Bench & Bar of Minnesota

BANKRUPTCY
JUDICIAL LAW

• Spendthrift Trust Protects Post-Petition Inheritance. In this August decision, the bankruptcy court held that property inherited by a trust did not qualify as property of the bankruptcy estate. The debtor’s mother created a trust in 2001 providing that, upon her death, the trustee would distribute all the trust’s assets to her children in equal shares. The trust also contained a spendthrift clause. The debtor declared bankruptcy in March 2005. Less than two weeks later, the debtor’s mother passed away. The bankruptcy trustee commenced an action seeking judgment that the debtor’s interest in the trust constituted property of the bankruptcy estate.

At issue was the application of §541(a)(5) of the Bankruptcy Code, which provides that if the debtor inherits property within 180 days of the bankruptcy filing, and if that property would have been property of the estate had that inheritance occurred prior to filing, then that inherited property is property of the bankruptcy estate. The bankruptcy court found that the debtor’s interest in the trust was created by an inter vivos transfer prior to the petition, and therefore, §541(a)(5) did not apply. The bankruptcy court further found that but for the trust’s spendthrift provision, the debtor’s interest in the trust would have become property of the bankruptcy estate. In re Katusky (Iannacone v. Katusky), 2007 WL 2248089 (Bankr.D.Minn. 08/06/07)

• Information for “Means Test” Determined at Time of Petition. The bankruptcy court was faced with applying BAPCPA in a situation where the debtor resided in a household as a joint tenant. Debtor and her housemate were jointly liable on the home mortgage, had a joint bank account, and were jointly liable for an automobile loan. Prior to filing, the debtor’s housemate contributed $600 a month towards the loan on the automobile and household expenses. All other expenses were paid by the debtor. At the time of filing, the debtor’s income was above the median income for a household of one in Minnesota. The debtor also failed to report the $600 contribution made by her housemate. The U.S. Trustee moved to dismiss the case for abuse.

The debtor and her housemate took subsequent remedial actions in an attempt to resolve the objection, such as having the housemate move out, stop the monthly payments, and close the joint bank account. The court determined all of these actions to be irrelevant. The court held that the date the debtor filed the petition determines the debtor’s income, expenses, and household size. The court then went on to find the debtor resided in a household of two, that her income was less than the median, and that the debtor’s filing did not constitute abuse. In re Ellringer, 2007 WL 1976750 (Bankr.D.Minn. 06/20/07).

— Drew Moratzka
Mackall Crounse & Moore PLC

CIVIL LITIGATION
JUDICIAL LAW

• Jury’s Factual Findings Limit Court’s Equitable Relief. A dispute arose between landlord and tenant over whether the lease permitted the tenant to run a telecommunications cable from its leased space to an exterior wall. When the landlord refused to permit the tenant to run the cable, the tenant sued. The tenant sought both legal and equitable relief, claiming breach of contract, unjust enrichment, and interference with contractual relations, and seeking declaratory judgment and contract reformation.

The tenant’s legal and equitable claims were tried together, as permitted under Minn. R. Civ. P. 18.01. The jury found that the landlord’s refusal to permit the cable did not breach the lease. The district court found, however, that the tenant was entitled to declaratory relief, making its own factual findings supporting the tenant’s right to run the cable. The Court of Appeals affirmed, and the Minnesota Supreme Court granted review on the issue of whether the district court was bound by the jury’s factual findings in fashioning an equitable remedy.

Launching from the premise that the right to a jury trial is enshrined in Article 1, section 4 of the Minnesota Constitution, the Court went on to consider “how jury findings that are common to claims at law and claims for equitable relief impact the district court’s decisions on the claims for equitable relief.” Reviewing precedent from the federal courts, the Court “agree[d] with the great weight of authority on this issue and [held] that factual findings that are common to both claims at law and claims for equitable relief are binding upon the district court.” Such a rule protects the right to a jury trial and prevents inconsistent decisions between legal and equitable claims, thus maintaining the integrity of the judiciary. The Court remanded the case to the district court to determine which of the jury’s findings on the legal claims were common to the plaintiff’s equitable claims, with the admonition that “the court may not enter a declaratory judgment that is inconsistent with the jury’s findings as to any common factual disputes.” Onvoy, Inc. v. Allete, Inc. et al., A05-1497 (Minn. 08/02/07). www.lawlibrary.state.mn.us/archive/supct/0708/opa051497802.htm

— Jim Mayer
— Jennifer Kitchak
Fredrikson & Byron PA

EMPLOYMENT & LABOR LAW
JUDICIAL LAW

• Racial Discrimination; Wrongful Discharge. An African-American nursing assistant failed in his claim of racial discrimination. His claim of wrongful discharge was denied because his contention that white employees were given preferential treatment was unsubstantiated. The evidence indicated that he had a much more “extensive” disciplinary history and the incidents in which he was involved were more serious than those involving others. Because of the severity of the incidents and their multiplicity, his retaliation claim also was not actionable. Muafong v. Minnesota Masonic Home — Northridge Care Center, 2007 WL 2034280 (Minn. App. 2007) (unpublished). www.lawlibrary.state.mn.us/archive/ctapun/0707/opa060899-0717.htm

• Racial Discrimination; Hiring. A claim of race discrimination by a sales manager of an automobile dealership after he was not hired by a competing dealer was unsuccessful where he rejected the salary offered. The charge of racial discrimination was not maintainable because the claimant did not show race was the reason that he was not hired. Further, his rejection of the salary offer constitutes a legitimate, nondiscriminatory reason for the competitor’s refusal to hire him. Harrison v. United Auto Group, 2007 WL 2002559 (8th Cir. 2007).

• Racial Discrimination; Hiring, Demotion. The claims of racial discrimination and retaliation by the African-American provost of a college for failing to hire him as president and then demoting him was rejected by the 8th Circuit. The discrimination claim failed because the person selected was more qualified and the demotion was due to a legitimate reason of plagiarism by the provost. Gilbert v. Des MoinesAreaCommunity College, 2007 WL 2254936 (8th Cir. 2007).

• Sex Discrimination; Nonsupervisor. A woman employee’s claim of constructive discharge due to sexual harassment was rejected because the other employee was not her “supervisor.” Because he lacked supervisory authority, the claimant needed to prove that the company knew, or should have known, of the misbehavior, which she failed to do. Merritt v. Albemarle Corp., 2007 WL 2229862 (8th Cir. 2007).

• Sex Discrimination; Favoritism not “Widespread.” Claims of sex and age discrimination by a discharged railroad dispatcher were not actionable. The gender claim did not reflect “widespread” sexual favoritism. The age claim was not viable because the replacement employee was an older man. McGinnis v. Union Pacific Railroad, 2007 WL 2214432 (8th Cir. 2007).

• 1st Amendment Retaliation; Immunity. Two deputy sheriffs in Ramsey County were entitled to pursue their claims of 1st Amendment retaliation by the sheriff and the county as a result of a ruling of the 8th Circuit Court of Appeals. Addressing an interlocutory appeal from a decision by U.S. District Court Judge Ann Montgomery, the appellate court held that the sheriff was not entitled to qualified immunity because a “reasonable” decision maker would not have thought the employees to be exempt from 1st Amendment protection. Because the sheriff is not immune, the court lacked jurisdiction to hear the county’s claim. However, the sheriff’s administrative assistant was granted immunity and dismissed from the lawsuit. Shockency v. RamseyCounty, 2007 WL 2002545 (8th Cir. 2007).

• Unemployment Compensation; Noncompliance with Policy. An employee who failed to comply with her company’s collection policies was not entitled to unemployment compensation benefits under Minn. Stat. §268.095, subd. 6(a). The employee disagreed with the policy, which required her to ask customers when the payment would be made or sent, the source for the funds, and the reason for delay in payment. Since the policy appeared “reasonable,” the employee’s refusal to follow it constitutes disqualifying “misconduct” and bars unemployment benefits. Quern v. Wells Fargo Bank, 2007 WL 2034422 (Minn. App. 2007) (unpublished). www.lawlibrary.state.mn.us/archive/ctapun/0707/opa061576-0717.htm

• Unemployment Compensation; “Good Reason” to Quit. Although an employee may have had a valid personal reason to quit, because he was denied career advancement, his resignation barred eligibility for unemployment compensation benefits. The employee’s contention that he was better qualified than others who were promoted and that the employer had retaliated against him for filing a discrimination claim several years ago may have justified the employee quitting the job. However, those factors do not constitute a “good reason” to quit and thereby preserve eligibility for unemployment benefits. Neloms v. City of St. Paul, 2007

WL 2034300 (Minn. App. 2007) (unpublished). www.lawlibrary.state.mn.us/archive/ctapun/0707/opa061191-0717.htm

• Unemployment Compensation; Resignation Under Threat. An employee who quit after he was told that he would be given a “final” warning within a week, but was not told that he was discharged or given a discharge date, was not entitled to unemployment compensation benefits. Although the claimant agreed to resign after being told by the supervisor that it might be in his best interest to do so in order to avoid bad references, the claimant’s resignation disqualified him from receiving unemployment benefits because there was work available to him at the time he quit, under Minn. Stat. §268.095, subd. 2(b). Cumming v. Taylor Corp, 2007 WL 2034361 (Minn. App. 2007) (unpublished). www.lawlibrary.state.mn.us/archive/ctapun/0707/opa061260-0717.htm

• Unemployment Compensation; “Domestic Abuse” Exception. The “domestic abuse” exception of the unemployment compensation law may entitle a claimant to benefits where he quit his job to take care of his homeless children. The appellate court remanded denial of benefits for a janitor who quit his job to help take care of his homeless children, who were in Chicago, with their drug-addicted mother. The case was remanded for presentation of documentation of the mitigation provision under §268.095, subd. 1(8). Edwards v. MOAC Mall Holdings, LLC, 2007 WL 2302719 (Minn. App. 2007) (unpublished). www.lawlibrary.state.mn.us/archive/ctapun/0708/opa061819-0814.htm

LEGISLATION

• Whistleblower. Three new federal whistleblower laws have gone into effect covering truck drivers, railroad workers, and public transit employees. The measures, passed by Congress and signed by President Bush this summer, implement some recommendations of the 9/11 Commission.

The measures are contained in 49 U.S.C. §§1413, 1536, and 20109. The first of these protects employees of public transportation agencies who engage in whistleblowing activities, including furnishing accident- or security-related information to management, law enforcement personnel, members of Congress, or the Government Accounting Office. The Motor Carrier Provision, §1536, and the railroad measure, §20109, also extend whistleblower rights to employees who accurately report their working hours.

• Salary Discrimination Claims. A bill to extend the time-limitations period for salary discrimination claims was narrowly approved by the House of Representatives, but awaits an uncertain fate. The House voted 225-199 for H.R. 2831, which would incorporate the decision of the U.S. Supreme Court in Ledbetter v. Goodyear Tire & Rubber Co., 127 S.Ct. 2162 (2007) and allow employees 180 days after the last paycheck to sue for wage discrimination under federal law. The outlook in the Senate is unclear, and President Bush has indicated he may veto it.

— Marshall H. Tanick
Mansfield Tanick & Cohen, PA

September 2007 In this month's "Notes & Trends: Bankruptcy Civil Litigation Employment & Labor Law Environmental Law Federal Practice Intellectual Property Juvenile Law Real Property Tax Torts & Insurance	BANKRUPTCY JUDICIAL LAW • Spendthrift Trust Protects Post-Petition Inheritance. In this August decision, the bankruptcy court held that property inherited by a trust did not qualify as property of the bankruptcy estate. The debtor’s mother created a trust in 2001 providing that, upon her death, the trustee would distribute all the trust’s assets to her children in equal shares. The trust also contained a spendthrift clause. The debtor declared bankruptcy in March 2005. Less than two weeks later, the debtor’s mother passed away. The bankruptcy trustee commenced an action seeking judgment that the debtor’s interest in the trust constituted property of the bankruptcy estate. At issue was the application of §541(a)(5) of the Bankruptcy Code, which provides that if the debtor inherits property within 180 days of the bankruptcy filing, and if that property would have been property of the estate had that inheritance occurred prior to filing, then that inherited property is property of the bankruptcy estate. The bankruptcy court found that the debtor’s interest in the trust was created by an inter vivos transfer prior to the petition, and therefore, §541(a)(5) did not apply. The bankruptcy court further found that but for the trust’s spendthrift provision, the debtor’s interest in the trust would have become property of the bankruptcy estate. *In re Katusky (Iannacone v. Katusky), 2007 WL 2248089 (Bankr.D.Minn. 08/06/07) • Information for “Means Test” Determined at Time of Petition. The bankruptcy court was faced with applying BAPCPA in a situation where the debtor resided in a household as a joint tenant. Debtor and her housemate were jointly liable on the home mortgage, had a joint bank account, and were jointly liable for an automobile loan. Prior to filing, the debtor’s housemate contributed $600 a month towards the loan on the automobile and household expenses. All other expenses were paid by the debtor. At the time of filing, the debtor’s income was above the median income for a household of one in Minnesota. The debtor also failed to report the $600 contribution made by her housemate. The U.S. Trustee moved to dismiss the case for abuse. The debtor and her housemate took subsequent remedial actions in an attempt to resolve the objection, such as having the housemate move out, stop the monthly payments, and close the joint bank account. The court determined all of these actions to be irrelevant. The court held that the date the debtor filed the petition determines the debtor’s income, expenses, and household size. The court then went on to find the debtor resided in a household of two, that her income was less than the median, and that the debtor’s filing did not constitute abuse. In re Ellringer*, 2007 WL 1976750 (Bankr.D.Minn. 06/20/07). — Drew Moratzka Mackall Crounse & Moore PLC
September 2007 In this month's "Notes & Trends: Bankruptcy Civil Litigation Employment & Labor Law Environmental Law Federal Practice Intellectual Property Juvenile Law Real Property Tax Torts & Insurance	CIVIL LITIGATION JUDICIAL LAW • Jury’s Factual Findings Limit Court’s Equitable Relief. A dispute arose between landlord and tenant over whether the lease permitted the tenant to run a telecommunications cable from its leased space to an exterior wall. When the landlord refused to permit the tenant to run the cable, the tenant sued. The tenant sought both legal and equitable relief, claiming breach of contract, unjust enrichment, and interference with contractual relations, and seeking declaratory judgment and contract reformation. The tenant’s legal and equitable claims were tried together, as permitted under Minn. R. Civ. P. 18.01. The jury found that the landlord’s refusal to permit the cable did not breach the lease. The district court found, however, that the tenant was entitled to declaratory relief, making its own factual findings supporting the tenant’s right to run the cable. The Court of Appeals affirmed, and the Minnesota Supreme Court granted review on the issue of whether the district court was bound by the jury’s factual findings in fashioning an equitable remedy. Launching from the premise that the right to a jury trial is enshrined in Article 1, section 4 of the Minnesota Constitution, the Court went on to consider “how jury findings that are common to claims at law and claims for equitable relief impact the district court’s decisions on the claims for equitable relief.” Reviewing precedent from the federal courts, the Court “agree[d] with the great weight of authority on this issue and [held] that factual findings that are common to both claims at law and claims for equitable relief are binding upon the district court.” Such a rule protects the right to a jury trial and prevents inconsistent decisions between legal and equitable claims, thus maintaining the integrity of the judiciary. The Court remanded the case to the district court to determine which of the jury’s findings on the legal claims were common to the plaintiff’s equitable claims, with the admonition that “the court may not enter a declaratory judgment that is inconsistent with the jury’s findings as to any common factual disputes.” *Onvoy, Inc. v. Allete, Inc. et al., A05-1497 (Minn. 08/02/07). www.lawlibrary.state.mn.us/archive/supct/0708/opa051497802.htm* — Jim Mayer — Jennifer Kitchak Fredrikson & Byron PA
September 2007 In this month's "Notes & Trends: Bankruptcy Civil Litigation Employment & Labor Law Environmental Law Federal Practice Intellectual Property Juvenile Law Real Property Tax Torts & Insurance	EMPLOYMENT & LABOR LAW JUDICIAL LAW • Racial Discrimination; Wrongful Discharge. An African-American nursing assistant failed in his claim of racial discrimination. His claim of wrongful discharge was denied because his contention that white employees were given preferential treatment was unsubstantiated. The evidence indicated that he had a much more “extensive” disciplinary history and the incidents in which he was involved were more serious than those involving others. Because of the severity of the incidents and their multiplicity, his retaliation claim also was not actionable. *Muafong v. Minnesota Masonic Home — Northridge Care Center,* 2007 WL 2034280 (Minn. App. 2007) (unpublished). www.lawlibrary.state.mn.us/archive/ctapun/0707/opa060899-0717.htm • Racial Discrimination; Hiring. A claim of race discrimination by a sales manager of an automobile dealership after he was not hired by a competing dealer was unsuccessful where he rejected the salary offered. The charge of racial discrimination was not maintainable because the claimant did not show race was the reason that he was not hired. Further, his rejection of the salary offer constitutes a legitimate, nondiscriminatory reason for the competitor’s refusal to hire him. *Harrison v. United Auto Group, 2007 WL 2002559 (8th Cir. 2007). • Racial Discrimination; Hiring, Demotion. The claims of racial discrimination and retaliation by the African-American provost of a college for failing to hire him as president and then demoting him was rejected by the 8th Circuit. The discrimination claim failed because the person selected was more qualified and the demotion was due to a legitimate reason of plagiarism by the provost. Gilbert v.* *Des MoinesAreaCommunity College, 2007 WL 2254936 (8th Cir. 2007). • Sex Discrimination; Nonsupervisor. A woman employee’s claim of constructive discharge due to sexual harassment was rejected because the other employee was not her “supervisor.” Because he lacked supervisory authority, the claimant needed to prove that the company knew, or should have known, of the misbehavior, which she failed to do. Merritt v. Albemarle Corp., 2007 WL 2229862 (8th Cir. 2007). • Sex Discrimination; Favoritism not “Widespread.” Claims of sex and age discrimination by a discharged railroad dispatcher were not actionable. The gender claim did not reflect “widespread” sexual favoritism. The age claim was not viable because the replacement employee was an older man. McGinnis v. Union Pacific Railroad, 2007 WL 2214432 (8th Cir. 2007). • 1st Amendment Retaliation; Immunity. Two deputy sheriffs in Ramsey County were entitled to pursue their claims of 1st Amendment retaliation by the sheriff and the county as a result of a ruling of the 8th Circuit Court of Appeals. Addressing an interlocutory appeal from a decision by U.S. District Court Judge Ann Montgomery, the appellate court held that the sheriff was not entitled to qualified immunity because a “reasonable” decision maker would not have thought the employees to be exempt from 1st Amendment protection. Because the sheriff is not immune, the court lacked jurisdiction to hear the county’s claim. However, the sheriff’s administrative assistant was granted immunity and dismissed from the lawsuit. Shockency v.* *RamseyCounty*, 2007 WL 2002545 (8th Cir. 2007). • Unemployment Compensation; Noncompliance with Policy. An employee who failed to comply with her company’s collection policies was not entitled to unemployment compensation benefits under Minn. Stat. §268.095, subd. 6(a). The employee disagreed with the policy, which required her to ask customers when the payment would be made or sent, the source for the funds, and the reason for delay in payment. Since the policy appeared “reasonable,” the employee’s refusal to follow it constitutes disqualifying “misconduct” and bars unemployment benefits. Quern v. Wells Fargo Bank*, 2007 WL 2034422 (Minn. App. 2007) (unpublished). www.lawlibrary.state.mn.us/archive/ctapun/0707/opa061576-0717.htm* • Unemployment Compensation; “Good Reason” to Quit. Although an employee may have had a valid personal reason to quit, because he was denied career advancement, his resignation barred eligibility for unemployment compensation benefits. The employee’s contention that he was better qualified than others who were promoted and that the employer had retaliated against him for filing a discrimination claim several years ago may have justified the employee quitting the job. However, those factors do not constitute a “good reason” to quit and thereby preserve eligibility for unemployment benefits. *Neloms v. City of* *St. Paul, 2007 WL 2034300 (Minn. App. 2007) (unpublished). www.lawlibrary.state.mn.us/archive/ctapun/0707/opa061191-0717.htm* • Unemployment Compensation; Resignation Under Threat. An employee who quit after he was told that he would be given a “final” warning within a week, but was not told that he was discharged or given a discharge date, was not entitled to unemployment compensation benefits. Although the claimant agreed to resign after being told by the supervisor that it might be in his best interest to do so in order to avoid bad references, the claimant’s resignation disqualified him from receiving unemployment benefits because there was work available to him at the time he quit, under Minn. Stat. §268.095, subd. 2(b). *Cumming v. Taylor Corp, 2007 WL 2034361 (Minn. App. 2007) (unpublished). www.lawlibrary.state.mn.us/archive/ctapun/0707/opa061260-0717.htm* • Unemployment Compensation; “Domestic Abuse” Exception. The “domestic abuse” exception of the unemployment compensation law may entitle a claimant to benefits where he quit his job to take care of his homeless children. The appellate court remanded denial of benefits for a janitor who quit his job to help take care of his homeless children, who were in Chicago, with their drug-addicted mother. The case was remanded for presentation of documentation of the mitigation provision under §268.095, subd. 1(8). *Edwards v. MOAC Mall Holdings, LLC,* 2007 WL 2302719 (Minn. App. 2007) (unpublished). www.lawlibrary.state.mn.us/archive/ctapun/0708/opa061819-0814.htm LEGISLATION • Whistleblower. Three new federal whistleblower laws have gone into effect covering truck drivers, railroad workers, and public transit employees. The measures, passed by Congress and signed by President Bush this summer, implement some recommendations of the 9/11 Commission. The measures are contained in 49 U.S.C. §§1413, 1536, and 20109. The first of these protects employees of public transportation agencies who engage in whistleblowing activities, including furnishing accident- or security-related information to management, law enforcement personnel, members of Congress, or the Government Accounting Office. The Motor Carrier Provision, §1536, and the railroad measure, §20109, also extend whistleblower rights to employees who accurately report their working hours. • Salary Discrimination Claims. A bill to extend the time-limitations period for salary discrimination claims was narrowly approved by the House of Representatives, but awaits an uncertain fate. The House voted 225-199 for H.R. 2831, which would incorporate the decision of the U.S. Supreme Court in Ledbetter v. Goodyear Tire & Rubber Co., 127 S.Ct. 2162 (2007) and allow employees 180 days after the last paycheck to sue for wage discrimination under federal law. The outlook in the Senate is unclear, and President Bush has indicated he may veto it. — Marshall H. Tanick Mansfield Tanick & Cohen, PA
September 2007 In this month's "Notes & Trends: Bankruptcy Civil Litigation Employment & Labor Law Environmental Law Federal Practice Intellectual Property Juvenile Law Real Property Tax Torts & Insurance	ENVIRONMENTAL LAW JUDICIAL LAW • Wetlands; Administrative Exhaustion Process Must Address Specific Issues. The United States Court of Appeals for 8th Circuit upheld a district court’s refusal to consider issues related to a wetlands conversion determination that the appellant failed to raise in the administrative appeals process. The Natural Resources Conservation Service had determined that the appellant, John Ballanger Jr., had converted 4.5 acres of wetland to row cropland, which made him ineligible for U.S. Department of Agriculture (“USDA”) payments for the years following the conversion. Ballanger appealed that decision through several administrative levels, all of which affirmed the Conservation Service’s determination. Ballanger challenged the USDA’s final decision in the U.S. District Court for the Southern District of Iowa. Ballanger raised four specific issues before the court. The court upheld the USDA’s determination with regard to one of the issues and refused to consider the other three because Ballanger had refused to raise them specifically in the administrative appeal process. Ballanger appealed these decisions to the 8th Circuit, which affirmed the district court’s decisions. The 8th Circuit agreed with the district court’s determination that an appellant challenging a wetland conversion determination must specifically raise before the agencies all of the issues he or she seeks to litigate in court. The 8th Circuit went on to explain that although that requirement is not specifically set forth in the statutes or rules that govern such appeals, the adversarial nature of the appeal process and prior 8th Circuit precedent in this area support the district court’s refusal to consider the disputed issues. The 8th Circuit also upheld the district court’s determination on the one issue it considered, namely, that “manipulation of a wetland” required as part of a conversion included the removal of woody vegetation, and that the USDA did not need to show that such removal impacted the wetland function. Ballanger v. Johanss, __ F.3d ___, 2007 WL 2189064 (8th Cir. 2007). ADMINISTRATIVE ACTION • CAFO Rule Compliance Deadline. The U.S. Environmental Protection Agency (“EPA”) has extended the deadline for compliance with certain permitting requirements related to Concentrated Animal Feeding Operations (“CAFOs”). The EPA, on February 10, 2006, issued proposed revisions to its CAFO rules in response to a decision from the 2nd Circuit Court of Appeals, Waterkeeper Alliance, et al. v. EPA, 399 F.3d 486 (2nd Cir. 2005). As part of the proposed revision, the EPA established deadlines by which newly defined CAFOs must receive National Pollutant Discharge Elimination System (“NPDES”) permit coverage and by which CAFOs with existing NPDES permits must submit nutrient management plans (“NMPs”). Under the revisions proposed February 10, 2006, the EPA had set a deadline of July 31, 2007, by which “new” CAFOs would have to obtain an NPDES permit and previously permitted CAFOs would have to submit their NMPs. The EPA moved both deadlines back to February 27, 2009, under a final rule issued on July 24, 2007. “Revised Compliance Dates Under the National Pollutant Discharge Elimination System Permit Regulations and Effluent Limitation Guidelines and Standards for Concentrated Animal Feeding Operations,” 72 Fed. Reg. 40,245 (07/24/07) (to be codified at 40 C.F.R. parts 122 and 412). — Bill Hefner The Environmental Law Group
September 2007 In this month's "Notes & Trends: Bankruptcy Civil Litigation Employment & Labor Law Environmental Law Federal Practice Intellectual Property Juvenile Law Real Property Tax Torts & Insurance	FEDERAL PRACTICE JUDICIAL LAW • 28 U.S.C.§1406(a); Choice of Law Following Transfer. Presented with “almost indistinguishable” and seemingly contradictory 8th Circuit authority, an 8th Circuit panel, relying primarily on “sister circuits’ apparently universal agreement,” held that the choice-of-law rules of the transferee court are to apply following a transfer under 28 U.S.C. §1406(a). *Eggleton v. Plasser & Theurer Export von Bahnbaumaschinen Gesellschaft, MBH, ___ F.3d ___ (8th Cir. 2007). • Fed. R. Civ. P. 12(b)(6); Notice Pleading. Over the last several months, this column has noted the Supreme Court’s decision in Bell Atlantic Corp. v. Twombly, 127 S. Ct. 1955 (2007), and Judge Kyle’s subsequent sua sponte* order suggesting that Bell Atlantic Corp. had “changed the legal landscape for evaluating motions to dismiss.” Jenkins v. County of Hennepin, 2007 WL 1965552 (D. Minn. 07/03/07). The district’s latest word on this topic comes courtesy of Judge Ericksen and Magistrate Judge Nelson. In a Report and Recommendation filed in connection with a Fed. R. Civ. P. 12(b)(6) motion, Magistrate Judge Nelson concluded that Bell Atlantic Corp. did little to change the Rule 12(b)(6) calculus, and that the minimal “short and plain” statement standard of Fed. R. Civ. P. 8(a)(2) remains in force. No objections were filed in response to the Report and Recommendation, and the motion to dismiss was denied by Judge Ericksen without additional comment. *Baribeau v. City of* *Minneapolis, 2007 WL 2123307 (D. Minn. 07/20/07). • “First-Filed” Rule; “Compelling Circumstances” Exception. Judge Frank issued orders in two “first-filed” disputes within days of each other. In the first case, Judge Frank found that the “compelling circumstances” exception applied and warranted a departure from the first-filed rule. However, two days later, Judge Frank found no compelling circumstances that warranted any departure from the application of the first-filed rule. ABC Teacher’s Outlet, Inc. v. School Specialty, Inc., 2007 WL 2122660 (D. Minn. 07/17/07). Travel Tags, Inc. v. Performance Printing Corp., 2007 WL 2122662 (D. Minn. 07/19/07). • 28 U.S.C. §1292(b); Interlocutory Appeal. Judges Davis and Frank both recently certified controlling questions of law for immediate appeal under 28 U.S.C. §1292(b). AT&T Communications of the Midwest, Inc. v. Qwest Corp., 2007 WL 1994047 (D. Minn. 07/03/07). Saunders v. Ace Mortgage Funding, Inc., 2007 WL 2008677 (D. Minn. 07/06/07). • Fed. R. Civ. P. 11 and 37(b)(2)(C); Sanctions Denied. Judge Davis adopted a Report and Recommendation by Magistrate Judge Boylan which recommended the denial of the defendant’s motion for sanctions arising from the plaintiff’s alleged violation of the pretrial scheduling order. MTS Systems Corp. v. Hysitron Inc., 2007 WL 2159490 (D. Minn. 07/25/07). • Class Action; Fed. R. Civ. P. 68 Offer of Judgment to Class Representative. Judge Davis rejected a defendant’s attempt to moot a purported FDCPA class action by making an offer of judgment to the class representative. Jancik v. Cavalry Portfolio Services, LLC, 2007 WL 1994026 (D. Minn. 07/03/06). • Motion to Strike Untimely Jury Demand Denied. Judge Kyle denied a motion to strike an untimely jury demand in a removed case, finding that the defendant had suffered no prejudice as a result of the plaintiffs’ filing of a jury demand one day after the deadline for doing so. Eichten v. Kmart Corp., 2007 WL 2084142 (D. Minn. 07/17/07). • Motion to Strike Summary Judgment Affidavit “Not Authorized.” Judge Magnuson has now joined Judge Schiltz in finding that a motion to strike an affidavit submitted in connection with a summary judgment is “not authorized” under the Federal Rules of Civil Procedure or the district court’s local rules. Willcox v. Liberty Life Assurance Co.*, 2007 WL 1862221 (D. Minn. 06/26/07). — Josh Jacobson Law Office of Josh Jacobson
September 2007 In this month's "Notes & Trends: Bankruptcy Civil Litigation Employment & Labor Law Environmental Law Federal Practice Intellectual Property Juvenile Law Real Property Tax Torts & Insurance	INTELLECTUAL PROPERTY JUDICIAL LAW • Patent Infringement: Transfer of Venue. Judge Frank denied a motion to transfer a patent case, holding that “the Court will not penalize the true plaintiff for filing its suit in its forum state to protect its interests in the event that good faith settlement negotiations … prove fruitless.” Travel Tags sued Performance Printing, a Texas company, in Minnesota but did not immediately serve them. Travel Tags waited to serve its complaint until the parties’ settlement negotiations deteriorated. On the same day Travel Tags served its complaint, Performance Printing filed and served a declaratory judgment action against Travel Tags in Texas. Performance Printing moved to transfer Travel Tag’s Minnesota action to Texas because even though Travel Tags was first to file, the three-month delay between filing and service supported a “compelling circumstance” exception to the “first-filed” rule. The “first-filed” rule gives priority to the first jurisdiction in which a suit is filed and applies in the absence of “compelling circumstances.” Some factors courts consider in determining “compelling circumstances” are inequitable conduct, bad faith, anticipatory suits, and forum shopping. The court disagreed with Performance Printing, finding that the three-month delay of service is not an example of a “compelling circumstance.” *Travel Tags, Inc. v. Performance Printing, Corp., Civ. No. 06-2970 (D. Minn. 07/19/07). • Contingent Trademark License: Unenforceable. Judge Schiltz held that a contingent trademark license is unenforceable as a matter of law if it is nothing more than an agreement to agree. Cabela’s sued Gander Mountain to enforce a Contingent Trademark License (CTL), which required a perpetual, exclusive trademark license from Gander Mountain to Cabela’s. The CTL required that the license be “evidenced by a separate written agreement in form and content customary to licenses of the type described above.” The parties disputed whether the proper form and content of the exclusive trademark license was similar to a 1996 trademark license between the parties or just a general exclusive trademark license. The court ruled that the 1996 license was not contemplated by the CTL and that there was no evidence presented as to what terms a “general” exclusive trademark license would include. The court dismissed Cabela’s claims stating “[I]t is inconceivable … sophisticated parties represented by sophisticated counsel – would have chosen this language to refer to the 1996 License” when they could have easily included a reference to the 1996 license in the CTL. Gander Mountain Co. v. Cabela’s, Inc., No. 04-CV-3125 (D. Minn. 07/10/07). • Trade Secret Misappropriation: Preliminary Injunction. Judge Davis granted a preliminary injunction and temporary restraining order against a former Wells Fargo employee (Bengston) who was corresponding with Wells Fargo clients while he was in possession of client spreadsheets. Wells Fargo argued that a preliminary injunction and temporary restraining order was needed due to Bengston’s misuse of confidential information after leaving Wells Fargo. While employed, Bengston had signed an employment agreement that included a nonsolicitation provision and a provision prohibiting the misuse of confidential information. At the hearing, Wells Fargo presented evidence of letters between Bengston and Wells Fargo clients, revealing active solicitation. Bengston solicited his former clients as well as clients with whom he had no previous interaction. In addition, Bengston was in possession of “spreadsheets containing personal Wells Fargo client information, including client account number and account values.” Judge Davis found that the evidence, the balance of harms, and the public interest supported granting both the preliminary injunction and temporary restraining order. Wells* *Fargo* *Inv., LLC. v. Bengston*, No. 0:07-CV-3192 (D. Minn. 07/09/07). — Tony Zeuli — Ryan Fletcher Merchant & Gould
September 2007 In this month's "Notes & Trends: Bankruptcy Civil Litigation Employment & Labor Law Environmental Law Federal Practice Intellectual Property Juvenile Law Real Property Tax Torts & Insurance	JUVENILE LAW JUDICIAL LAW • Child Protection; Corporal Punishment. In a published decision by the Minnesota Court of Appeals, appellant parents of two minor children challenged the district court order adjudicating their children in need of protection or services. The parents argued that the district court erred when it found that their use of corporal punishment was “physical abuse” and created an injurious or dangerous environment under Minn. Stat. §260C.007, Subds. 6(2), (9) (2006). The parents contended that the record contained no clear and convincing evidence of physical abuse, and that the CHIPS statute is unconstitutional as applied to them because they have a fundamental right to use corporal punishment to discipline their children. The Court of Appeals reversed the district court’s CHIPS adjudication, holding that physical abuse requires unreasonable force or cruel discipline that is excessive under the circumstances. In this case, the Court of Appeals held that the relevant circumstances were the child’s age, height, and weight; the seriousness of the child’s infraction; the degree of force used by the parent; the physical impact of the discipline. The Court of Appeals concluded that the force used was not unreasonable, nor did it constitute cruel discipline that was excessive. The court went on to hold that in some circumstances, the discipline used in this case could constitute emotional maltreatment, but there was no evidence that would support such a finding in this record. The court further noted that there was no evidence that the children’s environment was unsafe, injurious, and dangerous. *In the* *Matter of the Welfare of the Children of: N.F. & S.F., Parents**, A07-152 (Minn. App. 07/24/07). www.lawlibrary.state.mn.us/archive/ctappub/0707/opa070152-0724.htm* • Termination of Parental Rights. In an unpublished decision issued by the Minnesota Court of Appeals, a parent challenged the termination of her parental rights by the district court when it found that she had failed to comply with her parental duties, found her to be palpably unfit to be a parent, concluded that reasonable efforts failed to correct the conditions leading to out-of-home placement of her child, and other alleged procedural shortcomings by the trial court. This parent, who is paranoid and schizophrenic, failed to comply with her case plan, and she believed that the problems that she and her child were having were caused by the county. The mother’s child had missed long periods of school., and she failed to visit the child after the child was removed from her home. She was also found by the court to be uncooperative with medical recommendations concerning the child’s hemophilia and her own mental health needs. The Court of Appeals affirmed the termination of parental rights, finding that the record supported the conclusion of the trial court that this parent was unlikely to be able to care for her child in the foreseeable future. In the *Matter of the Welfare of the Child of: H.K. & P.K., Parents**, A07-342 (Minn. App. July 24, 2007). www.lawlibrary.state.mn.us/archive/ctapun/0707/opa070342-0724.htm* • Termination of Parental Rights; Incarcerated Parent; Best Interests. In another unpublished decision, the Minnesota Court of Appeals reviewed a district court’s termination of a father’s parental rights where the district court had found clear and convincing evidence establishing two statutory criteria for termination. In affirming the decision, the Court of Appeals held that where the father could not complete his case plan during his incarceration and was not eligible for work release, the district court did not err in terminating his parental rights on the basis of continuous neglect and palpable unfitness. Consideration of the father’s incarceration did not improperly influence the district court’s decision. Further, the termination was found to be in the child’s best interests because the child had been in out-of-home placement for seven months beyond the preferred six-month target and, she had special needs. *In the* *Matter of the Welfare of the Child of: S.S. and E.F., Parents**, A07-120 (Minn. App. 07/24/07). www.lawlibrary.state.mn.us/archive/ctapun/0707/opa070120-0724.htm* • Termination of Parental Rights; Failure to Protect. In an unpublished decision, the Minnesota Court of Appeals reviewed a mother’s challenge of the district court’s termination of her parental rights. This case involved a four-month-old infant who had four sets of bruises in different stages of healing and two bone fractures of a type typically caused by twisting. The child had been with the father while the mother worked and the mother did not challenge the father’s explanations for the injuries. The district court terminated the mother’s parental rights after determining that the mother was unable or unwilling to protect her children and that one of her children had suffered egregious harm while in her care. It was also observed that the mother maintained contact with the father and did not initiate marriage-dissolution proceedings. Based on that record, the Court of Appeals affirmed the district court’s termination of the mother’s parental rights. *In the* *Matter of the Welfare of the Child of: T.P. and P.P., Parents*; In the Matter of the Welfare of the Child of: T.P. and D.W., ParentsA07-16 (Minn. App. 07/31/07). • Indian Child Welfare Act; Transfer of Jurisdiction. In a published decision, the Minnesota Court of Appeals reviewed the “good cause” necessary to deny a petition filed under the Indian Child Welfare Act (ICWA) to transfer jurisdiction of a child protection proceeding from state court to tribal court. The appeal arose from the district court’s order granting the respondent tribe’s petition to transfer jurisdiction of the child protection proceeding to tribal court. The guardian ad litem in the case appealed, arguing that the district court erroneously concluded that the proceeding was not at an advanced state and, thus, good cause to deny the petition to transfer jurisdiction was lacking. The Court of Appeals, however, affirmed the trial court’s decision to transfer the case to tribal court. The court held that the “good cause” necessary to deny a petition filed under ICWA to transfer jurisdiction of a child protection proceeding from state court to tribal court may be present if the proceeding sought to be transferred is at an “advanced stage.” ICWA distinguishes between temporary placement proceedings and permanent placement proceedings. Therefore, when addressing whether, under ICWA, a proceeding is at an “advanced stage,” the district court must assess the stage of the proceeding that was pending when the petition to transfer jurisdiction to the tribal court was filed. In this case, where neither a termination of parental rights nor a permanent placement petition was pending when the tribe filed its petition to transfer jurisdiction to the tribal court, and the district court’s finding that the tribe did not improperly delay its petition to transfer jurisdiction was supported by the record, the Court of Appeals affirmed the trial court’s decision granting the tribe’s motion to transfer jurisdiction. In the Matter of the Welfare of the Children of: R.M.B. and R.E.*R, A07-18 (Minn. App. 07/17/07). www.lawlibrary.state.mn.us/archive/ctappub/0707/opa070018-0717.htm* — Gary A. Debele Walling, Berg & Debele PA
September 2007 In this month's "Notes & Trends: Bankruptcy Civil Litigation Employment & Labor Law Environmental Law Federal Practice Intellectual Property Juvenile Law Real Property Tax Torts & Insurance	REAL PROPERTY JUDICIAL LAW • Comprehensive Plan; Regulatory Taking. Developer entered into a purchase agreement for golf course property contingent on the city’s amendment of its comprehensive plan to permit residential development of the property. The city denied the proposed amendment of the comprehensive plan, citing concerns of traffic and school overcrowding. The property owner sued the city, alleging that the denial was arbitrary and capricious and constituted a taking of the property without just compensation. The district court concluded that the city’s reasons for denying the comprehensive plan amendment were legally insufficient and not supported by the facts in the record. The district court reasoned that: (1) a golf course was no longer a reasonable use of the property, (2) none of the conditional or permitted uses currently allowed by the city were reasonable uses, and (3) if the city wanted the property to remain open space or a community recreational opportunity, the city must acquire the property through eminent domain. The district court ordered the city to amend the comprehensive plan to allow residential development or commence eminent domain proceedings. The Court of Appeals reversed the district court, holding that the city had a rational basis for denying the comprehensive plan amendment and the property owner had no basis for a taking claim. In analyzing the denial of the comprehensive plan amendment, the Supreme Court utilized the rational basis standard of review. The city cited preservation of open and recreational space, reaffirmation of historical land use designations, disruption of surrounding neighborhoods due to increased traffic, and burdens on the school system. Based on the reasons cited by the city, the Supreme Court found that the property owner failed to establish that the city lacked a rational basis for its decision to deny the amendment application or that the decision was supported by an inadequate factual basis. In analyzing the property owner’s regulatory takings argument, the Supreme Court reaffirmed that the government does not need to directly appropriate or invade the property to effectuate a taking and applied the three-factor balancing test to determine whether a taking has taken place. The test includes: (1) the economic impact of the regulation on the claimant, (2) the extent to which the regulation has interfered with an investment-backed expectation, and (3) the character of the governmental action. On the economic impact factor, the Supreme Court applied a reasonable use standard – requiring that a land-use regulation must afford an owner some reasonably beneficial and economically viable use of his land – and found that genuine issues of material fact exist as to whether the city’s denial of the comprehensive plan amendment left any reasonable use of the property. On the investment-backed expectations factor, the Court concluded the property owner had no expectation of developing the property when he purchased the property, his purchase price reflected the existing use restrictions and any loss incurred by the owner were the result of general market conditions and not the city’s action. On the character of the governmental action factor, the Court concluded the burden of the regulation fell disproportionately on a relatively few property owners and the land use designation seemed aimed at things considered traditional governmental functions. In balancing the factors, the Court concluded that the determinative factor was whether the denial of the comprehensive plan amendment left the owner with any reasonable use of the property, reversed the Court of Appeals on the taking issue, and remanded to the district court for a determination of the factual dispute. *Wensmann Realty, Inc., et al. v. City of* *Eagan, 734 N.W.2d 623 (Minn. 2007) • Homestead; Forfeiture. This consolidated appeal involves one case in which the property owner pleaded guilty to a third-degree controlled-substance crime for possessing 23 pounds of marijuana on his homestead property and another case in which another property owner pleaded guilty to a first-degree controlled-substance crime stemming from the sale of methamphetamine at his homestead. In both cases, the county commenced forfeiture actions against the property owners’ homesteads and both property owners asserted their homesteads were exempt from forfeiture based on Article I, Section 12 of the Minnesota Constitution, as implemented by Minn. Stat. §510.01. Both district courts ruled that the homesteads were subject to forfeiture. The issue on appeal was whether the drug-forfeiture statute violated the homestead protection set forth in the Minnesota Constitution. The Court of Appeals reversed the district courts and held that the drug-forfeiture statute may not be constitutionally applied to homestead property because it permits the forfeiture of homestead property in satisfaction of the homestead owner’s liability, which is prohibited by the Minnesota Constitution. The court reasoned the homestead exemption prohibits the sale or seizure of homestead property for “liabilities of every kind or description without exception” and the drug-forfeiture statute creates liability by holding the owner liable for his criminal acts. The counties argued that the drug-forfeiture statute does not effect a seizure or sale for the payment of liability because forfeiture is an in rem* action against the property itself. The court rejected this argument because the analytical foundation of in rem proceedings is a legal fiction and does not militate against the purposes of the homestead exemption, which are avoidance of the destruction of home, division of family, and increased burden on the community. *Torgelson v. Real Property known as 17138 880th Ave., Renville County, 734 N.W.2d 279 (Minn. App. 2007). www.lawlibrary.state.mn.us/archive/ctappub/0707/opa061507-0710.htm* — Michael E. Kreun Beisel & Dunlevy, PA
September 2007 In this month's "Notes & Trends: Bankruptcy Civil Litigation Employment & Labor Law Environmental Law Federal Practice Intellectual Property Juvenile Law Real Property Tax Torts & Insurance	TAX JUDICIAL LAW • Income Tax: Tax Protestor; Motions for Continuance and Bias Removal. The Minnesota Tax Court rejected the tax protestor’s motion for a continuance based on an alleged federal appeal and claims of bias by the Tax Court judge. The motion for a continuance was made on the eve of the trial date, which had been set approximately a year earlier. The taxpayer claimed that the United States Tax Court petition he had filed could be reinstated within 90 days and amended. He admitted there was no prejudice to him in any continuance. Bias allegations against the trial judge and his request for the chief judge’s ruling on the removal issue were rejected. On the merits, the court determined that the taxpayer had taxable income reportable for 2000 and 2001 and the orders should be recalculated for tax, penalties and interest. The court also stated that the General Rules of Practice for the District Courts were not adopted by the Minnesota Tax Court either by the statute (Minn. Stat. §271.06, Subd. 7) or by the Tax Court rules. *Ronald E. Byers v. Commissioner of Revenue, No. 7601-R, 2006 WL 2380586 (Minn. T. Ct. 08/14/06). In Ronald E. Byers v. Commissioner of Revenue, No. A06-2450, 2007 WL 1932956 (Minn. 2007), the Minnesota Supreme Court affirmed that the Tax Court’s decision was correct and supported by the evidence as a whole. www.lawlibrary.state.mn.us/archive/supct/0707/opa062450-0705.htm* • Real Property: 60-Day Rule Violated. The Minnesota Tax Court held that the taxpayer violated the 60-Day Rule because it possessed but did not submit information to the county assessor on tenant-paid real estate expenses and whether an escalator clause was triggered. In addition, the court found that the 60-Day Rule was not unconstitutionally vague because the Minnesota Supreme Court had specifically articulated in several Court decisions what information is required under the 60-Day Rule. *Kmart Corporation v.* *County* of *Mower, Nos. C1-01-467, C3-00-489, and C4-02-540 (Minn. T. Ct. 05/31/07). As of July 31, 2007, the case is on appeal to the Minnesota Supreme Court under Docket No. A071474. • Procedure: Timeline for Challenging “Special Assessments.” The Minnesota Court of Appeals reversed the district court on when the time period for challenging special assessments commences. The taxpayer challenged a special assessment made on his property by the City of Minneapolis and filed appeals with both the city clerk and the Hennepin County District Court. The district court found that failing to file objections prior to the public hearing provides a basis for dismissal, and therefore granted summary judgment to the city. On appeal, the Court of Appeals held that because the city elected to use its home rule charter in making the special assessment, the charter rules govern the appeals process with which a disgruntled property owner must comply. The court interpreted the charter rule to establish that a taxpayer has 30 days from the city’s adoption of the special assessment to file a notice of appeal with the mayor or city clerk, and an additional ten days to file with the district court. Here, the Minneapolis City Council approved the special assessment on May 13, 2005; therefore, the taxpayer’s filing of his appeal with the city clerk on June 10 and the filing of his appeal with the district court on June 20 was timely. Curiskis v. City of* *Minneapolis, 729 N.W.2d 655 (Minn. App. 2007). www.lawlibrary.state.mn.us/archive/ctappub/0704/opa060982-0410.htm* • Procedure: Standing to Challenge County’s Use of Third-Party Data for Appraisal. The Minnesota Tax Court held that the taxpayer had no standing to challenge the county’s use of private or nonpublic third-party data contained in its appraisal and which would be offered into evidence at trial since the 13 property owners whose data was to be used were advised and failed to make an appearance after receiving notification of use of their facts and financial information. *U Haul Real Estate Company v.* *County* of *Dakota, Nos. C0-04-7150, C5-02-7252, and C9-03-7864 (Minn. T. Ct. 05/16/07). • Procedure: Failure to Challenge IRS Levy. the Minnesota Court of Appeals concluded that the district court correctly entered summary judgment on the grounds that the individuals’ claim of title was waived by their failure to file an unlawful levy claim against the IRS within nine months of the IRS seizure. The IRS filed a series of tax liens on a farm in an attempt to recover federal taxes owed by two individuals, who had an interest in the farm. The IRS later seized the farm through a levy under IRC §6331. The individuals took no steps to release or challenge the levy within the nine-month challenge period set forth in IRC §§7426(a)(1), 6343, and 6532(c). The IRS then proceeded with a valid and recorded forfeiture sale. The court rejected the individuals’ claims that their untimely wrongful-levy action under IRC §7426 did not bar their claim of title or that they were not the alter ego of the Basic Bible Church of America. Viola Weber v.* *BasicBibleChurch* of *America, James Noske**, No. A06-1079, 2007 WL 1599169 (Minn. App. 06/05/07). • Procedure: Date of Final Order Determines Filing Date for Costs and Disbursements. the Minnesota Tax Court held that the Tax Court Rules of Procedure required a motion for costs and disbursements to be filed no later than 90 days after the date of the Tax Court’s final order. See* Rule 8610.0150. The Tax Court’s final order was issued on July 19, 2006, and began to run on July 20, 2006. In order to be timely, the motion for costs and disbursements needed to be filed by October 17, 2006; however, the motion for costs and disbursements was filed on October 18, 2006. The court rejected the contention that “date of final order” should not be July 19, 2006 but should be interpreted to mean July 21, 2006, when the district court entered the order of the Tax Court. *Kmart Corporation v.* *County* of *Martin, Nos: C1-01-201, C1-02-211, C4-00-232, C5-03-318, and C8-04-162 (Minn. T. Ct. 04/06/07). • Property Tax: Failure to Comply With 60-Day Rule. In a 2006 decision, Irongate Enterprises, Inc. v. County of St. Louis, 2006 WL 1141191 (Minn. T. Ct. 04/28/06), the Minnesota Tax Court granted the county’s motion for dismissal based on the taxpayer’s failure to provide sufficient information required under Minn. Stat. §278.05, Subd. 6(a). The subject property was a retail shopping center with 15 existing leases and the dispute related to the payable 2005. Within the “60 Day Rule,” the taxpayer provided income statements for 2003, 2004, and year-to-date 2005 with rent rolls for January 31, 2004. The county then requested “all leases of space in the property for the period January 1, 2000 to the present.” The taxpayer refused to turn over the tenant leases but offered to make the leases available for inspection at the office of the owner in Los Angeles. The court held that under existing case law, the absence of full disclosure of income and expense information including leases mandated dismissal. In August of this year the Minnesota Supreme Court affirmed. The majority opinion placed principal emphasis on the word “including” as being expansive and requiring lease information. A vigorous dissent took the position that the issue was a discovery question and that the taxpayer had provided enough lease information to comply with the 60-Day Rule. The dissent thought that the majority opinion set forth a rule that was “at best, too vague and at worst, without limits. Based on today’s decision, my best advice to property owners who wish to contest their property tax assessment is to crank up the copy machine and provide absolutely everything they have within 60 days.” Irongate Enterprises, Inc. v.* *County* of *St. Louis, No. A06-1193, (Minn. 2007). www.lawlibrary.state.mn.us/archive/supct/0708/opa061193-0802.htm* • Inflated Basis; Affect on Statute of Limitation. When the Notice of Final Partnership Administrative Adjustment was sent by the IRS, it determined that the partnership had overstated its basis in certain gas reserves sold during a 1998 restructuring, thus causing an understatement of partnership income by more than 25 percent of the amount stated in the return. In that instance, the six-year statute of limitations rather than the normal three-year limit would apply. The U.S. Tax Court ruled that an overstatement of basis did not give rise to a six-year statute of limitations for the issuance of a Notice of Final Partnership Administrative Adjustment under IRC §6501(e), and therefore, the normal three-year statute applied. *Bakersfield Energy Partners, Inc. v. Commissioner, 128 T. C. No. 17(2007). • Jurisdiction: State Property Tax Lien Case; Foreign Government Owners. The U.S. Supreme Court held that a federal district court had jurisdiction to consider New York’s law suit to establish the validity of property tax liens against properties owned by two foreign governments and used by them, in part, to house lower-level diplomatic employees. The Court held that the immovable property exception to the general rule of immunity from suit for foreign governments under the Foreign Sovereign Immunity Act applied to confer jurisdiction on the district court over the city’s suit to collect taxes from the foreign owners with missions to the United Nations. Permanent* *Mission* of *India* *to the* *United States* v. *New York City, No. 06-134, ___ U.S. ___ (06/14/07). • State Taxes on Out-of-State Companies; Nexus. The U.S. Supreme Court denied certiorari in two nexus cases challenging the constitutionality of state taxation of out-of-state companies that lacked a physical presence within the state under the Commerce Clause. FIA Card Services v. West Virginia Tax Commissioner, No. 06-128, cert. denied* (06/18/07) and *Lanco, Inc. v. Director,* *New Jersey* *Division of Taxation, No. 06-1236, cert. denied* (06/18/07). The debate about whether the Constitution prohibits “economic nexus” continues to roil. See, Capital One Bank v. Commissioner of Revenue, Nos. C262391 and C262598 (Mass. App. T. Bd., 06/22/07) (out-of-state bank’s credit card activities in Massachusetts constituted “substantial nexus,” and therefore, it was subject to taxation in the state). • Taxation of Warrants and Valuation. The U.S. Tax Court determined the tax consequences of warrants issued in a settlement of a suit after a dispute flowing from a company’s termination of a placement agency agreement with the taxpayer and related parties. The court found that IRS erred in concluding that the warrants were issued in connection with the performance of services. Rather, the court found they were not taxable in 1997 under IRC §83 (dealing with property transferred in connection with the performance of services). It found that the warrants had an ascertainable fair market value on the date of grant in 1995, and therefore, were taxable in that year. *Kevin B.* *Kimberlin and Joni R. Steele*, 128 T. C. No. 13 (2007). • “Sham Doctrine”; Capital Loss on Stock Sales. The Court of Federal Claims determined that a Heinz subsidiary’s sale of Heinz stock was a sham, and therefore, a capital loss was denied for lack of stock basis. Heinz attempted a Regulation §1.302-2(c) basis shift/basis increase with basis of additional shares of parent stock, which the Heinz subsidiary had purchased on the open market and then transferred to the parent in a purported IRC §302(d) dividend, effecting an IRC §317(b) redemption. The court held that stock sales and transfers between Heinz and its subsidiary were designed solely to eradicate prior-year gains. H. J. Heinz Co. & Subsidiaries v. United States, 99 Aftr 2d ¶ 207-2940 (Fed. Cl. 2007). ADMINISTRATIVE ACTION • Sales & Use Tax: Out-of-State Business Use Exemption. In May the commissioner updated the previous notice issued in 1993 and set forth the commissioner’s position on where maintenance work must be performed in order for repair and replacement parts to be exempt from the sales tax. The Minnesota sales and use tax exemption for property purchased for business use outside Minnesota and used as a part of a maintenance contract applies if (1) the repair or replacement parts are shipped or transported outside Minnesota by the purchaser and (2) the repair or maintenance work is performed outside Minnesota. The exemption does not apply if the repair or maintenance work is performed in Minnesota, even if the property repaired or maintained will be shipped or transported by the purchaser for use outside Minnesota. Minnesota Department of Revenue No. 93-09 (amended 05/07/07). • Sales and Use Taxes: Collection and Remittance of Sales Tax on Tickets Sold at Selling Events. In a notice updated to reflect changes in tax rates, the commissioner explains the duties and responsibilities of an “operator” (a person who controls the renting or leasing of space to persons conducting business as a seller at an event) for collecting and remitting sales or use tax on total sales at events of tickets or the like that are used for purchasing items or admissions. The sales and use tax should be calculated on the gross receipts of all tickets sold, not the amount redeemed. Numerous examples are provided to illustrate the cascading of the sales and use tax on alcoholic gross receipts tax, and local tax rates. Minnesota Department of Revenue Notice 99-05 (amended 06/18/07). • Sales and Use Taxes: Flea Markets. The commissioner has detailed what information the operator of a flea market, show, etc. must obtain from sellers who rent space at the event. The following information is required: evidence that the seller holds a valid sales tax permit; a written statement that no taxable items are being sold; or a written statement indicating (1) that the selling event is the only selling event that the seller will participate in for the calendar year, (2) the seller will participate in the event for no more than three days; (3) the seller will have less than $500 in gross receipts during the calendar year; and (4) the seller’s name, address, and telephone number. Minnesota Department of Revenue Notice 07-09 (06/25/07). • Excise Tax: Health Care Providers. The commissioner has updated a previously issued notice for changes made in the law since 1993 on the definition of a health care provider. The definition no longer includes vendors of medical equipment and supplies. Rather it includes only persons whose health care occupation is regulated or required to be regulated by the state of Minnesota. Minnesota Department of Revenue Notice 93-13 (amended 04/09/07). • Excise Tax: MinnesotaCare Tax – Government Payments. The commissioner updated a notice previously issued in 1993 and clarified which government payments are subject to the MinnesotaCare tax. The notice was amended to make it consistent with recent changes to the law on federal “CHAMPUS” program payments (Civilian Health Insurance Program for Military Personnel (now called TRICARE)) and Social Security Administration payments for insurance-eligibility examinations. Payments made by the government for services provided under general assistance medical care, the MinnesotaCare program, or the medical assistance program are excluded from MinnesotaCare tax. Payments received under workers compensation insurance and payments received from a state agency for prescription safety glasses provided to employees are considered nonexempt receipts. Minnesota Department of Revenue Notice 93-18 (amended 05/07/07). • Excise Tax: MinnesotaCare: Health Care Providers/Patient Services. The commissioner updated his notice previously issued in 1994 to achieve consistency with recent law and rule changes. “Health care provider” is defined as a person whose occupation is regulated by the state and who furnishes medical, dental, optical, or other health care services. The term includes staff-model health plan companies, licensed ambulances, and sellers of hearing aids and prescription eyewear. “Custodial services” is defined as training services, supervision, and support activities designed to help a person maintain the highest possible level of independence and integration into the community. “Patient services” is defined to include health care goods and services provided to a patient or consumer, including bed and board, use of facilities, and diagnostic or therapeutic services. Minnesota Department of Revenue Notice 94-14 (amended 05/07/07). • Excise Tax: MinnesotaCare: Dietetic and Nutrition Care Services. Minnesota The commissioner updated his previous notice issued in 1997 to address recent law changes. Licensed and registered dietitians, nutritionists, and dietetic technicians are subject to the MinnesotaCare tax. Weight loss services provided by a health care provider are subject to tax. However, companies that provide prepackaged weight loss programs or preplanned packages with no individualization for the customer, provide no medical exam, and do not employ licensed dietitians, nutritionists, or other health care providers as customer service representatives are not subject to tax. The Revenue Notice eliminates the reference to medical assistant since those services are excluded from the statutory definition of patient services and amends an example dealing with services by employees of school districts since these services are now statutorily exempt if no fee is charged. Department of Revenue Notice 97-11** (amended 05/07/07). • Procedure: Employment/Payroll Taxes. Employers may now submit their Minnesota Forms W-2 (and any 1099 with Minnesota withholding) electronically through e-File Minnesota at the same time they file the year-end withholding tax return. Employers with more than 250 employees are required to submit W-2s electronically or magnetically on CD or 3 1/2” diskette (tax year 2006 was the last year for which magnetic media were allowed). Further, employers that withheld more than $10,000 in fiscal year 2006 (threshold down from $20,000) must make 2007 deposits electronically. Employers must also deposit withholding tax electronically if required to pay any other Minnesota business tax to the commissioner electronically. Employers that are required to deposit electronically and do not are assessed a 5 percent penalty; even if a paper check is sent on time. Employers making supplemental payments to employees at a different time than regular wages are paid should not use the tax tables provided in the employer guide to determine how much to withhold on those payments. Instead, regardless of the number of withholding allowances the employee claimed, the employer should multiply the supplemental payment by 6.25 percent (.0625). The result is the amount to withhold. Additional information is available at: http://www.taxes.state.mn.us/taxes/withholding/index.shtml. • Property Taxes: Reissuing Uncashed Lapsed Checks; Definition of “Reasonable Cause.” The commissioner has explained his position on Minn. Stat. §270C.347, Subd. 1, regarding the reissuance of a check for property tax refunds after the two-year period of issuance had expired. The notice provides examples of “reasonable cause” such as serious illness of the taxpayer, unforseen disasters or hardships, or that the taxpayer received the check after the two-year period to obtain the refund had expired.. The documentation needed to establish “reasonable cause” is also provided for in the notice and includes verification of medical records, police reports, insurance records, etc. and the time interval between the event causing the delay and the resulting failure to timely cash the check. *Minnesota Department of Revenue Notice 07-11* (06/25/07). • Deductibility of “Fees” for WRAP Accounts. The IRS has concluded that flat fee brokerage charges for consulting and advisory services (so-called WRAP accounts) are not carrying charges under Reg. §1.266-1(b)(1)(iv) and thus cannot be capitalized. Had IRS upheld capitalization of such fees, they would have been added to the basis of the underlying stock or other assets in the account so that on a later sale, there would be smaller capital gains or larger capital losses. Instead, these expenses are recoverable only as miscellaneous itemized deductions, limited to 2 percent of adjusted gross income. As a result of the 2 percent floor, many holders of WRAP accounts will not get any tax benefit or will get only a small tax benefit for the fees. *Internal Legal Memorandum 200721015. • Stock Transfer in Connection with Services. An employee, who had been granted stock in exchange for services under IRC §83, may have to accept new restrictions when his employer takes in new investors or merges with or is bought out by another corporation. The IRS explains the tax consequences of this type of corporate activity on the employee. It uses three examples to explain the tax consequences under IRC §83 when restrictions are imposed on substantially vested stock resulting in the stock becoming substantially nonvested. Rev. Rul 2007-49,2007-31 IRB.* • Web Guidance for Nonprofits. Four new web-based information tools called “life cycles” were launched to help guide tax-exempt organizations through the IRS rules that pertain to them. The new tools aim to provide easy navigation through the IRS website for different for different types of exempt organizations, including social welfare organizations; labor organizations; agricultural and horticultural organizations such as farm bureaus; and trade associations and other business leagues. IR-2007 124. • Proposed Regulations for Expenses of Trusts and Estates. The IRS proposed regulations on which costs incurred by an estate or nongrantor trust would be subject to the 2 percent of adjusted gross income floor for miscellaneous itemized deductions under IRC §67(a). The basic question is whether investment management and advisory fees paid by trusts for estates are fully deductible for income-tax purposes. Are these fees and certain other types of expenses fully deductible, or are they limited by the “2 percent floor” on miscellaneous itemized deductions? If that limit applies, that means they would be deductible only to the extent that the total of these and other miscellaneous deductions exceed 2 percent of the trust’s or estate’s adjusted gross income. Costs incurred by estates or nongrantor trusts that are unique to an estate or trust would not be subject to the 2 percent floor. The proposed regulations provide examples of qualifying (fees not subject to 2 percent of AGI floor limitation) and nonqualifying costs (those subject to the limitation). In addition, if a fee is “bundled,” a reasonable method of allocation of the single fee must be made for the various components of the fee. The IRS invites comments on the proposed regulations. Proposed Regulation §1.67-4(c) (07/26/07). LEGISLATION • Federal Conformity Law Enacted for Minnesota Tax Year 2006. Minnesota adopted federal conformity for 2006. Previously Minnesota had total conformity through May 19, 2006, but did not pick-up federal laws after that date. H.F. 8 conforms Minnesota’s provisions from May 19, 2006, through and including December 31, 2006, but only for tax year 2006. H.F. 8 was enacted on January 30 2007, as Laws 2007, Chapter 7. The House Research summary is available at this link: http://ww3.house.leg.state.mn.us/hrd/bs/85/HF0008.html. The Department of Revenue analysis is available at this link: http://www.taxes.state.mn.us/taxes/legal_policy/revenue_analysis/2007_2008/senate_files/SF0017_HF0008.pdf. • Tax Gap: Funding to Increase Taxpayer Compliance, Commissioner to Increase Audits. To meet tax collection goals set by the Legislature, the commissioner is now accepting applications to hire about 40 auditors in the corporate income tax, sales tax, and special tax areas. The commissioner will also add 28 collection officers at its collection office in Ely, bringing its staffing there from 65 to 93 employees. The commissioner’s tax collection goals are aggressive. He will need to hire about 140 new personnel to meet the legislative mandate. In the appropriations bill that funded the commissioner for the fiscal biennium ending in 2009 (H.F. 548), the Legislature challenged the commissioner to close the “tax compliance gap.” The Legislature provided $15.6 million to hire additional personnel to identify and to collect $60 million for the biennium ending June 30, 2009, or a net gain of $42.4 million in taxes from individuals and businesses that currently do not pay all taxes owed. The law requires the commissioner to report the number of businesses and individuals that are noncompliant with the income tax and sales tax system, as well as the percentages and dollar amounts of valid tax liabilities that were collected by the compliance initiatives. See H.F. 548. • Toll-Free Taxpayer Assistance Numbers. Minnesota legislation amends Minn. Stat. §270C.03, Subd. 1, to require the commissioner to restore and maintain toll-free taxpayer assistance numbers for calls from anywhere in the state, effective January 1, 2008. 2007 Minn. Laws, Chapter 148, Article 2, Section 48. The call line was previously dropped for budgeting reasons. • JOBZ Property Tax Exemption. Minnesota legislation amends Minn. Stat. §272.02, Subd. 64, to change the JOBZ property tax exemption. It does not apply to any school district’s debt-service levy as defined in Minn. Stat. §123B.55, but does apply to all referendum revenue levies made under Minn. Stat. §126C.17 regardless of when that levy was approved by the voters. The provision is effective for taxes payable in 2008. 2007 Minn. Laws, Chapter 146, Article 4, Section 10. • State Unemployment Insurance Payments. This legislation amends Minn. Stat. §268.051, Subd. 1a to require electronic filing and payments for unemployment insurance from businesses with 50 or more employees in any calendar quarter. The provision is effective January 1, 2008. Electronic payment and returns were previously required for companies with 500 or more employees. 2007 Minn. Laws, Chapter 128, Article 2, Section 2. • Federal Income Tax Credit For New Employees. Minnesota businesses can reduce their federal income tax liability by as much as $9,000 for each qualifying new hire under the Work Opportunity Tax Credit (“WOTC”). The WOTC was extended to 2011 when the president signed the Small Business and Work Opportunity Tax Act earlier this year. The legislation also significantly expands businesses’ eligibility for the federal tax credit. The WOTC legislation identifies nine different categories of disadvantaged job seekers. Most notably it designates disabled veterans as a qualifying category, recognizing the special employment challenges they face due to disabilities sustained while serving our country. There is no limit to the number of qualifying new hires that a business may claim for the tax credit. DEED is responsible for certifying businesses in Minnesota for WOTC. For application forms and specific information about the nine qualifying categories, visit the DEED website at: www.deed.state.mn.us/wotc or contact the WOTC coordinator in Minnesota at (651) 205-4505 or (888) 234-5521. • Federal Minimum Wage. The first increase to the federal minimum wage in the past ten years has gone into effect. On July 24, 2007, the federal minimum wage increased from $5.15 to $5.85 per hour. The rate will again increase to $6.55 per hour in July 2008 and to $7.25 per hour in July 2009. Although most employers are aware of the minimum wage increase, they may not be aware that, by July 24, 2007, all employers were also required to post an updated notice of the applicable federal minimum wage rates and related legal obligations. Failure to post an updated notice may result in fines of up to $10,000. Updated posters may be downloaded free of charge from the Department of Labor at http://www.dol.gov/esa/regs/compliance/posters/flsa.htm. LOOKING AHEAD The Minnesota Legislature adjourned this spring without taking action on a number of tax-related matters, a development likely to produce consequences as follows: • Lack of Federal Conformity in 2007. Laws 2007, Chapter 1, conformed all federal tax legislation updates for tax year 2006 only. Therefore, for the year 2007, all federal enactments since May 18, 2006 have not been adopted in Minnesota. This could cause a problem with returns in 2008; provided the Legislature does not immediately adopt conformity language upon reconvening in 2008. • Out of Conformity with Streamlined Sales and Use Tax Agreement (“SSTA”). The second Omnibus Tax Bill would have conformed Minnesota laws with the recent changes to the Streamlined Sales and Use Tax Agreement. If the Legislature does not enact retroactive provisions in 2008, Minnesota will be out of conformity with the SSTA Agreement on January 1, 2008. • Next Legislative Year – 2008. Although the Legislature and the governor did not succeed in tax initiatives in 2007 (barring a special session), they will have another opportunity to address tax, budget, and other bills when the Legislature reconvenes on February 12, 2008. All bills introduced in 2007 are eligible to be considered in the 2008 Legislative Session. • Penalty for Federal Tax Returns Standard for Preparers Questioned. The recent change to federal tax law requiring preparers of tax returns under IRC §6694 to have a “more likely than not” standard for undisclosed, non-tax-avoidance items rather than the previous “realistic possibility of success” standard has generated loud requests by preparers for change. Preparers claim the new law is unfair since it applies higher standards to tax-return preparers than to taxpayers, who can still use “substantial authority” standards. Not only does the new law raise the standards considerably for preparers but it sharply boosts penalties to $1,000, or half the preparer’s total fee, which ever is larger. Fines for preparers showing “willful or reckless conduct” are much higher still. The calls for amendment to the law are directed to Congress and the Treasury. The alleged problems in the unequal standards are: • Changing the preparer’s role from that of an advocate to that of an advisor; • Making it more difficult to determine the correct treatment of some routine items, if there is a lack of IRS guidance on tax treatment at the time the return is prepared and analysis is needed on a taxpayer’s specific facts and circumstances; and • Creating excessive disclosures that will overburden the IRS (possibly defeating the purpose of the disclosure system) and overwhelm the electronic filing system (which cannot process a large number of disclosures in a return). The calls for change recommend that Congress modify the new law to require that the “more-likely-than-not” standard apply only with respect to tax-avoidance (i.e., tax shelter items). For all other routine, non-tax-shelter items, the “substantial authority” standard would apply. • Partnership “Carried Interest” Under Attack. Recent reports of capital gain taxation of “carried interests” for hedge fund managers caused Congress to review the current taxation. “Carried interest” is the share of the gains from an investment hedge fund that investment managers are allowed to keep. “Carried interest” payments are typically 15 percent to 25 percent of the capital gains earned by an investment hedge fund and are currently taxed at the capital gains rate of 15 percent. The issue is whether the “carried interest” is compensation, and therefore, subject to the highest taxation rate or an equity interest subject to capital gains. Although Congress is very interested in reviewing a possible change in the way “carried interest” is taxed, there could be a steep learning curve on the issue which will require study time. See proposed H.R. 2834, proposed S. 1624. • Tax-Exempt Entity Participation in Off-Shore Hedge Funds. Congress is investigating whether tax-exempt organizations’ use of off-shore corporations to invest in hedge funds is accelerating the shift of U.S. assets offshore to avoid to U.S. taxes. Many nonprofits own hedge funds, which if located in the United States would be taxed at a rate as high as 35 percent (federal). Because hedge and private equity funds use debt financing, they typically produce taxable unrelated business income for the tax-exempt investors. Generally, universities, pension funds, and foundations pay no tax on investment income, although they are required to pay “unrelated business income tax” when they receive profits from debt-financed investing. Apparently, to avoid this result, the investment funds set-up special purpose “blocker” companies (off-shore subsidiaries) in tax havens (such as the British Virgin Islands or the Cayman Islands) that convert profits into dividends. Nonprofits do not pay taxes on dividend income. Congress is concerned since nothing of substance within the funds has changed when they are moved out of the country. The funds still engage in the same of types of investments using debt financing, except the nonprofit’s share of income is now labeled “dividends,” which, the nonprofits argue, permits them to avoid U.S. taxation. Look for Congress to attack this apparent “loop hole” as unfair and unjust. —Jerry Geis Briggs & Morgan
September 2007 In this month's "Notes & Trends: Bankruptcy Civil Litigation Employment & Labor Law Environmental Law Federal Practice Intellectual Property Juvenile Law Real Property Tax Torts & Insurance	TORTS & INSURANCE JUDICIAL LAW • Negligence; “Seat Belt Gag Rule.” The Minnesota Supreme Court held that the so-called “seat belt gag rule,” which applies to actions arising from the use or nonuse of a passenger restraint system, does not bar a child’s action against his parent for negligent installation of a child-passenger-restraint system. Plaintiff child brought action against his parents for injuries resulting from their negligent installation and maintenance of a child-passenger-restraint system, or car seat. The district court granted summary judgment for plaintiff, and the Minnesota Court of Appeals affirmed. On further review, the Supreme Court affirmed, holding that the plain language of Minn. Stat. §169.685, subd. 4(b), permits a child to bring an action against his parents for negligent installation of a car seat. Section 169.685 (the “seat belt gag rule”) requires exclusion of all evidence of use or nonuse of seat belts or child car seats except where the action “involves a defectively designed, manufactured, installed, or operating seat belt or [car seat].” Defendants argued that the word “defective” is a technical term closely associated with products liability so that the statute’s exception applies only to products liability cases involving negligence by the manufacturer or distributor and any evidence of parents’ negligence must be excluded. The Supreme Court held that the word “defective” had various meanings and that its common meaning encompassed “faulty” or “negligent.” Therefore, the statute’s exception applied in cases like this one, involving a parent’s negligent installation of a car seat. *Harrison* *v. Harrison, No. A05-1038, (Minn. 06/21/07). www.lawlibrary.state.mn.us/archive/supct/0706/opa051038-0621.htm* • Physician Disciplinary Proceedings: Burden of Proof, Injunctive Relief and Privacy Rights. In a case arising from a decision by the Minnesota State Board of Medical Practice Complaint Review Committee to suspend temporarily plaintiff’s medical license, the Minnesota Court of Appeals made several rulings concerning the board’s complaint-review process. Plaintiff sued the board seeking a declaratory judgment that its use of the “preponderance of the evidence” standard violated his due process rights and that the board’s publication of the temporary suspension order on its website violated both the Minnesota Government Data Practices Act (MGDPA) and the Medical Practice Act (MPA). Plaintiff also sought rescission of the suspension. The district court dismissed the complaint in its entirety. The Court of Appeals affirmed. The court ruled that the application of the “preponderance of the evidence” standard did not violate plaintiff’s due process rights. The court also held that plaintiff was prevented from seeking injunctive relief of any kind due to the doctrine of “exhaustion of administrative remedies.” Because the plaintiff had not exhausted all of his administrative remedies, plaintiff had to show that exhaustion would have been futile. The court noted that nothing prevented the plaintiff from petitioning the board to apply a higher “clear and convincing” standard at the contested hearing. As a result, exhaustion was not necessarily futile and plaintiff was barred from receiving injunctive relief. Finally, the court held that the board’s publication of the disciplinary information did not violate the MGDPA or the MPA. Although the information was considered confidential under the MGDPA, the court ruled that the board was entitled to publish the information “to promote health and safety.” The court held that the information could be published under the MPA because the statute allowed publication of “disciplinary measures of any kind.” *Uckun v.* *MinnesotaState* Board of Medical Practice*, No. A06-1365, (Minn. App. 06/26/07). www.lawlibrary.state.mn.us/archive/ctappub/0706/opa061365-0626.htm* • Construction Defect Litigation; Notice and Standing Requirements. In an appeal arising from a claim of residential home defects and violation of the statutory new home warranties in Minn. Stat. ch. 327A, the Minnesota Court of Appeals held that a homeowner-plaintiff complies with the requirement of serving written notice of breach of the warranties by serving a detailed summons and complaint on the builder. The complaint at issue, which the court held was sufficient notice, alleged claims for breach of contract, negligence, and breach of statutory warranties, and attached a ten-page inspection report. The court further ruled that a homeowner retains standing to sue the homebuilder for construction defects under Minn. Stat. §327A.02 during the statutory redemption period following a mortgage-foreclosure sale. The court reasoned that, despite the foreclosure sale, the homeowner qualified as a vendee and had standing to sue under §327A.02. Because the homeowner had status as a vendee prior to the foreclosure sale and retained ownership of the home until the end of the redemption period, the court found that the homeowner maintained her standing to sue. The court refused to determine what right, if any, the purchaser of the home at the foreclosure sale would possess to assert a home-warranty claim. *Peterson v. Johnson, No. A06-1830, (Minn. App. 06/26/07). www.lawlibrary.state.mn.us/archive/ctappub/0706/opa061830-0626.htm* • Negligence; Primary Assumption of Risk. When two skiers collide, one skier generally cannot sue the other if he or she knew, appreciated and had a chance to avoid the risk of collision, the Minnesota Court of Appeals has held. The defendant was crossing a ski slope at a slow pace when he collided with the plaintiff, an 11-year-old. The only witness to the incident, the defendant’s wife, stated that she saw the plaintiff collide into the defendant’s right shoulder area while traveling at a high rate of speed. The plaintiff sued the defendant alleging negligence. The district court granted defendant’s motion for summary judgment holding that plaintiff’s claim was barred under the doctrine of primary assumption of risk. The Court of Appeals affirmed. The court stated that primary assumption of the risk applies where a person who voluntarily takes a risk (1) knows the risk, (2) appreciates the risk, and (3) has a chance to avoid the risk. Here, the plaintiff candidly admitted in his deposition that he did know, appreciate, and had a chance to avoid the risks inherent in skiing. The court distinguished this case from a prior case where the Minnesota Supreme Court refused to apply the doctrine in a collision between skiers because in that case, no evidence was introduced that the plaintiff had knowledge of the risks associated with skiing. *Peterson ex rel. Peterson v. Donahue, No. A06-1824, (Minn. App. 06/26/07). www.lawlibrary.state.mn.us/archive/ctappub/0706/opa061824-0626.htm* • Statute of Limitations; Improvements to Real Property. The Minnesota Court of Appeals has held that the 2004 amendment to Minn. Stat. §541.051, subd. 4, does not apply retroactively to claims that accrued before the amendment’s effective date of August 1, 2004, provided the claim was brought within two years of discovery. Plaintiff homeowners filed statutory warranty and common-law negligence claims against the builder of their home. The district court granted summary judgment for defendant, holding that the claims were time-barred by the 2004 amendment to Minn. Stat. §541.051, subd. 4, because plaintiffs brought all of their claims more than ten years after substantial completion of their home. The Court of Appeals affirmed in part and reversed in part, holding that the 2004 amendment could not retroactively bar statutory warranty claims that accrued prior to the amendment’s effective date of August 1, 2004. The court reasoned that the ten-year statute of repose in the pre-2004 version of §541.051 applied only to common-law claims and expressly did not apply to statutory-warranty claims that were brought within two years after discovery. The court held that the statute could not be applied retroactively because the Legislature did not “clearly and manifestly” indicate its intention that it so apply. The court held that the 2004 amendment could not be applied to bar plaintiffs’ statutory-warranty claim because the plaintiffs discovered the damage to their home in 2003 and it was immaterial that the claim was commenced after the effective date. *Sletto v. Wesley Construction, Inc., No. A06-1413, (Minn. App. 07/03/07). www.lawlibrary.state.mn.us/archive/ctappub/0707/opa061413-0703.htm* — David Turner Bassford Remele, A Professional Association