Bench & Bar of Minnesota

ADMINISTRATIVE LAW
JUDICIAL LAW

• Arbitrary and Capricious and Substantial Evidence Standards. The Court of Appeals ruled that a school board did not adequately explain its decision to expel a student as required under the Pupil Fair Dismissal Act (PFDA) and consequently the court was “unable to exercise meaningful appellate review of the decision.”

A student was expelled for fighting. She exercised her right under the PFDA to waive an evidentiary hearing on the proposed expulsion and presented her case directly to the school board. The board decided to expel the student who appealed that decision to the commissioner of the Minnesota Department of Education under Minn. Stat. §121A.49.

The commissioner found that the board had failed to include the “controlling facts” on which it based its expulsion decision as required by Minn. Stat. §121A.47, subd. 13 and remanded the matter. The student appealed the board’s amended resolution and the commissioner affirmed it. This certiorari appeal followed.

The district argued that its second resolution had sufficient detail to satisfy the statutory requirements because it contained the rationale for the board’s decision, namely that expulsion of the student for less than one year would be inconsistent with the board’s past practice. The court disagreed, finding that information about the number of and length of prior expulsions did not provide any information concerning the seriousness of the student’s conduct relative to that of other students and failed to explain why the board concluded that this student’s conduct was “at least as egregious as those incidents that led to one calendar year expulsions.” Without this information, the court could not determine whether the decision to expel this student for one calendar year was the product of reasoned decision-making.

The court found that the phrase “sufficient detail” required by the PFDA defied a precise definition but that it was akin to a math teacher’s requirement that students “show their work.” The court remanded and directed the board to explain its decision in “sufficient detail” by articulating, at a minimum:

the basis for determining the relative egregiousness of the student’s conduct;
the factual context of incidents to which the student’s conduct was compared; 3. an explanation of the determination of how the student’s conduct compared to other incidents; and 4. an explanation of how the board reached its conclusion about the relative seriousness of the student’s conduct after considering the mitigating circumstances. In the Matter of the Expulsion of N.Y.B. from Anoka-Hennepin Independent School District No. 11, A07-1277, 750 N.W.2d 318 (Minn. App. 06/10/08).

• Preclusive Effect of Administrative Decision. The Minneapolis City Council decided to grant a certificate of appropriateness for a proposed athletic facility next to the De La Salle High School campus. Friends of the Riverfront brought a suit in district court challenging the proposed facility under the Minnesota Environmental Rights Act (MERA). The district court dismissed the suit, primarily on the basis that the issues had already been decided in the city council proceeding. The plaintiffs appealed

Collateral estoppel is a common-law doctrine that precludes the relitigation of previously determined issues. Collateral estoppel can be applied based on administrative hearings when an administrative body acts in a quasijudicial capacity. Under the collateral-estoppel doctrine, an administrative decision is entitled to preclusive effect only if the administrative hearing allowed the parties a full and fair opportunity to be heard. In the administrative context, a full and fair opportunity to be heard requires that the hearing provide adequate procedural safeguards and that the tribunal not be impermissibly biased.

The court looked to the Restatement (Second) of Judgments for guidance to determine what procedural safeguards are adequate. The Restatement requires the right “to present evidence and legal argument” and “other procedural elements as may be necessary[,] … having regard for the magnitude and complexity of the matter in question, the urgency with which the matter must be resolved, and the opportunity of the parties to obtain evidence and formulate legal contentions.” Restatement (Second) of Judgments §83(2) (1980).

The Court of Appeals found that the plaintiffs were able to present written argument and evidence to the council and that in a case in which the purpose of the hearing was to determine whether the development was historically appropriate, written argument was sufficient. In light of the subject matter of the hearing, the court concluded that there was no need for a hearing examiner to develop a factual record. The court determined that the hearing provided adequate procedural safeguards.

The court also examined whether the city council was impermissibly biased. Such bias would exist if the council were in the position of determining the legality of its own conduct. Because the city council’s MERA decision was primarily about whether De La Salle High School’s conduct was legal, not whether its own conduct was legal, the court found that the tribunal was not impermissibly biased. The court held that the city council hearing provided a full and fair opportunity to be heard and that the MERA claim was barred by the collateral estoppel doctrine. State of Minnesota by Friends of the Riverfront, et al. v. City of Minneapolis, et al., A07-0925, ___ N.W.2d ___ (Minn. App. 06/24/08).

—Anne Becker
Attorney in Private Practice
—Maria Lindstrom
Office of Administrative Hearings

CIVIL LITIGATION
JUDICIAL LAW

• Dram Shop Proximate Cause. Appellants, the family of decedent, Michael Riley Jr., brought a dram shop action against respondent bowling alley, alleging that respondent’s illegal sale of alcohol caused Riley to be intoxicated, and that the intoxication caused Riley to jump to his death in the flood-swollen Minnesota River. The district court granted respondent’s motion for summary judgment and the Court of Appeals affirmed. The Supreme Court reversed and remanded for trial because it concluded that a genuine issue of material fact existed concerning the issue of proximate cause.

The unfortunate series of events which eventually led to Michael Riley’s death are convoluted. The preceding evening, Riley had been drinking with friends at the bowling alley. He left in the early morning hours and was driving a motor vehicle when a state patrol officer observed him speeding. The officer began pursuit with lights and siren on. Eventually Riley stopped his vehicle in the vicinity of a bridge over the Minnesota River, which connects the cities of North Mankato and Mankato. The officer administered several tests, including a PBT, which showed Riley’s blood alcohol at 0.18, after which the officer advised Riley that he would be placed under arrest for driving while impaired. At that point, while the officer’s attention was diverted, Riley ran toward the bridge railing and jumped into the Minnesota River. Riley did not survive the jump into the flood-swollen river, and several months later his body was found and removed from the river. Appellants, Riley’s family, commenced a dram shop action against respondent bowling alley.

In opposition to the respondent’s motion for summary judgment, appellants submitted an expert psychological report which was based upon the expert’s examination of decedent’s medical and drug history, and interviews with the decedent’s family and friends. The expert expressed the opinion that decedent was possibly in a blackout state when he jumped into the river and that the decedent would not have thought or attempted such an escape were he sober. The district court considered the report, but found it of “minimal evidentiary value.” The Court of Appeals concluded that the report did not provide sufficient evidence of proximate cause to survive summary judgment. Further, the Court of Appeals concluded that decedent’s speeding, the trooper’s stop, and decedent’s fleeing arrest were actions which constituted breaks in the chain of causation between decedent’s intoxication and his drowning.

The Supreme Court explained that the type of causal relationship between intoxication and injury which is required to prevail in a dram shop action is proximate causation, which the Court equated with the term “substantial factor.” In other words, the intoxication must be a substantial factor in bringing about the injury.

Ordinarily, whether proximate cause exists in a particular case is a question of fact for the jury to decide. In support of its motion for summary judgment, respondent relied upon the line of cases which denied dram-shop recovery where the injury was caused by another person or “occasion.” Appellants argued that those cases could be distinguished because in this case it was the decedent’s own impaired decision to jump into the river that directly caused his injury, even though there were several other intervening events after the intoxication. The Supreme Court agreed with appellants’ analysis and concluded that there was sufficient evidence to establish a genuine issue of material fact as to whether decedent’s intoxication was a substantial factor in his decision to jump into the river in an attempt to escape arrest. Osborne v. Twin Town Bowl, Inc., 749 N.W.2d 367 (Minn. 2008).

— Andrew Shern
Murnane, Brandt

CRIMINAL LAW
JUDICIAL LAW

• DWI/Implied Consent: Medical Privilege; Waiver. The defendant was involved in an alcohol-related collision and taken to the hospital. A police officer read the defendant the implied consent advisory and the defendant agreed to testing. The officer was unable to obtain a blood sample for alcohol testing because of the defendant’s condition. Later, police obtained a search warrant for the defendant’s medical records, which revealed that her blood alcohol concentration, via a blood test, was .12 at the time of her admission to the hospital. At trial, the records were admitted over the defendant’s objection. She claimed a violation of the medical privilege. On appeal, both parties agreed that the defendant’s medical records were privileged. The prosecution argued that the defendant’s agreement to testing via the implied consent law acted as a constructive waiver of the medical privilege.

Held, the defendant’s consent to testing for the purpose of the implied consent law does not operate as a waiver of the defendant’s medical privilege. Unlike the Wisconsin privileged patient statute, examined in State v. Heaney, 676 N.W.2d 698 (Minn. App. 2004), rev’d., 689 N.W.2d 168 (Minn. 2004), Minnesota law has no exception for alcohol concentration results (see Minn. Stat. §592.01, subd. 1(d)). Furthermore, the appellant has not waived her medical privilege by placing her medical condition at issue. State v. Poetschke, A07-1323 (Minn. App. 06/10/08). www.lawlibrary.state.mn.us/archive/ctappub/0806/opa071323-0610.pdf

• DWI/Implied Consent: Probable Cause Despite Passing PBT. Appellant was detained for various moving violations. The officer observed seven indicia of intoxication prior to employing the preliminary breath test (PBT): erratic driving, bloodshot watery eyes, odor of alcohol, admission of drinking, swaying, failing four of six HGN clues, and difficulty completing the one-legged stand.

Held, the arresting officer had probable cause to arrest the appellant for DWI. Although in this case the PBT results were less than the legal limit, independent probable cause to arrest Reeves for DWI nonetheless remained. All of the various indicia provided the arresting officer, under a totality of the circumstances analysis, with probable cause to believe the appellant was driving while under the influence. Daniel Joseph Reeves v. Commissioner of Public Safety, A07-1237 (Minn. App. 06/24/08). www.lawlibrary.state.mn.us/archive/ctappub/0806/opa071237-0624.pdf

• Spreigl/Prior Bad Acts; Domestic Abuse Exemption.In a prosecution for gross-misdemeanor domestic assault, the state successfully introduced evidence of three prior incidents of domestic abuse under Minn. Stat. §634.20. Held, the evidence of prior acts of domestic abuse was properly admitted, and it was not plain error for the court to fail to instruct the jury regarding use of the evidence when the evidence was received and in the final jury charge. (Defendant did not at trial request such instructions.) This case underscores the difference between evidence offered under Rule 404(b), “Spreigl,” and that offered under § 634.20, the latter being admissible as a “discrete category of other bad acts” when domestic violence is involved. The Court of Appeals reiterates that evidence offered under §634.20 is not Spreigl evidence: “Rather, this evidence is offered to demonstrate the history of the relationship between the accused and the victim of domestic abuse.” As such, the state is not required to provide notice of the evidence or to prove it by clear and convincing evidence. State v. Ronald James Meyer, A06-2335 (Minn. App. 06/03/08). www.lawlibrary.state.mn.us/archive/ctappub/0806/opa062335-0603.pdf

• Search and Seizure: Probable Cause to Search. Appellant was a passenger in a vehicle stopped for speeding and for lack of a front license plate. Upon approach, the trooper smelled the odor of burnt marijuana and noticed that the driver was nervous. The trooper requested and received consent to search the vehicle from the driver. He then asked the passenger (appellant) to step out of the vehicle, and conducted a Terry-frisk. When the officer asked appellant if he had any weapons, the appellant handed the officer a folded pocketknife and a small amount of marijuana. The trooper then searched the vehicle, aided by a canine, and discovered a rolled up dollar bill with traces of cocaine. Upon arrest, appellant was searched more thoroughly and was found to possess a felony amount of cocaine.

Held, the trooper had a legal basis to expand the scope of the traffic stop to search both the car and the appellant. The Supreme Court holds that the trooper had probable cause to search for a “criminally significant quantity of marijuana” upon smelling the odor of marijuana emanating from the vehicle and, independently, had a probable cause basis for the search when the appellant later also handed the trooper a small, noncriminal amount of marijuana. “The probable cause standard is merely a test to determine objective constitutional reasonableness, and regardless of the quantity of marijuana observed, the presence of any amount logically suggests there may be more.” State v. Danny Ortega, A07-22 (Minn. App. 06/03/08). www.lawlibrary.state.mn.us/archive/ctappub/0806/opa070022-0603.pdf

• Search and Seizure: Unsuccessful Controlled Buy; Probable Cause. After receiving information from a confidential informant that the respondent was dealing drugs from a certain residence, authorities attempted a controlled buy. A separate confidential reliable informant (CRI) went to the residence and asked for a “dub,” which is slang for a pill of crack cocaine. The respondent told the CRI that he did not know them and he would not sell anything to them. The CRI then left the address.

After examining the confidential informant’s basis of knowledge, veracity and reliability, the court follows other jurisdictions in holding that a controlled buy need not be successful in order to support a probable cause determination. Indeed, the respondent’s reply to the CRI’s attempted purchase indicated that he would have sold drugs if he had known the CRI. This statement corroborates the CRI’s report that the appellant was selling drugs out of his home. The answers given by the respondent to the CRI, although technically noncriminal, by themselves support a finding of probable cause under the totality of the circumstances test. State v. Corey Lamont Holiday, A07-2366 (Minn. App. 06/03/08). www.lawlibrary.state.mn.us/archive/ctappub/0806/opa072366-0603.pdf

• Appeals: Motion for Reconsideration; Timely Notice of Appeal. Respondent moved for discovery of the source code for the Intoxilyzer 5000, and the motion was granted. A motion for reconsideration by the prosecution was denied. On January 29, 2008, respondent’s counsel requested suppression of the Intoxilyzer test results due to the state’s failure to disclose the source code. The district court indicated they would grant the request, and that a formal written order was forthcoming. On February 4, 2008, the district court issued a written suppression order. The state moved for reconsideration of the order on February 8, 2008. On February 15, 2008, the motion was denied at a hearing. The state filed a notice of appeal on February 19, 2008.

Held, the state’s notice of appeal was timely. Although the motion for reconsideration was not filed within the five-day period from which the court announced, on the record, that it would be granting the defense motion to suppress, the court also indicated that it would issue a formal order. Under those circumstances, the ambiguous language contained in Rule 28.04, subd. 2(8) is construed as applying to a bench ruling only when the district court has not indicated that a written order will follow. Hence, the five days, under these circumstances, begins to run after the prosecuting attorney is served by the defense or the clerk of court with notice of entry of a written order. State v. Jeremy Michael Palmer, A08-0335 (Minn. App. 06/03/08). www.lawlibrary.state.mn.us/archive/ctappub/0806/opa080335-0603.pdf

• Informants: Disclosure of Identity. Appellant had been charged as a felon-in-possession under Minn. Stat. §624.713. At the time of the arrest, he was with another individual, walking on the road, and the appellant was arrested based on an outstanding warrant. During the pat-down, police discovered a nearly full box of ammunition; in addition, police found a loaded pistol on top of newly fallen snow. The other individual told police that the appellant carried the pistol for protection. Police later obtained a statement from a citizen informant who stated that the appellant’s companion was known to carry the pistol and had been seen brandishing the same.

The district court granted the defense motion to disclose the identity of the informant, using only the helpfulness test with respect to ownership of the pistol. In an unpublished decision, the Court of Appeals reversed.

The Supreme Court notes that the common law grants the government a “privilege” to withhold the disclosure of individuals who furnish information to law enforcement, citing Roviaro, 353. U.S. 53 (1956). The privilege, however, is not unlimited, and gives way when an informant’s identity is relevant and helpful to the defense, or is essential to a fair determination of a cause. The court notes that there is a lower threshold for disclosure when the informant is an active participant in a criminal activity, as opposed to a “mere transmitter” of information and holds that the informant’s information in this case may be helpful. The case is remanded to district court for an in camera hearing to determine whether the informant’s information is sufficiently helpful to the preparation of the defense that the public interest must give way to ensure that the defendant receives a fair trial. State v. Johnny Rambahal, A07-512 (Minn. 06/19/08. www.lawlibrary.state.mn.us/archive/supct/0806/OPA070512-0619.pdf

• Miranda: Due Process; Future Right to Counsel. Appellant was a suspect in a stabbing murder. Prior to his confession, police gave appellant a Miranda warning to which the appellant responded: “Yes, but I have just one question. So if I ask for a lawyer now, will there be a lawyer present now?” The police explained that it was not likely that the appellant would be able to speak to an attorney until the next day. Law enforcement also explained that if the appellant asked for an attorney, the interview would stop and the police would not speak to the appellant until he spoke to an attorney. The appellant then stated that he wished to speak to law enforcement, and went on to confess to a murder.

Held, the Miranda warning was proper. Such warning is inadequate only if it fails to state that the defendant has the right to counsel before and during questioning, and the warning implies that the right to counsel is linked to some future point in time. In this case, police stated: “If you ask for a lawyer right now, we’ll stop the interview. We won’t talk to you anymore until a lawyer can represent you but chances are you won’t be able to talk to a lawyer until tomorrow.” This language does not violate due process by linking the right to counsel to a future event after questioning. The Supreme Court concludes that the term “now” accurately and clearly described the appellant’s right to an attorney before questioning, at the time the warning was given. Police made it clear that if appellant invoked his right to have an attorney “now,” the right would be honored, and the interrogation would cease until the appellant obtained an attorney. There was no direct or indirect allusion to a right to a counsel being afforded some time after interrogation. State v. Hector Manual Medrano, A07-1437 (Minn. 06/26/08). www.lawlibrary.state.mn.us/archive/supct/0806/OPA071437-0626.pdf

—Frederic R. Bruno
Frederic Bruno & Associates

—C.J. Deike
Edina Home Realty Services

August 2008 In this month's "Notes & Trends: Administrative Law Civil Litigation Criminal Law Employment & Labor Law Federal Practice Intellectual Property Probate & Trust Law Real Property Tax Torts & Insurance	ADMINISTRATIVE LAW JUDICIAL LAW • Arbitrary and Capricious and Substantial Evidence Standards. The Court of Appeals ruled that a school board did not adequately explain its decision to expel a student as required under the Pupil Fair Dismissal Act (PFDA) and consequently the court was “unable to exercise meaningful appellate review of the decision.” A student was expelled for fighting. She exercised her right under the PFDA to waive an evidentiary hearing on the proposed expulsion and presented her case directly to the school board. The board decided to expel the student who appealed that decision to the commissioner of the Minnesota Department of Education under Minn. Stat. §121A.49. The commissioner found that the board had failed to include the “controlling facts” on which it based its expulsion decision as required by Minn. Stat. §121A.47, subd. 13 and remanded the matter. The student appealed the board’s amended resolution and the commissioner affirmed it. This certiorari appeal followed. The district argued that its second resolution had sufficient detail to satisfy the statutory requirements because it contained the rationale for the board’s decision, namely that expulsion of the student for less than one year would be inconsistent with the board’s past practice. The court disagreed, finding that information about the number of and length of prior expulsions did not provide any information concerning the seriousness of the student’s conduct relative to that of other students and failed to explain why the board concluded that this student’s conduct was “at least as egregious as those incidents that led to one calendar year expulsions.” Without this information, the court could not determine whether the decision to expel this student for one calendar year was the product of reasoned decision-making. The court found that the phrase “sufficient detail” required by the PFDA defied a precise definition but that it was akin to a math teacher’s requirement that students “show their work.” The court remanded and directed the board to explain its decision in “sufficient detail” by articulating, at a minimum: the basis for determining the relative egregiousness of the student’s conduct; the factual context of incidents to which the student’s conduct was compared; 3. an explanation of the determination of how the student’s conduct compared to other incidents; and 4. an explanation of how the board reached its conclusion about the relative seriousness of the student’s conduct after considering the mitigating circumstances. *In the Matter of the Expulsion of N.Y.B. from Anoka-Hennepin Independent School District No. 11,* A07-1277, 750 N.W.2d 318 (Minn. App. 06/10/08). • Preclusive Effect of Administrative Decision. The Minneapolis City Council decided to grant a certificate of appropriateness for a proposed athletic facility next to the De La Salle High School campus. Friends of the Riverfront brought a suit in district court challenging the proposed facility under the Minnesota Environmental Rights Act (MERA). The district court dismissed the suit, primarily on the basis that the issues had already been decided in the city council proceeding. The plaintiffs appealed Collateral estoppel is a common-law doctrine that precludes the relitigation of previously determined issues. Collateral estoppel can be applied based on administrative hearings when an administrative body acts in a quasijudicial capacity. Under the collateral-estoppel doctrine, an administrative decision is entitled to preclusive effect only if the administrative hearing allowed the parties a full and fair opportunity to be heard. In the administrative context, a full and fair opportunity to be heard requires that the hearing provide adequate procedural safeguards and that the tribunal not be impermissibly biased. The court looked to the Restatement (Second) of Judgments for guidance to determine what procedural safeguards are adequate. The Restatement requires the right “to present evidence and legal argument” and “other procedural elements as may be necessary[,] … having regard for the magnitude and complexity of the matter in question, the urgency with which the matter must be resolved, and the opportunity of the parties to obtain evidence and formulate legal contentions.” Restatement (Second) of Judgments §83(2) (1980). The Court of Appeals found that the plaintiffs were able to present written argument and evidence to the council and that in a case in which the purpose of the hearing was to determine whether the development was historically appropriate, written argument was sufficient. In light of the subject matter of the hearing, the court concluded that there was no need for a hearing examiner to develop a factual record. The court determined that the hearing provided adequate procedural safeguards. The court also examined whether the city council was impermissibly biased. Such bias would exist if the council were in the position of determining the legality of its own conduct. Because the city council’s MERA decision was primarily about whether De La Salle High School’s conduct was legal, not whether its own conduct was legal, the court found that the tribunal was not impermissibly biased. The court held that the city council hearing provided a full and fair opportunity to be heard and that the MERA claim was barred by the collateral estoppel doctrine. *State of Minnesota by Friends of the Riverfront, et al. v. City of Minneapolis, et al.,* A07-0925, ___ N.W.2d ___ (Minn. App. 06/24/08). —Anne Becker Attorney in Private Practice —Maria Lindstrom Office of Administrative Hearings
August 2008 In this month's "Notes & Trends: Administrative Law Civil Litigation Criminal Law Employment & Labor Law Federal Practice Intellectual Property Probate & Trust Law Real Property Tax Torts & Insurance	CIVIL LITIGATION JUDICIAL LAW • Dram Shop Proximate Cause. Appellants, the family of decedent, Michael Riley Jr., brought a dram shop action against respondent bowling alley, alleging that respondent’s illegal sale of alcohol caused Riley to be intoxicated, and that the intoxication caused Riley to jump to his death in the flood-swollen Minnesota River. The district court granted respondent’s motion for summary judgment and the Court of Appeals affirmed. The Supreme Court reversed and remanded for trial because it concluded that a genuine issue of material fact existed concerning the issue of proximate cause. The unfortunate series of events which eventually led to Michael Riley’s death are convoluted. The preceding evening, Riley had been drinking with friends at the bowling alley. He left in the early morning hours and was driving a motor vehicle when a state patrol officer observed him speeding. The officer began pursuit with lights and siren on. Eventually Riley stopped his vehicle in the vicinity of a bridge over the Minnesota River, which connects the cities of North Mankato and Mankato. The officer administered several tests, including a PBT, which showed Riley’s blood alcohol at 0.18, after which the officer advised Riley that he would be placed under arrest for driving while impaired. At that point, while the officer’s attention was diverted, Riley ran toward the bridge railing and jumped into the Minnesota River. Riley did not survive the jump into the flood-swollen river, and several months later his body was found and removed from the river. Appellants, Riley’s family, commenced a dram shop action against respondent bowling alley. In opposition to the respondent’s motion for summary judgment, appellants submitted an expert psychological report which was based upon the expert’s examination of decedent’s medical and drug history, and interviews with the decedent’s family and friends. The expert expressed the opinion that decedent was possibly in a blackout state when he jumped into the river and that the decedent would not have thought or attempted such an escape were he sober. The district court considered the report, but found it of “minimal evidentiary value.” The Court of Appeals concluded that the report did not provide sufficient evidence of proximate cause to survive summary judgment. Further, the Court of Appeals concluded that decedent’s speeding, the trooper’s stop, and decedent’s fleeing arrest were actions which constituted breaks in the chain of causation between decedent’s intoxication and his drowning. The Supreme Court explained that the type of causal relationship between intoxication and injury which is required to prevail in a dram shop action is proximate causation, which the Court equated with the term “substantial factor.” In other words, the intoxication must be a substantial factor in bringing about the injury. Ordinarily, whether proximate cause exists in a particular case is a question of fact for the jury to decide. In support of its motion for summary judgment, respondent relied upon the line of cases which denied dram-shop recovery where the injury was caused by another person or “occasion.” Appellants argued that those cases could be distinguished because in this case it was the decedent’s own impaired decision to jump into the river that directly caused his injury, even though there were several other intervening events after the intoxication. The Supreme Court agreed with appellants’ analysis and concluded that there was sufficient evidence to establish a genuine issue of material fact as to whether decedent’s intoxication was a substantial factor in his decision to jump into the river in an attempt to escape arrest. Osborne v. Twin Town Bowl, Inc., 749 N.W.2d 367 (Minn. 2008). — Andrew Shern Murnane, Brandt
August 2008 In this month's "Notes & Trends: Administrative Law Civil Litigation Criminal Law Employment & Labor Law Federal Practice Intellectual Property Probate & Trust Law Real Property Tax Torts & Insurance	CRIMINAL LAW JUDICIAL LAW • DWI/Implied Consent: Medical Privilege; Waiver. The defendant was involved in an alcohol-related collision and taken to the hospital. A police officer read the defendant the implied consent advisory and the defendant agreed to testing. The officer was unable to obtain a blood sample for alcohol testing because of the defendant’s condition. Later, police obtained a search warrant for the defendant’s medical records, which revealed that her blood alcohol concentration, via a blood test, was .12 at the time of her admission to the hospital. At trial, the records were admitted over the defendant’s objection. She claimed a violation of the medical privilege. On appeal, both parties agreed that the defendant’s medical records were privileged. The prosecution argued that the defendant’s agreement to testing via the implied consent law acted as a constructive waiver of the medical privilege. Held, the defendant’s consent to testing for the purpose of the implied consent law does not operate as a waiver of the defendant’s medical privilege. Unlike the Wisconsin privileged patient statute, examined in State v. Heaney, 676 N.W.2d 698 (Minn. App. 2004), rev’d., 689 N.W.2d 168 (Minn. 2004), Minnesota law has no exception for alcohol concentration results (see Minn. Stat. §592.01, subd. 1(d)). Furthermore, the appellant has not waived her medical privilege by placing her medical condition at issue. *State v. Poetschke, A07-1323 (Minn. App. 06/10/08). www.lawlibrary.state.mn.us/archive/ctappub/0806/opa071323-0610.pdf* • DWI/Implied Consent: Probable Cause Despite Passing PBT. Appellant was detained for various moving violations. The officer observed seven indicia of intoxication prior to employing the preliminary breath test (PBT): erratic driving, bloodshot watery eyes, odor of alcohol, admission of drinking, swaying, failing four of six HGN clues, and difficulty completing the one-legged stand. Held, the arresting officer had probable cause to arrest the appellant for DWI. Although in this case the PBT results were less than the legal limit, independent probable cause to arrest Reeves for DWI nonetheless remained. All of the various indicia provided the arresting officer, under a totality of the circumstances analysis, with probable cause to believe the appellant was driving while under the influence. *Daniel Joseph Reeves v. Commissioner of Public Safety, A07-1237 (Minn. App. 06/24/08). www.lawlibrary.state.mn.us/archive/ctappub/0806/opa071237-0624.pdf* • Spreigl/Prior Bad Acts; Domestic Abuse Exemption.In a prosecution for gross-misdemeanor domestic assault, the state successfully introduced evidence of three prior incidents of domestic abuse under Minn. Stat. §634.20. Held, the evidence of prior acts of domestic abuse was properly admitted, and it was not plain error for the court to fail to instruct the jury regarding use of the evidence when the evidence was received and in the final jury charge. (Defendant did not at trial request such instructions.) This case underscores the difference between evidence offered under Rule 404(b), “Spreigl,” and that offered under § 634.20, the latter being admissible as a “discrete category of other bad acts” when domestic violence is involved. The Court of Appeals reiterates that evidence offered under §634.20 is not Spreigl evidence: “Rather, this evidence is offered to demonstrate the history of the relationship between the accused and the victim of domestic abuse.” As such, the state is not required to provide notice of the evidence or to prove it by clear and convincing evidence. *State v. Ronald James Meyer, A06-2335 (Minn. App. 06/03/08). www.lawlibrary.state.mn.us/archive/ctappub/0806/opa062335-0603.pdf* • Search and Seizure: Probable Cause to Search. Appellant was a passenger in a vehicle stopped for speeding and for lack of a front license plate. Upon approach, the trooper smelled the odor of burnt marijuana and noticed that the driver was nervous. The trooper requested and received consent to search the vehicle from the driver. He then asked the passenger (appellant) to step out of the vehicle, and conducted a Terry-frisk. When the officer asked appellant if he had any weapons, the appellant handed the officer a folded pocketknife and a small amount of marijuana. The trooper then searched the vehicle, aided by a canine, and discovered a rolled up dollar bill with traces of cocaine. Upon arrest, appellant was searched more thoroughly and was found to possess a felony amount of cocaine. Held, the trooper had a legal basis to expand the scope of the traffic stop to search both the car and the appellant. The Supreme Court holds that the trooper had probable cause to search for a “criminally significant quantity of marijuana” upon smelling the odor of marijuana emanating from the vehicle and, independently, had a probable cause basis for the search when the appellant later also handed the trooper a small, noncriminal amount of marijuana. “The probable cause standard is merely a test to determine objective constitutional reasonableness, and regardless of the quantity of marijuana observed, the presence of any amount logically suggests there may be more.” *State v. Danny Ortega, A07-22 (Minn. App. 06/03/08). www.lawlibrary.state.mn.us/archive/ctappub/0806/opa070022-0603.pdf* • Search and Seizure: Unsuccessful Controlled Buy; Probable Cause. After receiving information from a confidential informant that the respondent was dealing drugs from a certain residence, authorities attempted a controlled buy. A separate confidential reliable informant (CRI) went to the residence and asked for a “dub,” which is slang for a pill of crack cocaine. The respondent told the CRI that he did not know them and he would not sell anything to them. The CRI then left the address. After examining the confidential informant’s basis of knowledge, veracity and reliability, the court follows other jurisdictions in holding that a controlled buy need not be successful in order to support a probable cause determination. Indeed, the respondent’s reply to the CRI’s attempted purchase indicated that he would have sold drugs if he had known the CRI. This statement corroborates the CRI’s report that the appellant was selling drugs out of his home. The answers given by the respondent to the CRI, although technically noncriminal, by themselves support a finding of probable cause under the totality of the circumstances test. *State v. Corey Lamont Holiday, A07-2366 (Minn. App. 06/03/08). www.lawlibrary.state.mn.us/archive/ctappub/0806/opa072366-0603.pdf* • Appeals: Motion for Reconsideration; Timely Notice of Appeal. Respondent moved for discovery of the source code for the Intoxilyzer 5000, and the motion was granted. A motion for reconsideration by the prosecution was denied. On January 29, 2008, respondent’s counsel requested suppression of the Intoxilyzer test results due to the state’s failure to disclose the source code. The district court indicated they would grant the request, and that a formal written order was forthcoming. On February 4, 2008, the district court issued a written suppression order. The state moved for reconsideration of the order on February 8, 2008. On February 15, 2008, the motion was denied at a hearing. The state filed a notice of appeal on February 19, 2008. Held, the state’s notice of appeal was timely. Although the motion for reconsideration was not filed within the five-day period from which the court announced, on the record, that it would be granting the defense motion to suppress, the court also indicated that it would issue a formal order. Under those circumstances, the ambiguous language contained in Rule 28.04, subd. 2(8) is construed as applying to a bench ruling only when the district court has not indicated that a written order will follow. Hence, the five days, under these circumstances, begins to run after the prosecuting attorney is served by the defense or the clerk of court with notice of entry of a written order. *State v. Jeremy Michael Palmer, A08-0335 (Minn. App. 06/03/08). www.lawlibrary.state.mn.us/archive/ctappub/0806/opa080335-0603.pdf* • Informants: Disclosure of Identity. Appellant had been charged as a felon-in-possession under Minn. Stat. §624.713. At the time of the arrest, he was with another individual, walking on the road, and the appellant was arrested based on an outstanding warrant. During the pat-down, police discovered a nearly full box of ammunition; in addition, police found a loaded pistol on top of newly fallen snow. The other individual told police that the appellant carried the pistol for protection. Police later obtained a statement from a citizen informant who stated that the appellant’s companion was known to carry the pistol and had been seen brandishing the same. The district court granted the defense motion to disclose the identity of the informant, using only the helpfulness test with respect to ownership of the pistol. In an unpublished decision, the Court of Appeals reversed. The Supreme Court notes that the common law grants the government a “privilege” to withhold the disclosure of individuals who furnish information to law enforcement, citing Roviaro, 353. U.S. 53 (1956). The privilege, however, is not unlimited, and gives way when an informant’s identity is relevant and helpful to the defense, or is essential to a fair determination of a cause. The court notes that there is a lower threshold for disclosure when the informant is an active participant in a criminal activity, as opposed to a “mere transmitter” of information and holds that the informant’s information in this case may be helpful. The case is remanded to district court for an in camera hearing to determine whether the informant’s information is sufficiently helpful to the preparation of the defense that the public interest must give way to ensure that the defendant receives a fair trial. *State v. Johnny Rambahal, A07-512 (Minn. 06/19/08. www.lawlibrary.state.mn.us/archive/supct/0806/OPA070512-0619.pdf* • Miranda: Due Process; Future Right to Counsel. Appellant was a suspect in a stabbing murder. Prior to his confession, police gave appellant a Miranda warning to which the appellant responded: “Yes, but I have just one question. So if I ask for a lawyer now, will there be a lawyer present now?” The police explained that it was not likely that the appellant would be able to speak to an attorney until the next day. Law enforcement also explained that if the appellant asked for an attorney, the interview would stop and the police would not speak to the appellant until he spoke to an attorney. The appellant then stated that he wished to speak to law enforcement, and went on to confess to a murder. Held, the Miranda warning was proper. Such warning is inadequate only if it fails to state that the defendant has the right to counsel before and during questioning, and the warning implies that the right to counsel is linked to some future point in time. In this case, police stated: “If you ask for a lawyer right now, we’ll stop the interview. We won’t talk to you anymore until a lawyer can represent you but chances are you won’t be able to talk to a lawyer until tomorrow.” This language does not violate due process by linking the right to counsel to a future event after questioning. The Supreme Court concludes that the term “now” accurately and clearly described the appellant’s right to an attorney before questioning, at the time the warning was given. Police made it clear that if appellant invoked his right to have an attorney “now,” the right would be honored, and the interrogation would cease until the appellant obtained an attorney. There was no direct or indirect allusion to a right to a counsel being afforded some time after interrogation. *State v. Hector Manual Medrano, A07-1437 (Minn. 06/26/08). www.lawlibrary.state.mn.us/archive/supct/0806/OPA071437-0626.pdf* —Frederic R. Bruno Frederic Bruno & Associates
August 2008 In this month's "Notes & Trends: Administrative Law Civil Litigation Criminal Law Employment & Labor Law Federal Practice Intellectual Property Probate & Trust Law Real Property Tax Torts & Insurance	EMPLOYMENT & LABOR LAW JUDICIAL LAW • Duty-Related Disability. The police officer who resigned more than a year after duty-related disability is entitled to full on-duty disability benefits from the Public Employment Retirement Association (PERA), according to a ruling of the Minnesota Court of Appeals. Reversing a denial of benefits by PERA, the appellate court held that the law providing for duty-related benefits, Minn. Stat. §353.656, does not contain an exclusion for employees who qualify, based upon one year of inability to perform their normal duties, even if they thereafter resigned. The case is the latest in a series of rulings over the past few years reversing denial of PERA benefits to law enforcement personnel. *In the matter of Michael Palermo, 2008 WL 2495280 (Minn. App. 06/24/08) (unpublished). • Data Practices. A labor union is entitled to obtain the names and wages paid to employees on publicly funded “prevailing wage” projects under the Minnesota Government Data Practices Act. Affirming a ruling of the Stearns County District Court, the appellate court held that the provision under the Data Practices Act regarding access by labor unions to information for collective bargaining purposes, Minn. Stat. §13.43, subd. 6, does not restrict the right of unions to obtain data furnished by private contractors to public entities in compliance with the “prevailing wage” law, Minn. Stat. §177.41. But the court held that home addresses of employees constitute “private” data that cannot be released to labor unions, absent collective bargaining purposes. IBEW Local 292 v. City of St. Cloud, 750 N.W.2d 307 (Minn. App. 06/10/08). • Discovery Dismissal. A litigant’s lawsuit may not be dismissed for failure to comply with discovery without advance warning to the litigant of the prospective dismissal in the 8th Circuit. The 8th Circuit adopted the Minnesota rule that requires advance warning to a litigant, in this case a pro se* claimant, of prospective dismissal before discovery abuse leads to disposition of the lawsuit. The decision conformed with the Minnesota state court rule in Bio-Line v. Wilfey, Inc., 336 N.W.2d 662 (Minn. 1985). *Smith v. Gold Dust Casino, 526 F.3d 402 (8th Cir., 2008). • Promissory Estoppel. A police officer, who was guaranteed a minimum of 16 hours of work per week, was judged to have been properly terminated as an “at will” employee. The Minnesota Court of Appeals held that there was no evidence for promissory estoppel because the officer was not promised permanent employment or that he would be terminated only for cause. Stiehm v. City of Dundas, 2008 WL 2574974 (Minn. App. 07/01/08) (unpublished). • Unemployment Compensation: Vague, Untimely Complaint. An employee who quit due to complaints of management about sex harassment was denied unemployment benefits. The denial of benefits was appropriate because the employee’s allegations were “vague and contradictory” and she did not report the harassment until after she resigned. Hatanpaa v. Park Supply, Inc., 2008 WL 2415501 (Minn. App. 06/17/08) (unpublished). • Unemployment Compensation: Incarcerated Employee. An employee who is incarcerated or performing community service work by court order is ineligible for unemployment benefits. The appellate court held that an employee serving a statutory minimum sentence of one-year incarceration following a fifth DWI offense is not eligible for benefits under Minn. Stat. §268.085, subd. 2(3) while in a local correctional facility and under electronically monitored house arrest, even if eligible for a work-release program. Carlson v. Dept. of Emp. & Econ. Dev., 747 N.W.2d 367 (Minn. App. 04/15/08). • Unemployment Compensation: Failure to Complain. An employee who quit her job rather than complain about demands placed upon her was denied unemployment compensation benefits. Although the employee, who worked at a group home for developmentally challenged adults, had a “difficult boss,” this did not constitute good reason or cause by the employer for her to quit her job. The employee was urged by her doctor to restrict her activities because of an injury to her shoulder, but she did not complain about working outside of her restrictions nor give the employer an opportunity to alleviate the situation before she quit. Jenson v. Grove Homes, Inc., 2008 WL 853469 (Minn. App. 04/01/08) (unpublished). • Unemployment Compensation: Reversible Error. An unemployment law judge’s denial of unemployment compensation benefits was reversed on two grounds when the judge uncritically accepted the employer’s testimony and obtained information for consideration from a source not part of the record. The unemployment judge accepted the position of the employer, rather than the divergent testimony of the employee, without making any explicit credibility determination and, furthermore, obtained outside information from a website, which was not part of the record and that was used to discredit the claimant’s testimony. Farhat v. Hertz Corp., 2008 WL 763207 (Minn. App. 03/25/08) (unpublished). • Unemployment Compensation: Suitable Temporary Employment. The Court of Appeals reversed and remanded a determination of disqualification for unemployment benefits of an employee of a temporary staffing agency. The claimant was disqualified for failing to request additional work within five calendar days after completing a temporary assignment. The appellate court reversed and remanded because there was no finding by the unemployment judge regarding the suitability of the temporary job assignment that the claimant had completed, which is required by Minn. Stat. §268.095, subd. 2(d). Levang v. TCG, Inc., 2008 WL 853461 (Minn. App. 2008) (unpublished). LEGISLATION • Care for Relatives Bill. In the waning days of the legislative session this spring, Gov. Pawlenty vetoed a measure that would have allowed employees to use their sick leave to care for immediate relatives. The bill would have let all workers in the private and public sectors take time off to take care of adult children, spouses, siblings, parents, or grandparents. The governor deemed it an “unfunded mandate” for financially strapped local governments. —Marshall H. Tanick* Mansfield Tanick & Cohen, PA
August 2008 In this month's "Notes & Trends: Administrative Law Civil Litigation Criminal Law Employment & Labor Law Federal Practice Intellectual Property Probate & Trust Law Real Property Tax Torts & Insurance	FEDERAL PRACTICE JUDICIAL LAW • Punitive Damages; 1:1 Ratio; Maritime Law. In a decision that was on its face limited to federal maritime law, the Supreme Court held that a compensatory to punitive damages ratio of 1:1 is “the fair upper limit” absent “exceptional blameworthiness” such as “intentional or malicious conduct” or “behavior driven primarily by desire for gain.” Despite the decision’s express focus on maritime law, it is likely that defendants will cite this decision in an attempt to further limit awards of punitive damages in other settings. *Exxon Shipping Co. v. Baker, ___ S. Ct. ___ (2008). Three weeks before the Exxon Shipping Co.* decision, the 8th Circuit rejected a due process challenge to an award of punitive damages eight times the size of the compensatory damage award, describing the defendant’s conduct as “particularly egregious.” *Craig Outdoor Advertising, Inc. v. Viacom Outdoor, Inc.,* ___ F.3d ___ (8th Cir. 2008). • Preliminary Injunction; Challenge to Statutes; Dataphase Factors. A recent en banc appeal from a decision enjoining a South Dakota statute regulating abortions provided the 8th Circuit with an opportunity to revisit the standards governing a preliminary injunction barring the implementation of state statutes. A majority of the en banc court held that the party seeking to enjoin the statute must show that it is “likely to prevail on the merits” rather than merely demonstrating a “fair chance” of success. Judge Murphy, joined by three other dissenters, accused the majority of “revis[ing]” the long-standing 8th Circuit standard for preliminary injunctions, thereby “creating a special test for enjoining legislative enactments.” *Planned Parenthood Minnesota, North Dakota, South Dakota v. Rounds, ___ F.3d ___ (8th Cir. 2008). • Untimely Motion to Amend; “Good Cause”; Fed. R. Civ. P. 16(B). The 8th Circuit held that a district court abused its discretion in granting a defendant’s untimely motion to amend an answer to assert a new affirmative defense where the court failed to address Fed. R. Civ. P. 16(b)’s “good cause” standard as part of its analysis. Sherman v. Winco Fireworks, Inc., ___ F.3d ___ (8th Cir. 2008). • Motion to Compel Arbitration; Amount in Controversy. After McGinnis brought a putative class action in the Arkansas courts, Advance filed a diversity action seeking to compel arbitration of the plaintiff’s individual claim. McGinnis moved to dismiss the federal action for lack of the requisite amount in controversy, but Advance argued that any possible judgment in the state court action and its costs of defending that action could be considered in determining the amount in controversy. The district court dismissed the action and the 8th Circuit affirmed, rejecting Advance’s argument that the amount in controversy can be measured “by the potential value [to Advance] of avoiding state court litigation.” Advance America Servicing of Arkansas, Inc. v. McGinnis, 526 F.3d 1170 (8th Cir. 2008). • Enforceability of Settlement Agreement; Evidentiary Hearing. The 8th Circuit found no abuse of discretion in a district court’s refusal to conduct an evidentiary hearing to resolve a dispute over the enforceability of an alleged settlement agreement where the party requesting the hearing did not do so until after the district court had issued an order indicating its intent to enforce the settlement agreement. Bath Junkie Branson, L.L.C. v. Bath Junkie, Inc., 528 F.3d 556 (8th Cir. 2008). • Arbitration; Continued Viability of “Manifest Disregard of Law” Theory. Relying exclusively on the Supreme Court’s recent decision in Hall Street Assocs., L.L.C. v. Mattel, Inc., Judge Kyle refused to consider that portion of the plaintiff’s motion to vacate an arbitration award premised on a the arbitrator’s alleged “manifest disregard of the law.” Prime Therapeutics LLC v. Omnicare, Inc., ___ F. Supp. 2d ___ (D. Minn. 2008). —Josh Jacobson* Law Office of Josh Jacobson
August 2008 In this month's "Notes & Trends: Administrative Law Civil Litigation Criminal Law Employment & Labor Law Federal Practice Intellectual Property Probate & Trust Law Real Property Tax Torts & Insurance	INTELLECTUAL PROPERTY JUDICIAL LAW • Patent Revival; Untimely Maintenance Fee. Judge Ericksen upheld the Patent and Trademark Office’s (PTO) denial of a petition to revive a patent that expired because the maintenance fee had not been paid on time. Reitmann sued the director of the PTO, Dudas, under the Administrative Procedure Act, to accept delayed payment of the patent maintenance fee. Patent law allows the PTO to accept late payment of any maintenance fee if the patentee can demonstrate that the delay was unavoidable. Reitmann claimed she could not have avoided the delay of her payment because after the patent had issued she endured a car injury and suffered from chronic depression, anxiety, and fatigue. The court, however, disagreed and upheld the PTO’s denial to revive the patent because the record showed Reitmann pursued arbitration against her car insurer, actively tried to market and license the patent, and was cleared medically to scuba dive. The court held, “[R]eitmann was not disabled throughout the period that the patent was expired, such that she could not have earlier paid the maintenance fee.” *Reitmann v. Dudas, No. 07-CV-4176 (D. Minn. 06/27/08). • Patents: Exceptionality Rule; Inequitable Conduct. The Court of Appeals for the Federal Circuit refused to create “a benign conduct” exemption to the exceptionality rule in patent law. Nilssen sued Osram for infringement of patents covering light bulbs and ballasts. The district court held the patents unenforceable after finding Nilssen’s conduct in obtaining them inequitable. Inequitable conduct by a patentee may result in a finding of exceptionality. Patent law allows attorney fees for cases deemed “exceptional.” Based on its determination of inequitable conduct, the court found the case exceptional and awarded Osram attorney fees. On appeal, Nilssen argued that his conduct was benign rather than exceptional. The court refused to distinguish between types of inequitable conduct or create an exemption for “benign conduct.” Although the law offers no per se rule of exceptionality for inequitable conduct, the appellate court affirmed the grant of attorney fees: “[]it is a contradiction to call inequitable conduct benign. … conduct [that is] held to be inequitable … is hence per se not benign.” Nilssen v. Osram Sylvania, Inc., No. 2007-1198 (Fed. Cir. 06/17/08). • Patents: Claim Construction; Exclusions. A split panel of the Court of Appeals for the Federal Circuit upheld a unique claim construction that excluded from the patent claims-at-issue every disclosed embodiment. Helmsderfer sued Bobrick for infringement of a patent covering diaper-changing stations. The claims-at-issue require a top surface partially* hidden from view. The district court granted a judgment of noninfringement after finding the top surface of Bobrick’s diaper station completely hidden from view. Helmsderfer appealed arguing that the plain meaning of the term “partially” includes completely. He supported his interpretation with the specification stating the top surface “is generally hidden from view.” Claim construction law generally cautions against interpreting a claim term in a way that excludes embodiments from the scope of the invention. It also suggests adopting a meaning that includes the disclosed examples when a term has multiple ordinary meanings. The appellate court, however, found no evidence or reasoning on the record to explain how partially means completely: “Often … different claims are directed to … different disclosed embodiments. The patentee chooses the language and accordingly the scope of his claims.” *Helmsderfer v. Bobrick Washroom Equip., Inc., No. 2008-1027 (Fed. Cir. 06/04/08). —Tony Zeuli* —Arthur Geldres Merchant & Gould
August 2008 In this month's "Notes & Trends: Administrative Law Civil Litigation Criminal Law Employment & Labor Law Federal Practice Intellectual Property Probate & Trust Law Real Property Tax Torts & Insurance	PROBATE & TRUST LAW JUDICIAL LAW • Will Construction; Chargeback Formula; Extrinsic Evidence vs. Surrounding Circumstances. In its opinion approving a personal representative’s construction of a will provision requiring adjustments of beneficiaries’ shares for certain advancements made prior to the decedent’s death, the Minnesota Court of Appeals discussed what evidence may be considered in a will construction case where the will is not ambiguous. The will provided that the decedent exercised her testamentary power of appointment over a marital trust, and that the marital trust should be distributed in equal shares to her three children, but that each child’s share should be “reduced by the amount of any emergency or exceptional education payments I made to any institution for such child, or the descendants of such child.” The will provided further that any reduction would then be divided among all the children (including the child whose share was so reduced). One of the children challenged the personal representative’s interpretation of the formula language. It is not entirely clear from the opinion, but apparently the child claimed that educational distributions charged against his share were not “emergency or exceptional” and therefore should not have been included in the chargeback. The Court of Appeals held that the personal representative correctly interpreted the formula. The court held that the formula (including the “emergency or exceptional” language) was not ambiguous, and that extrinsic evidence was therefore not admissible. However, the court distinguished between extrinsic evidence and evidence of “surrounding circumstances,” stating that the latter is “always admissible.” (quoting In re Estate of Arend, 373 N.W.2d 338, 342 (Minn. App. 1985)). Among the “surrounding circumstances” the court held could be considered were the fact that the decedent had established educational funds for her grandchildren, and that she made larger educational advancements to certain grandchildren as compared to the others. The court approved the personal representative’s interpretation of the will to provide that “exceptional educational payments” meant payments other than from the educational funds the decedent had established. *In re the Estate of Prestegaard, A07-1713 (Minn. App. 06/17/08) (unpublished). www.lawlibrary.state.mn.us/archive/ctapun/0806/opa071713-0617.pdf* • Promised Gift; Charitable Subscription Law, Unilateral Contract and Promissory Estoppel Held Inapplicable. The Minnesota Court of Appeals has held that a decedent’s promise, in writing, to make a stream of gifts to her brother and his wife is not enforceable against the decedent’s estate. Prior to her death, Nievedia Ross wrote a letter to her brother and his wife, Shane and Cheryl Valentin, promising to make certain gifts to them, including a monthly payment of $4,000 “until they do not wish to receive this gift from me anymore.” Nievedia made several gifts to Shane and Cheryl, including a downpayment on a house, mortgage payments, and two vehicles. In 2004, Shane died, and Nievedia ceased the $4,000 monthly payments. Nievedia died in 2005. Cheryl submitted a claim against Nievedia’s estate for approximately $187,000, representing the mortgage debt with respect to the home that Ms. Ross helped Shane and Cheryl buy, certain credit card debt, and sales tax incurred upon the transfer of the vehicles to Cheryl (the sales tax was incurred because Nievedia refused to sign a gift declaration). Cheryl used three theories to support her claims. All were rejected by the Court of Appeals. First, Cheryl argued that Nievedia’s promise to continue making gifts was enforceable under cases holding that certain charitable pledges are enforceable without consideration. For example, in Estate of Stack, 164 Minn. 57, 204 N.W. 546 (1925), the Minnesota Supreme Court held that a decedent’s promise to give $5,000 to a college was enforceable where the college erected new buildings and purchased equipment in reliance on the promise. The Court of Appeals held this line of cases is inapplicable where the gift is promised to an individual, rather than a charitable, religious or educational institution. Second, Cheryl argued that Nievedia’s promise was enforceable as a unilateral contract. The Court of Appeals held that in order to form a unilateral contract, the party to be bound must bargain for an act or forbearance on the part of the party seeking to enforce the contract. Although Cheryl incurred debt in reliance on Nievedia’s promise, the court noted there was no evidence Nievedia required that the debt be incurred in order for the gift to be made, and that Cheryl therefore failed to show that Nievedia bargained for Cheryl’s act of incurring the debt. Finally, Cheryl argued that she was entitled to the promised gifts under the theory of promissory estoppel. The Court of Appeals stated that the elements of the theory are “(1) a clear and definite promise, (2) intention by the promisor to induce the promisee’s reliance on the promise, (3) the promisee’s detrimental reliance, and (4) the need to enforce the promise to prevent an injustice,” and held that Cheryl failed to prove the second and fourth elements. The court found there was no evidence Nievedia intended for her promise to induce Cheryl to incur debt, and that because Cheryl ended up better off financially than she would have been without the gifts that were made, enforcement of the promise of additional gifts was not necessary to prevent injustice. *In re the Estate of Ross, A07-1294 (Minn. App. 05/27/08) (unpublished). www.lawlibrary.state.mn.us/archive/ctapun/0805/opa071249-0527.pdf* —Cameron R. Seybolt Fredrikson & Byron, P.A.
August 2008 In this month's "Notes & Trends: Administrative Law Civil Litigation Criminal Law Employment & Labor Law Federal Practice Intellectual Property Probate & Trust Law Real Property Tax Torts & Insurance	REAL PROPERTY JUDICIAL LAW • Bankruptcy; Ability of Trustee to Avoid Defective Mortgage. In this bankruptcy proceeding, the debtors executed a mortgage to Ameriquest to secure a promissory note. The mortgage correctly stated the address of the property, but the legal description described a different piece of property, one that the debtors previously owned. The bankruptcy trustee sought to avoid the mortgage under 11 U.S.C. §544, which generally provides that the trustee has the power to avoid any obligation incurred by the debtor that would be avoidable by a bona fide purchaser of the property. The bankruptcy court granted summary judgment in favor of the trustee, determining that the mortgage was avoidable. On appeal, the Bankruptcy Appellate Panel for the 8th Circuit affirmed. Whether a bona fide purchaser would be able to avoid the obligation must be determined by state law. Under Minnesota law, a bona fide purchaser of real property may avoid prior conveyances that have not been recorded in accordance with the law. A bona fide purchaser is one who in good faith purchases property without actual, constructive, or implied notice of other inconsistent rights. For the purposes of §544, it is irrelevant whether the trustee had actual notice. The question is whether implied or constructive notice exists. Ameriquest argued that there was an apparent defect in the mortgage by virtue of the inconsistency between the street address and legal description, which gave rise to implied notice. The appellate court disagreed. The court concluded that because the legal description correctly described a parcel of property, it was complete and accurate and therefore there is nothing on the face of the document to indicate that the description was somehow defective. Ameriquest also argued that notice could be found in the fact that the mortgage was discoverable through the grantor/grantee index. The court likewise rejected this argument, concluding that the only notice provided would be that there is a mortgage given on a different property. Affirmed. *In re Stradtmann, ____ B.R. ____ (8th Cir. BAP 06/30/08). • Standard for Grant of Variance from County Ordinances. Property owners purchased a vacant lot that did not meet the county’s width and area requirements, but was grandfathered in as a nonconforming lot. Nearly 20 years after purchasing the lot, the owners planned to build a home and garage on the lot and applied for a permit from the county. Although the county ordinances apparently required a survey of the property for approval, the property owners did not obtain a new survey but instead relied on markings placed when the property was originally platted. Based on these markings, the structures appeared to meet county ordinance setback requirements. County officials inspected the property and approved the permit. The owners completed construction expending over $200,000. Over a year after construction, it was determined that the structures had been constructed within the setbacks and the county cited the property owners for violating the ordinances. Subsequently, the property owners applied to the county for a variance. In considering the variance, the county decided to treat the application as if it had been made before the improvements had been constructed. The board denied the variance, concluding that there was “no adequate hardship unique to the property” and that there was sufficient room on the lot to construct improvements without a variance. The owners appealed the decision to the district court which granted summary judgment in favor of the county. The Court of Appeals affirmed. On appeal the Minnesota Supreme Court reversed and remanded. The owners initially argued that the setback requirements did not apply to their application because the lot was grandfathered in. But the owners had not raised this issue before the board and the court declined to address it. The primary question for the court to decide was the proper standard to be used to determine whether to grant a variance. The statute that grants counties the authority to award variances uses two terms, “practical difficulties” and “practical hardship.” The owners argued that the less rigorous “practical difficulties” standard should be used. The court noted that other jurisdictions were split on whether and when to use which standard. Ultimately, the court distinguished between two types of variances, area variances and use variances, and concluded that the lesser “practical difficulties” standard should apply to county area variance considerations. Because the county did not consider practical difficulty and did not appear to consider other factors set forth in the county ordinances, the decision was arbitrary and capricious. But because the county did not have the benefit of the court’s decision, the court remanded the matter for further considerations, rather than simply ordering the issuance of the permit. Reversed and remanded. In re Decision of County of Otter Tail Board of Adjustment, A06-1696, ____ N.W.2d ____ (Minn. 06/19/08). www.lawlibrary.state.mn.us/archive/supct/0806/OPA061696-0619.pdf* —C.J. Deike Edina Home Realty Services
August 2008 In this month's "Notes & Trends: Administrative Law Civil Litigation Criminal Law Employment & Labor Law Federal Practice Intellectual Property Probate & Trust Law Real Property Tax Torts & Insurance	TAX JUDICIAL LAW • Bankruptcy Code: Stamp Tax Exemption. The United States Supreme Court reversed the appellate court (In re Piccadilly Cafeterias, Inc., 484 F.3d 1299 (11th Cir. 2007) and held that §1146(a) of the Bankruptcy Code affords a stamp tax exemption only to transfers made pursuant to a confirmed Chapter 11 Plan and not prior to the actual confirmation. The Florida Department of Revenue argued that the 11th Circuit’s interpretation of the statute was not justified and claimed that the lower court’s decision created much unnecessary litigation and ambiguity. Piccadilly argued that the statute was ambiguous and that the legislative history supported the bankruptcy court’s decision. “While both sides present credible interpretations of §1146(a), Florida has the better one,” the Supreme Court indicated. “To be sure, Congress could have used more precise language—i.e., ‘under a plan that has been confirmed’—and thus removed all ambiguity. But the two readings of the language that Congress chose are not equally plausible: Of the two, Florida’s is clearly the more natural.” *Florida Department of Revenue v. Piccadilly Cafeterias, Inc., No. 07-312, __ S.Ct. __ (06/16/08). • RICO: First-Party Reliance on Misrepresentations. The United States Supreme Court affirmed the appellate court (Bridge v. Phoenix Bond & Indemnity Co., 477 F.3d 928 (7th Cir. 2007) and held that first-party reliance on misrepresentations was not* an element of a civil Racketeer Influenced and Corrupt Organizations Act (“RICO”) claim predicated on mail fraud. A person could be injured “by reason of” a pattern of mail fraud without relying on any misrepresentations, as in this case where the unsuccessful bidders allege that they were harmed when they lost valuable liens they otherwise would have been awarded. *Bridge v. Phoenix Bond & Indemnity Co. No. 07-210, __ S.Ct. __ (06/09/08). • Real Property: “Green Acres” Classification. The Minnesota Tax Court held that 17 acres of land in Washington County qualified for the “Green Acres” classification under Minn. Stat. §273.111 as of January 2, 2006. The decision reversed an earlier ruling of May 6, 2008, in which the court had held that the land did not qualify. The subject property consisted of 17 acres that originally was part of 102 acres that had been sold off for development over the years. The taxpayer claimed the “Green Acres” exemption because of his operation of a tree farm for the growing of evergreens, which were to be available for landscaping purposes or as Christmas trees. The facts disclose that he was listing the 17 acres for sale or land lease, that he made sales of less than $1,500 of tree sales in 2005 and 2006, and there were only 55 trees left on the 17 acres. Taxpayer had planted no trees since he had bought the 102 acres in 1994. The county contended that the property was being held for future development and failed the ten contiguous acres test. The taxpayer and the court agreed that there was no special classification for “future development” and that the land was actually being used for growing trees. The classification statutes do not require intensive agricultural activities. Merely conducting the very minimum of farm-like activities to keep an agricultural classification and eligibility for “Green Acres” until receiving the right offer to sell the property as commercial property minimally meets the criteria for agricultural classification. Robert L. Brackey v. County of Washington, C4-06-7837, 2008 WL ____ (Minn. T. Ct. 06/23/08). • Real Property: Aggregate Tax. The Minnesota Tax Court ruled that the taxpayer, which processed aggregate in Becker County but did not extract the aggregate from the land in Becker County, was not subject to the aggregate tax under Minn. Stat. §298.75. In order to be subject to the tax, one must be an “operator,” operating in a designated county and removing aggregate from the subject county, or an “importer,” who buys aggregate outside of the county, and then has it transported into the county for processing. The court ruled that the taxpayer was neither an “operator” or an “importer.” The fact that the aggregate was extracted from Otter Tail County, which did not have the aggregate tax, and processed in Becker County, which had the aggregate tax, did not make a difference. Aggregate Industries – North Central, Inc. v. County of Becker, CV-07-759, 2008 WL ____ (Minn. T. Ct. 06/12/08). • Jurisdiction: Second Request for Equitable Innocent Spouse Relief. The United States Tax Court rejected a taxpayer’s request to enjoin IRS collection action, and held that it lacked jurisdiction to determine the matter because the taxpayer failed to timely petition the tax court within 90 days of a final notice of determination denying her request for equitable innocent spouse relief under IRC §6015(f). The tax court petition, filed by the taxpayer within 90 days of her second request for IRC §6015(f) relief, essentially duplicated her previously denied request, and did not confer jurisdiction on the Court. Judith A. Barnes, f.k.a. Judith Genrich v. Commissioner of Revenue, 130 TC No. 14 (06/11/08). ADMINISTRATIVE ACTION • Procedure: State Contractors; IRCA Compliance. Effective January 29, 2008, vendors and subcontractors that do business with the state must certify compliance with the Immigration Reform and Control Act of 1986 (8 U.S.C. §1101, et seq.) and certify use of the E-Verify system established by the Department of Homeland Security. (See* Governor’s Executive Order 08-01). The E-Verify program can be found at http://www.dhs.gov/ximgtn/programs. If the solicitation is in excess of $50,000, the vendor and subcontractor must certify that the company is in compliance with the Immigration Reform and Control Act of 1986 in relation to all employees performing work in the United States and does not knowingly employ persons in violation of the United State immigration laws. Further, that the company will have implemented or be in the process of implementing the E-Verify program for all newly hired employees in the United States who will perform work on behalf of the state by the date of the delivery product or service. See, for details: www.mmd.admin.state.mm.us. • Procedure: Independent Contractor Exemption Certificate. Effective January 1, 2009, individuals in the construction and improvement industry (commercial or residential building) working as independent contractors must apply for and receive from the Minnesota Department of Labor and Industry an “Independent Contractor Exemption Certificate.” Any commercial or residential building business, who hires an independent contractor without an exemption certificate for the services they offer or any individual without an exemption certificate, will be in violation of the new law found in Minn. Stat. §191.723. Employers and individuals in violation are subject to a penalty of $5,000 for each violation. The Department of Labor and Industry published proposed rules in the State Register on March 31, 2008: “Proposed Rules Governing Independent Contractor Exemption Certificates; Minn. Rules Chapter 5202.” Applications for an “Independent Contractor Exemption Certificate” are available through the Minnesota Department Labor and Industry. See http://www.doli.state.mn.us/ic.html. • Mileage Rates Through December 2008. The IRS announced that the optional mileage allowance for owned or leased autos (including vans, pickups or panel trucks) will increase 8¢ from 50.5¢ to 58.5¢ per mile for business travel from July 1, 2008 to December 31, 2008 to better reflect the real cost of operating an auto in this period of rapidly rising gas prices. This rate can also be used by employers to reimburse tax-free under an accountable plan employees who supply their own autos for business use. The rate for using a car to get medical care or in connection with a move that qualifies for the moving expense will also increase 8¢ for the last half of 2008 from 19¢ to 27¢ per mile. Ann. 2008-63, 2008-28 IRB, IR 2008-82. • Withholding Rates for Misclassified Workers. The IRS concluded that an employer may use IRC §3509 to determine its employee FICA tax and federal income tax withholding liability for prior years when the employer is reclassifying a worker following receipt of an IRS SS-8 determination letter. The employer can make an interest-free adjustment to pay its employee FICA tax and federal income tax withholding liability for prior years. Chief Counsel Advice 200825043. • Student Loan Forgiveness in Exchange for Public Service. The IRS ruled that the forgiveness of a law student’s loan in exchange for the borrower working for a certain period of time in a qualifying law-related public service position was not includible in his gross income. The revenue ruling clarified that a law school loan made under a Loan Repayment Assistance Program generally satisfies the requirements of IRC §108(f). Rev. Rul 2008-34, 2008-28 IRB. • Proposed Rules on Stricter Return Preparer Penalty. The IRS issued proposed regulations on tax return preparer penalties under IRC §6694 and IRC §6695, reflecting the controversial changes made by the Small Business and Work Opportunity Act of 2007. Among the many issues addressed in the 200-plus pages of the proposed regulations are the new standards of conduct that must be met to avoid imposition of the tax return preparer penalty under IRC §6694 and the broadened scope of the definition of income tax return preparers. Preamble to Prop Reg, Prop Reg §1.6694-1, Prop Reg §1.6694.2, Prop Reg §1.6694-3, Prop Reg §1.6694-4, Prop Reg §301.7701-15 (06/16/08). LOOKING AHEAD • State of Minnesota Economy and Tax System. Establishing a cause and effect relationship between state spending and relative economic and tax success is a precarious task since so many other influential factors matter, not the least of which are developments outside of the state’s control. Nonetheless, one hears the experts trumpeting Minnesota’s economy and tax system are robust, and opponents protesting the opposite. Therefore, it is helpful to review the underlying facts supporting each group’s position to ascertain their premises and use of the numbers. Three statistical reports were recently issued which bear review in light of the upcoming elections of 2008 and the tax and economic debates and reform proposals in the future: • Growth & Justice, Minnesota Budget Project Report. In May 2008, Growth & Justice and the Minnesota Budget Project released a report which showed that Minnesota ranked 19th in 2006 in overall state and local taxes as a percentage of personal income. This was the same rank as in 2004. The figure was significantly improved from the state’s ranking in 1995, when Minnesota had the fifth highest taxes in the nation. The report also opined that Minnesota was not making the valuable public investments in education and infrastructure that helped produce a good quality of life. • Minnesota Taxpayers Association Report. The Minnesota Taxpayers Association, in May 2008, released its report showing that for fiscal year 2006, Minnesota’s total state and local tax collections ranked 14th highest per capita. This was a decline of two spots from 12th highest in fiscal year 2005. On a per thousand dollars of personal income basis, totals in state and local collections ranked 20th nationally, up three spots from fiscal year 2005. Minnesota’s per capita tax ranking continues to drift slowly downward—a trend that began in 2002—because there have been no additional tax increases. On the expenditure side, Minnesota state and local direct general expenditures ranked 15th in the nation on a per capita basis (down from 12th in 2005). Minnesota’s expenditures are above the national average for public welfare, highways, and natural resources/parks, but less than 80 percent of the U.S. average on both the per capita and per $1,000 of income basis for spending on fire protection, corrections, sewer, and health/hospital costs. • Minnesota 2020 Report. Minnesota 2020 released a report in June, “Minnesota’s Slip Toward Mediocrity: Less Investment, Less Return,” which indicates that Minnesota has slipped behind other states in employment and personal income in recent years as it spent less on education and other governmental programs. To compare the relative size of government in the 50 states, the report is based on several criteria which include (1) a broad measure of revenues or expenditures (as opposed to just “taxes”), (2) combined state and local government revenues or expenditures (not only state-level information), and (3) revenues or expenditures per $1,000 of personal income (rather than per capita). It examines revenues and spending as a percentage of personal income, which the report states, provides a “common-sense way of adjusting for higher costs of labor and living in high personal income states.” The report tracks a relative decline in government spending in Minnesota per $1,000 of personal income from 1995 to 2006. During that time, Minnesota dropped from 10th to 29th, with the sharpest decline occurring since 2002. Minnesota dropped from 6th in state and local taxes per $1,000 of income in 2002 to 18th in 2004, where it remained in 2005 and 2006. Minnesota had the 14th lowest unemployment rate in the nation in 2002 and 2003, but the 32nd lowest in 2007. The state ranked 27th in 2002 in rate of employment growth, but dropped to 44th in 2007. The report can be viewed at: www.mn2020.org/index.asp?Type=B_BASIC&SEC=%7B62624F79-55F4-4268-A305-A11A18130. —Jerry Geis Briggs & Morgan
August 2008 In this month's "Notes & Trends: Administrative Law Civil Litigation Criminal Law Employment & Labor Law Federal Practice Intellectual Property Probate & Trust Law Real Property Tax Torts & Insurance	TORTS & INSURANCE JUDICIAL LAW • Homeowner’s Insurance: Exclusions. The Minnesota Court of Appeals has held that an insured who knowingly provides an injured party with a syringe of methamphetamine, and encourages the injured party to inject the drug, is not entitled to a defense or indemnity under a homeowner’s insurance policy for claims of harm arising out of that drug use. State Farm Fire & Casualty Co. v. Schwich, A07-1093 (Minn. App. 05/20/08). www.lawlibrary.state.mn.us/archive/ctappub/0805/opa071093-0520.pdf • Uninsured Motorist Insurance: Definition of “Policyholder.” The Minnesota Supreme Court has held that where an insurance policy limits uninsured motorist insurance coverage to the “policyholder” identified on the declarations page, and that page lists only “named insureds” and “drivers,” the term “policyholder” refers unambiguously to the “named insureds” only. The doctrine of reasonable expectations does not apply to provide uninsured motorist coverage where the policy unambiguously denies coverage. *Carlson v. Allstate Insurance Co., A06-1664 (Minn. 05/22/08). www.lawlibrary.state.mn.us/archive/supct/0805/OPA061664-0522.pdf* • No-Fault Automobile Insurance: Surviving Dependents. The Minnesota Supreme Court held that the definition of “dependent” under the Minnesota No-Fault Automobile Insurance Act excludes a decedent’s girlfriend and is limited to surviving spouses and children. Auto Owners Insurance Co., v. Perry, A06-1235 (Minn. 5/29/08). www.lawlibrary.state.mn.us/archive/supct/0805/OPA061235-0529.pdf • Miller-Shugart Agreements: Garnishment; Probable Cause. Plaintiff sought damages as a result of a dog bite that occurred at the dog’s owner’s home. Plaintiff and homeowner entered into a Miller-Shugart settlement, and after judgment was entered plaintiff served a garnishment summons on the insurer. The insurer denied liability, claiming that plaintiff was a resident of the home where the bite occurred and thus was excluded from coverage for bodily injury. The district court denied plaintiff’s motion to add the insurer as a party to the action, finding that plaintiff failed to establish probable cause that her injury was covered by the homeowner’s insurance policy. The Minnesota Court of Appeals reversed, and on further review the Supreme Court agreed, holding that whether probable cause for the garnishment action exists depends on whether the evidence establishes that the garnishee might be liable. Because plaintiff submitted sufficient evidence to show she might not be a resident and thus her claim would be covered, the insurer was properly subject to the garnishment action and plaintiff was entitled to add the insurer as a party. *McGlothlin v. Steinmetz, A06-1016 (Minn. 06/19/08). www.lawlibrary.state.mn.us/archive/supct/0806/OPA061016-0619.pdf* • Corporations: Indemnification; Good Faith Requirement. The Minnesota Supreme Court held that plaintiff’s guilty plea to a knowing and willing violation of federal law did not establish, as a matter of law, that he did not “act in good faith” for purposes of indemnification under Minn. Stat. §302A.521, subd. 2(a). Augustine v. Arizant Inc., A06-1238 (Minn. 06/26/08). www.lawlibrary.state.mn.us/archive/supct/0806/OPA061238-0626.pdf —David Turner Bassford Remele, A Professional Association