minn. 08/29/02). http://www.lawlibrary.state.mn.us/archive/supct/0208/c502245.htm

Overpayment In The Virgin Islands. The 3rd Circuit reversed the district court and ruled that accrual of interest on a corporation's tax overpayment to the Virgin Islands should be calculated under federal law, not local tax laws. Chase Manhattan Bank N.A. v. Government of the Virgin Islands, et al., No. 01-4317 (3rd Cir. 08/13/02).

AMT Foreign Tax Credit Limitation. A couple was held to be subject to the Alternative Minimum Tax (amt) foreign tax credit limitation. They claimed $600,000 in U.S. tax, but a $750,000 credit based on taxes paid in Canada, reporting zero liability because of the U.S.-Canada tax treaty's prohibition against double taxation. The court ruled that the amt foreign tax credit could not exceed 90 percent of the pre-credit minimum tax under Section 59. The Tax Court said that the treaty contemplated the changes to the tax laws made in 1986, and thus the treaty was consistent with the limitation. Robert M. Price, et ux. v. Commissioner, T.C. Memo 2002-215, 08/23/02.

Venue Was Correct In False Tax Return Conviction. The 9th Circuit affirmed an individual's conviction for subscribing a false tax return when he knowingly provided incomplete information to his return preparer. The defendant had appealed because of improper venue. The court stated that the act of preparing a tax return begins upon the furnishing of information to the preparer and continues until the IRS receives the information. For a continuing offense, venue is proper in any district where the conduct occurred, thus venue was proper in this case because the taxpayer had provided information for his return in that venue. U.S. v. Pace, No. 01-10458, (9th Cir., 08/22/02).

Dismissal of Omnibus Claim Affirmed. The 10th Circuit affirmed a district court decision dismissing claimed violations of the Omnibus Taxpayer Bill of Rights, because of insufficient and conclusory allegations. The taxpayer alleged 16 violations because of bank records requested without his permission, but failed to allege how these violations occurred. He also alleged that a revenue officer knowingly demanded a greater sum than authorized by law but failed to identify the officer, and a suit for damages against such an officer can be filed only after a criminal conviction against the officer has been obtained. Overton v. U.S., No. 02-6117, (10th Cir., 08/22/02).

Negligence Penalties and Interest Upheld. A couple appealed a Tax Court decision holding them liable for negligence penalties and interest for several reasons. The 6th Circuit affirmed the Tax Court, holding that the post-payment judicial forum, in which they could obtain a determination of tax, satisfied due process requirements, even though there was no preassessment hearing. The court also held that a deficiency notice was not required, because interest does not require the same procedures as a normal deficiency. They had also protested the penalty, saying that they relied on the advice of their tax return preparer. This argument was rejected because the couple failed to prove that they gave their preparer all the necessary information and that their reliance on him was reasonable. Barlow, et ux. v. Commissioner, No. 01-1161, (6th Cir., 08/21/02).

D.C. Law Trumps Choateness Doctrine. A U.S. Bankruptcy Court was affirmed when the D.C. District Court held that District of Columbia law trumps the "first-in-Time, first-in-Right" doctrine, and thus the city's sales tax liens against a corporation had priority over the IRS's tax liens, even though they were filed almost a year after the IRS liens. IRS v. District of Columbia, et al., No. 01-2338 (rmu), (D. D.C., 08/20/02).

Clergy Housing Allowance Clarification Act; Parsonage Exception; Constitutionality. After the passage of the Clergy Housing Allowance Clarification Act, which was intended to prevent the constitutional inquiry into the "parsonage exception" of ¤107(2), the parties to the lawsuit stipulated to dismissal. Professor Erwin Chemerinsky, who had been called upon by the court to help them decide the constitutional issue, filed an opposition to the dismissal and a notice of motion to intervene. The court denied the motion, stating that Chemerinsky failed to demonstrate a "significant protectable interest" in the matter that is the subject of the action, that he may raise the issue in a separate lawsuit; thus, denial of intervention won't impair his ability to protect his interest as a taxpayer, and that Chemerinksy's constitutional arguments are better suited for consideration in a traditional procedural posture before a district court. Then, the matter was dismissed because of the parties' stipulation. Warren, et ux. v. Commissioner, No. 00-71217, (9th Cir., 08/26/02).

Tax Fraud; Insanity Defense; Withdrawal of Plea. An individual was indicted for filing false tax returns. After his proposed insanity defense was turned down he entered into a plea agreement. Six months later, he filed motion to withdraw his plea, claiming he didn't know what he was doing when he entered his pleas, that he was under stress, and that he misunderstood the concept of cooperation with the government. A U.S. district court denied Martin's motion and sentenced him to prison. The 6th Circuit affirmed the district court's decision, stating that Martin had experience with the court system, that he failed to show that he did not know what he was doing, and that it did not matter if the pleas were inconsistent with one another. United States v. Charles H. Martin, No. 00-6700; No. 00-6701, (6th Cir., 08/21/02).

Establishment Clause; Tax-Exempt Bonds; Sectarian School. The 6th Circuit reversed the district court and held that the issuance of tax-exempt bonds to David Lipscomb University, a school that integrates Christianity into its curriculum, does not violate the Establishment Clause of the 1st Amendment. The court held that the issuance of the bonds was part of a neutral program to benefit education, and did not confer a special benefit upon the university. Harold E. Steele, et al. v. Industrial Development Board of Metropolitan Government of Nashville, No. 00-6646, (6th Cir., 08/14/02).

Reward Claim; Sovereign Immunity; Government Officer. An individual, after providing information to the IRS that resulted in collection of taxes, fines, interest and penalties from several other people, filed suit for a reward. The court held that he failed to show that the government waived sovereign immunity. The court also noted that the IRS has discretion to determine whether a reward is paid and that the Federal Tort Claims Act specifically excludes claims based on the performance of a discretionary function by a government officer. Robert C. Ward v. IRS, et al., No. cv-02-01613 cas (jtlx), (D.Cal. (Cent.), 06/17/02).

Claim for Credit; Statute of Limitations; Precedent Overruled. The 9th Circuit had held in Miller v. U.S., 38 F.3d 473 (9th Cir. 1994) that a claim for credit of taxes must be filed within two years from the time the tax was paid, and that a failure to do so divests the court of jurisdiction. They were relying on their construction of ¤6511(a). The IRS subsequently issued Rev. Rul. 76-511, which was on point and disagreed with the 9th Circuit's Miller decision. Relying on administrative law cases U.S. v. Mead Corp, 533 U.S. 218 (2001) and Skidmore v. Swift & Co., 323 U.S. 134 (1944), the 9th Circuit decided that deference was due to the IRS's interpretation of the statute, and overruled their previous decision. Astrid E.A. Omohundro, et al. v. United States, No. 00-56558, (9th Cir., 08/19/02).

Declaratory Judgment Act; Failure to Present Constitutional Claim. An individual challenged the Declaratory Judgment Act on the ground that it deprives federal district courts of jurisdiction over cases involving constitutional challenges to the tax code. The district court dismissed the suit, on the ground that the plaintiff failed to present a cognizable constitutional claim, and that he had another remedy. Robert L. Allum v. United States, No. cv-02-12-bu-seh, (D. Mont., 07/09/02).

Jurisdiction Over Levy Determination, Redetermination of Liability. An individual filed suit in U.S. District Court seeking redetermination of his tax liability. The suit was dismissed, upon a finding that the Tax Court retains exclusive jurisdiction over the claim. Olson v. Hernandez, et al., No. civ 02-093-tuc ckj, (D. Az. 07/01/02). Another individual's motion to set aside a levy determination was determined by the district court to be within the exclusive jurisdiction of the Tax Court. Cortes v. U.S., No. cv-s-01-0940-rlh (lrl), (D-Nev., 07/10/02).

Innocent Spouse Relief; Equitable Provision. The IRS abused its discretion when it denied innocent spouse relief to a woman whose only source of income was public assistance and who had no knowledge of her former husband's failure to pay their taxes. August v. Commissioner, T.C. Memo 2002-201, No. 10065-00, 08/12/02.

Tax Assessment Against Partnership. The 9th Circuit affirmed the district court, holding that a bankruptcy court correctly decided that tax assessments against a partnership do not bind married debtors or partners, because these individuals were not "individually assessed." U.S. v. Galletti, et ux., et al., No. 01-55953; No. 01-55954, (9th Cir., 08/08/02).

Temporary Travel Expenses Deductible. An individual who was promised work near her home, but continued to take temporary assignments out of town, was still entitled to business travel expense deductions for her commutes. Daiz v. Commissioner, T.C. Memo 2002-192, No. 10462-01, 08/06/02.

Discharge of Indebtedness. A taxpayer owed approximately $29,000 to his credit card company, mbna, on which he made payments totaling $4,250. At this time, disagreements arose as to interest and late fees that had been charged. The taxpayer settled his dispute with mbna for $12,700, which the court characterized as a payment towards his credit card balance. The remaining balance, approximately $13,000, was required to be reported as cancellation of indebtedness income, even though the taxpayer claimed that the cancellation was part of the settlement of his claim. Earnshaw v. Commissioner, T.C. Memo 2002-191, No. 5221-01, 08/05/02.

Car Dealer Not Responsible For Employee's Fraud. After a business named eah, controlled by an individual named Holtham, sold its assets and paid sales fees, it transferred the remaining amount to Holtham to pay off its known creditors. However, an employee of eah had been understating the liability of the dealership for excise taxes, which the IRS then discovered. The court held that Holtham was not responsible for these taxes because the money was passed to Holtham from eah without intent to defraud the government, and now the company's assets equaled its debts. U.S. v. Executive Auto Haus Inc., et al., No. 6:00-cv-154-Orl-18krs (D. Fla. (Mid.), 06/28/02).

Employee Stock Ownership Plan. The Tax Court, upholding the commissioner ruled that a corporation's esop was not a qualified retirement plan because it failed to satisfy the minimum participation requirements of 26 U.S.C. ¤401(a)(3). The corporation appealed, arguing that its esop and its affiliate's esop should have been aggregated for purposes of determining whether the requirements of ¤401(a)(3) had been met. Since they failed to show that the two esops were "of the same class," they did not prove that they were entitled to aggregate the esops. The Tax Court was affirmed. Beals Bros. Management Corp. v. Commissioner, No. 01-3922 (8th Cir. 08/27/02).

Administrative Matters

IRS Accepts June BLS Price Indexes. The IRS accepted the Bureau of Labor Statistics price indexes for June 2002 in Rev. Rul. 2002-52. Department stores use the price indexes with the retail inventory and last-in, first-out methods for valuing inventories for tax years ended on, or with reference to, June 30, 2002. Rev. Rul. 2002-52.

For Bond Purposes, Publishing Facility Is Not Manufacturing Facility. The Service has ruled that a publishing company's facility planned to be financed by exempt bonds does not qualify as a manufacturing facility. ltr 200234012.

Bond Redemption Won't Disqualify Tax-Exempt Financing. The Service has ruled that a determination that a project was not financed with tax-exempt bonds under section 42(h)(4)(B) will not result from the redemption of tax-exempt bonds after a low-income housing development is placed in service. ltr 200234005.

Transfer of Bare Legal Title To State Authority; Recapture. The Service has ruled that the transfer of bare legal title to a low-income residential rental housing project from a limited partnership to a state authority does not result in recapture under section 42(j). ltr 200234010.

Passive Activity Losses and Credits. The IRS has issued final regulations on the treatment of self- charged items of income and expense for purposes of applying the limitations on passive activity losses and credits. 26 cfr Parts 1 and 602, rin 1545-an64.

Income Tax Return Preparer ID Number Regs. Final regulations (T.D. 9014) that allow income tax return preparers to elect to use alternative identification numbers in place of their Social Security numbers have been published by the IRS.26 cfr Part 1, rin 1545-ax27.

IRS Corrects Joint and Several Liability Final Regs. The IRS has corrected final regulations relating to relief from joint and several liability under Code Sec. 6015 (T.D. 9003).

LLCs, Single-Member LLCs Separate for Sales Tax Purposes in MN. To explain that limited liability companies and single- member limited liability companies will be treated as separate legal entities for sales tax purposes, the Minnesota Department of Revenue has released Revenue Notice No. 02-10. Revenue Notice No. 02-10

Legislation

Reward for Rural Homebuyers? Rep. Brad Carson (d-ok) introduced H.R. 5273, the New Homestead Opportunity Act, which would provide credits and loan initiatives to assist homebuyers with the sale or exchange of their principal residence, and would encourage first-time homebuyers to buy rural property.Treatment of Single Sum Payments to Terrorist Survivors. Sen. John F. Kerry (d-ma) introduced S. 2824, a bill to set rules for the treatment of single sum deferred compensation payments received by survivors of terrorist attack victims from the victims' employers.

Credit for Congressional Campaign Contributions. Sen. Byron L. Dorgan (d-nd) introduced a bill that would provide for a nonrefundable tax credit of up to $200 for single filers or $400 for joint filers for contributions to congressional candidates. S. 2825.

Tax Credit for Rural Public School Teachers. John D. Rockefeller iv (d-wv) introduced the "Incentives to Educate American Children (I Teach) Act," which would provide a $1,000 refundable tax credit for teachers in grades K-12 in high poverty or rural areas. The bill would also provide a $1,000 credit for certified teachers. S. 2844.

Increase in Higher Education Deduction. Robert G. Torricelli (d-nj) introduced a bill that would increase the qualified higher education expenses deduction to $10,000. S. 2851.

m Bill Introduced to Allow Churches to Participate in Politics. The Houses of Worship Political Speech Protection Act, introduced by Sen. Bob Smith, (r-nh), would allow churches and clergy to participate or intervene in political campaigns without losing their tax-exempt status as long as the participation is not a "substantial" part of their activities. S. 2886.

Gas Tax Dollars to Stay in the States. James M. Inhofe (r-ok) introduced the "Transportation Empowerment Act," a bill that would allow states to keep federal gas tax dollars raised in the state, and would phase out the gas tax over a four-year period ending in 2008. S. 2861.

Child Tax Credit. A proposal to amend the Code to raise the age limit for the child tax credit to 19 from 17 was introduced by Rep. Tammy Baldwin (d-wi). H.R. 5182.

Help for Those with Home Businesses. Mac Collins (r-ga), a Ways and Means Committee member, has introduced the "Home Office Tax Simplification Act," a bill that would repeal the depreciation recapture on sale of a principal residence by a home-based business owner, instead providing a flat $2,500 deduction for the business use of a home. H.R. 5220.

Trade Promotion Authority Bill. The Senate voted to pass a "Trade Promotion Authority" bill on August 1, 2002. The bill contains a $4.8 billion package of health care tax credits, and a resolution on the global trade rule treatment of indirect border tax rebates versus tax relief for direct taxation of foreign-earned income. President Bush signed it into law on August 5, 2002. H.R. 3009.

Wellstone Proposes Defense Amendment. Sen. Paul Wellstone (d-mn) has proposed to amend the 2003 defense appropriations bill that would prohibit the use of funds provided for in the bill "for payment on any new contract to any corporate expatriate." H.R. 5010, Amendment No. 4364.

Corporate Responsibility Bill. House Minority Leader Richard A. Gephardt d-mo) introduced the "Business, Investors', and Employees' Bill of Rights Act of 2002," a bill that would stiffen criminal penalties and increase protections for employee pension plans, while prohibiting insider loans and requiring the removal of unfit corporate officers. It would also discourage offshore tax havens, tighten industry oversight, and strengthen auditor independence. H.R. 5160. This bill followed quickly on the heels of H.R. 3763, a corporate accountability bill signed into law by President Bush on July 30, 2002.

Deduction for Unpaid Child Support. Rep. Christopher Cox (r-ca) has proposed the "Child Support Enforcement Act," a bill that would allow the custodial parent a bad debt deduction for unpaid child support payments, and would require a chronically delinquent parent to include the unpaid child support in gross income. H.R. 5130.

-- Liz Stuva
-- Mohammad Rahman
-- Kathryn J. Sedo
University of Minnesota Tax Clinic

TORTS & INSURANCE
Judicial Law

Road Repairs; Municipal Immunity. DeWitt was injured when the bus she was riding struck a depression in the roadway in Minneapolis. DeWitt sued the city of Minneapolis for her injuries, claiming the city negligently failed to implement established policies to inspect and maintain the roadway and warn drivers about the roadway's defect. The city moved for summary judgment on the ground that official and statutory immunity barred the suit because once the city received notice of the defect, the city's actions were discretionary and thus immune from claims. The district court denied the motion and the city filed a timely appeal.

A city employee testified he received a complaint about the road defect on the evening before DeWitt was injured. He went to the site immediately. He placed a warning flasher there. After placing the flasher, the employee returned to work and placed the complaint in a complaint box for a supervisor to send a work crew out to the site as soon as one became available. The court found that once the employee received notice of the defect and its location, he responded within the confines of the city's clearly established policy. His actions did not require the type of discretionary judgment that gave rise to immunity. Thus, the Minnesota Court of Appeals affirmed the trial court. DeWitt v. Metropolitan Council, et al., C6-01-2141, (Minn. App. 08/06/02). (unpublished) http://www.lawlibrary.state.mn.us/archive/ctapun/0208/2141.htm

UIM Coverage for Spouse. Marcia Kelly was injured when a Dodge automobile she was riding in crashed on the freeway. The Dodge was driven and owned by her husband and was insured by State Farm Mutual Insurance Company (State Farm). That policy named Marcia Kelly and her husband both as insureds. At the time of the accident, Kelly and her husband also owned a Pontiac insured by a second State Farm policy naming both her and her husband as insureds.

Marcia Kelly brought a damages claim against her husband. State Farm settled the claim by paying her $100,000, the liability limit of the Dodge policy. She then brought a claim against State Farm to recover uim benefits under the Pontiac policy. The district court concluded she was entitled to uim coverage under the Pontiac policy even though her husband, the alleged tortfeasor, was a named insured on the Pontiac policy.

Shortly after that decision, however, the Minnesota Court of Appeals issued a decision in Johnson v. St. Paul Guardian Ins. Co., 627 N.W.2d 731 (Minn. App. 2001), rev. den. (Minn. 09/11/01). In Johnson, the Minnesota Court of Appeals held that a wife who was injured while riding on a motorcycle driven by her husband could not recover uim benefits under an insurance policy covering an uninvolved vehicle and naming her husband as an insured. On reconsideration, the district court ruled that under the Johnson case, Marcia Kelly was not entitled to uim coverage and granted summary judgment to State Farm.

The Minnesota Court of Appeals affirmed. It reasoned that uim coverage is generally a first-party coverage that follows the person insured, not the vehicle the person may be occupying. However, the "family-vehicle exception" prevents an insured from collecting uim benefits and liability benefits from the same policy on the theory that claiming first-party benefits under the policy of the owner or insurer of the at-fault vehicle is similar to converting less expensive uim coverage into more expensive third-party liability coverage. Relying on Johnson, the Court reasoned that the purpose of uim benefits is to protect the insured from those who carry inadequate liability coverage.

Justice Hanson concurred specially. He asserted that Johnson was precedential and cannot be materially distinguished from the present case. Nevertheless, he concluded that if it were not for Johnson, he would have decided the matter differently. He reasoned the public policy underlying the underinsurance coverage is to assure that victims of vehicle accidents receive adequate compensation for injuries. He would conclude that the Johnson analysis was incomplete and based on factual distinctions not material to the policy goals of the underinsurance statute, and that this case would benefit from further review. Kelly v. State Farm Mutual Insurance Company, C0-02-217, Minn. App. 08/13/02. (unpublished) http://www.lawlibrary.state.mn.us/archive/ctapun/0208/217.htm

Legal Malpractice; Attorney-Client Relationship; Equitable Subrogation. See Pine Island Farmers Coop, et al., v. Erstad & Riemer, C1-01-670, (Minn. 08/22/02), discussed under Civil Litigation, supra. ED.

Invasion of Privacy; Social Security Number. The safety director of Lakeville Motor Express, Inc., faxed a list of 204 employee names and social security numbers to 16 trucking terminals in six states. Appellant, one of the employees, brought an invasion-of-privacy class-action lawsuit. The district court dismissed the complaint, ruling that the dissemination did not constitute "publication," and appellants appealed.

Two key determinations must be made incident to this cause of action: (1) whether a person's social security number is indeed a private fact; and (2) whether publication has occurred. The Court of Appeals had little problem determining that given the very sensitive and important nature of social security numbers, and the identity-theft phenomenon, that social security numbers are indeed private facts.

The difficult question for the Court of Appeals was what level of publication or dissemination of another's social security number constitutes tortious invasion of privacy. The court ultimately remanded the case, stating that "the publicity requirement in this case, where the dissemination was not for profit or with malicious intent, ought to be whether it unreasonably exposed appellants to a significant risk that their social security numbers would be misused". Sandra Bodah, et al. v. Lakeville Motor Express, Inc., C5-02-276, (Minn. App. 08/20/02. http://www.lawlibrary.state.mn.us/archive/ctappub/0208/c502276.htm

Dram-Shop -- Loss of Means of Support. Plaintiff, the injured party in a dram-shop action, sought to include as his damages under the Civil Damages Act loss of means of support for himself. The Court of Appeals rejected this argument, stating that the Civil Damages Act provides a limited cause of action for a "spouse, parent, child, guardian, employer, or other person," and does not include the injured person. Although the phrase "means of support" is not defined, the Court of Appeals finds that the phrase incorporates within its requirement that the claimant be a dependant. Britamco Underwriters, Inc. v. A & A Liquors of St. Cloud, et al., C7-02-327, (Minn. App. 08/20/02). http://www.lawlibrary.state.mn.us/archive/ctappub/0208/c702327.htm

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